Case Study Analysis: Starbucks' Market Entry in China

This case study examines the challenges Starbucks faced when entering the Chinese market. It details the legal battles over trademark infringement with the copycat Xingbake, highlighting the Chinese government's initial reluctance to prosecute infringers. The study explores cultural challenges, such as the preference for tea over coffee and the rise of nationalism impacting consumer choices. Ethical considerations are also addressed, particularly the theft of Starbucks' identity. The study analyzes the role of the host government in intellectual property rights enforcement and the significant financial losses due to piracy. Despite winning the trademark dispute, the case study concludes that Starbucks must continue to address similar challenges in the competitive Chinese market and provides insights into the company's strategies for overcoming these hurdles.

Running head: CASESTUDY ON STARBUCKS
Case Study on Starbucks
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction......................................................................................................................................2
Challenges faced by Starbucks........................................................................................................2
Legal challenges..........................................................................................................................2
Role of the host Government...................................................................................................3
Cultural Challenges.....................................................................................................................3
Ethical Challenges.......................................................................................................................4
Conclusion.......................................................................................................................................4

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Introduction
The Chinese market is well known for its tendency to infringe copyright and trademark
over the years and the Chinese government has been ever so reluctant about prosecuting the
infringers. Especially, in its retail market, China houses copycats of all leading international
brands. After a legal battle of 2 years, Starbucks won the lawsuit against the Chinese copycat
Xingbake who has been using Starbucks’s name and logo since the Seattle based company
registered its name in China (Friedmann, 2016). The company faced certain legal, cultural and
ethical challenges in this matter, which are discussed in the paper.
Challenges faced by Starbucks
Legal challenges
Starbucks brought charges against its Chinese copycat Xingbake and started a lawsuit in
2003 for using Starbucks name and logo. Xingbake argued that it had registered itself in 2000,
which is before Starbucks applied for its for Chinese trademark. While Starbucks argued that, it
had registered its name and trademark mermaid logo in 1996 in China. As New York Times
described, since Xingbake started infringing the trademark, Starbucks had lost a great deal of
business in the Chinese mainland (Xiaowen & Yong, 2014).
It was a tough battle for the global managers of Starbucks as China is infamous
pertaining to its uncountable trademark infringing businesses and the Chinese government taking
no actions against them Establishing all the fact, Starbucks received damages of 5, 00,000 Yuan
or $62,000 that a Shanghai court awarded ("Starbucks wins trademark dispute", 2018). Since
then, this case is regarded as the pioneer trademark case in the Chinese legal background.

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Role of the host Government
As per the Wall Street Journal, the Chinese government had been pushed by the US and
EU to crack open the piracy and intellectual property rights (IPR) infringing industry. The
government and the legal system was under pressure to take severe steps against the IPR violator
that has cause a great loss to Starbucks over the years. The government of these countries had
several diplomatic conferences to discuss and focus on this burning issue of piracy over the
years. Statistical data says that China is responsible for a global loss of $250 billion a year due to
piracy and trademark infringements (JOURNAL, 2018). The awarded compensation seem quite
insignificant in terms of the huge damages awarded in the western world, however, it somehow
showed the light to the many victims of IPR violations who are operating their businesses in
China and have been suffering financial blow.
Cultural Challenges
According to Ferreira & Ferreira, (2018) Starbucks, a Seattle based coffee selling chain
have faced immense cultural challenges in a country that has its roots embedded in the culture of
tea-drinking population over generations. To overcome the hurdle, Starbucks introduced an array
of Chinese teas and traditional moon-cakes to compete with the local rivals. Yet, many critics are
of the view that Starbucks still needs to up its game by incorporating a bigger selection of tea in
its menu to capture a bigger consumer base in the tea-loving nation.
Additionally, the global manager had to face the challenge of growing nationalism of
the Chinese citizen choosing local brands over a western coffee brand, which is expensive at the

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same time. It has its customer strength in the major cities and the coastal urban areas, while its
business suffers in the suburbs.
The low purchasing power of the majority of Chinese population has been a challenge for
Starbucks as well as its coffee and other products are quite expensive for the Asian market. It
charges up to 20% more for its coffee in China in comparison to other markets. The company in
its guard has argued for the steep pricing for it faces higher costs in doing business in China than
other places.
Ethical Challenges
Introduction of Starbucks in the Chinese beverage industry has caused a stir in its strong
tea drinking population. Although it has not made any significant mark in the tea-drinking rate,
yet it has given a tough blow to the local coffee beverage sellers. The company has shook the
local coffee chains with its international fame and charm. However, there has been a few brands
that tried to steal the company’s identity and operate in china; Xingbake being one of the major
among others. This has been an ethical struggle for the company for its identity and logo had
been tampered with, which is a severe violation of IPR ("BBC NEWS | Business | Starbucks
wins Chinese logo case", 2018).
Conclusion
Even though it is major international brand having a loyal customer base, yet the
company faced various challenges while established itself in the Asian market, especially China.
Starbucks would be naïve to assume that all its challenges are over with the settlement of the
Xingbake case. Considering the numerous copycat that still exists I the Chinese market, it is

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quite evident that the company would have to experience similar challenges in the future. This
was just the beginning of the several combats ahead.

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References
BBC NEWS | Business | Starbucks wins Chinese logo case. (2018). Retrieved from
http://news.bbc.co.uk/2/hi/business/4574400.stm
Ferreira, J., & Ferreira, C. (2018). Challenges and opportunities of new retail horizons in
emerging markets: The case of a rising coffee culture in China. Business Horizons, 61(5),
783-796.
Friedmann, D. (2016). Protection against Abuse of Trademark Law in Greater China: A Brief
Analysis of the People's Republic of China, Hong Kong, Macau, and Taiwan. Cal. W.
Int'l LJ, 47, 157.
JOURNAL, G. (2018). Starbucks winsChina court caseover trademark. Retrieved from
https://www.wsj.com/articles/SB113618843802035727
Starbucks wins trademark dispute. (2018). Retrieved from
https://www.nytimes.com/2006/01/02/business/worldbusiness/starbucks-wins-trademark-
dispute.html
Xiaowen, X., & Yong, H. (2014). China's intellectual property protection in franchising.
Frontiers L. China, 9, 657.