Starbucks in INDIA

Starbucks in INDIAStarbucks started its operation in India by forming a strategic alliance with Tata Coffee Co. in 2004. India is the fifth largest producer of coffee in the world and it accounts for 4% of the total worlds coffee production with an average consumption of 10 cups per day. Starbucks has presence in Pune, Banglore, Delhi and Mumbai while its coffee plantation is location in Karnatak. Indian hot drink market is as: 7.4% coffee, 22.7% tea and 69.9% goes to other hot drinks.

/ 1PESTEL Analysis POLITICAL:

There are worse corruption practices in India and according to Transparency International report, India ranks at number 84.Presently government of India is going to be changed due to election. New foreign policy is yet to be decided so nothing can be predicted about trade policy at the moment due to government instability however as far as consumption patterns of people in foods and drinks are concerned, a growth has been seen which is good for Starbucks. As new elections are in process and BJP is expected to take the lead. It would be a threat for Starbucks as BJP is totally against westernization and western cultures. / 2Economic:Indian economy is growing at the fastest pace among asian countries(excluding China).

Sales contribution of Starbucks in US has decreased by 70% due to high competition and prices issues due to which Starbucks is expanding its network immensely in Asian countries like India and China. Disposible income has increased due to which increase purchasing power has shown a good trend in consumption of tea, coffees, foods and other eatables.

/ 3Social:In India, nearly 70% of the hot drink market is dominated by tea therefore it has been given a title of traditional Tea drinking nation. The economy is influenced by westernization due to which coffee is seen as statement of wealth particularly among youth due to which nearly 70% of the coffee shops are occupied by students and young professionals. The majority of Indian population is rural. Unemployment rate is high which means labor rates are low. Urbanization is taking place and that would be a good opportunity for Starbucks to manage its human resources.

/ 4Social:In India, nearly 70% of the hot drink market is dominated by tea therefore it has been given a title of traditional Tea drinking nation. The economy is influenced by westernization due to which coffee is seen as statement of wealth particularly among youth due to which nearly 70% of the coffee shops are occupied by students and young professionals. The majority of Indian population is rural. Unemployment rate is high which means labor rates are low. Urbanization is taking place and that would be a good opportunity for Starbucks to manage its human resources.

/ 5Technology:As far as technological advancements are concerned, there is good acceptability of modern technology in India. Living habits are largely affected by gadgets, internet and branding. Eating habits are influenced with creativity poured into the products. People are largely influenced by social media campaigns. Due to proper use of technology, Starbucks is able to well-serve their customers in lesser time and has achieved operational efficiencies.

/ 6Environmental:Starbucks is an environment friendly organization.

It has used modern techniques and recyclable materials to order to avoid any harm to the environment and the society. It wont be any trouble for socially responsible organization like Starbucks to protect environment.

/ 7Legal:The government of India has enhanced the ownership limit of foreign retailers selling a single brand to 100%. It has increased the trend of foreign investments in India. Conditions are quite favorable for Starbucks to expand its operation in the Indian market. It is quite possible that Tata Coffee and Starbucks may start working independently, promoting their own chains in future.

/ 8SWOT Analysis:Strengths: It has a strong brand name worldwide. It has an established logo, various copyrights/patents & trademarks. It has an attractive website. It has no franchise system due to which quality control is done under direct supervision of Starbucks Corporation. It is an international chain which is known for delivering high quality products. It enjoys good strategic relationships with its suppliers. It has a superb marketing strategy. It has used effective use of various IT tools in their marketing strategy. It has sophisticated atmosphere.

Weaknesses: It has a high turn-over of its employees due to which there is lack of workforce on the floor. Products are expensive. Milk, beverages, drinks and baked goods are not free from genetically-modified ingredients.

Opportunities: It can expand its product lines by introducing new innovative products. It can enter into ice-cream and soft drinks industries. It can develop new distribution/delivery channels. Easy availability of work force. Low labor cost. India has a tea based culture so it will still appreciate new innovations coming in coffee sector.

Threats: It is operating under JV model with Tata. In future Tata may decide to get isolated from Starbucks and start promoting its own products. Consumer trends to stay away from use of caffeine. Caf Coffee day chain has been operating in India for over 25 years. Barista, Jamin Java, Costa Coffee and Gloria Jeans are establishing strong networks in India coffee market.

/ 9Porters Five Force ModelBargaining Power of Suppliers: Starbucks is working in alliance with Tata. Though global trends may show a threat of high bargaining power of suppliers but presently its low.

Bargaining power of buyers: Indian market is extremely price sensitive market. Average price of tea is extremely low. As far as disposable income is concerned, people would prefer to go for alternatives if price levels are not in range.

Threat of substitutes: Other substitute in India Coffee markets is herbal tea. It is very less likely to happen as coffee consumption is increasing. Moreover people cannot abandon the use of caffeine in their daily routine through coffee.

Threat of new entrants: Average coffee consumption is increasing. It is quite possible that some new chain may make an entry. Market has a potential to invite new entrants who are able to provide good quality coffee in low price.

Initials/YYYY-MM-DD/ 10Security LevelCompetitive Rivalry:In India coffee market, key players are Caf Coffee Day(Market share: 75%) Barista(Market share:20%. They are aggressively expanding their networks while small players like Jamin Java, Gloria Jeans, Costa Coffee(Market Share: 5%) and Coffee Bean are already trying capture small market share.

Number of stores of CCD, Barista, Coffee Bean and Starbucks are 1100, 240, 90 and 4 respectively.

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