Paper Example. Starbucks China: Managing Growth Through Innovation

China's market has always been known to be volatile, as such, Starbucks operations must be innovative for consistency and maintenance of its market and supply chain. The Chief Executive Officer of Starbucks had foreseen the environment and considered the placement of significant investment that would guarantee smooth operations. The investments were to primarily focus on matters human resources, the IT systems, businesses processes, and physical assets. For the management of the company's growth (Starbucks) through Innovation, there is a need for the identification of new shops and new leases. There also exist a need for decentralization. Another issue of significance is based on the strengthening of quality control processes, an issue which has proved to be difficult in China (Farhoomand, 2020). The difficulty has been pegged on the existence of other multinational corporations, for example, Nestle and the McDonald's, which has suffered extensively from different scandals, particularly those related to supply-chain food scandals in the past years. The focus of the paper is, however, limited to the Chinese economy from 2016 to 2019. Data and additional graphics may also be used in strengthening elaborations.

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The 2016 China's economic growth was noted to have reached a percentage estimate of about 6.8, with some analysts further reducing it to 4.5, an aspect that was described as one of the lowest rates of economic growth. The lack of consensus on the actual level of economic growth in China has been pegged on their lack of control of the economy. For example, the manufacturing and the industrial sector have, for a long time, driven its economy, something that is believed is still replicating in other forms (Qian & Xing, 2016). During those days, a notable overall decline was noted on demand for products with the US$600 government program equally coming to a stop.

Considering the lack of truth on the actual level of the Chinese economy, the Chief Executive Officer of Starbuck has considered the implementation of particular measures that can guarantee both survival and growth to the company. He has also noted the existence of a natural preference of coffee coming from local vendors. This issue sent the company to the drawing board and coming up with more innovative strategies. One of the strategies is based on debranding. It entailed the removal of logos, company colors, and fonts to make it look more corporate and independent (Sholihah, Ali, Ahmed, & Prabandari, 2016).

Starbucks has also had a paradox of growth. For example, during January 2016, it operated about 9,600 licensed shops and other company-operated shops globally (Sholihah et al., 2016). The revenue for the licensed shops stood at 9%, an issue that qualified an assumption about the more licensed shops opened by the company, the less revenue it was likely to acquire from every shop. The evidence for the assertion can be noted below. The two exhibits both show the paradox in growth for both the licensed stores and the company-based stores, respectively.

Exhibit 1

On the part of the Chinese economy, at least a 6% steady economic curve has been noted every year for the last three years. 2019 itself recorded an economic level of 6.1%, even though the increase is still considered low, it remains within the target estimates of the government. As such, going to the future, the economy is expected to remain within the 6.1 to 6.5 percentage range though under pressure. The image below shows a steady decline in the Chinese economy since the year 2017. The question of coronavirus pandemic also raises concerns about the future of world economies globally, with China not being an exception. Companies like Starbucks are also worried about the impact (Sholihah et al., 2016).

How the COVID-19 (coronavirus) influence Starbuck's Chinese Market and Supply Chain

The effects of Coronavirus disease is one that continues to be felt globally. It has crippled businesses, considering lock-downs initiated by governments to curb its spread. Luckily for Starbucks operations in China, there exist new cases reported, and the Chinese government continues to give hope to the people on the high recovery rate. Starbucks must, however, change its manner of operation to ensure that its customers continue to receive services, and at the same time, they are protected from the Covid-19 pandemic. It must, therefore, explore its innovative strategies and approaches to ensure that it is not profoundly affected by the pandemic and also maintain its Chinese market and supply chain. One of the things it can do is first to offer them a basic education on how to curb the spread of the covid-19 pandemic (Barua, 2020). The next innovative step is inviting the clients to make orders for their favorite coffee products and receive free deliveries at the comfort of their homes or areas of the resident. Starbucks must, therefore, ensure that it works with medical personnel who understand the Covid-19 virus and are efficient in implementing its preventive recommendations to ensure safety during product distribution. As such, the maintenance of its market and supply chain relies on its online strategy and partnership with the medical personnel.

Conclusion

In summary, Starbucks' operation in China has been analyzed with the inclusion of the Chinese economy from the year 2016 to 2019. A view of Starbucks' maintenance of its Chinese market and supply chain has also been discussed with much focus getting based on Starbucks' online strategy. Most importantly, China remains a viable area for business for Starbucks, provided it becomes more innovative in its business dealing.

References

Barua, S. (2020). Understanding Coronanomics: The economic implications of the coronavirus (COVID-19) pandemic. Retrieved from http://www.academia.edu/download/62805107/Coronanomics-SB-draftv1-4-2020200403-23224-7qq02.pdf

Farhoomand, A. (2020). Starbucks China: Managing growth through Innovation. ACRC.

Qian, Y. A. N. G. & Xing, T. U. (2016). Starbucks VS Chinese Tea-Starbucks Brand Management Strategy Analysis in China. International Business and Management, 12(1), 29-32. Retrieved from https://pdfs.semanticscholar.org/74c8/7643726f0b6426a160a4cb5f5bba6f06d996.pdf

Sholihah, P. I., Ali, M., Ahmed, K., & Prabandari, S. P. (2016). The Strategy of Starbucks and its Effectiveness on its Operations in China, a SWOT Analysis. Asian Journal of Business and Management (ISSN: 2321-2802) Volume. Retrieved from https://www.researchgate.net/profile/Mohammad_Ali223/publication/328569449_The_Strategy_of_Starbucks_and_it's_Effectiveness_on_its_Operations_in_China_a_SWOT_Analysis/links/5bd5ab0c299bf1124fa7b34a/The-Strategy-of-Starbucks-and-its-Effectiveness-on-its-Operations-in-China-a-SWOT-Analysis.pdf