Compensation Management Business 4340 - an Examination of the Factors That Have Contributed to the Increase of Coffee Consumption in China

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- Purpose

The objective of this study is to examine the extent to which exposure to western culture has affected coffee consumption in China. Historically, the purchasing habits of Chinese consumers was directly related to traditional values and beliefs. However, with the emergence of the free market economy they traditionally values are slowly being replaced with western consumerism (Wang & Lin, 2009).

This research paper will analyses how thrift and saving patterns which are ranked as one of the most important Chinese cultural values are slowing changing. (Chinese Culture Connection, 1987). The concept of thriftiness has an important role on the daily spending habits of Chinese customers with respect to debt, saving, and spending patterns. Furthermore, this study will evaluate how the western ideals of conformity and brand loyalty are affecting the buying habits of Chinese consumers. In addition, Chinese culture has a strong sense of conspicuous purchasing habits where the acquisition or consumption of products is sometimes used as a means to advertising ones to wealth to reach higher level of social status (Bagwell and Bernheim, 1996). Therefore, the correlation between conspicuous spending and increased demand for western branded coffee products will be evaluated. Finally, this paper will examine the extent to which changes in Chinese culture with respect to individualism, materialism, and consumerism are due Western Influences and how coffee consumption has been affected by this phenomena.

As result of the ideas discussed above this research paper will endeavor to examine the following questions:

To what extent has exposure of Chinese’s society to western culture influenced the consumption of coffee in China?

- Literature Review

The academic literature used in this paper can be categorized into the economical and sociological view. The two models used in this study comprise of the traditional Chinese consumption values and changes which is considered as an economical perspective while coffee buying behaviour is considered a sociological view.

TRADITIONAL CHINESE CONSUMPTION VALUES AND CHANGES (Economical view)

Many analysts of the Chinese consumer market have described China’s shift from its traditional conservative society to a Western consumer society ‘the move of the generation’ (Wang & Lin, 2009). The core cultural buying behaviors are changing and Wang et al’s theoretical model discusses these factors (2000).

Thrift and Saving/Spending Patterns

This concept is a core Chinese factor that impacts the manner in which consumers view debt, saving, income, and purchasing habits. Despite increasing income, consumer borrowing habits are 35% lower in China which illustrates how conservative the population is (Asian Development Bank,2015).

“There is a widely spread story in China, comparing the values and lifestyle of a typical American lady and a typical Chinese lady. The American lady took mortgages in her early years to live in big houses. When she dies, she has no savings but a big house. The Chinese lady saved all her money to buy the house. When she had enough savings to buy the house, she was dying. In her lifetime, she accumulated big savings but never lived in her own house. This story illustrates thrifty values related to consumer attitudes toward debt in China.” (Wang et al., 2001).

Face and Conspicuous Consumption

Face, or miànzi, is a concept of central importance because of its pervasive influence in interpersonal relations among Chinese. Face refers to prestige that is gained from purchasing and consuming expensive goods and services. An individual seeks to increases their social standing through conspicuous buying habits. This trend is a central reason why China is important vast amounts of luxury goods. Professionals in cities consume brand name products as means to publicly declare their stature (McEwen et al., 2006).

Conformity and Brand Loyalty

Chinese society attaches significance to past experiences, they are less likely to switch brands unless the experience was extremely unpleasant. The average Chinese mature consumer is much slower in switching brands compared to the mature American consumer. As result the Chinese consumer is slow in accepting new products and services. However, young professionals in China are involved in more conspicuous consumption as result respond faster to changes in trends (Wang et al., 2000).

Changes under Western Influences

The establishment of the consumer market in China in the mid-1980s, has led to changes in consumer behavior and identity (Wang et al., 2001).The growing tendency to self-serve at the expense of others, growing materialism, increased consumerism and rising individuality has expanded as a result of western business and cultural migration. Growing spending habits and decreasing conservative attitudes towards debt are a troubling sign (Asian Development Bank, 2015).

COFFEE BUYING BEHAVIOR (sociological view)

In this area, the main piece of literatures has a research problem in relation with fair trade coffee. Coffee is considered a western style beverage as result there has been an explosion in the consumption of upscale coffee products (Curtis et al., 2007).

Yang et al.(2012) has illustrated in his model for Chinese buying behaviour that coffee market in China is growing fast. Nationally, coffee in China is not considered an average drink. In the 1980s, coffee drinkers were rare and coffee was usually treated as high- priced imported gift items exchanged more for its token value (i.e., as an expensive gift) rather than actual consumption value (Curtis et al., 2007). Today, more people in China may consume coffee for the same reasons as in most western countries. Coffee is considered to be a low involvement good. “Buying a specific type of coffee is often a matter of habit. these different reasons represent different attribute dimensions when a customer purchases coffee, such as brand-orientated, flavor-orientated, ethical- orientated, and price- orientated” (Curtis et al., 2007). Since a significant portion of Chinese consumers purchase branded coffee for taste but also for social status when companies have bad social records, consumers decide not to buy their products because it does not serve a fashionable purpose (De Pelsmacker et al., 2005).

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