How dependent are Starbucks and KFC on China?

Ambitious Starbucks is expanding in China, but customer lingering is a big obstacle to Starbucks' expansion in China, it was reported on Wednesday. "customers love these stores so much that they sit hour after hour. Sometimes they don't even buy a cup of coffee." In fact, although these multinationals are expanding at an alarming rate in China, China is still a relatively small market in terms of their sales in China as a share of their total global sales, which depends on whether customers stay in stores for too long. Maybe it doesn't have much to do with it.

As of 2010, Starbucks had 459 stores in China, but the average Chinese consumer drank coffee only three times a year. Consumers in eastern China need to work 1.3 hours to buy a 12-ounce caramel macchiato, while those in the west and central China take 1.6 and 1.9 hours, respectively. Starbucks had global revenue of $10.71 billion in 2010, but revenue in China was only $358 million, accounting for only 3.3 per cent of its global revenue.

How dependent are multinational companies on the Chinese market? Will there be no recovery without the Chinese market? We looked at the annual reports of several companies, and the data may disappoint many people-in fact, the lack of the Chinese market is not very important to most multinationals. China's ubiquitous Carrefour supermarket still makes most of its revenue in France, with revenues of 8.169 billion euros in China in 2011, less than 10% of its total global revenue. Even for Coca-Cola, which can be seen almost anywhere in the world, the Chinese market accounts for only about 7% of its total revenue. Among our most common multinationals, perhaps only Yum's KFC will have a lot of difficulties leaving the Chinese market, where KFC accounts for 49.8% of its total revenue, or almost half of its total revenue.

The research report released by the Economist Intelligence Unit (EIU) at the end of last year also supports this conclusion. According to the report of the Economist, the global financial crisis has made multinational corporations, especially large ones, more dependent on the Chinese market to generate more revenue, but at present, China is still a relatively small market for most multinational corporations. The report is based on a survey of 328 senior managers of non-Chinese multinationals, as well as in-depth interviews with executives, business scholars and market analysts of large foreign multinationals. In this survey, only 8% of respondents believe that China is already their largest market, 17% of companies expect China to become their largest market within five years, and 21% think this will happen within 5-10 years.

Of the 70 multinationals surveyed that disclosed data on the Chinese market, only 10 companies accounted for more than 20% of their global revenue last year, including Mead Johnson, Cartier, BHP Billiton, Yum, Ultra Semiconductor and so on. China accounts for less than 10% of the revenue of more than half of the multinationals.

The survey also shows that while multinationals are still bullish on China, there are signs that they are distributing their investments around the world to balance their overall strategic layout. Thirty-seven per cent of respondents thought China was critical to global strategy, compared with 53 per cent in the 2004 survey. Another 33% of respondents believe that although the Chinese market does not have a vital position, it also has important strategic significance, down from 41% in the 2004 survey.

(responsible Editor: Leo)

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