Introduction | Starbucks | Foreign Direct Investment

INTRODUCTION

In 1991, the Indian economy experienced a rebirth after the liberalization policies of the new prime minister. Thirteen years later, India has become one of the most exciting economies in the world with a huge increase in foreign investment and consumers who are willing to “spend, spend, spend!” Due to massive outsourcing on the part of foreign companies especially from the United States, educated Indians are now presented with exciting career opportunities, excellent pay, and the confidence to spend more money. Time magazine reports that these new consumers command $10.5 billion in cash to burn. There couldn’t be a more opportune time for the Starbucks Coffee Company to open its shops in the exotic land of India. The following is a proposal to open two new locations of Starbucks in India: one in Mumbai, a highly populated cosmopolitan business city, and the other in the nation’s capital, New Delhi. These locations were strategically picked to ensure success of the business venture and will serve as test locations. If the new stores are highly profitable, Starbucks can expand to more than 200 locations in India. Starbucks India locations will customize their menu to meet the tastes of their new target market. This includes the addition of more tea items taking in accordance that Indians are known to be more a “tea-drinking” population, as well as adding some new flavours in their coffee selection. The major competition for Starbucks at the moment is the Barista Coffee Co., which is an existing coffee shop branch in India, but Starbucks is expected to gain its market share for several reasons. The international popularity of the Starbucks brand will help the company step into the country. With superb marketing and reasonable prices, neither of which the Barrista Coffee Company is able to provide, Starbucks will take over the market, and with its assurance of quality and commitment to giving back to the community, the company will earn brand loyalty.

INTRO
India’s pop culture shows a heavy desire to follow western trend. As put simply by Indian entrepreneur Ravi Deol, “Indian consumers want to do what the rest of the world is doing.” The young Indians buyers want everything from McDonalds, to Levis Jeans, and Brittney Spears CDs, but what’s more is that they are willing to pay for it. Indian consumers will definitely welcome the internationally popular Starbucks Coffee Company to its country, as thirty-nine other countries have. The two new proposed locations for Starbucks Coffee shops are strategically picked to ensure their success. Both Mumbai and New Dehli are home to many call centers where these younger spenders work, and many colleges and Universities are also located here. This will allow Starbucks to target the younger consumer generation with the advertisement campaign. These two cities are also major hot spots for tourists, who recognize a multinational brand such as Starbucks. The new Starbucks menu must cater to the India taste, mixing traditional menu items with those that a customized for the Indian tastes.

V. rejecting its previous socialist path along with the old inefficient centralized bureaucratic state. loosened approval requirements and allowed majority foreign equity ownership. Under this constitution. A. reducing poverty by about 10 percentage points. 60 to 100 percent for semi-processed goods. There also three branches including a bicameral legislature. The most common business organization used by foreign investors in India is the locally incorporated company because other forms such as sole proprietorships and partnerships are essentially impossible under the Indian law. The current prime minister of India is the Honored Atal Bihari Vajpayee. Companies may be public or private but the common public is not allowed to buy shares of the company and there can only be up to fifty shareholders. meaning it’s a representative democracy with power divided between the state and federal government. Peter Drucker sees India as an economic powerhouse. ECONOMICS India's economy encompasses traditional village farming. and better corporate governance. India has large numbers of well-educated people skilled in the English language. Though liberalized. and 100 percent and .J. India is bound to play a monumental role in the future of the global industry. a comprehensive WTO strategy. Import duties are applied to almost all goods entering India. a sophisticated legal and accounting system and a user-friendly intellectual infrastructure.4% in the last quarter of 2003 supports his argument. In 1999. Abdul Kalam. a judiciary that can and does overrule the government. handicrafts. With a world changing from an industrial to an informational economy. India's time tested institutions offer foreign investors a transparent environment that guarantees the security of their long-term investments. India has recently emerged as a vibrant free-market economy. the head of State and the head of government in India are different. In 1991. executive branch. and a multitude of support services. The current government of India is in favour of long-term foreign investment. The head of government is the prime minister and is responsible to the Indian parliament. The head of state is the President who serves more as a symbolic ceremonial figure. India is a federal republic. The tariff system is based on the Harmonized System (HS) and tariffs are in the 40 to 60 percent range for basic raw materials. reform in agriculture and small scale industry. Narashima Rao. These include a free and vibrant press.P. the government liberalized the number of industries open to foreign investment.POLITICS India’s government was formed in 1947 after the country gained its independence from the Imperial Britain. The economy has posted an excellent average growth rate of 5-7% since then. The country has recently become is a major exporter of software services and software workers. The Indian constitution adopted in 1950 was modeled after the United States constitution. economic policies for International business still have many restrictions. and judicial branch. Unlike America. modern agriculture. The Prime Minister called for a second Generation of reforms to include improving the investment climate. and the information technology sector leads the strong growth pattern. when the Congress party gained power under the leadership of P. The current Indian president is Dr. Management guru. and the risen GDP of 8. cutting red tape. and has little power except for in emergency situations. a wide range of modern industries.

03 billion people. Muslim 14%. it is the most important language for national.4% of the world’s land. require approval by the Foreign Investment Promotion Board or a newly created committee for review of smaller investment projects. ranging from the tall Himayan mountains to tropical rainforests of Jamunake. Since our locations are close the newly opened call centers .     SOCIOCULTURAL With a population of about 1. India itself has a very diverse culture and history. and other 0.7%. in India is the young both male and female from the ages of 16-38. the Iranians. Muslims and Parsis.9%. and the birth rate is 1. This large population provides a huge consumer market for businesses. Geographically speaking. The caste system though no longer sanctioned by the government still exists to a certain extent.above on finished and consumer goods. Heavy rainy season and stretches of extremely hot summers are common. On average 50% of Indians are literate. A certificate of origin is not required on imports originating in the United States. The Primary target market for Starbucks Coffee Co. a packing list and bill of lading. This market is well educated and comes from middle class to upper middle class population. Some of the rituals associated with normal life are the frequent relegious fasting days of the Hindus. India’s land features are as diverse as its people. Though most of India is rural land. not considered a priority industry eligible for automatic clearance by the Reserve Bank of India. The following are the foreign investment policies of India:  All foreign investment projects. Arabians and Afghanistani.08. Automatic approval is granted to foreign investments of up to 51 percent equity in 34 high-priority industrial sectors. Central Asians. Therefore. India is located in South Asia in the Eastern Hemisphere. India has been influenced by many cultures including the English. India is the second most populated country in the world. *No specific tax incentives exist to attract foreign investment. Jains 0.4%. The national language is Hindi and about 83% of the population speaks it.4%. political. and commercial communication. India has 18 official languages primarily asscociated with the different states. Many Indians are vegetarian and most do not eat beef. yet it is slowly fading away. Foreign companies are permitted to acquire land and own buildings as long as permission is obtained from the Reserve Bank of India. Other than that. There are 25 states and seven union territories and New Dehli is the capital. Sikh 2%. The breakdown of religions are as follows: Hindu 80%. there are also large Urban areas. Though English enjoys associate status. The government permits foreign firms to hold up to 51 percent equity in Indian venture on a case-by-case basis. Shipments to India require a commercial invoice. The male to female ratio is 1. Buddhist 0. Christian 2. as well as over 700 different dialects.5%. That makes up over 15% of the world’s population even though the country only occupies 2.

special marketing strategies will be used to gain their brand loyalty to Starbucks.where well educated and highly paid consumers work. Tourists will recognize Starbucks. This market will also fall in the middle to upper middle class population and will find the Starbucks India prices relatively cheap.. and Japan. . Germany. as it is a multinational company. The secondary target markets are the tourists in the areas. The geographics of the target market are mainly consumers who live or work in the vicinity of the two proposed locations for the Starbucks Coffee shops.S. as most tourists in India come from the countries of U. England.

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