Monday, January 15, 2007

I am a nerd, N-E-R-D

So, while I'm over here in HK having a good time exploring the region, and Lan Kwai Fong, I am ostensibly here for school. Moreover, I truly do want to make the most of the opportunity to learn as much about China as I can in the 3 short months I am here. Part of the education will entail travelling around, but I do hope to make the most of the resources CUHK has to offer.

To that point, and given my well documented addiction to coffee, it should be no surprise that I attended a lecture from the Starbucks VP of Greater China that the B-School organized. He discussed Starbucks' expansion in China, and gave a real interesting talk. Some of the most interesting points included:
  • The fact that China is a tea culture did not scare them. They had already succeeded in Japan and England which are also tea cultures.
  • Starbucks is expensive here, a Grande Coffee is 20 Yuan ($2.25 US), which is even more expensive than it is back home, and Lattes are 35 ($4.25) . However for the Chinese its even worse given the average salary of 4000-10000 Yuan/month for professionals here in China. As the VP put it, if you made $4000/month would you spend $20 for a cup of coffee? (I wouldn't. Actually that would cause me to break the habit. . . my frugality would win out.)
  • That being said, most Chinese when they think of Starbucks don't think coffee. They think "good environment," which is the hook Starbucks uses here. People here like getting their latte and lounging at the store. Unlike in the US, which is 80% take-out, China is 80% stay-in. As a result, Starbucks has to invest in more comfortable furniture than it does in the US.
  • Apparently in Chinese culture, invitations to visit one's home are reserved for only family and the closest of friends. Invitations to offices involve a lot of protocol over who out-ranks whom, etc. Restaurants had normally been the place to have casual gatherings with acquaintances and business contacts, but those were only good for mealtime, The "good environment" filled the void for these casual meetings in between mealtimes.
  • To adapt to local tastes they have things like Green Tea frappucinos and put more of an emphasis on food(given the long lingering times).
  • Hu Jintao, the president of China, was seen toasting with a Starbucks mug when he was in Seattle. He is also quoted as saying if he were'nt president he'd spend a lot of time at Starbucks. Thus, mayors around China are petitioning Starbucks to enter their cities seeing it as a sign that their city has made it.
Besides the obvious lesson that getting the public endorsement of the head of state of a semi-autocratic country will help business in said country, Starbucks' experience does underline the importance of understanding the local culture of the markets you're entering. It will allow you to highlight and amplify the relevant aspects of your product/business that appeal to the new market, while adapting the other aspects of your business that either are unimportant or potentially negative.

Along similar lines, I heard about an academic conference about China on campus last week and crashed a whole bunch of seminars. The school brought scholars from all over the world to talk about the research on China they were conducting. Some of the talks I went to included:
  • Sino-Japanese Relations : Ups and Downs
  • To Lend or Not to Lend: A Case Study of the Transformation of a Chinese Commercial Bank’s Decision Making on Corporate Loans
  • Marketization Without Privatization: The Politics of Partial Reform in China’s Public Service Units (PSUs)
  • Tax Controversies and the Development of Tax Procedure in China
  • Commodification of Welfare in Shanghai: Managing Risks and Opportunities in a New State-Society Relationship

Most were about as interesting as they sound, but I did learn some interesting tidbits. For example, the state of China is devolving a lot of services (ie. health, education, welfare) to quasi governmental agencies. These agencies are also where 60% of China's educated class work. This allows the government to retain control while minimzing public funding. These agencies are in the process of being reformed to benefit "millions of people," not hundreds of millions so they're being reformed for the employees. . . not those being served.

I'll stop there before I continue to further convice you all of my nerdom.