A strategic analysis of Starbucks Coffee Company, in India
Introduction
Starbucks is one of the leaders in coffee industry. Starbucks has entered into many new markets and today it has more than 16,000 outlets across the globe (Johnson, Scholes and Whittington 2011). Due to unlimited business opportunities, Starbucks Corp has set strategies to enter India as it is next major hub for development in near future. Previously Starbucks has gained wide success in China and Japan due to high consumption of coffee and tea. Since its inception, Starbucks has tapped the major markets across the world, India was left untapped. In India, Starbucks has setup alliances with TATA Global Beverages which is a unit of TATA Group of Companies. Starbucks along with TATA has started with an investment of $80 million and plans to open 50 coffee shops in a year. Currently few coffee shops has been setup by Starbucks, however in near future, it is expected that the company will achieve its target in capturing Indian market (Lamb2009). Thus, besides sourcing coffee beans from TATA, Starbucks can now explore more Asian markets (Hitt, Ireland and Hoskisson 2012).
This report presents marketing environment analysis and strategic analysis of Starbucks to enter Indian markets. Moreover, this report includes Pestle Analysis, SWOT analysis, Industry life cycle, BCG, ANSOFF Matrix, Competitive Profile Matrix and Porter's Generic Strategies.
Company Overview
Starbucks Tea, Coffee and Spice business
This report deals with a Strategic Fit Analysis of Starbucks Coffee Company with focus on the United States Segment. Genus (1998) highlighted that strategic fit is the concept whereby strategy is a means for achieving a match between the external environment of an organisation and its internal capabilities, as part of a quest for establishing competitive advantage over rival competitors.
Founded in 1985, Starbucks is one of the largest coffeehouse companies in the world with over 16,000 stores in 50 countries. This report evaluates major internal and external factors affecting Starbucks using various analytical techniques. Based on the Starbucks brand in UK, it identifies suitable marketing strategies for Starbucks to expand its business in the UK market within the next two years. In line with the chosen marketing strategies, recommendations for the marketing mix are discussed.
Starbucks Corporation, generally known, as Starbucks Coffee is the leading retailer and a brand of world’s forte coffee in the world, with more than 15,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim, wherever in this world where premium quality coffee is in demand. Starbucks is the largest coffeehouse company in the world ahead of UK rival Costa Coffee, with 20737 stores in 63 countries and territories, including 11910 in the United States, 1496 in China, 1442 in Canada, 1052 in Japan and 772 in the United Kingdom. The first Starbucks was open in 1970. The name was inspired from Herman Melville’s Moby Dick, a definitive American novel regarding the 19th century whaling industry. The nautical name matches seamlessly for a store that imports the world’s finest coffees to the cold thirsty people of Seattle. In May 1998, Starbucks have finally successfully entered the European market through its acquirement of 65 Coffee Company stores initially originated from Seattle in the UK. Both companies shared a common culture, focusing on a great commitment to customized coffee, similar company values and a mutual respect.
1.Analyze the business-level strategies for the corporation you chose to determine the business-level strategy you think is most important to the long-term success of the firm and whether or not you judge this to be a good choice. Justify your opinion.
The Government of India at that time had loosened the regulations where foreign single brand companies could start investing in India, but, despite the norms being more relaxed, Starbucks had decided to use other ways of entering into India. Starbucks had met up with Tata Global Beverages whereby they had both discussed their interests to enter into a partnership to operate Starbucks in India. Starbucks had considered a partnership with Tata because they knew
Starbucks will perform substantially in India, considering that Indian people love coffee, and they don’t have a lot of gathering places in their country. The company is struggling in Europe since it is very difficult to compete with European coffee and lattes; other than that the costcosts offorto the Starbucks products are expensive compared to other local stores in Europe, which have more reasonable prices. Some examples of the business partnerships are: American Red Cross, Abyssinian Development Corporation and Business for Social Responsibility (BSR). These partnerships acquire new points of views, knowledge and expertise from individuals withoffrom different backgrounds, ethical solutions that go in accordance with core values, and principles of community service, and environmental
This will also solve two main criticism made about Starbucks : a too fast growth and a cannibalizing turnover in closely located stores. But still, Starbucks needs to work on its image which decreased over time, and on product quality, because without a good image, expanding is less effective and efficient. And finally, since the company is no more limited to a coffee-shop company, it can use its new products as a new internationalization product, with new strategies as context changes. Quantitative Study This study is based on a ranking of countries based on several different data. Each country if first ranked based on : (1) Its Human Development Index, (2) Its GNI per Capita (PPP), (3) Its Urban population with number of tourists added, (4) Its coffee consumption (per capita * total population), and (5) Its coffee trade balance (Imports-Exports). These 5 data allow to create a single index that allows to rank countries based on their development, money available, potential consumers and market. The trade balance is used to show the ease of importing coffee in a country and therefore do not care about main exporters. Once ranked, 3 data have been added : Presence of Starbucks, OECD Country risk and IDA index. End ranking is provided in Annex 4. Among the top 40 countries
Success Strategy of Starbucks could be classified as a “Patterns of Action”. “While much of the Starbucks expansion will likely occur overseas in high-growth markets like China, it seems to me that Starbucks will have to
In addition, Starbucks proposes to enter Russia. The company with its joint-venture partner, M.H. Alshaya, intends to open its first store in Moscow, Russia in the fourth quarter of fiscal 2007. Russia is one of the fastest growing economies in Europe. Economic growth combined with growing coffee consumption and popularity of western brands make Russia a key opportunity for Starbucks. The company intends to enter India through a joint venture. The coffee market in India is expected to grow by approximately 12% during the 2007-2010 period. New markets diversify the revenue base of the company.
Market positioning and growth strategies play an instrumental role in sustaining the competitive advantage in the highly competitive global beverage industry (Frigenti, 2012). By analyzing the strategies adapted by the Starbucks, one of the leading global coffee retail chains in the world, this report will provide insights about the latest trends and the key factors that play an influential role in beverage industry (Dermot, 2013). This report will also discuss various opportunities that case study organisation can look into to improve its profitability and will also outline the key threats it needs to tackle in the future to remain competitive in the market.
This case mainly talks about the Café Coffee Day company, and their competitive position with the challenge of the world’s largest global brand coffee chain——Starbucks in five parts. The first part introduces the history of India’s coffee market in total and the detailed information about each of the company is specified in the following two parts. The last two parts focus on elaborating CCD’s “slight course correction” that the management is confident with and raises the discussion about the central question that whether a further response is needed.
India, like many other Asian countries, has a tea drinking culture, but the coffee market is catching up and growing fast. This case talked about the stories of Café Coffee Day (CCD), the Indian coffee industry market leader, along with its competitor Starbucks from USA. CCD was founded in 1996 and by April 2013 it had around 3,000 stores within the Indian market. CCD had not faced any severe threat up till 2012 when Starbucks made its entry into the Indian market through a joint venture with Tata. As the world’s largest coffee chain company, Starbucks wanted to get a slice of the cake. In 2013, it opened 11 stores in Delhi and Mumbai.
This essay includes a PESTEL Analysis, SWOT Analysis, Competitors Analysis and Value Chain analysis which help to identify the both external and internal opportunities and threats available within the Macro-environment in India and the coffee retail industry. At the end of my essay, I will give a suggestion that how CCD could best response to the challenge of Starbucks in India.
1. What factors in the global environment provide opportunities or threats for Starbucks? How do Starbuck’s strengths and weaknesses match up to its opportunities and threats?
Starbucks’ retail entry model in the United States does not have the same strategy as their international model. In the states Starbucks holds great control as a corporation, but in international territory, country partnerships, cultural, government laws and politics play a very important role in Starbucks’ entry strategy. Starbucks has set it sights globally since the coffee market has come close to saturation in the U.S. which will give them the opportunity to continue to expand without fierce competition. Starbucks has looked to countries like India and other emerging markets with great growth potential to set down new roots. Starbucks recognizes India as a great choice to expand business internationally but also recognizes the complexity in the same market after several attempts to enter without success.