team star - starbucks in india
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Starbucks Entry Strategy in India
Presented by : Team STAR
Agenda
• The Starbucks Story• The India Story• Can Their Marriage Work?• The Proposal Story
The Starbucks Story
Starbucks History
Starbucks was born in Seattle civilian traditional market
Entered 32 global markets, at a rate of 3-4 shops daily
Entered great China market by Joint Venture
40,000 outlets!!!!!!
1971 1996 1998 Future
Starbucks History
Starbucks Success
• http://www.youtube.com/user/starbucks?blend=1&ob=4#p/u/0/KEodK38cmvE
Starbucks Success
• Starbucks Culture:– Product & Service 5 senses: taste-smell-visual-audition-touch– Brand: position-identity-word of mouth
• Management – Diversified entry modes – Employee training
Starbucks Success
“We aren’t in the coffee business, serving people. We are in the people business, serving coffee”
--- Howard Schultz (Serwer, 2004)
You & StarbucksIt’s bigger than coffee !
The India Story
India - The Re-Emerging Economy
• GDP – $ 1.73 trillion US dollars– Estimated growth of 7.5% YoY
• FDI– $ 197,935 million US dollars, from April 2000 to April 2011
• Political Situation– Relatively stable congress has been in power consecutively for 2 sessions– Corruption level is high, but measures are being taken to make the system as
transparent as possible• Employability
– Good command of English– Flexible about working hours– Good grasping power
Indian Consumer Market
The Indian Consumer
Characteristics• Indians are touch and feel
consumers• They get lost in super markets• Highly dependent on word of mouth• Love celebrity endorsement
Needs•They need assistance and importance•They need to be looked after•Product pricing and quality•Indian consumers need freebies
Western Influence - Experience America/Europe• Urban middle and upper class Indian consumer has a positive attitude towards
western trends.• The Indian consumer has become much more open-minded and experimental • Exponential growth of western trend reaching the Indian consumer by way of
the Media and Indians working abroad
Coffee chains growing in India
Market’s Estimated Potential• Revenues: $800-900 USD by 2015• Café : 5000 by 2015• Consumption: Compounded Annual Rate of 25%
Café Market Over the Years• Total 1500 units, 1000 have opened in last 5 Years• Coffee Consumption: 85gm Per Capita • 3rd largest Coffee Bean Producer of the World
Major Players• Café Coffee Day • Barista Lavazza• Costa Coffee
Can Their Marriage Work?
Cultural Distance Administrative Distance
English is widely spoken in both the countries.
India and the U.S have close political, economic and military relations.
Improving ethnic ties between India and the U.S. Asian Indians constitute 1% of the U.S population.
India is the world’s largest democracy and has a politically stable environment.
Similar to the U.S, India is a secular country with high religious tolerance.
India is a member of WTO and has an open policy for foreign investment in retail industry.
Different social norms in the two countries, but this divide is closing fast.
India has a strong legal system, which makes it a safe business destination.
CAGE Analysis - I
CAGE Analysis - II
Geographic Distance Economic Distance
The two countries are about 7500 miles apart and don’t share a common border.
India is the fastest growing consumer market in the world.
Excellent transport connectivity between India and the U.S .
Per capita income has doubled in India since last seven years because of economic growth.
India has a long coastline and has good shipping connectivity.
Average household disposable income is expected to grow by 5.3% each year.
Existing internet and telecom connectivity between the two countries.
The U.S is one of India’s largest trading partner and is also the largest foreign investor in India.
The Proposal Story
Global Strategy Transnational Strategy
Home Replication
Multidomestic Strategy
Global Strategy Transnational Strategy
Home Replication
Multidomestic Strategy
Pres
sure
s fo
r Glo
bal I
nteg
ratio
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Pressures for Local Responsiveness and FlexibilityLOW HIGH
HIG
HLO
W
Entry Strategy
Potential Mode of EntryMode of entry Advantages Disadvantages
Licensing Lower cost and risk No tight controlRisk for losing know-how
Franchising Lower cost and riskFast growth
Quality controlHard monitoring
Joint Venture Benefit from local partnerShare cost and riskPolitical considerations
Loss control of technologyNo tight control of partnerConflicts and battles
Wholly -owned subsidiaries
Technology controlTight overall control100% share of profitsLocation and experienceCurve economy
Full cost and riskCulture problems
Mode of entry Advantages Disadvantages
Licensing Lower cost and risk No tight controlRisk for losing know-how
Franchising Lower cost and riskFast growth
Quality controlHard monitoring
Joint Venture Benefit from local partnerShare cost and riskPolitical considerations
Loss control of technologyNo tight control of partnerConflicts and battles
Wholly -owned subsidiaries
Technology controlTight overall control100% share of profitsLocation and experienceCurve economy
Full cost and riskCulture problems
Mode of Entry in Other Markets
58%29%
4%8%
Starbuck's previous choice for mode of entry
Joint VentureLicenseWholly OwnedMajority Owned
Choice of the partner
Offer- 19 Coffee Estates- 6 Tea Estates- Coffee Curing- Instant Coffee
Vision- Preferred choice in the premium markets- Customer centricity, quality, sustainability and an engaged workforce- Respected organization
Mission- Enhance value to stakeholders- Improving the quality of life of our people.
Values - Integrity- Understanding- Excellence- Unity- Responsibility
Terms of the JV
• Stakes– 51% for Starbucks / 49% for Tata Coffee
• Lock-in period– 5 years
• Buy-out strategy– If the 51% rule disappear, then they can reconsider the stakes
proportion
• Organization within Starbucks– International Division Structure
Q&AFrom the board
Our Competitors
Café Coffee Day
• Pioneers of Café culture in India• Retail division of India’s largest coffee
conglomerate• Coffee is priced above 50 INR (~US$1) onwards• Awarded India’s most admired F&B Retailer last
year• Operates 1,134 outlets across India
and plans to add another 815 outlets by 2014
Barista Lavazza
• Owned by Lavazza, Italy’s largest Coffee company
• Targets the top 20% of the consumers• Plans to open about 300 outlets by 2012• First coffee retailer in India to start a loyalty
program• Adjusted as the Most Admired Retail Leisure
Chain in 2011
Costa Coffee
• First international coffee chain in India• Owned by Costa Coffee, the second
largest coffee chain in the world• Adopted the master franchisee model to
enter the market• Targets only the metropolitan cities ruling out
the option of expanding in Tier II and III cities• Plans to have 300 outlets in the next four
years
CSR in India
Starbucks CSR in India
• India is the world’s third largest coffee exporter• Raise the coffee farmers to C.A.F.E. and Fair Trade standards• Increase volume of export quality coffee in India• Starbucks will gain reduction in costs by securing local supply
of coffee
+ +
Thank you!
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