A cup of Starbucks was a middle-class symbol in China. Since the opening of its first store in China in 1999, Starbucks had conquered the Chinese coffee market with its experience driven philosophy. Nonetheless, a few ambitious and well-funded Chinese tech entrepreneurs had decided to challenge Starbucks. Founded in October 2017, Luckin Coffee expressed a desire “to be part of everyone’s life, starting with coffee.” Leveraging its core competence in technology and a business model focussed on delivery and heavy discounts, Luckin scaled up rapidly. By 2020 it operated more stores in China than Starbucks. But Starbucks was responding to the new threat, forging an alliance with Alibaba backed Ele.me. In this situation, what should both firms do to do to win the war for China’s coffee consumer?
The authors have used this case to teach courses is Strategic Management, Competitive Strategy and Multinational Strategy in China. Both at the undergraduate and postgraduate / executive level
After being taught the case students will be able to:
- Perform an internal and external analysis using a range of frameworks and identify a suitable business strategy for a firm
- Identify the resources and capabilities of a firm and use the VRIN model to identify which of these can provide the firm with a (sustainable) competitive advantage
- Identify ways of obtaining resources required to execute a business strategy and discuss the pros and cons of obtaining them through either borrow, buy or build.
- Know in what ways companies can scare away new entrants to an industry
- Assess the strategic options a company has once a new entrant has entered an industry