Purpose of Assignment  This course has provided the in-depth information necessary to create an all-encompassing global business plan. The final goal is the assimilation of all previous assignments pe

STARBUCKS WINS KEY TRADEMARK CASE IN CHINA 7

Challenges Encountered by this Case

Legal Challenges

The defining problem in this case was one involving intellectual property rights in the form of Starbucks’ trademark in its name, nature of business, and even its business logo. The Shanghai coffee shop identified as Xing Ba Ke had violated Starbuck’s trademark in terms of store designs, name, and the logo as well. Starbucks registered its Chinese name in 1998, while Xing Ba Ke registered its name in 1999, and this was the reason Starbucks won the case in 2006 and was awarded $62,000 as compensation. The main legal challenge was the infringement in trademark since Xing Ba Ke had imitated Starbucks’ brand and logo. According to the law, Starbucks’ brand is protected as an intellectual property and only Starbucks has the right to distribute its goods to the public and make profits from the exercise. For Xing Ba Ke to therefore imitate this design and make money from it, it was a gross misconduct in the eyes of the law and in losing the court case, Xing Ba Ke had to immediately stop selling products under the name and logo.

Cultural Challenge

Culture denotes the values, behaviors and beliefs that are specific of a group of individuals and is passed down from one generation to the next through different forms of communication. Businesses also have their own cultures, which outlines their values and beliefs as well, as denoted by how they conduct business and the appeal they have to their customers and the general public at large. Xing Ba Ke’s behavior in the case was a gross violation of acceptable business cultures as it was symbolic of unfair competition in business. Starbucks had spent time and money to come up with the perfect business model which they then nurtured to ensure it became very appealing to a wide range of customers. This was the reason for their success in China in the first place. For the Shanghai coffee shop to therefore come in and just mimic this business design, it told more about the business itself and even the management team as being people who did not mind getting rich off the hard work of others. As a rude gesture, it also indicated that the management did not respect the other business and was too lazy to come up with a different business model that could compete with Starbucks in China.

Ethical Challenge

This trademark violation was simply a violation of the acceptable industry professional code of conduct, and also infringed upon the moral conduct of the Chinese people. Morally speaking, there is an acceptable way of behavior that is widely accepted in different communities all around the world. In business practices, there is a professional code of conduct that guides businesses to do the right thing. Xing Ba Ke was rude to Starbucks for going against this professional code of conduct and making money from its brand, and the general manager was equally rude and insulting when he said that he could not have copied Starbucks’ logo and brand since Xing Ba Ke was formed and registered in China before Starbucks (Svensson et al., 2010). Even if this were the case, Starbucks has been in existence longer than Xing Ba Ke and when coming up with a brand name and a logo, it was obvious that Xing Ba Ke came across Starbucks’ logo but just ignored this and went ahead to use it anyway.

Roles Played by the Host Government in this Global Business Operation

The first role was to welcome the global business in their country, in this case in 1998 when Starbucks registered its name in China. The Chinese government then made it possible for Starbucks to carry out their operations by allowing the corporation to conduct business operations in their country and offering protection to ensure continued business operations. The government however played a role in the trademark infringement by registering Xing Ba Ke despite the name and logo very closely resembling that of a company that had already been registered and allowed to carry out business operations. For most governments, a certificate of registration is not given to a business until the government has done extensive research and ascertained that there is not another business registered under the same or similar name, and that while the products offered may be similar, the new business is completely new and does not mimic designs by already existing businesses.

Additionally, the host government ensured justice was served when Xing Ba Ke was sued for trademark violations. In the court proceedings, China did right by Starbucks to research on which business was registered first, and to also compare the brand and logos of the two businesses in order to find out if they are related or are indicative of completely different things. In this case, despite Xing Ba Ke being a Chinese company, the host government ensured justice was served by ordering Xing Ba Ke to pay Starbucks compensation for the trademark violation that had occurred.

Operational Challenges faced by Global Managers

The first pertinent issue is slow and lengthy decision-making processes. From the case, Starbucks decided to sue Xing Ba Ke in 2003, but it was not until January of 2006 that a Shanghai court ruled that in using a similar name and logo, Xing Ba Ke was being malicious and practicing improper competition. This fact, coupled with the small amount offered in compensation, is indicative of a slow process to make decisions. Between 2003 and 2006, Xing Ba Ke must have made profits amounting to a figure much higher than the $62,000 offered in compensation.

The second challenge is a disparity in government regulations and corporate culture. In the U.S. for instance, no two businesses can be registered when they share a similar logo. Understandably, the strict procedures put in place during the screening period before businesses get authorized to operate afford the government sufficient time to ensure that a new business is not violating intellectual property rights held by another existing company, thus minimizing the chances of trademark violation cases later in the future (Berman et al., 2000). Additionally, it is considered a good corporate culture for businesses to demonstrate fairness in competition, something which according to the case is not common in China since at the time, violations in trademarks were a common occurrence.

References

Berman, M. N., Reese, R. A., & Young, E. A. (2000). State Accountability for Violations of Intellectual Property Rights: How to Fix Florida Prepaid (and How Not To). Tex. L. Rev., 79, 1037.

Svensson, G., Wood, G., & Callaghan, M. (2010). A corporate model of sustainable business practices: An ethical perspective. Journal of World Business, 45(4), 336-345.