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INTRODUCTION

Starbucks is another industry to enter the Indian markets due to vast potential and the

huge untapped market. Indian market is always influenced by the traditions followed in

the Western counterparts hence the success of Mc Donald’s, KFC, etc to name a few.

With access to Hollywood movies where these brands are flashed quite often, the aura

surrounding brands such as Starbucks scale new heights.

Indian consumers have always welcomed change when it comes to their taste buds.

Cappuccinos, Latte have eclipsed the traditional Espresso filter coffee. Filter coffee

seems like an archaic notion, only restricted to the elderly people. In fact the coffee shops

have itself undergone a tremendous transformation, with them replacing a hang-out joint

for the teenagers.

The timing of their entry could not have been better. With Barista, Café Coffee Day and

Costa coffee almost losing their sheen, Starbucks comes in like a breath of fresh air. The

future outlook of any company is not complete without an analysis of the industry in

which it operates.

The coffee industry of India is the sixth largest producer of coffee in the world,

accounting for over four percent of world coffee production, with the bulk of all

production taking place in its Southern states. India is most noted for its Monsooned

Malabar variety. It is believed that coffee has been cultivated in India longer than

anywhere outside of the Arabian Peninsula.

Tata Starbucks Limited, the 50/50 joint venture between Starbucks Coffee Company and

Tata Global Beverages Limited is bringing an unparalleled experience to Indian

customers. Both companies have a history of delivering product innovation and the

highest quality experience to customers around the globe. They are delighted to come

together today and transform the coffee experience for consumers across India, while

providing a community gathering place to connect with family and friends. Thus, Coffee

culture is poised to be deeply in-grained into Indian culture in the near future, if this

strategic alliance succeeds.

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OBJECTIVE OF STUDY

To analyse Starbucks as a company

To analyse the Indian coffee industry and India as a potential destination for

Starbucks.

To discuss strategies undertaken by Starbucks in India.

To discuss the opportunities and challenges that Starbucks face in India.

To discuss the benefits of tie up with TATA

To discuss the threats from competitors and its position in the market.

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COMPANY PROFILE

STARBUCKS CORPORATION

Starbucks Corporation is an American global coffee company and coffeehouse chain

based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world,

with 20,891 stores in 62 countries, including 13,279 in the United States, 1,324 in

Canada, 989 in Japan, 851 in the People's Republic of China, 806 in the United Kingdom,

556 in South Korea, 377 in Mexico, 291 in Taiwan, 206 in the Philippines, 179 in

Turkey, 171 in Thailand, and 167 in Germany

Starbucks Mission: Our mission: to inspire and nurture the human spirit – one person,

one cup and one neighbourhood at a time.

Our Coffee: We’ve always believed in serving the best coffee possible. It's our goal for

all of our coffee to be grown under the highest standards of quality, using ethical sourcing

practices. Our coffee buyers personally travel to coffee farms in Latin America, Africa

and Asia to select the highest quality beans. And our master roasters bring out the balance

and rich flavour of the beans through the signature Starbucks Roast.

TATA GLOBAL BEVERAGES AND TATA COFFEE

Tata Global Beverages is a part of the global Tata Group. Tata Global Beverages is a

global beverage business and the world’s second largest tea company. The group’s

annual turnover is US $1.5 bn and it employs around 3000 people worldwide. The

Company focuses on ‘good for you’ beverages and has a stable of innovative regional

and global beverage brands , including Tata Tea, Tetley, Himalayan natural mineral

water and Eight O’ Clock Coffee.

Tata Coffee is a subsidiary of Tata Global Beverages. It is Asia’s largest coffee plantation

company and the 3rd largest exporter of instant coffee in the country. The Company

produces more than 10,000 MT of shade grown Arabica and Robusta coffees at its 19

estates in South India and its two Instant Coffee manufacturing facilities have a combined

installed capacity of 6000 metric tonnes.

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TATA STARBUCKS- JOINT VENTURE TO OPEN CAFES IN INDIA

Starbucks is the number one specialty coffee retailer in the world. The company wants to

deliver the finest coffee products and offers handcrafted beverages. Starbucks is not only

about drinking coffee but about a unique experience. The company follows an

international expansion strategy through strategic alliances. Starbucks wants to prevent

competitors from having a head start, build upon the growing interest for Western brands

and take advantage of the higher coffee consumption rates. After building a successful

brand in Japan and China, Starbucks wants to enter the Indian market. Starbucks found a

local supplier for their coffee, Tata.

MUMBAI, India, January 30, 2012 - Tata Global Beverages Limited and Starbucks

Coffee Company today announced a joint venture between the iconic international coffee

brand and the 2nd largest branded tea company in the world. The 50/50 joint venture,

named TATA Starbucks Limited, will own and operate Starbucks cafés which will be

branded as Starbucks Coffee “A Tata Alliance.”

The retail stores had started developing in cities across the country, beginning with stores

in Delhi and Mumbai in calendar 2012.

In a separate sourcing and roasting agreement between Starbucks Coffee Company and

Tata Coffee Limited, Tata Coffee Limited will roast coffee to supply TATA Starbucks

Limited, and to export to Starbucks Coffee Company. This agreement paves the way for

consumers in India to enjoy the premium Starbucks Experience, while further discovering

the unique taste of high-quality Indian arabica coffee worldwide. TATA Starbucks

Limited brings together two companies with a rich heritage in and passion for coffee, tea

and innovative beverages. Together, the JV will enable an expanded range of beverage

offerings for Indian consumers.

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PESTLE ANALYSIS

The PESTLE analysis is a tool which provides insight of the external environment in

which organizations operate or will operate and aids the strategy formulation of those

organizations. Considering the fact that Starbucks is planning to enter the market in India,

the PESTLE analysis is going to evaluate favorable and unfavorable conditions in the

country’s political, economic, social, technological, legal and environmental setting.

a. Political factors

The political factors have strong influence upon the regulation and controlling of business

and the spending power of consumers and other businesses. We must consider those

factors as very important and even crucial depending on the political system of the

country we are operating in and the political condition of the country as a whole.

The Indian economy has been subject to series of positive economic reforms since 1991

which had created a better working environment for foreign companies and has made it

possible for foreign investors to operate in the country more easily. The reforms have

also resulted in higher growth rates, lower inflation and increase and ease of the foreign

investments. The current Indian government - United Parties Alliance (UPA), headed by

the Indian National Congress party (INC) has shown more tolerance towards foreign

countries in general and towards FDI in numerous economic sectors. These reforms have

placed India in a favorable position in the world economic stage.

Taking into consideration the political environment in India as a whole, the bureaucracy

complications and the regulatory FDI controls and regulations, it is safer for Starbucks to

enter India via a joint venture or a strategic alliance with an Indian company that can

provide a buffer from possible political tension. Furthermore, Starbucks can face some

opposition from the existing competitors (CCD, Barista, etc.) through the use of political

influence and delaying tactics. Although situations like these are possible to happen, the

chance is low taking into account that the Indian market is large enough to hold more

companies and the leaders in the Indian gourmet coffee industry will not be strongly

affected by Starbucks’ entry.

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b. Economic factors

The factors like inadequate infrastructure, bureaucracy, regulatory and foreign investment

controls, the reservation of key products for small-scale industries, and high fiscal deficits

are constraining economic growth of India. However, the liberalization measures taken in

1991 opened the economy to foreign investment and trade: it dismantled important

controls, lowered customs duties, and devalued the currency: it virtually abolished

licensing controls on private investment, dropped tax rates, and broke public sector

monopolies. Further, reforms have been seen in retail industry with Indian government's

approval on FDI up to 51% on multi brand retail. The country has recently become is a

major exporter of software services and software workers, and the information

technology sector leads the strong growth pattern. With a world changing from an

industrial to an informational economy, India is bound to play a monumental role in the

future of the global industry.

c. Socio-Cultural factors

As job opportunities increase in India, money stays in the palms of the Indian consumers

enabling them to reinvest in the Indian economy. Attitudes towards money are also

changing. The mantra for the average Indian family, as in most of Asia, has always been

saving, but young Indians today, inspired by job opportunities, have switched to spending

extravagantly. The attitude of the young generation is to enjoy life and spend money.

According to sources the population of the country consists of more than 60% of the

people between the age of 15-59. Also with the westernization of the social trends more

and more young people trust western brands and prefer foreign goods. They also go for

the same trends and try to mimic the same status of exclusivity young people in the US

and Europe look for. This places Starbucks at a very dynamic position, where it has a

good opportunity and much possibility to capture quick customers. The only problem is

that they will not be the first on the market with specialty coffee offering and their

otherwise leadership position could strongly be undermined and only sustained by their

brand image.

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Next to that, the culture and cuisine of India poses a very interesting challenge. The mix

of traditional tea-drinking population together with the various differences between

Muslim and Hindu and the growing difference among various regions of the country,

make it extremely to divide and place is concrete consumer groups. Still the most obvious

separation with regard to coffee consumption is visible in the city versus rural areas

separation with the urban population having distinctly higher preferences for coffee. Still

the numbers of coffee consumers remains low with slow negative growth figure between

2000 and 2005 - 6.7% and 2.0% respectively.

d. Technological factors

Starbucks entered into a strategic alliance with Tata Coffee LTD., the largest coffee

producer in India. With signing this agreement, Starbucks finally found the partner it

needed. A company which met all the conditions and standards followed by Starbucks.

Tata proved its quality standard by winning a gold medal for the best Robusta coffee in

the world.

The factor of quality is very important at the Indian market as high quality coffee beans

are easily available. With this strategic relation with the Tata Group, the company,

Starbucks, might be able to succeed with competitive pricing in India.

Another important technological factor is the lack of infrastructure in India. However,

having such an experienced local partner, Starbucks does not face any problems with this

issue. It also provides free Wifi at all its outlets in India, with a great ambience.

e. Legal factors

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. Import duties are applied

to almost all goods entering India. The tariff system is based on the Harmonized System

(HS) and tariffs are in the 40 to 60 percent range for basic raw materials, 60 to 100

percent for semi-processed goods, and 100 percent and above on finished and consumer

goods. Shipments to India require a commercial invoice, a packing list and bill of lading.

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A certificate of origin is not required on imports originating in the United States. FDI

approval though has come to relaxation. Lower tariffs and lower barriers to enter have

made the Indian market extremely promising and willing to change.

f. Environmental factors

Starbucks believe in the importance of caring for our planet and working with and

encouraging others to do the same. As a company that relies on an agricultural product, it

makes good business sense. It engages itself in recycling, energy management, water

conservation, green building, and in reducing carbon footprints wherever possible. With

these integrated environmental responsibilities, the company will obviously build its

image in the eyes of Indian Consumers as well. The ecological concerns regarding the

farming of Arabica coffee must also be addressed in order to ensure consistency in

productivity.

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MARKETING STRATEGY

Capture Value

In this section, tools and techniques will be used to explain how Starbucks can create and

capture value for their products.

Market Segmentation

Apart from the demographic characteristics presented in part one of the analysis,

marketers should also consider psychographic variables such as interests and lifestyles. In

general, India’s coffee culture has changed the way young Indians socialise. In a country

where there is a limited bar culture, and where drinking alcohol is still not allowed in

many circles, it has provided an acceptable and safe outlet for people, particularly young

Indians, to share a drink. As mentioned earlier, coffee is becoming a statement of wealth

and prosperity among people with high disposal income, i.e. individuals in employment.

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Target Market Selection

The marketing strategy will focus on targeting both groups – college and university

students (aged 18‐25) in the short term and working professionals (25‐40) in the medium

to long run. Also, tourist and frequent flyers will be a target audience in the long‐run.

Product and Service Positioning

It is essential to have a unique selling point to position Starbucks above competitors. In

TATA‐Starbucks customers will be able to rely on genuine service, an inviting

atmosphere and a superb cup of premium coffee or tea every time.

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CHAPTER 1. PROMOTION STRATEGY

MEANING :

Promotional activities will not be analysed in details as they should be in line with

Starbucks promotions worldwide. Besides, retailers in India rely heavily on

word‐of‐mouth (personal communication). The Starbucks Card will be introduced – a

convenient way to pay for your drinks and earn rewards for your purchase. Furthermore,

“in‐store promotions accompanied by new products such as drinks and accessories

sourced from the regions” should be present in India as well.

Starbucks might consider the idea of advertising on television. In the US, there are three

places that the average American spend his time during weekdays ‐ at home, in the work

place and in Starbucks. So, they should somehow show the western lifestyle to the Indian

and a TV advertisement. Furthermore, it is the first 50/50 joint venture for Starbucks; so,

both Starbucks and TATA Group will benefit from co‐marketing activities.

Promotion is one of the market mix elements or features, and a term used frequently in

marketing. The specification of five promotional mix or promotional plan. These

elements are personal selling, advertising, sales promotion, direct marketing, and

publicity.[ A promotional mix specifies how much attention to pay to each of the five

subcategories, and how much money to budget for each. A promotional plan can have a

wide range of objectives, including: sales increases, new product acceptance, creation of

brand equity, positioning, competitive retaliations, or creation of a corporate image.

Fundamentally, however there are three basic objectives of promotion. These are:

1. To present information to consumers as well as others.

2. To increase demand.

3. To differentiate a product.

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There are different ways to promote a product in different areas of media. Promoters use

internet advertisement, special events, endorsements, and newspapers to advertise their

product. Many times with the purchase of a product there is an incentive like discounts,

free items, or a contest. This is to increase the sales of a given product.

The term "promotion" is usually an "in" expression used internally by the marketing

company, but not normally to the public or the market - phrases like "special offer" are

more common. An example of a fully integrated, long-term, large-scale promotion are

My Coke Rewards and Pepsi Stuff. The UK version of My Coke Rewards is Coke Zone.

Promotional activities to push a brand enabling social media channels to spread content

making something viral such as the advertising by Coke using the release of a new bond

film creating a huge amount of attention which then gets promoted across all social

channels by people spreading the information due to excitement.

Promotion can be done by different Media's, namely print media which includes

Newspaper and magazines, Electronic media which includes radio and television, Digital

media which includes internet, social networking and social media sites and lastly

outdoor media which includes banner ads, OOH (out of home)

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TYPES OF PROMOTION STRATEGY

i. Advertising

ii. Selling

iii. Sales Promotion

iv. Public Relations

i. ADVERTISEMENT

What is advertising?

Advertising is a form of communication designed to persuade potential customers to

choose your product or service over that of a competitor

Successful advertising involves making your products or services positively known by

that section of the public most likely to purchase them.

It should be a planned, consistent activity that keeps the name of your business and the

benefits of your products or services uppermost in the mind of the consumer.

Why advertise?

The objective of advertising is to increase your profit by increasing your sales.

Advertising aims to:

Make your business and product name familiar to the public

Create goodwill and build a favourable image

Educate and inform the public

Offer specific products or services

Attract customers to find out more about your product or service

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The rules of advertising

There are four rules to consider when planning any advertising activity – ie: before you

prepare and book any form of advertising.

Aim - What is the primary purpose of the advertisement? Is it to inform, sell, produce

listings or improve the image of your business?

Target - Who is the target? From which sector of the public are you trying to achieve a

response? For example is it male, female, adult, teenager, child, mother, father etc.

Media – Bearing the aim and target in mind, which of the media available to you is the

most suitable – ie: TV, radio, press or Internet?

Competitors – What are your competitors doing? Which media channel do they use? Are

they successful? Can you improve on their approach and beat them in competition?

Developing effective advertising

Good advertising generally elicits the following four responses:

Attention – It catches the eye or ear and stands out amid the clutter of competing

advertisements.

Interest – It arouses interest and delivers sufficient impact in the message or offering.

Desire – It creates a desire to learn more or crave ownership.

Action – It spurs an action which leads to achievement of the ad’s original objective – ie:

it prompts potential customers to purchase or use your product or service.

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Making sure your advertisement is legal

Section 52 of the Trade Practices Act (Cth) 1974 prohibits misleading or deceptive

conduct.

You must consider the advertisement as a whole and the ordinary meaning of the words

used. You must determine if the people to whom the advertisement is directed are likely

to be misled or deceived by its content.

You can use humour, cartoons and slogans to make your ad stand out, but be sure they’re

not likely to mislead or deceive your audience. The Australian Competition and

Consumer Commission (ACCC) provides advertising guidelines in information circulars

that are available from the local office of the ACCC, or from www.accc.gov.au.

Commonly used media

There are many media options open to advertisers. Which media you use will depend on

who you are trying to reach, what you want to say and your budget. Often a combination

of media (the media mix) can be used to good effect. Remember to keep your branding

and message consistent across all media. This includes use of colours, logos, design

elements and fonts.

• Stationery

Stationery, which includes letterheads, envelopes and business cards, is a means by

which your business image or “name identification” is projected. Good quality stationery,

used with care and attention and with a high standard of presentation, is an everyday

means of presenting your business image.

• Window display or office front

The external presentation of your business office or shop is one of the principal ways of

establishing your business image. An attractive, well maintained exterior with clear, bold

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sign writing is an essential start. Windows should be bright, attractively presented,

scrupulously clean and well lit at night. The display should be arranged neatly and aimed

at projecting an attractive company image and providing a reason to buy your products or

services. Above all it should have sufficient impact to attract attention.

• Press advertising

This is a commonly used form of general advertising and includes advertising in all press

such as newspapers, magazines and journals. Press advertising is suitable for image

building, information dissemination and sales campaigns. It is also a very affordable

option for small businesses.

• Radio

Radio is considered by many advertisers as an ideal medium due to its ability to reach

specific target groups e.g. teenagers, racing followers or grocery buyers. Radio

advertising covers spot adverts (usually 15 or 30 second), promotions or talkback/DJ

discussions. Most radio stations offer packages which include production and extension

of your radio campaign through their websites.

• Television

Television is a powerful advertising medium because it creates impact through sight,

sound and movement however the cost of producing the advertisement and procuring

sufficient air time to allow the campaign to work often makes it prohibitive for small

business.

• Direct mail

This is a broad category covering direct communication with the consumer through

email, post or fax. It can include newsletters, catalogues and letters. If you plan to use

email, be sure to comply with national anti-SPAM legislation which makes it illegal to

send unsolicited commercial electronic messages.

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• Outdoor

This is any type of advertising which is done outdoors, including static advertising such

as billboards, backs of street benches and bus shelters or mobile advertising displayed on

buses, trains, taxis or towed signage.

• Ambient

Refers to any form of advertising that occurs in a non-standard medium outside the home,

and usually where your consumers are likely to be. It’s limited only by your imagination

and includes things like advertising on the back of shopping receipts or toilet doors at the

cinema, placing branded coasters at the local pub, projecting onto buildings, advertising

inside lifts or distributing branded cups.

• Cinema

You can purchase cinema advertising by individual cinemas or screens for a set amount

of screenings or “runs”. Most providers offer packages which include production and

screening of your advertisement

• Point of Sale

Advertising at the point where the consumer makes a purchase decision eg: floor stickers,

in-store digital advertising, shopping trolley signage, shelf or counter posters or playing

interviews about your product in store.

• Online

The options for online advertising continue to grow rapidly. They include advertising on

your website, advertising on other websites, creating links to your website from other

websites, publishing blogs, offering online product games, social networks and forums.

• Directory listings

Many consumers use business directories to find a supplier. Directories include the

yellow or white pages, union directories, trade directories or local business directories.

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Evaluating the effectiveness of your advertising

Famous American department store merchant John Wanamaker (1838-1922) was

attributed as saying “Half the money I spend on advertising is wasted – the trouble is I

don’t know which half.” This quote is often still true today as many businesses do not

evaluate the effectiveness of their advertising.

Evaluating effectiveness can be as simple as staff asking every new customer “How did

you hear about us?” or asking every customer that responds to an advertised special

“where did you see or hear our advertisement?”

Whatever method you use, it is absolutely critical in getting top value for your

advertising dollar by finding out which media works and which doesn't.

ii. SELLING

What is selling?

Put simply, selling is the exchange of goods or services for an agreed sum of money.

Depending on the circumstances, a sales transaction can include one, some or all of the

following stages.

Prospecting and qualifying – identifying qualified prospects ie: those that are likely to

want or need your product or service and can afford to pay for it.

Pre-approach – undertaking research about prospects to assist in the actual selling

process.

Approach – making actual contact with the prospect in person, by phone or in writing.

Presentation and demonstration – presenting and demonstrating the features and

benefits of your product or service in order to convince the prospect that their want or

need can be satisfied.

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Handling objections – demonstrating the product or service value to overcome real or

perceived objections or misunderstandings that are impeding the purchase decision.

Closing – bringing the selling process to a successful conclusion by either asking for the

order or responding to a positive decision from the prospect.

Follow-up – proactive or reactive contact with the purchaser to establish their satisfaction

level and to address any problems that may exist.

In planning the selling element of your marketing strategy you will need to consider the

following:

The size and structure of your sales team

1. Recruiting, training, motivating and evaluating individuals and the team as a whole

2. The remuneration structure

3. The location/territory to be serviced

4. Management and communication systems

Selling is a particularly important element if you are marketing services because the

purchaser of a professional service is in fact buying the capabilities of the seller. So he or

she would be closely evaluating the behaviour and characteristics of your sales person,

your business, its reputation, facilities and appearance.

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iii. SALES PROMOTION

What is sales promotion?

Sales promotion relates to short term incentives or activities that encourage the purchase

or sale of a product or service. Sales promotions initiatives are often referred to as “below

the line” activities.

What are the major sales promotion activities?

Sales promotion activities can be targeted toward final buyers (consumer promotions),

business customers (business promotions), retailers and wholesalers (trade promotions)

and members of the sales force (sales force promotions). Here are some typical sales

promotion activities:

1. Consumer promotions

Point of purchase display material

In-store demonstrations, samplings and celebrity appearances

Competitions, coupons, sweepstakes and games

On-pack offers, multi-packs and bonuses

Loyalty reward programs

2. Business promotions

Seminars and workshops

Conference presentations

Trade show displays

Telemarketing and direct mail campaigns

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Newsletters

Event sponsorship

Capability documents

3. Trade promotions

Reward incentives linked to purchases or sales

Reseller staff incentives

Competitions

Corporate entertainment

Bonus stock

4. Sales Force Promotions

Commissions

Sales competitions with prizes or awards

iv . PUBLIC RELATIONS

What is public relations?

The Public Relations Institute of Australia (PRIA) defines Public Relations (PR) as: “The

deliberate, planned and sustained effort to establish and maintain mutual understanding

between an organisation (or individual) and its (or their) publics”.

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Put more simply, public relations is about building good relations with the stakeholders

(public) of your business by obtaining favourable publicity, building a good corporate

image and handling or heading off unfavourable rumours, stories and events.

By building good relationships with your stakeholders, particularly customers, you can

generate positive word of mouth and referrals from satisfied customers.

Who is a stakeholder?

Stakeholders are the various groups in a society which can influence or pressure your

business’s decision making and have an impact on its marketing performance. These

groups include:

Clients/customers

Staff

Shareholders

Strategic partners

Media

Government

Local community

Financial institutions

Community groups

Operationally, stakeholders really refer to those groups that your business is or should

be, communicating with.

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What are the main public relations Tools?

Typical PR tools include:

1. News creation and distribution (media releases)

2. Special events such as news conferences, grand openings and product launches

3. Speeches and presentations

4. Educational programs

5. Annual reports, brochures, newsletters, magazines and AV presentations

6. Community activities and sponsorships

What are the key steps in implementing public relations?

Implementing effective public relations activities requires careful planning. The three

major steps are outlined below

Setting the objectives – what is it you want to achieve and who do you want to reach? Is

it to create awareness of a new product or service to your existing clients, to overcome

community misconceptions about your business or to create a positive impression with

your bank manager?

Deciding on the message and the vehicle – what is the major thing you want to

communicate and what public relations tools will you use to get the message to its target?

Evaluating the results – did you achieve the desired result and did it lead to a positive

outcome?

Many small businesses do not devote enough attention to public relations in their

promotional mix but done properly, it can be a powerful and cost effective business

development and marketing tool.

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CHAPTER 2: COLLECTION OF DATA & ANALYSIS

1. COMPETITION

Café coffee day has 2,000 locations mostly in India, with plans to reach 5,000 stores

worldwide in the next five years, whereas Starbucks has only 15 till now. It has created a

stir in the coffee industry with just 15 cafes which are doing very well. In the days after

its first store opened in October in a chic area of Mumbai, lines stretched so long that

security guards were forced to implement a one-in, one-out policy. Starbucks plans to

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setup many such cafes in the near future and give a tough competition. Currently in 2013,

Starbucks has 7 outlets in Delhi and 8 in Maharashtra. Even though Starbucks has a

number of competitors it has adapted well in the Indian markets and giving a tough

competition to the other brands.

2. PRODUCT LIFE CYCLE

Since Starbucks has just entered the Indian markets a year back, it shall come under the

introduction stage which is slowly moving towards the growth stage.

Introduction

Starbucks is currently in the introduction stage. It has started earning sales. This stage

requires a good deal of promotion. It is a 50-50 partnership with TATA and thus becomes

easier for Starbucks to get into the Indian market. Since TATA group is in India since

years. It knows the Indian market well. Thus, can develop marketing strategies according

BARISTAA

STARBUCKS

CCD

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to the Indian tastes and needs more efficiently. This stage involves high costs and

investments to be made, less sales and profits. The company has to make it aware to the

people of their entry.

Growth

Starbucks is making its way towards the growth stage. It has already expanded its outlets

in India with 15 cafes in India and plans to set up a total of 50 Starbucks cafes. This stage

has a high growth rate, which means higher sales and more profits. There is lot of

promotion and advertisements. Also the cost per unit decreases. Competition is also high:

e.g. Gloria jeans, costa coffee, coffee bean and tea leaf as well as café coffee day and

barista.

Maturity

In the maturity stage, the end of stage of the growth rate and sales slowdown as the

product has already achieved acceptance in the market. There is severe competition, and

need for innovation in order to compete in the market. As we can see from the graph,

Café coffee day has already gained acceptance in the market, having a huge number of

outlets. It is now facing tough competition from new entry Starbucks and other prevalent

brands.

Decline

When sales decrease and continue to drop to lower levels, the product has entered the

decline stage of the product life cycle. In the decline stage, changes in consumer

preferences, technological advances, and alternatives that satisfy the same need can lead

to a decrease in demand for a product.

As we can see from the above graph, Barista Lavazza is almost at the verge of declining, but if it

gets more innovative and competitive, it can strive in the market. There has been a decline in

the number of outlets of barista due to losses. It has also got new competition from Starbucks.

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PERCEPTUAL MAP

The graph shows that: as far as quality is concerned, Starbucks is better than both Barista

as well as café coffee day. But pricing wise, Starbucks has a slightly higher price than the

other two. It clearly shows that Barista has the lowest quality of the two having a little

high price than CCD. And CCD is in a good position of fairly good quality and

affordable price.

Starbucks, with Tata’s as partner, has opted for competitive pricing that is nearly half the

coffee chain's charges elsewhere in the world -- with a cup of coffee costing about Rs. 80

for a small offering and Rs. 165 for a large one. Starbucks is known for its high product

quality and as a premium brand.

A hot coffee at Starbucks will range from Rs. 80 to Rs. 165, while a cold coffee will cost

anywhere between Rs. 120 and Rs. 200. The CCD sells hot coffee at about Rs. 80 and

cold coffee at about Rs. 150. Though CCD has a number of branches in India, Starbucks

has created a buzz and penetrated in the Indian market and differentiates itself from other

cafes already prevalent.

As far as for Barista, it is not doing well, since there is no innovation. The quality is not

that good as compared to others having almost the same price range as Café Coffee Day.

HIGH QUALITY

LOW QUALITY

LOW

PRICE

HIGH

PRICE

STARBUCKS

CAFÉ COFFEE DAY (CCD)

BARISTA LAVAZZA

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At Barista, A hot coffee costs Rs. 85 and cold coffee costs Rs. 155. Also, one of the

weaknesses of Barista is that it is perceived to be expensive by people.

ANALYSIS ON THE BASIS OF THE INTERVIEW

Q1 Why did you decide to come into India with a partner? We do not have any

restrictions in FDI in single brand retail. Why did not you just do it on your own?

Howard Schultz: India is like no other market in the world. Tata's position in India is very

unique. It is a company that has unique capabilities in terms of infrastructure. But mostly

their values were so consistent with ours, building a company with a conscience, treating

people well, taking care of the communities and we thought this was an opportunity to do

something together that we just could not do ourselves.

Q2 No doubt Tata is one of the biggest corporate houses in India. It is their second

coming in the coffee space. They ventured into the coffee retail space with Barista by

holding a minority stake and that really did not go very well. How did they sell

themselves to you to?

Howard Schultz: The coffee market here is ferocious in terms of competition. There are

so many players trying to do what we think we can do better. What Tata brings is a

unique perspective in terms of real estate acquisition capabilities, the opportunity to

integrate Starbucks into Taj Hotels, the ability to bring food from the Taj into Starbucks

stores and the capability that we just could not do on our own just in terms of the

infrastructure and distribution. Their previous experience had no bearing whatsoever on

what we thought would be a fantastic partnership.

We are here to build a major business and when I say major business, we think over time

India will be one of the largest markets in the world for Starbucks. We also think that the

competition has done us a favour. They have educated the market and created lots of

consumers. Our own research suggests that this market is perhaps like no other. The

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awareness of Starbucks is so large here and there is so much pent-up demand that we

think that over time this is going to be one of the best markets in the world for Starbucks.

I do not think we could have done it without Tata.

Q3 Earlier we were given to believe that you had a 50 outlet target for Starbucks in India

by the end of 2012. Do you have a revised plan now on how you are going to be

expanding?

Howard Schultz: I do not know where that number originally came from, but I am not

here to say how many stores or how soon. I will tell you we are going to build a very

large successful business here.

Q4 Your pricing is significantly lower from the way you price a cup of coffee in the US.

Starbucks has a policy of not bending their pricing too much. Given that, why did you

break the rules for India?

Howard Schultz: I do not know if we broke the rules. We want to create a value

proposition and as much accessibility as possible. We are sourcing and roasting coffee in

India. This is the first time we have ever done that anywhere outside of North America

for store opening. This gives us a competitive advantage as well, but we want to win here

and we have created a pricing strategy that will be very competitive and put us in a

position to succeed.

Q5 How will you ensure that the Starbucks expansion in India will be both sustainable

and profitable given that a lot of premium players who entered the market, to name a few

such as Costa Coffee, Gloria Jean's, Coffee Beans, are all struggling and have not yet

been able to make a dent in the Indian market?

Howard Schultz: Yes. We have heard this many-many times in Japan, in China, in

Europe, in Mexico that Starbucks is not going to succeed here, no one else has, you are

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an outsider, etc. We are going to take the long view. This is not a sprint, it is a marathon.

We are going to bring a quality product that does not exist. The experience will be so

significantly different. Our people will be passionately committed to service and are

highly trained and the experience of the store will be significantly different. You can not

compare the Starbucks brand and reputation what we are going to bring to this market to

what exists here. What we are bringing is going to be new and exciting and completely

different.

Q6 What is your purpose in the Indian market considering we are populated with

restaurants, roadside eateries, etc?

Howard Schultz: We want to create a coffee experience that is a stunning experience in

terms of quality. We want to create a physical environment that does not exist and when

people see it, it will become the third place (third most popular place after home and

work). From a reputation standpoint, we also want to create the kind of company that is

steeped in humanity and gives back to the community and we will do that here as well.

Q7 You have specialised food menus, catering to the Indian palette. What is so special

about the menu that you deemed it right to be served at a Starbucks outlet?

Howard Schultz: We got great advise from the people at the Taj about the kind of food

that would appeal to the Indian customer. People have been pretty excited about the food

at all the tastings that we have done. The food is very different than anything we have

done anywhere else because it is cue to the Indian palette. It will be hot, it will be cold, it

will be savoury and sweet and will be vegetarian as well as meat. I suspect that the food

will be a higher percentage of sales than we have seen in other markets.

Q8 What about the fact that India is traditionally not a coffee drinking nation, but a tea

loving nation?

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Howard Schultz: Not any more. Walk the streets of India. There are so many coffee

players doing pretty well. That gives us a lot of confidence that the winds are going to be

at our back.

Q9 Is there an element of customisation that has gone into designing outlets for city /

locality? How does the balance between standardisation of the brand and customisation

for city / locality work for Starbucks?

The stores are a critical part of the Starbucks experience that we offer to consumers. Each

and every one of our flagship store actually incorporate very significantly the culture and

the tradition of the country. The designers marry the elements of Indian tradition and

craftsmanship with the modernity elements of Starbucks. I give full credit to our

designers as they balance the elements as there is a high expectation that people have

from a Starbucks store that they have visited abroad.

The designers have worked across many markets and their understanding of the Indian

ethos that they have incorporated well and it differs from store to store. There is no magic

number saying that this much of Indian sensibility and this much of core Starbucks will

be there. It’s a fine balance they maintain.

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CHAPTER 3. CONCLUSION

Starbucks’s success in India like other foreign brands depends on their adaptability in

addition to what they do globally. Like Domino’s “Peppy Paneer” pizza, McDonald’s

McAloo tikki burger Starbucks might consider tasty healthy vegetarian recipes for an

Indian breakfast treat, next to its muffins some chicken tikka sandwiches may also do

fine.

Starbucks is catering to local tastes, it has been doing very well in many other countries

including China and hopes to have success in India as well. The staff is very pleasant and

professional and is slowly creating a good image in the minds of the customers giving

them a really good ambience with high premium products at fairly affordable rates.

The winning mantra according to Schultz, 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.”

Thus, Starbucks should follow the strategies that is using and set up more number of

outlets. There is also a good feedback from people and has already created its image in

the consumers mind. Starbucks has a huge potential and can do much better in the near

future.

SUGGESTIONS

1. Tata Starbucks can aim at increasing the number of outlets since the current cafés

are already doing well.

2. Keep a constant track of its competitors, and have a competitive advantage.

3. Conduct research of places in India, before setting up a café, since each city has

its own culture, tastes and preferences.

4. Maintain high quality of products.

5. Try to make the prices a little more affordable for the lower income group.

6. Continue to introduce new products that are suitable to Indian taste.

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BIBLIOGRAPHY

Vrushali Paunikar, 2011, "International Business Plan Starbucks India", A proposal

Ruchi Mankad and Joel Sarosh Thadamalla, 2011, "Case: Starbucks Coffee

Company, The Indian Dilemma", Strategic Management and Business Policy, 13th

Edition, Thomas L. Wheelen, J. David Hunger

Herve R., Dec 21, 2004, "The Starbucks Corporation: Past, Present and Future",

Auch-Roy-Pen: 1207HA

Harold Brown, 2011, "External Environmental Analysis of Starbucks and the Coffee

Industry"

Flight, Georgia. “Grinding Out Success Next to Starbucks” Business 2.0, Oct. 2006.

Vol. 7, Issue-9

Ryan C. Larson, 2008, "Starbucks a Strategic Analysis - Past Decisions and Future

Options", Brown University Economics Department

WEBLIOGRAPHY

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on Aug 15, 2013

http://www.starbucks.in/responsibility accessed on Aug 15, 2012

http://www.tatacoffee.com/corporate/company_profile.htm accessed on Aug 15, 2013

http://www.indiacoffee.org/indiacoffee.php?page=CoffeeData accessed on Oct 17,

2012

http://www.indiacoffee.org/userfiles/RFP-FINAL-SEP12.pdf Oct 20, 2012

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Aug 17, 2013

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http://en.wikipedia.org/wiki/Tata_Starbuck accessed on sept 3, 2013