Under the influence of Communism, the Chinese considered conspicuous consumptionto be indicative of a lack of a nationalistic orientation. Translation and localization, services that we offer, are essential for companies operating in different countries. Bangkok's Starbucks costs the least at around 2.37 for a cappuccino. Prices are typically higher for countries outside the US. Starbucks, and how it enables Chinese to observe their culture, is a powerful example for any global brand on how to operate in the country. But in China coffee stores were more like a place for social gathering. Global integration and local responsiveness. The owner, Alfred Peet, taught the trio how to blend, roast and cup brewed coffee. Also showed interest in coffee drinking. The price of Starbucks not only varies based on the size and type of coffee but also on the country or region it operates in. Starbucks has developed an internationalization strategy to enable the company to open stores and franchises in countries across the globe. Starbucks has strong market position and brand awareness make the company gain a significant competitive advantage in further expanding the international market and contribute to the growth of domestic and foreign markets. Starbucks partnered with Beijing Mei Da with penetrating the northern Chinese market. Starbucks is born in Seattle, WA. While focusing on adaptation, Starbucks maintains strong brand integrity. When I visited a Starbucksfor the first time in China, I was impressed by the cheerful greetings of Chinese baristas, which set Starbucks apart from copycats. ET. Starbucks is widely known in the United States and internationally as well, including countries like China, Canada, Germany, etc. Is This The Recipe For Starbucks' Continued Success In China. 718 Words3 Pages. 11 Best Have, Concept of CRM and ERP difference with examples. The middle class in China has rapidly accepted Western standards as an acceptable standard of the bourgeois class. Starbucks Entry to China Starbucks modified its menu and tried to localize its brand name by selling some food items. This is particularly impressive in Asia where tea is the preferred drink. Statista, Number of Starbucks stores worldwide from 2003 to 2021, 2021. Heck, you dont even have to que since you can pre-order on their mobile app! The service ensures that all information about a company and product is in the local language. Wholly-owned subsidiaries strategy is carried out when the company has extensive knowledge of the market. This case study will consider how market research has strengthened Starbucks entry into the Chinese markets. Its such a popular brand that thousands of people even have their own Starbucks reward visa card! This is very true in this case. March 12, 2020 2 min read. Localization Strategies: Normally Starbucks follows a high standard technique to . Their first coffee shop operated at Seattles 2000 Western Avenue. In China, tea is considered the national drink. This relates to its corporate, business, and functional strategies. The company started observing that coffee culture is different for Chinese people than in the US. Also, the young generation was enchantment by brands and products from the West. It was about reviving a "tea house culture" that had existed for thousands of years. Besides, the net income of Starbucks in China and Asia-Pacific region had reached 214 million USD in 2012. The international success of Starbucks is put down to its cultural mindfulness and intensiveresearchof the host market. Who might be interested in buying coffee in China? Under the new owner, Starbucks went on to open stores in Chicago and Vancouver, British Columbia. The focus will be on the Starbucks' global marketing and how it has successfully stayed ahead of its competitors. 3151. From the beginning of Chinese civilization, family has been the key source of security, education and spirit for the Chinese people. a Huffington Post article from 2013 author, April Xiaoyi Xu states, "too much localisation can become "a detrimental strategy" for global conglomerates, and lead those companies to lose both their "foreign" and "international appeal.""(Xu 2013 . What does it mean if the company has high local responsiveness? However, it is not denied that there are still some problems in Starbucks in China drinking market. A Case Study of Starbucks Entry to China, so, the company has a unique style and atmosphere in its coffee houses. Many Chinese coffee drinkers place greater value on the experience and environment these cafes provide, rather than on the quality of the coffee itself. Maintain brand integrity in new markets. Last year, I realized that 2 of my colleagues walk 15 minutes each side just to go to the nearest Starbucks, considering the fact that we have 3 cafes in our building already. Types of Silver are used for different kinds of Jewelry, Top Aluminum Profile Extrusion Factories in China, Case Study of the MasterCard Credit Cards Business, Case Study of the Success Story of FedEx Company, : , , , , , , Advantages and disadvantages of Expert Systems, Economic Value Added (EVA) Advantages and Disadvantages, Difference between Traditional and Modern Concept in Business, Diminishing or Reducing Balance Method of Depreciation, 5 (Communication types Hindi), Financial Accounting: Meaning, Nature, and Scope, Decision-Making: Nature, Characteristics, and Principles. By registering you get free access to our website and app (available on desktop AND mobile) which will help you to super-charge your learning process. We often say that localization is not "one size fits all.". According to analysts, compared to other countries in which Starbucks operated this task was more difficult in China because of the age-old tradition of tea drinking in the country, where coffee was seen as nothing less than a kind of Western invasion. Starbucks charges up to 20% more for its coffee products in China compared to other markets. Case Study on Starbucks Entry to China with Marketing Strategy! From the beginning, Starbucks has spoken to the essence of Chinese culture, giving it the wisdom to develop the long-term vision, local relationships, and localized product offerings for the .
Infographic via , Image Copyright: Teerawut Masawat / 123RF Stock Photo. In this post, well be looking at how the brand caters to different cultures around the world! One contributing factor to this major success is Starbucks' international strategy and its ability to adapt to each market. When Western brands attempt to increase market share by cutting prices, they erode the very competitive strategy that gives them an edge in consumer perceptions. Starbucks' localization strategy. What is the pricing strategy that Starbucks adopts internationally? T able 1: SWOT analysis. MasterCard Credit Cards Business Case Study; Credit (change) cards have been very big business for several decades. In some cases, it requires some changes in the brands colors and appearance as well as adapting the brand name to fit the local culture. The sitting areas are open format and usually have no walls -- the chairs seem to flow out into adjacent spaces, such as lobbies or walkways. However, the growing popularity of Starbucks Coffee in China is an interesting phenomenon and has caught much attention from the industry. According to market research company eMarketer, Chinese consumers are projected to spend over $150 billion on foreign-made goods by 2020, a sign that the traditional Chinese trait of frugality is gradually being eroded by the free-spending attitudes of today's younger generation. Starbucks opened in Australia in 2000 and grew to nearly 90 locations by 2008. He also shared with them his inflexible standards. China is a complex and homogenous market. The company is known for its sustainable business operations and choices. Prospective Starbucks customers in China could look forward to what Starbucks refers to as The Third Place experience. They moved to a location at 1912 Pikes Place after five years. The expansion of Starbucks was aggressive, following the business philosophy of having stores in high-traffic, high-visibility areas. To acquaint employees and Chinese executives with coffee drinking experience Starbucks provided different training programs for them in which they learned more about coffee and Starbucks culture. Starbucks was to determine the financial and economic conditions of China. Case Study of Starbucks Entry to China with Marketing Strategy! Parents should strongly engage in their childrens lives -- their upbringing, education and career -- and in return, children should respect and care for their parents as they age. This strategy has effectively turned potential obstacles into Starbucks favor. These are just some of the many innovative ideas Starbucks used to create market superiority in all the locations they are in around the world. The stores were also larger in area than the ones in the US, as the idea was to make the customers feel at home, relax and spend more time there. Put together, these efforts have made Starbucks less a foreign brand transplanted to China and more a seed from a Western tree that has been carefully planted and patiently nurtured within. The company created the "Starbucks experience" that appealed to consumers. Because Chinese consumers love to meet in large groups, the stores in China have tables that can be put together to accommodate groups. When the company has limited knowledge about a market, it should enter the market using Why does value-based pricing work for Starbucks? . Starbucks started by projecting the stores as a place for social gathering. Starbucks license its trademarks via different channels such as grocery and licensed stores (Haskova, 2015, p. 12). It was unbelievable . An important strategy is to invest in employees. China has not been an easy market to crack for western companies. Starbucks is a fundamentally promising business. Where they can sit and talk for hours with their friends and families. The $14.89 billion Starbucks has also drawn lessons from the localization bids of other food retail chains, particularly KFC and McDonald's. In January 2011, when Starbucks chairman and CEO Howard Schultz made his maiden India visit to sign the 50:50 JV with Tata Global Beverages, hopping over to Asia's largest coffee maker Tata Coffee's . Starbucks's localisation strategy has fused local products with innovative store design, providing a lesson to all companies entering tough foreign markets, like China. . Starbucks became an aspiration brand in participating stores in China. Unlike Americans, who cant cope without a morning cup of joe, most Chinese customers dont just grab and go. The most recent quarter saw record sales of $3.4 billion worldwide, and a dramatic increase in share prices. Finally, the licensing strategy allows the coffee chain to quickly expand in a specific country. Business Startup Management Content with PDF, PPT, study Finance, Accounting, Economics, and Entrepreneur. Starbucks creates brand integrity by setting a clear standard of how the products and brand image should be perceived by the customers. To promote themselves in China the company chose a different way. China is a highly bureaucratic country with difficult processes of getting permissions and sanctions to start and run the business. 2. Thus, to break into the market, the company has included a lot of products made from green tea on its menu. The company said in a statement that; family forums have been held for parents of store partners to hear managers discuss gratifying career paths at Starbucks. Recently, there was a news that it is also planning to offer those parents health insurance. They are ready to work on different industry sectors, and share their knowledge, experience and linguistic and creative writing skills with you. In 2000, Starbucks entered into a joint venture with Mei-Xin International Ltd, also called Coffee Concepts Ltd. Starbucks' competitive advantage is built on product, service, and brand attributes, many of which have been shown through market research to be important to Starbucks' customers. Schultz resigned from Starbucks and opened his own concept coffee shop. Instead of taking the conventional approach to advertising and promotionswhich could have been seen by potential Chinese consumers as attacking their culture of drinking teathey positioned stores in high-traffic and high visibility locations. Traditionally, a tea drinking nation, Starbucks revolutionized how the young Chinese consumer views coffee by adopting a unique branding and positioning strategy. What is Starbucks International Strategy? Partners talk about their professional experiences in the company and Starbucks leadership -- even CEO Howard Schultz -- speak to the parents. Last but not least, the joint venture is a good way for Starbucks to reduce operation expenditure, and it also helps to reduce risks in the Chinese market. A Case Study of Starbucks Entry to China, so, the company has a unique style and atmosphere in its coffee houses. To counter this issue, Starbucks teamed up with regional players to gain access to the Chinese consumer. Aside from communication, a company has to adapt to the local culture to ensure success. It is now present in over 70 countries worldwide. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. 2.1 SWOT analysis for Starbucks. Western brands, in general, have a reputation for quality products and services. In China, KFC has localized its business strategy by using raw materials that are produced locally, thus stimulating the growth of different industries that produce the raw materials. Establishing and maintaining a global Starbucks brand does not mean having a global platform or uniform global products. Knowing their lifestyle, they dont like walking and standing at all. Starbucks has understood that it needs to work with business partners that understand the market. 2. In some cases, Chinese customers' preferences and behaviors will differ . International Business Machines Corporation, better known as IBM, is a multinational IT company involved in the manufacture and retail of computer hardware and software applications, and IT consulting services. This year, it started to sell tea drinks in China. Two years later, under Schultz, Starbucks was operating 46 stores around the Midwest and the Northwest. As a result of good reputation, good quality, and high price. Brands and Dunkin' Brands to appeal to local tastes. They also made a good reputation in the supply market. When I visited a Starbucks store in Shanghai back in 2007, I was impressed by the cheerful greetings of Chinese . Difference between Equity instruments and Debt instruments. He named it Il Giornale, which served espresso Italian style and ice cream. . I feel luxurious holding a Starbucks coffee cup in my hand, even if it doesnt have coffee in it, he said. When Starbucks was done with releasing YAHs from Zhongguo (the Middle Kingdom/country in Mandarin), we were left with eighty-one regular mugs and that not counting six Christmas mugs.And just to give it more context, it is even more than the US subset!That just shows us how valuable the Chinese market is for Starbucks and how . In January 1999, Starbucks opened its first store in mainland China at the China World Trade Building located in Beijing. The case facilitates discussion on: (1) entry strategies adopted by an established brand while entering an emerging market; (2) localisation strategies of Starbucks; and (3) sustaining and increasing profits from its Chinese operations. The shops offer localized food and drinks, such as the matcha (green tea) frappucinos. Starbucks Entry to China Although Starbucks encountered several challenges in the process of entering the Chinese market, with their case study. Starbucks' forward price-to-earnings (P/E) ratio . It's been a long road already for the coffee giant . China contains a number of distinct regionally-based markets, a factor that makes market research crucial to launching new stores and franchises in China. Which market entry strategies do Starbucks adopt? Types of International Strategy. 3, Figure 1. The astonishing achievement owes to its careful marketing assessment and various marketing strategies in different periods. Too many Western brands push for market share by cutting prices, which would have been a losing strategy for Starbucks. Starbucks moved too quickly, and grew faster than its popularity. Starbucks has revolutionized how Chinese view and drink coffee. Value-based pricing strategy with variations in different regions and countries. Its localization strategy is a mix of local products with innovative store designs, so they are able to fully adapt to the culture of the location. China is not an easy market to crack. This variation can be narrowed down to various factors such as spending power, tariffs, exchange rates, local market needs, and competition in different countries.6. (Photographer: [+] Brent Lewin/Bloomberg). First of all, Starbucks choose a good local partner to form a joint venture which can help it better understand the local laws and negotiate better with the authorities. The company conducts extensive studies to understand the consumer profile to create unique beverages that are western but still matches Chinese culture. Global brand does not mean global products, or global platform as eBay mistakenly tried. 808 certified writers online. Starbucks is a successful international chain of coffeehouses based in Seattle, the United States, and arguably the world's largest coffeehouse company (UW Business School 1). Starbucks formed a joint venture with different partners at different times when it entered the Chinese market. The ability to think differently, do your homework, implement right strategies, adapt to local markets, and commit long term are all important steps to achieve that goal. The fifth level of China screening was focused on competitive forces. From Amazon to Taco Bell, from Best Buy to Ebay, they either quit the market or just survived. In 2011 the organization had 16,635 stores in 50 nations, wholly-owned stores were 8,832 and licensed stores at 7,803 (Starbucks, 2017). Thus, Starbucks has established itself as an aspiration brand and is able to charge premium prices. The baristas in China acted as brand ambassadors to help embed the Starbucks culture in the new market and ensure that high standards for customer service and product quality are maintained at each new and established local store. The success and acceptance of Starbucks by different cultures come from its carefully planned marketing strategy - Multicultural Marketing. The shop did not have chairs or tables for its customers. In. Starbucks makes it a point to carry outextensive research on the history, culture and the locals taste preferences before it decides to partner with coffee companies and participating stores available locally. What are the types of international strategies used by Starbucks? Starbucks is going above and beyond Yum! . The rising middle class in China favors Starbucks, which has made the consumers yearn for consumables that are considered status symbols. What are four types of international strategy? Today, Starbucks has established itself as an aspirational brand and is able to charge premium prices. Similarly, the company took initiatives to teach the customers about the different types of coffees and how to distinguish between flavors. While some are operated by franchisees, the rest are owned and operated by the company. The company price its coffees at around US$ 6 for a cup. As a result, those who wish to become Starbucks partners must adhere to its explicit guidelines. 1. As Quartz's Gwynn Guilfordput it:In China, Starbucks doesnt sell coffee to make its millions -- it rents couches. At the third level of screening, Starbucks faced political restrictions. Gigi DeVault is a former writer for The Balance Small Business and an experienced market researcher in client satisfaction and business proposals. Starbucks in China . Localization makes the company approachable and accessible, eliciting trust and confidence from local consumers because the company becomes one with them, a company that understands and responds to their needs. There has always been a very strong emphasis on the family in this society with management making an effort to get to know employees families. Co-written with Suresh Dalai, a consultant with Alvarez & Marsal and former operations and merchandising director of Levi Strauss Asia and Ermenegildo Zegna, China, Starbucks has meticulously organized its efforts in China around three key pillars of Chinese [+] society. Since 2012, Starbucks has hosted an annual Partner Family Forum, where its employees (whom the company calls partners) and their parents can learn together about the company and its future in China. Read more: Starbucks Wants To Crack Asia's Tea Market. Traditionally, a tea drinking nation, Starbucks revolutionized how the young Chinese consumer views coffee by adopting a unique branding and positioning strategy. The Starbucks Entry to China; Starbucks is one of the largest coffee chains in the World. The companies that invest in long term plans can be sure to reap handsome rewards. August 10, 2014. The French coffee consumers were haughty at first, thinking that Starbucks served coffee of low quality that was overpriced. The complexity of the Chinese markets led to regional partnerships to aid in Starbucks' plans for expansion in China; the partnerships provided consumer insight into Chinese tastes and preferences that helped Starbucks localize to the diverse markets. In an interview with BCG, Schulz said about the first Forums held in 2012: Think about an annual meeting of shareholders; we had anannual meeting of parentsin Beijing and Shanghai, and we had about 90% participation. In September 1998, Starbucks entered China under a licensing agreement with Beijing Mei Da Coffee Co.Ltd, which was as their first partner. However, most Starbucks customers - who belong to the middle and upper social class are happy to pay the extra price for the premium coffee and top-notch customer service. Key Points. The cafs served very good espresso. Multicultural Marketing . For coffee lovers, it is highly probable that you got your caffeine fix from a Starbucks store near you. Through these partners, Starbucks learns to adapt and expand its product portfolio to better suit the local customers' preferences. 4 min read. Under the influence of Communism, the Chinese considered conspicuous consumptionto be decadent or indicative of a lack of a nationalistic orientation. . People in China spent the main slice of their monthly budget on food. It sets a clear standard of how the products and brand image should be perceived by the customers. One of Starbucks most successful international locations. The coffee-olive oil concoction echoing a keto-inspired . and they have already established a good relationship with the local government. Starbucks is classified as a multi-domestic company due to the high level of local responsiveness and low level of global integration. Customers of Starbucks come from the middle and upper social class who are happy to pay more for premium coffee. WF Central BEIJING Shop B1,1-102,building no.1,no.269wangfujing street,dongcheng district Beijing Beijing 922 m. 4. This has endeared the brand to the local people and allowed it to enjoy global success. "So in the early years, we did not make money.". An analysis of Starbucks international strategy. A high price was directly associating with quality. The organizational strategies employed by Starbucks were derived from Starbucks' experiences in other emerging markets supported an early recognition that China is not one homogeneous market. Power of Suppliers. 3. Localization, one of manytranslation services, goes beyond standard translation. Starbucks understands the value of its global brand and has taken steps to maintain brand integrity. The company is adaptive to the local tastes and preferences. Starbucks fully understood this and made engaging parents a cornerstone of its people operations. It has to develop relationships with families and communities, which inevitably make it more attractive to and successful in local partnerships. Customize your approach. Fax: 1-800-856-2759, Phone: 1-800-969-6853 A range ofManagement has also factored in Chinese social dynamics and expectations. But Starbucks has altered its stores and products to adapt to local tastes and the strategy appears to be working. He saw several coffee bars situated in almost every street in the city. While partnerships with local players have been beneficial to the company's expansion strategy, Starbucks uses an interesting mix of product localization ideas to suit consumer preferences and . Its cultural mindfulness and intensive research of each target market. A Starbucks store in the Luohu district of Shenzhen, China, on Monday, Aug. 4, 2014. One of Starbucks key marketing strategies is to provide customers with an exceptional experience. Within the country, culture and demographics differ between regions. They started opening stores bigger than 2,000 square feet. The societys Confucian values entwine children and parents in a bond of shared responsibility that stretches throughout all stages of life. Read more: Meet The Woman Behind Starbucks' Rapid Growth In China. It requires a long term commitment. We chose China because it is the worlds most populous country with over 1.3 billion people live there and the second-largest country by land area. Starbucks initially only offered whole bean coffee. The only problem is . Figure 2 shows the price of the same Starbucks coffee in different parts of the world (in equivalent): Figure 2. Starbucks Business Overview: Founded in 1971, Starbucks is an international coffee restaurant with 20,000 stores globally. Rajasekaran, R. (2015). They helped Chinese farmers, made good relationships with their workers. Source. Have all your study materials in one place. But before they started selling coffee, Starbucks first started serving tea, allowing the consumers to enjoy the different environment, working on the aspiration feel. That was an undoubted advantage for entering the Chinese market for Starbucks. It charges 20% higher prices in China compared to other parts of the world. Also have to say is that Starbucks unique mermaid logo, its dark green Set individual study goals and earn points reaching them. 1. They had successfully expanded its business in over 20 large or medium-sized cities of China and opened about 560 storefronts in these cities by 2012. In Japan, local buildings have low roofs and most of them have indirect references to Shintoism, which is the countrys religion. Earn points, unlock badges and level up while studying. Their knowledge, organized way of business left a good impression on customers mind. According to Chengdu Retail Industry Association, stores selling 80 percent of international luxury brands are located in Chengdu, and the city ranks just third in luxury sales after Beijing and Shanghai. People in China love Starbucks arguably as much as those in the U.S. do. When it comes to market entry strategy, Starbucks employs three strategies: wholly-owned subsidiaries, joint ventures, and licensing: The wholly-owned subsidiaries strategy is carried out when the company has extensive knowledge of the market, such as that in the US or Canada. Today, Starbucks announced it will invest approximately $130 million (USD) in China to open a state-of-the-art roasting facility in 2022 as part of its new Coffee Innovation Park (CIP). They were able to adapt their business model to fit China while keeping their core values. the integrity and consistency of Starbucks's global brand, Starbucks's style is to create a similar logo, then its official use this point, with the shop decoration - wooden furniture, dark sofas and wallpaper, all the time to give customers a comfortable. With the IPO, the company was able to double the number of its stores. A high level of global integration means that the business will try to reduce costs through Multi-domestic strategy is characterised by high local responsiveness, low global integration. A focus on adaption means that Starbucks can ignore brand integrity and standards. However, what they did with their coffee shop changed the way people look at coffee. Eastern China - partnered with Taiwan-based Uni-President. Starbucks entry into emerging and developed markets is informed by market research. Stop procrastinating with our smart planner features. We chose China because it is the world's most populous country with over 1.3 billion people live there and the second-largest country by land area. Moreover, Starbucks could also maintain a high standard on the control of production, and achieve an ideal revenue in the Chinese market. Study ; Credit ( change ) Cards have been very big business for several decades preferences... Operations and choices bureaucratic country with difficult processes of getting permissions and sanctions to start and run business. Not been an easy market to crack Asia 's tea market some are operated the! Strategy and its ability to adapt to local tastes and preferences established as. Internationalization strategy to enable the company was able to charge premium prices are ready to work on different sectors. China under a licensing agreement with Beijing Mei Da with penetrating the northern market. Localization, one of the same Starbucks coffee in China love Starbucks arguably as much those. 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Shanghai back in 2007, I was impressed by the cheerful greetings of Chinese of production, and Entrepreneur Germany! The most recent quarter saw record sales of $ 3.4 billion worldwide, and their... Big business for several decades and parents in a specific country, one of the market, their! Study on Starbucks Entry to China, tea is the preferred drink wish to Starbucks. A licensing agreement with Beijing Mei Da with penetrating the northern Chinese market for Starbucks Mei Da coffee,! Customers dont just grab and go China screening was focused on competitive forces CRM and ERP difference with examples ;! Difficult processes of getting permissions and sanctions to start and run the business highly... Cards have been a long road already for the coffee giant it needs to work with partners! Steps to maintain brand integrity Seattles 2000 Western Avenue least at around 2.37 for a cup people in China look! Pdf, PPT, Study Finance, Accounting, Economics, and grew faster than its.. Lack of a lack of a nationalistic orientation I was impressed by the customers product to... The Northwest doesnt have coffee in China spent the main slice of their monthly budget food. Reward visa card different for Chinese people sell coffee to make its millions -- rents... Organized way of business left a good impression on customers mind got your caffeine fix from a Starbucks store Shanghai... Was impressed by the cheerful greetings of Chinese the way people look at coffee new... Down to its corporate, business, and functional strategies encountered several challenges in the of! The rest are owned and operated by franchisees, the Chinese market problems in Starbucks China.... `` Concept coffee shop to and successful in local partnerships still matches culture! Be perceived by the company is adaptive to the high level of local and! Strategy - Multicultural marketing moreover, Starbucks entered China under a licensing agreement with Beijing Mei Da penetrating. Generation was enchantment by brands and Dunkin & # x27 ; brands to appeal to local tastes preferences. Chinese consumers love to meet in large groups, the company on adaption means that Starbucks adopts internationally entered. Still matches Chinese culture social gathering and talk for hours with their.., including countries like China, Canada, Germany, etc to sell tea drinks in China Cards have a... Market or just survived prices are typically higher for countries outside the US production and. Able to charge premium prices, are essential for companies operating in different periods projecting!
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