Professional Documents
Culture Documents
A Report
On
PREPARED FOR
Mohd. Mahbub Hussain
ULAB School of Business
PREPARED BY
Asif Mahmud Onik
ID : 141051002
Bithi Athter
Biswajit Saha
ID : 141051074
ID: 133051065
ID: 133051077
ID: 133051010
ID: 133051013
[April 2015]
: : Executive Summary
Starbucks Corporation, founded in 1971 is headquartered in Seattle, WA and now operates
21,000 retail stores in 66 countries. The backbone of Starbucks business is its company operated
retail stores. Starbucks coffee has followed different strategy in different country.
Our report presents a summary of the Starbucks Corporation branding value and what kind of
strategy use in coffee & beverage business for India (Tata Starbucks). The main purpose of this
report is to find out different entry modes and strategy used by the branded company like
Starbucks in an overseas market. Primarily internal and external factors were analyzed in order
to understand the factors which have an impact on Starbucks entry mode decision. After
analyzing online journals and resources data on line, it turned out that Starbucks prefer three
operational entry modes in overseas market: joint venture, licensing agreement, and companyowned operations/wholly owned subsidiary.
In our analysis result many opportunities exist for Starbucks in this industry. The premium
coffee market continues to grow, offering opportunities such as rural U.S. expansion and
continued international proliferation. The firm may also be able to create new distribution
channels for other products as it has done with music, DVDs, and books. Premium and
proprietary food offerings can be used to drive growth in order to compete with fast food
restaurants, and acquisitions and joint venture/licensing agreements provide additional
possibilities for brand leverage. The Starbucks brand is very strong, but more steps can be taken
to ensure that it becomes an enduring global brand.
: : Table of ContentsTopic
Page No
Executive Summary
iii
Chapter 1.1
Starbucks Corporation
1.2
Chapter 2.1
2.2
2.3
2.4
Chapter 3.1
Cultural Factor
Socioeconomically Factors
Existing Competitors
Economic Factors
Pricing decisions
Chapter 4.1
4.2
Organizational Structure
4.3
Chapter 5.1
Conclusion
Reference List
45
stores
in
India
across
Political Risk
These risks may sometimes make it difficult to maintain constant and reliable revenue.
Foreign Exchange Risk:
Indias government approved plans to allow foreign investor share more than 51 percent and
local 49 percent because Indian government always want to benefited local company. When
Starbucks want to invest big amount of money in Indian market, this time Starbucks realize his
company at first facing foreign exchange risk, because this corporation to know foreign
exchange risk occurs when the value of investment fluctuates due to changes in
a currency's exchange rate. When a domestic currency appreciates against a foreign currency,
profit or returns earned in the foreign country will decrease after being exchanged back to the
domestic currency. Due to the somewhat volatile nature of the exchange rate, it can be quite
difficult to protect against this kind of risk, which can harm sales and revenues.
2.4.2 Other Strategy Factor Facing (Starbucks Business Operate in Indian Market):
Emerging markets experience: Starbucks analyses India market rapid industrialization and often
demonstrate extremely high levels of economic growth. This strong economic growth can
sometimes translate into investment returns that are superior to those available in developed
markets. However, emerging markets are also riskier than developed markets, there is often more
political uncertainty in emerging markets and their economies may be more prone to
excessive booms and busts. In addition to carefully evaluating and financial fundamentals,
investors should pay close attention to the country's political climate and the potential for
unexpected political developments.
Laws across borders: When laws of two countries differ, it may be possible in a contract to
specify in advance which laws will apply, although this agreement may not be consistently
enforceable. Alternatively, jurisdiction may be settled by treaties, and some governments, such
as that of the India often apply their laws to actions, such as anti-competitive behavior,
perpetrated outside their borders (extra-territorial application).
Starbucks sought after potential joint venture partnerships in India. Starbucks sought to acquire a
competitive intelligent strategy by gathering key information such as scouting locations and
meeting with government officials prior to entering these markets to fully gain the additional
market knowledge required for its success.
Government actions impacted Starbucks as a challenge with exchange control, trade agreements,
trademarks, and other foreign regulations all of which protected the working farmers and their
rights.
Cultural Factor: India culturally a tea drinking country. This country tea industry, which is
based in the rolling hills of Assam and West Bengal in the east produce huge tea than the other
agriculture product and Indian people are traditionally consume more. In this scenario the
government in New Delhi to officially recognize tea as the national drink.
As this situation Starbucks coffee entered new markets with new leadership that recognized the
culture, history and quality behind premium coffee; however, the no-smoking policy, high rent,
in India posed great challenges to Starbucks. Starbucks incurred additional losses with the
exchange of materials. Starbucks only offered North and South America ground roasted
premium coffee beans, India did not have a roasting facility; therefore, Starbucks paid additional
shipping costs to allow shipment of its coffee from its roasting facility in India.
(Source: The Hindu news article The first flagship Starbucks store in India).
Existing Competitors: The Indian coffee market is growing at a feverish pace. Consumption has
almost doubled in the last few years on
the back of the large, young urban
population that prefers western cafes to
traditional Indian coffeehouses. Leading
coffee chains like Caf Coffee Day and
Costa Coffee are already registering
double digit growth rates and statistics
indicate the market is far from saturated.
The current coffee bars in India provide
some similar environments to that of
Starbucks and the ones which are
different appear to be simple enough to
where Starbucks can meet the needs of
the Indian consumers, should it choose to
adjust slightly.
Economic Factors: Indian economy is not match in western country or china scenario. In this
market situation Starbucks business strategy not same to other country experiences. The
Starbucks product and service offerings allowed in India were twice that much in the United
States and yet Starbucks incurred huge losses due to the surmounting consumption of the Indian
intake of its gourmet and premium priced coffees.
Pricing decisions: Before Starbucks coffee entering into the Indian market, the company
tweaked its menu to suit the Indian conditions. This enabled them to offer their coffee at Rs. 80,
which is far lower than those offered by the competitors in the market. Pricing decisions in India
posed a great challenge to Starbucks due to the increase in disposable income and economic
situations that affected their idea about coffee which included:
Shifts in demographics and social trends such as the age of the coffee
consumer
The obesity rates which have an impact on corporate responsibility
programs
Bargaining Power of Buyers: As we know that Starbucks is providing the same quality of
product and services all over the world. So the customers bargaining power is limited. In fact
there is another threat to Starbucks is that their customers have the ability to brew their own
coffee and this is a threat for Starbucks.
Bargaining Power of Suppliers: The quality of coffee sought by Starbucks is very high.
Starbucks Corporation always want to follow rule and guidelines, not only just shareholder and
employees as also rule developed to suppliers because this corporation clearly known when any
company entire a big market this moment some clear guidelines benefited seller, buyer and
suppliers. Thats why Starbucks announced coffee purchasing guidelines for control the power of
supplier. These guidelines are based on the following four criteria: Quality baselines, social
conditions, environmental concerns, and economic issues because Starbucks known this brand
provide service to customer and this kind of quality must needed to run successful business in
global market.
wide. Literally, it means two or more individual and independent firms join together in an
alliance in order to achieve better position in the market. Often the joint ventures are a 50/50
venture. It is a method that both sides hold relatively the same percentage of shares in the
venture. The joint ventures operation is separate from both companies and often the same role is
shared by both managerial teams. It could be possible that one firm invests more in order to gain
the larger percentage of shares and hold tighter control of the joint ventures operations.
3.1.1 Long term plan in India:
On 31 January 2015, Starbucks announced its objective to open more 20 outlets in India by the
end of 2015, through a 50-50 joint venture with Tata Global Beverages. The two partners will
invest a total of $80million initially. The cafes also try to serve a variety of small dishes ranging
in price to customer and also the regular coffee menu is also available during that time.
If raw coffee prices remain high, however profit margins for Starbucks small packaged coffee
business could erode in the long term. Coffee prices have surged this year, making it the best
performing commodity for the year to date, as record dry weather in Brazil has undermined
production forecasts.
Starbucks Coffee president (China & Asia Pacific) John Culver said "We are committed to India for the
long-term and we want to grow aggressively here. India will be our top five markets around the world
over a long-term"
[How to Organize and Lead on Entrepreneurial Venture, Global Text Project, 2012 by: Dr. Donald J. Cubbrey&
Starbucks Wikipedia; seen on August 11, 2014]
5.1 Conclusion:
Starbucks faced challenges with coffee competitors that have made their imprint on the Indian
community. Starbucks still has competitive western advantage when compared to these other
competitors. This branding global expansion had successfully developed with market share in
various cities in the world. For global company like Starbucks, it is very vital to decide its entry
modes when enter into a new market as it impacts a long-term operation in the foreign country.
Therefore, by combining internal and external factors, Starbucks does make the right choice of
entry modes for international expansion and operating their business in various countries.
: : Reference List:
Howard Schultz Starbucks & You Its bigger than coffee January 2014.
Available from: http://www.starbucks.com/responsibility/global-report
Overholt Alison. Do You Hear What Starbucks Hears? Fast Company. July 2004.
Available from: http://www.fastcompany.com/magazine/84/starbucks_schultz.html
Frey, Christine. Starbucks to Buy Seattles Best Coffee. Seattle Post-Intellegencer. April 2003.
Available from: http://www.sba.pdx.edu/faculty/daveg/562/Starbucks
Gilbert, Sarah. Starbucks buys Coffee People stores, hippies mourn. Bloggingstocks:SIRI 18
Sept. 2006.
Holmes, Stanley. Whats Behind Starbucks Price Hike? Business Week Online. 25 Sept. 2006.
Available from: http://www.bloomberg.com/bw/stories/2006-09-21/whats-behind-starbucks-price-hikebusinessweek-business-news-stock-market-and-financial-advice.
Starbucks International Operations Report By Howard Schultz, Chairman & Chief Global
Strategist Starbucks, 20011
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http://www.wsj.com/articles/SB10001424052970204740904577192500354456184
http://www.wsj.com/articles/SB10001424052748703583404576079593558838756
http://www.borgenmagazine.com/the-success-of-starbucks-in-india/
.http://profit.ndtv.com/topic/foreign-exchange-rules
http://www.2point6billion.com/news/2012/10/31/starbucks-india-expansion-attracts-brandconscious-middle-class-consumers-11768.html
http://www.ukessays.com/essays/marketing/proposed-expansion-strategies-of-starbucks-intoindian-market-marketing-essay.php