MKTG2000
Submission # 1
Situation Analysis
Starbucks China

Name: Chen Zheng
Lillian Tepera

Market Need
As the birthplace of tea production, China already has a tea-drinking culture that is thousands of years old and tea-related trade in China has had huge impacts on its modern economy. Starbucks is not likely to gain much market share by forcing coffee-oriented drinking products upon Chinese culture. Starbucks should adopt new flavoured drinks, like green tea to attract local tea consumers. Unlike American culture in which many customers prefer to take-out their food, or grab drink to-go, customers in China prefer to dine-in with friends. Starbucks coffeehouses in China are a very suitable gathering place for friends and business meeting. Coffeehouses can usually provide a large space with comfortable sofas and chairs but still allow each group of customers the privacy they need (Rein, 2012).

The Market
In recent decades, the rising middle class has become the major consumer group in China, especially in luxury and imported products consumption. Shanghai, Beijing and Hangzhou, the three cities on the top of the purchasing power ranking list, contribute millions to China’s GDP along with the growing industries of IT, finance, and other emerging industries workers (Rein, 2012). These groups of consumers not only have affordability, but also a huge demand and acceptance for western products and the lifestyle. The majority of these people work at an international scale. Some of our target consumers have educational backgrounds from the West or come from overseas. The expansion and strategies of Starbucks are specifically aiming at this target market, which allows Starbucks in China to set up the pricing slightly high compared to the same product in the U.S. In the downtown areas of these cities, Starbucks outlets should be easily found at shopping malls, office buildings and major intersections that are the high traffic areas of young professionals. This demographic distribution makes Starbucks very approachable and accessible for its target market. Consumers are able to grab a cup of coffee before work, order some snacks besides their workplace, have a great teatime during shopping and also have a convenient space for a small business meeting (Sandhom, 2014).

Macroenvironmental Analysis

Political
Penetrating the Chinese marketplace may present unique challenges such as obtaining the correct authority to sell and market in China. China is known for its restriction on international, especially Western, companies from entering their marketplace (Economy, 2003). For example, corporations such as eBay, Google, Facebook, and YouTube are restricted in China. For a large Western corporation such as Starbucks looking to enter the Chinese marketplace, political acceptance may be limited.

Economic China has experienced a tremendous growth in their economy in the past two decades, growing at an average of 8% annually. Economic growth does not seem to be slowing (Economy, 2003). This presents interesting implications for international businesses looking to penetrate the Chinese market. The increase in residual income among Chinese citizens presents many opportunities for high-end international companies.

Social Due to the large economic growth in China, the standard of living for many Chinese citizens has improved dramatically. Thousands of Chinese citizens have been lifted out of poverty and will continue to experience improvements in their life as the Chinese economy continues to grow. Chinese first-tier cities are experiencing growth in population as more jobs become available in large cities. The large population in China, especially with their growing income, is an opportunity for many international firms looking to tap into the Asian marketplace. China’s culture is very tea-oriented (Peterson, 2014). This may be challenging for Starbucks, as Starbucks is primarily coffee-based. However, Starbucks may consider