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CHPT I: INTRODUCTION
Starbucks is another industry to enter the Indian markets due to vast potential and the huge
untapped market. Indian market is always influenced by the traditions followed in the
Western counterparts hence the success of Mc Donalds, KFC, etc to name a few. With
access to Hollywood movies where these brands are flashed quite often, the aura surrounding
brands such as Starbucks scale new heights.
Indian consumers have always welcomed change when it comes to their taste buds.
Cappuccinos, Latte have eclipsed the traditional Espresso filter coffee. Filter coffee seems
like an archaic notion, only restricted to the elderly people. In fact the coffee shops have itself
undergone a tremendous transformation, with them replacing a hang-out joint for the
teenagers.
The timing of their entry could not have been better. With Barista, Caf Coffee Day and
Costa coffee almost losing their sheen, Starbucks comes in like a breath of fresh air. The
future outlook of any company is not complete without an analysis of the industry in which it
operates.
The coffee industry of India is the sixth largest producer of coffee in the world, accounting
for over four percent of world coffee production, with the bulk of all production taking place
in its Southern states. India is most noted for its Monsooned Malabar variety. It is believed
that coffee has been cultivated in India longer than anywhere outside of the Arabian
Peninsula.
Tata Starbucks Limited, the 50/50 joint venture between Starbucks Coffee Company and Tata
Global Beverages Limited is bringing an unparalleled experience to Indian customers. Both
companies have a history of delivering product innovation and the highest quality experience
to customers around the globe. They are delighted to come together today and transform the
coffee experience for consumers across India, while providing a community gathering place
to connect with family and friends. Thus, Coffee culture is poised to be deeply in-grained into
Indian culture in the near future, if this strategic alliance succeeds.




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1.2 OBJECTIVE OF STUDY
To analyse Starbucks as a company
To analyse the Indian coffee industry and India as a potential destination for Starbucks.
To discuss strategies undertaken by Starbucks in India.
To discuss the opportunities and challenges that Starbucks face in India.
To discuss the benefits of tie up with TATA
To discuss the threats from competitors and its position in the market.




















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CHPT II: RESEARCH METHODOLOGY



PRIMARY SECONDARY
INTERVIEW METHOD WEBSITES
NEWSPAPER ARTICLES

My research methodology requires gathering relevant data from the specified documents and
compiling databases in order to analyze the material and arrive at a more complete
understanding of Tata Starbucks and its strategies to enter India.
The primary data used in this project is interview method. The questions prepared are
relevant to the proposed topic which takes the topic in more depth. The questions are
prepared for the manager of Starbucks which will give us an insight for the topic and help
analyse the current situation.
The secondary data is found from newspaper articles of times of India, business today and
many more. Other information has been derived from many websites such as starbucks.in,
studymode.com, slideshare, Wikipedia etc. this will give us the information regarding the
political, economic, environmental and socio-cultural factors. It also provides the marketing
mix undertaken by Starbucks for India with more focus on the pricing which is much
reasonable as compared to the international prices with a touch of Indian taste and variety.








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CHPT III: COMPANY PROFILE

3.1 STARBUCKS CORPORATION
Starbucks Corporation is an American global coffee company and coffeehouse chain based in
Seattle, Washington. Starbucks is the largest coffeehouse company in the world, with 20,891
stores in 62 countries, including 13,279 in the United States, 1,324 in Canada, 989 in Japan,
851 in the People's Republic of China, 806 in the United Kingdom, 556 in South Korea, 377
in Mexico, 291 in Taiwan, 206 in the Philippines, 179 in Turkey, 171 in Thailand, and 167 in
Germany
Starbucks Mission: Our mission: to inspire and nurture the human spirit one person, one
cup and one neighbourhood at a time.
Our Coffee: Weve always believed in serving the best coffee possible. It's our goal for all of
our coffee to be grown under the highest standards of quality, using ethical sourcing
practices. Our coffee buyers personally travel to coffee farms in Latin America, Africa and
Asia to select the highest quality beans. And our master roasters bring out the balance and
rich flavour of the beans through the signature Starbucks Roast.

3.2 TATA GLOBAL BEVERAGES AND TATA COFFEE
Tata Global Beverages is a part of the global Tata Group. Tata Global Beverages is a global
beverage business and the worlds second largest tea company. The groups annual turnover
is US $1.5 bn and it employs around 3000 people worldwide. The Company focuses on good
for you beverages and has a stable of innovative regional and global beverage brands ,
including Tata Tea, Tetley, Himalayan natural mineral water and Eight O Clock Coffee.
Tata Coffee is a subsidiary of Tata Global Beverages. It is Asias largest coffee plantation
company and the 3rd largest exporter of instant coffee in the country. The Company produces
more than 10,000 MT of shade grown Arabica and Robusta coffees at its 19 estates in South
India and its two Instant Coffee manufacturing facilities have a combined installed capacity
of 6000 metric tonnes. It exports green coffee to countries in Europe, Asia, Middle East and
North America. Tata Coffees farms are triple certified: Utz, Rainforest Alliance and SA8000
reinforcing its commitment to the people and the environment.


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3.3 TATA STARBUCKS- JOINT VENTURE TO OPEN CAFES IN INDIA
Starbucks is the number one specialty coffee retailer in the world. The company wants to
deliver the finest coffee products and offers handcrafted beverages. Starbucks is not only
about drinking coffee but about a unique experience. The company follows an international
expansion strategy through strategic alliances. Starbucks wants to prevent competitors from
having a head start, build upon the growing interest for Western brands and take advantage of
the higher coffee consumption rates. After building a successful brand in Japan and China,
Starbucks wants to enter the Indian market. Starbucks found a local supplier for their coffee,
Tata.
MUMBAI, India, January 30, 2012 - Tata Global Beverages Limited and Starbucks Coffee
Company today announced a joint venture between the iconic international coffee brand and
the 2nd largest branded tea company in the world. The 50/50 joint venture, named TATA
Starbucks Limited, will own and operate Starbucks cafs which will be branded as Starbucks
Coffee A Tata Alliance.
The retail stores had started developing in cities across the country, beginning with stores in
Delhi and Mumbai in calendar 2012.
In a separate sourcing and roasting agreement between Starbucks Coffee Company and Tata
Coffee Limited, Tata Coffee Limited will roast coffee to supply TATA Starbucks Limited,
and to export to Starbucks Coffee Company. This agreement paves the way for consumers in
India to enjoy the premium Starbucks Experience, while further discovering the unique taste
of high-quality Indian arabica coffee worldwide. TATA Starbucks Limited brings together
two companies with a rich heritage in and passion for coffee, tea and innovative beverages.
Together, the JV will enable an expanded range of beverage offerings for Indian consumers.
As an example, the companies have agreed to jointly leverage assets and innovation to offer a
premium tea product branded Tata Tazo. The TATA Starbucks Limited joint venture will
operate cafs under the Quick Service Restaurant category.




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CHPT IV: CONCEPTUAL FRAMEWORK
4.1. Situation Analysis of the Indian Coffee Retail Market
As coffee shops may be nearing saturation point in the US and Europe,
Starbucks has identified the potential to expand in emerging markets like China
and India. The coffee industry is expected to continue growing through at least the
year 2015 and even longer in emerging markets.
As there is no framework that provides a full picture of the dynamics within a
particular market, a more holistic approach will be adopted. Political, Economic,
Sociocultural, technological, environmental and legal factors will be examined from a
PESTLE analysis and the Power of Suppliers, the Threat of Competitors and the
Threat of Substitutes from the Porter Five Model.
A. PESTLE ANALYSIS
The PESTLE analysis is a tool which provides insight of the external environment in which
organizations operate or will operate and aids the strategy formulation of those organizations.
Considering the fact that Starbucks is planning to enter the market in India, the PESTLE
analysis is going to evaluate favorable and unfavorable conditions in the countrys political,
economic, social, technological, legal and environmental setting.
a. Political factors
The political factors have strong influence upon the regulation and controlling of business
and the spending power of consumers and other businesses. We must consider those factors
as very important and even crucial depending on the political system of the country we are
operating in and the political condition of the country as a whole.
The Indian economy has been subject to series of positive economic reforms since 1991
which had created a better working environment for foreign companies and has made it
possible for foreign investors to operate in the country more easily. The reforms have also
resulted in higher growth rates, lower inflation and increase and ease of the foreign
investments. The current Indian government - United Parties Alliance (UPA), headed by the
Indian National Congress party (INC) has shown more tolerance towards foreign countries in
general and towards FDI in numerous economic sectors. These reforms have placed India in a
favorable position in the world economic stage.
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Taking into consideration the political environment in India as a whole, the bureaucracy
complications and the regulatory FDI controls and regulations, it is safer for Starbucks to
enter India via a joint venture or a strategic alliance with an Indian company that can provide
a buffer from possible political tension. Furthermore, Starbucks can face some opposition
from the existing competitors (CCD, Barista, etc.) through the use of political influence and
delaying tactics. Although situations like these are possible to happen, the chance is low
taking into account that the Indian market is large enough to hold more companies and the
leaders in the Indian gourmet coffee industry will not be strongly affected by Starbucks
entry.
b. Economic factors
The factors like inadequate infrastructure, bureaucracy, regulatory and foreign investment
controls, the reservation of key products for small-scale industries, and high fiscal deficits are
constraining economic growth of India. However, the liberalization measures taken in 1991
opened the economy to foreign investment and trade: it dismantled important controls,
lowered customs duties, and devalued the currency: it virtually abolished licensing controls
on private investment, dropped tax rates, and broke public sector monopolies. Further,
reforms have been seen in retail industry with Indian government's approval on FDI up to
51% on multi brand retail. The country has recently become is a major exporter of software
services and software workers, and the information technology sector leads the strong growth
pattern. With a world changing from an industrial to an informational economy, India is
bound to play a monumental role in the future of the global industry.
c. Socio-Cultural factors
As job opportunities increase in India, money stays in the palms of the Indian consumers
enabling them to reinvest in the Indian economy. Attitudes towards money are also changing.
The mantra for the average Indian family, as in most of Asia, has always been saving, but
young Indians today, inspired by job opportunities, have switched to spending extravagantly.
The attitude of the young generation is to enjoy life and spend money. According to sources
the population of the country consists of more than 60% of the people between the age of 15-
59. Also with the westernization of the social trends more and more young people trust
western brands and prefer foreign goods. They also go for the same trends and try to mimic
the same status of exclusivity young people in the US and Europe look for. This places
Starbucks at a very dynamic position, where it has a good opportunity and much possibility to
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capture quick customers. The only problem is that they will not be the first on the market
with specialty coffee offering and their otherwise leadership position could strongly be
undermined and only sustained by their brand image.
Next to that, the culture and cuisine of India poses a very interesting challenge. The mix of
traditional tea-drinking population together with the various differences between Muslim and
Hindu and the growing difference among various regions of the country, make it extremely to
divide and place is concrete consumer groups. Still the most obvious separation with regard
to coffee consumption is visible in the city versus rural areas separation with the urban
population having distinctly higher preferences for coffee. Still the numbers of coffee
consumers remains low with slow negative growth figure between 2000 and 2005 - 6.7% and
2.0% respectively.
d. Technological factors
Starbucks entered into a strategic alliance with Tata Coffee LTD., the largest coffee producer
in India. With signing this agreement, Starbucks finally found the partner it needed. A
company which met all the conditions and standards followed by Starbucks. Tata proved its
quality standard by winning a gold medal for the best Robusta coffee in the world.
The factor of quality is very important at the Indian market as high quality coffee beans are
easily available. With this strategic relation with the Tata Group, the company, Starbucks,
might be able to succeed with competitive pricing in India.
Another important technological factor is the lack of infrastructure in India. However, having
such an experienced local partner, Starbucks does not face any problems with this issue. It
also provides free Wifi at all its outlets in India, with a great ambience.
e. Legal factors
Companies may be public or private but the common public is not allowed to buy shares of
the company and there can only be up to fifty shareholders. Import duties are applied to
almost all goods entering India. The tariff system is based on the Harmonized System (HS)
and tariffs are in the 40 to 60 percent range for basic raw materials, 60 to 100 percent for
semi-processed goods, and 100 percent and above on finished and consumer goods.
Shipments to India require a commercial invoice, a packing list and bill of lading. A
certificate of origin is not required on imports originating in the United States. FDI approval
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though has come to relaxation. Lower tariffs and lower barriers to enter have made the Indian
market extremely promising and willing to change.
f. Environmental factors
Starbucks believe in the importance of caring for our planet and working with and
encouraging others to do the same. As a company that relies on an agricultural product, it
makes good business sense. It engages itself in recycling, energy management, water
conservation, green building, and in reducing carbon footprints wherever possible. With these
integrated environmental responsibilities, the company will obviously build its image in the
eyes of Indian Consumers as well. The ecological concerns regarding the farming of Arabica
coffee must also be addressed in order to ensure consistency in productivity.

B. Porters Five Forces Model

I ndustry Rivalry
Major competition for Starbucks in India comes from that of Caf coffee day. The
abbreviation CCD is known to most of the people in urban parts of India. Their positioning is
same as what Starbucks have in US. The other competitors include Barista Lavazza,
Quicky's, Barista and Costa Coffee, which are also the multinational brands, and widely
recognized. Apart from them, secondary competitors include the Georgia Coffee, served in
fast food joints like that of Mc Donalds and KFC, etc.

Potential for New Entrants
The entry barriers in the coffee retail industry are relatively low in India, particularly for the
foreign players. This is possible owing to the fact that 51 % FDI is allowed in India in retail
sector. Any large or well-funded company having the thorough understanding of the market
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can enter into retail sector in India. Given the fact that Starbucks is a global, it is having its
own advantages when it comes to achieving the economies of scale. Starbucks being the
global coffee retail chain, they are not going to have any particular capital related problems.
Also, they are having MoU being signed with TATAs for opening their outlets in their TAJ
group of hotels and resorts. India, being the sixth largest producer of coffee in the world is
having the largest home grown supply of coffee beans and thus, sourcing coffee in this
industry is not going to be much of the problem.
Customer or Supplier Loyalty - Indian market is already being captured by the long
established brands like Caf coffee day, Barista, Barista Lavazza and Costa Coffee. Thus, it is
going to be pretty much difficult for any of the new entrant to establish its brand name in the
Indian market. However, Starbucks being the international brand will definitely help in
attracting the educated Indian crowd.
Market Experience - The existing players in the Indian coffee retail industry have been here
in the market from last 10 years. Thus, their management must be having greater
understanding of the Indian markets and Pallets. Therefore, for Starbucks, it is going to be
important to first understand the Indian preferences, before making any major move.
Differentiation - Coffee is not the product where there is a great scope for product
differentiation. However, it depends on most of the cases on the store ambience, which can
act as the point of differentiation.
Threat of Substitute Products
India has predominantly tea-based culture thus; awareness about coffee need to be created
more and more tea-based drinks in association of TATA coffee needs to be included in its
offerings. Besides tea, other product substitutes, here, will include other beverages, for
example, soda, fruit juices, water, beer or other liquid and/or carbonated beverages. Since
Starbucks also sells fast foods, other fast food beverages like burgers, etc. The lower end
local coffee houses or other snack shops which are less luxurious will also act as substitutes
to Starbucks. These are places which provide people with the place to sit, chat and relax at
fair prices.
Bargaining Power of Suppliers
In the case of coffee retail, the suppliers, supplying the retailer with the coffee beans are not
having much of the bargaining power. This is particularly because of the fact that coffee
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retailers like that of Starbucks tend to be very big buyers for any of the supplier to lose as a
whole. This also gives the Starbucks to dictate terms to the supplier. However, this sourcing
would be done on ethical norms of Starbucks and TATA Coffee. Similarly, suppliers of other
resources like that of paper products etc., will not be having much of the bargaining power as
there are many sources from which the company can source them. However, this is not valid
in the case of the suppliers supplying the technological machinery and equipments as there
are not many suppliers here.
Bargaining Power of Buyers
In the past, buyers in India were not having much of the bargaining power as there were not
many food retail giants which were present in the country. However, with the advent of
multinational food retail giants in India, like that of Mc Donalds, Barista Lavazza, Caf
Coffee Day and Costa Coffee, consumer is faced with lots of choices. Thus, it will be
difficult for Starbucks to influence the Indian buyers to pay premium for their products. As
also the per capita income of Indian Customers is low and their mindset is not so affirmative
with coffee culture, however it is catching up among youths, the pricing need to be highly
competitive and on zonal basis.














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4.2. STARBUCKS SWOT ANALYSIS






STRENGTH
Leading retailer and roaster for brand
specialty coffee in the world;
Brand image with the motto The Starbucks
Experience;
Strong balance sheet;
One of the strongest franchises in the world
with more than 6500 licenses shops in the
world;
Starbucks is known for providing superior
products and services;
Have loyal customers in every country that
has entered;
Sophisticated atmosphere, music, interior
design and artwork;
Have a lot of flavours variation;
High market share and market growth.
WEAKNESS
High pricing which not everyone can
afford;
Starbucks refuses to guarantee that milk,
beverages, chocolate, ice cream, and baked
goods sold in the companys stores are free
of geneticallymodified ingredients;
No experience in countries like India.
OPPORTUNITIES
- High consumerism in emerging markets;
- Easier to penetrate market because
Starbucks is selling as experience, not just a
simple product;
Many of Starbucks coffee are using organic
beans;
Fair Trade Products can be offered.
THREATS
threat from competitors
Increasing health concern of the negative
effect of coffee;
Starbucks domination is driving small cafes
out of the business;
Threat of substitute products in cultures
where there is a strong preference for tea, like
China, India and UK
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INTERNAL FACTORS

Strengths
Taking into consideration the size and market power of Starbucks as a leader in specialty
coffee retailing, the brand equity of the company is one of the most valuable assets they have
(Interbrand Top 100 Most Valuable Brands - N 97 estimated brand value $ 3.339 m). This
strength also has the highest rate in the strengths section because through its consistent and
innovative marketing strategy and exclusive product positioning Starbucks managed to
maintain throughout the years its brand integrity and kept on its very consistent mission and
vision. The strong joint ventures and strategic alliances that the company has establish all
over the word made it possible for them to create and develop a sustainable supply chain of
high quality.
Moreover, Starbucks has also placed great attention to the well-being and satisfaction of
their employees. The company ranks at N 98 Fortune`s 100 Best Companies To Work For.
Another very important strength of Starbucks is their financial stability. Taking into account
that the company`s total net revenues for 2010 increased 17.2%, compared to 2009, to $2.8
billion, the capital availability that Starbucks has is making it easier for them to manage their
expansion in other new markets like India.
Weaknesses
Because of the high quality exclusive products that Starbucks is offering their price range is
also very high compared to their competitors. It is a weakness of the company but at the same
time it is not addressed heavily because it is part of their exclusive image.
Entering the Indian market, Starbucks are not the first movers in the coffee retail industry;
there are already established leaders on the market and thus Starbucks are market followers.
Because of this high competition Starbucks is also facing a problem regarding their suppliers.
They signed a supply deal with Tata Coffee which is actually co-owner of the main
competitor on the market.







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EXTERNAL FACTORS
Opportunities
Following Indias economic liberalization in 1990 the country experiences accelerated
growth which reaches an average of 7% in the years after 1997. This, alongside with the
increasing levels of GDP, results in growing disposable income of consumers. In a country
where cultural trends play important role in society growing income and standards of living
creates demand for western goods. In recent years there has been a growing number of
department stores. They accommodate mainly the high-income and the upper-middle
segment, which happens to be the target group of Starbucks. Placing coffee-bars in such
places is a big opportunity for achieving high profits and is definitely something that
Starbucks has experience with.
Another opportunity on the Indian market is the growing size of Starbucks target group. In
2006 the middle class in India was estimated at around 250 million and it is growing in urban
areas. All, these factors show that Starbucks has a large enough target group which is willing
and able to pay premium price for a high quality western brand. Starbucks has the potential to
skim the Indian market, because of its positioning and brand image.
Threats
The coffee retail market in India consists of mainly home grown brands. The biggest ones are
Coffee Caf Day (CCD), and Barista Coffee. These companies are considered as threats to
Starbucks entry in the Indian market because they are offering similar and sometimes
identical products. CCD, for instance, the company which pioneered the concept of specialty
coffee in India, has wide range of caf formats with almost identical concept used by
Starbucks. Besides, CCD has presence all around the India. The same company also sells
merchandise and is involved in heavy marketing, such as establishing relations with the
Indian movie and television series industry. Furthermore, CCDs best-seller the cold Frappe
is a direct competition to Starbucks Frappuccino.
It is also mentioned that the infrastructure in India is weakly developed, which might result
difficulties or larger amounts of costs incurred in the business operations of Starbucks. In
addition the retail environment in India is largely unorganized and dominated by small and
individually owned businesses. The threat from substitute goods in India should also be
considered. The Indian population is still heavy tea drinkers. The consumption of tea per
person in 2000 was reported to 44 litres in comparison to 1.2 litres of coffee. Another good,
which is considered a substitute, is the instant coffee. It is reported that 65 % of households
bought instant coffee and only 18 % bought filter coffee.
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4.3 TOWS MATRIX
The TOWS matrix, serves as a framework for organizations to assess the combination of
external and internal factors. The matrix helps companies to decide on approaches depending
on the opportunities and threats the business environment has to offer and how the company
is going to take advantage on them depending on their internal capabilities.
Maxi-maxi strategy
The growing Indian economy provides attractive opportunities for a company such as
Starbucks. These favorable economic conditions create an environment in which exclusive
and luxury products such as Starbuck coffee will be in growing demand. The international
popularity of the Starbucks brand will help the company to position itself on the Indian
market. Starbucks in one of the best known American brands in the world and it is also
connected with positive affiliations on the market. With its strong and distinctive brand image
the company is able to take advantage of the growing demand for branded, western and
luxury products.
On the other hand, in order to gain market share, Starbucks can reduce the prices, but not
below the competitions levels and by maintaining healthy profit margins. This is possible
since Starbucks has at its disposal coffee from a local supplier.
One way the firm could protect its position involves developing a marketing campaign
emphasizing its superior customer service in comparison to its competitors.
Maxi-mini strategy
The high brand equity and recognition of Starbucks` products is definitely the biggest
advantage they have over their competitors. Taking into account the size of their Indian
competitors and the size of the market as a whole, Starbucks has to put more emphasis on its
marketing strategy and try to stress on the promotion of its exclusiveness and premium
product portfolio in order to differentiate its brand in the consumer`s mind.
In order to grow and outperform its already existing competitors Starbucks must also
emphasize on the company`s points of difference, which include the brand experience as a
whole, the brand quality that they are offering and also the convenient access to their
locations.
Starbucks is well known for its high quality and distinctive products, so substitute products
can`t deliver to the customer the same exclusive level of high quality and cannot satisfy the
customers` needs and wants as Starbucks does. In order to create and retain a position in the
customers` mind Starbucks must extend their product portfolio so that it can match the local
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preferences. For example, they can offer special Indian tea and other typical for the region
herbal mixes.
Mini-maxi strategy
As a company that offers specialty coffee the limited portfolio of Starbucks, in terms of non-
coffee products, can be considered as exclusive offering. Therefore, the company is in a good
position to take advantage of the growing opportunity that the cultural westernization is
offering and minimize the impact of their weakness. As exclusive product, Starbucks`
specialty coffee can give the targeted consumers the desired social status.
Mini-mini strategy
Starbucks should keep its prices high as the alternative can undermine the exclusivity and top
quality image of the coffee. Thus, Starbucks has the ability to minimize the impact of their
high price weakness on the India market and deal the pressure from competition which is a
definite threat. Even though, the main competitors have similar, and even more extensive
product portfolios, Starbucks has the competitive advantage of its exclusive brand image.
Moreover, Starbucks should slightly try to extend their product line portfolio in order to
answer the consumers` existing demand for instant coffee.

















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4.4 MARKETING STRATEGY

Capture Value
In this section, tools and techniques will be used to explain how Starbucks can create and
capture value for their products.
Market Segmentation
Apart from the demographic characteristics presented in part one of the analysis, marketers
should also consider psychographic variables such as interests and lifestyles. In general,
Indias coffee culture has changed the way young Indians socialise. In a country where there
is a limited bar culture, and where drinking alcohol is still not allowed in many circles, it has
provided an acceptable and safe outlet for people, particularly young Indians, to share a
drink. As mentioned earlier, coffee is becoming a statement of wealth and prosperity among
people with high disposal income, i.e. individuals in employment.
Target Market Selection
The marketing strategy will focus on targeting both groups college and university students
(aged 1825) in the short term and working professionals (2540) in the medium to long run.
Also, tourist and frequent flyers will be a target audience in the longrun.
Product and Service Positioning
It is essential to have a unique selling point to position Starbucks above competitors. In
TATAStarbucks customers will be able to rely on genuine service, an inviting atmosphere
and a superb cup of premium coffee or tea every time.
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MARKETING MIX

1. PRODUCT
Anil Dharker (2012), a Mumbian columnist and social commentator in India, points out that
when a foreign player sees a commercial opportunity and enters the new market; and then it
adapts giving McDonalds as an example. However, this should not be the case and Starbucks
should have a clear strategy about their product range (both drinks and food) it is going to
offer prior entering the Indian market. Costa Coffee Shops in India, for instance, offers
products like Apple Pie Latte, Latte Caramellato, Coconut Hot Chocolate, etc. suited for
Indian taste.
Apart from the usual products offered internationally, Starbucks in India has some Indian
style product offerings such as Tandoori Paneer Roll, Elaichi Mawa Croissant, Murg Tikka
Panini and Chai Tea Latte to suit Indian customers. Its recently introduced pumpkin spiced
latte especially for the Indian tastes. Free Wi-Fi is available at all Starbucks stores. Therefore,
Starbucks should adapt their drinks in order to cater local preferences. Ice coffees should also
be included in Starbuckss menu as Indians have a strong preference for them because of high
temperatures during summer.
However, one should not ignore the fact that India is a tea loving country even though people
prefer to consume tea at home because finding a perfect cup of chai outside is really tough,"
said Smiti Singh, a Bangalorebased software engineer, who drinks at least four cups of tea a
day. TATA Tea (a unit of the softwaretosteel TATA conglomerate) is the worlds second
largest branded Tea Company, so their premium tea products should be also offered to
customers apart from the Tazo Tea.
The biggest distinction is north India's preference for bread, meat, and chai (tea), compared to
the Souths preference for rice, pulses, and coffee. Foodwise, paninis, sandwiches and wraps
with meat but not with beef. The cow is considered sacred by most Hindus and hence beef is
considered taboo in the majority of Indian states. Predominant food option in the south
should be the bistro boxes with rice and pulses.

PLACE
As an international brand, Starbucks should also open kiosks at airports; thus, not depending
solely on Indian tastes and preferences as airports are occupied with people from all over the
world, who will recognise the Starbucks logo.
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In Mumbai (most populous city in India) Starbucks should position the stores mainly in
shopping centres, cinemas, near universities or cultural venues as it is commercial and
entertainment capital of India.
In general, experts felt that largest caf chains in India like CCD, Barista Coffee are targeting
the same locations, mainly the large cities. Geographical expansion has huge possibilities as
cities are not saturated and the market is not limiting at all. Therefore, StarbucksTATA
should aim to gain competitive advantage. As of June 2013, Starbucks operates 15 outlets in
2 cities of India. The company plans to have 50 outlets in India by the end of 2013.
CITY STATE/UT NO. OF OUTLETS
DELHI 7
MUMBAI MAHARASHTRA 8
Recently, there have been few more stores that have opened in Pune and Mumbai.

PROMOTION
Promotional activities will not be analysed in details as they should be in line with Starbucks
promotions worldwide. Besides, retailers in India rely heavily on wordofmouth (personal
communication). The Starbucks Card will be introduced a convenient way to pay for your
drinks and earn rewards for your purchase. Furthermore, instore promotions accompanied
by new products such as drinks and accessories sourced from the regions should be present
in India as well.
Starbucks might consider the idea of advertising on television. In the US, there are three
places that the average American spend his time during weekdays at home, in the work
place and in Starbucks. So, they should somehow show the western lifestyle to the Indian and
a TV advertisement. Furthermore, it is the first 50/50 joint venture for Starbucks; so, both
Starbucks and TATA Group will benefit from comarketing activities.



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PRICE
Historically Starbucks has retained it US pricing
model in almost every market they have
entered, but should they follow the same pattern
in India? Starbucks adopts their pricing based
on the demand form the Indian consumer. After
analysing analysed the Indian market for hot
drinks and the price elasticity of products,
probably the prices of products should be at
least 30% lower than in the US.
In contrast to central Beijing, where Starbucks
charges $4.34 for a 12-ounce cappuccino, in
Mumbai it costs $2.14. "A lot of people were
truly surprised by our pricing strategy," said
Avani Saglani Davda, CEO of the Starbucks
and Tata partnership. The lower prices are part
of its long-term plan to operate stores beyond a
handful of major urban areas, she said. "If the
Indian consumer doesn't see value, then it tends
to be a temporary commitment to the brand," Davda said.. The change comes with economic
growth and with the cross-border experiences of people like Neeti Singhi, who returned to
Mumbai a decade ago after living for a couple years in San Francisco."I got hooked on Tazo
chai," Singhi admits, referring to Starbucks' tea brand, Tazo. Although she is surrounded by
some the world's best chai all over Mumbai, she ordered a chai latte at its new flagship
Starbucks. "In India, its all tea with just a touch of milk and mostly a lot of sweetener," she
said. "At Starbucks, it's all milk with a little flavor of tea."

PHYSICAL EVIDENCE:
Physical evidence plays a very important role in creating a good brand image among the
customers. It is very important to have good ambience, architecture and friendly employees,
introducing customisation and being more customer centric. Starbucks does just the same.
Example: its newest outlet in Pune- To create a local connect, Starbucks has tried and
incorporated several local themes into the dcor as well as the cuisine. This store located in
Koregaon Park is housed in a traditional bungalow encircled with trees which pairs the brand
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with the city of Pune. Copper, a primary resource traced to the earliest history of this city, has
been weaved throughout the store to honor the rich cultural and copper heritage of Pune.
The two storied store has been designed to reflect the rich historical architecture of the city
and the interiors of the store embrace and celebrate the local culture with the use of railings,
displayed antiques and copper. The elevations in the exterior of the store are attractively
designed to reflect the shadows of the Gum trees surrounding it, along with the traditional
Indian swing which is popular throughout Pune.

SEGMENTATION, TARGETING & POSITIONING

SEGMENTATION
Starbucks coffee company mainly uses geographic, demographic, psycho graphic and geo-
demographic segmentation.
Starbucks segments the people on the basis of
Geographic location: Urban Areas such as Mumbai, Delhi, Pune
Demographics: age group 18 to 40 years.
Mainly for the high income group that would include middle class and upper middle class.
Gender- Both men and women.
College students will be the main target for short term.

TARGETING
a. Primary Target Market: The Primary target market for Starbucks Coffee Co. in India is
the young both male and female from the ages of 16-38. This market is well educated and
comes from middle class to upper middle class population. Since our locations are close the
newly opened call centers where well educated and highly paid consumers work, special
marketing strategies will be used to gain their brand loyalty to Starbucks. The geographics of
the target market are mainly consumers who live or work in the vicinity of the two proposed
locations for the Starbucks Coffee shops
b. The Secondary Target Market: The secondary target markets are the tourists in the
areas. Tourists will recognize Starbucks, as it is a multinational company, as most tourists in
India come from the countries of U.S., England, Germany, and Japan. This market will also
fall in the middle to upper middle class population and will find the Starbucks India prices
relatively cheap.
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POSITIONING
Brand Positioning:
Starbucks positions itself as a very sophisticated and high quality, which is not just about the
coffee but also the overall ambience that it creates for the customers. It already has a brand
image created amongst people since it is known as an international brand. Thus, Starbucks in
India positions itself as a premium brand.
Positioning Starbucks products into a marketing mix influences their customers to the point
that a loyal Starbucks customer will never switch to any other brand of coffee because
Starbucks is as much superior item. The position that has taken over the products in the
minds of customers has been both of a great marketing and also by the almost feeling of
being involved with the decision making of the company. Attention is given to the customer
and drinks are tailored to liking.
This one is easy as we got our answer from the horses mouth. Last year Howard Schultz in
an interview with Forbes India had made it clear that the last thing they would do is water
down the experience. I think it would be very disappointing for us to come all the way from
Seattle to India and water down the experience because we dont have the courage to create
something that is consistent with our heritage. So expect the company to go aggressively
after real estate in Delhi and Mumbai. Malls, airports, office blocks are prime targets.
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Differentiation Strategy SERVICE DIFFERENTIATION
1. Only coffee shop in the world where the coffee beans are ground each time a new pot is
brewed instead of grinding coffee only in the morning.
2. Sensory Branding in terms of the consistent & distinct smell of freshly ground coffee beans
when one enters a Starbucks outlet.
3. Creating the signature Starbucks experience for Indian customers which are identical to
any of its stores abroad.
4. Introducing the Starbucks Card service in Indian market for customer loyalty & feedback








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CHPT V: COLLECTION OF DATA & ANALYSIS

5.1 COMPETITION

Caf coffee day has 2,000 locations mostly in India, with plans to reach 5,000 stores
worldwide in the next five years, whereas Starbucks has only 15 till now. It has created a stir
in the coffee industry with just 15 cafes which are doing very well. In the days after its first
store opened in October in a chic area of Mumbai, lines stretched so long that security guards
were forced to implement a one-in, one-out policy. Starbucks plans to setup many such cafes
in the near future and give a tough competition. Currently in 2013, Starbucks has 7 outlets in
Delhi and 8 in Maharashtra. Even though Starbucks has a number of competitors it has
adapted well in the Indian markets and giving a tough competition to the other brands.


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5.2 PRODUCT LIFE CYCLE

Since Starbucks has just entered the Indian markets a year back, it shall come under the
introduction stage which is slowly moving towards the growth stage.

Introduction
Starbucks is currently in the introduction stage. It has started earning sales. This stage
requires a good deal of promotion. It is a 50-50 partnership with TATA and thus becomes
easier for Starbucks to get into the Indian market. Since TATA group is in India since years.
It knows the Indian market well. Thus, can develop marketing strategies according to the
Indian tastes and needs more efficiently. This stage involves high costs and investments to be
made, less sales and profits. The company has to make it aware to the people of their entry.

Growth
Starbucks is making its way towards the growth stage. It has already expanded its outlets in
India with 15 cafes in India and plans to set up a total of 50 Starbucks cafes. This stage has a
high growth rate, which means higher sales and more profits. There is lot of promotion and
BARISTA
A
STARBUCKS
CCD
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advertisements. Also the cost per unit decreases. Competition is also high: e.g. Gloria jeans,
costa coffee, coffee bean and tea leaf as well as caf coffee day and barista.

Maturity
In the maturity stage, the end of stage of the growth rate and sales slowdown as the product
has already achieved acceptance in the market. There is severe competition, and need for
innovation in order to compete in the market. As we can see from the graph, Caf coffee day
has already gained acceptance in the market, having a huge number of outlets. It is now
facing tough competition from new entry Starbucks and other prevalent brands.

Decline
When sales decrease and continue to drop to lower levels, the product has entered the decline
stage of the product life cycle. In the decline stage, changes in consumer preferences,
technological advances, and alternatives that satisfy the same need can lead to a decrease in
demand for a product.
As we can see from the above graph, Barista Lavazza is almost at the verge of declining, but
if it gets more innovative and competitive, it can strive in the market. There has been a
decline in the number of outlets of barista due to losses. It has also got new competition from
Starbucks.















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5.3 PERCEPTUAL MAP










The graph shows that: as far as quality is concerned, Starbucks is better than both Barista as
well as caf coffee day. But pricing wise, Starbucks has a slightly higher price than the other
two. It clearly shows that Barista has the lowest quality of the two having a little high price
than CCD. And CCD is in a good position of fairly good quality and affordable price.
Starbucks, with Tatas as partner, has opted for competitive pricing that is nearly half the
coffee chain's charges elsewhere in the world -- with a cup of coffee costing about Rs. 80 for
a small offering and Rs. 165 for a large one. Starbucks is known for its high product quality
and as a premium brand.
A hot coffee at Starbucks will range from Rs. 80 to Rs. 165, while a cold coffee will cost
anywhere between Rs. 120 and Rs. 200. The CCD sells hot coffee at about Rs. 80 and cold
coffee at about Rs. 150. Though CCD has a number of branches in India, Starbucks has
created a buzz and penetrated in the Indian market and differentiates itself from other cafes
already prevalent.
As far as for Barista, it is not doing well, since there is no innovation. The quality is not that
good as compared to others having almost the same price range as Caf Coffee Day. At
Barista, A hot coffee costs Rs. 85 and cold coffee costs Rs. 155. Also, one of the weaknesses
of Barista is that it is perceived to be expensive by people.

HIGH QUALITY
LOW QUALITY
LOW
PRICE
HIGH
PRICE
STARBUCKS
CAF COFFEE DAY (CCD)
BARISTA LAVAZZA
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5.4 ANALYSIS ON THE BASIS OF THE INTERVIEW
Q1 Why did you decide to come into India with a partner? We do not have any restrictions in
FDI in single brand retail. Why did not you just do it on your own?

Howard Schultz: India is like no other market in the world. Tata's position in India is very
unique. It is a company that has unique capabilities in terms of infrastructure. But mostly
their values were so consistent with ours, building a company with a conscience, treating
people well, taking care of the communities and we thought this was an opportunity to do
something together that we just could not do ourselves.

Q2 No doubt Tata is one of the biggest corporate houses in India. It is their second coming in
the coffee space. They ventured into the coffee retail space with Barista by holding a minority
stake and that really did not go very well. How did they sell themselves to you to?

Howard Schultz: The coffee market here is ferocious in terms of competition. There are so
many players trying to do what we think we can do better. What Tata brings is a unique
perspective in terms of real estate acquisition capabilities, the opportunity to integrate
Starbucks into Taj Hotels, the ability to bring food from the Taj into Starbucks stores and the
capability that we just could not do on our own just in terms of the infrastructure and
distribution. Their previous experience had no bearing whatsoever on what we thought would
be a fantastic partnership.
We are here to build a major business and when I say major business, we think over time
India will be one of the largest markets in the world for Starbucks. We also think that the
competition has done us a favour. They have educated the market and created lots of
consumers. Our own research suggests that this market is perhaps like no other. The
awareness of Starbucks is so large here and there is so much pent-up demand that we think
that over time this is going to be one of the best markets in the world for Starbucks. I do not
think we could have done it without Tata.




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Q3 Earlier we were given to believe that you had a 50 outlet target for Starbucks in India by
the end of 2012. Do you have a revised plan now on how you are going to be expanding?

Howard Schultz: I do not know where that number originally came from, but I am not here to
say how many stores or how soon. I will tell you we are going to build a very large successful
business here.

Q4 Your pricing is significantly lower from the way you price a cup of coffee in the US.
Starbucks has a policy of not bending their pricing too much. Given that, why did you break
the rules for India?

Howard Schultz: I do not know if we broke the rules. We want to create a value proposition
and as much accessibility as possible. We are sourcing and roasting coffee in India. This is
the first time we have ever done that anywhere outside of North America for store opening.
This gives us a competitive advantage as well, but we want to win here and we have created a
pricing strategy that will be very competitive and put us in a position to succeed.

Q5 How will you ensure that the Starbucks expansion in India will be both sustainable and
profitable given that a lot of premium players who entered the market, to name a few such as
Costa Coffee, Gloria Jean's, Coffee Beans, are all struggling and have not yet been able to
make a dent in the Indian market?

Howard Schultz: Yes. We have heard this many-many times in Japan, in China, in Europe, in
Mexico that Starbucks is not going to succeed here, no one else has, you are an outsider, etc.
We are going to take the long view. This is not a sprint, it is a marathon. We are going to
bring a quality product that does not exist. The experience will be so significantly different.
Our people will be passionately committed to service and are highly trained and the
experience of the store will be significantly different. You can not compare the Starbucks
brand and reputation what we are going to bring to this market to what exists here. What we
are bringing is going to be new and exciting and completely different.



30 | P a g e

Q6 What is your purpose in the Indian market considering we are populated with restaurants,
roadside eateries, etc?

Howard Schultz: We want to create a coffee experience that is a stunning experience in terms
of quality. We want to create a physical environment that does not exist and when people see
it, it will become the third place (third most popular place after home and work). From a
reputation standpoint, we also want to create the kind of company that is steeped in humanity
and gives back to the community and we will do that here as well.

Q7 You have specialised food menus, catering to the Indian palette. What is so special about
the menu that you deemed it right to be served at a Starbucks outlet?

Howard Schultz: We got great advise from the people at the Taj about the kind of food that
would appeal to the Indian customer. People have been pretty excited about the food at all the
tastings that we have done. The food is very different than anything we have done anywhere
else because it is cue to the Indian palette. It will be hot, it will be cold, it will be savoury and
sweet and will be vegetarian as well as meat. I suspect that the food will be a higher
percentage of sales than we have seen in other markets.

Q8 What about the fact that India is traditionally not a coffee drinking nation, but a tea loving
nation?
Howard Schultz: Not any more. Walk the streets of India. There are so many coffee players
doing pretty well. That gives us a lot of confidence that the winds are going to be at our back.

Q9 Is there an element of customisation that has gone into designing outlets for city /
locality? How does the balance between standardisation of the brand and customisation for
city / locality work for Starbucks?
The stores are a critical part of the Starbucks experience that we offer to consumers. Each and
every one of our flagship store actually incorporate very significantly the culture and the
tradition of the country. The designers marry the elements of Indian tradition and
craftsmanship with the modernity elements of Starbucks. I give full credit to our designers as
they balance the elements as there is a high expectation that people have from a Starbucks
store that they have visited abroad.
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The designers have worked across many markets and their understanding of the Indian ethos
that they have incorporated well and it differs from store to store. There is no magic number
saying that this much of Indian sensibility and this much of core Starbucks will be there. Its
a fine balance they maintain.





























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CHPT VI: CONCLUSION
Starbuckss success in India like other foreign brands depends on their adaptability in
addition to what they do globally. Like Dominos Peppy Paneer pizza, McDonalds
McAloo tikki burger Starbucks might consider tasty healthy vegetarian recipes for an Indian
breakfast treat, next to its muffins some chicken tikka sandwiches may also do fine.
Starbucks is catering to local tastes, it has been doing very well in many other countries
including China and hopes to have success in India as well. The staff is very pleasant and
professional and is slowly creating a good image in the minds of the customers giving them a
really good ambience with high premium products at fairly affordable rates.
The winning mantra according to Schultz, Starbucks will look to create different entry points
for different demographics and will create food relevant to Indian consumers that [it does
not] provide anywhere else.

Thus, Starbucks should follow the strategies that is using and set up more number of outlets.
There is also a good feedback from people and has already created its image in the consumers
mind. Starbucks has a huge potential and can do much better in the near future.



















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CHPT VII: SUGGESTIONS

1. Tata Starbucks can aim at increasing the number of outlets since the current cafs are
already doing well.
2. Keep a constant track of its competitors, and have a competitive advantage.
3. Conduct research of places in India, before setting up a caf, since each city has its
own culture, tastes and preferences.
4. Maintain high quality of products.
5. Try to make the prices a little more affordable for the lower income group.
6. Continue to introduce new products that are suitable to Indian taste.
7. Coffee shops normally close around eleven oclock at night, so Starbucks should
consider the option of closing at midnight or even one oclock in the morning; thus,
becoming the preferred venue for young people. Also, providing some guitar for jam
sessions or karaoke nights on Friday or Saturday may attract even more people.


























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APPENDICES

Q1 Why did you decide to come into India with a partner? We do not have any restrictions in
FDI in single brand retail. Why did not you just do it on your own?

Q2 No doubt Tata is one of the biggest corporate houses in India. It is their second coming in
the coffee space. They ventured into the coffee retail space with Barista by holding a minority
stake and that really did not go very well. How did they sell themselves to you to?

Q3 Earlier we were given to believe that you had a 50 outlet target for Starbucks in India by
the end of 2012. Do you have a revised plan now on how you are going to be expanding?

Q4 Your pricing is significantly lower from the way you price a cup of coffee in the US.
Starbucks has a policy of not bending their pricing too much. Given that, why did you break
the rules for India?

Q5 How will you ensure that the Starbucks expansion in India will be both sustainable and
profitable given that a lot of premium players who entered the market, to name a few such as
Costa Coffee, Gloria Jean's, Coffee Beans, are all struggling and have not yet been able to
make a dent in the Indian market?

Q6 What is your purpose in the Indian market considering we are populated with restaurants,
roadside eateries, etc?

Q7 You have specialised food menus, catering to the Indian palette. What is so special about
the menu that you deemed it right to be served at a Starbucks outlet?

Q8 What about the fact that India is traditionally not a coffee drinking nation, but a tea loving
nation?

Q9 Is there an element of customisation that has gone into designing outlets for city /
locality? How does the balance between standardisation of the brand and customisation for
city / locality work for Starbucks?

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BIBLIOGRAPHY

Vrushali Paunikar, 2011, "International Business Plan Starbucks India", A proposal
Ruchi Mankad and Joel Sarosh Thadamalla, 2011, "Case: Starbucks Coffee Company,
The Indian Dilemma", Strategic Management and Business Policy, 13th Edition, Thomas
L. Wheelen, J. David Hunger
Herve R., Dec 21, 2004, "The Starbucks Corporation: Past, Present and Future", Auch-
Roy-Pen: 1207HA
Harold Brown, 2011, "External Environmental Analysis of Starbucks and the Coffee
Industry"
Flight, Georgia. Grinding Out Success Next to Starbucks Business 2.0, Oct. 2006. Vol.
7, Issue-9
Ryan C. Larson, 2008, "Starbucks a Strategic Analysis - Past Decisions and Future
Options", Brown University Economics Department

WEBLIOGRAPHY

http://news.starbucks.com/article_display.cfm?article_id=707 accessed on Sept 2, 2013
http://news.starbucks.com/article_display.cfm?article_id=703 accessed on Sept 2, 2013
http://www.starbucks.in/about-us/company-information/mission-statement accessed on
Aug 15, 2013
http://www.starbucks.in/responsibility accessed on Aug 15, 2012
http://www.tatacoffee.com/corporate/company_profile.htm accessed on Aug 15, 2013
http://www.indiacoffee.org/indiacoffee.php?page=CoffeeData accessed on Oct 17, 2012
http://www.indiacoffee.org/userfiles/RFP-FINAL-SEP12.pdf Oct 20, 2012
http://www.cafecoffeeday.com/company-mission.php?mnid=3&lmids=3 accessed on Aug
17, 2013
http://www.cafecoffeeday.com/our-business.php?mnid=3&lmids=1 accessed on Aug 17,
2013
http://en.wikipedia.org/wiki/Tata_Starbuck accessed on sept 3, 2013