Undeniably, there are a handful of authentic “must-see” opportunities. However, I present to you one – Starbucks in China. The way colossal companies are granted free rein in a totalitarian regime evokes memories of an era when monarchs conferred exclusive rights for fur trapping. Starbucks possesses the product, the connections, and with some agile marketing strategies, they'll establish pervasive branding before you know it. It'll be match, game, and set – if it isn't already decided.
China stands as the rising economic giant in the world today
yet it is not an open market for foreign enterprises. Numerous companies, both American and international, would argue the contrary. China has developed a reputation for being somewhat lenient in its application of intellectual property laws. Technology firms, especially, such as Microsoft, have expressed frustration at witnessing their creations copied in China. Golf club makers, music producers, film studios, and many other industries can also be added to the list of grievances.
Then we have Starbucks, our colossal American coffee enterprise
I’m observing a franchise from my office at ICMediaDirect.com in the Empire State Building. It’s perpetually bustling, teeming with tourists. Did you know there's a franchise located at the Great Wall? Were you aware that Starbucks revealed plans for a store in Beijing’s Forbidden City, causing considerable outrage among the locals? They initially resisted but rapidly acclimated. (I suppose the Chinese are no different from the rest of us.)
What distinguishes Starbucks from Calloway Golf in establishing such a business model? A product that is irreplaceable, quite simply. You can't replicate coffee beans on a large scale. That is the foundation that assures Starbucks' success in mainland China. Their CEO, Howard Schultz, has proclaimed China to be their “top priority” regarding expansion.
Schultz and Starbucks are not reticent about their ambitions in China. Presently, they operate around 11,000 stores across 37 nations, with approximately 375 situated in China. By 2008, Starbucks anticipates that 20% of their revenue will originate from their Chinese locations. Their long-term vision includes 30,000 stores, with roughly 8,000 in China.
This is a buildup of truly monumental dimensions
Recall that China is, perhaps nominally, a Communist state. While certain communist economic strategies may have waned, the officials in Beijing have firmly clung to their authority. Starbucks has been fully embraced, with open doors, red carpets, and welcoming committees – the entirety of it. This isn't merely due to a fondness for their CEO; it's because their product, its supply chains, and everything related cannot be imitated.
I could ponder this indefinitely, but there's ample evidence that the scales are tipped in favor of the Seattle-based coffee brand. Recently, Starbucks won not one, but two lawsuits in China defending its intellectual property. Some resourceful and evidently astute locals attempted to replicate aspects of the Starbucks brand and sell coffee to their fellow citizens. No luck there. Chinese courts ruled in favor of Starbucks.
I wonder if the local coffee vendor believed he had a chance? Did the Chinese judge deliberate deeply on the merits of both sides? Were economic authorities in Beijing interested in how this case would unfold? There was little suspense. A savvy CEO like Schultz wouldn’t publicly declare such ambitious targets for success in markets like China without knowing he could achieve them beforehand. Someone in Beijing is fond of them, or perhaps appreciates the revenue they bring in.
This situation brings to mind a book I recently perused about the notorious pirate Captain Kidd. In essence, the English monarchy employed Kidd to plunder pirate fleets for profit. While he sailed the seas, political winds shifted, and he became a scapegoat – his “trial” was a sham. The authorities needed a swift conviction, and Kidd paid with his life. While the stakes may not have been as high, the outcome was no less certain when China ruled in favor of Starbucks against local imitations.
China is gravitating towards Westernization, or a more capitalist framework. The increasing desires and expectations of a consumer-focused society facilitate Starbucks’ mission, particularly since their competitors are minimal. With suitable agreements secured in Beijing, it’s now time for Starbucks to present themselves to the Chinese populace. Here's how they’ll triumph:
Starbucks outlets will act as Internet hubs
where social interaction and music downloads will be central to the Starbucks Experience. Advertising firms, such as ICMediaDirect.com, will execute seasonal online promotions (similar to this past Christmas season’s Red Cup initiative in the US) for Starbucks to align the brand with chic culture. Cross-promotion with music downloads and entertainment websites will be key.