Starbucks

Trident University International

BUS 401

Winter 2011

Module 2 (CA)

William C. Armstrong

Dr. Yi Lang

4 February 2012

STARBUCKS, THE FORBIDDEN DRINK

Starbucks opened its first stores in China in 1999. One of those first stores was an outlet store located in the Forbidden City, until 2007 when it closed after a commentator from a popular news station launched an on-line campaign by criticizing the shop saying it “Tramples over our Chinese culture.” This campaign grew in popularity leading to 500,000 people signing an on-line petition to force them out. Starbucks was offered a chance to remain providing they sold their coffee through a store operated by other brands and without being identified as Starbucks. Obviously, Starbucks kindly declined and packed up shop. It would appear that the “Authorities” have used a renovation of the commercial area of the Forbidden City as an opportunity to force the world’s biggest coffee-shop operators out.

According to an article in the Economist Newspaper, “Some American business people fear this indicates that the Chinese government is behind the campaign and that forcing Starbucks out of the Forbidden City is the opening shot in what may become a long and broad attack on leading American brands operating in China.” This, they say, is in reaction to the increasing amount of China-bashing taking place in America, especially in Congress1. Whatever the fear may be, the end result was Starbucks backing down and closing their shop.

Despite the setback, Starbucks is still in full march on their global strategy to enter China’s market. With 690 outlets in China and Taiwan, the international business is "robust" as operating margins expanded to 7.2 percent from 6.6 percent according to their website. In the past four or five years, Starbucks has been active in purchasing local equity back from partners in China. Howard Schultz, chairperson of the coffee chain, said future success in China would...