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How to expand overseas and compete with other chains like Caf Coffee Day, Barista and Mc Donald.
QUESTION ANSWERS.
What are some of the challenges associated with Starbucks aggressive growth strategy?Could an unanticipated change in coffee consumption patterns disrupt Starbucks in the same way that it paved the way for the companys growth in the 1980s? A change in the coffee consumption pattern can disrupt Starbucks. But it can also capitalize on this change. For example in the 1960s the average per adult day to day consumption was three cups of coffee. Nowadays the consumption has reduced to less than two cups a day where only half the American adults are coffee drinkers. But during this decaffeinated coffee sales soared. Also a new category of loyal coffee drinkers was born which only consumed premium or specialty coffee. Starbucks capitalized on this change and its specialty coffee sales increased from 45 million dollars to more than 2 billion dollars.
What problems might arise from Starbucks efforts to expand rapidly into nations such as India? India is generally considered as a tea drinking nation. The main coffee drinkers are the urban population. Coffee consumption is highest in south India, where filter coffee already has a loyal customer base. The challenges faced by Starbucks are manifold 1. CCD and Barista are already well established brands whose prices are much more competitive as compared to Starbucks. The main problem would be to devise a strategy that would pull customers away from CCD, Costa Coffee and Barista. 2. Nestle, Kraft and Proctor and Gamble already have a presence in India, the strongest maintaining a reasonable profit could be a problem. Nestle products are well established and much cheaper 3. Filter coffee is a hot favorite in south India and decaffeinated coffee is not popular in India. Starbucks will face stiff competition from this sector.
How would you see the competition of Starbucks in India, with players like Costa Coffee,Mc donalds, Barista and Caf Coffee day. Draw out a competitive strategy for Starbucks?
Mc Donalds ,Barista and Caf Coffee Day are already well established brands in
India and are cheaper as compared to Starbucks.( keeping in mind that the Indian consumer is quite price sensitive). Starbucks will face fierce competition from these brands.
COMPETITIVE STRATEGY FOR STARBUCKS. PRODUCT Starbucks being a new foreign entrant can capitalize on the fact that the Indian consumer especially the urban youth are ready to try out new products. Differentiating strategy should be used by Starbucks to show what is its unique selling proposition over other chains in India. It will have to come up with competitive pricing strategies against the known brands. Use the exclusive coffee chain tag. Celebrity endorsement to attract customers. Starbucks can lower down the price because Indian customers are price sensitive. Projecting the De caf version as a harmless coffee through emotional marketing.
CASE FACTS
The impact of the Asian financial crisis on Korea was partly a result of the economic system of state intervention adopted by Korea in the mid-1950s. Modeled after the Japanese economic system, the Korean authoritarian government targeted export growth as the key for the countrys future. Initially, the government adopted a strategy of import substitution, and that later gave way to a strategy of expo,, or die. Significant incentives were given to exporters, such as access to low-cost money (often borrowed abroad in dollars and loaned to companies at belowmarket
interest rates in Korean won), lower corporate income taxes, tariff exemptions, tax holidays for domestic suppliers of export firms, reduced rates on public utilities, and monopoly rights for new export markets. Clearly, the government wanted Korean companies to export. The chaebol, of which the four largest were Hyundai, Daewoo, Samsung, and the LG Group, became the dominant business institutions during the rise in the Korean economy. They were among W largest companies in the world and were very diversified, as can b:: seen by Daewoos investment and business choices. They were held together by ownership, management, and family ties. In particular family ties played a key role in controlling the chaebol. Until the 1980s, the banks in Korea provided most of the funding to the chaebol, and they were owned and controlled by the government. Because of the importance of exporting, the chaebol were all tied to general trading companies. The chaebol received lots of support from the government, and they were also very loyal to the government, giving rise to charges of corruption. Most chaebol were initially involved in light industry, such as textile production, but the government realized that companies needed to shift first to heavy industry and then to technology industries. Daewoo transitioned to heavy industry in 1976 when the Korean government asked President Kim to acquire an ailing industrial firm rather than let the firm go out of business and create unemployment.
After the Thai baht was devalued on July 2, 1997, the Korean won soon followed, and the Korean stock market crashed as well. One possibility was to dismantle Daewoo and let it have only auto-related businesses. All of the other businesses would be sold off to domestic or foreign investors, and the name would be changed to something other than Daewoo. Another option for President Kim was to sell some of Daewoos auto assets. Ford, Daimler Chrysler, and General Motors showed interest, but selling Daewoo Motor, the second largest automaker in Korea, would be a big blow to the country. After a year of negotiations, General Motors purchased a portion of the $1.2 billion Daewoo Motor in April 2002 for $400 million agreed to keep only three manufacturing plantstwo in Korea and one in Vietnam-leaving creditors scrambling to sell its other plants in Eastern Europe, Asia, and the Middle East. By mid-2002, the Korean economy was showing promising signs of recovery and reform. In 2001, the economy grew by 3 percent and was expected to grow by 5 to 6 percent in 2002.
QUESTION ANSWERS 1. Does Korea look like a good market to invest? Why or why not?
Ans. Korea doesnt look like a market to invest due to the following facts: a) b) c) d) Presence of many other conglomerates in the Korean market. Secrecy in the climate of companies created difficulty in studying and plotting the move. More emphasis and high flexibility for exports and less for imports. As the Korean stock market crashed during that time, it brought uncertainty in the market for Investing, demoralising the new entering companies. e) Bank and the Korean government were biased towards native companies.
4. What risks does GM face in taking over Daewoo Motors? Suggest some suitable product/brand strategies for GM.
Ans. GM faced problems like How to market Daewoo cars and reduce the $830 million of Daewoo debt Should GM continue selling Daewoo cars in the United States and Europe and compete with its own brands.
Without increasing its debt, will it be able to restore Daewoos 37 percent share of the market in Korea.