China takes on Starbucks, biting a hand that feeds it, analysts say
1. Starbucks asserts that higher costs in China are due to the fact that “Chinese customers, unlike their American counterparts, often consume Starbucks food and beverages in the stores.” As a result, owners are forced to spend more on location and design. Is this a viable excuse for inflation? What other forces may be influencing the increased cost of purchasing a latte in Beijing?
2. The article contends that the taxes levied against foreign business in China are hampering the transition from a production-based economy to a more consumer-centric model. Do the taxes on international businesses restrict growth, or level the playing field, so that local Chinese-ownedcompanies can begin to thrive as the economy shifts towards a more westernized model?
1. I do not believe that inflating the prices due to Chinese customers eating inside the store versus outside is a good excuse at all. This statement is ludicrous, because that it is an awfull reason to spend extra money on location or looks for people who eat inside, they should all just look similar, such as the ones set up in America. I doubt that the Chinese public would be extremely offended if a Starbucks did not have a fountain of liquid gold in the middle of the room. I believe the main forces acting on and driving the prices skyward are the taxes by the Chinese government and the importing abilities of Starbucks with coffee and milk related products. The Chinese government is giving them a hard time when it comes to expenses due to the communist, producer based economy.
ReplyDelete2. The Chinese taxes on international trade restrict the growth of their nation economically. It destroys relations with other nations that may or may not want to trade with them, because as time goes on the idea of such taxes seem absurd. Companies like Starbucks will only follow through with it if they raise their prices on certain sales items, which the Chinese find offensive, if not generally unfair. This does level the playing field for Chinese businesses, but it somewhat decimates the trade from everywhere else. If they are attempting to take after the western civilization’s model for a market, they should be more accepting of international trade instead of laying tax after tax on them and destroying what could be a small touch of outside culture for the people in China.
-Andrew Winter
I agree with you Andrew! I also think that it is 'absurd' that they're focusing on the looks of the store. I like how you said "I doubt that the Chinese public would be extremely offended if a Starbucks did not have a fountain of gold in the middle of the room." Your making your point clear!
Delete-Jolynn Catanuso
oh noes, I wrote awfull instead of awful
DeleteI definitely agree with you. China's excuse that the elevated prices are a result of people eating inside is most definitely "ludicrous". I looked up some pictures of the inside of China's Starbucks, and they look identical to those in America. Clearly, Starbucks is not putting the money into the decoration of their stores, but into the strict taxes they must pay to bring their products into China.
Delete-Jess Barlow
I strongly agree with Andrew when he points out the inaccurate excuse behind why the starbucks prices are increasing in China. Interior design?! If The American company of starbucks wants to increase their prices in an area where it is harder to accommadate their customers (due to imports and such) there should not be an uproar. It is not like starbucks has a coffee monopoly in China.. Starbucks has its right to increase the prices. I think that the Chinese governement has a problem with an American company thriving in their country. I personally do not drink starbucks because it is over priced.. why Chinese citizens wouldnt just drink coffee somewhere else I do not understand. Regardless, Starbucks has its right to increase its prices in China. sorry for the butchered spelling in this... -Courtney Kenny
DeleteI love the assertive tonality of your comments Andrew. You strongly voice your opinion and I am curious to see what others will think!
ReplyDelete1. I believe that Chinese customers spending more time inside Starbucks is not a viable excuse to start inflation at all. In my opinion, there is too much concern on how the store looks. There is a difference between spending a fair amount of money on location and looks, and spending too much money to please the public. Smart workers would worry less about detail inside the store, and focus on detail of their products. I think that competition is a force that is increasing the cost of a latte in Beijing because there is a lot of pressure overall. This competition is shown when the article says "For some industries in which some state-owned companies face competition from foreign firms, targeting the latter can be viewed as a form of protectionism." Also, the Chinese government is impacting the cost due to the pressure of "Dairy goods — like the ones that find their way into China's Starbucks drinks — have been hit with huge taxes in recent years, in what is likely a measure to protect Chinese dairy farmers." These are reasons why the cost is increasing in Beijing.
ReplyDelete2. The Chinese taxes on international trade are restricting the growth of their economy itself. I believe that raising the taxes and continuing to have these taxes is ridiculous because sooner or later the customers will not want to pay, especially if other nations do not want to trade with them. Starbucks will gradually increase the cost on their items. Since they could be aiming for a western civilization outlook, they should not be throwing taxes on the international trade.
-Jolynn Catanuso
If more Chinese costumers are wanting to consume their purchases within Starbucks, wouldn't you say that the size of an average Starbucks store would have to increase to withhold its demand? And wouldn't the expansion of square footage cost more money for the company, resulting in product's price raise?
DeleteI don't think the Chinese government should tell Starbucks (SBUX) what to charge. Starbuck is an American company. china should have not let them into China if they were gonna tell them what to charge. Capitalism is what drives American companies, not Communism. -Jesse Nathan
ReplyDelete1) More customers eating inside Starbucks does not give a good enough excuse for higher prices. The interior of stores is not a good reason to increase the price of a latte. The real reason for the higher prices is that the production cost of making the same exact latte is higher in China than it is in America because the cost to import the coffee beans and milk is much more costly if the shop is in China. If the production cost of coffee goes up, the supply decreases. When the supply decreases, the price increases because the demand is not effected. Now there is less supply than there is demand. That forces prices to go up in order to keep the economy in its natural state. I also agree with Andrew in saying that one of the “forces acting on and driving the prices skyward are the taxes by the Chinese government and the importing abilities of Starbucks”.
ReplyDelete2) The taxes on the international businesses is a good idea to promote Chinese businesses, but the taxes are not high enough for local businesses to have the upper hand. In order for China to have dependence from international companies, the taxes either have to be raised, or the Chinese businesses need to become more prevalent. As of now, I believe the taxes should be lowered until Chinese businesses can grow. This is because as Andrew stated “It destroys relations with other nations that may or may not want to trade with them” and if China wishes to become a Western economy, they need to be able to trade with other nations.
-Alex Bedard
1. Having more customers eating-in is not a solid excuse for the higher prices of Starbucks' products. After further research, I found that the inside of Starbucks in China look almost identical to those in the U.S. Clearly, the higher prices are not contributing to the interior design of the store. The real reason for elevated prices on certain items is the taxes that China is forcing Starbucks to pay on the items they import. Because of China's taxes, it costs more for Starbucks to import supplies to China than the U.S and therefore, because Starbucks is an American, capitalist business, they must increase the cost of their products so they don't lose profit. This must be the cause of the higher prices because only certain items (a.k.a. the higher taxed items) cost more. If prices were raised on items because Starbucks needs more money to decorate, as the Chinese government suggests, it would be strange and impractical from a business standpoint to only raise the cost of some items and lower the cost of others. The more logical explanation for the higher costs would be China’s high import taxes, which would only affect select Starbucks’ items.
ReplyDelete2. The taxes on international businesses definitely restrict China’s economic growth. Foreign, capitalist, businesses, such as Starbucks, are forced to raise their prices to make up for the money they lost in taxes. The elevated prices will become much higher than those of the local businesses and foreign companies won’t be able to compete with them. This competition has, and will continue to deter Western companies from operating in China. Big-name companies that the citizens want to buy from won’t do business in China-business that could add a significant amount of money to China’s economy. Therefore, taxing international businesses heavily to promote Chinese businesses, is and will continue to restrict China’s economic growth.
-Jess Barlow
I agree with you on the fact that the taxes restrict China's economic growth. You brought up a good point when you compared local businesses to foreign businesses and how they wouldn't be able to compete with them. If China keeps the tax on imported goods, what do they expect? The prices to be lower? Like you said, the prices will continue to restrict China's economic growth. ~ Charlotte Dyer
Delete1. I would like to disagree with the common opinion that the increased interior usage is not a good enough reason to raise the prices of the beverages. First, the article states that more Chinese customers stick around to drink beverages than American customers. Andrew, you claim that “the Chinese public would [not] be extremely offended if a Starbucks did not have a fountain of liquid gold in the middle of the room.” The Chinese customers are clearly not looking for a fountain of gold in the middle of the room. What the Chinese customers need is more space. A Starbucks in China can’t have the same space as a Starbucks in the United States, the store would get overcrowded. A larger space means much more cost. There is an increase in the price of furniture, cleaning supplies, staff and the property tax would be much larger. If the space was being rented, it would be necessary for Starbucks to pay more for the extra square feet. Also, Starbucks needs to pay much more to get all of the supplies that it needs. All of the Chinese imports are taxed, which increases the price even more.
ReplyDelete2. The taxes restrict growth greatly. While it is essential for the Chinese people to start their own businesses, other foreign businesses first need to come in and show the Chinese how to do things. When companies like Starbucks come to China they give the opportunity for Chinese people to purchase franchises of the stores. The taxes only slow down this transition. If China wants a more western economy, it needs to start behaving more like a western country. That means lowering taxes on foreign companies.
If Starbucks believes that creating an environment where the Chinese people will want to sit and enjoy the products they bought from Starbucks, why shouldn't they be able to drive up the prices of their products to accommodate the expensive interior? If people don't like the price, they can go somewhere else to buy coffee, but they thing about Starbucks is that they have high quality products. This makes people come back and willing to pay high prices for the products they love.
Delete1. Raising prices and excusing it on the idea that Starbucks has more customers seems unhinged. Prices increase as a result of coffee bean imports rising. In extra research I found that a website Reuters.com quotes,” Retail sales of coffee in China grew more than 90 percent between 2007 and 2012, hitting 7 billion Yuan ($1.15 billion) last year.” China has decided to raise the price of imports because those imports are becoming more expensive.
ReplyDelete2. I believe that taxes on international businesses would stimulate Chinese economy. I agree with Alex in saying that the taxes imposed wouldn’t be high enough for the local businesses however, in my opinion I think in the end the economy would level out. Taxes would be a way to give china more economic growth, even though foreign imports/exports would be more expensive. On the other hand, it helps the Chinese gain that stability.
1. The excuse that costs are higher in China because their customers consume it within the store is not a viable excuse for inflation. I don’t understand why a store has to spend extra money on its location or its looks. Looks aren’t everything, after all. Customers are there for the food and beverages, not because of its looks or its locations. I think that the customers would be more concerned with the quality of their food, rather than the appearance of the store. It is said within the article that China is not a producer of coffee beans, therefore the cost of importing them will add to the high cost. Also within the article is the fact that “…dairy goods…have been hit with huge taxes in recent years…” will also drive up the prices.
ReplyDelete2. The taxes on international businesses restrict the growth completely. If China were to get rid of the taxes on the imported goods, the cost could potentially be lowered. If China keeps the tax on these goods, which is necessary for the food and beverages, the prices will stay the same or even increase. In my opinion, if China is complaining of higher prices, I think they should reevaluate the taxes on the imported goods which Starbucks needs for their products.
~ Charlotte Dyer
1. Having more people drink inside the Starbucks stores in China is not a viable reasoning for higher priced beverages. Although, being in a marketing class, I can see the other side of this too. Most businesses try to focus on the wants and needs of its customers. If most costumers want to consume their beverages inside, than Starbucks will spend more money decorating the interior and making seating arrangements that will accommodate this rather than spending less money on the interior and just having a window for a drive through which cost a lot less. On the other hand, they are only overcharging one beverage. If what I was saying was true above than there would be an increase in all of the products, not just the latte. The real reason Starbucks is raising its prices on the latte is because China is taxing them for importing foreign ingredients. This is causing them to drive up there prices, especially on products that contain milk. Seeing as though latte's mainly consist of milk, that is the reason why they are being overcharged.
ReplyDelete2. The taxes on International businesses is restricting China's economic growth. China's economy is heavily reliant on Foreign Direct Investment (FDI). Anything that 'distracts' or drives businesses away will take a toll on China's economy. Such as, the so called false reports on CCTV that aired Starbucks higher prices with a hidden camera could possibly drive away other investments in the future. This could badly damage China's consumption based economy. Their economy is what keeps them at a continual sustained rate.Therefore, taxing and negatively publicizing foreign businesses will hurt their economic growth.
-Carly Seguin
Starbucks in China can drive up their prices if they wish to, because no one is forced to buy coffee from them. If the Chinese citizens don’t like the prices, they can take their business somewhere else. Because the Chinese supposedly spend more time in Starbucks, consuming their items from Starbucks than people in the U.S. do, Starbucks feels the need to keep the interior nice because they want to please their customers. If this means raising the prices in their lattes’, then the owners should be able to make this decision. The interior may not be the only variable driving the price in. The article mentions, “Importing coffee beans, since China is not a producer, and likely milk, given China's food-safety scares in recent years, may also drive up Starbucks' costs.” No only might the interior of the building be expensive, but in order to get the actually product to sell, the company has to pay to import it. As an example, just recently, a Dunkin Donuts just a couple minutes from Souhegan has completely remodeled to change the interior in an effort to please the people, as the interior of Starbucks pleases the American people. The extra cost to have a nice design of the building in worth the extra cost in coffee.
ReplyDeleteDepending on weather people continue to buy this taxed coffee with show whether taxes on internal business will restrict growth or level the playing field. Clearly, Starbucks believes that even with the raised prices, they will continue to grow and make a profit. If people in China stopped buying from Starbucks and the company began to lose money, they would be forced to drop their prices. Because they just raised them, they must be successful and the Chinese people value the design and interior of where they might stop for an afternoon coffee. Starbucks can do whatever they want with their building and their prices. If Chinese citizens are unhappy with the prices, they can take their money elsewhere.
I agree with you Katie, Starbucks has the right to do what they want to with their prices. Your example of how the Dunkin Donuts near SHS has remodeled to please their costumers , connected excellently to the Starbucks in China.
Delete1. I agree with Andrew Winter,and Alex Moresco, in saying that just because people are eating in the restaurant/cafe that they should allow the prices to inflate. Like Andrew says "...they should all just look similar, such as the ones set up in America.", i agree with this and this shouldn't cost any extra money to decorate. In my opinion that should be a reason why they might lose their customers. Though normally the price of coffee would go up because of import taxes or the price of the coffee bean that the company may use. But Alex akes a good point to say "What the Chinese customers need is more space. A Starbucks in China can’t have the same space as a Starbucks in the United States..." I agree with this and the cost for the furniture and other items to decorate the store are also higher. This would cause Starbucks stores to try to make there customers happy by decorating their establishment.
ReplyDelete2. The international taxes are actually hurting the growth of china, by making it harder for people to do trade with china. For most companies like Starbucks they are forced to raise their prices on their products in order to make the kind of profit they want to. This means that china cant do a lot of business with and China's people may want to buy there products and can't.
Agreeing with Andrew, I too believe the inflation of prices for interior sitting versus exterior, for customer satisfaction, is not a viable excuse at all. As Jess Barlow points out from her deeper research/image search, she says she "found that the inside of Starbucks in China look almost identical to those in the U.S. Clearly, the higher prices are not contributing to the interior design of the store." This I also agree with. But I also agree with Jesse Nathan on the fact that Starbucks is an American company and China should not be forcing higher prices. Although I do see that the importing of items is expensive, and is the real reason for elevated prices. Chinas government forces taxes on to Starbucks in order to pay for the items they import. If the foreign imports are so expensive, the China government needs to lower the prices.
ReplyDeleteThe international taxes are causing harm and lack of growth toward the growth of China. As stated in the article, China economy relies on Foreign Direct Investment. As Carly states, "Anything that 'distracts' or drives businesses away will take a toll on China's economy. Such as, the so called false reports on CCTV that aired Starbucks higher prices with a hidden camera could possibly drive away other investments in the future. This could badly damage China's consumption based economy." Through false publications and taxing on foreign businesses, economic growth is being hurt. Also in my opinion, China needs to lower the taxes on imported goods. With the higher prices on products, Chinas people will not buy their own products, which is essential to their economic stability. -Callie Anderson
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ReplyDeleteIt may be true that Chinese customers consume their Starbucks in the stores so I believe this is an extremely viable excuse for inflation. If so many people eat and drink at Starbucks locations then they should spend more money for their customers to be comfortable and happy. Starbucks has a right to higher their prices because more customers are eating there. Companies should have their stores look nice and feel comfortable, and if raising prices allows them to achieve this then that is their right. Like Katie said
ReplyDelete"Starbucks feels the need to keep the interior nice because they want to please their customers. If this means raising the prices in their lattes’, then the owners should be able to make this decision."
The article gives many other reasons for this inflation that are completely viable. "not all Starbucks products are more expensive in China". But inflated prices are because "the cost of operating in China is also higher". The article even says some prices are lower than the U.S. and you don't see us writing articles and getting upset about this. Also foreign companies have fees that domestic Chinese companies do not. Therefore Starbucks in China will need money to cover these. Starbucks located in China need to import the coffee beans and also import milk "given China's food safety scares in recent years". Finally, China taxes for imported goods such as dairy so they should not be complaining about higher prices. Many restaurants and coffee shops spend money to please their customers by decorating the interior. If the company wants people to continue coming to their establishments it needs to look nice and feel nice, therefore money is required to go into this. If that means raising prices a little this is completely reasonable and a very viable excuse.
I believe that the taxes on international businesses level the playing field for the Chinese owned companies. Although this is true i believe these taxes are an ineffective way of doing this. international companies already gain an extreme amount of money from their locations everywhere around the world. China is not necessarily needed in their income. They are allowing the Chinese businesses to "catch up" to businesses that are already far ahead but this is something that will never happen. Locally owned Chinese businesses will never reach the height and popularity that international businesses have. The taxes may also cause international businesses to not want to deal with China, and not put their stores there. This would hurt China because their people would not have a wide variety of options. On the other hand these taxes do restrict growth. They restrict the growth of the country and its people. The people of China will not be exposed to other options then the Chinese ones, and the international businesses will not get the income and experience from the Chinese.
1.After reading Andrew’s, Courtney’s, and Katie’s responses, I find that I agree with what they are saying about the prices of products in Starbucks. I think that Starbucks’ excuse of spending a “significant amount on store location and design” is not legit. I think that their prices a hiked up because of the high operating costs in China and because of China’s high importation costs. Starbucks just doesn’t want to upset the Chinese government too much by calling them out as the direct cause of the high latte prices. Also, this excuse for why the prices of lattes are expensive does not hold up because if it were true, the prices of every single the other product would also be increased, but that is not the case. The prices of their other products are “comparable or in some cases even lower than [their] competitors”.
ReplyDelete2.These taxes against foreign business are China is indeed hampering China’s transition from a production-based to a consumer-based economy. If China really wishes to have a consumer economy, then one would think that they would be more willing to have foreign business to get the products to their citizens. Instead, they are making it harder for businesses to take part in their economy because of the heavy taxes. If they truly wish to make this transition then they should be more willing to trade with others and should even encourage it. The taxes on international businesses hold back foreign businesses during the Chinese transition to a more westernized model so that foreigners are not the only businesses profiting. While foreign businesses are restricted by the heavy taxes, Chinese-owned companies are given a chance to profit and adapt to the new style of business, almost like they are being given a head start in China’s new economy. This seems like the Chinese are giving their own an unfair advantage over the competition, but at the same time, I can understand why they would want to do that. They want China’s economy to profit off of their own community, not for foreign countries to profit because of their work.
-Hannah Kenney
1. I agree with Molly of understanding and believing both sides but agree with only one. If more Chinese people are staying inside to finish their food and drinks, it would only make sense to add more space to their locations so their costumers are comfortable, therefore also adding onto the cost of specific products because of import taxes.
ReplyDelete2. The Chinese taxes on international trade is hurting their economy greatly. It's disintegrating relationships between countries because sooner or later, even the mention of taxes, is simply crazy. Big corporation companies like Starbucks can only follow through if they place higher prices on specific food and drink items. Which, as we've seen, the Chinese find offensive. This causes a decrease in trade with China and other companies, making it even harder for China's economy to become more westernized. China should be more accepting of international trade without taxes and also be more accepting of the westernized type economy.
~ Patience Deaton
1) Many Starbucks, built within the United States, are blueprinted to a smaller floor plan than the average restaurant. American costumers usually leave the store once they receive their purchases, whereas the Chinese costumers tend to consume their beverages and foods within the store. Starbucks proclaims that the higher prices on their store’s products within China, is due to the greater majority of customers consuming their purchases before exiting. Although Starbucks most likely has to build larger stores in China due to its customers, I do not believe that it is a viable excuse for the inflation that the company has forced upon China. There are many other contributing factors that also play a role in the heightened costs, such as the importation of ingredients and specific goods.
ReplyDelete2) Taxes that are placed upon international businesses restrict the growth upon both the international business and the China itself. When placing larger taxes on international companies compared to Chinese-owned companies one must expect the international companies to raise their prices in order to make a substantial profit. The large taxes placed upon international companies may also have a negative effect on China’s future with global business and the want for them to engage with China. From a Chinese standpoint, the high taxes on international businesses may seem to “level the playing field”, but when all of the actual money spent on imports for the international business is added up, it becomes clear the international business have a leg down compared to the locals who simply purchase their products from the local market.
-Erin Woods
Stemming off of Katie and Alex, Starbucks has every right to increase their prices to cater to customers and if that means raising prices in order to have an adequate interior, then so be it. The product itself is vital to gaining customers, but the atmosphere also plays a huge role. The article states, “Because Chinese customers, unlike their American counterparts, often consume Starbucks food and beverages in the stores, Starbucks spends a significant amount on store location and design.” If a restaurant/café has a more attractive atmosphere, consumers are going to buy more into the experience as whole rather than just the product. If the overall product experience is raised, it will attract a clientele that is used to paying more for a higher quality experience which would lead to greater profit margin. Although product prices are higher in China, the consumers in China also expect the higher quality experience that calls for owners to spend more on things such as location and designs in order to cater to the customers. There are additional factors that lead to a higher price in China as well, namely the cost of importing food as well as taxes.
ReplyDeleteI agree with the general consensus of the taxes on international business hindering China’s growth economically. Companies only want to do business in other countries if there’s a great enough market and profit margin, however large taxes will scare away those companies who feel it would affect their profitability. Therefor, countries as whole would start to drift away from their ties economically with China. I agree with Alex in the idea that China should lower the taxes until the Chinese business are able to gain the upper hand and prosper on their own.
love it Jess! I completely agree with you that the design and atmosphere plays a huge role in the profit made by the company
Delete1. I think that the location of where the Chinese people ingest their food is not a good excuse. Whether or not they eat inside vs. outside, or elsewhere, shouldn't be a factor of the price of the goods. If they wanted a real excuse, they could just say that importing coffee beans and milk are what really bring up the price of the goods was the main reason. It isn't necessary to make the place look more than half decent on the inside. In the U.S. the fast food/ coffee shops don't have everything nice inside, just the basics, there should be no need to make the place fancy just to please the customers more than enough.
ReplyDelete2. If the Chinese are looking for a more "westernized" country model, increasing taxes on the foreign companies is not the way they should go. By increasing these taxes, making their own country's companies better in comparison, the westernization they are looking for, will soon go down the loo. The taxes that China is putting out on foreign ones, are just restricting growth of their own country's economy and goals.
~Garrett Smith
I do not think that the location and design of stores is enough justification for Starbucks to raise their prices. On one hand, I agree with Alex Maresco, Molly, and Patience that Starbucks needs more space in China since more people in China eat inside the store. Another reason why Starbucks has a valid point is that establishment taxes are higher in China than in the US according to the FDA and this source: http://www.doingbusiness.org/data/exploreeconomies/china/starting-a-business. While the US has a fixed rate of about $2,000, China taxes almost .1% of the capital needed for the establishment. While this does not seem like a large percentage, the cost of an store in China greater than the cost of a store in the US.This makes a store in China more expensive than one would definitely raise the prices of Starbucks’ items.
ReplyDeleteHowever, are these points valid enough on their own to raise the prices of lattes? I don’t think so. First of all, China’s taxes for imported items like milk and coffee beans is a very good reason for raising the price of Starbucks’ products. Secondly, according this article, http://behindthewall.nbcnews.com/_news/2013/10/22/21078363-starbucks-caught-in-chinas-crosshairs-over-posh-prices, Chinese customers question the quality of their purchased goods if the price is too low. These customers are now aware of the raised prices of Starbucks lattes and they defend the prices of these luxury items. The last thing Starbucks would want is customers not buying their items because they thought there was something wrong with the quality of their food. Starbucks might be assuring their Chinese customers of the high quality ingredients in their food with the large prices. All of these reasons combined make Starbucks raise their prices in China, but the single most important reason is the taxes, not the location and design of the stores.
I agree with the opinion that taxes against foreign companies are helping the Chinese owned companies to survive in a westernized model. While it is true that taking the taxes away from foreign companies might help China grow into a more consumer-based economy, I know from experiences in India that Western stores make local ones go out of business. Before McDonald’s and other Western fast food restaurants came to India, there were many Indian snack shops in close vicinity of each other. However, since the appearance of these Western restaurants, many of these Indian snack shops have gone out of business and it has become increasingly difficult to find these local shops. While China may be different from India, the popularity of Western brands nowadays is the same in both places. This would lead to less people going to Chinese stores, making the Chinese stores go out of business. While lowering taxes on foreign companies would help China make the global investments it needs, it would lead China’s economy to be completely dependent on Western companies.
1. I don’t believe that location and design is a viable excuse for inflating prices in China. It makes no sense to inflate the cost of couple drinks when the company could just make every Starbucks look the same. Most Starbucks in the US look exactly identical and no one complains about it, whether they drink their latte in the store or just grab it to go. I think the main reason the prices of some items in Chinese Starbucks’ are the higher cost of importing items like coffee. Taxes imposed by the Chinese government could also cause inflation, but Starbucks would not dare make the government look bad, so they claim the raised prices are due to “design.”
ReplyDelete2. The taxes imposed by the Chinese government on international and foreign businesses in China level the playing field for Chinese-owned corporations and businesses. It makes it easier for home-grown companies to get started and keep up with foreign businesses that might otherwise get ahead and beat the family-owned or local companies into the ground. Local businesses are good for the Chinese economy because they keep all profits local economically. None of the profit is being exported, so the money continues to circulate and stimulate the economy in China alone. The taxes could start to hinder China's international growth in the long run, but short term the taxes are beneficial to local organizations.
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Emma Fleuette
1) I believe the excuse Starbucks gave for inflating their prices due to the fact that more customers eat indoors at these Chinese Starbucks is not completely true or at least this excuse is not practical. This price inflammation, like most everyone said, cannot be because of the nice interior design of the Starbucks. It is most likely because of the high taxes to import these goods as well as the taxes the company faces from the communist country. On another note giving this excuse was a poor choice that the Starbucks Corporation made. If this is the legitimate reasoning for their price inflammation than so be it, like Katie said it is the owner’s decision to do what they want with the company. But as proof to how ridiculous this sounds read everyone’s comments.
ReplyDelete2) Taxes on international businesses are restricting growth in China’s economy, but the reasoning for these taxes are very justified. As the Chinese economy tries to move towards a westernized model and is also a communist country it makes sense for these taxes to be in place. They are giving a chance to the Chinese-owned companies to thrive in their own country, showing the communist value of equality. They are giving a small cushion to the Chinese companies and restricting the international companies from taking over the economy. The negative side to this is that other international businesses may not want to expand to China because of these taxes, restricting growth in China’s economy.
-Michael Robicheau
1. By taking the least valid point from the argument that was made in the favor of Starbucks, and asking if it is a viable excuse creates a pretty loaded question. The observation that Chinese customers consume their food and beverages in the store is not a viable excuse to charge extra for a product. But the article clearly said that since the milk and coffee beans have to be imported, the price will increase, especially due to the Chinese government’s high standards for food safety. The taxes certainly limit bigger businesses when it comes to importing goods but bigger businesses have the ability to pay these taxes while smaller businesses often times do not. The excuse of the need to charge more due to that Chinese customers will typically spend more time in the store is completely invalid because Starbucks should have been prepared for the challenges and circumstances they must face when beginning business in another country in which they did not originate from.
ReplyDelete2. The taxes on bigger and more developed businesses definitely levels the playing field for smaller businesses by halting the typical domination of the market by larger businesses. This will definitely make things more interesting watching more small businesses have the chance to succeed whereas before in different conditions they could not.
- Kate Ede
I see your point Kate but don't you think that the appeal of the store is important to the company? If people are buying the product in the store, why not make it look good? The prices are raised because the company needs to fulfill the demand of the consumers
Delete1. I believe that the design and outlook is important to a company in providing products and fulfilling the desire of the consumers. The Starbucks Company in China has all the right to use money to produce a well interiorly designed environment for the people. If people are in the store, then the owners are going to make in appealing and likable, because they want the demand to increase. This is basic for all companies, organizations, and businesses. Design can often spike an increase of supply and demand for products. In this case, the owners who are forced to spend more on location and design are doing it for their own benefit, and to make the consumers happy. The location is important because the more populated and wealthy location, the more consumers are willing to buy for the product. Therefore, the business has a right to place the location wherever is most helpful, even if it costs them. I agree with opinions of Katie, Alex and Jess when Jess states, “Starbucks has every right to increase their prices to cater to customers and if that means raising prices in order to have an adequate interior, then so be it. The product itself is vital to gaining customers, but the atmosphere also plays a huge role.” Because the product is being bought, the Starbucks Company believes that perfecting the interior design will allow for a successful business. The article states that, “Because Chinese customers, unlike their American counterparts, often consume Starbucks food and beverages in the stores.” This proves that it makes sense for the company to consider the design and location because Starbucks is popular in the area, inside the store.
ReplyDelete2. I believe that the taxes on international businesses level the playing field. China is becoming stronger and more successful. I believe that the taxes against foreign business allow China to grow and thrive. There is competition between countries all around, and considering that, “China will be the biggest market (for Starbucks) outside of the U.S.," profit margins there are not as high as they are in the U.S. because of high operational costs. International business taxes will benefit the Chinese economy. As Emma said, “It makes it easier for home-grown companies to get started and keep up with foreign businesses that might otherwise get ahead and beat the family-owned or local companies into the ground.” Because the western civilized model is sought to be a successful, internationally and market based model, the Chinese will temporarily benefit and thrive off of the international business taxes.
-Jordan Catanuso
1.) Having more customers drinking inside the building is not an acceptable reason to raise the prices. The reason Starbucks is raising its prices on the latte is because China is taxing on foreign ingredients. This is causing them to drive up there prices, especially on products that contain milk. Seeing as though latte's mainly consist of milk, that is the reason why they are being overcharged. I too agree with Andrew in saying that one of the “forces acting on and driving the prices skyward are the taxes by the Chinese government and the importing abilities of Starbucks”.
ReplyDelete2.) The taxes on the international businesses is a good proposal to promote Chinese businesses, but the taxes aren’t quite high enough for local businesses to have the upper hand. When companies like Starbucks come to China they give the opportunity for Chinese people to purchase franchises of the stores. Taxes only slow this process down. If china wants to be more western then that means lowering taxes on foreign companies. Essentially china needs to lower there taxes, because if the higher prices on there products stay like this then people will not buy there products which is not good for there economy. –Chris DeChambeau
1. I do believe a reasonable argument can be made to reason why the prices for some Starbucks products are increased, there is much more to it than just the cost of “store location and design.” While the cost of design could be a large factor in the increase in cost, it also could be that since Chinese consumers are more likely to eat or drink products in the store, that they are using up more resources in the store and creating more work for employees in turn, increasing the payments the store has to make to keep up their business. There are also factors outside of the fact that more people eat within the store. This could included things such as the fact that the store has increased prices based on the taxes China has put in place for certain imported ingredients Starbucks has to pay for.
ReplyDelete2. Although the taxes on international businesses may increase the chance of a local business’s chance to compete, I do believe it makes a significant enough impact to be necessary. As stated in the article "In the case of Starbucks, I'm not aware of any large local coffee chain stores, so it's unclear to me what's going on." Many international businesses were most likely brought to China based on the fact that they do not have similar stores locally. Meaning, the businesses that do create franchises in China don’t have many competitors anyway. Implementing this taxes will only prevent new businesses from coming to China and making the westernization of China unsuccessful. Eventually the taxes will not “level the playing field” between international and local businesses, but will result in local businesses having no competitors at all.
1. I believe that more costumers in stores is not a valid excuse for a business to dramatically inflate prices from one country to another. The cost of buying a property in a nice location with a beautifully designed interior and exterior is much less than the company is making by increasing the prices. I very much agree with Andrew when he says that the force that is most likely driving up the prices is “the taxes by the Chinese government and the importing abilities of Starbucks with coffee and milk related products.” While doing further research on this topic I found, on www.reuters.com, that Imported products often cost more in China because of high import duty and tax rates. Roasted coffee beans, for example, draw an import duty of 15 percent and a sales tax of an additional 17 percent. This is a large tax for Starbucks to pay for coffee beans, so to account for the high taxes the coffee chain must raise their prices to continue to profit in China.
ReplyDelete2. The taxes on international business restrict growth because, like Jess said, “Foreign, capitalist, businesses, such as Starbucks, are forced to raise their prices to make up for the money they lost in taxes.” So all international businesses will have very high prices compared to local businesses because of the extra tax they must pay. This will help promote local business because the high prices that international businesses must charge will create less competition between local and international business. But many citizens of china are looking for international companies such as, Starbucks, and Dunkin Donuts, wanting to spend money at widely recognized chain businesses. These companies generate a great amount of money that eventually will be added into China’s economy. This shows that taxing international business heavily will promote local business but in the end will drive away large companies that would contribute large amounts of money to China’s economy.
-Madison Angulas
1.) I do not believe that this is a viable excuse for the the significant increase in prices. The people in China will most likely continue to go to Starbucks and pay for they merchandise even if the interior and exterior design of the building is not superior. Therefore I agree with Andrew when he said that the Chinese people should not be extremely offended if the interior of their store wasn't as good looking. They would probably be happier with the money they would be saving. Other forces that could be causing the price to go up would be that the Chinese people aren't complaining about the high prices, they see no problem with it because they don't notice it so why wouldn't the companies charge more if people aren't complaining?
ReplyDelete2.) Taxes on international businesses do restrict the growth because why would other nations want to put up with such unnecessary taxes? Other nations will not want to trade with them if they have too high of taxes before their economy has grown more and this will ruin their plan of becoming a westernized country.
-Shelby Desmarais
1. I agree with Shelby, I think that while improving decor to please customers makes sense, it should not raise prices significantly. Plenty of people sit and eat inside of the American Starbucks, and they are very suitable. The people seem to be more outraged about getting charged higher prices than other nations. Without prior complaints the need to perpetually charge higher prices for the foreseeable future seems hard to understand. Especially when Starbucks is already a multi million dollar company.
ReplyDelete2. I have a hard time picking a side for this particular question. I understand how this could hurt the growth of foreign companies. The taxes could contribute to the taxes which hurt the number of customers Starbucks gets. Also it could hurt China, because why would companies who are already wildly successful come to China to get taxed? Yet part of me understands because domestic companies could be hurt by the growth of international companies.
-Kate Heaney
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