Starbucks Coffee in China

There is a joke in the United States: when the economic crisis occurred in the United States in 2008, Howard Schultz, CEO of Starbucks, lamented: "Oh, my God!" Starbucks closed 200 stores a day on a street in New York. How can we live in the future? "

The joke reflects the number of Starbucks coffee shops in the United States. It is said that when Starbucks is at its peak, its number is comparable to that of speed limit signs on American highways, that is, if you look up on any street in the United States, you will see a Starbucks. Starbucks' green goddess logo has become another symbol of the United States, a totem after McDonald's bright yellow M.

With Starbucks entering China on a large scale, sensitive Chinese have found that Starbucks, a coffee chain that can no longer hillbilly hillbilly in the United States, has become a coffee aristocrat in Chinese soil. Chinese consumers have complained: "Why?" If an American earns $2,000 a month, he only needs to spend $3.45 on a Starbucks. While a Chinese man earns two thousand yuan, he spends 24 to 30 yuan on a Starbucks. Americans, this is too bullying. "

Western economics stipulates that Starbucks coffee must be expensive in China.

Is Starbucks deliberately boosting its brand positioning in order to make high profits, catering to face-saving Chinese with high prices, and profiteering at the expense of Chinese consumers?

Fayed, an economics professor at the University of California, Davis, believes that Starbucks' pricing in China follows a very important principle in economics: the law of one price (The Law of One Price). In other words, in the context of globalization, when the same product is sold in different regions, it should be expressed as equal value. To put it simply, if a cup of Starbucks sells for $3.45 in the United States, it should be priced at $3.45 in China multiplied by the exchange rate between US dollars and RMB when Starbucks officially entered the Chinese market in 2010, or 23.8, or about 24 yuan. If Starbucks prices his products below that price, he should be regarded as dumping. In Professor Fayed's eyes, Starbucks' pricing of its products in the Chinese market is reasonable and legal. Such pricing makes room for profits for Chinese coffee shops and drinks, and is a reasonable product of the theory of free competition in western economics.

In fact, the law of one valence is equivalent to the position of Newton's law of universal gravitation in physics in western economics, and it is a law that everyone knows. It is a pity that Chinese economics has been out of touch with Western economic research for a long time, and once there is an incomprehensible phenomenon, it is easy for Chinese consumers to think that this is the economic exploitation of the Chinese people by US imperialism. to accuse American companies of profiteering.

The Big Mac Burger Index is not applicable in China.

If we look at the extension of the law of one price, we will have different perspectives and conclusions on many economic disputes between China and the United States.

According to the law of one price and the law of purchasing power parity (Purchasing Power Parity), the American Economist (The Economist) used the concept of Big Mac Burger Index for the first time in 1986. The index uses McDonald's Big Mac hamburgers sold in different countries as an important economic index to determine whether each country's currency exchange rate is at the right level.

Of course, this index also becomes the theoretical basis for the United States to accuse China of unreasonable RMB exchange rate. According to the "Big Mac Burger Index", American economists were surprised to find that in July 2013, a Big Mac hamburger sold for $4.56 in the United States, and at an exchange rate of 6.3, it should sell for 28.7 yuan, or about 29 yuan, in China. The actual price of a giant hamburger in China is only 17 yuan. According to this price, the exchange rate between the US dollar and the RMB should be set at 1: 3.5 instead of the current 1: 6.3. In this way, the Chinese people feel even more wronged. This 17 yuan is not given by me, it is set by your American company, why do you use your own price to complain that my exchange rate is too low? If I do not know the law of one price or the law of purchasing power is wrong, then your American company clearly knows these economic principles, but also gives a 17 yuan, this is not a trick me?

So in retrospect, this "Big Mac Burger Index" has an important economic basis. This index is based on the principle of free competition. The so-called principle of free competition means that in a specific industry, the competitive strength of each enterprise is balanced, restricts each other, and there is no possibility of monopoly.