Starbucks Coffee

Teguh Reza Reski Rahadi Delfi

Background
2002
Starbucks announced that it was planning to enter India. Later it postponed its entry as it had entered China. There was news that Starbucks reviving its plan to enter India Starbucks officially visited India but they returned unconvinced about appropriate partner for its entry Starbucks announced that they were ready to entry Indian market in the next 18 months, but again, it's postponed.

2003

2004

2006

Environmental Scanning
Political India economic reforms since 1991 (O) Permission foreign direct investment with goverment control (O/T) India GDP growth (O) Middle class increase spending power (O) High fiscal deficits (T) Socio-cultural

Economic

Different food habits across religion and regions (O/T)

Generally preffered tea, in exception south India (O/T) Young people demographic (O)

Technology

Has good IT workforce, and good familiarity with IT (O)

Inadequate infrastructure aside urban area (T)

5Forces Analysis

Corporate Culture
Starbucks have a common culture for all of its outlets. They believe that the baristas should not only know how to handle the coffee properly but also how to impart to customers the passion of the products. Starbucks offers all of the full and part-time employee the opportunity to receive full healthcare benefits, stock options/discounted stock purchase plans, and other benefits.

Corporate Structure
The Starbucks implemented matrix organizational structure In U.S, there are four divisions: Western/Pacific, Northwest/Mountain, Southeast/Plains, and Northeast/Atlantic. The major advantage : maximize communication channel. With this changes, Starbucks will be able to develop products specified to market appeal more rapidly after the appropriate adjustment have been made

Corporate Resource
Has a strong foothold in American market. Strong expansion throughout the world Has a broad distribution channels and product line Has done strategic alliances with many company Below the line marketing strategy (word of mouth)

SWOT
Strengths Good Starbucks brand image in coffee business Starbucks experience as differentiating factor The founder (Howard Schultz) has an innovative vision and strong leadership Starbucks has a loyal customer that willing to pay premium prices Has strong financial capability Weakness The products price are relatively more expensive than the competitors, Aggressive expansion leads to cannibalization and lowering brand image Starbucks related to health implications as it served a high-calorie and high-fat products.

SWOT Contd
OPPORTUNITIES India economic reforms Permission foreign direct investment with government control India GDP growth Middle class increase spending power Young people demographic THREAT High fiscal deficits Different food habits across religion and regions Generally preferred tea, in exception south India Inadequate infrastructure aside urban area

IFAS

Factor Strenght

Weight

1 5 5 4 5 5 3 4 3

2 5 5 4 5 4 4 3 4

Rating 3 5 5 4 5 5 3 3 4

4 5 5 5 5 4 4 4 4

5 5 4 5 4 4 4 3 4

Averag Stdev e

CV

Value

Good brand image

Starbucks experience Innovative leader Has loyal customer Has strong financial capability Weakness Expensive products price Aggressive expansion has health implications issue Total

0.252 0.062 0.134 0.233 0.134 0.059 0.088 0.037 1

5 0 0.00% 4.8 0.4 8.33% 4.4 0.4899 11.13% 4.8 0.4 8.33% 4.4 0.4899 11.13%

1.26 0.2976 0.5896 1.1184 0.5896

3.6 0.4899 13.61% 0.2124 3.4 0.4899 14.41% 0.2992 3.8 0.4 10.53% 0.1406 3.203

EFAS
Weight 1 OPPORTUNITIES 1. India economic reforms 2. Permission foreign direct investment with government control 3. 4. 5. India GDP growth Middle class increase spending power Young people demographic 0.105 5 5 5 5 4 4.8 0.4 0.4898 4.6 98 4.8 4.8 4.8 0.4 0.4 0.4 8% 0.504 2 Rating 3 4 5 Averag e Stdev CV Value

0.259
0.167 0.167 0.088

5
5 5 5 THREAT

5
5 5 5

5
5 5 4

4
5 5 5

4
4 4 5

11% 1.1914
8% 0.8016 8% 0.8016 8% 0.4224

1.

High fiscal deficits

0.035 0.039 0.059 0.081 1

2 2 3 3

3 3 3 3

3 2 2 4

3 3 3 3

2 3 2 3

2. Different food habits across religion and regions 3. Generally preferred tea, in exception south India 4. Total Inadequate infrastructure aside urban area

0.4898 98 0.4898 2.6 98 0.4898 2.6 98 2.6 3.2 0.4

19% 0.091 19% 0.1014 19% 0.1534 13% 0.2592 3.116

Directional Strategy Matrix

Directional Strategy Matrix
EFAS 5

Q2 Stability

Q1 Growth HD IFAS 4 5

Starbu cks 3

Retrenchment Q3

Diversification Q4

Directional Strategy Matrix Contd

Concentric Diversification Strategy:

Localization products : tea beverages, local food Merchandise products

Tows
TOWS Matrix Strenghts
1 2 3 4 5 Good Brand image Starbucks Experience Innovative Leader Loyal Customer Strong financial

Weaknesses
1 Expensive products 2 Aggressive Expansion 3 Health implications

Opportunities
1 2 3 4 5 India Economic Reform Permision of FDI GDP Growth Mid Class increase Young People Demographic

SO strategies
1 Entering india market (S1, S5, O2) 2 Targeting youth and business market (S2, O5 O4) 3 Modern ambience (S4, O4)

WO strategies
1 Put premium price (W1, O4, O3) 2 Increase low fat coffee (W3, O3)

Threats
1 2 3 4 High Fiscal Defisit Diff Food Habit Generally preferred tea Inadequate infrastructure aside urban

ST strategies
1 Product localization (S3, T2, T3)

WT strategies
1 Focus on urban area (W2, T4, T1)

Functional
Functional Marketing

Organization & HRM

2 Targeting youth and business market (S2, O5 O4) 3 Modern ambience (S4, O4) 4 Put premium price (W1, O4, O3) 5 Focus on urban area (W2, T4, T1)
R&D and Production

1 Product localization (S3, T2, T3)

Financial

1 Increase low fat coffee (W3, O3) 2 Product localization (S3, T2, T3)

1 Entering india market (S1, S5, O2)

GE Matrix
Element Overall Market Size Competitive intensity Historical profit margin Ambience store Market Attractiveness Pricing package Innovation Culture region Environmental impact Total Weight Rating 0.252 0.109 0.098 0.068 0.063 0.072 0.225 0.113 1 Value 5 1.26 3 0.33 4 0.39 4 0.27 3 0.19 3 0.22 4 0.90 3 0.34 3.90

Element Market share Share growth Service quality Competitive Position Brand reputation Performance efficiency Advertising cost Performance productivity Total

Weight Rating 0.239 0.091 0.279 0.139 0.113 0.039 0.1 1

Value 5 1.20 4 0.36 4 1.12 5 0.70 4 0.45 2 0.08 3 0.30 4.20

Postponed to Enter Indian Market: Reasons

Regulatory

Starbucks thinks that government regulatory about FDI was unfavorable for t hem (51% max). Stability of government policy present risk to the business in the future.

Market Culture

Tea Culture

Timing

Too late to enter the market because there were already player in this market.

Consumer spending rises

Most of population in India between 15-59 years

allow FDI in 2006.

Growing of the middle class

Emerging Coffee culture

GDP Steady growth from 1999 to 2004

Enter Indian Market

Growing interest in Western consumer Brands and Luxury product

Indias Market

Products

Thank You