It is essential for businesses in any industry to satisfy the needs and wants of their customers. Moreover, it is extremely crucial for international businesses to fulfil their customer’s desires to succeed and make a significant amount of revenue. An important factor considering international business operations is culture and how multinational companies can adapt to the ever-changing environment. Culture is defined as the beliefs, values and norms within a business that define communication, working relationships and motivation between internal stakeholders. (Hoang 3rd Edition).
Starbuck’s Inc. is a classic example of adapting to cultural norms. They currently operate in more than 24,000 locations worldwide (Starbuck’s Inc.) in 70 countries including the USA and China. Through one of their core values being “creating a culture of warmth and belonging, where everyone is welcome” already shows the significance of culture and how it affects their sales and reputation.
A picture of Starbuck’s in Chengdu, Sichuan Province with traditional Chinese building elements (Mark Ralston)
China and south east Asia’s market sales have largely contributed to sales. The 23% growth rate of income in 2016 would have not been possible without major changes to Starbuck’s marketing strategy and research and development. Through spending $378.8 million on market research in 2016 (Garnick, Puget Sound Business Journals), one major point that they found was that China had an emerging tea culture. (Sorkin, NYTimes).
Starbuck’s decided to release a tea line with Teavana for their Asian market. Being a loyal Starbuck’s fanatic from the Philippines, I observed that a large proportion of customers order tea instead of coffee. I was super happy when I discovered the release of Teavana at my local Starbuck’s. In fact, my favorite drink is part of the Teavana line! Not only did they add a line of tea beverages, but they also changed their store’s ambiance and altered their recruitment and management strategies to suit their Asian markets.
Was this worth it? Former CEO Howard Schultz said that he’d like to open 2400 more locations in China by 2021, and current CEO Kevin Johnson had recently announced that their ditching Teavana in the USA to focus on growing their business in China. (Quartz). It’s not like their 10% annual growth rate has done any good to the business!
The changes that Starbuck’s has made to satisfy China’s cultural norms have clearly affected their sales throughout their years of operation. With a total revenue of $21.32 billion in 2016 (Statistica), Starbuck’s remains at the top of the ready to drink coffee market with 75% of the market share (Trefis Team, Forbes). However, to achieve the satisfaction of markets of different geographical ranges, it is necessary to sacrifice costly expenses on factors such as high quality market research, operations, and a consistent human resource management.
At the end of the day, business is about taking risks, and learning from them.
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Works Cited
* All products require an annual contract. Prices do not include sales tax (New York residents only). (n.d.). Starbucks: revenue 2016. Retrieved October 13, 2017, from https://www.statista.com/statistics/266466/net-revenue-of-the-starbucks-corporation-worldwide/
Hoang, P. (2014). International baccalaureate Business and Management (3rd ed.). Place of publication not identified: Ibid Press.
Purdy, C. (2017, July 28). Starbucks is ditching its tea business as it shifts focus to China. Retrieved October 13, 2017, from https://qz.com/1040957/starbucks-teavana-stores-are-closing-as-the-company-pivots-to-china/
Ralston, M. (n.d.). Picture of Starbucks in Chengdu with Chinese traditional building elements [Photograph]. Chengdu, Sichuan Province.
Sorkin, A. R. (2017, July 31). While Other U.S. Companies Flee China, Starbucks Doubles Down. Retrieved October 13, 2017, from https://www.nytimes.com/2017/07/31/business/dealbook/sorkin-china-starbucks.html
Starbucks Reports Record Q2 FY17 Revenues and EPS. (n.d.). Retrieved October 13, 2017, from https://investor.starbucks.com/press-releases/financial-release/2017/Starbucks-Reports-Record-Q2-FY17-Revenues-and-EPS/default.aspx
Team, T. (2016, September 19). Let’s Look At Starbucks’ Growth Strategy. Retrieved October 13, 2017, from https://www.forbes.com/sites/greatspeculations/2016/09/19/lets-look-at-starbucks-growth-strategy/#2fdd92243d71