Professional Documents
Culture Documents
Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................3
Economy of India........................................................................................................................4
Culture & Habits..........................................................................................................................4
Competition.................................................................................................................................5
Positionality and Location Strategies..........................................................................................5
Solution options...............................................................................................................................5
Rapid Expansion..........................................................................................................................5
Consumption Patterns..................................................................................................................5
Recommended Solution(s)...............................................................................................................5
Discussion........................................................................................................................................6
Conclusion.......................................................................................................................................6
KOFI OR COFFEE 2
Executive Summary
The one-page write up explaining ‘entire case in a nutshell.’
Target Audience: Who does not want to read the entire project report.
KOFI OR COFFEE 3
Introduction
The entering of Starbucks into Indian market was an opportunity for the enterprise to grow
its global revenue in a competitive market. Due to strict regulations from Government of India,
the company decided to partner with Tata Global Beverages which is one of the ventures of
Indian corporate giant ‘Tata.’ TGB has its operations globally and specializes in various
products, especially tea and bottled water. The Tata-Starbucks partnership is an opportunity for
both the company to grow its revenue in the competitive environment, locally and
internationally. Avani Davda is the youngest CEO within the leadership of Tata and is facing the
challenging task of making Tata-Starbucks a success by expanding to various market within
India and increasing the revenues.
Starbucks
The Starbucks is a multinational brand with presence in markets of 65 countries across
the globe with more than 20,000 retail stores. It started its journey in 1971 with opening a shop
in Seattle and gradually expanded to whole of the United States. The growth of Starbucks into
Global iconic brand resulted in diversification of its business model which initially was based on
stand-alone store of format within United States. Starbucks partner with leading businesses in the
different markets of the world to increase its revenues because that is an effective way to
understand the local sociocultural, and economic environment. The other form of diversification
includes distribution of products through grocery stores and supermarkets, along with placement
rest areas of Highway. The Starbucks dominates the ‘Coffee and Snack Shops’ market within
United States and Tata Global Beverages (TGB) became a potential customer for entering into
the Indian market.
been in record double digits during recent years. The significance of international revenues and
compensating for the United States, European and Middle Eastern markets, Starbucks decided to
explore growth opportunities around the globe which includes the second most populous country
of the world, India. The trends of urbanization, demographic statistics with majority chunk of
young population, and rapidly transforming economy has been source of attraction for Starbucks.
Key Issues
The Tata-Starbucks have been facing several issues regarding its success in increasing
overall sales and profitability margins. Following are some of the key issues:
Economy of India
Despite the rapid economic growth of India at a pace of 8% per annum, the inflation and
purchasing power remained a key factor in increasing sales revenue and profit margins for Tata-
Starbucks. The recent stability of inflation around 5% can not be taken for granted because at
some point in time over the past couple of years, the inflation rate has been in double digits.
Additionally, the 8% annual growth is not evenly distributed and hence a special segment of
upper-class is taking more advantage as compared to the middle. The overall economic situation
of the country with poor infrastructure and power shortage have resulted in increasing the cost of
production for some manufacturers, hence making it difficult for investors to decide on their
respective decision. Tata-Starbucks’ target market consists of young adults and belonging to
salaried middle-class.
Competition
The competition for Starbucks in India are both local and international. Some familiar
international brands include McDonald’s, Costa Coffee, and Dunkin Donuts. In local brands, the
lead position is with Café Coffee Day (CCD) with its presence in Indian market for over more
than two decades. The Indian market is saturated in terms of competition and it is difficult to
maintain presence with significant profit margins with their respective international niche.
Hence, the retail formats of different brand vary. For example, Coffee Day Xpress focuses on
beverages, Coffee Day Square emphasizes on single-origin coffees with are sold as high-end, and
Coffee Day Lounge is targeting families and their respective patterns of consumption style. The
international and local brands that experimented by entering into the market either had to
shutdown or lower their prices and in some cases were looking for partners to sustain. This is
primarily due to saturation of market and consumer trends which are difficult to manage in short
to medium run.
Solution options
The discussion of suggested solutions provided in the case (along with merit & demerits
of each).
Rapid Expansion
The initial strategy would be one of rapid expansion, not necessarily tied to profit goals.
Aggressive expansion in areas identified as “emerging markets” was a tactic straight out of
Starbucks’ standard playbook; it had deployed a similar strategy in China (Vijayaraghavan,
2015). Tata Consulting Services would provide support in the venture’s use of technology.
The first Tata-Starbucks store opened in Mumbai. Reportedly, a seed amount of $80
million had been set aside for rolling out new stores (Bailey, 2014). Within two years of
launching, there were more than 50 stores spread across six cities. The locations were all in
major metropolitan areas, mostly in Southern India. These areas included: the city of Mumbai,
the commercial hub of India; New Delhi, the capital city; Hyderabad and Pune, both mid-sized
cities in the middle of the country, each of which boasted a strong presence of high-tech
companies; Bangaluru, the iconic high-tech city mentioned in the book “The World is Flat;” and
Chennai, a Southern city with very high per capita coffee consumption. Each of those cities had
some combination of three factors: substantial numbers of coffee drinkers, groups with high
levels of disposable income, and a significant number of “Westernized” consumers.
Consumption Patterns
Consumption patterns had changed in some segments of society, and these changes related to
social changes resulting from the advent of outsourcing by international companies into India.
Most employees of such firms, typically working in the field of technology, were young, willing
to spend money and comfortable in a different, especially Western, culture. They were amenable
to drinking coffee and tea outside the home and paying more than the absolute minimum for it.
This marked the beginnings of “café habits,” if not quite a “café culture,” and thus offered hope
and promise for businesses like Tata-Starbucks.
Outsourcing and technology-related sectors had contributed significantly to employment and
growth of a middle class. There had been an increase in the number of young adults with
disposable income and aspirations.
Recommended Solution(s)
Wat could be the better option(s) to address the challenges and issues company is facing
in your opinion within the given scenario and why.
The
KOFI OR COFFEE 7
Bibliography