INTRODUCTION
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.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.
COMPANY PROFILE STARBUCKS CORPORATION
Starbucks Corporation is an American global coffee company and
coffeehouse chain based in Seattle, Washington. Starbucks is the
largest coffeehouse 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
GermanyStarbucks Mission: Our mission: to inspire and nurture the
human spirit one person, one cup 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.TATA GLOBAL BEVERAGES AND
TATA COFFEETata 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 plantation company 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. TATA STARBUCKS- JOINT VENTURE TO OPEN CAFES IN
INDIAStarbucks 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. PESTLE
ANALYSISThe 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 political, economic, social,
technological, legal and environmental setting.
a. Political factorsThe 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.
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 factorsThe 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 places Starbucks at a very dynamic position,
where it has a good opportunity and much possibility to 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 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.MARKETING STRATEGY
Capture ValueIn this section, tools and techniques will be used
to explain how Starbucks can create and capture value for their
products.Market SegmentationApart 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.CHAPTER 1. PROMOTION
STRATEGY MEANING :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.Promotion is one of the market mix elements or features,
and a term used frequently in marketing. The specification of five
promotional mix or promotional plan. These elements are personal
selling, advertising, sales promotion, direct marketing, and
publicity.[ A promotional mix specifies how much attention to pay
to each of the five subcategories, and how much money to budget for
each. A promotional plan can have a wide range of objectives,
including: sales increases, new product acceptance, creation of
brand equity, positioning, competitive retaliations, or creation of
a corporate image. Fundamentally, however there are three basic
objectives of promotion. These are:[2]1. To present information to
consumers as well as others.
2. To increase demand.
3. To differentiate a product.
There are different ways to promote a product in different areas
of media. Promoters use internet advertisement, special events,
endorsements, and newspapers to advertise their product. Many times
with the purchase of a product there is an incentive like
discounts, free items, or a contest. This is to increase the sales
of a given product.
The term "promotion" is usually an "in" expression used
internally by the marketing company, but not normally to the public
or the market - phrases like "special offer" are more common. An
example of a fully integrated, long-term, large-scale promotion are
My Coke Rewards and Pepsi Stuff. The UK version of My Coke Rewards
is Coke Zone.
Promotional activities to push a brand enabling social media
channels to spread content making something viral such as the
advertising by Coke using the release of a new bond film creating a
huge amount of attention which then gets promoted across all social
channels by people spreading the information due to excitement.
Promotion can be done by different Media's, namely print media
which includes Newspaper and magazines, Electronic media which
includes radio and television, Digital media which includes
internet, social networking and social media sites and lastly
outdoor media which includes banner ads, OOH (out of home)
TYPES OF PROMOTION STRATEGYi. Advertising
ii. Selling
iii. Sales Promotion
iv. Public Relationsi. What is advertising?
Advertising is a form of communication designed to persuade
potential customers to choose your product or service over that of
a competitor
Successful advertising involves making your products or services
positively known by that section of the public most likely to
purchase them.
It should be a planned, consistent activity that keeps the name
of your business and the benefits of your products or services
uppermost in the mind of the consumer.
Why advertise?
The objective of advertising is to increase your profit by
increasing your sales. Advertising aims to:
Make your business and product name familiar to the public
Create goodwill and build a favourable image
Educate and inform the public
Offer specific products or services
Attract customers to find out more about your product or
service
The rules of advertising
There are four rules to consider when planning any advertising
activity ie: before you prepare and book any form of
advertising.
Aim - What is the primary purpose of the advertisement? Is it to
inform, sell, produce listings or improve the image of your
business?
Target - Who is the target? From which sector of the public are
you trying to achieve a response? For example is it male, female,
adult, teenager, child, mother, father etc.
Media Bearing the aim and target in mind, which of the media
available to you is the most suitable ie: TV, radio, press or
Internet?
Competitors What are your competitors doing? Which media channel
do they use? Are they successful? Can you improve on their approach
and beat them in competition?
Developing effective advertising
Good advertising generally elicits the following four
responses:
Attention It catches the eye or ear and stands out amid the
clutter of competing advertisements.
Interest It arouses interest and delivers sufficient impact in
the message or offering.
Desire It creates a desire to learn more or crave ownership.
Action It spurs an action which leads to achievement of the ads
original objective ie: it prompts potential customers to purchase
or use your product or service.Making sure your advertisement is
legal
Section 52 of the Trade Practices Act (Cth) 1974 prohibits
misleading or deceptive conduct.
You must consider the advertisement as a whole and the ordinary
meaning of the words used. You must determine if the people to whom
the advertisement is directed are likely to be misled or deceived
by its content.
You can use humour, cartoons and slogans to make your ad stand
out, but be sure theyre not likely to mislead or deceive your
audience. The Australian Competition and Consumer Commission (ACCC)
provides advertising guidelines in information circulars that are
available from the local office of the ACCC, or from
www.accc.gov.au.
Commonly used media
There are many media options open to advertisers. Which media
you use will depend on who you are trying to reach, what you want
to say and your budget. Often a combination of media (the media
mix) can be used to good effect. Remember to keep your branding and
message consistent across all media. This includes use of colours,
logos, design elements and fonts. Stationery
Stationery, which includes letterheads, envelopes and business
cards, is a means by which your business image or name
identification is projected. Good quality stationery, used with
care and attention and with a high standard of presentation, is an
everyday means of presenting your business image.
Window display or office frontThe external presentation of your
business office or shop is one of the principal ways of
establishing your business image. An attractive, well maintained
exterior with clear, bold sign writing is an essential start.
Windows should be bright, attractively presented, scrupulously
clean and well lit at night. The display should be arranged neatly
and aimed at projecting an attractive company image and providing a
reason to buy your products or services. Above all it should have
sufficient impact to attract attention.
Press advertisingThis is a commonly used form of general
advertising and includes advertising in all press such as
newspapers, magazines and journals. Press advertising is suitable
for image building, information dissemination and sales campaigns.
It is also a very affordable option for small businesses.
RadioRadio is considered by many advertisers as an ideal medium
due to its ability to reach specific target groups e.g. teenagers,
racing followers or grocery buyers. Radio advertising covers spot
adverts (usually 15 or 30 second), promotions or talkback/DJ
discussions. Most radio stations offer packages which include
production and extension of your radio campaign through their
websites.
Television
Television is a powerful advertising medium because it creates
impact through sight, sound and movement however the cost of
producing the advertisement and procuring sufficient air time to
allow the campaign to work often makes it prohibitive for small
business.
Direct mail
This is a broad category covering direct communication with the
consumer through email, post or fax. It can include newsletters,
catalogues and letters. If you plan to use email, be sure to comply
with national anti-SPAM legislation which makes it illegal to send
unsolicited commercial electronic messages. Visit the Australian
Communications and Media Authority website for more details -
www.acma.gov.au.
Outdoor
This is any type of advertising which is done outdoors,
including static advertising such as billboards, backs of street
benches and bus shelters or mobile advertising displayed on buses,
trains, taxis or towed signage.
AmbientRefers to any form of advertising that occurs in a
non-standard medium outside the home, and usually where your
consumers are likely to be. Its limited only by your imagination
and includes things like advertising on the back of shopping
receipts or toilet doors at the cinema, placing branded coasters at
the local pub, projecting onto buildings, advertising inside lifts
or distributing branded cups.
Cinema
You can purchase cinema advertising by individual cinemas or
screens for a set amount of screenings or runs. Most providers
offer packages which include production and screening of your
advertisement
Point of SaleAdvertising at the point where the consumer makes a
purchase decision eg: floor stickers, in-store digital advertising,
shopping trolley signage, shelf or counter posters or playing
interviews about your product in store.
OnlineThe options for online advertising continue to grow
rapidly. They include advertising on your website, advertising on
other websites, creating links to your website from other websites,
publishing blogs, offering online product games, social networks
and forums.
Directory listings
Many consumers use business directories to find a supplier.
Directories include the yellow or white pages, union directories,
trade directories or local business directories.
Evaluating the effectiveness of your advertising
Famous American department store merchant John Wanamaker
(1838-1922) was attributed as saying Half the money I spend on
advertising is wasted the trouble is I dont know which half. This
quote is often still true today as many businesses do not evaluate
the effectiveness of their advertising.
Evaluating effectiveness can be as simple as staff asking every
new customer How did you hear about us? or asking every customer
that responds to an advertised special where did you see or hear
our advertisement?
Whatever method you use, it is absolutely critical in getting
top value for your advertising dollar by finding out which media
works and which doesn't.iii. SELLING What is selling?
Put simply, selling is the exchange of goods or services for an
agreed sum of money.
Depending on the circumstances, a sales transaction can include
one, some or all of the following stages.
Prospecting and qualifying identifying qualified prospects ie:
those that are likely to want or need your product or service and
can afford to pay for it.
Pre-approach undertaking research about prospects to assist in
the actual selling process.
Approach making actual contact with the prospect in person, by
phone or in writing.
Presentation and demonstration presenting and demonstrating the
features and benefits of your product or service in order to
convince the prospect that their want or need can be
satisfied.Handling objections demonstrating the product or service
value to overcome real or perceived objections or misunderstandings
that are impeding the purchase decision.
Closing bringing the selling process to a successful conclusion
by either asking for the order or responding to a positive decision
from the prospect.
Follow-up proactive or reactive contact with the purchaser to
establish their satisfaction level and to address any problems that
may exist.
In planning the selling element of your marketing strategy you
will need to consider the following:
The size and structure of your sales team
1. Recruiting, training, motivating and evaluating individuals
and the team as a whole
2. The remuneration structure
3. The location/territory to be serviced
4. Management and communication systems
Selling is a particularly important element if you are marketing
services because the purchaser of a professional service is in fact
buying the capabilities of the seller. So he or she would be
closely evaluating the behaviour and characteristics of your sales
person, your business, its reputation, facilities and
appearance.
iii. Sales Promotion
What is sales promotion?
Sales promotion relates to short term incentives or activities
that encourage the purchase or sale of a product or service. Sales
promotions initiatives are often referred to as below the line
activities.
What are the major sales promotion activities?
Sales promotion activities can be targeted toward final buyers
(consumer promotions), business customers (business promotions),
retailers and wholesalers (trade promotions) and members of the
sales force (sales force promotions). Here are some typical sales
promotion activities:
1. Consumer promotions
Point of purchase display material
In-store demonstrations, samplings and celebrity appearances
Competitions, coupons, sweepstakes and games
On-pack offers, multi-packs and bonuses
Loyalty reward programs
2. Business promotions
Seminars and workshops
Conference presentations
Trade show displays
Telemarketing and direct mail campaigns
Newsletters
Event sponsorship
Capability documents
3. Trade promotions
Reward incentives linked to purchases or sales
Reseller staff incentives
Competitions
Corporate entertainment
Bonus stock
4. Sales Force Promotions
Commissions
Sales competitions with prizes or awards
iv . Public Relations
What is public relations?
The Public Relations Institute of Australia (PRIA) defines
Public Relations (PR) as: The deliberate, planned and sustained
effort to establish and maintain mutual understanding between an
organisation (or individual) and its (or their) publics.
Put more simply, public relations is about building good
relations with the stakeholders (public) of your business by
obtaining favourable publicity, building a good corporate image and
handling or heading off unfavourable rumours, stories and
events.
By building good relationships with your stakeholders,
particularly customers, you can generate positive word of mouth and
referrals from satisfied customers.
Who is a stakeholder?
Stakeholders are the various groups in a society which can
influence or pressure your businesss decision making and have an
impact on its marketing performance. These groups include:
Clients/customers
Staff
Shareholders
Strategic partners
Media
Government
Local community
Financial institutions
Community groups
Operationally, stakeholders really refer to those groups that
your business is or should be, communicating with.
What are the main public relations Tools?
Typical PR tools include:
1. News creation and distribution (media releases) 2. Special
events such as news conferences, grand openings and product
launches
3. Speeches and presentations 4. Educational programs 5. Annual
reports, brochures, newsletters, magazines and AV presentations 6
Community activities and sponsorshipsWhat are the key steps in
implementing public relations?
Implementing effective public relations activities requires
careful planning. The three major steps are outlined below
Setting the objectives what is it you want to achieve and who do
you want to reach? Is it to create awareness of a new product or
service to your existing clients, to overcome community
misconceptions about your business or to create a positive
impression with your bank manager?
Deciding on the message and the vehicle what is the major thing
you want to communicate and what public relations tools will you
use to get the message to its target?
Evaluating the results did you achieve the desired result and
did it lead to a positive outcome?
Many small businesses do not devote enough attention to public
relations in their promotional mix but done properly, it can be a
powerful and cost effective business development and marketing
tool.CHAPTER 2 COLLECTION OF DATA & ANALYSIS
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 stir in 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.
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 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.
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 the coffee 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.
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 the capability
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.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.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.
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.
CHAPTER 3. 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.:SUGGESTIONS
1. Tata Starbucks can aim at increasing the number of outlets
since the current cafs are already 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.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 Coffee Industry"
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 Future Options", Brown University Economics
DepartmentWEBLIOGRAPHY
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
BARISTAA
STARBUCKS
CCD
HIGH QUALITY
LOW QUALITY
LOW PRICE
HIGH PRICE
STARBUCKS
CAF COFFEE DAY (CCD)
BARISTA LAVAZZA