China will soon become Starbucks biggest market outside the U.S. And with over 500 outlets in the country, Starbucks has quickly joined the ranks of McDonald’s and K.F.C. But what makes Starbucks’ business model so profitable? Like McDonald’s before it, the key to Starbucks’ success lies within the company’s ability to adapt to a growing foreign market.

Starbucks’ business strategy is specifically catered to meet the demands of the Chinese. Instead of simply transplanting the business model that works in the U.S. onto a different continent, Starbucks adapted their menu to offer items that appealed more to local tastes, offering more tea-based drinks rather than the bitter coffee that sells so well in America. And while the ‘on-the-go’ method of consumption may work best in the American market, a dine-in service better suited the needs of local Chinese consumers.

Although the dine-in service has resulted in fewer actual customers than in their U.S. outlets, their stores in China still manage to be more profitable than their American cousins despite the lower volume. And with a reported 34.6% margin in China (versus 21.8% in America), one has to wonder: how do they do it? Simply put, the coffee in China costs more. Like a Mercedes, or a Louis Vuitton bag, the Starbucks cup has become a status symbol.

To justify the increased price of the coffee, Starbucks also provides its customers with service comparable to, if not better than, many 5-star hotels. This has proved mutually beneficial both for the customers and the Starbucks employees – treat your employees better, and they will treat customers better.

Starbucks places a high emphasis on compensation, pleasant work atmospheres, and career assistance, which is essential in a market where a 30% annual turnover is standard. If an employee feels secure and taken care of in their position, they are less likely to leave their job, which means less time spent training a new recruit.

Let Starbucks be a lesson to those aspiring to expand into the Asian market: what works for you and yours, may not necessarily translate well into a highly competitive market where labor and real estate costs are sky high – yes, a thorough understanding of your target customers and a flexible strategy are crucial, but a well trained and loyal staff is paramount to the success of your business.  Elder-Marini Group knows this, and excels in training your employees to help your business grow and become more dynamic.