Starbuckization: International Expansion and the Export of Americanized Culture

In 1995, Starbucks Coffee International aligned with Sazaby Inc. to develop what would be the coffee company's first international venture: a coffeehouse in Japan the following year. With over 1,000 stores in the United States in the company's 24 years of operations, expansion overseas was proving to be inevitable given the company's popularity among both customers and NASDAQ traders. In 1992, the company's first year of being public, a total of 2.1 million shares totaling a $28 million net were sold (Gulati, Huffman, Neilson 2002). Originally a European concept tempered with a Seattle-based coffee house, Howard Schultz's company was founded on the principle of providing an experience over a product. Adapting the coffee bars of Milan to an American demographic, Schultz saw in Starbucks the potential to be the "third place" in consumers' lives. Next to the home and the workspace, Starbucks was a go-to point for young couples, students, writers, and families, to name but a few. It also offered speedy barista service in order to satisfy the needs of both customers who come to sit in their overstuffed armchairs, read the paper, and listen to the ambient music and customers who need a morning java before going to the office.

This model was slightly adapted to fit in with the target customers of Tokyo, a city that, much like New York, Seattle or Los Angeles, featured a large population with a high disposable income rate. Moreover, the Japanese are a culture that is adoptive of Western trends. One aspect of Starbuck's model for business that was adapted for the Japanese market was that its new target customer were Japanese businessmen, successful, in their 40s, who were in search of a place to socialize, have a coffee, and smoke (JETRO 2006).

The balance that Starbucks needed was realized by Sazaby. While the target had changed, the product needed to remain essentially the same. Whereas McDonald's has operated as a large, multinational enterprise, Starbucks in spite of its growth wishes to remain seen as a small company. Each coffee shop considers itself a link in a chain of boutiques, albeit one boutique may be directly across the street from another Starbucks (Kiviat 2006). George Ritzer's concept of McDonaldization includes the component of calculability. Success is predicated on the quantity of the product rather than the quality (Ritzer 2004:13). In order to increase product output and increase sales revenue, McDonald's menus are shifted in each country to satisfy local custom, yet the blandness of the food, its poor quality, and categorically proven unhealthiness remain the same.

Yet while McDonald's formed the very foundation of "fast food"-or as Starbucks refers to it, QSR or quick serve restaurant-Starbucks foundations lie in what is encouraged to be a slower, more life-stylistic experience. Starbucks operates under a decentralized authority, where many decisions are made store by store. Franchises are eschewed and, in terms of research, if a senior executive does not like a new drink, it will not appear on the menu (Kiviat 2006). Starbuck's inspiration did not come from feeding customers quickly and easily, rather it came from selling a basic commodity wrapped in an experience without the commitment of being in a sit-down restaurant or café. At its core, the store's name (taken from Melville's Moby Dick) and its ubiquitous green mermaid logo were both references to the foreign allure and romance of the early coffee traders. Whereas McDonald's is popular in Japan for its price-points, Starbucks' popularity stemmed from its novelty.

However, as critics pointed out, it was not entirely novel. Coffeehouse culture was first popularized in Japan by locally-based coffee roaster Doutor. Much like Starbucks, Doutor is as ubiquitous in Japan as pachinko parlors. The chain sells fast food options as well as gourmet coffees. However, and most importantly, it originally created the coffeehouse culture-the Third Place-in Japan; a haven for the smoking, middle-aged, upper class. Doutor also had the advantage of being the company to wean the tea-intensive Japan onto coffee. It also had established brand loyalty and a history of being in Japan during the country's economic boom in 1971 (Lewis 2003). Why, then, the foreign expansion for Starbucks?

While the Japanese showed a demonstrated pull towards foreign, particularly US, brands, Starbucks operated on an idea taken from Gillette chairman Alfred M. Zeien, courtesy of Benjamin Barber: "I do not find foreign countries foreign" (Barber 2003:23). While the basic tools of Segmentation, Targeting, and Positioning may have changed per the Japanese marketing plan, Starbuck's success in foreign countries is based on the assumption that there is not much of a difference between opening up a new café in Seattle and a new café in Shanghai.

Japan proved an excellent test run for Starbucks; the country also served as a testing ground and ultimate springboard for the company's line of green tea products including the green tea Frappuccino. The country hosts over 600 Starbucks stores and, as of 2006, accounted for $565 million in sales (JETRO 2006). Bolstered by their success in one Asian market, Starbucks quickly expanded around Southeast Asia and, in 1999, opened their first store in China. While the Japanese had already been introduced to coffee, China at the end of the millennium was still a tea-drinking country. Test runs with coffee samples provoked responses such as "dry land" from the Chinese (Adamy 2006).

Starbucks also faced a unique problem in entering the Chinese market. The nation had yet to enter the World Trade Organization when the first store opened in Beijing's World Trade Center. Moreover, there was an enormous reluctance on the government's part that the coffee chain had not experienced with other countries. It was no secret that the Chinese were still wary in dealing with foreign businesses and that they often played that fear to their advantage. The country is currently still struggling to maintain their identity while operating successfully in western commerce. As James McGregor explains in his study, One Billion Customers "The belief that foreigners strong-armed their way into China in the past two hundred years in order to plunder the country's wealth is deeply ingrained in the Chinese psyche. They are taught from childhood that China was the world's mightiest empire, the best at everything, until the foreigners came knocking at the end of the eighteenth century to ruthlessly exploit a people who did no harm" (McGregor 2005:23).
China's current authoritarian political system also does not help matters. Its political system "crushes dissent, controls information, and injects itself into every facet of business....the country really has no ideology other than enriching itself" (McGregor 2005:24). Zeien's theory that foreign markets are not found to be foreign is questioned in such a setting as China. The country itself, however, also hosts a population of 1.3 billion (Adamy 2006). A significant percentage of this population is young, in an urban location, and with access to a steady income. The generation of one-child per family has created an army of "little emperors," children pampered by parents and grandparents, children who have grown up embracing individuality in a monochromatic culture, and have the financial means to do so. A Chinese middle class has emerged.

This demographic was seen as Starbuck's best gateway into China; a demographic that wants to see and be seen, who disregard the significant price of a latte in comparison to their disposable income and see it rather as the mark of quality and sophistication (Fowler 2003). The perception of Starbucks as a "yuppie status symbol" is not unique to China-it is in fact what led to initial criticisms of the coffee chain around the same time it was entering China (Thompson and Arsel 2004). During World Trade Organization talks in 1999, one of the locations in Seattle was vandalized by protestors who saw the chain as symbolic of "free-market capitalism run amok, another multinational out to blanket the earth" (Holmes 2002). Again in reference to Zeien, the bulk of criticism towards Starbucks-arguably a whipping boy for the multitude of other multinational enterprises-is that as it makes foreign markets less foreign, it also homogenizes the cultures within the markets. Starbucks and its supporters argue that, as it moves into foreign markets, it works with its brand to make it acceptable foreign cultures. Items may be dropped or added to the menu, the store is redesigned, and all attempts are made to establish Starbucks as an easy "fit" for each local lifestyle (Thompson and Arsel 2004).

In expanding to China, Starbucks did clear many of the hurdles that are set up for businesses by the government. Banking in general is difficult for the store, and the popular Starbucks payment card will, with the current system, never be offered in the country.

In expanding to China, Starbucks did clear many of the hurdles that are set up for businesses by the government. Banking in general is difficult for the store, and the popular Starbucks payment card will, with the current system, never be offered in the country. Sweetened Frappuccinos and lattes are the most popular drinks among customers; until recently most Starbucks in the country's 425 stores only brewed regular drip coffee upon request (Adamy 2006). As the company is seeking to make China its second largest market (next to the United States), it faces the challenge of turning a country with a 5,000 year history of tea into coffee drinkers. Should this succeed, Starbucks will have lived up to its perceived hegemonic influence that is described by Thompson and Arsel.

The chain has, in fact, already succeeded. It has shaped "consumer lifestyles and identities by functioning as a cultural model that consumers act, think, and feel through" (Thompson and Arsel 2004). Words such as "grande," "venti," and "macchiato" are now part of the global lexicon. In real estate, apartments and office complexes are more attractive if they are near a Starbucks. International products and a wide variety of roast beans have raised the public's expectations for coffee. It has also raised the bar for spending on coffee. Or, as Marian Salzman of JWT Worldwide puts it: "We live in a society where people think $5 is $1 because of Starbucks" (Horovitz 2006). The chain is so ubiquitous that, in additional to product placements in countless movies, mock-Starbucks have been used (the same green circular logo and all) in various forms of media including Far Bucks in the film Shrek 2 and Coffee Bucks on the television show Scrubs. Both of these examples also include the joke of one shop being directly across the street from the other.

With China, however, Starbucks may have proved to be too ubiquitous. Its opening of a store in Beijing's Forbidden City, a city once open solely to the emperors and now a major tourist attraction, was seen as an insult to Chinese history and culture. Rallied against heavily online by Chinese bloggers, 70% of the people surveyed by a local media group said they would never go to that location and would prefer to see it close (Fowler 2003). It was a misstep over the line between hip and imperialistic on Starbuck's part and currently the company is debating whether they should close the store. It will not, however, be swayed by popular opinion so much as it will be swayed by the Forbidden City and Chinese government.

While it is not easily swayed to close their stores, Starbucks did find it necessary to close its six stores in Tel Aviv in 2003. The risk analyses proved to be too much to guarantee the safety of its customers. More recently, the same fate awaited the Starbucks in Lebanon after the bombings in the country. Current Starbucks CEO Jim Donald agues that-regardless of Starbucks being an American company-when a store opens overseas "it becomes their Starbucks store" (Allison 2007). While the company has a strong partnership with Alshaya Group in the Middle East, a group that lobbied to re-open the stores in Lebanon to give the Lebanese their Third Place, not everyone shares the sentiment that Starbucks is "their store."

Qatar-based network Al Jazeera, famous for broadcasting Osama bin Laden's post-September 11^th videos, has also expressed criticism against Starbucks in its magazine division. It has been a longstanding debate as to what Starbuck's ties are with Israel and the Israeli Army, the religion of Schultz and his 1998 honor from the Jerusalem Fund of Aish HaTorah both called into question by Al Jazeera writer Adam Robertson. Schultz's 1998 award was in recognition of, as Robertson describes, his "services to the Zionist state in 'playing a key role in promoting the close alliance between the United States and Israel.' It's noteworthy that the Jerusalem Fund of Aish HaTorah funds Israeli arms fairs" (Robertson 2007). In an official comment from the company, Starbucks claims to have no political stance, particularly in the Israeli-Palestinian conflict. However, its presence in the West Bank is still a point of criticism for many who are against the global expansion of American corporations.

Starbuck's biggest challenge-and biggest proponents of the "Starbuckization" theory-may, however, still lie in Europe. In the birthplace of coffee bars, seemingly each Starbucks that opens on the continent is the subject of criticism and parody. When opening in Vienna, the heart of European coffee culture, protestors of globalization cited Viennese cafes-like the historic small chains in the United States and elsewhere-as being in danger of folding under the competition. Owners of the 1,900 existing cafes were not threatened by the coffee giant, however, choosing to rely on the customer loyalty they had cultivated, and on Starbuck's no-smoking policy. While younger customers gravitate towards Starbucks for its hip-ness and more casual setting, it is predicted by many that Starbucks is a passing trend; most customers will gravitate towards back the traditional café. Viennese cosmetics worker Ulli Schiller reported to BBC News in 2001 (when Starbucks initially entered the Austrian market): "I've never heard of Starbucks, but I wouldn't go to a coffee house where you can't smoke. And I wouldn't order a coffee to go in a paper cup, because I want to enjoy coffee where it's cozy" (BBC 2001). The white paper cups, to-go atmosphere, and ban on smoking has also made it difficult for the chain to expand further than they would like to in France.

While McDonald's held considerable success in France, it also targeted-like Starbucks in Asia-a new market that was previously untapped. In McDonald's case, this was the French lower class that needed cheap, fast food. Yet Starbucks maintains its identity as a high-class fare, which throws the company directly in the face of Paris institutions such as Les Deux Magots and Flore. The logic behind the ban on smoking in European Starbucks remains an unanswered question, especially as the café specifically targeted smokers in countries such as Japan and China for their clientele. While the company may be seeking to create a smoke-free environment, the sidewalk cafes in Paris offer the same coffeehouse experience in a fresh-air setting. It is ironic that a brand that has stemmed from the tradition of European coffeehouses has had issues in adapting to the culture from whence it came. It is a game of commercial telephone, the central message passing through multiple filters and arriving back at its source in a modified form. The company has yet to enter Italy and has only now begun to focus on Eastern Europe. Yet with entering countries such as Romania and Russia, will the company be able to sustain business in cities where the majority of residents are unable to afford a three-dollar latte and have a host of local cafes to choose for the third place experience?

As the company works towards its goal of running 40,000 locations worldwide-a number greater than McDonalds, and roughly 1/3 completed with 12,440 locations as of December, 2006-the company is also looking to branch out in other areas (Kiviat 2006). While maintaining their boutique image, this may be a challenge. Yet Jim Donald still hand-signs each letter that goes to employees and partners worldwide-the CEO estimates that he signs roughly 33,000 pieces of correspondence on an annual basis-as one means of enhancing the company's small business identity (Allison 2007). International partnerships are decided on the basis of which locally-based partners have the best understanding of what Donald describes as a "small box, restaurant-type setting."

Meanwhile, Chairman Howard Schultz is working to extend the Starbucks brandscape into media and entertainment. This began primarily in 1993 and 1999 in establishing a partnership with Barnes and Noble and acquiring San Francisco-based Hear Music, respectively. The music played in Starbucks stores within the United States is courtesy of discs put out by the music company, discs that are also available for sale within the stores. Starbucks also produced Ray Charles' Genius Loves Company, a CD that won eight Grammy Awards in 2004 and made up for 25% of the company's sales in the same year (835,000 copies were sold). The following year, Starbucks sold 3.5 million CDs (Horovitz 2006). While Schultz is no longer the CEO of the company, he is still working to establish Starbucks as a Hollywood company. He helped to establish Starbucks Entertainment in 2004, which works with the William Morris Agency to align the brand with film, music, and literature. The film industry was entered through the company's promotion of the film Akeelah and the Bee. Starbucks has also begun to promote and sell books within the store. Much like the company set the trend standards for coffee, it seeks to do the same for popular culture.

This extends into what Donald sees as Starbucks coffee future. Going full circle as coffee merchants, the focus of the new Starbucks-as seen in a test run in Northbrook, Illinois-will be purchasing the entire experience to bring home. This includes espresso makers, French presses, beans, mugs, CDs, and DVDs. Whether this venture will extend into the international market, or whether this will succeed as the new face of Starbucks in the United States, is still debatable. When a company's main product-particularly as marketed internationally-is an experience, will it still maintain a competitive advantage? The third place cannot still exist if it is brought into the home or workspace, particularly for the see and be seen marketing used in Japan and China. Perhaps, however, this was one of the original intents when Starbucks first opened; providing the tools for gourmet coffee at home while simultaneously offering café space for socialization. If McDonald's is seen as the Americanization of the world, Starbucks would be more appropriately seen as the Europeazation of the world.

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