MINISTRY OF EDUCATION AND SCIENCE OF UKRAINE Donetsk National Technical University Higher School of Economics and Management Department

of Foreign Languages for Professional Communication

Cross-Cultural Management Project

CULTURAL FEATURES OF CLIENTS IN AMERICAN AND UKRAINEAN TRANSNATIONAL COMPANY STARBUCKS

Written by ____Musienko Ruslan____ ____Pogorelova Alyona_ ____Shkarupa Liya__________ ____Vasilenko Maxim__________ Group ____IES08a___

/ Submitted: _____ ________________ 200_. / Checked: _____ ________________ 200_. /Grade: _______________________________________________ / Lecturer: ______________________________ N.Yu.Todorova

Table of Contents Introduction 1. American target audience. 1.1 Eating habits. 1.2 American Values reflected in advertisement. 2. Ukrainian target customer 2.1 Eating habits 2.2 Ukrainian values and its advertisement 2.3 Question Analysis 3. 3. Recommendations to Starbucks management for performing an advertisement company in Ukraine. Conclusion List of references

Introduction

Our decision of chosen this theme was its topicality, as problem, when will Starbucks be opened in Ukraine? worrying a lot of its citizens. Main aim of our work is: to show what cultural features of prospective should Starbucks Company take into account when planning to enter the Ukrainian market. Main tasks are :

to describe American Target audience; To show how do Ukrainian target audience perceived by Americans; Give a recommendation to companys main purposes.

There are many studies analyses and defining the challenges of cross-cultural management, the most referenced authors being Hofstede and Trompenaars. But in our work we`d like to make question analysis about eating behavior prerogatives of citizens of our city. The first Starbucks was opened in Seattle, Washington, on March 30, 1971 by three partners: English teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker. The three were inspired by entrepreneur Alfred Peet (whom they knew personally) to sell high-quality coffee beans and equipment. Less than in 30 years, company became a worldwide leader in its industry with dozens of stores around the globe. The brand recognition of Starbucks coffee, and its elevation to a catchword denoting the ultimate corporate co modification of the anti-corporate, "slacker" lifestyle, is all the more phenomenal for the company's marked refusal to achieve that status through the medium of advertising. A chain of retail coffee outlets that offer fresh specialty drinks and beans to go, the Seattle-based company expanded across North America at a quick pace during the 1990s, and by early 1998 Starbucks stores could boast a combined foot-traffic count of five million visitors weekly. Because of Starbucks, Americans can now pronounce the foreign terms
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"latte" and "barista" when discussing complex coffee beverages and the foodservice professionals who make them. Starbucks' corporate origins date back to 1971, but the company did not really begin its march to massive success until 1986, when a Starbucks executive, Howard Schultz, created a coffeehouse in Seattle to serve upscale espresso drinks. He called it Il Giornale, and modeled it on the coffee-imbibing locales ubiquitous to Italian cities. The following year, Schultz put financing together and bought out Starbucks' two original founders, who had little faith in his attempt to introduce European-style coffee and coffee culture. By 1998, Starbucks was the number-one roaster and retailer of specialty coffee in the United States, closing in on its goal of 2,000 stores by the year 2000, expanding into Asian markets, and introducing bottled beverages and packaged beans in supermarkets. Yet it was the actual Starbucks space that attracted both devotees and disparagers. The stores are carefully designed to look just slightly cutting-edge and modern in their fixtures and fabrics; the lighting is subdued and ambient. Sociologists term it a "third place" neither work nor home, but a neighborhood spot where it's okay to sit alone, offering the chance of running into old friends or making new ones. "I don't think Starbucks' success has that much to do with coffee," urban sociologist Peter Katz told Seattle Weekly's Bruce Barcott. "Starbucks is selling community." Starbucks has demonstrated all dimensions of a growth strategy: Internationalization in expanding into new countries and the global market. It has shown concentration in being creative and relying on its core competency of making high quality coffee and coffee equipment to develop new products and markets. Horizontal Integration has been evident in the many strategic acquisitions, partnerships, and joint ventures. Vertical Integration has been another key success factor as Starbucks Corporation has integrated backwards in opening coffee roasting plants and forwards in controlling the distribution of its many products. This growth has taken it from a single store in Pikes Place Market in Seattle, to a

worldwide company with sales of over $2.1 Billion and operations in almost thirty countries, in just 21 short years. Currently Starbucks is present in more than 55 countries around the world and its still expanding. In the following work we tried to analyze if there are any perspectives for company such as Starbucks in Ukraine and what are the culrural barriers between Ukrainian and American culture, that Starbucks is known as a large promoter of.

1. American target audience. 'We need a certain amount of humility and a sense of humour to discover cultures other than our own; a readiness to enter a room in the dark and stumble over unfamiliar furniture until the pain in our shins reminds us where things are. (Trompenaars) The target market is 18-34 year-olds who are newly independent and are looking forward to transitioning into a world where they get to call the shots. These are the types of Starbucks customers most likely to choose another brand of coffee based on its cheaper price. They will be reached through a wide variety of mediums including print, radio, outdoor, Internet, and other non-traditional forms. American Coffee Assosiation published a report on how American consumers drink coffee in 2005. Nowadays 56% of American citizens drink at least 1 cup of coffee per day (In 2005 there were 53%, in 2004 - 49%). 82% of Americans drink coffee at least, once a week (2% more than year before). Number of Americans that drink coffee regularly equaled with number of regular customers of nonalcoholic beverages (cola, lemonade, etc.) Most active coffee drinkers are 25 to 29 years old. According to the data provided by International Coffee Organisation , everyday coffee consumption equals 2,25 bn cups of coffee, every 5th of them in the USA. USA is world's largest coffee consumer, and ICO proclaimed Seattle as "coffee capital of the world", because it is Seattle that has biggest number of cafeterias per capita. Starbucks now has an opportunity to persuade consumers that their coffee has maintained its high quality, and that the products and services are worth the premium price. Because Starbucks is known for being Americas original coffeehouse, it has the ability to infuence the future of the coffee industry. Starbucks also has potential for growth in the area of corporate social responsibility. In November 2008 it launched its (STARBUCKS) RED campaign,
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which makes a contribution to the Global Fund each time someone buys a special (STARBUCKS) RED product. This partnership with the Global Fund marks a great opportunity for Starbucks to boost its brand image in 2009 and 2010. Starbucks itself is one of its greatest competitors. Mintel suggests that the chain has oversaturated its market and the recent closing of several hundred franchises is evidence of this. Also, Starbucks sales have suffered in 2008, which has resulted in market share growth for smaller coffeehouse chains and independents. Starbucks has been closing stores while industry competitors like McDonalds are focusing heavily on growth. Furthermore, the state of the economy is forcing people to cut certain items from their budget. Coffeehouses like Starbucks are taking a big hit because many people consider coffee a luxury item and know that they can brew it at home for a fraction of the price. Another threat lies in the McDonalds ad campaign that portrays Starbucks as a snobby and expensive place to get coffee Purchasing Rate and Buying Habits Credit cards and debit cards are the more likely means of currency for purchase. In 2006, the purchasing rate for Starbucks products was very high. The rate has decreased along with demand due to economic issues. The buying habit of consumers has decreased in several ways included coffee. This is because in the 90s and early 2000s, the consumer had more expendable income available to make such purchases as quality coffee. To outline the habits of those that do buy coffee, the time period between 6 and 10 in the morning have the highest rate of purchase; this is increased further during the winter season. The second highest rate is found during the time period between 4 and 7 in the evening.

1.1 Eating habits. Granted, not everyone thinks of the chain as radical. Take Bryant Simon, a historian at Temple University. In his 2009 meditation on Starbucks, Everything
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But the Coffee, he offers the usual critiques of the company. It says it sells coffee, but it doesnt. It says its a venue for conversation and civic discourse, but it isnt. It sells overpriced coffee-like beverages and a safe, predictable, environment. It preys on needy, status-seeking consumers by offering them clean bathrooms, innovative products, and a soothing ambiance in myriad convenient locations. For Simon, Starbucks was designed to be an exclusive, elitist institution: When CEO Howard Schultz began adding locations in the late 1980s, he made sure to put his stores in the direct path of lawyers and doctors, artists on trust funds and writers with day jobs as junk bond traders.

1.2 American Values reflected in advertisement Surprisingly, the company gives very little advertising, just as many schools and the role of coffee in society has increased so much that Starbucks cups often flit in different subjects and have become an integral part of American life (the company is growing by leaps and bounds, and a famous leader Jay Leno even joked. That recently opened Starbucks coffee shop in his apartment).Americans belong to low-context culture type, which is tend to differentiate personal relationships, work and other aspects of everyday life, and also to individualist culture type. Precisely in this context we can understand how Starbucks, as company initially established in America, was quickly welcomed and gained its popularity while being a prompt service type of company and supporting a fast pace of life inherent to individualist culture. Monochrome time, strict planning of the schedule and desire not to waste a single minute led phrase "Time is money" to becoming an American national motto. According to their lifestyle, Starbucks provided them with fast service and instant preparation of their favorite drinks (coffee and tea in lots of varieties), while keeping quality high and never forgetting about considerable price. [4]

At the beginning, company will have huge demand, because, according to the laws of marketing, everything new gets attention momentarily unrelated to the price. But after certain amount of time, company will start losing its clients and upper-middle class people will become its main consumers. But those are making only 7% of country's population, while middle class make 40%, according to the research made by business magazine along with TNS Ukraine. [4] Strategies in Starbucks company - tries to express exclusiveness and quality of the product - positions itself as a premium product in its market - appeals mostly to the upper-middle class customers - presents huge assortment of coffee and coffee-based beverages (as an advantage over its contenders) - regularly announcing the launch of its new products - appeals to customer through environmental cleanup programs and RED program along with the Global Fund to help people living with HIV in Africa - presents visiting Starbucks as a way to take a break and spend some time with friends.

2. Ukrainian target customer 2.1. Eating habits The traditional Ukrainian cuisine is rich of natural ingredients. You will always remember taste of tomatoes, cucumbers, pepper, lettuce, onions, apples, grapes, peaches grown in the famous fertile Ukrainian soil. The Ukraine customs and traditions in cooking are based on a combination of fresh or pickled fruits and vegetables, meat, mushrooms, and herbs. Often they include a great number of ingredients and their unusual combinations. Ukrainian cooking uses black pepper, red pepper, salt, bay leaf, parsley and dill (usually in spring and summer), garlic and onion. Staples include potatoes, cabbage, fish, pork, beef and sausage. Ukrainian people eat many dishes made of potato. In Ukrainian people tend to eat fatty food, such as whole milk, sour cream, butter, etc. Sometimes people even go to villages to get whole milk because it is considered to be beneficial for children. Ukrainian people like to cook. They practically don't eat junk food. The description of Ukrainian cuisine would be incomplete without salo (pork fat). Placing a thin sliced salo on black bread with garlic and salt will make it especially delicious. It is hard to name a nation, that would respect bread as much as Ukrainians do. During many centuries Ukrainians were strongly attached to their land and its fruits. Bread was regarded as one of the holiest foods. The cult of bread is well observed in Ukraine customs and rituals. Hosts often give their guests a loaf of bread with salt on the top. The ritual of offering a guest bread and salt is a ceremony of welcome which dates back many centuries. "The Bread and Salt" tradition is very symbolic in Slavic culture. It can symbolize many things. During wedding ceremonies in Ukraine instead of the

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customary wedding cake, traditional bread called Korovai, is served. It symbolizes a new-family birth and its future prosperity. In general, Ukrainians eat a light breakfast. It can be bread with butter served with coffee or tea, or pastries. Kasha (cereal), steamed buckwheat, barley, or millet with milk may also be served. Their main meal is eaten around midafternoon and usually consists of soup, such as borshch and a dish with meat or poultry. The third meal of the day takes place around 6 or 7 p.m. It is usually a time when all family members get together. Ukrainians eat with a fork in their left hand and a knife in their right hand. It is considered impolite to hold your hands under the table during dinner, or to put your elbows on the table. In order not to seem wasteful, Ukrainians may eat everything on their plates. When they are visiting, Ukrainians may ask for second helpings to show appreciation for the food. Hosts often give guests a loaf of bread with salt on top, a tradition that dates back many centuries. Bread and salt were once considered necessary ingredients for health. The bread represents hospitality and the salt represents friendship. American Coffee Assosiation published a report on how American consumers drink coffee in 2005. Nowadays 56% of American citizens drink at least 1 cup of coffee per day (In 2005 there were 53%, in 2004 - 49%). 82% of Americans drink coffee at least, once a week (2% more than year before). Number of Americans that drink coffee regularly equaled with number of regular customers of nonalcoholic beverages (cola, lemonade, etc.) Most active coffee drinkers are 25 to 29 years old. According to the data provided by International Coffee Organisation , everyday coffee consumption equals 2,25 bn cups of coffee, every 5th of them in the USA. USA is world's largest coffee consumer, and ICO proclaimed Seattle as "coffee capital of the world", because it is Seattle that has biggest number of cafeterias per capita.

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As you can see, Ukrainian eating habits are much similar to the neighboring European countries, such as Poland and Russia, in which Starbucks is operating already. In fact, eating habits will be the minimal problem, since the main reason Starbucks is not in Ukraine yet is on the financial side. Obviously, Ukrainian eating habits are much healthier than those in the U.S.A. and has much longer and richer history. Coffee tradition in Ukraine Ukraine started drinking coffee about two centuries before the events that took place in Vienna and shaped the beverage tastes of Europeans. Coffee in Ukraine was first introduced by Armenian merchants from the Crimea. They came together with the trade caravans in the days of King Danylo (i.e., in the middle of the 13th century) to Halychyna lands and founded a trade colony in Lviv. Here, the Armenians concentrated in the hands the trade in eastern goods, they would drink coffee and offered it to others. Coffee beans bought in Genovese Kaffa (now Feodosia). So Ukrainians were familiar with coffee long before other Europeans. The peculiarity of our coffee tradition that this drink came to Ukraine peacefully, while the Turks in the occupied territories in the Balkan countries were inoculated to the local population a taste for coffee as occupiers. Coffee returned to Ukraine only in the end of 18th century through Lviv, which after the first break up of Poland became an Austrian territory and Viennese confectioneries and cafes were actively opening around the city. And in 1829 the first coffee house, specially designed as a lounge for lovers of the drink was opened in the city. It survived to our days.

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2.2. Ukrainian values and its advertisement If traditions are a heart of the national culture, the life values are its foundation. Choosing Ukrainian values that could be pictured in advertisements, we decided to choose the following: - Ukraine belongs to collectivist type of culture, Ukrainians are traditionally family oriented people Pretty often parents (or grandparents) live together with their children and help them to raise the kids. This tradition was a necessity when just a couple generations ago the majority of Ukrainians lived in the villages. Advertisement should include reflection of family values and promote the coffeehouse as a nice place to spend time with your family. - It is a Ukraine custom that grandparents play a great role in raising children. They say: "Children are our future." Sometimes parents and grandparents sound overprotective. But without any doubt they try to do their best to bring their children up as decent people. So advertisement in this case should be picturing Starbucks as a nice place to go with your children. - Ukraine belongs to the specific type of culture. Ukrainians are well known for their hospitality. They love to invite people to their homes or to visit their friends or relatives. Traditional Ukraine customs are to put all the best food on the table and to feed the guest once he entered their home. Ukrainian parties are not about food only. It is a long process with plenty of eating, drinking, and conversation. Advertisements should reflect Ukrainian hospitality as a unique feature and an essential part of Ukrainian culture and people. - Ukrainians are emotional and often accompany their reaction with gesture. Theres a lot of particularism that is focused on relations, but not on rules. They often help their friends and relatives to get a job. Ukrainians are very
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communicative and friendly nation. They can spend hours at the table communicating, eating and drinking. So, of course, advertisement should represent Starbucks as a place where you can spend time with your friends and include promotion of friendship and a big smile. Ukraine customs and traditions determine the style of public behavior. Ukrainians are brought up to avoid attracting attention to themselves. They usually speak quietly in public. To sit or lay on the floor is inappropriate in public places. 2.3. Question Analysis Ukrainians are the nation with very strong social, family and food traditions that should be taken in count to build a successful model of advertisement and promotion campaign, which is especially important for company such as Starbucks - the worldwide leader in its market sector. Drinking coffee been a tradition here since 13th century, so this fact can be important for an advertising campaign as well as for launching a new products exclusively for Ukrainian customers (as, for example, McDonalds does). Creating a nice friendly atmosphere will be very important here, as well as providing a good service corresponding to the company traditions. As we written in previous chapter Ukrainian is In case if its coffeehouse business will succeed here, Starbucks can also become a major player in the Ukrainian market of natural ground coffee. In Ukraine, 85% of consumed coffee is instant, and only 15% is natural. Specialists, by the way, avoid the word "natural" (because it turns out that instant is unnatural) and use the term specialty coffee. In turn, specialty coffee is divided by ground (80% of total consumption) and coffee beans (20%). Incidentally, the coffee preferences indicate the level of development. For example, in African countries where the product is grown, the level of coffee consumption instant (soluble) reaches 99%. So, theres a market niche for
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Starbucks to look at. For example, in U.S.A., Starbucks brand coffee sold in grocery stores at the prices that are similar to ones found in the cafes. Given that less people are willing to go out, the fact that they can purchase this during their normal grocery shopping is an advantage. This is combined with the fact that they can get that same great quality taste at home. The results of question analysis shows us the next answers on our questionnaire: How often do you drink coffee? In Ukraine, like to drink coffee. According to the results of questionnaire 41% of the population drinks coffee several times a day, 21% once a day, 15% several times a week, 13% several times a month, and only 10% did not drink coffee - it's mostly older people ( mainly because of medical contraindications). Women are drinking more coffee than the stronger sex.

do not drinkcoffee at all several timesa month several times a week once aday several timesa day
0 5 10 15 20 25 30 35 40 45

What type of coffee you prefer? The women in this matter, the preferences are divided almost evenly. Men are drink the americano or an espresso, but not averse to drinking a latte. But people over 60 years drink cappuccino.

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Latte 16%

americano 34%

espresso 26% cappuccino 24%

What do you eat with your coffee? Men prefer to drink coffee and sandwiches, some would like to add to drink brandy. Item "nothing" usually celebrated women. Cigarettes - that's the main answer in the column "is your option."

somethingsweet sandwiches anything 0 2 4 6 8 10 12 14 16

Where do you usually drink coffee? 63% of Ukrainians drink coffee own cooking (at home or at work) 13% buy coffee from vending machines, and only 24% bought coffee at a cafe.

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coffee machine

homemade caf?

With whom do you usually drink coffee? 54% drink coffee alone, 31% like to drink goryachitelny drink with friends, while 15% usually drink coffee in a family atmosphere.

withfamily withfriends oneselfat thework /study 0 10 20 30 40 50 60

Do you know about the company Starbucks?

know 32%

do notknow 68%

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According to the survey, we can see that Ukrainians love coffee drinks, but most are not willing to spend the considerable material resources and time, so basically they drink coffee at home and alone, and not in a cafe surrounded by friends. Company should point out the advantage of saving money by making it yourself and enjoy that great taste in the comfort of your own home. There are many varieties offered for the Starbucks ground coffee that the consumer can get the flavor they want without to a store and have it made for him or her. With the hectic lifestyles of can make it on your own time will be very beneficial to the consumer. spending the extra to travel today, the point that you

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3 Replace this Phrase with the Title of the Third Chapter

3. 3. Recommendations to Starbucks management for performing an advertisement company in Ukraine. onsidering the above-mentioned information we can recommend the following: etc.) - To take to account the difference between geographical coffee consumption rates. For example, the highest coffee consumption level is on the West of Ukraine, while the fastest growing market is on the East. - Price policy. This may be the key problem, so that point should be taken seriously. Management will have to decide what the target audience are going to be and to set the price rank on this basis. - Launching some brand new products made strictly for Ukrainian market. - To push competitors out of the market. There are plenty of photos of Starbucks look-a-likers all over the Internet, some even using modified Starbucks logo. So this fact is obviously could be used for an advertising campaign as well, if not for the copyright suit. This one is in Kiev: To take special effort on advertising some original products being introduced to this country for the first time. (e.g. Frapuccino, Iced-coffee drinks

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Conclusion As a conclusion to the following work, we can certainly say that there are very comfortable conditions for company such as Starbucks on the Ukrainian market. In this market sector, Starbucks as a worldwide leader can set a whole new industry standard, be an example to other, smaller companies and bring a serious competition to the market. Again, all of this is possible only if Starbucks will find the way to make its products affordable for a middle-class customer and build a strong customer base. Financial barrier, in our opinion, is the main problem in this situation. Lots of Ukrainians are already impatiently waiting for the time when this world-recognized brand will be established in their country to feel the same way as Americans, Europeans and Russians feel (there are already about 10 coffeehouses throughout Moscow). This barrier is inevitable, because in the U.S.A. and other western countries, Starbucks is widely recognized as an affordable luxury and always puts a price rank higher than its competitors. Company makes an emphasis on quality of the product and represents the good cant be cheap rule. In Ukraine, where average income level is quite different from that of developed countries, price policy is the number one problem. Coffee consumption will not be a problem, as long as it shows continuous progress, especially for the last 4-5 years. In accordance with the researches made in 2009 by European Coffee Association, the coffee consumption level in Ukraine shows huge and stable growth. For example, if in the beginning of 2000s average consumer drank about 0,5kg of coffee a year, by 2004 consumption level increased to 1,0kg. Today this number is about 1,5kg of coffee a year per person. As for the advertisements, one of the biggest tasks is to promote the fact of them offering a high quality product that makes them unique among competitors.

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principles of management Starbucks case study , SCAE ( http://www.slideshare.net/hukill/final-note-to-self .. : TROMPENAARS, F. Riding the Waves of Culture. London: Nicholas " " ,, 2010,

http://www.scribd.com/doc/29172193/Starbucks-Introduction-Case-Study 2

) (http://www.scae.com.ua)
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.-,2007.
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Brealey Publishing. 6
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http://www.obozrevatel.com/news/2010/9/7/389389.htm - : 08

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