Forbidden in the Forbidden City China PDF

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This is an essay talking about the forbidden city in Beijing and how it slowly pushed Starbucks out of the area because it did not promote the Chinese norms and values....

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CASE 3-1 Starbucks: Forbidden in the Forbidden City

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eijing’s Forbidden City is China’s top tourist attraction, holds UNESCO World Heritage site status, and hosts between six and eight million visitors each year. Covering 720,000 square meters, the Forbidden City consists of several buildings and over 10,000 rooms. Built in 1420, the Forbidden City served as the residence of 24 of China’s Ming and Qing emperors until the end of imperial rule in 1911. It is a destination of choice for both Chinese and foreign visitors.

Coffee in China With its strong tradition of tea drinking, many question the sustainability of the coffee market in China. Tea has a long history in China, is cheaper than coffee, and is believed to have health benefits that coffee does not possess. Coffee festivals were organized in both Shanghai and Beijing in 2001 by the International Coffee Organisation to familiarize Chinese consumers with coffee consumption and culture; still, for many Chinese, tea is considered a staple and coffee a fad. As evidence of the potential of the coffee market in China, domestic and international companies are selling high-priced reports on demand forecasts, trends, and developments in the Chinese coffee market. Chinese consumers are typically more familiar with instant coffee, since it was introduced to the market before fresh brewed coffee. Generally there are three groups of coffee consumers in China: young, affluent professionals; returnees (those who have studied or worked abroad, become coffee drinkers, and intend to continue to drink coffee on return); and foreign expatriates. Not surprisingly, coffee is consumed more frequently in large urban centers by those who are more familiar with Western tastes and lifestyles.

Starbucks Starbucks, a Seattle coffee company started in 1971, is recognized worldwide as a highly successful North American company. The company was built on three tenets: hospitality, production, and education. The company went public in 1992 and opened its first international store in Tokyo, Japan, in 1996. In addition to the more than 11,000 locations operating in the United States, by 2008 Starbucks had over 4,500 stores located in 48 countries outside the United States. Stores are either companyoperated, joint ventures, or licensed. President and CEO Howard Schultz’s vision for the company was that it would occupy a “third place” in consumers’ minds, after home and work. Having saturated the North American market, Starbucks continues to look farther afield for potential markets. In its 2008 annual report, Starbucks highlights an international focus in its mission by stating: “Every store is part of a community, and we take our responsibility to be good neighbors seriously. We want to be invited in wherever we do business. We can be a force for positive action—bringing together our partners, customers, and the community to contribute every day. Now we see that our

Case prepared by William X Wei and Kimberley Howard, both of Grant MacEwan University. Reprinted with permission.

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Starbucks’ Experience in China

responsibility—and our potential for good—is even larger. The world is looking to Starbucks to set the new standard, yet again. We will lead.” In 2008, international activities accounted for 20 percent of Starbucks revenue. Starbucks is not naïve regarding the difficulty in entering and sustaining international markets. Some of the risks to their success internationally were listed in its 2008 annual report, including the global economic crisis, Starbucks’ increasing dependence on the success of its international operations for growth, and the success of other international segments being determined by the financial performance of their three largest international markets—Canada, Japan, and Britain.

Starbucks’ Experience in China Starbucks launched a Taiwanese store in 1998 and registered both the name “Starbucks” as well as a Chinese version of its name, “Xingbake.” Xingbake is a literal and phonetic rendering of the Starbucks name; “xing” means “star,” and the Chinese phonetic pronunciation of “bake” is similar to “bucks.” In 1999, a coffee shop called the Shanghai Xingbake Coffee Shop Ltd. opened. Its logo was similar to Starbucks— a circle with white words on a green background; however, instead of a picture of a mermaid in the center, there was a picture of a cup of coffee. After unsuccessful attempts to settle out of court, Starbucks sued Xingbake, and in December 2006, a landmark decision by the Shanghai Municipal Higher People’s Court ruled in favour of Starbucks. Shanghai Xingbake was ordered to stop using the name Xingbake, apologize publicly to Starbucks, and pay 500,000 yuan (U.S.$62,500) to Starbucks. The case was considered by many multinationals operating in China as a breakthrough in deterring trademark infringement. Believing that Chinese consumers want a Western experience when they patronize Starbucks, there were only minor changes made to the products served and sizes offered in China. The décor of Starbucks’ Chinese locations is typically a mix of Eastern and Western styles. Starbucks often include a fireplace, a foreign concept in Chinese homes, but also incorporates many familiar components such as bamboo and Chinese symbols, designs, and artifacts. Starbucks is generally viewed as an exotic, Western-style place for young Chinese professionals and provides a place to meet, talk, see, and be seen. Many see it as a bridge between East and West. Starbucks provides an experience as well as a product, and for many patrons it’s the atmosphere as much as the coffee that attracts. The environment and the fresh-brewed coffee process is interesting and exciting for these young Chinese. Opportunities exist to better educate potential consumers. Unfamiliar with the coffee drinking culture, some Chinese report not knowing what to do or how to act in a Starbucks. One customer said, “The first time I come to Starbucks, I don’t know what this [sugar, stirrers, milk] was for, I want to use this but I don’t know if this [is] simple for me to use…I like to come to Starbucks, I like the environment and atmosphere, but I don’t like the coffee very much here because I think this is a cultural [sic], you need to try to explain this culture to me more in detail, but they don’t do this.” At the invitation of Beijing administrators, Starbucks opened a store in the Forbidden City in 2000, near the Hall of Preserving Harmony. City officials envisioned the opening of Starbucks as contributing to municipal funds. Some of the initial media coverage questioned whether Starbucks belonged in the Forbidden City, but eventually the discussion subsided. Occasionally the debate would reoccur, and in response, Starbucks removed its sign in 2005 but continued to operate.

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Starbucks: Forbidden in the Forbidden City

In January 2007, the debate heated up when Chenggang Rui, a popular CCTV anchor, argued on his blog that Starbucks’ presence in the Forbidden City was “not globalizing but trampling over Chinese culture.” He went on to say, “The Forbidden City is a symbol of China’s cultural heritage. Starbucks is a symbol of lower middle class culture in the West. We need to embrace the world, but we also need to preserve our cultural identity. There is a fine line between globalization and contamination.” These statements triggered an online campaign for the removal of Starbucks from the Forbidden City, which collected more than 500,000 signatures supporting the closure of Starbucks. When Jim Donald, Starbucks president and CEO at the time, received a letter from Chenggang Rui reiterating his belief that Starbucks should leave the Forbidden City, Donald responded, “When Starbucks was invited by museum officials to open a store six years ago, we did so with great sensitivity to, and respect for, the historic and cultural heritage of the Forbidden City. We have shown and continue to show our respect for local history, culture, and social customs, and have made serious efforts to fit within the environment of the Forbidden City.” In response to the protests, Starbucks executives worked with the administration of the Forbidden City to come up with a solution acceptable to both parties. One of the proposed options included continuing to operate in the Forbidden City, only without the Starbucks name. In the end, Starbucks’ VP for Greater China stated: “We decided that it is not our custom worldwide to have stores that have any other name, so therefore we decided the choice would be to leave.” Starbucks’ Forbidden City location closed in July 2007. Starbucks’ officials described the decision as “very congenial.” A traditional Chinese café has since replaced Starbucks. Starbucks closure may have sparked a trend of diminishing the commercial presence in the Forbidden City. Since the Starbucks closed, the number of shops in the Forbidden City has been cut in half. As of September 2008, Starbucks has 448 company-operated and licensed stores in China.

Case 3-1 Starbucks: Forbidden in the Forbidden City

Discussion Questions: 1. Why is China, traditionally a non-coffee drinking culture, an important market for Starbucks? 2. Do you think it was a good decision to house Starbucks in a world heritage site? What could Starbucks have done differently to be better accepted in the Forbidden City? 3. What options existed for Starbucks in this situation? Did Starbucks’ executives handle the situation effectively? If not, how do you think they should have handled the situation? 4. Do you agree that Starbucks in the Forbidden City is “not globalising but trampling over Chinese culture”?

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