CaseQuestions: CCD-Starbucks

Group 4

As a market leader, what are the most important competitive advantages of

CCD? What are the biggest competitive challenges CCD might have to face
with the arrival of Starbucks in India?

CCD Competitive Advantages:

1. First mover advantage:CCD has the first mover advantage as it was the first to
introduce the concept of cafes in India and had no competitors and hence they
could sell at a premium price.
2. Advantage in price: CCD did their own sourcing with 3000 acres of plantations;
they can source coffee at a much lower rate than the market provided
competitive advantage in price.
3. Vertical Integration:They own the chain from top to bottom, which is vertically
integrated whereas the competitors often outsource their activities. The quality is
excellent and has a variety of in house mixes and recipes, which have helped
them, create a loyal customer base.
4. Customer relationships:Its target segment was of youth from age group 15 to
30, of which 60% were its regular customer, this made possible for their staff to
make an emotional connect with them to increase brand loyalty. Not franchising
their outlets helped them save time in setting up new outlets and also ensure
quality
Competitive Challenges:

1. Costs:As CCD opened outlets of its own, its setup cost had been high.Renting
cost had been increasing and hence opening new stores became costly. It
became difficult for CCD to keep reasonable footfall round the clock
2. Global presence and competition: A major competitive challenge that CCD
has in relation to Starbuck in particular is its lack of global presence and
therefore the loss of excitement that Indian culture find in the new experiences.
With opening of international market, competition became more intense
3. Change in consumer preferences:With increase in exposure towards luxury,
the expectation of costumers to CCD has increased. Caf business just like
fashion business, menus needs to be revamped more often, as much as once a
quarter, unlike once in 2 to 3 years previously. Starbucks have a premium image
 and its world no 1, so all the upper segment customer of CCD may get carried
away by Starbucks
4. Expansion plans:Lastly the store is concentrated in only two major urban areas
in India, with various other metropolitan cities untouched

What are the advantages Starbucks as one of the best global player in
coffee retailing? What are the challenges for Starbucks to compete with the
dominant player like CCD in India?

Is CCD in the direct competition of Starbucks or they are catering to the

different segments and which will grow the overall coffee market in India?

We can analyze it based on the STP of both the companies:

Segmentation: CCD- Youngsters looking to hang out with friends

Starbucks- People looking for coffee with experience

Targeting: CCD- College Students and Working professionals

Starbucks- Upper middle class

Positioning: CCD- A place between office & home

Starbucks- Great Coffee; Great Service

Initially, Barista was CCDs closest competitor. Starbucks, being a premium

brand (50% more expensive than CCD) is slightly overpriced for the Indian
consumers and thus is not a direct competitor.

CCD will grow the overall coffee market in India, as it is planning to improve both
the breadth and the quality of its food and beverage offerings; upgrade interiors,
and improve the service levels through training. They are on the right track of
targeting the college students and working professionals, nearly 40% of the
market. Also another advantage is the fact that the average ticket size is smaller
at Rs. 175 and since Indians are a little price sensitive, it works to the companys
advantage.

What leanings from the China can be implemented by Starbucks in India?

Or Indian market is very different now as Starbucks is entering after 12
years? Is joint venture with Tatas a right decision by Starbucks?

Learnings from China:

1. Partnering with the local firms Starbucks in China partnered with 3 different
firms to obtain local expertise
2. Tailor its offerings according to the local taste Starbucks China introduced
beverages using popular local ingredients
3. Education about Coffee Starbucks China educated the local population about
coffee and how to adapt to it in their daily life
4. Service Quality Starbucks distinguished itself from the rest of the competitors
by providing exceptional service standards.
5. In-store experience It focused on providing the in-store experience to its
customers by providing them an upscale ambience. It soon became a de facto
meeting place for executives as well as for the gathering of friends
6. Brand Positioning Starbucks positioned itself as a premium brand to offset the
higher cost of dine-in services
7. Talent Strategy It influenced the parents of their employees by making them
hear testimonials
8. Initial focus on high visibility areas Initially Starbucks opened its stores in
international hubs like Beijing, Shanghai and Guangzhou

Partnering with the Tata Group is the right strategy for Starbucks as
1. They are a trusted brand in the country and partnering with the right brand is
essential for its success
2. They bring with themselves their supply chain expertise
3. Tata Group already owned the Tata Global beverages which is the second
largest branded tea company in the world
4. They had their presence in the catering space which made it easier for them to
create an offering for the Indian customers

How should CCD respond to Starbucks in India? What should be their

important goals? Should CCD expand aggressively with premium offerings
to compete with Starbucks?

CCD should adopt a flank position defensive strategy, and focus on

consolidating its share of the young middle and upper class segment through its
cafes, and a mature office goer/experience seeker crowd through its lounges and
squares.

The major goals CCD should focus on are:

 Enhanced Increase Retention of
training and price sensitive
Customized awareness
retention customers
in-store and recall of
measures of looking to
experience frontline CCD squares have a good
personnel and lounges time

From Exhibit 7, it is seen that the perceived value from a CCD Lounge/square is
more with respect to Coffee Xpress or shops. To leverage this, CCD should
expand to acquire SEC A1/A2 and B1 customers, who would otherwise be
enamored by the affluent experience of Starbucks.

How should CCD handle the breadth of the offerings? What should be the
strategy for non-coffee product categories?