A recent article by CNBC on Why Starbucks succeeds in China while others haven’t is yet another example of how companies can succeed in the world’s most challenging market.
As the author begins the article:
About 14 years ago, I met an entrepreneur who wanted to open up coffee shops around China. I never thought the coffee business would work there. The Chinese would not easily give up their tea-drinking culture for a bitter, overpriced drink, I told him. Starbucks has proven me wrong.
China will soon become the biggest market outside the United States for Starbucks. It has 500 stores and these stores are more profitable per outlet than Starbucks outlets in the U.S.
The keys to Starbucks were to:
- Create products tailored to China’s unique cultural tastes (e.g. green tea drinks and Frappacino’s).
- Differentiate itself from its competitors (spacious, comfortable air-conditioned or heated stores attracting professionals for business meetings).
- Position its brand as “aspirational” to allow higher product pricing.
- Ensure high quality customer service with a big focus on recruiting and training.
This is not rocket science. Understanding your customer and differentiating yourself from the competition and/or existing alternatives is really no different in China than it is in any market. The challenge with China is to find those that have a combination of the “go-to-market” smarts and on-the-ground experience.
A recent article by MSNBC outlined the most popular American companies in China. Their methodology was to take the top brands in the US then pick the top 10 brands in China based on market share.
The top 10 companies are (market share in parentheses):
- KFC (40%) - If you’ve travelled domestically in China, KFC topping this list wouldn’t be a surprise. There are KFC’s everywhere which are always packed, and they’ve adapted to the Chinese cultural taste better than any other fast-food brand.
- General Motors (12.8%) -GM’s sales in China has topped the U.S. in recent years.
- Microsoft (99.3) – This statistic is very misleading. Most Microsoft software is pirated with an estimate of only 20% of legitimate Windows licenses.
- Boeing (52%) - Air travel has increased 16% in 2011 from 2010.
- Nike (N/A) – Followed closely by local brand Li Ning which has more than a 30% share.
- Coca Cola/Sprite (61.5%/26.95) – Did you know that Sprite is the NUMBER one soda in China?
- Procter & Gamble (55%) – Leader in hair care products with room to grow.
- Intel (14.9%) -This is the share of ALL semicoundoctor revenue (chips that go into computers, mobile phones, set-top boxes, etc.). Intel has between 70-80% market share in PC’s (desktop, notebook and server computers).
- Starbucks (70%) – The global leader in coffee store sales is also the leader in China.
- Apple (51%) – With over half the tablet market and the fourth position in smart phones, Apple has become the luxury brand of gadgets.