Starbucks: Brewing Coffee in India

Prepared By: IMRAN KHAN HARSHALL BANDEKAR HARLEEN KAUR RISHABH LAL HITESH MOTIRAMANI

BUSINESS STRATEGY SEC F

Table of Contents
CHAPTER 1: INTRODUCTION ......................................................................................................................... 4 Starbucks: Brewing Coffee in India ............................................................................................................... 5 Starbucks: Caffeinating India ........................................................................................................................ 5 Coffee: A Recession Free Product ................................................................................................................. 6 Coffee Industry: In a Nut Shell .................................................................................................................. 6 PORTER’s FIVE FORCES.............................................................................................................................. 6 The Threat of New Entry ....................................................................................................................... 6 Threat of substitutes: ............................................................................................................................ 7 The Bargaining Power of Suppliers ....................................................................................................... 7 The Bargaining Power of Buyers ........................................................................................................... 7 Competitive rivalry ................................................................................................................................ 8 PESTEL ....................................................................................................................................................... 8 Political ...................................................................................................................................................... 8 Economic ................................................................................................................................................... 9 Ecological: ................................................................................................................................................. 9 Sociocultural ............................................................................................................................................. 9 Weather ........................................................................................................................................................ 9 PORTER’s Diamond ............................................................................................................................. 10 1) Demand condition for porters diamond .............................................................................................. 10 2) Related and supporting industries:..................................................................................................... 11 Specialty coffee cultivation in India .................................................................................................... 11 MONSOONED MALABAR AA ............................................................................................................... 11 MYSORE NUGGETS EXTRA BOLD......................................................................................................... 11 Robusta Kaapi Royale.......................................................................................................................... 11 3) Factor conditions in India: .................................................................................................................. 12 Land ..................................................................................................................................................... 12 Labor: .................................................................................................................................................. 12 4) Firm Structure, Industry Structure and Rivalry ................................................................................... 13 CHAPTER 2: BACKGROUND ......................................................................................................................... 14 Starbucks: The History ................................................................................................................................ 14 Industry structure and rivalry: .................................................................................................................... 16 1|Page

Café coffee Day ....................................................................................................................................... 17 International exposure of Café coffee day ......................................................................................... 17 SWOT Analysis – CCD .......................................................................................................................... 18 Strategies adopted by Cafe Coffee Day: ............................................................................................. 19 Barista Lavazza ........................................................................................................................................ 19 SWOT analysis of Barista..................................................................................................................... 20 Strategies adopted by Barista: ............................................................................................................ 21 Costa Coffee ............................................................................................................................................ 21 Gloria Jean's ............................................................................................................................................ 22 Competitors’ Visibility ................................................................................................................................. 22 CSR initiatives by Barista Lavazza, Café Coffee Day, Costa Coffee: ............................................................ 29 Barista Lavazza: ....................................................................................................................................... 29 Café Coffee Day:...................................................................................................................................... 29 Costa Coffee: ........................................................................................................................................... 30 CHAPTER 3: The SWOT’s ............................................................................................................................. 31 Opportunities and Roadblocks’ Ahead ....................................................................................................... 32 Opportunities: ......................................................................................................................................... 32 Increasing Coffee Consumption .............................................................................................................. 32 Challenges: .............................................................................................................................................. 33 Starbucks: SWOT Analysis ........................................................................................................................... 34 Strengths: ................................................................................................................................................ 34 Weaknesses: ........................................................................................................................................... 35 Opportunities: ......................................................................................................................................... 35 Threats: ................................................................................................................................................... 36 Strategic Position – Starbucks ..................................................................................................................... 36 Proposed Strategies ................................................................................................................................ 38 1. The Product ..................................................................................................................................... 38 2. Pricing.............................................................................................................................................. 39 3. Promotion ....................................................................................................................................... 39 4. Place ................................................................................................................................................ 39 Starbucks’ current Strategy .................................................................................................................... 39 1. Rapid store expansion strategy....................................................................................................... 39 2|Page

2. Employee Training and Recognition ............................................................................................... 40 3. Real Estate, Store Design, Planning, and Construction ................................................................... 40 4. Store ambience ............................................................................................................................... 40 5. Coffee purchasing strategy ............................................................................................................. 40 Strategic Capabilities – Resources and Competency .............................................................................. 41 1) Resources ........................................................................................................................................ 41 2) Competences - Their competitive advantage ................................................................................. 42 Conclusion ............................................................................................................................................... 44 TOWS Analysis: ........................................................................................................................................... 45 CHAPTER 4: Reactions and Outlooks .......................................................................................................... 46 Company Reaction over a period of time ................................................................................................... 47 Future Outlook of Starbucks in India .......................................................................................................... 47 References: ................................................................................................................................................. 52

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CHAPTER 1: INTRODUCTION

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England. there will not be the problem of brand name recognition among them 1 TATA Coffee is a part of TATA Sons Conglomerate 5|Page . the companies will also work towards developing Starbucks stores in retail outlets and hotels. Asia largest publicly traded coffee grower. it is a widely proven fact that there is lot of scope for the development of coffee café culture in India. Germany. Starbucks: Caffeinating India India and China are the world‘s two fastest growing economies. With the growing disposable income of Indians. their Chinese venture turned out to be much profitable than that of their US business.Starbucks: Brewing Coffee in India Starbucks Corp. Thus. They will also target the tourists who will be visiting India.. Also. is aiming India as its next major hub for development. Thus. a non-binding agreement between two giants. their venture in China proved to be more profitable than that of US. Starbucks entered into a deal with TATA Coffee Ltd1. and Japan who are well aware of Starbucks brand name. the Indian market is heavily driven by the upcoming youth culture which is totally driven by the western trends. Surprisingly. Starbucks had already ventured into the Chinese market and not surprisingly. Here in India. in china.S. people tend to spend more towards apparels and fast foods. In addition to sourcing coffee beans from TATA‘s Indian facilities. in particular. Starbucks want to replicate the success they had in USA and more recently. Thus. This is. Starbucks want to capitalize on this particular opportunity... Since. They are planning to start with targeting the niche upper class segment by opening their outlets in Taj Hotels and Resorts. There are plans to combine the trust and legacy of TATA coffee with the iconic brand image of Starbucks which can move on to development of Starbucks retail coffee chains in other parts of Asia. they want to replicate their success in Chinese mainland in India. Their primary target market is the younger generation of age 16-40 years. With the success of Indian owned Café Coffee Day and Barista Coffee. most of the tourists coming to India are from the countries of U.

they will open few stores in India. 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. Though. Thus. Also.Coffee: A Recession Free Product Coffee Industry: In a Nut Shell PORTER’s FIVE FORCES The Threat of New Entry The entry barriers in the coffee retail industry are relatively low in India. Thus. they are having MoU being signed with TATA‘s for opening their outlets in their Taj group of hotels and resorts. Barista. particularly for the foreign players. they are going to have any particular capital related problems. their management must be having greater understanding of the Indian markets and 2 FDI stands for Foreign Direct Investment 6|Page . Thus. for a start. Any large or well-funded company having the thorough understanding of the market can enter into retail sector in India. However. This is possible owing to the fact that 51 % FDI2 is allowed in India in retail sector. sourcing coffee for any new entrant 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 Café coffee day. Barista Lavazza and Costa Coffee. it is having its own advantages when it comes to achieving the economies of scale. being the sixth largest producer of coffee in the world is having the largest home grown supply of coffee beans. Economies of Scale: given the fact that Starbucks is a global. they have plans to open new stores in most of the major Indian cities. their entry can assured to be pretty smooth Access to supply: India. Thus. Capital Requirement: Starbucks being the global coffee retail chain. it is going to be pretty much difficult for any of the new entrant to establish its brand name in the Indian market.

which can act as the point of differentiation. soda.. Therefore. this is not valid in the case of the suppliers supplying the technological machinery as there are not many suppliers here. The Bargaining Power of Buyers In the past. will include other beverages. Similarly. water. for Starbucks. with the advent of multinational food retail giants in India. it is going to be important to first understand the Indian preferences. This also gives the Starbucks to dictate terms to the supplier. the suppliers. any foreign player will need to have an Indian partner. This will also include other fast food beverages like burgers etc. Starbucks is also planning to enter in Indian markets with collaboration with TATA coffee. Legislation or government action: In India FDI regulation for single branded retail stores is 51%. However. fruit juices. This is particularly because of the fact that coffee retailers like that of Starbucks tend to be very big buyers for any of the supplier to lose as a whole. Threat of substitutes: Products for Product substitution Product substitutes. like that of Mc Donalds. suppliers of other resources like that of paper products etc. 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. it depends on most of the cases on the store ambience. supplying the retailer with the coffee beans are not having much of the bargaining power. compulsorily. The Bargaining Power of Suppliers In this case of coffee retail. Barista Lavazza. However. These are places which provide people with the place to sit. will not be having much of the bargaining power as there are many sources from which the company can source them. Café Coffee 7|Page . Differentiation: Coffee is not the product where there is a great scope for product differentiation. Thus. apart from the Starbucks coffee. before making any major move. Substitution of a need This will include the lower end local coffee houses or other snack shops which are less luxurious. for example. However.Pallets. here. Therefore. chat and relax. beer or other liquid beverages.

The copy of the order made available to the SLBCs. which are also the multinational brands. 2010.Day and Costa Coffee. The abbreviation CCD is known to most of the people in urban parts of India. Thus. Support for coffee replantation.indiacoffee. Their positioning is same as what Starbucks have in US.org/indiacoffee. and Growers‘ Associations for information and initiate necessary action for speedy implementation of the Package. it will be difficult for Starbucks to influence the Indian buyers to pay premium for their products. widely recognized. 241. Apart from them. TN & Kerala 3 Source: http://www.665 coffee growers) having accumulated bank loans covering all the coffee growing regions of the country. consumer is faced with lots of choices. Competitive rivalry Major competition for Starbucks in India comes from that of Café coffee day. Modalities for implementation of coffee development programs – NTA 3. secondary competitors include the Georgia Coffee served in fast food joints like that of Mc Donalds and KFC PESTEL3 Political  The Government of India has communicated the sanction for the implementation of the Coffee Debt Relief Package – 2010 for the debt ridden small coffee growers with a total implication of Rs. Banks.  Implementation modalities-XI Plan Support Schemes-including Mechanization 1. Support for Grower Collectives in Coffee Sector – Modalities 4. Barista and Costa Coffee.33 crores vide order No 4/3/2008-Plant (B) dated 14th June.  It is estimated that this relief package would benefit more than 95% of the small growers (74929 small growers out of the total of 78. water augmentation & quality up gradation for coffee in Karnataka. The other competitors include Barista Lavazza.php?page=ModalitiesImplementationDevelopment 8|Page . Modalities for implementation of coffee development programs – NER 2.

Indian coffee manufacturers are also getting hit by the price increase. Modalities for implementation of scheme for setting up of Quality Evaluation/Cup Tasting Lab 6. average age of Indians around 30. Coffee manufacturers have to compromise on their margins since their input costs are raising. Weather A major factor affecting coffee prices is weather. if weather does not cooperate. a place for young people. farmers are not able to produce as much as demanded and once again. Weather is an uncontrollable force that can seriously damage the crop yield in any given year. Since Brazil accounts for 29% of coffee production. if weather does not cooperate. Sociocultural Coffee stores hangout places. Weather is an uncontrollable force that can seriously damage the crop yield in any given year. Modalities for Implementation of Development Support Scheme Economic In que with Global price increase in coffee. So. a decrease in production in Brazil leads to a significant lack of supply. So. there is a supply/demand imbalance that leads to rising prices. demand for coffee significantly overcame the available supply of coffee partially due to the fact that Brazilian coffee fields had experienced extremely poor weather and could not produce enough coffee to meet worldwide demand. farmers are not able to produce as much as demanded and once again. Modalities for implementation of subsidy schemes for Coffee Processing 7. Ecological: A major factor affecting coffee prices is weather. This is again creating supply side pressures and further escalating the prices. In 2004. therefore a big scope for this industry to blossom in India. there is a supply/demand imbalance that leads to rising prices.5. 9|Page . Coffee growers on the other hand are sorting to practices like Hoarding with the hope of further price increase in global markets so that they can cash in on exports.

000 cafes by the end of 2014. So.co. cafes and kiosks.185 outlets across India across three formats -.and the price to the coffee shops will rise and rise. "The company has a plan to aggressively expand the number of outlets it operates to 2.PORTER’s Diamond 1) Demand condition for porters diamond Restaurant chain Cafe Coffee Day said it plans to almost double the number of outlets it operates in India by the end of 2014 as it embarks on an expansion spree.cfm?c_id=206&objectid=10747625 10 | P a g e . It is looking to add about 815 new outlets in the next three-and-a-half years. speculative actions. As demand rises. Tea consumption in India has declined ever since the subcontinent's population discovered the lure of the bean and the roast.nz/food/news/article. For example. 4 Source: http://www. and to a slight degree. Supply and Demand Fundamentals4 Coffee prices are largely determined by supply/demand fundamentals.This tells us that demand for Specialty coffee is rising every year. coffee prices generally increase when demand exceeds supply and they generally decrease when supply exceeds demand. Also. A division of the Amalgamated Bean Coffee Trading Company Ltd (ABCTCL). traditional suppliers in Brazil and Columbia will struggle to match it . Cafe Coffee Day currently operates 1. if the world-wide coffee crop yield decreased for any given year to an amount less than the demand from world-wide coffee retailers then coffee prices would likely to increase as the availability of coffee would be less and people would be willing to pay a higher price if there was a strong lush enough demand for coffee." Cafe Coffee Day president (marketing) K Ramakrishnan said.nzherald.lounges.

syrupy flatness reminiscent of aged coffees. This is a rare. The coffees are mainly used in blends to mellow and impart richness to rougher. The cup ensures full body.2) Related and supporting industries: Coffee cultivation and manufacturing in India Specialty coffee cultivation in India . Wayanad. MYSORE NUGGETS EXTRA BOLD these wonderful and exotic coffees are prepared from washed Arabicas grown in the regions of Chikmagalur. the coffee exhibits full aroma. This process yellows the bean and reduces the acidity. Bababudangiris and Shevaroys. In the cup. imparting a heavy. musty flavour. Coorg. The beans are bold. acidier coffees. smooth and mellow flavor 11 | P a g e . Chikmagalur and Travancore. The best grade in monsooned coffee is Monsooned Malabar AA. uniform bluish-green in color. and grey to bluishgrey in color. Robusta Kaapi Royale This coffee is prepared from Robusta Parchment AB from the regions of Coorg. moist monsoon winds circulate around the coffee beans. with a hint of spice. soft. MONSOONED MALABAR AA Monsooned coffee or coffee beans ‘swollen‘ with moisture from the air. Stored in special warehouses. is prepared at the curing works situated on the West Coast of Southern India. good acidity and fine flavor. making them swell in size and take on a mellowed but aggressive. medium to good body. with a clean polished appearance. Biligiris. round with pointed ends. For preparing monsooned coffees only dry processed Arabica and Robusta beans are used. The beans are very large. premium coffee and truly represents the best quality coffee from India.

shopping malls. This also helps in promoting the brand among the tourists from western parts of the world. who are very well aware of Brand Name Starbucks Capital: Coffee stores not a capital intensive industry. The estates are spread across the districts of Coorg. 3) Factor conditions in India: Land Land is not a major concern. However. proper land is also available in India if Starbucks wants to open independent stores. is not a problem here. Availability of space for opening up retail coffee stores in real estate‘s establishment like openings in Hotels. 12 | P a g e . Tata Coffee is the largest integrated coffee plantation company in the world. Tata Coffee is coffee company owned by the Tata Group. Availability of cheap labor in most of the coffee growing region and qualified labor for working in coffee cafes is a something promising for the coffee retailing in India. like all other industries. Labor: Availability of cheap labor: Cheap labor. This is particularly beneficial for the multinational coffee retail chains like that of Starbucks. what matters is location for coffee stores. Chickmaglur and Hassan in Karnataka and Valparai district in Tamil Nadu.Specialty coffee manufacturing in India There are not many Key Indian players operating in Specialty coffee manufacturing. corporates etc. Stores are often opened up in the vicinity of crowded places. Majority of the expenditure is made in purchasing a strategic location and building a quality store that provides a good ambience and experience to the customers. The company owns 19 coffee estates in Southern India. Understanding of English language: Much of the labor pool available in India is well versed with English language. Capital required is not huge but on medium level. is the main stake of Indian Coffee Industry.

however. there are very few players which are driving the market . 13 | P a g e .4) Firm Structure.which is increasing year after year. In indian coffee retail industry. Thus. there is a increasing competition among them . Starbucks can add this factor in their favor when they will be launching their full scale operations in India. Industry Structure and Rivalry Firm structure of Starbucks can help them a lot as their original management system is closely in synchronization with Indian philosophy of management.

CHAPTER 2: BACKGROUND Starbucks: The History 14 | P a g e .

The shop specialized in selling the Arabica beans to the niche market of coffee purists. Later. . After joining the company. The stores sold whole beans and premium priced coffee beverages and their target market was the young white collar Americans who are educated and have high disposable incomes. Home and workplace. joined by Orin Smith. A few years later.opened a small coffee shop in Seattle's pike place market.Starbucks. Starbucks has the very humble start when three coffee fanatics. According to him. As soon as he took over. Starbucks has been established as the dominant specialty coffee brand in North America. he travelled to Italy. Schultz said that the espresso bar of that time became the prototype of his long term vision. where he was fascinated by the Italy's coffee culture. he was met with a great resistance. Schultz got the chance to acquire Starbucks when the founders agree to sell him their share in Starbucks. where Americans mostly spend their time. Gordon bowker . It was only in 1982. in 1992. By 2002. Sales of Starbucks had climbed by the CAGR2 of 40% and net earnings had earned by the CAGR 6 of 50%. He was highly impressed by the way that the local coffee bars influenced the lives of native Italians. Starbucks have more than 15000 stores in more than 50 countries 5 6 Howard Schultz is now the president of Starbucks CAGR stands for Compounded Annual Growth Rate 15 | P a g e . When he proposed his plans of expansion. He was later. He thought of giving them another place where they could go and relax. joined the company‘s marketing division. Gerald Baldwin. that Howard Schultz5. and Ziev siegl. as we see today was not there from the very beginning. Though. he started opening new stores all over USA. there were only two places at that time. After returning back from Italy. As of 2011. he convinced the company to set up the espresso bars in the corner of its downtown Seattle shop. who is the present day CEO of Starbucks.

Differentiation and Focus For Starbucks India seems to fit into the generic strategy of focus with an emphasis on differentiation within the particular target consumer segment. So in terms of accessibility of the stores the current Indian industry structure differs from that of Starbucks. branding and user experience that enables it to charge a price premium due to the perceived unavailability of close substitutes. An ideal strategy would involve a firm establishing themselves in a rapid manner through an aggressive growth strategy. As defined by Michael Porter there are three potentially successful generic strategies: Overall cost leadership. one of the premium hotels in India. However the industry structure in India for retail coffee stores is bit different. Since Retail coffee stores are mushrooming at every other place because of the high industry growth rate and demand condition we expect a greater extent of competitive rivalry in the respective markets 16 | P a g e . Starbucks India can also but combines this broad scope with a differentiation strategy based on design. the specialty coffee industry has the potential for high barriers to entry but lacks them due to the industries immature state and the presence of no established firms. since they would be opening up their stores in Taj group of Hotels. Café coffee day and Barista have their stores open in the public areas where the masses as well as the elites have the access. A focused strategy should target market segments that are less vulnerable to substitutes or where a competition is weakest to earn above-average return on investment.Industry structure and rivalry: In India.

Major chunk of CCD customers falls within the age group of 20 to 30 which accounts for 57% of the overall percentage. USA 2006: Second and third place at IBC 2008: Top three positions at IBC and represented India at WBC at Copenhagen 17 | P a g e . amalgamated bean coffee trading company ltd started the concept of coffee bars in India with first store in 1996 on brigade road in Bangalore. Encompassing all these factors in a single line. the sentence "A lot can happen over Coffee. It is also having fairly impressive track record at the IBC (India Barista Championship) & WBC (World Barista Championship) is as follows: 2003: Top 5 ranks at IBC & stood 5th at WBC at Boston. India‘s largest coffee conglomerate. Coffee Day has a rich and abundant source of coffee. in June 2010. At first. In a bid to take their coffee chain national in 2000. Factors like ambience. With Asia's second-largest network of coffee estates (10.Café coffee Day Café coffee day is India‘s largest coffee retail chain. USA. The group comprises of mainly college going students and young working professionals A lot can happen over coffee" became a popular line among youngsters. food. Café Emporio runs on 2 formats similar to CCD‘s regular cafés and Lounge & Square set ups. music. 2004: Top 6 positions at IBC & resulted at WBC at Trieste. the management decided to strengthen their brand pull with an appealing tag line. It has network strength of more than thousand coffee stores across 120 cities in India.A café chain from Czech Republic. Italy. The regular cafes are pure play cafés serving hot and cold beverages and ready to eat snacks while the lounges and squares come with a broader menu and elegant layouts. acquired Café Emporio. International exposure of Café coffee day Café coffee day. and atmosphere and meeting people were identified as the aspects that were drawing people to their Cafes.500 acres) and 11.7 of them in Prague and 1 each in Brno and Olomouc and 2 at Freeport-Hate.000 small growers. CCD has won the best BREWMASTERS in the country. 2005 : Top 6 positions at IBC & resulted at WBC at Seattle.‖ was phrased. Cafe Emporio has 11 cafes in Czech Republic.

Tie Ups with good companies. USP of brand is its considered a highly affordable brand.2009: CCD secured the first. Improper sitting arrangement Opportunity Coffee cafe industry is one of the fastest growing industry in Asia. third. Koylas7. Peshawar . Weaknesses: Many of the CCD stores are incurring loses due to wrong site selection. Starbucks etc. More people like to visit CCD for informal meetings. Other hukka parlors like Sheeshas . U Turn are also gaining lot of attention and preferred by young generation to hang around which in turn is attracting the market captivated by CCD 7 Hukka. Large untapped Market Tie-ups with other companied for promotion. Sheesha and Koyla are Traditional Indian additives 18 | P a g e . In house sourcing of coffee beans. second and fourth place at the IBC and represented India at the WBC in London SWOT Analysis – CCD Strengths: Large Number of outlet. fourth and ‗Most Promising Talent‘ position at the IBC and represented India at WBC at Atlanta 2010: First. Threat: Entry of foreign players like Georgia.

As of 2009. 2) The baseline “A lot can happen over coffee”. Sterling Sivasankaran. The prices are less compared to the other two. It targeted the middle class. They are headquartered in NOIDA. It was founded first in 1997 by Amit Judge and was part of his group companies. mini-metros were also added to its list. 3) Cafe Coffee Day‘s also targeted other locations like corporate houses. conduct business meetings or just spend time with friends. After the deal with TATA coffee fell. Coffee is supplied by the Indian roaster Fresh and Honest.5% share in the Italian retail market Barista Lavazza's pioneering efforts at providing truly Italian coffee house experience has been met with tremendous appreciation. house wives and students. 4) Cafe Coffee Day positioned itself as a mass market brand. Lavazza traces its origin back to 1895. Operating in over 80 countries. Barista was the fastest brand to make it to the list of super brands and is ranked among the top 50 phenomenon that changed India The first Barista Lavazza was opened at Basant Lok. hospitals and shopping malls. browse the internet. apart. New Delhi in Feb 2000. Bangladesh and Middle East. Cafe Coffee Day priced its products 20% lower than its competitors. upper middle class. Barista Lavazza Barista Lavazza is a chain of espresso bars in India. Most Admired Retail Leisure Chain 2011-Awards for shoppers and consumer insights 19 | P a g e . The latter is also owned by Lavazza. In 2007. with estimated annual revenue of Rs 200 crores. Lavazza is the sixth largest coffee roaster in the world. Sterling divested their entire stake to Lavazza. Italy‘s largest coffee company. airport. His first equity deal was with TATA coffee. This segment has high potential and great buying power and has great market share. headquartered in Chennai. bought over the firm. having outlets in Sri Lanka. Barista Lavazza is currently owned by Lavazza. it has a 46. the chain has 200 stores in India. positions it close to every one‘s heart. Visitors could sip coffee.Strategies adopted by Cafe Coffee Day: 1) Cafe Coffee Day offered an informal ambience with bright and eye-catching interiors.

Rise in the cost of coffee and dairy products. Threat: Coffee Substitute. 20 | P a g e .Times Food Guide 2008-Best Coffee Bar Award IMAGES Retail Award 2007-'Most admired retailer of the year: Catering Outlets' Super Brand 2006-2007 HT Food Guide 2000-Best place to have coffee TOPS award for Specialty Coffee Excellence by the Specialty Coffee Association of America(SCAA) Times Group and Business Standard recognizes Barista Lavazza as the 'Brand of the year' in 2002 SWOT analysis of Barista Strengths: Claim to sell the best coffee. Strong Brand image. Self Service for the customers. Competition from national and international players. Large Number of outlet In house sourcing of coffee beans Espresso-Highest selling coffee Weaknesses: Perceived as an expensive brand. Opportunity Strong brand recall. Excellent Human resource. Tie-ups with other companies for promotion.

The idea was to change customer‘s occasional indulgence and make it a habit and educate them about the original coffees. croissants. such as music. They like to be in a place which is classy and luxurious like Barista. It has already drawn up an aggressive expansion blueprint. pastries and desserts. 3) Every month. 2) Alliance with Tata coffee would supply food items like baguettes. The current number is 75. coasters. This class has high potential because these people associate with anything that is of status symbol. 4) Barista entered into marketing tie-ups with planet M. Doctors. So Barista choose this segment contains people with big designations like MD‘s. It also developed store-in-store concept by focusing on themes that compliment coffee. it introduced and focused on a particular type of coffee. The company also entered branded merchandising with caps. 21 | P a g e . 6) Barista‘s adopted a strategy on which it segmented itself to the elite class. CEO‘s and people belonging to elite class. Costa Coffee Costa coffee is a UK-based coffee retailer. sandwiches. books and art. which entered India in 2005 through the Jaipuria Group as its master franchisee.Strategies adopted by Barista: 1) Barista positioned itself as a lifestyle brand with Italian neighborhood. The company extended its product portfolio from roasted coffee range to single origin coffee. cookies. co‘s and cups. they spend very high. crossword and Ebony to set up it Espresso‘s at the corner. under which it plans a four-fold increase in the number of stores in the next three years. 5) Barista entered home brew segment with freshly grounded coffee.

For the first time. Competitors’ Visibility No. In review of the 5 years of operations in India. including 17 in the overseas market.Costa Coffee. As a result. in this case. where coffee is a popular drink.com) keeps continuous track of the number. But despite any successes displayed in the hard numbers. The brand needs to refocus their efforts in the south. 22 | P a g e . Costa's higher management is declaring that they can do better. Gloria Jean's is sourcing and roasting coffee beans outside of Sydney. That's because coffee attracts a 112% import duty in India and in a price sensitive market like this. expanded its already far-reaching coffee empire throughout India in 2005. The corporation directly planted their original UK model onto the Indian subcontinent. of Outlets CCD CCD crossed over 1000 cafes throughout the nation by 2011. passing on the extra costs to the consumers would be suicidal for any player. Company is also tweaking its sourcing strategy for the Indian market. like other ambitious coffee corporations. the entire Costa Coffee model had to be reworked. Costa discovered the coffeehouses were first and foremost meeting places. They have a minimum of 1151 outlets. Gloria Jean's Gloria Jean's currently has 16 outlets in Mumbai and Delhi. It is looking to increase that number to 25 by year's end across other metros. A ‗meter‘ on their official website (Cafecoffeeday. The number increases almost every week. in India itself. Barista Barista has around 286 outlets across India. and then jump eightfold to 200 by 2014.

Himalaya Drugs is developing daily diet products and looking at marketing them by tying-up with leading consumer brands.Comparison: Even though the numbers of outlets are more for CCD. Movie launches: Apart from product launches. So. through CCD as part of their annual laterals like Wall visuals. on the same road. to create four dishes. that is why judgments should not be based only on the number of outlets. The association with Cafe Coffee Day across 100 outlets in seven cities was not only to expand the category. Posters and Door stickers. Tie-ups CCD Himalaya with CCD: To drive usage of honey. but also towards creating touch points to experience the goodness of Himalaya Forest Honey. In some places like Connaught Place in New Delhi. Tent cards. Levi’s: CCD has also tied-up with Levis where CCD will promote Levis product in their cafes. the company also does a number of tie-ups with the movie Industry in the same manner. But Barista has stores that are generally huge and are almost always have two floors. Rich Chocolate Cake and ice cream topped with honey and nuts. Honey milk shake. Honey Cappuccino. There is also a special Levi‘s Drink. It provided a platform to reach out to the target audience in a relaxed environment where they could experience innovative uses of honey. there are almost three CCD outlets. It has tied up with Café Coffee Day. but that is more due to them opening up stores in every nook and corner. 23 | P a g e . The Cafe Coffee Day partnership is unique. Levi‘s 501. Levi‘s recently launched their latest range of apparel.

Elle-18: Barista is jointly tied up with Elle 18 to promote their product. This would be followed by similar bars at Taj Mahal hotels in Calcutta. The first such bar would be at the Emperor Lounge at the Taj Mahal hotel in New Delhi followed by a Barista Bar at the Sea Lounge at the Taj Mahal Hotel in Mumbai. today if you look at Barista consumers. discuss business and send the information across. The objective being. it is easier for them to meet at Barista. It is going to be focused primarily on work. the objective is to build a platform for their range of coffee colored lipsticks and for them. which is a youthful brand. Barista also will be housed at the coffee shops of all major Taj Hotels in the country. they both will grow with this association. Chennai and Bangalore. The strategy is to target younger audiences. they are working with Elle 18. Elle-18 is launching a collection of coffee colored lipsticks and has named it after Barista‘s beverages! Therefore. Moreover. 24 | P a g e . a leading coffee bar chain. The customer segment of Barista is very different from the ones who visit a regular coffee shop. which have a penchant for the "finer things in life". This tie-up was primarily done in order to provide consumers' access to the Internet. For Elle 18. Lacoste with Barista: Lacoste India has decided to tie-up with coffee outlet chain Barista in all the major metros and some mini-metros. towards the busy executive who is traveling and has dropped by for coffee or the small office segment who might just want to work out of Barista. the objective is to associate with the brand and have their consumers coming in to Barista. has tied up with Taj group of Hotels for setting up exclusive Barista espresso bars at the Taj hotels in metro cities.BARISTA Barista with Taj Group: Barista Coffee. Moreover. a fair number of them come to Barista to discuss business over a cup of coffee. Barista with Tata Tele services: Barista has also tied up with Tata Tele service.

Café interiors at the company's 430 outlets are being given a whole. there has been a greater thrust on providing more value added services such as video juke boxes. The young colors of today. The larger cafes will also have lounge areas and a few beanbags. The first thing that the customers come across is the surrounding and the ambience of the store. in this business. lime green. yellow. particularly. orange. The crockery will also sport these colors.AMBIENCE CCD ―First Impression is the Last Impression‖. In a change from the largely wood and granite based interiors. Fig: File photo of ambience in café coffee day 25 | P a g e . new look. and purple will predominate. there is more of steel and lots more color. To further brighten the vibrant atmosphere of the cafés. and exciting round the year promotions. cozy sofa seating. This is true.

it is warm . Shoulder Bags @ Rs 209 Coffee Mints @ Rs 40 26 | P a g e . like chess. Orange color signifies of a style and friendly ambience of its own. continue to be the key factors while growing the chain. word scramblers. Business Model Followed By CCD: they follow franchisee Model for their business Barista: Company Owned Outlets. The background has a dark Orange color. and a guitar to pluck some chords. In order to match the color combination of the surrounding even the uniform of employees are orange in color. It has lots of board games for anyone to indulge in.it is orange. The ambience of the location and the quality of coffee would. the focus would. The place invites the customers to spend time. Merchandising CCD Funky Caps @ Rs 60 onwards Cool T-Shirts @ Rs 175 onwards Bags @ Rs 160 onwards Mugs @ Rs 60 onwards Coffee Filters @ Rs 95 onwards Reglon Sleeves T-Shirts @ Rs 249 Marquis pens @ Rs 315 Onwards.BARISTA The color shades that they have used are terracotta. continue to be to recreate the ambience of the typical Italian neighborhood espresso bars in India. as to provide a comfortable place for people to relax and experience ―the joy of coffee‖. so. However.

It‘s not that these were foreign franchises. So. One thing in this regard that they have done is that they have shaped their menus to be flexible enough so that they can adjust to changing situations such as weather.BARISTA Coffee Mugs in Orange and Blue which cost Rs 55 and Rs 99 T-Shirts which cost Rs 150 Barista has also started a new concept of Barista merchandise. Barista Merchandise is available only at selected Barista espresso bars in Delhi. these chains had to make sure that they were able to attract the consumers by making themselves a part of the Indian culture. the Indian consumers were in for a pleasant surprise when they found out that they can have local delicacies like ‘Aam Panna. Some of the Barista Merchandise is as follows: 1.for a cup of coffee was not a routine thing for the Indian consumers. Barista House blend One of the most interesting things to keep in mind with regards to all the coffee chains is the manner in which they have blended into the Indian culture. Its Not that the taste would be the same like the older days. Kolkata. Hyderabad and Bangalore. French Press 2. Mango Shake’ in these coffee chains as well. but the very fact that spending Rs. Mumbai. but still it was close it could get to the original taste. In Barista Merchandise customer can take home different types of beans and have coffee of his own taste. Chennai. 27 | P a g e . For this very fact. 50/.

That surely is a lip smacking prospect for the Indian Consumer. None of them offer a facility wherein customers can be a part of the actual production of their coffee. instead of focusing only on the western foods. malls. Although the prices may be a little high. but the very fact that you can have these drinks at your beck and call. So. None of the coffee giants has tried and ventured into the segment like the one adopted by the Subway. it acts as a close substitute for the drinks back at home. sandwiches. etc. The mothers‘ who are working and do not get the time to make things like these which are relished by their children. sauces and even the toppings. by opening self help kiosks in places such as metro stations. Also. does not pinch the consumers a great deal and in turn puts the coffee outlets in good stead. they have given equal importance to local foods such as Samosa. 28 | P a g e .The biggest beneficiaries for this were the working mothers and the students who were away from home for studies or work. That is one aspect where Starbucks can focus. it is not that you will only get to eat burgers. This makes them feel related to them as it gives a sense of pride to be able to whip up your own favorite goodie. for the children away from home. Another thing that they have done is that. So. But there is one glaring mistake they are reportedly committing till now. they can any time walk into a coffee chain in the sweltering heat with their children and enjoy these drinks. etc. but instead one can have their favorite coffee with a local delicacy. Subway gives the consumers the convenience to choose their own breads. Kulchas.

and Costa Coffee. which enables the customer to browse the menu. This will make the consumers feel a sense of importance and gain a sense of belonging towards Starbucks. But with increased guidelines about allotting a certain percentage of profits aside for giving back to the society.People can punch in their order and make their own coffee using the ingredients of Starbucks. CSR has assumed greater importance in the cash purses of major corporates. which has been made available at CCD and Barista outlets. Café Coffee Day: Their biggest CSR initiative9 is the SVGH Vocational Training College which was established in April 2005 in Chikmaglur. Barista Lavazza: Taking its 'Use Mobile. thereby eliminating the need to use paper for these purposes. CSR initiatives by Barista Lavazza. who come to these outlets.com/news/story. Café Coffee Day. So. viz. Through a unique mobile software application. It has the vision to create an environment where 8 9 Source: http://www. through a Bluetooth transfer. Costa Coffee: CSR or Corporate Social Responsibility has always been a topic where there is never a commonly reached consensus. the three coffee stalwarts. training and ensuring them due placements. Karnataka. where the customer can view the total bill for the items ordered. Café Coffee Day. Bill. and About Us. They will be given the option of downloading the application onto their mobile phone.afaqs. Barista Lavazza. The home screen of the application will have three options: Order. Customers. Save Paper' campaign further. Idea Cellular8 has partnered with the two coffee chains to make it possible to eliminate the use of paper in transactions. select the items to be ordered and see the order summary. which carries information on the campaign.posterous. It has the aim of bridging the gap between the urban and the rural youth by giving opportunities for the economically underprivileged ones for learning. people can download the menu card and bill on their mobile phones. will be informed about this initiative.com/a-lot-can-happen-over-coffee-csr-at-ccd-corpo 29 | P a g e .html?sid=26298 Source: http://csr-updates. also did not lag far behind.

―We have tied up with an NGO called Enable India and want to hire about 100 such employees per year. So. Courses offered include Certificate Course in Hospitality Management & Micro Finance. they are all ears.htm 30 | P a g e .org/newspaperarticles/newspaperarticles_11277. The college trains and supports rural youth to be independent.‖ If corporate social responsibility (CSR) beckons hotels and restaurants across the country. Costa Coffee: Even this coffee giant is not lagging behind the CSR standards. Shyamala Deshpande. It provides them an opportunity for personal and professional development thereby equipping them with skills to handle the rapidly changing environment. the Indian market might want to see CSR initiatives taken from Starbucks as well.students are motivated to find their purpose and realize their full potential. But. providing food and accommodation. Costa Coffee plans to open eight to nine stores which will be run entirely by handicap employees in the next one year. To do their bit for the society. uniforms and transport facilities. we see that all these companies have already initiating the process of CSR in India. 10 Source:http://www.karmayog. as time progresses. The college has trained 1180 students. The Trust bears the entire expenses of the course which includes imparting education. they are recruiting physically challenged people for various operations. Current employees are involved actively in SVGH programs and help by conducting modules etc. The trained students are guaranteed employment. you might be welcomed by a silent brew master carrying a note: ―I‘m hearing impaired. many of whom have found employment at CCD outlets across the country.‖ says Cafe Coffee Day‘s HR head. Please jot down your order. responsible and adaptable. They have already taken it to a new level and it will be up to Starbucks to see as to how it will react to all these initiatives. It has given employment opportunities to many hearing impaired employees as its latest initiative10. Not much can be expected in the nascent stages as they will still be finding their feet in the Indian market initially. So next time you visit a Cafe Coffee Day or Costa Coffee outlet.

CHAPTER 3: The SWOT’s 31 | P a g e .

there is scope for another 5.wharton. disposable incomes. coffee shops serve as a social hub. The nation's per capita consumption of coffee is just 85 grams.S. Valued at around US$185 million. That's because like most of Asia.500 cafes have sprung up across India in the past decade. or 100. the organized café market in India is estimated to be growing at a compound annual rate of 25%.000 tons. this is expected to increase to 55%. For this segment.Opportunities and Roadblocks’ Ahead Opportunities: Coffee stores are becoming quite popular in India.000 tons. That‘s the space the foreign chains want to tap. compared to 4. domestic consumption is only a third. 11 Source :http://knowledge.org/newsview. disposable incomes.2 billion people are 25 or younger. The Indian Coffee Board's numbers reveal that while India is the sixth largest coffee producer in the world.2 billion people are 25 or younger. For this segment.indiacoffee.cfm?articleid=4607 http://www. By 2015. Increasing Coffee Consumption11 India's coffee consumption pattern gives a clue to the potential that the market holds.5 kilograms in France. colleges and shopping malls. particularly those with steady.6 kilograms in Japan and 6 kilograms in the U. mostly from six organized chains. By 2015.upenn. Coffee is a staple only in the southern part of the country. More than 1. coffee shops serve as a social hub. These stores have become a hotspot for the quite popular among youths in India as hangout places. with an annual output of 300. According to industry estimates.000 or so outlets strategically located close to offices. clocking an average annual growth of around 40 percent.edu/india/article. India is predominantly a tea drinking nation. particularly those with steady. Stirring up the market is India's growing youth segment: around 50% of India's 1. Stirring up the market is India's growing youth segment: around 50% of India's 1. 4.php?newsid=68 32 | P a g e . this is expected to increase to 55%.

For most foreign players. there is a scramble for putting together the best team. even as one strives to deliver the best international standard of cafe experience. but on the overall ambience and guest experience. will only intensify. This piece of news might bring some disappointment to both the companies. With every player on expansion track.wharton. Indian consumers. up 60% since last year..edu/india/article. there are strong roadblocks ahead. Some brands like CCD and Gloria Jeans‘ have set up their own training schools. Also due to inflationary pressures in the economy in recent times people have started spending less on frills and save more. was also eyeing the Indian market. The price of roasted coffee is currently at an all-time high of US$7 to US$8 per kilogram. after having dropped the plan a few years ago following some regulatory hurdles. But vending coffee is not a highly skilled job and is low paying. Challenges:12 Even as the market gets more competitive. This requires trained staff. but for others it's a tough task. which often results in high turnover. zeroing in on the right location is crucial.livemint. According to live mint report that quotes Boston Consultancy Group saying Pressured by rising prices.html?atype=tp http://knowledge. the world‘s largest coffee retailer. Manpower is yet another challenge. Then there is the huge real estate cost.cfm?articleid=4607 33 | P a g e . the rent-to-sales ratio in India is one of the highest across their global markets. however affluent. With more players entering the arena.Starbucks Corp. have always put a premium on value-for-money offerings.upenn. 42% of Indian consumers plan to cut spending and change habits to suit the ―new normal‖. the challenges around managing costs.com/2011/06/22015037/42Indiansplantocutspendi. 12 Source: http://www. Gloria Jean's White points out that the mix of high rent costs and low menu prices puts tremendous pressure on the business. Now it has made announcement to enter India to exploit the vast potential of Indian market as mentioned above. Much of the success of a café depends not just on the quality of the products it serves. With all players targeting a similar profile of consumers.

greater brand visibility in comparison to that of their competitors. there is a need to analyze the performance of the company in the recent past.Starbucks: SWOT Analysis While analyzing Starbucks from the strategy point of view. they are able to charge premium prices for their product. we will be using SWOT analysis to assess the company characteristics. This allows them to implement new products quickly across a large demographic and ensures a large exposure of clientele to prevent new entrants from gaining market share. Therefore. Also. This also allows them to confront international competitors before they enter into the US market. Starbucks and it is the part of their daily lives. Starbucks has been successful in changing the positioning of coffee as the commodity to a luxury product. we have to look. in order to gauge the company performance. This apart from obvious scale advantage gives them access to lot of international markets. 34 | P a g e . In US. they have in US. are familiar with the brand name. They are having presence in almost every part of the market and hence. Starbucks has a well‐known Starbucks has a well‐known practice to make efforts to preserve the environment and be ethical in its dealings. not only at the company characteristics but also at the market characteristics in which it operates. This has helped them to create all new categories. the name Starbucks is being associated with quality. With this. something which might not have been possible before. Strengths: Most of the consumers. They also have large number of international stores in other parts of the world. here in this project. This is particularly because of the large number of coffee outlets. Starbucks is having the great advantage over its competitors when it comes to brand visibility. Company has also initiated the CSR activities which gives the company a good public image. This also serves to counter some criticism that its sheer size creates. Starbucks is having the well-established international outlets all over the world. at least in the USA.

XM Café. regardless of the country they are operating in. they must diversify or go out of business whereas other competitors. without thinking twice. Starbucks prices are not flexible. allowed Starbucks to gain exposure to different market niches.000 stores across 50 countries. Starbucks has had a hard time taking off because it won‘t maintain kosher standards Opportunities: Acquisition of brand names such as that of Seattle‘s Best. There is a great opportunity for Starbucks in the developing economies like India. They have already experimented in china. Most of the customers will pay for their products. which expand its market at a lower cost than opening full branches. The main problem for Starbucks is that. regardless of culture and values of the country they are operating in. If coffee does turn out to be a fad. they charge same price for their products. However. one of their biggest opportunities continues to be in development of overseas business. Also. Starbucks also offers a range of products that it sells to other companies such as its bottled Frappuccinos and other specialty goods. They apply the same business models and formulas. such as Dunkin Donuts. It has also premium pricing for its products. there is an increasing notion that Starbucks is literally fleecing their customers. in terms of location. and Tazo Tea. Starbucks is still considered as the luxury coffee outlet. Starbucks had used their vast resources in order to develop businesses all over the world. In Israel. Also. Also. for example. Starbucks had faced problems in maintaining their outlets in many of the international locations. which turned out to be extremely profitable venture. This has allowed them to generate even more revenue and give them better brand image. This helps them achieve economies of scales in sourcing the raw material. its entire business rests on the coffee industry. have investments in a variety of industries. and thus enjoys a significant profit margin Weaknesses: Among masses.Starbucks operate around 15. 35 | P a g e . For example.

Dunkin Donuts. We're building a national retail company by creating pride in--and a stake in--the outcome of our labor.According to this statement. it starts one year after the option is granted. After one year. Rising prices of coffee are putting pressure on the profit margins of the company. etc. All of these "happy" employees help account for another of Starbucks' intangible resources--the company's reputation for providing quality and knowledgeable service. There is a vesting period of five years. Our only sustainable advantage is the quality of our workforce.600 individuals. These classes are designed to teach the employees to make decisions that will enhance customer satisfaction without requiring manager authorization.Threats: Other fast food chains like that of McDonalds. In 1996. employees may join a 401K plan. Schultz believes that without these benefits." --Howard Schultz Founder and former CEO of Starbucks . Strategic Position – Starbucks We can't achieve our strategic objectives without a work force of people who are immersed in the same commitment as management. Growing health concerns among the masses has shifted the demand from coffee towards health drinks. Schultz believes that happy employees are the keys to competitiveness and growth. Burger King. including roughly 15.. This workshop is one of five classes that all employees (called partners) must complete during their first six weeks with the company. Classes cover everything from coffee history to a seven-hour workshop called "Brewing the Perfect Cup at Home". This workshop focuses on the need to educate the customer in the proper coffee making techniques. already have the infrastructure in place and are instead adding quality coffee to their menus to compete with Starbucks.000 in retail stores and regional offices. Starbucks deploys their human resources by requiring that each employee have at least 24 hours of training. Starbucks employed approximately 16. juices etc. then vests the employee at 20 percent every year. In addition. Another way that Starbucks ensures that its employees are content is by offering a stock option plan called the Bean Stock Plan. Store managers teach the classes. the human resource is the number one resource in Starbucks Corporation. every employee receives a new stock option award each year and a new vesting period begins. people do not feel financially 36 | P a g e .

Starbucks has a P/E ratio of 47. Starbucks also has resources within its company partnerships.250 retail outlets worldwide. with new units tending to range from 1. scours mountain trails in Indonesia. design and build the unique interiors and displays.1. promotional events. However. Developing relations with foreign countries and growers have enabled Starbucks to obtain rights 37 | P a g e . These outlets include: company operated units. Starbucks opens its stores in those cities where its direct mail business is strong so it can ensure a ready audience. and licensed kiosks located in airports. A joint venture with Pepsi has produced successful sales of Frappucino within supermarkets. According to the 1998 S&P. The stores range from 200 to 400 square feet. This equates to a competitive advantage over rivals such as Seattle's Best Coffee (SBC) who franchises rights to its stores in order to expand rapidly. In order to make this work. His standards are demanding and he conducts exacting experiments in order to get the proper balance of flavor. etc. Dave Olsen. and agreements with foreign growers and their host countries. and elsewhere in search of Starbucks' premium bean.1. Partnerships with companies such as Nordstrom and Barnes & Noble allow Starbucks to set up shop in arenas suitable to the Starbucks experience. Kenya. Starbucks hopes to attain a sustainable competitive advantage by keeping its employees happy and trained which in turn leads to superior customer service. By owning and operating most of its outlets and its roasting and distribution facilities. As far as its other primary physical resource. training and evaluation. The firm employs a staff of over 100 people whose job is to plan. This valuable financial resource indicates that Starbucks is a fast growing and a relatively low risk company for investors to invest in. It also operates three roasting and distribution facilities.700 square feet. As of early 1998. He argues that stock options and the complete benefits package increase employee loyalty and encourage attentive service to the customer. This capability of attention to detail and caliber is one way how Starbucks delivers a consistently high-quality product.500 . Guatemala. but lacks total control of its own operations. Starbucks is taking advantage of this resource by obtaining both short and long-term capital to finance its rapid expansion both domestically and abroad. the company's senior vice-president and chief coffee procurer. coffee connection outlets. coffee.or spiritually tied to their jobs. Store design. and acidity. Starbucks has a reputation for obtaining some of the world‘s highest quality coffee beans. Starbucks has a broad range of control. body. are all controlled by Starbucks. Starbucks Corporation (with the exception of airport locations) owns and operates 1. the intangible resource associated with these physical resources is the ambience that each store provides.

Initially they have planned to open up in Mumbai and Delhi. Presently. which is an existing coffee shop branch in India. Starbucks' main core competency is its ability to offer a quality cup of coffee served by attentive and knowledgeable staff in a comfortable environment while continuing to grow at a rapid rate. coffee-related accessories and equipment. This includes the addition of more tea items taking in accordance that Indians are known to be more a ―tea-drinking‖ population. work. the company will earn brand loyalty. A new menu can be formulated to match up tastes preferences of the Indians known already. The Product Starbucks Coffee shops sells a variety of coffee and tea beverages along with different types of pastries. but Starbucks is expected to gain its market share for several reasons. The Starbucks Coffee Company must customize their menu to fit the tastes of the Indians. and with its assurance of quality and commitment to giving back to the community. study. nor its ability to grow. Proposed Strategies 1.. Better gauges of the numerical figures in the inventory policies can be made after observing consumer trends. This seems to be the most opportune time for the Starbucks Coffee Company to open its shops in India. and baked goods. Starbucks might take over the market. The international popularity of the Starbucks brand will help the company step into the country. obtain highprofile locations. The coffee shops provide customers with a pleasant place to come and relax. If the new stores are highly profitable. as well as adding some new flavors in their coffee selection.to the Narino Supremo coffee bean . The inventory policy is to keep the stores stocked but not overstocked to ensure freshness of products. these locations were strategically picked to ensure success of the business venture and will serve as test locations. With superb marketing and reasonable prices.one of the highest-quality beans in the world. Starbucks does not have any rivals that can match its reputation. The major competition for Starbucks at the moment is the Barista Coffee Co. These agreements are providing opportunities for Starbucks to expand its product line. confections. and penetrate foreign markets. Starbucks India locations will customize their menu to meet the tastes of their new target market. 38 | P a g e . procure reliable sources of quality coffee beans. Starbucks can expand to more than 200 locations in India. or have business meetings.

Starbucks' products became more available. Since this is a test venture and there are only two locations of Starbucks being opened. which include everything from newspaper advertising to television ads. The use of penetration pricing will ease the company‘s slide into the market place. the stores near office buildings are visited more by business people while stores in shopping centers are mostly visited by families. Starbucks’ current Strategy 1. Pricing Competitive pricing is necessary for the success of the venture. Rapid store expansion strategy Domestic store expansion A three-year expansion strategy ―Starbucks everywhere‖ approach 39 | P a g e . Direct mail advertising with promotional coupons can be used to reach the homes of the target market. 4. By doing this. university campuses and even office buildings. Promotion Types of available media for marketing purposes. Due to licensing and specialty sales Starbucks' products became available in airplanes from United Airlines as well as in hotels. where they are placed at a distinctive place with different lighting and elegant packaging to stress its exclusiveness. the promotion for the store has to be very focused on our target markets. As Starbucks products are available in different locations. Billboard advertising on the roads leading to the store locations is a good way to increase awareness of the locations. For example. Abroad Starbucks' products are also available in supermarkets. Place The creation of new selling points will enable Starbucks to introduce its products to people who have never visited a Starbucks retail store. the prices for all good will be relative to the others. in India are very similar to those of the United States. 3.2. different types of customers buy Starbucks products.

2. hire and train baristas and store managers Screening Training programs Awards for partners 3. Using fixedprice purchase commitment and purchasing coffee future contracts. Starbucks Coffee International Expanding its consumer products channel globally. Employee Training and Recognition Systems to recruit. checks on agricultural conditions and crop yields. Real Estate.International store expansion Company-owned and company-operated stores or licensing Created a new subsidiary. and Construction A broad range of store formats (the right image and character) A ―stores of the future‖ project team High-traffic. Store ambience The concept of ―everything matters‖ Assessment of standards 5. Coffee purchasing strategy Starbucks builds relationship with growers and exporters. high-visibility store locations Control of average store opening costs Wi-Fi availability at stores 4. Contributing to the 40 | P a g e . Store Design. and searches out varieties and sources that would meet its standards. Planning.

Practically all resources fall into one of four categories: Physical. skills and adaptability of the workers at Starbucks. Promoting coffee cultivation methods that protected biodiversity and maintained a healthy environment. customer databases. shareholders) of Starbucks. and suppliers of money (e. 85% of Starbucks revenue comes from direct sales in pubs. Physical Resources . teas.000 outlets around the world. coffee-making equipment.These are the intangible/immeasurable resources of Starbucks. storage containers and other accessories. any vehicles they own for transporting goods and all the equipment that is used to create the cup of coffee (or pastry etc. Schultz. Staff who work to their potential in these areas often become a company's ‗most valuable asset'.Starbucks has around 15. One of the few ways Starbucks can protect this 41 | P a g e . Financial Resources . Obviously for Starbucks the less debt they are in. coffee mugs. Some of this capital includes varieties of whole coffee beans. Intellectual capital .).sustainability of coffee growers and helping environment conservation. the founder of Starbucks. foodstuffs. believes every member of staff plays an equal part in the ‗customer experience' regardless of whether they be CEO or waiter. Human.000 employees. patents. Starbucks have a lot of working capital tied up in the business. Financial and Intellectual capital. the more positive their resource audit looks.g. Human Resources .The human resources are the knowledge. debtors & creditors. business systems and relationships with business partners. The entire group has 110. filters. cash.The physical resources of Starbucks are the shops that they own. This is the information captured in brands. and still opening more in other countries. All these can contain great value and when a business is purchased these values fall under the price-tag marked ‗goodwill'.These are the capital. coffee grinders. Strategic Capabilities – Resources and Competency 1) Resources - The strategic capability of any company is underpinned by the resources available to it.

intangible information is to ensure employees sign confidentiality agreements to protect any leaks of knowledge to competitors.The quality is indeed a key factor in its success. the quality of products offered by the group is a reason for higher prices. repair and training. the company has retained its leadership through numerous alliances particularly in the development of new products and sales of its coffee. e. especially in terms of advances in technology.Another criterion differentiating Starbucks from its competitors is prices. Having adopted this strategy has allowed Starbucks to take an advantage over its competitors. advance the development of alliances with suppliers in advance and then on savings related to production quantities. hotels. 2) Prices .The Starbucks brand has become almost synonymous with coffee all around the world and the same is the situation in India even though India does not have 42 | P a g e . 3) Suppliers . coffee sales at the "Coffee Shop" are more expensive than their competitors. the brand has been able to emerge as a leader in quality products and services. it focuses on the need to ensure the customer experience' of visiting a Starbucks store is all the more enjoyable due to the friendliness and efficiency of staff and consistently high quality product on 5) Ownership specific advantages . or the supermarkets. This area is concerned with the members of staff that deal with the customers.g. Thus. The products which they know mostly calls for coffee and therefore the coffee beans are mainly from traditional crops and quality controls on these products are extremely common.Their competitive advantage -Its strategy of "first to the market". The purpose of the brand by building such relationships with its suppliers as to promote the single outside the coffee shop to reach consumers on different levels. and thus in new places such as libraries. 4) Customer service . installation.The most important key success factors when looking at Starbucks is their customer service excellence and other activities that enhance or maintain the value of the product. In fact.One of the key factors leading position occupied by Starbucks result of the relationship with the company weaves its suppliers. 2) Competences . communication turns around a lot of this criterion. 1) Quality .

with an increasing share coming from its international operations. which has been around for a few years now but is relatively unheard of in most parts of the country. The company has to be very careful while entering into joint 43 | P a g e . Their success in teadrinking nations like China and Japan has to be given due credit and the company will surely benefit from these learning when it looks at the Indian market. 6) Internalization (Control) . as has been brought out earlier. and the employee welfare schemes of the company have received wide acclaim. Starbucks has already had prior association and some knowledge about the Indian market conditions. making Starbucks one of the best employers in the US. Their alliance with India‘s Tata Group for sourcing coffee beans has been in existence since 2004. As far as India is concerned. Starbucks has years of experience and knowledge about various cultures around the world which gives them an edge in international operations. Having opened its first store in 1971. and although previous joint ventures have been unsuccessful. The vision created by Howard Schultz. efficient governance. The most important for Starbucks is its blends of coffee and its unique roasting techniques.000 stores adding almost 1500 stores in the last one year. gives Starbucks a very big advantage over its rivals especially in terms of expansion strategies and the ability to undertake risks and buy-out local competition. the President and former CEO of Starbucks. has resulted in over 16. Starbucks has had relations with a number of Indian retailers for entering the Indian market.a single Starbucks outlet. Additionally.Following up on the ownership advantages. The company has recorded revenues of more than $ 10 billion and over $ 300 million in net earnings. the corporate culture. Starbucks has built up a reputation it cannot afford to damage. This gives the company definite advantages as compared to Costa Coffee (the first foreign coffee chain in India). Besides the above. Starbucks has been highly successful in starting a cult following that has put the Starbucks brand at a level higher than just a coffee shop. irrespective of which market it chooses to enter. it may seem necessary for Starbucks to focus on these areas in order to internalize certain activities so that its competitive edge is maintained especially in India where tough competition is already governing majority of the market share. The strong financial position and the relatively low debt-ratio. The passionate staff and their unique blends of the best coffee beans have propelled Starbucks as a way of life in many parts of the world. economic and political situation and the changes in consumer trends.

Conclusion In spite of some drawbacks mentioned above regarding the business environment for Starbucks in India. it might prove beneficial for the company to dwell a bit upon adopting a multi-tier strategy and thinking beyond conventional entry modes in order to harness the immense potential that India holds. it will be plagued by certain shortcomings. India is (after China) undoubtedly the most developing amongst the emerging economies.ventures in India so as not to lose this advantage to its rivals. Another possible threat to the ownership advantages of Starbucks lies in the prevalent ‗employee theft‘ in India. 44 | P a g e . This puts Starbucks in a precarious situation and there may be a need for the company to secure other sources for the coffee beans that it might need for the Indian operations. albeit cautiously and with adequate preparation. and the strong likelihood of competitors ‗stealing‘ trained personnel and baristas from Starbucks and thereby undermining its success in the Indian market. Of course. Under such circumstances it might seem that an agreement with a local well-established partner would be a safe bet and Starbucks could look at reviving the relations with those Indian companies that had shown interest early on. coffee has made steady inroads into the minds and lives of the people serving nearly a million people every day. The major issue here for Starbucks is the continued source of the best coffee beans as one of the major competitors of Starbucks in India (Barista Coffee) is owned by the Tata Group. the advantages far outweigh the limitations especially if Starbucks focuses its attention on the socio-cultural aspects of the Indian business environment. and it is clear from the analysis and the arguments provided above that the time is just right for Starbucks to try its luck now. the retail food market in India is expected to grow by 9 % and although the traditionally tea-drinking country is the largest producer and consumer of tea in the world. Over and above this. Finally. its relations and contracts with Tata Coffee for supply of coffee beans have to be looked into. how Starbucks decides to make its mark on the Indian gourmet coffee market and when it does so has to be left to the management of the company. Moreover. Starbucks has already entered most of the emerging economies except India. After all. which seems to surprise everyone including its potential competitors in India. However. there will always be groups and organizations ready to protest against such companies especially in emerging economies where the sentiments towards local companies are inherently strong. The fact remains that India is an emerging economy and like all emerging economies.

TOWS Analysis: 45 | P a g e .

CHAPTER 4: Reactions and Outlooks 46 | P a g e .

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. Future Outlook of Starbucks in India Starbucks is another industry stalwart to enter the Indian markets due to vast potential and the huge untapped market.55 rupees at 10:35 a. the aura surrounding brands such as Starbucks scale new heights. On announcement of agreement between the two parties. India's largest coffee producer. to 544. 21. KFC14. and initially wanted to make a solo entry. But the company's effort was stalled by FDI regulations.bloomberg. etc to name a few. Tata Coffee gained as much as 17 percent. 2009.com/news/2011-01-14/starbucks-takes-first-step-to-india-with-tata-accordafter-china-expansion. Indian market is always influenced by the traditions followed in the Western counterparts hence the success of Mcdonalds. 13 Source: http://www.41 in NASDAQ Stock Market trading on that day. the biggest intraday jump since Aug.50 rupees in Mumbai trading.m. The stock traded at 490. Starbucks rose 0. With access to Hollywood movies where these brands are flashed quite often. Starbucks will source and roast green coffee beans from Tata Coffee and will also set up retail outlets in partnership with the Tata‘s. in January. This reflects the confidence that investors show in both the company and the upcoming deal.7 percent to $32.html 14 McDonalds and KFC are the American Fast-food chains 47 | P a g e . India does not allow 100% foreign ownership in single-brand retail outlets and was compelled to take the partnership route.Company Reaction over a period of time13 Starbucks brewed an agreement with Tata Coffee. Starbucks had in fact begun scenting opportunity in India much earlier.

The impact of this announcement was reflected in the stock prices of Tata Coffee reaching their 52-week highs during this period. with the bulk of all production taking place in its Southern states.Movies like You’ve got mail starring Tom Hanks and Meg Ryan15. The timing of their entry could not have been better. The two companies will also explore social projects in the coffee-growing regions Tata Coffee operates. It is believed that coffee has been cultivated in India longer than anywhere outside of the Arabian Peninsula. technicians and agronomists to improve coffee-growing and milling skills. Latte have eclipsed the traditional Espresso filter coffee. Cappuccinos. With Barista. Starbucks comes in like a breath of fresh air. he two companies will collaborate on providing training to local farmers. The future outlook of any company is not complete without an analysis of the industry in which it operates. accounting for over four percent of world coffee production. only restricted to the elderly people. With the success of Barista. 15 Tom hanks and Meg ryan are the Academy award winner Hollywood actors 48 | P a g e . In fact the coffee shops have itself undergone a tremendous transformation. Indian consumers have always welcomed change when it comes to their taste buds. Currently it is in talks with Tata Coffee for an entry in the Indian shores. Café Coffee Day and Costa coffee almost losing their sheen. the world is a witness that the Indian market is ready to usher in Starbucks and make it a successful venture. Filter coffee seems like an archaic notion. India is most noted for its Monsooned Malabar variety. with them replacing a hang-out joint for the teenagers. Café Coffee Day. show both of them having Starbucks coffee before leaving for work leaves a lasting impression on the minds of consumers. The coffee industry of India is the sixth largest producer of coffee in the world.

Challenges: No matter how lucrative a market is. Apart from this. In this case. That is one of the issues to be sorted out. Similarly.One of the hurdles that the two companies have to sort out is Starbucks‘ franchisee-led business model — something Tata is uncomfortable with. For this very reason it is following it‘s tried and tested franchise model. we feel that Starbucks will face the following challenges in the Indian market: Blending in the Indian culture: Venturing into Indian market is going to be a new thing for Starbucks. the union of Starbucks and Tata Coffee looks to create a froth that will leave the Indian consumers wanting for more. From our analysis. with their market share increasing in proportion to their increasing number of franchises. This is an important aspect as this model has benefitted Starbucks in the past. but every company faces certain challenges when it enters into unknown waters. in this case Starbucks is also poised to face certain challenges when it enters the Indian market. it has ventured with Tata Coffee to 49 | P a g e .

Through this the consumers can relate to them more easily as they can have their regular homely drinks at these places as well. Mango Shake.enter this segment. etc. So this has to be taken care by Starbucks as well so that they are able to win the hearts of the Indian consumer. They want more by paying as less as possible. Café Coffee Day and Barista have done well. they offer seasonal drinks. Price sensitivity: Indian consumers by nature are very price sensitive. for eg Aam Panna. In this regard. Why this might be a problem for Starbucks can be seen by the following diagram: 50 | P a g e . They both have imbibed the culture in their regular offerings. in the summer seasons. For example. But still changing its product offerings to suit the needs of each of the market is an onerous task in itself.

During this time they have gauged the market very well and have really left the new entrant with a lot of thinking to do. Have an outlet in music stores like Planet M and Music World. These are some of the challenges that they might face and also some measures that they can adopt to curtail the competitive rivalry to some extent.(assuming a dollar to rupee rate of 1$. the more popular coffee like Cappuccino and Latte would require the consumers to shell out almost Rs. Imagine listening to your favorite music while sipping a hot cup of Cappuccino. Though this has been adopted by Café Coffee Day. Competitive rivalry: Like any other industry. But following strategies can be used by them to overcome the threat of these competitors: By tying up with certain book stores. Barista Lavazza and Costa Coffee. time and the budget of their launch.Rs. 51 | P a g e . Similarly.Through this we can see that a regular simple small coffee costs the consumer as much as Rs. so that the people can relate to them in a better manner. such prices would not do Starbucks much good and it will have to come up with attractive pricing strategies to lure the Indian customers. but it can be used by them as well depending on the location in which they plan to open up their store. This will surely attract a lot of consumers. like Crossword.for a small cup. the consumers might not have to lose their purse strings too much as the conglomerate is famous for working for the middle man (from Tata Namak to Tata Nano fame). When the consumers are very price sensitive. Provide hot tea in those mud cups (kullhars). etc to provide a convenience to the customer. Starbucks will be facing tough competition from stalwarts like Café Coffee Day. All of them have been in the industry for almost 5-6 years. The other promotional tactics that can be adopted by them is too early to be commented upon as they depend upon the location. They have blended in the culture really well and have become a synonym for hang out places and having fun. But as the alliance is with Tata Coffee.45). 45/. 90/.

business-standard.indiacoffee.starbucks.hubpages.pdf http://globalcoffeegrind.com www. Chitraju.cafecoffeeday.com/2010/07/06233436/India-mulls-FDI-in-multi-brand.google.livemint.com International Business Plan Starbucks India Proposal by Vrushali Paunikar Starbucks: Strategic Marketing Plan by Boscheratto.com www. Annual Report www.cafecoffeeday.edu/india/article.html?sid=26298 52 | P a g e . Small .bloomberg.cfm?articleid=4607 http://www.com/news/story.wharton.livemint.com/Images/Brand_Partnerships.org/newsview.costacoffee.afaqs.References: www.in www.barista.com www. Ehab Aziz and Bassem Naguib Starbucks: Corporate Social Responsibility Fiscal Year 2003.com/india/news/costa-coffee-brews-mass-marketplan/432284/ http://www.html http://www.php?newsid=68 http://www.upenn.com/hub/Costa-Coffee-Fails-in-India http://www.html?atype=tp http://knowledge.Toth and West Strategic Analysis of Starbucks by Taghred Khattab.co.com/news/2011-01-14/starbucks-takes-first-step-to-india-withtata-accord-after-china-expansion.html http://www.com/2011/06/22015037/42Indiansplantocutspendi.

au/journals/TfC . AUCH-ROY – PEN: 1207HA December 21.Michelle Ton PARTNERING TO SCRIPT SUCCESS STORIES!. Chen Yee Liaw . Vol.org/indiacoffee.php?page=ModalitiesImplementationDevelopme nt The Starbucks Corporation: Past.indiacoffee. South India Transforming Cultures eJournal.from cafecoffeeday.Kevin Tjho .uts. Starbucks: Part of Youth Culture by Peter Dey The Future of Starbucks : An Analysis by Team Macchiato by Zack Higbee.lib.com Environmental Governance in the Coffee Forests of Kodagu. Present and Future By Hervé R. February 2008 http://epress.Calvin Ting .edu. 3 No 1. 53 | P a g e ..http://www. 2004.

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