International Business Management

The following report consists of the entry mode chosen by STARBUCKS to enter the Indian Market of Coffee House. This Report will give you a better understanding about an organization’s require to expand globally. Globalisation plays a very important role for any organization. It helps the company to expand over different areas and connect with different people. The report depicts about the entry mode chosen by STARBUCKS to invade the Indian market. It also briefs about the competitive Environment faced by STARBUCKS to gain the desired market share.

It also consists of the Political, Economical, Social and Technological Analysis faced by STARBUCKS and the Corporate Strategy used to survive among the rivalry. This report clearly discusses the Strength, Weakness, Opportunities and Threats faced by STARBUCKS in the Indian Economy and how they have been successful to overcome them. Followed by the conclusion part which states how successful was the chosen entry mode and growth of STARBUCKS in its new market.

Vanessasong.(2012).Retrieved from http://blogs.ubc.ca/vanessasong/2012/11/15/doesnt-matter-what-starbucks-sells-india-loves-it/

Table of Contents:

Assignment Cover Sheet…………………………………………….………………………………………………………………………………1 Assignment 1 – Research Report…………………………………………….………..………………………………………….……………2 Project Starbucks India……………………………………………………………………………………………………………………………….3 Executive Summary…………………………………………………………………………………………………………………………………….3 Table of Contents……………………………………………………………………………………………………………………………………….4 Introduction……………………………….………………………………………………………………………………………………………………5 Entry mode chosen by Starbucks………………………………………………………………………………………………………………..6

Why Starbucks – TATA will work?……………………………………………………………………………………….7 Starbucks Competitive Environment…………………………………………………………………………………………………………..8 Starbucks PEST Analysis…………………………………………………………………………………………………………………………9-10 Corporate Strategy of Starbucks……………………………………………………………………………………………………………….10 SWOT Analysis………………………………………………………………………………………………………………………………………….11 Conclusion………………………………………………………………………………………………………………………………………………..12 References………………………………………………………………………………………………..…………………………………………13-14

Introduction

Globalisation means growth of a company to global or international boundaries. It is consider being a process where the economic, cultural and social activity of a particular organization is carried to an international level. It helps in the exchange of ideas, goods and services between the people of different nations which overall leads to the expansion of the society of a country.

To expand globally, a company has three key questions to answer:

“The essential act of entrepreneurship is the new entry. It can be accomplished by entering new or established markets with new or existing goods or services. New entry is the act of launching a new venture, either by a start-up firm, through an existing firm or via internal corporate venturing” (Lumpkin and Dess, 1966)

Starbucks a very popular coffee house started back in 1971 where they were the retailer of whole bean coffee, tea and spices with just one simple store. But today they have millions of customer with nearly 18000 outlets spread over 60 countries. Starbucks mission is to inspire and nurture every human being with one cup in one neighbourhood at a time.

Unlike many other famous brand for coffee like Coffee Bean, Costa; Starbucks also invaded the Indian market recently to earn their rupee income. Indian café market saw a tremendous increase in the sales of $230 Million in the year 2012 and the figure is expected to rise as high as to $410 Million by 2017. The Starbucks effect entering the market at this moment shall help the sales to double up in the next five years.

Entry Mode Chosen by Starbucks and Its Success:

Starbucks Corporation entered Indian Coffee house market as a Joint Venture with TATA Global Beverages as TATA Starbucks Limited both owing 50% share in the company. The outlets are branded as Starbucks “A Tata Alliance”. Starbucks made attempts to enter India by an alliance with Kishore Biyani Future Group about three years ago, but the plans were rejected by Foreign Investment Promotion Board (FIPM). Starbucks entering India through joint venture was a safe move since it had a lot of tensions and apprehensions about the uncertain future in the Indian market. Every country has different kinds of demographics, people of different culture and the world trade which is changing at a very fast pace, and this makes difficult for a company to determine any changes. Starbucks entry was successful due to a Joint Venture with a partner from a host country, because TATA is fully aware of the market conditions in India, the demographics and expectations of the people of India. In this phase the new entering company just needs to provide their technology, talents and should know how to expertise whereas the host company helps by providing the domestic market knowledge and their own local technology. When the two good things combine together, it becomes out to be a successful, prospective and collaboration model of business for both the companies.

Starbucks looks to expand globally. (2012). Retrieved from http://blogs.ubc.ca/taylorcarkner/

Why Starbucks – TATA will work?MoU (Memorandum of Understanding) has made collaboration between the two companies for roasting and sourcing coffee beans in India at TATA Coffee’s Corporation. As India’s coffee market are growing at a very rapid pace having a potential of 500 coffee bars, so there seems to be a good roastingof the coffee between the two companies. Both companies have shared and committed towards responsible business values. They shall also help the local farmers to learn the techniques of growing coffee in a better way contributing towards the society. India has a very vast dynamic market and both the companies are focusing on exploring the local opportunities of growing coffee with farmers within the TATA ecosystem. Also A partner like Starbucks, shall help TATA to capture the domestic market opportunities of India. Starbucks teams up with Tata to enter India. (2012). Retrieved from http://forbesindia.com/article/special/starbucks-teams-up-with-tatas-to-enter-india/32152/1

Starbucks Competitive Environment:As India is a country with a very vast dynamic market, the list of competitors is also vast. Over the recent years, India has seen many international brands coming and establishing business in India, due to which there has been an increase in the competition. Similarly, Starbucks also has to face a number of existing competitors in the Indian café market. Barista: it gives the experience of authentic Indian coffee. It is one of major Indian coffee chain and also gives a restaurant experience. It mainly targets the young adults and corporate customers and is very popular in metropolitan cities like Delhi, Mumbai and so on. Café Coffee Day: another very famous coffee offering a great variety of beverages and bakery items is very popular especially among college going students and teenagers due to its budget pricing items. Costa Coffee: It is also a very famous International Coffee house recently entered India targeting the high class people has become very popular and has established a very strong presence of its image among coffee lovers. These coffee houses has already strengthened their foothold in the Indian market, but Starbucks with the help of TATA who has a vast knowledge of Indian market and Starbuck’s own strong brand image together will be able to overcome these competitors in the market and establish a new market share for their own company.

Starbucks PEST Analysis:

Political Factors:Economic relations between coffee growing countries and US affects Starbucks to source the best coffee beans. Different Environmental and Consumer Protection Laws in different countries. Starbucks products affect due to increase in tariff.

Different legal system in different states of India.Economical Factors:High currency exchange rate affecting the external suppliers of Starbucks. The high increase of annual GDP growth rate in India is 5.8% since last 20 years. Currently the GDP growth is 6.1% in 2012. The increase in the inflation rate of India which was 7.81% in September 2012. Unemployment rate in India is reduced from 11.7% to 9.4% in 2012. Social Factors:

People changing trends and shift in the taste from tea consumption to coffee consumption. Increase of Health Conscious People in India has shifted people’s thinking to trust and rely on International Brand. The growing trend of people of considering the coffee house and a place of meeting corporate clients and as a recreational place to hang around with friends and families.

Technological Factors:Advancement in the Indian technology like the Indian Energy Consumption. Increase in social networking sites usage in India helped Starbucks to promote easily. Changing trends in India of making payment through credit or debit and the Introduction of Starbucks member’s card helped Starbucks to increase its customer loyalty.

Starbucks Corporate Strategy:Strategy of Rapid Expansion of the stores: Starbucks has started a three year project as expansion strategy to open as many outlets as possible in the existing markets and also to research and expand in the new and developing market. This will help them to increase their coffee-lovers customers worldwide. The new approach of “Starbucks Everywhere” is a strategy to meet the needs and demands of their customers in every corner of the world. Starbucks has also started to increase its consumer products channel in the South Pacific Region through Company Owned and Company Operated or Licensing the International Store expansion. This has helped Starbucks to create a new subsidiary of Starbucks Coffee International. Employee Training and Recognition: Starbucks has a unique system to recruit and hire their staffs and store managers. Every staff hired undergoes a number of screening and training programs before they can represent Starbucks in front of the customers. Starbucks training programs help every staff to increase their confidence level in the area of customer service. Starbucks also has a number of employee recognition programs on monthly and annual basis to retain their best and excellent employees. Store Ambience: The Starbucks store designs, planning and construction is always a unique one. There store designs are sustainable and reflect of what they area and what they do. They always design their store using the responsible sustainable materials and practices.

A coffee house should be a welcoming and a familiar place, inviting different people to connect, therefore every Starbucks store design always reflect the unique character of their neighbourhood in which they serve. Product Line: Starbucks is the market leader in the coffee retailer area with a strong brand name. if offers a huge and wide variety of products to its customers giving Starbucks a competitive advantage over its competitors. It offers products starting from various kinds of coffee, smoothies, refreshers, bakery products, yogurts, hot breakfast, food nutrition and so on. The Starbucks menu is prepared keeping the neighbourhood in mind. Coffee Purchasing Strategy: Starbucks unique purchasing strategy of coffee is the only reason for its success. They believe in building strong and close relationship with its suppliers and exporters, regularly checking the agricultural condition and yielding of the crops. They are also continuously searching different sources and varieties to meet and increase the Starbucks level. They are always contributing towards the sustainability of coffee farmers and also help in the conservation of the environment. They also provide different coffee cultivation methods that help to protect the bio-diversity resulting in a healthy environment.

SWOT Analysis:

Conclusion:Though India is considered a nation which loves tea, but in the recent years India’s tradition of drinking tea changed to loving coffee and this has helped India to develop a new coffee lovers market. By analyzing and keeping the above facts in mind, it is considered a very intelligent move by Starbucks to enter India in a Joint Venture with TATA which provided them with a feasible and low risk option to invade India.

Starbucks appeals to local palates with new Delhi store. (2013). Retrieved from http://www.firstpost.com/business/starbucks-appeals-to-local-palates-with-new-delhi-store-616716.html

References:Riley,J. (2009, October). Q&A What is Globalisation?. Retrieved from http://www.tutor2u.net/blog/index.php/business-studies/comments/qa-what-is-globalisation

Starbucks coffee company. (2012, August). Starbucks Company Profile. Retrieved from http://globalassets.starbucks.com/assets/9a6616b98dc64271ac8c910fbee47884.pdf

DNA India. (2013, March). Global café chains look to steam open India. Retrieved from http://www.dnaindia.com/money/1810500/report-global-cafe-chains-look-to-steam-open-india

Rahman, S. (2011, September). Starbucks India entry mode. Retrieved from http://www.slideshare.net/shahrukhr/starbucks-india-entry-mode

Wikipedia. (2013, august). Tata Starbucks. Retrieved from http://en.wikipedia.org/wiki/Tata_Starbucks

Jurevicius, O. (2013, February). SWOT analysis of Starbucks. Retrieved from http://www.strategicmanagementinsight.com/swot-analyses/starbucks-swot-analysis.html