Coventry University Research Proposal Sample
Weaning China off Tea: Effectiveness of Starbucks’ Market Creation/Disruption Strategy in China
Starbucks is an American premium, coffee retail chain with operations across 62 countries, both directly through its 19,767 or through licensed stores and grocery outlets. The company is involved in purchasing, roasting, marketing and retailing specialty coffee (whole bean and handcrafted) and other related products, including tea and fresh food items. Starbucks has been and remains one of the world’s most successful brands, but prior to its entry into China, its operations were largely concentrated in North America, Europe, and Japan. China presented a unique proposition for Starbucks, because of one key cultural factor, i.e. a culturally entrenched preference for tea. China’s use of tea goes back 17,600 years ago, and many Chinese consumers prefer tea for its perceived/actual health benefits. The country is home to highly competitive and successful brands of tea, including Oolong, black and green tea (Wang, 2013).
On the contrary, coffee was introduced in China barely three decades ago and still struggles against cultural indifference towards it. It is against this backdrop that Starbucks set up its first store in 1999, at which time it was thought the company would fail, not least because other leading western brands such as Dunkin donuts and Wal-Mart had previously failed to make a mark in the market. Despite the widespread expectations that the venture would have failed, Starbucks has been hugely successful in China. By the close of 2014, the company had 570 stores (with higher per store revenues than the US) across 48 cities. To succeed, Starbucks positioned itself as an upmarket, aspirational purchase, as against a threat to the entrenched tea culture. It also introduced green tea flavoured coffee to tap into the tea-loving market, and most importantly, the company focused on the emerging middle classes, youthful and open to western products, for whom it effectively created a new demand/market (Wang, 2015; Yip & Hult, 2012).
Preliminary Literature Review
This review explores new product adoption/diffusion and product lifecycle literature, with an emphasis on the creation of new demand for an existing or new product. It includes the theories of disruptive market creation, strategies and barriers.
The theory of disruptive innovations and/or disruptive marketing is largely applied to the field of technology, but it is equally applicable to other innovations. According to Kim & Mauborgne (1999) direct competition involves considerable competitive rivalry, which in turn makes for increased costs, lower profit margins and more rapid onset of the maturity and decline stages of the product lifecycle. While most firms focus on out-competing their rivals, there is limited strategic flexibility in mature or saturated industries, which means that increasing market shares, sales, and other outcomes comes at an immense increase in costs. Creating new demand or market calls for a different pattern of strategic thought, which concentrates outside the established boundaries, and redefining new rules of competition. Firms can create new markets by drawing on the strengths of substitute industries, drawing from strategic groups in industries, analyzing the chain of consumers, borrowing from complementary service and product offerings, functional and emotional buyer groups and looking at time. Gecevska et al. (2010) draws on the product lifecycle theory to understand the intensification of competitive rivalry envisaged by Kim & Mauborgne (1999). Gecevska et al. (2010), new products move from the conception of the idea, market introduction, growth, maturation and decline, each of which requires different strategies. The product introduction stage is characterized by low consumer adoption/awareness, and this stage is identical to the introduction of new product in an established industry and the introduction of a completely new product without existing demand.
The introduction of coffee in China faced non-existent demand three decades ago, but while companies such as Nestle entered the market and created some demand, the arrival of Starbucks once again faced a market without a pre-existing demand for the type of product that Starbucks offered. The strategic problems involved in the market creation and considerable. Roger’s model of innovation diffusion requires that it meets five basic criteria. The products must offer a relative advantage over the existing products or in the existing set of circumstances, which can be a challenge for products such as food, which are heavily influenced by cultural factors. Crucially, the products should be compatible with the past experiences, cultural preferences, needs and values of the market. While incompatible products may still be adopted, the process will not be as rapid and easy as products that are consistent the market’s expectations. The product should also be simple and easily used, and lend itself to testing on a limited basis to determine if it meets the expectations of the market. Finally, the market should be capable of observing results of the using the consumption.
Perner (2011) discusses some of the issues of product diffusion in Roger’s diffusion model from the perspective of consumer psychology. According to perner, consumer decision-making is predictable and shaped by multiple factors and stages, which include the evaluation of the aspects of Roger’s innovation diffusion model. The process begins with information search and analysis, which is influenced by culture/subculture (knowledge, belief systems and language, etc.). Culture is a particularly difficult aspect to manoeuvre, not least because culture is comprehensive (comprises multiple aspects that must fit), socialized overtime, manifested with certain specific boundaries of accepted conduct, subconscious and may be static or dynamic. The extent of variations in culture, determine the likelihood with which many aspects from different cultures are likely to be compatible, and in the case of Starbucks, the differences in oriental and western cultures is considerable and cuts across language, food, and dress among others. This is perhaps best captured by Hofstede’s cultural dimensions they, which provides that cultures differ in five key ways. These include gender equality, collectivism/individualism, power distance, future orientation and uncertainty avoidance (Luger, 2009; Perner, 2011). Further, the successful creation of new demand must utilize the role individual, family decision-making, group influences, perceptions, attitudes and learning.
Other literature on creation of new demand for a new or existing product across different cultures, as well as literature on international marketing and business, tend to emphasize the strategic, sociocultural and political barriers that Starbucks had to navigate. These works include Gelfand & McCusker (2002), Rugman & Collinson (2012) and Perner, (2011). According to Gelfand & McCusker (2002) for instance, oriental cultures are high context, while western cultures tend to the low context, with these aspects affecting many areas of strategy, including communication and implementation. On the other hand, Rugman & Collinson (2012) emphasizes the differences in international strategic environments that are absent in domestic markets, which affect everything from the strategies used to the repatriation of earnings.
Research Questions & Objectives
Methodology and Research Methods
Research strategy and underpinning philosophy
This study will seek to determine whether the demand for Starbucks products in China existed before the company was established or because of the company, as a way of identifying the extent of disruption of the market caused by Starbucks. To achieve this purpose, this study would most rely on qualitative data, drawn from both secondary and primary research. The underpinning philosophy for this study is the reasoned action theory. The reasoned action theory provides that human beings think carefully and are aware of their own behaviors and attitudes. Their actions are most a consequence of thinking and decision-making. This means that it is possible to determine the underlying reasons for any actions, behaviors, and attitudes. Effectively, this means that by understanding what people think through this study, it is possible to identify the reasons why they prefer Starbucks (if at all) and based on this, it is possible to determine just how disruptive the Starbucks has been in China.
The proposed study would rely on a descriptive design. A cross-sectional approach has been preferred because the goal is to give a snapshot of Starbucks’ customers at a certain point in time as against overtime. Other than a descriptive design being simple and easy to apply, it is also cost-effective. Compared to a longitudinal research, a cross-sectional approach makes it easy to assess more aspects of the consumer, and it is possible to determine some factors over time, without having to follow respondents for a period time, even if they will be willing to cooperate.
A search of the internet using search engines (including using Starbucks’ website and annual statements), as well as scholarly databases such as Google Scholar and Business Source Premier will be done using keywords/phrases such as Starbucks strategy in China and Reasons for Starbucks’ success in China. The researcher(s) will modify the search strategies according to the results. Upon every search, most relevant, recent and credible sources (based on the publisher’s credibility) and published later than the year 2000 would be selected for analysis. The researchers would then read through and analyze aspects of strategy and customers perceptions of Starbucks in China. A phenomenological content analysis method will be used to analyze the content of the data.
This study would also include the collection of data from the field i.e. as against relying only on secondary data, because the situation on the ground may have changed materially since the time when secondary data sources were completed. For example, there may be a new customers as Starbucks, who have different reasons why they chose the company, different from what other consumers may have thought a few years ago. To obtain primary research, a survey of Starbucks patrons at one large Starbucks’ store, would be conducted, using questionnaires and/or interviews. A questionnaire will be prepared and piloted. Potential respondents would be approach randomly, informed about the study and asked to participate. A systematic random sample of 55 Starbucks’ customers in China would be chosen from a pool of those who agree to participate. Questionnaires will then be dispatched to them by email for completion. Those who prefer phone interviews would be interviewed by phone or Skype, and interviews will be recorded and transcribed immediately after the interview is completed.
The researcher would pilot the questionnaires and will either conduct the study by themselves or recruit and train research assistants to ensure that instruments used in the study are applied consistently for higher reliability. However, the sample would be obtained from one Starbucks’ store in China (out of a possible 570), which means that the results would lack external validity and power for generalizability. This should not be a big problem since the purpose of a qualitative study is to understand a phenomenon, not necessarily describe or generalize about the population. Lastly, given the scale of China as country (population of 1.2 billion) and the number of Starbucks stores in the country, it may be necessary to conduct further studies in future in order to develop a full picture of Starbucks’ strategy.
Planning and Resources
Other than stationary, it may be necessary to recruit and train research assistants on the instruments that would be used in the study, data collection and analysis procedures. This is important to ensure reliability and replicability of the study because there would be no variations depending on the persons administering the questions. Other resources may include a computer with a word processing software to be used for content analysis. The Gantt chart below gives the schedule of activities.
Creswell, J., 1998. Qualitative inquiry and research design: Choosing among five traditions. Thousand Oaks: Sage Publications.
Gecevska, V., Chiabert, P., Anisic, Z. & Lombardi, F., 2010. Product lifecycle management through innovative and competitive business environment. Journal of Industrial Engineering and Management, 3(2), pp. 323-36.
Gelfand, M. J. & McCusker, C., 2002. Metaphor and the cultural construction of negotiation: A paradigm for theory and research. In: Handbook of cross-cultural management. New York: Blackwell Publishing.
Kim, W. C. & Mauborgne, R., 1999. Creating New Market Space. Harvard Business Review.
Luger, E., 2009. Hofsteede's Cultural Dimensions. Boston: GRIN Verlag..
MarketLine, 2014. Starbucks Corporation, New York: MarketLine.
Pascal, J., 2010. Phenomenology as a Research Method for Social Work Contexts: Understanding the Lived Experience of Cancer Survival. Currents: New Scholarship in the Human Services Vol 9, Number 2, pp. 1--23.
Perner, L., 2011. Consumer Behavior: The Psychology of Marketing. [Online] Available at: http://www.consumerpsychologist.com/[Accessed 12 Oct 2014].
Rogers, E. M., 2003. Diffusion of innovations (5th ed.), New York, NY: Free Press.
Rugman, A. M. & Collinson, S., 2012. International Business (6th Ed). London: Pearson Education.
Social Research Methods, 2009. Social Research Methods. [Online] Available at: http://www.socialresearchmethods.net/kb/convdisc.php[Accessed 13 Nov 2014].
Starbucks Corporation, 2015. Starbucks. [Online] Available at http://www.starbucks.com/[Accessed 3 April 2015].
Wang, A., 2013. Health Benefits of Oolong Tea, in organic facts. [Online] Available at Retrieve from http://www.organicfacts.net/health-benefits/beverages/health-benefits-of-oolong-tea.html.[Accessed 22 April 2015].
Wang, H. H., 2015. Five Things Starbucks Did to Get China Right. [Online] Available at: http://www.forbes.com/sites/helenwang/2012/08/10/five-things-starbucks-did-to-get-china-right/[Accessed 22 April 2015].
Yip, G. & Hult, T., 2012. Total Global Strategy. New York: Pearson Education.
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