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MIM- Brodie Branding Starbucks in India Module: Doing Business Abroad Submitted by Vi shal Gholap Submission deadline: 11th March 2011 Submitted to Dr. Tim Andrews Nu mber of Words: 3534 2. Branding Starbucks in India 2011 Table of Contents1. Introduction ................................................................................................................................. 32. Literature Review: ...................................................................................................................... 3 2.1. The concept of Branding: ..................................................................................................... 3 2.2. India: market background and consumer behaviour ............................................................ 4 2.3. Brand: Starbucks .................................................................................................................. 53. Implications: ............................................................................................................................... 8 3.1. Compatibility: Starbucks and India:..................................................................................... 8 3.1.1 External Branding: .......................................................................................................... 8 3.1.2. Internal Branding: .......................................................................................................... 9 3.2. The way forward for Starbucks: ......................................................................................... 104. Conclusion: ............................................................................................................................... 11 References: ................................................................................................................................ 12 Appendix 1: ............................................................................................................................... 15 2 | Page 3. Branding Starbucks in India 2011 1. Introduction Starbucks is set to mark its presence in the Indian caf business with the strategic alliance withTata Coffee Limited in January 2011. India is said to have space for 5400 cafs (Chaudhary,Jayaraman, and Bailay, 2010). India is a complex market due to the diversity across the nation.Thus it is necessary for Starbucks to look into some of its standard practices and make changesto suit the market. As Starbucks is a late entrant, along with the market entry and expansionstrategies it should also focus on the adjustments it should make in the branding strategy. Thus, aneed to assess Starbucks as a brand and the market dynamics is raised. This assessment willenable a brand manager to determine the viability of Starbucks existing branding strategy inIndia. The main objective of this report is to determine the extent to which Starbucks shouldadapt itself for the market. The report also gauges the actions of other brands in India and thesteps Starbucks should take in order to have a good start in the market. This report provides anunderstanding of the branding concept, India-as a market and the Starbucks brand. With afoundation of these concepts, we evaluate the branding strategies of existing caf businesses inIndia and then make recommendation for Starbucks.2. Literature Review: 2.1. The concept of Branding: Sometimes product and brands are mistaken to be the same. But there exists a vast differencebetween a product and a brand. A product is anything that can be offered to a market forattention, acquisition, use or consumption that might satisfy a need or want (Kellar 2008).Whereas A brand is a name, term, sign or symbol, design or any combination of these which isintended to identify goods or services of one seller or group of sellers, and to differentiate themfrom those of competitors (Kellar, 2008). Philip Kotler (1996) states that a brand namerepresents the totality of product image, company image and corporate identity. Brands aremade up of the hardware element (colour, logo, design, etc.) and also the software element imagei.e. the identity of a brand. The software element is based on the perceptions that are built upamong the employees and the customers of the company. Thus, Tai and Chew define brand asan Idea that you own in Customers Minds. There are other definitions of a brand comprising ofthe name, term, logo, alphabets, sign or symbol, features of the product, perceptions of the 3 | P a g e

4. Branding Starbucks in India 2011 customer and employees, promises made by the company, differentiating feature from otherproducts.Brand is one of the strategic assets which give a competitive edge to the company in the longerrun. Companies adopt two different ways of branding strategies product branding andcorporate branding. (Kapferer, 2008) In product branding the visibility of the product in itself isgiven more importance. It stands independent without any association with the makers of theproduct. Any kind of positive and negative effect on the product brand will not influence theother product brands owned by the company. On the other hand, sometimes company uses thesame corporate brand for all the products it offers to the market. The risk of brand contaminationto other brands is higher with company branding. By devising a efficient strategy to build aperception in the consumers minds , brands contribute towards minimizing functional, physical,financial, social, psychological and time risks (also see Appendix 1). (Kellar 2008)Brands are often accompanied by mantras. These mantras build up a connection between theheart and soul of the brand and its market position. Example- Brand: Nike; Mantra: Just do it.These mantras make up the perception aspect that is associated with the brand. Effectivecommunication of the mantras can lead to a solid brand. This flow of communication has to beboth internal as well as external. External branding to the consumers is seen as the mostimportant factor in the entire branding strategy. But internal branding makes sure that theorganisation is parallel to the perceived characteristics of the brand in the market. Thus, theemployees of the organisation should be motivated to represent the brand through their workattitude and by being updated with the deep understanding of the brand. Internalisation of thebrand is very essential in service oriented organisations. The brand experience in a servicesector is totally driven by what happens at the point of sale. (KAPFERER, 2008) A brand canbe successfully internalised only if the employees of the organisation deeply understand thebrand values, accept them as their own and live the brand.2.2. India: market background and consumer behaviour India and China form the largest human population base on the planet. The governments in thesecountries have been taking steps to satisfy the needs of this population thus leading theireconomies to higher growth prospects. Thus, today, all the companies want to associatethemselves with these emerging economies and reap the benefits of their unsaturated markets. 4 | P a g e 5. Branding Starbucks in India 2011 India has been a colony of the British for a very long time. Thus, the lifestyle of people in someregions is closely related to todays UK culture. With globalization the world has come closerand thus there has been a great cultural influence from the western countries. In the past, Indiawas considered as a reserved nation, but it is now emerging out of this protectionist phase(Kapferer, 2008).India has her own concept of time for absorbing change (Coyler, 2006). Thus, it becomesnecessary for brands to enter the market at the most appropriate time. Also, it is essential thatthese brands invest comparatively more time in creating a favorable consumer base. Kelloggsfailed in its attempt to change the breakfast habit of the Indian market by introducing them to theAmerican breakfast (Coyler, 2006). A Global brand like Coca-Cola had to break its principles inIndia. Coca-Cola advertisements, traditionally, never featured a movie star, but only an adcampaign with Bollywood movie star gave immense visibility to Coca-cola (Kellar, 2008). TheIndian market very strongly associates brands to the celebrities and personalities that promotethem. Thus, understanding the psychology of the Indian consumer is critical for a brand to makean impact.India primarily has been a tea-drinking nation. As per Euromontior (March 2009), 85% of the teaproduced in India is consumed within the nation. But the consumption of coffee has beenincreasing in the past few years. Along with the growing middle class segment of the market,India also has some extremely rich consumers that

demand for western products with a localflavour. In the northern, eastern and western regions of India, out of home coffee consumption isgaining popularity. In urban India, the concept of Italian style corner coffee bars has beensuccessful in attracting the youth. Barista Lavassa, Caf Coffee Day and Mochas are some of thepopular brands that are known for the caf services they offer. (Euromonitor, 2010)2.3. Brand: Starbucks Starbucks started as a coffee retail chain and now is known for its cafs. It promises to offer arich experience to the customer and is not just another coffee selling chain. Starbucks missionis to inspire and nurture the human spirit- one person, one cup and one neighbourhood at a time(Starbucks Corp., 2011). In each of its 15,000 outlets across 50 countries, Starbucks aspires toestablish itself as a place after home and office and terms itself as the next neighbourhood wherepeople can drop by to have a cup of coffee and chat with their family and friends (Starbucks 5 | P a g e 6. Branding Starbucks in India 2011 Corp., 2011). Most of the Starbucks outlets maintain the romantic ambience of an Italian coffeebar (Kellar, 2008). Apart from coffee, Starbucks also serves range of pastries, tea (Tazo) andother refreshing drinks (Starbucks Corp., 2010). Starbucks outlets also sells CDs, books, creditcards & coffee brewing appliances and in 2006 Starbucks entered in the film business bypartnering with Lions Gate. (Kellar, 2008)Certain coffee brands like Sumatra served at Starbucks outlet have gained popularity butStarbucks as a brand continues to be stronger compared to its individual offerings. HowardSchultz, Chairman, President and Chief Executive Officer Starbucks Corporation believes thatthey are not in the business of coffee serving people, but of people serving coffee (Kapferer,2008). This belief comes from the top management and is accepted and implemented at the storelevel to create a soothing and pleasant experience for the consumers.Starbucks is based on its radical innovations in coffee retail chains and has been the marketleader in United States. This reputation makes it easier for Starbucks to launch itself in othermarkets (Kapferer, 2008). Though cultural differences in the new market call for extra efforts inthe branding strategy concerning the diversity, market niche, change & contradictions, naming,colour and symbols (Wheeler, 2006). In the UK, Starbucks is seen as an ethical brand andknown for the fair treatment it offers to its suppliers. (Marketing, 2008)The branding strategy ofStarbucks is controlled centrally from Seattle headquarters to avoid the risk of compromisingwith its image and nurture healthy growth.Starbucks believes that there is a direct relationship between the financial performance and themanner in which the customers are treated. Thus, human resource activities to improve partner(term used for employees in Starbucks) relations with the company hold high importance.(Flamholtz, 2001) During the years 1993 to 2003; to establish a strong market presenceStarbucks had increased its advertising budget to gain brand visibility (refer table 1 below). 6 | P a g e 7. Branding Starbucks in India 2011 Table 1:But today, Starbucks does not rely on advertising to promote its brand. The then presidentHoward Behar and other executives realized the importance of the needs of the consumer andpromoted the idea of implementing a consumer focused model rather than the product focusedone. This move gave a boost to Schultzs vision of Starbucks being a personal treat (Kellar,2008). Instead it invests in training partners term used for employees in Starbucks ,architecture, the sensory contact, touch and other similar aspects which build the overallenvironment of the distribution outlet (Kapferer, 2008). To develop a strong bond between itspartners (employees) and the company values, Starbucks prints mission statements on thebusiness cards. (Weber, 2005) It also engages its employees in First impression a 24-hour paidtraining program in any new store opened in North America.(Weber, 2005)Recently there has been an overhaul in its brand logo. The earlierlogo of

Starbucks consisted of the two-tailed mermaid (siren) andStarbucks coffee written around the siren. Starbucks is no longerjust a coffee retailer. Along with the caf business it has entered into 7 | Page 8. Branding Starbucks in India 2011 distribution of music CDs, credit cards and brewing equipment. Thus to exemplify thisdiversification, Starbucks has decided to drop its name from the brand logo. The traditional greencolour in the logo continues to remain the same which strongly appeals the consumers.(Knowledge@Wharton, 2011)3. Implications: 3.1. Compatibility: Starbucks and India: It has been a long wait for Starbucks to initiate its operations in India. Other fast food chains likeMcDonalds and Pizza Hut had entered India in the early 2000s. These brands faced manydifficulties in the initial stages (Haig, 2006). In January 2011, Starbucks entered into a strategicalliance with Tata Coffee Limited for sourcing of Arabica coffee beans and also in setting up ofStarbucks retail stores and cafs (Starbucks Coffee Company and Tata Coffee Limited, 2011).The Tata group of Companies is considered to be one of the most socially responsible businesshouses in India. A strategic alliance with a company of such a stature provides Starbucks with ahead start in developing both the internal as well as the external branding strategy.3.1.1 External Branding: Barista Lavazza and Caf Coffee Day are two of the major competitors of Starbucks in India.Lavazza, the Italian coffee retailer entered India in 2007 by acquiring the Barista Coffee Shopchain. Barista Lavazza aims at offering a truly Italian caf experience to the Indian consumers.After the acquisition of Barista, Lavazza did not change the brand name because Barista as abrand was well established in the Indian market. Barista had a pan India presence and due to itsexisting brand equity of Barista, it was not difficult for Lavazza to fortify its position in themarket. The visibility gained by Barista Lavazza is mainly by word of mouth. Also it associatesitself with different events organized by premium educational institutes and other corporatehouses.The first outlet of Caf Coffee Day was established in 1996. Caf Coffee Days mission is to bethe best Cafe chain by offering a world class coffee experience at affordable prices (CafCoffee day, 2011). Cafe Coffee Day has gained visibility in the Indian market because it investshuge sums on advertising. Caf Coffee Day promises to offer a pleasant coffee drinking 8 | P a g e 9. Branding Starbucks in India 2011 experience at an affordable cost. With this low cost model Caf Coffee Day is in a position todrive the market towards itself and give compete with Barista Lavazza.Starbucks does have some awareness among young generation of India, despite not beingphysically present in the market. This awareness is because of the era of globalization and thecontinued influence of western culture in the east. Also Indian students who have spent someyears in western countries are aware of Starbucks. Starbucks has to subtly cash-in on thisawareness and build on it to establish itself in the Indian market.3.1.2. Internal Branding: Sherry Robert has analysed the Starbucks culture based on Hofstedes model of Cultural analysis.A comparison of the cultures in India and Starbucks with respect to Hofstedes model (fourdimensions) will give an understanding of the acceptance of internal branding strategy ofStarbucks in India. India is highly power distant (Hofstede, 2010). A high level of powerdistance suggests that there is a high level of inequality of power and wealth among the people(Mead and Andrews, 2009). The hierarchical structure in Starbucks is loosely arranged in orderto motivate flow of ideas within the company (Glowa, 2001). Starbucks has also launched a blogwhich motivates the consumers to suggest innovative ideas of making coffee and other relatedbeverages. Thus, with a low level of power distance in its organizational culture, Starbucksmight find it difficult to create a satisfying tier of employees at the managerial level.Indian culture is not bound by many rules and regulations that aim at controlling the

unexpectedevents that might occur in the future. Likewise, Starbucks, in its journey since 1961, has forayedin businesses other than its core coffee retailing business without the attitude of controlling theunknown (Kapferer, 2008) and thus showing low need to avoid uncertainty.Starbucks is headquartered at Seattle in United States of America. US ranks high on Hofstedesscale for individualism whereas Starbucks mission statement exhibits the importance of teamwork, as it forms a very important factor in delivering an enriching experience to the consumers.(Starbucks Corp., 2010) For, Starbucks it will not be difficult to cultivate a culture of teamworkamong its employees as India is a highly collectivist nation.According to Hofstedes model India is a masculine culture. In India, even today, differencesexist in roles taken up by men and women. Starbucks considers all its employees to be equal and 9 | P a g e 10. Branding Starbucks in India 2011 does not differentiate among men and women (Glowa, 2001; Robert, nd). Starbucks culture andthe culture of India are closely related except for the dimension of power distance. Overall it canbe said that Starbuck will not find it difficult to develop a good brand image within theorganization, among the employees.Global brands like Starbucks, McDonalds, etc are seen as instruments of imperialism toculture.(Izberk-Bilgin) With their business these brands threaten the food habits of the localpeople. Sometimes, too much advertising of the western way(s) of drinking coffee or any otherwestern habit can be seen in the negative manner by the consumers.3.2. The way forward for Starbucks: The analysis of the internal culture of Starbucks and the Indian culture is not different in manyaspects. This compatibility between cultures does not guarantee an extra-ordinary experience toevery consumer that enters a Starbucks outlet. India is the second most populous nation in theworld and houses approximately a billion people belonging to different sub-cultures, languages,geographies, tradition, habits and socio-cultural behaviour (Coyler, 2006). To successful buildthe desired perception in the consumers mind about Starbucks it will be critical to understandthe market psychology.Firstly, in India the trend of outdoor drinking coffee has started emerging now. Competitors suchas Caf Coffee Day have already captured major share of the market with around 1000 storesacross the country. Caf Coffee day plans to have setup 1000 more stores by the end of 2014(Chaudhary, Jayaraman, and Bailay, 2010). In such a scenario, Starbucks cannot solely dependon its principle of creating visibility through word-ofmouth. For an organization in serviceindustry the most effective channel for marketing is through word-of-mouth. But, it will berecommended for Starbucks to advertise extensively in order to gain visibility and createawareness about its presence.Starbucks has maintained its image as the third place after home and office, where people canrelax, feel comfortable and have a cup of coffee. Barista Lavazza also promises a similaratmosphere to the consumers. In an attempt to provide an enriching experience to the consumers,Starbucks will have to develop a competitive yet affordable pricing strategy. With a premiumprice for the offerings, Starbucks can target only the elite class of people in selected cities. Also, 10 | P a g e 11. Branding Starbucks in India 2011 it will be difficult for Starbucks to convert the youth from Caf Coffee Day to the Starbucksexperience due to higher prices. Thus, Starbucks initially should establish its outlets in premiumlocations of the metropolitan cities and aim at the working class executives in the early age whohave high disposable income and engage with friends at cafs, lounges and other places.Most of the users in India, eye for products that are customised as per the local demands. Fastfood chains like McDonalds and Dominos failed to understand this market sentiment. Only afterthese fast food chains introduced Indianised food items, they started experiencing growth in theirbusiness. Thus, Starbucks should also consider this aspect and be open towards tailoring some ofits beverages as per the requirements that arise

in the market. Also to avoid itself from beingmisunderstood as a culture imperialist, Starbucks should get involved in different CSR activitiesas it does in China. Only by doing this, it can gain the confidence of the consumer and maintain asocially healthy brand name.Starbucks should continue with the same fundamentals of work force management as theworkforce is the main driver of the entire process of service delivery. All the new employees inthe company must be trained about core values and mission of the company. Printed materialsuch as small diaries and printed coffee mugs can be distributed among them. Also the traditionof printing mission statements on the business card must be continued. Training initiatives suchas first impression should also be carried out so that the new employees understand thebusiness, service and their role in the company. This will also enable the communication of theorganizational values to the suppliers and other external stakeholders. The employees should alsobe trained for the soft skills essential to make the experience for the consumer memorable. Theaesthetic features of the cafs play a very important role in creating the ambience of the caf.Thus, acute attention must be put in the conceptualization of the designs of the cafs.Starbucks should also utilize the TATA brand name which has a long tradition in the Indianmarket and is seen as a respectable and trustworthy brand. Any association with TATA willdefinitely give Starbucks a head start in the race to gain market share.4. Conclusion: There is a huge market for Starbucks in India in the caf business. The presence of strongcompetitors who already have a head start require Starbucks to make a difference with its brand 11 | P a g e 12. Branding Starbucks in India 2011 value. In the global scenario, the brand consistency evokes a set of values and perceptions thatare built towards the brand. (Bengtsson and Venkataraman, nd) Starbucks is a global brand andthus it would not be appropriate for Starbucks to undergo a brand makeover for India. Its culturehas evolved over a period of time with the experience it gained from operations in 50 differentcountries (markets). This experience has enabled Starbucks to adopt values that are in alignmentwith the culture in some eastern countries like India. Starbucks should continue exercising someinitiatives such as first impression in markets like India to build an efficient workforce that candeliver the promise of the third place to the customer. The evaluation of the brand Starbucksand its compatibility with the Indian culture is favourable. In addition, Starbucks should alsoinvest more in advertising and mass marketing, so that it can optimise its visibility and awareness.Its association with Tata Coffee limited also gives it an opportunity to create and gain trust of theIndian consumer.References:Bengtsson, A. and Venkatraman, M. (nd) The Global Brands Meaning Mlange: Seeking HomeAbroad through Global Brands. Advances in Consumer Research North American Conference.North America. Association of Consumer ResearchCaf Coffee Day (2011) Company & Mission. [www] http://www.cafecoffeeday.com/companymission.php?mnid=3&lmids=3 (7th March 2011)Chaudhary, D. and Jayaraman, P. and Bailay, R. (2010) Coffee chains line up to cater to Indiasyouth [www] http://www.indiacoffee.org/newsview.php?newsid=68 (4th March 2011) 12 | P a g e 13. Branding Starbucks in India 2011 Colyer, E. (2006) India: A hot brand climate. [www] thhttp://www.brandchannel.com/features_effect.asp?pf_id=316 (5 March 2011)Euromonitor International (March 2009) India: Country Pulse. [www]http://www.portal.euromonitor.com/Portal/DocumentView.aspx (5th March 2011)Euromonitor International (February 2010) India: Country Pulse. [www]http://www.portal.euromonitor.com/Portal/DocumentView.aspx (5th March 2011)Flamholtz, E. (2001) Corporate Culture and the bottom line European Management Journal. Vol.19 (No. 3). 2001. pp. 268 275Glowa, T. (2001) Examining Starbucks utilizing the

7s method and less than perfect information.[www] http://www.ncResearch.com. (8th March 2011)Haig, M. (2006) Brand Failures. 1st edition. United States: Kogan Page Limited.Hofstede, G. (2011) Greet HofstedeTM Cultural Dimensions: India [www] http://www.geerthofstede.com/hofstede_india.shtml (5th March 2011)Izberk-Bilgin, E. (2008) When Starbucks Meets Turkish Coffee: Cultural Imperialism andIslamism as Other Discourses of Consumer Resistance. Advances in Consumer Research. Vol.35. 2008.Weber, G. (2005) Preserving the Starbucks Counter Culture. Work force Management, February2005, pp. 28-34Kapferer, J.N (2008) The New Strategic Brand Management. 4th edition. Great Britain: KoganPage Limited.Kellar, K.L (2008) Brands and Brand Management, in, David Parker. Strategic BrandManagement: Building, Measuring and Managing Brand Equity. United States: Pearson PrenticeHall. pp. 1-46 13 | P a g e 14. Branding Starbucks in India 2011 Kellar, K.L (2008) Managing Brands over Geographic Boundaries and Market Segments, in,David Parker. Strategic Brand Management: Building, Measuring and Managing Brand Equity.United States: Pearson Prentice Hall. Pp. 146Kellar, K.L (2008) Starbucks: Managing a High Growth Brand, in, Jeff Shelsted. Best PracticeCases in Branding. United States: Pearson Prentice Hall. pp. 305 328Knowledge@Wharton (February 2011) Logo Overhaul: Will Customers Still Answer the SirenCall of Starbucks? [www] http://knowledge.wharton.upenn.edu/article.cfm?articleid= 2703 (8th March 2011)Marketing (2008) Coffee retail: Starbucks: the brand we love to hate. pp. 24. [www]http://find.galegroup.com/gps/infomark.do?&contentSet=IACDocuments&type=retrieve &tabID=T003&prodId=IPS&docId=A177358536&source=gale&srcprod=GBFM&userGroupNa me=st_itw&version=1.0 (8th March 2011)Mead, R. and Andrews, T (2009) International anagement. 4th edition. Great Britain: JohnWilledy and Sons, Ltd.Robert, S. (nd) Organisational Culture [www]http://www.articlesnatch.com/Article/Organizational-Culture--/996657 (8th MArch 2011)Starbucks Corp. (nd) Company Information: Mission Statement and values. [www]http://starbucks.co.uk/about-us/company-information/mission-statement (6th March 2011)Starbucks Corp. (nd) About Us: Our Heritage. [www] http://starbucks.co.uk/about-us/ourheritage (6th March)Starbucks Coffee Company and Tata Coffee Limited (January 2011) Tata Coffee & StarbucksSign MoU for Strategic Alliance in India. [www]http://news.starbucks.com/article_display.cfm?article_id=489 (6th March 2011)Starbucks Corp. (2010) Business Ethics and Compliance: Standards of Business Conduct. [www]http://assets.starbucks.co.uk/assets/sobc-english-2010.pdf (6th March 2011) 14 | P a g e 15. Branding Starbucks in India 2011 Wheeler, A (2006) Designing Brand Identity. 1st edition. United States: John Wiley & Sons, Inc. Appendix 1: By creating a perception in the consumers mind, a brand reduces the exposure of the product todifferent risks such as:1. Functional risks: any failure in the performance of the product.2. Physical and psychological risks: if there is any threat to the physical and/or psychologicalwell being or health of the user.3. Financial risk: enables premium pricing for premium brands, thus generating more revenueand profits.4. Social risk: any embarrassment caused by the ownership of the product. 15 | P a g e 16. Branding Starbucks in India 2011 Reference: K. Kellar (2008), What is a Brand, in, David Parker, Strategic Brand Management,United States: Pearson Prentice Hall, pp. 1 46. 16 | P a g e

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