When Global Growth Means Competing Culturally

A product has truly succeeded when it means more than the sum of its parts, and the same is true of its global growth in new markets. Think of your favorite brand of cookies you always buy, or your go-to shoes you wear every day until the soles wear through. Products – whether through effective marketing, personal attachments, or tradition – can take on meanings that go beyond their mere use-value.

The problem for companies going global is how to enter markets where branding matters and consumers have strong loyalties to particular products. Chinese companies operate at a double disadvantage: they enter as an outsider to a domestic market and because of their outsider status, these companies have no history to leverage with wary consumers.

Starbucks in France

In 2003, Seattle-based Starbucks announced that it would expand its signature coffee cafes into Europe, with a particular focus on France. In the next two years, Starbucks rolled out nine more cafes in foot traffic-heavy areas around Paris. The expansion into France was met with cynicism, perhaps even some disbelief. Like many European countries, France has a very strong historical tradition of drinking coffee. Small mom-and-pop cafes dot French alleyways and storefronts, where regulars get their morning cup of joe each day. Imagining Starbucks, an American corporation of all things, competing with the French corner café was a tall order indeed.

Moreover, French coffee drinkers wanted different things from their cafes. Smoking a cigarette along with an espresso inside a dark, cramped café is what most French expect from their café experience. Starbucks, on the other hand, intentionally keeps its stores family friendly (so no smoking) and cheerily lit.

Starbucks acknowledged these cultural differences by changing important elements of its café design and ambience. French Starbucks customers can now sit outside and smoke in permanent seating areas set up along storefronts. The coffee giant has also invested in expanding indoor seating options for French customers used to having hours-long conversations over coffee. Yet despite these efforts, initial sales mirrored the pessimistic expectations. Eight years after opening their first French store, Starbucks Europe still hadn’t made a profit .

Starbucks has stuck it out and may be looking at the light at the end of the tunnel. In June of this year, Starbucks announced that it had struck a deal with French grocery conglomerate Group Casino to open its cafes inside Casino grocery stores. The solution to Starbuck’s woes in France might just be partnering with an organization with broader reach and more history with French customers.

A similar narrative may play out as Chinese companies go global. Some of the strongest Chinese companies selling internationally are technology companies like Huawei and Lenovo. However, as technology products become cheaper and ever more ubiquitous as consumer items, they also have taken on strong cultural brands. Think of how successful Apple has been in marketing its “family” of gadgets. The sleek minimalism of the iPhone and the user-friendly interface of its desktop computers exude an ethos of millennialism, a contemporary freshness that it deliberately emphasized at the expense of its clunkier competitors, Microsoft, in a series of popular “Mac vs. PC” commercials.

Huawei and Lenovo will have to confront preexisting customer attachments and loyalties to more well-established brands in North American and Europe. This challenge is multifold: Chinese companies will not only have to combat resilient stereotypes of low-quality Chinese products, but also persuade consumers that their products can be hip and cool.  Perhaps, like Starbucks, Chinese companies may have to leverage partnerships and business deals with foreign companies to gain a foothold in markets with entrenched customer preferences and loyalties.