Starbucks Proj

8/12/2019 Starbucks Proj

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CHPT I: INTRODUCTION

Starbucks is another industry to enter the Indian markets due to vast potential and the huge

untapped market. Indian market is always influenced by the traditions followed in the

Western counterparts hence the success of Mc Donalds, KFC, etc to name a few. With

access to Hollywood movies where these brands are flashed quite often, the aura surrounding

brands such as Starbucks scale new heights.

Indian consumers have always welcomed change when it comes to their taste buds.

Cappuccinos, Latte have eclipsed the traditional Espresso filter coffee. Filter coffee seems

like an archaic notion, only restricted to the elderly people. In fact the coffee shops have itself

undergone a tremendous transformation, with them replacing a hang-out joint for the

teenagers.The timing of their entry could not have been better. With Barista, Caf Coffee Day and

Costa coffee almost losing their sheen, Starbucks comes in like a breath of fresh air. The

future outlook of any company is not complete without an analysis of the industry in which it

operates.

The coffee industry of India is the sixth largest producer of coffee in the world, accounting

for over four percent of world coffee production, with the bulk of all production taking place

in its Southern states. India is most noted for its Monsooned Malabar variety. It is believed

that coffee has been cultivated in India longer than anywhere outside of the Arabian

Peninsula.

Tata Starbucks Limited, the 50/50 joint venture between Starbucks Coffee Company and Tata

Global Beverages Limited is bringing an unparalleled experience to Indian customers. Both

companies have a history of delivering product innovation and the highest quality experience

to customers around the globe. They are delighted to come together today and transform the

coffee experience for consumers across India, while providing a community gathering place

to connect with family and friends. Thus, Coffee culture is poised to be deeply in-grained into

Indian culture in the near future, if this strategic alliance succeeds.


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1.2 OBJECTIVE OF STUDY

To analyse Starbucks as a company To analyse the Indian coffee industry and India as a potential destination for Starbucks. To discuss strategies undertaken by Starbucks in India. To discuss the opportunities and challenges that Starbucks face in India. To discuss the benefits of tie up with TATA To discuss the threats from competitors and its position in the market.


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CHPT II: RESEARCH METHODOLOGY

PRIMARY SECONDARY

INTERVIEW METHOD WEBSITES NEWSPAPER ARTICLES

My research methodology requires gathering relevant data from the specified documents and

compiling databases in order to analyze the material and arrive at a more complete

understanding of Tata Starbucks and its strategies to enter India.

The primary data used in this project is interview method. The questions prepared are

relevant to the proposed topic which takes the topic in more depth. The questions are

prepared for the manager of Starbucks which will give us an insight for the topic and help

analyse the current situation.

The secondary data is found from newspaper articles of times of India, business today and

many more. Other information has been derived from many websites such as starbucks.in,

studymode.com, slideshare, Wikipedia etc. this will give us the information regarding the

political, economic, environmental and socio-cultural factors. It also provides the marketing

mix undertaken by Starbucks for India with more focus on the pricing which is much

reasonable as compared to the international prices with a touch of Indian taste and variety.


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CHPT III: COMPANY PROFILE

3.1 STARBUCKS CORPORATION

Starbucks Corporation is an American global coffee company andcoffeehouse chainbased in

Seattle,Washington. Starbucks is the largestcoffeehouse company in the world, with 20,891

stores in 62 countries, including 13,279 in the United States, 1,324 in Canada, 989 in Japan,

851 in the People's Republic of China, 806 in the United Kingdom, 556 in South Korea, 377

in Mexico, 291 in Taiwan, 206 in the Philippines, 179 in Turkey, 171 in Thailand, and 167 in

Germany

Starbucks Mission: Our mission: to inspire and nurture the human spirit one person, onecup and one neighbourhood at a time.

Our Coffee: Weve always believed in serving the best coffee possible. It's our goal for all of

our coffee to be grown under the highest standards of quality, using ethical sourcing

practices. Our coffee buyers personally travel to coffee farms in Latin America, Africa and

Asia to select the highest quality beans. And our master roasters bring out the balance and

rich flavour of the beans through the signature Starbucks Roast.

3.2 TATA GLOBAL BEVERAGES AND TATA COFFEE

Tata Global Beverages is a part of the global Tata Group. Tata Global Beverages is a global

beverage business and the worlds second largest tea company. The groups annual turnover

is US $1.5 bn and it employs around 3000 people worldwide. The Company focuses on good

for you beverages and has a stable of innovative regional and global beverage brands ,

including Tata Tea, Tetley, Himalayan natural mineral water and Eight O Clock Coffee.

Tata Coffee is a subsidiary of Tata Global Beverages. It is Asias largest coffee plantationcompany and the 3rd largest exporter of instant coffee in the country. The Company produces

more than 10,000 MT of shade grown Arabica and Robusta coffees at its 19 estates in South

India and its two Instant Coffee manufacturing facilities have a combined installed capacity

of 6000 metric tonnes. It exports green coffee to countries in Europe, Asia, Middle East and

North America. Tata Coffees farms are triple certified: Utz, Rainforest Alliance and SA8000

reinforcing its commitment to the people and the environment.
http://en.wikipedia.org/wiki/List_of_coffeehouse_chainshttp://en.wikipedia.org/wiki/Seattlehttp://en.wikipedia.org/wiki/Coffeehousehttp://en.wikipedia.org/wiki/Coffeehousehttp://en.wikipedia.org/wiki/Seattlehttp://en.wikipedia.org/wiki/List_of_coffeehouse_chains


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3.3 TATA STARBUCKS- JOINT VENTURE TO OPEN CAFES IN INDIA

Starbucks is the number one specialty coffee retailer in the world. The company wants to

deliver the finest coffee products and offers handcrafted beverages. Starbucks is not only

about drinking coffee but about a unique experience. The company follows an international

expansion strategy through strategic alliances. Starbucks wants to prevent competitors from

having a head start, build upon the growing interest for Western brands and take advantage of

the higher coffee consumption rates. After building a successful brand in Japan and China,

Starbucks wants to enter the Indian market. Starbucks found a local supplier for their coffee,

Tata.

MUMBAI, India, January 30, 2012 - Tata Global Beverages Limited and Starbucks Coffee

Company today announced a joint venture between the iconic international coffee brand and

the 2nd largest branded tea company in the world. The 50/50 joint venture, named TATA

Starbucks Limited, will own and operate Starbucks cafs which will be branded as Starbucks

Coffee A Tata Alliance.

The retail stores had started developing in cities across the country, beginning with stores in

Delhi and Mumbai in calendar 2012.

In a separate sourcing and roasting agreement between Starbucks Coffee Company and Tata

Coffee Limited, Tata Coffee Limited will roast coffee to supply TATA Starbucks Limited,

and to export to Starbucks Coffee Company. This agreement paves the way for consumers in

India to enjoy the premium Starbucks Experience, while further discovering the unique taste

of high-quality Indian arabica coffee worldwide. TATA Starbucks Limited brings together

two companies with a rich heritage in and passion for coffee, tea and innovative beverages.

Together, the JV will enable an expanded range of beverage offerings for Indian consumers.

As an example, the companies have agreed to jointly leverage assets and innovation to offer a

premium tea product branded Tata Tazo. The TATA Starbucks Limited joint venture will

operate cafs under the Quick Service Restaurant category.


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CHPT IV: CONCEPTUAL FRAMEWORK

4.1.SituationAnalysisoftheIndianCoffeeRetailMarketAs coffee shops may be nearing saturation point in the US and Europe,Starbucks hasidentified thepotential to expand in emerging markets like Chinaand India. The coffeeindustryisexpectedtocontinuegrowingthroughatleasttheyear2015andevenlongerinemergingmarkets.As there isno framework thatprovides a fullpicture of the dynamics within a

particularmarket, a more holistic approach will beadopted. Political, Economic,Sociocultural, technological, environmental and legalfactorswillbeexaminedfromaPESTLEanalysisand the Power ofSuppliers, the Threat ofCompetitorsandtheThreat

of

Substitutesfrom

the

Porter

Five

Model.

A. PESTLE ANALYSIS

The PESTLE analysis is a tool which provides insight of the external environment in which

organizations operate or will operate and aids the strategy formulation of those organizations.

Considering the fact that Starbucks is planning to enter the market in India, the PESTLE

analysis is going to evaluate favorable and unfavorable conditions in the countrys p olitical,

economic, social, technological, legal and environmental setting.

a. Political factors

The political factors have strong influence upon the regulation and controlling of business

and the spending power of consumers and other businesses. We must consider those factors

as very important and even crucial depending on the political system of the country we are

operating in and the political condition of the country as a whole.

The Indian economy has been subject to series of positive economic reforms since 1991

which had created a better working environment for foreign companies and has made it

possible for foreign investors to operate in the country more easily. The reforms have also

resulted in higher growth rates, lower inflation and increase and ease of the foreign

investments. The current Indian government - United Parties Alliance (UPA), headed by the

Indian National Congress party (INC) has shown more tolerance towards foreign countries in

general and towards FDI in numerous economic sectors. These reforms have placed India in a

favorable position in the world economic stage.


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Taking into consideration the political environment in India as a whole, the bureaucracy

complications and the regulatory FDI controls and regulations, it is safer for Starbucks to

enter India via a joint venture or a strategic alliance with an Indian company that can provide

a buffer from possible political tension. Furthermore, Starbucks can face some opposition

from the existing competitors (CCD, Barista, etc.) through the use of political influence and

delaying tactics. Although situations like these are possible to happen, the chance is low

taking into account that the Indian market is large enough to hold more companies and the

leaders in the Indian gourmet coffee industry will not be strongly affected by Starbucks

entry.

b. Economic factors

The factors like inadequate infrastructure, bureaucracy, regulatory and foreign investment

controls, the reservation of key products for small-scale industries, and high fiscal deficits are

constraining economic growth of India. However, the liberalization measures taken in 1991

opened the economy to foreign investment and trade: it dismantled important controls,

lowered customs duties, and devalued the currency: it virtually abolished licensing controls

on private investment, dropped tax rates, and broke public sector monopolies. Further,

reforms have been seen in retail industry with Indian government's approval on FDI up to

51% on multi brand retail. The country has recently become is a major exporter of software

services and software workers, and the information technology sector leads the strong growth

pattern. With a world changing from an industrial to an informational economy, India is

bound to play a monumental role in the future of the global industry.

c. Socio-Cultural factors

As job opportunities increase in India, money stays in the palms of the Indian consumers

enabling them to reinvest in the Indian economy. Attitudes towards money are also changing.

The mantra for the average Indian family, as in most of Asia, has always been saving, but

young Indians today, inspired by job opportunities, have switched to spending extravagantly.

The attitude of the young generation is to enjoy life and spend money. According to sources

the population of the country consists of more than 60% of the people between the age of 15-

59. Also with the westernization of the social trends more and more young people trust

western brands and prefer foreign goods. They also go for the same trends and try to mimic

the same status of exclusivity young people in the US and Europe look for. This placesStarbucks at a very dynamic position, where it has a good opportunity and much possibility to


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capture quick customers. The only problem is that they will not be the first on the market

with specialty coffee offering and their otherwise leadership position could strongly be

undermined and only sustained by their brand image.

Next to that, the culture and cuisine of India poses a very interesting challenge. The mix of

traditional tea-drinking population together with the various differences between Muslim and

Hindu and the growing difference among various regions of the country, make it extremely to

divide and place is concrete consumer groups. Still the most obvious separation with regard

to coffee consumption is visible in the city versus rural areas separation with the urban

population having distinctly higher preferences for coffee. Still the numbers of coffee

consumers remains low with slow negative growth figure between 2000 and 2005 - 6.7% and

2.0% respectively.

d. Technological factors

Starbucks entered into a strategic alliance with Tata Coffee LTD., the largest coffee producer

in India. With signing this agreement, Starbucks finally found the partner it needed. A

company which met all the conditions and standards followed by Starbucks. Tata proved its

quality standard by winning a gold medal for the best Robusta coffee in the world.

The factor of quality is very important at the Indian market as high quality coffee beans are

easily available. With this strategic relation with the Tata Group, the company, Starbucks,

might be able to succeed with competitive pricing in India.

Another important technological factor is the lack of infrastructure in India. However, having

such an experienced local partner, Starbucks does not face any problems with this issue. It

also provides free Wifi at all its outlets in India, with a great ambience.

e. Legal factors

Companies may be public or private but the common public is not allowed to buy shares of

the company and there can only be up to fifty shareholders. Import duties are applied to

almost all goods entering India. The tariff system is based on the Harmonized System (HS)

and tariffs are in the 40 to 60 percent range for basic raw materials, 60 to 100 percent for

semi-processed goods, and 100 percent and above on finished and consumer goods.

Shipments to India require a commercial invoice, a packing list and bill of lading. A

certificate of origin is not required on imports originating in the United States. FDI approval


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though has come to relaxation. Lower tariffs and lower barriers to enter have made the Indian

market extremely promising and willing to change.

f. Environmental factors

Starbucks believe in the importance of caring for our planet and working with and

encouraging others to do the same. As a company that relies on an agricultural product, it

makes good business sense. It engages itself in recycling, energy management, water

conservation, green building, and in reducing carbon footprints wherever possible. With these

integrated environmental responsibilities, the company will obviously build its image in the

eyes of Indian Consumers as well. The ecological concerns regarding the farming of Arabica

coffee must also be addressed in order to ensure consistency in productivity.

B. PortersFiveForcesModel

I ndustry Rivalr y

Major competition for Starbucks in India comes from that of Caf coffee day. The

abbreviation CCD is known to most of the people in urban parts of India. Their positioning is

same as what Starbucks have in US. The other competitors include Barista Lavazza,

Quicky's, Barista and Costa Coffee, which are also the multinational brands, and widely

recognized. Apart from them, secondary competitors include the Georgia Coffee, served in

fast food joints like that of Mc Donalds and KFC, etc.

Potential for New Entrants

The entry barriers in the coffee retail industry are relatively low in India, particularly for the

foreign players. This is possible owing to the fact that 51 % FDI is allowed in India in retailsector. Any large or well-funded company having the thorough understanding of the market


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can enter into retail sector in India. Given the fact that Starbucks is a global, it is having its

own advantages when it comes to achieving the economies of scale. Starbucks being the

global coffee retail chain, they are not going to have any particular capital related problems.

Also, they are having MoU being signed with TATAs for opening their outlets in their TAJ

group of hotels and resorts. India, being the sixth largest producer of coffee in the world is

having the largest home grown supply of coffee beans and thus, sourcing coffee in this

industry is not going to be much of the problem.

Customer or Supplier Loyalty - Indian market is already being captured by the long

established brands like Caf coffee day, Barista, Barista Lavazza and Costa Coffee. Thus, it is

going to be pretty much difficult for any of the new entrant to establish its brand name in the

Indian market. However, Starbucks being the international brand will definitely help in

attracting the educated Indian crowd.

Market Experience - The existing players in the Indian coffee retail industry have been here

in the market from last 10 years. Thus, their management must be having greater

understanding of the Indian markets and Pallets. Therefore, for Starbucks, it is going to be

important to first understand the Indian preferences, before making any major move.

Differentiation - Coffee is not the product where there is a great scope for product

differentiation. However, it depends on most of the cases on the store ambience, which canact as the point of differentiation.

Threat of Substitute Products

India has predominantly tea-based culture thus; awareness about coffee need to be created

more and more tea-based drinks in association of TATA coffee needs to be included in its

offerings. Besides tea, other product substitutes, here, will include other beverages, for

example, soda, fruit juices, water, beer or other liquid and/or carbonated beverages. Since

Starbucks also sells fast foods, other fast food beverages like burgers, etc. The lower end

local coffee houses or other snack shops which are less luxurious will also act as substitutes

to Starbucks. These are places which provide people with the place to sit, chat and relax at

fair prices.

Bargaining Power of Suppliers

In the case of coffee retail, the suppliers, supplying the retailer with the coffee beans are not

having much of the bargaining power. This is particularly because of the fact that coffee


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retailers like that of Starbucks tend to be very big buyers for any of the supplier to lose as a

whole. This also gives the Starbucks to dictate terms to the supplier. However, this sourcing

would be done on ethical norms of Starbucks and TATA Coffee. Similarly, suppliers of other

resources like that of paper products etc., will not be having much of the bargaining power as

there are many sources from which the company can source them. However, this is not valid

in the case of the suppliers supplying the technological machinery and equipments as there

are not many suppliers here.

Bargaining Power of Buyers

In the past, buyers in India were not having much of the bargaining power as there were not

many food retail giants which were present in the country. However, with the advent of

multinational food retail giants in India, like that of Mc Donalds, Barista Lavazza, Caf

Coffee Day and Costa Coffee, consumer is faced with lots of choices. Thus, it will be

difficult for Starbucks to influence the Indian buyers to pay premium for their products. As

also the per capita income of Indian Customers is low and their mindset is not so affirmative

with coffee culture, however it is catching up among youths, the pricing need to be highly

competitive and on zonal basis.


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4.2. STARBUCKS SWOT ANALYSIS

STRENGTH

Leading retailer and roaster for brand

specialty coffee in the world;

Brand image with the motto The Starbucks

Experience;

Strong balance sheet;

One of the strongest franchises in the world

with more than 6500 licenses shops in the

world;

Starbucks is known for providing superior

products and services;

Have loyal customers in every country that

has entered;

Sophisticated atmosphere, music, interior

design and artwork;

Have a lot of flavours variation;

High market share and market growth.

WEAKNESS

High pricing which not everyone can

afford;

Starbucks refuses to guarantee that milk,

beverages, chocolate, ice cream, and baked

goods sold in the companys stores are free

of geneticallymodified ingredients;

No experience in countries like India.

OPPORTUNITIES

-High consumerism in emerging markets;

- Easier to penetrate market because

Starbucks is selling as experience, not just a

simple product;

Many of Starbucks coffee are using organic

beans;Fair Trade Products can be offered.

THREATS

threat from competitors

Increasing health concern of the negative

effect of coffee;

Starbucks domination is driving small cafes

out of the business;

Threat of substitute products in cultures

where there is a strong preference for tea, like

China, India and UK


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INTERNAL FACTORS

Strengths

Taking into consideration the size and market power of Starbucks as a leader in specialty

coffee retailing, the brand equity of the company is one of the most valuable assets they have

(Interbrand Top 100 Most Valuable Brands - N 97 estimated brand value $ 3.339 m). This

strength also has the highest rate in the strengths section because through its consistent and

innovative marketing strategy and exclusive product positioning Starbucks managed to

maintain throughout the years its brand integrity and kept on its very consistent mission and

vision. The strong joint ventures and strategic alliances that the company has establish all

over the word made it possible for them to create and develop a sustainable supply chain of

high quality.

Moreover, Starbucks has also placed great attention to the well-being and satisfaction of

their employees. The company ranks at N 98 Fortune`s 100 Best Companies To Work For.

Another very important strength of Starbucks is their financial stability. Taking into account

that the company`s total net revenues for 2010 increased 17.2%, compared to 2009, to $2.8

billion, the capital availability that Starbucks has is making it easier for them to manage their

expansion in other new markets like India.

Weaknesses

Because of the highquality exclusive products that Starbucks is offering their price range is

also very high compared to their competitors. It is a weakness of the company but at the same

time it is not addressed heavily because it is part of their exclusive image.

Entering the Indian market, Starbucks are not the first movers in the coffee retail industry;

there are already established leaders on the market and thus Starbucks are market followers.

Because of this high competition Starbucks is also facing a problem regarding their suppliers.

They signed a supply deal with Tata Coffee which is actually co-owner of the main

competitor on the market.


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EXTERNAL FACTORS

Opportunities

Following Indias economic liberalization in 1990 the country experiences accelerated

growth which reaches an average of 7% in the years after 1997. This, alongside with the

increasing levels of GDP, results in growing disposable income of consumers. In a country

where cultural trends play important role in society growing income and standards of living

creates demand for western goods. In recent years there has been a growing number of

department stores. They accommodate mainly the high-income and the upper-middle

segment, which happens to be the target group of Starbucks. Placing coffee-bars in such

places is a big opportunity for achieving high profits and is definitely something that

Starbucks has experience with.

Another opportunity on the Indian market is the growing size of Starbucks target group. In

2006 the middle class in India was estimated at around 250 million and it is growing in urban

areas. All, these factors show that Starbucks has a large enough target group which is willing

and able to pay premium price for a high quality western brand. Starbucks has the potential to

skim the Indian market, because of its positioning and brand image.

Threats

The coffee retail market in India consists of mainly home grown brands. The biggest ones are

Coffee Caf Day (CCD), and Barista Coffee. These companies are considered as threats to

Starbucks entry in the Indian market because they are offering similar and sometimes

identical products. CCD, for instance, the company which pioneered the concept of specialty

coffee in India, has wide range of caf formats with almost identical concept used by

Starbucks. Besides, CCD has presence all around the India. The same company also sells

merchandise and is involved in heavy marketing, such as establishing relations with the

Indian movie and television series industry. Furthermore, CCDs best-sellerthe cold Frappe

is a direct competition to Starbucks Frappuccino.

It is also mentioned that the infrastructure in India is weakly developed, which might result

difficulties or larger amounts of costs incurred in the business operations of Starbucks. In

addition the retail environment in India is largely unorganized and dominated by small and

individually owned businesses. The threat from substitute goods in India should also be

considered. The Indian population is still heavy tea drinkers. The consumption of tea per

person in 2000 was reported to 44 litres in comparison to 1.2 litres of coffee. Another good,

which is considered a substitute, is the instant coffee. It is reported that 65 % of households

bought instant coffee and only 18 % bought filter coffee.


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4.3 TOWS MATRIX

The TOWS matrix, serves as a framework for organizations to assess the combination of

external and internal factors. The matrix helps companies to decide on approaches depending

on the opportunities and threats the business environment has to offer and how the companyis going to take advantage on them depending on their internal capabilities.

Maxi-maxi strategy

The growing Indian economy provides attractive opportunities for a company such as

Starbucks. These favorable economic conditions create an environment in which exclusive

and luxury products such as Starbuck coffee will be in growing demand. The international

popularity of the Starbucks brand will help the company to position itself on the Indian

market. Starbucks in one of the best known American brands in the world and it is also

connected with positive affiliations on the market. With its strong and distinctive brand image

the company is able to take advantage of the growing demand for branded, western and

luxury products.

On the other hand, in order to gain market share, Starbucks can reduce the prices, but not

below the competitions levels and by maintaining healthy profit margins. This is possible

since Starbucks has at its disposal coffee from a local supplier.

One way the firm could protect its position involves developing a marketing campaign

emphasizing its superior customer service in comparison to its competitors.

Maxi-mini strategy

The high brand equity and recognition of Starbucks` products is definitely the biggest

advantage they have over their competitors. Taking into account the size of their Indian

competitors and the size of the market as a whole, Starbucks has to put more emphasis on its

marketing strategy and try to stress on the promotion of its exclusiveness and premium

product portfolio in order to differentiate its brand in the consumer`s mind.

In order to grow and outperform its already existing competitors Starbucks must also

emphasize on the company`s points of difference, which include the brand experience as a

whole, the brand quality that they are offering and also the convenient access to their

locations.

Starbucks is well known for its high quality and distinctive products, so substitute products

can`t deliver to the customer the same exclusive level of high quality and cannot satisfy the

customers` needs and wants as Starbucks does. In order to create and retain a position in the

customers` mind Starbucks must extend their product portfolio so that it can match the local


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preferences. For example, they can offer special Indian tea and other typical for the region

herbal mixes.

Mini-maxi strategy

As a company that offers specialty coffee the limited portfolio of Starbucks, in terms of non-

coffee products, can be considered as exclusive offering. Therefore, the company is in a good

position to take advantage of the growing opportunity that the cultural westernization is

offering and minimize the impact of their weakness. As exclusive product, Starbucks`

specialty coffee can give the targeted consumers the desired social status.

Mini-mini strategy

Starbucks should keep its prices high as the alternative can undermine the exclusivity and top

quality image of the coffee. Thus, Starbucks has the ability to minimize the impact of their

high price weakness on the India market and deal the pressure from competition which is a

definite threat. Even though, the main competitors have similar, and even more extensive

product portfolios, Starbucks has the competitive advantage of its exclusive brand image.

Moreover, Starbucks should slightly try to extend their product line portfolio in order to

answer the consumers` existing demand for instant coffee.


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4.4 MARKETING STRATEGY

Capture Value

In this section, tools and techniques will be used to explain how Starbucks can create and

capture value for their products.

Market Segmentation

Apart from the demographic characteristics presented in part one of the analysis, marketers

should also consider psychographic variables such as interests and lifestyles. In general,

Indias coffee culture has changed the way young Indians socialise. In a country where there

is a limited bar culture, and where drinking alcohol is still not allowed in many circles, it has

provided an acceptable and safe outlet for people, particularly young Indians, to share a

drink. As mentioned earlier, coffee is becoming a statement of wealth and prosperity among

people with high disposal income, i.e. individuals in employment.

Target Market Selection

The marketing strategy will focus on targeting both groups college and university students

(aged 1825) in the short term and working professionals (2540) in the medium to long run.

Also, tourist and frequent flyers will be a target audience in the longrun.

Product and Service Positioning

It is essential to have a unique selling point to position Starbucks above competitors. In

TATAStarbucks customers will be able to rely on genuine service, an inviting atmosphere

and a superb cup of premium coffee or tea every time.
http://www.google.co.in/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=dsnBuxDx6aVPJM&tbnid=4IDslHlkdYcB9M:&ved=0CAUQjRw&url=http://steinvox.com/blog/what-is-marketing-marketing-professionals-should-know/&ei=9YUtUo6oPI2Krge3poCYDw&bvm=bv.51773540,d.dGI&psig=AFQjCNFMKiiNLCi000NyoZJQbk4WbtuJRQ&ust=1378801519011613


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MARKETING MIX

1. PRODUCT

Anil Dharker (2012), a Mumbian columnist and social commentator in India, points out that

when a foreign player sees a commercial opportunity and enters the new market; and then it

adapts giving McDonalds as an example. However, this should not be the case and Starbucks

should have a clear strategy about their product range (both drinks and food) it is going to

offer prior entering the Indian market. Costa Coffee Shops in India, for instance, offers

products like Apple Pie Latte, Latte Caramellato, Coconut Hot Chocolate, etc. suited for

Indian taste.

Apart from the usual products offered internationally, Starbucks in India has some Indian

style product offerings such as Tandoori Paneer Roll, Elaichi Mawa Croissant, Murg Tikka

Panini and Chai Tea Latte to suit Indian customers. Its recently introduced pumpkin spiced

latte especially for the Indian tastes. Free Wi-Fi is available at all Starbucks stores. Therefore,

Starbucks should adapt their drinks in order to cater local preferences. Ice coffees should also

be included in Starbuckss menu as Indians have a strong preference for them because of high

temperatures during summer.

However, one should not ignore the fact that India is a tea loving country even though people

prefer to consume tea at home because finding a perfect cup of chai outside is really tough,"

said Smiti Singh, a Bangalorebased software engineer, who drinks at least four cups of tea a

day. TATA Tea (a unit of the softwaretosteel TATA conglomerate) is the worlds second

largest branded Tea Company, so their premium tea products should be also offered to

customers apart from the Tazo Tea.

The biggest distinction is north India's preference for bread, meat, and chai (tea), compared to

the Souths preference for rice, pulses, and coffee. Foodwise, paninis, sandwiches and wraps

with meat but not with beef. The cow is considered sacred by most Hindus and hence beef is

considered taboo in the majority of Indian states. Predominant food option in the south

should be the bistro boxes with rice and pulses.

PLACE

As an international brand, Starbucks should also open kiosks at airports; thus, not depending

solely on Indian tastes and preferences as airports are occupied with people from all over the

world, who will recognise the Starbucks logo.


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In Mumbai (most populous city in India) Starbucks should position the stores mainly in

shopping centres, cinemas, near universities or cultural venues as it is commercial and

entertainment capital of India.

In general, experts felt that largest caf chains in India like CCD, Barista Coffee are targeting

the same locations, mainly the large cities. Geographical expansion has huge possibilities as

cities are not saturated and the market is not limiting at all. Therefore, StarbucksTATA

should aim to gain competitive advantage. As of June 2013, Starbucks operates 15 outlets in

2 cities of India. The company plans to have 50 outlets in India by the end of 2013.

CITY STATE/UT NO. OF OUTLETS

DELHI 7

MUMBAI MAHARASHTRA 8

Recently, there have been few more stores that have opened in Pune and Mumbai.

PROMOTION

Promotional activities will not be analysed in details as they should be in line with Starbucks

promotions worldwide. Besides, retailers in India rely heavily on wordofmouth (personal

communication). The Starbucks Card will be introduced a convenient way to pay for your

drinks and earn rewards for your purchase. Furthermore, instore promotions accompanied

by new products such as drinks and accessories sourced from the regions should be present

in India as well.

Starbucks might consider the idea of advertising on television. In the US, there are three

places that the average American spend his time during weekdays at home, in the work

place and in Starbucks. So, they should somehow show the western lifestyle to the Indian and

a TV advertisement. Furthermore, it is the first 50/50 joint venture for Starbucks; so, both

Starbucks and TATA Group will benefit from comarketing activities.


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PRICE

Historically Starbucks has retained it US pricing

model in almost every market they have

entered, but should they follow the same pattern

in India? Starbucks adopts their pricing based

on the demand form the Indian consumer. After

analysing analysed the Indian market for hot

drinks and the price elasticity of products,

probably the prices of products should be at

least 30% lower than in the US.

In contrast to central Beijing, where Starbucks

charges $4.34 for a 12-ounce cappuccino, in

Mumbai it costs $2.14. "A lot of people were

truly surprised by our pricing strategy," said

Avani Saglani Davda, CEO of the Starbucks

and Tata partnership. The lower prices are part

of its long-term plan to operate stores beyond a

handful of major urban areas, she said. "If the

Indian consumer doesn't see value, then it tends

to be a temporary commitment to the brand," Davda said.. The change comes with economic

growth and with the cross-border experiences of people like Neeti Singhi, who returned to

Mumbai a decade ago after living for a couple years in San Francisco."I got hooked on Tazo

chai," Singhi admits, referring to Starbucks' tea brand, Tazo. Although she is surrounded by

some the world's best chai all over Mumbai, she ordered a chai latte at its new flagship

Starbucks. "In India, its all tea with just a touch of milk and mostly a lot of sweetener," she

said. "At Starbucks, it's all milk with a little flavor of tea."

PHYSICAL EVIDENCE:

Physical evidence plays a very important role in creating a good brand image among the

customers. It is very important to have good ambience, architecture and friendly employees,

introducing customisation and being more customer centric. Starbucks does just the same.

Example: its newest outlet in Pune- To create a local connect, Starbucks has tried and

incorporated several local themes into the dcor as well as the cuisine. This store located in

Koregaon Park is housed in a traditional bungalow encircled with trees which pairs the brand


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with the city of Pune. Copper, a primary resource traced to the earliest history of this city, has

been weaved throughout the store to honor the rich cultural and copper heritage of Pune.

The two storied store has been designed to reflect the rich historical architecture of the city

and the interiors of the store embrace and celebrate the local culture with the use of railings,

displayed antiques and copper. The elevations in the exterior of the store are attractively

designed to reflect the shadows of the Gum trees surrounding it, along with the traditional

Indian swing which is popular throughout Pune.

SEGMENTATION, TARGETING & POSITIONING

SEGMENTATIONStarbucks coffee company mainly uses geographic, demographic, psycho graphic and geo-

demographic segmentation.

Starbucks segments the people on the basis of

Geographic location:Urban Areas such as Mumbai, Delhi, Pune

Demographics:age group 18 to 40 years.

Mainly for the high income group that would include middle class and upper middle class.

Gender- Both men and women.

College students will be the main target for short term.

TARGETING

a. Primary Target Market:The Primary target market for Starbucks Coffee Co. in India is

the young both male and female from the ages of 16-38. This market is well educated and

comes from middle class to upper middle class population. Since our locations are close the

newly opened call centers where well educated and highly paid consumers work, special

marketing strategies will be used to gain their brand loyalty to Starbucks. The geographics of

the target market are mainly consumers who live or work in the vicinity of the two proposed

locations for the Starbucks Coffee shops

b. The Secondary Target Market: The secondary target markets are the tourists in the

areas. Tourists will recognize Starbucks, as it is a multinational company, as most tourists in

India come from the countries of U.S., England, Germany, and Japan. This market will also

fall in the middle to upper middle class population and will find the Starbucks India prices

relatively cheap.


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POSITIONING

Brand Positioning:

Starbucks positions itself as a very sophisticated and high quality, which is not just about the

coffee but also the overall ambience that it creates for the customers. It already has a brand

image created amongst people since it is known as an international brand. Thus, Starbucks in

India positions itself as a premium brand.

Positioning Starbucks products into a marketing mix influences their customers to the point

that a loyal Starbucks customer will never switch to any other brand of coffee because

Starbucks is as much superior item. The position that has taken over the products in the

minds of customers has been both of a great marketing and also by the almost feeling of

being involved with the decision making of the company. Attention is given to the customer

and drinks are tailored to liking.

This one is easy as we got our answer from the horses mouth. Last year Howard Schultz in

an interview with Forbes India had made it clear that the last thing they would do is water

down the experience. I think it would be very disappointing for us to come all t he way from

Seattle to India and water down the experience because we dont have the courage to create

something that is consistent with our heritage. So expect the company to go aggressively

after real estate in Delhi and Mumbai. Malls, airports, office blocks are prime targets.


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Differentiation Strategy SERVICE DIFFERENTIATION

1. Only coffee shop in the world where the coffee beans are ground each time a new pot is

brewed instead of grinding coffee only in the morning.

2. Sensory Branding in terms of the consistent & distinct smell of freshly ground coffee beans

when one enters a Starbucks outlet.

3. Creating the signature Starbucks experience for Indian customers which are identical to

any of its stores abroad.

4. Introducing the Starbucks Card service in Indian market for customer loyalty & feedback


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CHPT V: COLLECTION OF DATA & ANALYSIS

5.1 COMPETITION

Caf coffee day has 2,000 locations mostly in India, with plans to reach 5,000 stores

worldwide in the next five years, whereas Starbucks has only 15 till now. It has created a stirin the coffee industry with just 15 cafes which are doing very well. In the days after its first

store opened in October in a chic area of Mumbai, lines stretched so long that security guards

were forced to implement a one-in, one-out policy. Starbucks plans to setup many such cafes

in the near future and give a tough competition. Currently in 2013, Starbucks has 7 outlets in

Delhi and 8 in Maharashtra. Even though Starbucks has a number of competitors it has

adapted well in the Indian markets and giving a tough competition to the other brands.
http://seattletimes.com/ABPub/2013/01/24/2020204177.jpg


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5.2 PRODUCT LIFE CYCLE

Since Starbucks has just entered the Indian markets a year back, it shall come under the

introduction stage which is slowly moving towards the growth stage.

Introduction

Starbucks is currently in the introduction stage. It has started earning sales. This stage

requires a good deal of promotion. It is a 50-50 partnership with TATA and thus becomes

easier for Starbucks to get into the Indian market. Since TATA group is in India since years.

It knows the Indian market well. Thus, can develop marketing strategies according to the

Indian tastes and needs more efficiently. This stage involves high costs and investments to be

made, less sales and profits. The company has to make it aware to the people of their entry.

Growth

Starbucks is making its way towards the growth stage. It has already expanded its outlets in

India with 15 cafes in India and plans to set up a total of 50 Starbucks cafes. This stage has a

high growth rate, which means higher sales and more profits. There is lot of promotion and

BARISTA

STARBUCKS

CCD


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advertisements. Also the cost per unit decreases. Competition is also high: e.g. Gloria jeans,

costa coffee, coffee bean and tea leaf as well as caf coffee day and barista.

Maturity

In the maturity stage, the end of stage of the growth rate and sales slowdown as the product

has already achieved acceptance in the market. There is severe competition, and need for

innovation in order to compete in the market. As we can see from the graph, Caf coffee day

has already gained acceptance in the market, having a huge number of outlets. It is now

facing tough competition from new entry Starbucks and other prevalent brands.

Decline

When sales decrease and continue to drop to lower levels, the product has entered the decline

stage of the product life cycle. In the decline stage, changes in consumer preferences,

technological advances, and alternatives that satisfy the same need can lead to a decrease in

demand for a product.

As we can see from the above graph, Barista Lavazza is almost at the verge of declining, but

if it gets more innovative and competitive, it can strive in the market. There has been a

decline in the number of outlets of barista due to losses. It has also got new competition from

Starbucks.


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5.3 PERCEPTUAL MAP

The graph shows that: as far as quality is concerned, Starbucks is better than both Barista as

well as caf coffee day. But pricing wise, Starbucks has a slightly higher price than the other

two. It clearly shows that Barista has the lowest quality of the two having a little high price

than CCD. And CCD is in a good position of fairly good quality and affordable price.

Starbucks, with Tatas as partner, has opted for competitive pricing that is nearly half thecoffee chain's charges elsewhere in the world -- with a cup of coffee costing about Rs. 80 for

a small offering and Rs. 165 for a large one. Starbucks is known for its high product quality

and as a premium brand.

A hot coffee at Starbucks will range from Rs. 80 to Rs. 165, while a cold coffee will cost

anywhere between Rs. 120 and Rs. 200. The CCD sells hot coffee at about Rs. 80 and cold

coffee at about Rs. 150. Though CCD has a number of branches in India, Starbucks has

created a buzz and penetrated in the Indian market and differentiates itself from other cafes

already prevalent.

As far as for Barista, it is not doing well, since there is no innovation. The quality is not that

good as compared to others having almost the same price range as Caf Coffee Day. At

Barista, A hot coffee costs Rs. 85 and cold coffee costs Rs. 155. Also, one of the weaknesses

of Barista is that it is perceived to be expensive by people.

HIGH QUALITY

LOW QUALITY

LOW

PRICE

HIGH

PRICE

STARBUCKS

CAF COFFEE DAY (CCD)

BARISTA LAVAZZA


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5.4 ANALYSIS ON THE BASIS OF THE INTERVIEW

Q1 Why did you decide to come into India with a partner? We do not have any restrictions in

FDI in single brand retail. Why did not you just do it on your own?

Howard Schultz: India is like no other market in the world. Tata's position in India is very

unique. It is a company that has unique capabilities in terms of infrastructure. But mostly

their values were so consistent with ours, building a company with a conscience, treating

people well, taking care of the communities and we thought this was an opportunity to do

something together that we just could not do ourselves.

Q2 No doubt Tata is one of the biggest corporate houses in India. It is their second coming in

the coffee space. They ventured into the coffee retail space with Barista by holding a minority

stake and that really did not go very well. How did they sell themselves to you to?

Howard Schultz: The coffee market here is ferocious in terms of competition. There are so

many players trying to do what we think we can do better. What Tata brings is a unique

perspective in terms of real estate acquisition capabilities, the opportunity to integrate

Starbucks into Taj Hotels, the ability to bring food from the Taj into Starbucks stores and thecapability that we just could not do on our own just in terms of the infrastructure and

distribution. Their previous experience had no bearing whatsoever on what we thought would

be a fantastic partnership.

We are here to build a major business and when I say major business, we think over time

India will be one of the largest markets in the world for Starbucks. We also think that the

competition has done us a favour. They have educated the market and created lots of

consumers. Our own research suggests that this market is perhaps like no other. The

awareness of Starbucks is so large here and there is so much pent-up demand that we think

that over time this is going to be one of the best markets in the world for Starbucks. I do not

think we could have done it without Tata.


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Q3 Earlier we were given to believe that you had a 50 outlet target for Starbucks in India by

the end of 2012. Do you have a revised plan now on how you are going to be expanding?

Howard Schultz: I do not know where that number originally came from, but I am not here to

say how many stores or how soon. I will tell you we are going to build a very large successful

business here.

Q4 Your pricing is significantly lower from the way you price a cup of coffee in the US.

Starbucks has a policy of not bending their pricing too much. Given that, why did you break

the rules for India?

Howard Schultz: I do not know if we broke the rules. We want to create a value proposition

and as much accessibility as possible. We are sourcing and roasting coffee in India. This is

the first time we have ever done that anywhere outside of North America for store opening.

This gives us a competitive advantage as well, but we want to win here and we have created a

pricing strategy that will be very competitive and put us in a position to succeed.

Q5 How will you ensure that the Starbucks expansion in India will be both sustainable and

profitable given that a lot of premium players who entered the market, to name a few such as

Costa Coffee, Gloria Jean's, Coffee Beans, are all struggling and have not yet been able to

make a dent in the Indian market?

Howard Schultz: Yes. We have heard this many-many times in Japan, in China, in Europe, in

Mexico that Starbucks is not going to succeed here, no one else has, you are an outsider, etc.

We are going to take the long view. This is not a sprint, it is a marathon. We are going to

bring a quality product that does not exist. The experience will be so significantly different.

Our people will be passionately committed to service and are highly trained and the

experience of the store will be significantly different. You can not compare the Starbucks

brand and reputation what we are going to bring to this market to what exists here. What we

are bringing is going to be new and exciting and completely different.


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Q6 What is your purpose in the Indian market considering we are populated with restaurants,

roadside eateries, etc?

Howard Schultz: We want to create a coffee experience that is a stunning experience in terms

of quality. We want to create a physical environment that does not exist and when people see

it, it will become the third place (third most popular place after home and work). From a

reputation standpoint, we also want to create the kind of company that is steeped in humanity

and gives back to the community and we will do that here as well.

Q7 You have specialised food menus, catering to the Indian palette. What is so special about

the menu that you deemed it right to be served at a Starbucks outlet?

Howard Schultz: We got great advise from the people at the Taj about the kind of food that

would appeal to the Indian customer. People have been pretty excited about the food at all the

tastings that we have done. The food is very different than anything we have done anywhere

else because it is cue to the Indian palette. It will be hot, it will be cold, it will be savoury and

sweet and will be vegetarian as well as meat. I suspect that the food will be a higher

percentage of sales than we have seen in other markets.

Q8 What about the fact that India is traditionally not a coffee drinking nation, but a tea loving

nation?

Howard Schultz: Not any more. Walk the streets of India. There are so many coffee players

doing pretty well. That gives us a lot of confidence that the winds are going to be at our back.

Q9 Is there an element of customisation that has gone into designing outlets for city /

locality? How does the balance between standardisation of the brand and customisation for

city / locality work for Starbucks?

The stores are a critical part of the Starbucks experience that we offer to consumers. Each and

every one of our flagship store actually incorporate very significantly the culture and the

tradition of the country. The designers marry the elements of Indian tradition and

craftsmanship with the modernity elements of Starbucks. I give full credit to our designers as

they balance the elements as there is a high expectation that people have from a Starbucks

store that they have visited abroad.


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The designers have worked across many markets and their understanding of the Indian ethos

that they have incorporated well and it differs from store to store. There is no magic number

saying that this much of Indian sensibility and this much of core Starbucks will be there. Its

a fine balance they maintain.


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CHPT VI: CONCLUSION

Starbuckss success in India like other foreign brands depends on their adaptability in

addition to what they do globally. Like Dominos Peppy Paneer pizza, McDonalds

McAloo tikki burger Starbucks might consider tasty healthy vegetarian recipes for an Indian

breakfast treat, next to its muffins some chicken tikka sandwiches may also do fine.

Starbucks is catering to local tastes, it has been doing very well in many other countries

including China and hopes to have success in India as well. The staff is very pleasant and

professional and is slowly creating a good image in the minds of the customers giving them a

really good ambience with high premium products at fairly affordable rates.

The winning mantra according to Schultz, Starbucks will look to create different entry points

for different demographics and will create food relevant to Indian consumers that [it does

not] provide anywhere else.

Thus, Starbucks should follow the strategies that is using and set up more number of outlets.

There is also a good feedback from people and has already created its image in the consumers

mind. Starbucks has a huge potential and can do much better in the near future.


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CHPT VII: SUGGESTIONS

1. Tata Starbucks can aim at increasing the number of outlets since the current cafs arealready doing well.

2. Keep a constant track of its competitors, and have a competitive advantage. 3. Conduct research of places in India, before setting up a caf, since each city has its

own culture, tastes and preferences.

4. Maintain high quality of products.5. Try to make the prices a little more affordable for the lower income group.6. Continue to introduce new products that are suitable to Indian taste. 7. Coffee shops normally close around eleven oclock at night, so Starbucks should

consider the option of closing at midnight or even one oclock in the morning; thus,

becoming the preferred venue for young people. Also, providing some guitar for jam

sessions or karaoke nights on Friday or Saturday may attract even more people.


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BIBLIOGRAPHY

Vrushali Paunikar, 2011, "International Business Plan Starbucks India", A proposal Ruchi Mankad and Joel Sarosh Thadamalla, 2011, "Case: Starbucks Coffee Company,

The Indian Dilemma", Strategic Management and Business Policy, 13th Edition, Thomas

L. Wheelen, J. David Hunger

Herve R., Dec 21, 2004, "The Starbucks Corporation: Past, Present and Future", Auch-Roy-Pen: 1207HA

Harold Brown, 2011, "External Environmental Analysis of Starbucks and the CoffeeIndustry"

Flight, Georgia. Grinding Out Success Next to Starbucks Business 2.0, Oct. 2006. Vol.7, Issue-9

Ryan C. Larson, 2008, "Starbucks a Strategic Analysis - Past Decisions and FutureOptions", Brown University Economics Department

WEBLIOGRAPHY

http://news.starbucks.com/article_display.cfm?article_id=707 accessed on Sept 2, 2013 http://news.starbucks.com/article_display.cfm?article_id=703 accessed on Sept 2, 2013 http://www.starbucks.in/about-us/company-information/mission-statement accessed on

Aug 15, 2013

http://www.starbucks.in/responsibility accessed on Aug 15, 2012 http://www.tatacoffee.com/corporate/company_profile.htm accessed on Aug 15, 2013 http://www.indiacoffee.org/indiacoffee.php?page=CoffeeData accessed on Oct 17, 2012 http://www.indiacoffee.org/userfiles/RFP-FINAL-SEP12.pdf Oct 20, 2012 http://www.cafecoffeeday.com/company-mission.php?mnid=3&lmids=3 accessed on Aug

17, 2013

http://www.cafecoffeeday.com/our-business.php?mnid=3&lmids=1 accessed on Aug 17,2013

http://en.wikipedia.org/wiki/Tata_Starbuck accessed on sept 3,2013
http://en.wikipedia.org/wiki/Tata_Starbuck%20accessed%20on%20sept%203http://en.wikipedia.org/wiki/Tata_Starbuck%20accessed%20on%20sept%203

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