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Starbucks in China Essay Why did Starbucks fail in the Forbidden City? Zane lee (Ziang Li) ESLI PMP Why did Starbucks fail in the Forbidden City? Introduction Nowadays, economic globalization is becoming an irreversible tendency; therefore, different multinational corporations always want to extend their branches to other countries, especially for the food companies, such as, McDonald’s, Starbucks, and Burger King. In recent years, the world has also witnessed that China’s economy has developed to a higher level since China has reformed and opened for more than 30 years. According to Lardy, in the middle of 1990s, China had become one of the largest world’s trading nations (Lardy, 1995, p.1). Now, Chinese customers have more desire and abilities to enjoy western food. Therefore, many multinational food corporations, such as, Starbucks, KFC, and Krispy Kreme, want to enter in Chinese market, and these companies treat China as an emerging market because of the development of Chinese economy and consumption ability. However, China has thousands years of history, and its market situation is complicated. It is hard for western companies to be adapted to the situation. Now, some western food companies, to some extent, have achieved success in China, such as, Starbucks, KFC, and McDonald’s. There were also many companies, such as Dunkin, Krispy Kreme, and Burger King failed in China (Rein, 2012). Starbucks is one of the few that has successfully entered the Chinese market, but it is still facing many challenges, and it also failed in the most traditional areas in China, such as in the Forbidden City. In the past ten years, Starbucks has achieved much success in general business areas in China. Starbucks is an international coffee retailers which was founded in the early of 1970s in Seattle, U.S. It sells both a variety of coffee and other related beverages all over the world (Marketline, 2012, pp.3-4). Starbucks entered in Chinese market in 1999 (Wang, 2012, para.3). As the Trefils team (2012) shows that with the development of Starbucks, â€Å"Starbucks has successfully opened more than 570 stores in 48 cities since it first entered China twelve years ago. Building on this momentum, it plans to open 1500 stores by 2015† (Trefils team, 2012). To achieve the succe ss,  Starbucks’ marketing strategies have exerted a big influence in this process. According to Rein (2012), Starbucks introduced â€Å"coffee experience shop† to give customers an opportunity to experience Starbucks’ culture, and Starbucks developed some tea-flavor coffee to be adapted to Chinese flavor. Moreover, Starbucks chose wonderful shop location to promote its brand image and avoided using advertising or promotions to make direct conflicts with the Chinese tea culture. Furthermore, Starbucks also collaborates with local companies to spread Starbucks’ business and to reduce Starbucks’ cost (Rein, 2012). Through taking these strategies, Starbucks, to some degree, has overcame the challenges from both the traditional culture and the local competitors, such as U.B.C and Dio Coffee. However, Starbucks still failed in the Forbidden City. According to Netzley, Digantral, Wong, Tan, Hee (2011), at the Yale CEO Leadership Summit (2006), China Central Television’s news compere Chenggang Rui asked Jim that â€Å"Do you have plans to open stores in the Taj Mahai, Versailles, or Buckingham Palace?†. Half year later, Rui posted a blog in Sina blog to against Starbucks’ existence in the Forbidden City, and he thought that Starbucks existed in the Forbidde n City was a kind of erosion for Chinese culture. Even though in 2007, the internet was an infancy in China, it was growing fast. There were tens of thousands of people following Rui’s blog at that time. â€Å"In January 2007, Rui, an experienced media personality from CCTV turned this communication channel on Starbucks. The effort to remove the iconic western brand from the centre of the Forbidden City quickly became global news† (Netzleym, Digantral, Wong, 2006). Several months later, Starbucks closed the coffeehouse in the Forbidden City. By analysing Starbucks’ failure in the Forbidden City, this paper will help Starbucks to know how to control the risks, such as entering in some special areas in China, in the future and help other international companies to understand the Chinese culture. In recent years, Scholars have analysed how Starbucks can achieve success in the general areas in China. For example, Starbucks has two main business strategies: License and Joint Venture (Harrison, Chang, Gauthier, Joerchel, Nevarez, Wang, 2005, p.281), and Starbucks also uses HR strategy, which is offering good salary for staff, to maintain the quality workforce (Zhang, 2009, p.18). Scholars also have discussed some culture factors on cross-culture brand extension. For instance, â€Å"consumer s in several East Asian countries have higher levels  of self-construal. Therefore, the likelihood of brand extension success is expected to be higher in respect of these group† (Henseler, Horvà ¡th, Sarstedt, Zimmermann, 2010, p.8). Even though Starbucks’ marketing strategies made it success in general business areas in China, this does not mean that there is no potential risks for Starbucks in China. Starbucks is still facing challenges in the most traditional areas, such as in the Forbidden City, because the Forbidden City’s imperial culture excludes foreign culture, Chinese people’s nationalism could not accept Starbucks’ existence in the Forbidden City, and Starbucks’ fashion culture contradicts to the Forbidden City’s classic culture. This paper will discuss Starbucks’ failure in the Forbidden City from these three parts. The serious culture shock in the Forbidden City One of the most important reasons why Starbucks failed in the Forbidden City was Starbucks and the Forbidden City had different cultures, and they were different symbolisms. China has five thousand years history, and its traditional culture was handed down by each generation. Nowadays, Chinese traditional culture has exerted a big influence on modern business, especially on multinational companies which have set up business in China but have different cultures with Chinese. If multinational companies want to run their business to be more successful in China, it is necessary for them to understand Chinese traditional culture, especially for the company, like Starbucks, which want to set up its business in the most traditional areas in China. Starbucks’ symbol of western country could not combined with the Forbidden City’s imperial culture The Forbidden City is the symbolism of the imperial culture (Han Zhang, 2009, p.397). According to China. Org (2005), the Forbidden C ity (Imperial Palace) is setting in the center of Beijing, and it is the largest and most complete imperial palace and ancient building group in China. The buildings of Forbidden City was started to be built in 1406 and was finished in 1420. Since Ming dynasty, there had been twenty-four emperors lived and ruled China in this palace (China.org, 2005, para. 1). In the Forbidden City, yellow is the primary, and almost all roofs of buildings were decorated with yellow glazed tiles. During Ming and Qing dynasty, yellow was the color that only emperors could use. This kind of color â€Å"represents the emperor, the central figure of China, and also  represents land, the root and origin of all earthly creatures† (Han Zhang, 2009, p.397). Moreover, in ancient China, besides servants, only the people who had direct relationship with emperor could live in the Forbidden City. Therefore, the Forbidden City can be the symbol of the imperial culture. Starbucks is the symbolism of western culture. Starbucks is American company. Now, drinking coffee in Starbucks coffeehouse has become a normal living style for many American people. Moreover, Starbucks’ branches have spread to all over the world. On the one hand, according to Curtin and Gaither (2009), â€Å"In the eyes of many Chinese people, the image of Starbucks is encoded with a meaning that might convey, like many other western fast food brands which introduced from U.S., ‘America, western value’ in China† (Curtin Gaither, 2007, p.85). On the other hand, in or der to entering in Chinese market, Starbucks has developed its coffee flavours to be adapted to Chinese taste, and Starbucks also sells tea and moon cakes which are the traditional Chinese food in its coffee house (Rein, 2012). These product, to some degree, can implicate traditional culture. The supreme imperial culture of the Forbidden City excludes Starbucks’ culture. The imperial culture is a traditional Chinese culture, and it has thousands years of history. In the ancient time, normal people could not use the stuff that emperor used and also could not enjoy the food that emperor enjoyed, which means that the imperial power was supreme and had the feature of exclusiveness. According to Chiu and Cheng (2007), when Starbucks opened its coffeehouse in the Forbidden City, these traditional Chinese food were also sold in Starbucks Forbidden City Shop, and on the surface of its products, Starbucks still used its English logo (Chiu Cheng, 2007, pp.85-86). As Bzelova shows that moon cakes, which have thousands years of history, are treated as the symbol of family reunion and the round harvest moon. Initially, moon cake was invented by soldier. In Ming dynasty, the mood cake was introduced into the Forbidden City and became a kind of specialized food for emperor at one time (Bzelova, 2013). Another fact is moon cakes are usually yellow. As above mention ed, in the ancient time, only emperor could use the color â€Å"Yellow†. However, Starbucks sold the moon cakes with English logo, it was a kind of contradiction to the traditional Chinese culture. Moreover, the English logo which was painted on the yellow moon cake was a kind of contradiction to the imperial culture. Even though emperor was disappeared  for almost one hundred year and the Forbidden City had also become a tourist attraction, the imperial culture still exist in the Forbidden City, which can be revealed from the Forbidden City’s main color—â€Å"Yellow†. Therefore, selling these products by a foreign company could emerge conflicts to the Forbidden City’s imperial culture, and the imperial culture of the Forbidden City, to some degree, prevented Starbucks to run its business in the Forbidden City. Chinese nationalism could not accept Starbucks in the Forbidden City Chinese people’s nationalism could not accept Starbucks’ existence in the Forbidden City. As Miscevic (2010) defines that â€Å"nationalism† is usually used to describe two phenomena: â€Å"(1) the attitude that the members of a nation have when they care about their national identity, and (2) the actions that the members of a nation take when seeking to achieve (or susta in) self-determination† (Miscevic, 2010, p.1). Chinese people’s nationalism has hundreds years of history. In 1840, the first opium war happened in China, and Britain invaded in China by selling opium. For western countries, such as British, Spain, and France, after the first industrial revolution, their industries and economy were developed fast, and their domestic demands could not meet the requirements of their economic development; therefore, many of these countries wanted to invade to other countries to make profits, and China became one of the most important targets for western invaders. After the first opium war, China paid millions of silver for British and France and ceded territory to British. In the following one hundred year, Chinese people had experienced a series of invasions from western countries. Chinese people’s nationalism was set up during these disasters. According to He (2007), even though China is becoming more and more open, and people’s living condition is becoming more and more fortu nate, Chinese people still cannot accept that western culture exceedingly combined with Chinese culture (p.6). As above mentioned that Starbucks can be treated as a symbol of America. Even though in the history, China and America did not have direct conflict, U.S. is still usually treated as the representation of western power because America is one of the biggest and the most powerful country in the world (Cheng, 2012). However, Chinese people usually treat the Forbidden City as the most tradition area, and â€Å"[t]he presence of any foreign brands or products in this place may imply invasion of western culture assisted by western corporate power† (Hang Zhang. 2009, p.398). As these areas were destroyed by western invaders during the war; therefore, it is hard for Chinese people to accept western companies, such as Starbucks, which have strong culture to run its business in the Forbidden City. Starbucks’ fashion contradicts to the Forbidden City’s classic culture The Forbidden City is the symbolism of Chinese classic culture. This symbolism can be experienced from the Forbidden City’s design. According to Han Zhang (2009), â€Å"[t]he design of the Forbidden City, from its overall layout, as laid down in the Classic of Rites (Li ji), to the smallest detail of decoration, has symbolic meaning with underlying philosophical and religious principles† (Han Zhang, 2009, p.397). From Han Zhang’s analysis, we can find that the design of the Forbidden City’s buildings contains profound Chinese culture. As Wang (2010) indicates that â€Å"[t]he calligraphy tablets hung over each main gate and building, although often neglected by visitors, actually are special embodiments of traditional Chinese concepts either well known or maybe unexpected by their readers† (Wang, 2010, p.11). Taking the Confucianism â€Å"Harmony† for example, there are three great front halls in the Forbidden City, their names are â€Å"Hall of Supreme Harmony†, â€Å"Hall of Central Harmonyâ € , and â€Å"Hall of Preserving Harmony†, respectively. In ancient time, the emperor usually believed that he was the son of Heaven. â€Å"His highest goal was established to achieve harmony among Heaven, the Earth and the human being. Thus, harmony was repeatedly emphasized on the tablets to idealize the effectiveness of the court† (Wang, 2010, p.12). This is the one of the traditional cultures that can be found in the Forbidden City. The Forbidden City’s buildings also represent the theory of â€Å"syncretism between heaven and man† and the theory of â€Å"self-discipline and social commitment† (Zi, 1987, p.448). Therefore, the Forbidden City implies many great and profound Chinese classic culture. Starbuck is the symbol of fashion. From the surface of Starbucks, we can find that the meaning of Starbucks is represented by the green logo, â€Å"the fine coffee drinks, music, cozy in-store setting and free Wi-Fi† (Puel, Pons, Jin, 2007, p.2). According to Han and Zhang (2009), Starbucks is making itself to be a widely known brand in China. â€Å"Particularly, Starbucks is targeting affluent Chinese customers as well as the growing middle class, making itself ubiquitous in chic shopping malls†¦. Drinking Starbucks coffee has gradually become fashionable† (Han Zhang, 2009, p.397). Therefore, Starbucks’ fashion culture has deeply rooted in the heart of Chinese customers. Starbucks’ fashion culture contradicts to the Forbidden City’s classic culture. As Cha (2003) indicates that Chinese classic culture is dominated by the Confucianism, and in the Confucianism, â€Å"self-cultivation† is an important thought which means people should keep their bodies to be healthy and through self-reflection to improve their minds to reach an optimal state (Cha, 2003, pp.170-171). From the definition of â€Å"self-cultivation†, we can recognise that Chinese classic culture advocates the importance of having a peaceful living style, the importance of implementing self-discipline, and the importance of keeping on the rails. However, as Harrison (2005) shows that Starbucks’ fashion culture advocates the importance of freedom and the importance of materials (p.281). Therefore, Starbucks’ fashion culture could not combined with Starbucks’ classic culture. Objections Except the cultural factors, media influence is also a cause for Starbucks’ failure in the Forbidden City. In recent years, China’s internet media is developing so fast and is becoming more and more powerful on affecting business. According to Chiu, Lin, and Sliverman (2013), the most popular websites, such as Sina, Tencent, and Netease, are important media for companies to engage in the increasingly affluent online audience, and companies can also use â€Å"social media as a vital source of information for brand and product decisions. China’s social media landscape is a complex environment at huge scale† (Chiu, Lin, Sliverman, 2013, para.3). As above mentioned that Chenggang Rui posted a blog on Sina to against Starbucks. According to Han and Zhang (2009), â€Å"[s]ince September 2006, Sina launched a blogsphere, informally called ‘celebrity blogs (mingren boke),’ where most bloggers are well-known public figures such as performers, artists and writers. Using a ranking system, Sina promotes certain celebrities’ blogs and downplay others† (Han Zhang, 2009, p.397). After Rui posted his blog, his arguments were spread to many places quickly because of the tremendous internet users. â€Å"Without using Sina as platform, Rui’s voice would not have been so well received† (Han Zhang, 2009,  p.397). Therefore, the internet media, to some extent, made influence on Starbucks’ failure in the Forbidden City; however, the cultural problems is still the main cause for Starbucks’ failure because internet media is only a kind of medium for opponents to advocates the cultural problems. Conclusion This article shows the problems that Starbucks had experienced in the Forbidden City and analyses the reasons why Starbucks failed in the Forbidden City. With above mentioned analysis, we can draw a conclusion that Starbucks failed in the Forbidden City because of the serious Chinese culture shock. Even though Starbucks has achieved success in the general business areas in China, it still cannot thoroughly cope with the problem of culture shock in the most traditional areas in China, such as in the Forbidden City. The case that Starbucks failed in the Forbidden City is a good example not only for Starbucks itself but also for other multinational corporations in China to understand how serious the Chinese culture shock is, and Starbucks can also learn from this case to avoid making the same inappropriate decision in the future. References Bezlova, A. (2013). China’s traditional moon cake now a status symbol. Retrieved from http://www.culturebriefings.com/articles/chinmnck.html Cheng, D. (2012). The complicated history of U.S. Relations with China. Retrieved from http://www.heritage.org/research/reports/2012/10/the-complicated-history-of-us-relations-with-china Cha, S. H. (2003). Modern Chinese Confucianism: The contemporary neo-Confucian movement and its cultural significance. Social compass, 50(4), 481-491. Chiu, C. Y., Cheng, S. Y. (2007). Toward a social psychology of culture and globalization: Some social cognitive consequences of activating two cultures simultaneously. Social and Personality Psychology Compass, 1(1), 84-100. Curtin, P. A., Gaither, T. K. (2007). International public relations: Negotiating culture, identity and power. Thousand Oaks, CA: Sage. Chiu, C. Lin, D., Sliverman, A. 2013. High influence: China’s social media boom. Retrieved from http://cmsoforum.mckinsey.com/article/high-i nfluence-chinas-social-media-boom