*Note: The following article is part of my IB Extended Essay.
ABSTRACT
The question under investigation in this paper is “To What Extent Should Starbucks Glocalise its Products in China?”.
The investigation explores the aspects and implications of glocalisation, a common approach used by global conglomerates, as exemplified by one of the world’s most successful brand (Haig 87), Starbucks. This paper focuses on the impacts of international marketing in relation to Starbucks’ original corporate culture, applying a range of business theories and models in order to reach a tentative conclusion at the end of the report.
The report is structured mainly according to the marketing mix, with a range of weightings on the significance of each component, and sometimes merges two inherently similar elements of the marketing mix to be conclusive. All sections blend primary and secondary research with a focus on evaluating the advantages and disadvantages of Starbucks’ glocalisation of its products in China. Both internal and external factors are identified in the report’s final sections.
This research concludes that many glocalised elements of the marketing mix negatively threaten Starbucks’ brand image by diluting the global conglomerate’s brand image and thus potentially reducing consumer loyalty. In particular, bribing through expensive, over-packaged items that are considered vices of the Chinese society hurt the friendly-community-philosophy that was central to Starbucks’ original business model. The introduction of such glocalised products fails to comply with Starbucks’ Corporate Social Responsibility (CSR) and Environmental Mission. Furthermore, primary research also shows that a noticeable portion of the consumer segmentation do not tend to purchase glocalised products. From my secondary research, I found Starbucks China’s targeted segmentation to be the urban youth who prefer Westernised rather than glocalised products. Such factors conclude that Starbucks should be cautious when it considers further glocalising, which potentially would damage its fundamental corporate objectives and philosophy.
INTRODUCTION
Starbucks, a “postmodern brand”, is also labelled as “an archetypical brand” that turns a “physical”, “tangible” business idea into a “big”, “abstract” concept. (Haig 85) From a two- dimensional brick-and-mortar store to a three-dimensional brand with high “emotional power”, (Haig 87) Starbucks has thrived and grown with larger economies of scale.
Since its birth in 1987, Starbucks has continuously expanded into new markets like China to become one of the world’s most recognised brands within 26 years (Haig 87). While Starbucks’ marketing success is “legion” since the “gourmet coffee shop” had transformed into a “mainstream consumer brand”, (Thompson and Arsel 631) it has, in many ways, strayed from some of its mission and founder Howard Schultz’s original vision, in the China market, where the “new middle class” emerge as China’s powerful consumers (Forbe). One significant factor that leads Starbucks China to stray from Starbucks’ global brand image at times is “glocalisation”, which is the hybrid product of globalisation and localisation that may be inevitable in today’s global market.
The phenomenon of glocalisation occurs largely due to the increasing competition between businesses of the same industry (One Planet Education). However successful Starbucks may be in terms of its high growth potential and strong revenue figures in the China market, one may still question the positive and negative implications of the super-brand’s glocalisation approach. For instance, Pulitzer Prize winner Friedman writes that “glocalisation is the product of freedom” and should “enhance society” instead of “overpowering them”. (One Planet Education) Arguably the political and social climate is the opposite of Friedman’s proposal, since China has yet to become liberal, for instance, in trade (China Context), and that patriotic rebellions against Starbucks’ contribution in westernising China exemplifies an “overpowering” influence (BBC).
Although the coffee company has apparently gained entrance into this traditionally tea-drinking market by introducing tea-themed products including green tea cheesecake (glocalising its products to fit traditional Chinese culture), (CNBC) after it has created the demand for the “rising middle-class consumers” (Forbes), Starbucks needs to step forward to sustain consumer loyalty. Would glocalisation still be the right approach? A study of Starbucks’ current glocalised marketing approach can provide insight into this investigation, begging the question: “To What Extent Should Starbucks Glocalise its Products in China?”
STARBUCKS’ BRAND IMAGE AND PRODUCTS: “THE ‘GLOBAL’ COMPONENT”
In order to evaluate Starbucks China’s glocalised marketing approach, one should refer to Starbucks’ brand objectives and concepts that is crucial in defining its brand image. Founder Howard Schultz, in his book Pour your heart into it, shares his obsession with the Italian café culture with readers, that those coffee shops in the neighbourhoods were meeting spots, places where neighbours chat and relax. (31) Schultz wanted to bring the coffee-making techniques to the United States, along with the furniture, the atmosphere, and culture in general. (Schultz 31) Schultz cited sociologist Oldenburg, whose central philosophy in his work “The Best Good Place” can be summarised as people need an informal public space where they can let go of the thoughts of work and family, and casually chat with friends. (82) This theory has become one of the founding principles of Starbucks, which uses a lifestyle-oriented approach. (Cheng 20) Therefore, Starbucks’ products not only involve the physical food and drinks, but more significantly, include the feel-good factors associated with the “Starbucks Experience” such as the people component of the marketing mix. (Cheng 12)
In accordance with Say’s Law, “supply creates its own demands” (Library of Economics and Liberty Website), the success of Starbucks in its earlier years had created America’s new demand, transforming the previously uncommon coffee into a habit and daily necessity for Americans, and later, for the world. (Schultz 80)
In addition, Starbucks is very keen on Corporate Social Responsibility (CSR). Not only has Starbucks vowed to contribute to society through donations and other ethical sources, it also promises to reduce its environmental impacts. (Starbucks’ Official Website) In countries including the U.S. and China, customers who bring their own reusable water bottles get a certain discount. (Starbucks’ Official Websites, U.S. and China) This is in accordance with Schultz’s original vision for his company, of being a socially responsible, ethical and warm business organisation. (GreenBiz Website)
STARBUCKS IN CHINA: AN OVERVIEW
As of September 2012, there were 408 Starbucks coffee shops in China and the number is constantly growing. (SBUX 2012 Annual Report 10) The business organisation also stated in its 2012 Annual Report that it is “on track to reach our goal of 1,500 stores” in China, which “continues to be a significant growth opportunity” for Starbucks, by the year 2015. (32) According to Forbes Insights, the “new consumer-driven” China market, with its tantalising potential customer population of 1.3 billion and estimated total worth of $1.7 trillion, “presents challenges as serious as its market is large”. (3) In China, one cup of tall-sized Starbucks Latte or Cappuccino costs around RMB 32, affordable only by the rising middle-class, which is precisely the segment to be targeted by Starbucks by creating a “third place” outside of homes and workplaces (Schultz 173). According to recent figures from the World Bank, the average annual income in China is $5,740 (approximately $15.72 per day), 25% of which is spent on food consumption. (CNBC) From the analysis above, Starbucks China makes the Starbucks brand more well-known in this foreign market, but contaminates the brand image by targeting to the more financially capable segments instead of general community members.
Although the quantitative appraisal highlights the positive aspects of Starbucks’ performance in the China market and shows some facets that are distinguished from Schultz’s original vision and arguably the business organisation’s mission statement of serving “one community at a
time” (Starbucks official website), qualitative aspects focused in this report demonstrate more disparities. As a marketing-focused paper, this essay first identifies relevant elements of the marketing mix’s manifestations and implications (in terms of differences from the original vision and / or mission) in the China market. While external factors are identified within each sector, a PESTEL analysis combined in a SWOT analysis table will be included in a later section of this report.
GLOCALISED MARKETING APPROACH: PRODUCT PORTFOLIO
According to Pulitzer Prize winning New York Times Columnist Thomas Friedman, “healthy” glocalisation involves “a culture” that not only “naturally fit[s]” into another culture, but also “enriches” that culture. (One Planet Education) To achieve this goal, a business corporate culture, like that of Starbucks, should “resist those things that are truly alien” and “compartmentalize” aspects that can be “celebrated as different”.
Cultural barriers to entry were not easy to conquer even for this super-brand. Although strong global brands including Starbucks do not require a “complete brand makeover to compete”, Starbucks’ success supports that even those super-brands may ‘benefit from a few nips and tucks”. (Forbes 5) Its first store in China opened in 1998, when it was still very uncommon for Chinese people to drink coffee instead of tea. (Baike) As part of its marketing approach to “win the hearts of local consumers”, Starbucks has “glocalised” many of its products (Venkatraman and Nelson 1012), as observable from the Starbucks China’s official website, by altering “some brand attributes” to present “alignment with local Chinese culture and local Chinese tastes”. (Forbes 5)
Chinese New Year products such as “peach blossom tea latte”, Moon Festival products including coffee moon cakes, Dragon Boat Festival product “Zongzi”, and regular products targeted at the Chinese population such as tea products have been introduced. (Lab Brand) This aspect is not necessarily negative, but serves to demonstrate how brand image may change in different markets. Later, Schultz commented during an interview that growth as a strategy becomes “somewhat seductive” and “addictive”, but growth “should not, and is not, a strategy”, but is a “tactic”. (McKinsey) According to Hoang, a “tactic” is a “short term method used to achieve an organisation’s tactical objectives”, whilst a “strategy” refers to “any plan of action to achieve the strategic objectives of an organisation”, which, in other words, highlights a longer term. (41) By thinking that growth is short-term instead of long-term, Schultz has started to hold a rather different perspective from that he had years ago, when the firm was established. Then, his ambition was only to have the coffee shop across the United States in a not-so-short-term.
ABUSE OF LOCAL CUSTOMS AND CORPORATE SOCIAL RESPONSIBILITY
If glocalisation is a baby born to globalisation and localisation (One Planet Education), then it may have the advantages and disadvantages of its parent concepts. Many customers interviewed at Starbucks’ Wanjia Shopping Centre stated that they thought the green tea cheese pie launched to celebrate the Chinese New Year with the oriental element of green tea was far too sweet and oily. Observational research demonstrates that green tea cheese pie was originally a product in the China Starbucks market, but due to unknown reasons that staff are unwilling to disclose, is no longer sold. The reintroduction in the market during the Chinese New Year Festival, based on the customers’ feedback, was overall unsatisfactory. The combination did not result in having Western products with local flavours that attracted local customers, based on the informal interviews with 10 customers from China and abroad. Meanwhile, Manager Liu from the same store said that Chinese New Year products were inspired by the Chinese traditional culture, which was not originally intended by Starbucks China’s marketing department. Liu said that she personally considered that Starbucks prefers glocalisation across the globe. The intention of introducing Chinese-culture-oriented products during the festival periods is to blend Chinese culture with Starbucks’ original Western products. In order to achieve this goal, the shop employees introduced the cultural elements to each customer who visited the store. Nevertheless, the results were not as satisfactory. When asked how well the Chinese New Year merchandise sold, Liu admitted that those glocalised products did not sell well at all. Only about 20 products were sold each week (for approximately 10 weeks in January and February), despite shop assistants and baristas’ efforts in marketing them to the customers.
Hui Zhao, a graduate from a top business-school in China, who regularly purchases coffee from Starbucks and its rival companies in China, as well as Starbucks in the U.S., commented, “Starbucks’ glocalisation has been merging the most ugly facets of Chinese culture in the modern society into the company’s original corporate culture.” He urges us to evaluate its glocalised products.
What Manager Liu from Starbucks’ Shenzhen store admitted, “not easily recognised by either Chinese or foreign customers as Chinese-culture-inspired”, has been condemned by Zhao as brand dilution and Corporate Social Responsibility (CSR) contamination. Ironically, while Starbucks’ global Environmental Mission Statement is:
Recognise that fiscal responsibility is essential to our environmental future.
Instil environmental responsibility as a corporate value.
Encourage all partners to share in our mission. (Starbucks’ Official Website, UK),
In China, due to the focus on glocalisation strategies and tactics, one of the most environmentally-unfriendly contemporary cultures is blended into this otherwise mission- fulfiling company: tendency to bribe senior officers with expensive gifts, that are usually heavily-packaged. (China Context) Those over-packaged Starbucks moon cakes are sarcastically assimilating the corruptive social fault. (Xinhua News Agency)
Another business school graduate and “white-collar” employee who would be part of Starbucks’ targeted segment in China, Ms. Liu also suggested that Westernised moon cakes with coffee flavours are uncommon among local people in terms of taste, “they are neither attractive in terms of flavour nor the level of loyalty to tradition people look for when selecting moon cakes for family reunion purposes during the Festival.” According to Liu, families she knows would not purchase from the Starbucks’ moon cake product line. The product portfolio is untraditional and not particularly tasty, lacking the symbolic level demonstrated by cheaper moon cakes with purely local ingredients such as yolk, produced by Chinese foodstuff companies like Daoxiangcun. Whilst a piece of a typical Starbucks’ coffee-flavoured moon cake would cost around RMB 60.00 (Starbucks Official Website, China), a piece of Daoxiangcun moon cake only costs RMB 5.00.
Starbucks employees who do not wish to be named also said that the main customers for moon cakes are Chinese nationals, and hardly any Westerners purchase those products, suggesting that most people buy those cakes as gifts to impress business partners, usually executives, by selecting the more highly-priced moon-cakes. Liu agreed, asserting that, “those people are paying for the fashionable style by showing off Western tastes. Honestly, no one, Chinese or non- Chinese, would seriously like those moon-cakes, hybrid products of Western flavours and despised Chinese bureaucratic customs.” The countless layers of packaging cover the original scent of moon-cakes, metaphorically the beauties of Chinese culture, and become mountains of wastes after the Festival. It is like over-applying makeup on a six-year-old, whose natural beauty would be disguised. (GreenBiz Website)
In addition, upon reviewing the core principle of Starbucks’ focus on Corporate Social Responsibility (CSR) and the Environmental Mission Statement above, one may easily find the inconsistency between a socially-responsible community “Third Place” based on the Italian model, and the negative aspects introduced by the hybrid product line born to a blend of two potentially incompatible cultures. The Starbucks brand can face problems like dilution should major media companies report on this example of heading towards the wrong direction in terms of CSR and Environmental Mission. (China Context) Moon cakes have now become a status symbol in the contemporary Chinese society. (Culture Briefings Website) The price to be paid by Multinational Corporations (MNCs) like Starbucks by compromising to this social custom through glocalisation could be the lost of consumer loyalty and brand dilution.
PROCESSES AND PEOPLE: SERVICES
From Chinese social media sites including Weibo, I have found much customer complaints about Starbucks’ Fulicheng Store in Beijing offering dysfunctional sockets and slow Internet services that apparently intend to “shoo customers away instead of letting them enjoy the experience”. In addition, Starbucks’ Chinese employees are often found chatty amongst themselves and oftentimes unresponsive to consumers’ requests, contrary to Schultz’s vision of a friendly community shop environment. Striving to improve this, Starbucks China recently started asking for surnames of customers as its shops in Western nations does with first-names, to add a sense of familiarity. However, Zhao observed that in 90% of the occasions, employees would forget names and the situation became embarrassing.
Personally, I attempted to interview the marketing team of Starbuck China by visiting its headquarter office in Beijing, later calling and emailing the team. However, after stating my purpose of visit and requesting for assistance, I was treated as an unwanted advertiser whom clerks rudely shooed away, saying “we don’t want you here!” This demonstrates great deficiencies of Starbucks’ service attitude in China.
REASONS WHY STARBUCKS SHOULD CONSIDER LESSENING ITS GLOCALISATION
Firstly, China’s shift towards a tertiary-industry-oriented-market is yet to be developed. Services may not be up to the global Starbucks standard. Due to its demographic features, this populated country cannot be easily occupied with community-centred stores where employees know frequent drinkers by first names.
Secondly, the Chinese rising middle class has pushed Starbucks, as it attempts glocalising its products, to transform its emphasis on community and coffee as daily necessity to a “Xiaozi trend”1, a desire amongst the Chinese urban youth to ‘express individuality and status’ through participating in Western consumerism” (Colangelo 29). In this regard, Starbucks’ globally offensive, rather than defensive, marketing approach has turned more passive in China in order to meet the needs of the Xiaozi class profitably.
Thirdly, to align with local customs or culture, Starbucks has, to certain extent, failed to meet its CSR and environmental mission to introduce over-packaged products into its product portfolio. While this may not be necessary, it is a way to help Starbucks continue its high market share and market leadership in the China market, since rivals such as Costa have also launched similar products. (Costa China’s Official Website)
CONCLUSION
Through comparison and contrast, Starbucks’ glocalised marketing approach in China may lead to potential brand contamination, since existing brand dilution has attracted media attention and discouraged loyal customers. Although Starbucks China succeeds in creating a demand for the coffee-culture and leading a trendy lifestyle emotion-wise, it largely is unsuccessful in creating a sense of community amongst China’s “Xiaozi” urban youth, as demonstrated through its marketing mix, and therefore failing to stay coherent with Starbucks’ philosophy, marketing concept, and brand image guidelines. As the website Lab Brand Innovations suggests, too much localisation can become “a detrimental strategy” for global conglomerates, and lead those companies to lose both their “foreign” and “international appeal”.
From Italy2 to the United States, to emerging markets including China, Starbucks has altered significantly from Howard Schultz’s original vision. The ironic indifference towards Starbucks by the Italians and global coffee connoisseurs may be set aside by those who view Starbucks’ success worldwide as the successful big picture. However, brand dilution, partly due to glocalisation in China, is a serious issue that may ruin the world’s most successful brand to certain degree, financially and non-financially. It is recommended that Starbucks find the most comfortable extent to which it could balance glocalisation and localisation through carefully evaluation, especially what elements to “glocalise” so that local “bad” customs are not included.
2 Italy is the main inspiration for Schultz, but ironically, Starbucks has not yet managed to win the Italians’ favour after an unsuccessful attempt to enter the Italy market. (CNBC)
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*此文来源于我的IB论文。
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