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An India Pestle Analysis

Starbucks is a multinational espresso bar. The first Starbucks opened in 1971 and took their name from the
classical story of Moby Dick, since it appeared that the name was adequate for the company that imported the
best coffee for the citizens of Seattle. Howard Schultz bough this coffee company in Seattle in 1987 and soon
he managed to transform the six local coffee shops to a public national company with over 250,000 employees
and over 1300 stores. During the decade of the 2000's, Starbucks had opened coffee shops in more than 43
countries and over 15,500 regions. Only in 2002 Starbucks featured more than 5600 coffee shops. Now
Starbucks is the global market leader of espresso bars ( Starbucks , 2012 ).
Over the last few years Starbucks have decided to expand to the diverse market of India. India is the second
biggest country in the world in terms of population and seventh biggest by geographical area. India nowadays
in considered to be one of the emerging powers. India's economy is one of the fastest expanding in the world,
and it is forecasted that India will be the fifth largest consumer market by 2025. If today the Indian middle class
counts 300 million people, a number compared to the entire EU market, it is only expected for this number to
grow over the years, as this new market grows in power ( Worldscibooks , 2012 ).


In order to assess Starbuck's decision to expand their business activities in the Indian market, it is essential to
analyse all the factors which affect such decisions. These factors include the political, economic, social,
technological, ethical and environmental issues. For that reason the PESTLE analysis is used.

Political Factors
Political factors refer to the governmental policy in terms of the economy, the goods and services provided,
political decisions made in vital areas of business, education and workforce, as well as the decision made
concerning infrastructure.
Political Situation: The political situation in India can be characterized as stable. It has a federal republic
Democracy, which comprises political stability with effective governmental policies.
Privatization: India has reduced the political interface in the management of enterprises, thus leading to
improved efficiency and productivity of businesses. Privatization in India has been carried out in several stages;
such as, deregulation, de - reservation, and disinvestment ( Privatization in South Asia )

Economical Factors
Economical factors include interest rates, taxation changes, economic growth, inflation and exchange rates.

Taxation Policy: India features a well structured tax system. There are several different taxes or mandatory
contributions that a business in India has to make. These include a corporate income tax, Central sales tax,
social security contributions, employee's state insurance contribution, dividend tax, property tax, fuel tax, tax on
insurance contracts, vehicle tax ( pollution tax ), state VAT, CENVAT ( Excise Duty ), tax on interest, income
surcharge, education cess and secondary and higher education cess ( doingbusiness , 2012 ). Tax system in
India is considered to be favorable for a business expansion ( KPMG, 2012 ).
Economic reform: Since 1991 India has started to move towards a a more industrial policy. The Government
reduced the number of industriesunder compulsory licensing to six , Policy towards foreign capital was
liberalized , and the Foreign Investment Promotion Board ( FIPB ) was setup to promote and channelize foreign
investment in India ( Ahuja et al, 2006 ).
Interest rates: An increase in interest rates means that investment and expansion plans are suspended as a
result of falling sales for Starbucks and their suppliers. Also, mortgage repayments are rising and therefore,
consumers have less disposable income to spend on luxury items such as coffee. Low interest rates should
have the opposite effect. With India's interest rate as high as 8%, a business expansion at the present could
prove to be dangerous ( Bank of India , 2012 ).
Inflation: Inflation is a prerequisite for an increase in prices. Business costs will rise for Starbucks, in the event
of an inflation growth, as well as the costs of wear and therefore the menu cost will increase too and Starbucks
will have to create new pricing lists. Furthermore uncertainty is created in the decision making process,
because inflation redistributes money from lenders to borrowers. With the Indian inflation rates varying around
9 and 9,5 % such redistribution of income is likely to take place ( Trading Economics , 2012 ).

Social Factors
Social changes in a country has a significant impact on the demand for a firm's products, as well as the
availability and willingness of people to work.
Demographics: India's population is aging. From a total of almost 1,1 billion people, a 31,8 % are under 14
years old, 63,1 % are between 15 and 64 years old and a 5.1 % is over 65 years. Thus the greatest percentage
of population is the working population.
Lifestyle: India's lifestyle is more connected to tea, the production and consumption of which is considered
more of a small ceremony than just a habit. However coffee consumption has started to augment between
people over 15 years old, who consider consuming coffee as a sign of adopting a more common and global
lifestyle ( Srivastava , 2002 ).
Attitude towards work and leisure: Indian culture differs in terms of leisure days in comparison with the rest of
the world. As Sunday is considered to be a leisure day for most of the world, this does not correspond to the
Indian culture, as for them Friday is the official leisure day.

Technological Factors
New technologies create new products and new processes. India is already a big market in the mobile sector
and new operators will launch there their services soon.
Software: The annual growth rate of India's software exports has been consistently over 50 percent since 1991.
More specifically India's software industry has grown to 5,4 billion dollars in the beginning of the 2000's ( Indian
Embassy , 2012 )
Power Sector: India has a great percentage of self sufficiency in terms of total power energy needs. The
Government of India and its agencies and institutes have recently developed a number of plans and strategies
involving power sector technology ( International Energy Agency , 2011 ).

Legal factors
The factors influence the legal environment in which a company usually operates. In recent years significant
changes have been made in the legal environment in India which influence the way in which companies
operate. Such changes include the disability discrimination legislation, an increase in the minimum wage and
greater requirements for firms to recycle. In general legal changes can affect a firm's costs and demand .
International Trade regulations: After 1992 India has started to implement regulations which strengthen imports
and exports in the country. Through the foreign trade act, provisions for further development are made, as well
as routes of collaboration between the central government and the foreign trade are established ( Indian
Government , 2012 ).

Environmental Factors
Environmental Factors include the weather and climate change. The general move towards more
environmental friendly products and processes is affecting demand patterns and creating business
Climate: The climate in India with the long monsoons and the equally long dry periods creates a challenge
which needs to be met by the organizations. Infrastructure has to be such that can make businesses viable in
such diverse climate.
Air pollution: Of the 3 million premature deaths in the world that occur each year due to outdoor and indoor air
pollution, the highest number are assessed to occur in India. Organizations have to establish internal
regulations and standards in order to help in the decrease of this ratio.


Five forces Porter competitor analysis is an important tool for analyzing the structure of an industry on strategic
processes. It helps the trader to stand out in a competitive environment. Porter has identified five competitive
forces that shape every industry and every market. These are: The threat of entry, buyer power, the power of
suppliers, threat of substitutes and competitive rivalry.
The threat of entry includes: Economies of scale, high or low entry costs, not an ease of access to distribution
channels, the cost advantages not related to the firm size, the action of the government and the importance of
diversification. There will always be a constant pressure on Starbucks to react and adapt to the pressures of
new entrants. The easier it is for a new market entry, the greater competition in the market. For that purpose
Starbucks have signed an MoU with Tata Coffee in India, which allows them a future market entry thus
balancing the potential featured threats ( Starbucks , 2011 ). Since local foreign-investment rules limit a foreign
single-brand retailer to holding 51% of its joint venture with a local partner, it might prove to be a challenge for
Starbucks to enter to the Indian market.
The power of buyers: Buying power is likely to be high under certain conditions. A concentration of buyers may
occur, especially if the volume of purchases is high, the industry consists of many small businesses, there are
alternative sources of supply, cost of raw materials is a high proportion of total costs, the cost of switching is
low and poses little risk. The cost of switching between suppliers is low for Starbucks, especially due to the
large number of suppliers Starbucks have.
The power of suppliers: If the market is dominated by a few large suppliers and instead of multiple sources, the
bargaining power of suppliers is likely to be high, despite the fact that suppliers usually have a limited amount
of power. With Starbucks being the most famous
Coffee chain stores, with sales worldwide of $ 3.28 billion in 2002 and continuing to expand, they should still be
able to require coffee beans for some time. It's safe to say that suppliers need Starbucks equally if not more
than Starbucks that need them. However, having signed an MoU with Tata Coffee in India, the power of buyers
might prove to be high in this case and Starbucks might need to seek for alternative buyers in the Indian
The threat of substitutes: This threat occurs when a need for substitution appears and therefore substitutes
occur for some products. An example would be for Starbucks to offer an alternative drink if a customer wants to
switch from using coffee to tea. Indianizing the Starbucks products so that they meet the taste of Indians will
be a challenge for the people in Starbucks. Some of the moves likely to be made are adding some Indian teas,
coffees and food, such as vegetarian sandwiches.
Competitive Rivalry: Many factors contribute to the intense rivalry among existing competitors in an industry.
This is most likely to be high when the entry is possible, when the threat of substitute products exists, and when
suppliers and buyers are seeking to exercise market control. For this reason, the competitive rivalry in the
center of the diagram. Competitive rivalry in India will be high for Starbucks, since the coffee houses are
considered as the first and foremost meeting places. Competitors of Starbucks would include 2200 coffee
cafes amongst which, Cafe Coffee Day, a unit of Amalgamated Bean Coffee Trading Co., which now is the

largest chain of coffee retail stores, the Luigi Lavazza SpA-run Barista Lavazza chain of espresso bars and
Whitbread PLC-operated Costa Coffee stores as well.

By signing an MoU with Tata Coffee in India, Starbucks has chosen the alliance strategy for entering this new
market, and more specifically has achieved so through a joint venture. A joint venture is an association of
persons, natural or legal, by which they seek a common purpose through the use of of common means. The
intended purpose of a Joint Venture ( and hence also its length ) differs from that of other business strategies
and company types in the sense that it is not a constant but a unique business type and is usually associated
directly with a certain project.
The option of a joint venture was only natural due to the local foreign investment laws which occur in India. A
joint venture is a constantly more commonly used method for internationalization, which guarantees low
operational cost, a better competitive position and learning of new business capabilities. In the case of Tata
Starbucks Ltd, two companies formed the venture, an international and a local company . The most crucial
conditions for the formation of a joint venture are possession of additional benefits, the timing of opportunities
for both firms and the existence of barriers to full union, either economic, financial, legal or political. The
venture, Tata Starbucks Ltd, will spend 400 crore initially and open 50 Starbucks cafe across the country by the
end of the calendar year. The initial stores planned in Delhi and Mumbai in August. The move is part of the $
10-billion-plus US firm's strategy to focus on emerging markets such as India and China to drive future growth
rates. Although some of the cafes will be stand alone outlets, some others might be roofed under the Tata hotel
chain Taj.
A Joint venture is a controversial entry mode to new markets for a company, as it minimizes the cost and the
risk in rational levels for both venturing companies, while it also offers the opportunity to the one to learn from
the other. Furthermore it is yet another way of entering markets in countries where constraints exist and it is
also considered as a method of exchanging technological knowledge and the development of international
experience in the contemporary global environment. Apart from the aforementioned benefits however, joint
ventures feature some disadvantages. The main disadvantage of this business strategy is that the total control
of all the parameters of the venture is not feasible and therefore it is possible that problems might occur, mostly
because of the lack of full correlation between contribution and effect, even though this situation is more
structured than the rest. It is of course necessary that the participants of the joint venture must be able to
protect their strategic advantages, the potential to share control and of course to compromise to the demands
of each culture. It is considered of great importance that a venture takes place between the management of the
companies involved, which can either strengthen or dissolve a joint venture.
The company's value chain is very important for any manager, as they are required to optimize every link of the
chain in order to maximize the intake of the customer value. For Starbucks, the value chain of suppliers is
ssociated with the place of origin of the coffee beans they use to manufacture the final product. The best coffee
varieties are selected from around the world with the most rich and interesting flavor. They test more than
150,000 cups of coffee a year in order to select the best flavored coffee beans. Usually the selected variety of
Arabica beans has the most refined taste ( Starbucks, 201 ). Understanding the importance of the value chain

suppliers, Starbucks maintain close relationships with coffee exporters, with whom they work every day and
whom they train constantly. If Starbucks wants to use the joint venture with Tata Coffee in order to promote the
strategy of value creation they have already established internationally, they must maintain their position
towards the qualirt of the product serve and even look for alternatives suppliers closer to the Indian district
apart from Tata Coffee.
However the value chain needs to be associated with the resources the company has. The company's value
chain consists of:
The infrastructure of the company, which in the case of Starbucks is how they want to run their organization
and the implementation of optimal planning, economic policy and quality control. Starbucks has decided to
produce high quality coffee and quality control is directly related to this decision.
The administration of human resources, on which Starbucks has taken important decisions, such as that all
employees are equal. Even the waiters who are partly employeed receive bonuses for their work, such as free
coffee and health coverage to feel that their company appreciates them and gives them value, so that they can
and will in turn provide high quality services, thus increasing the value of the customers.
Technology Development is also crucial, which Starbucks uses in every department of the company, either to
train their workforce, or for the manufacturing of their products, or to control their stock.
Supply, ie the way in which Starbucks acquired the highest quality of coffee beans.
Operations, or else the procedures followed for the manufacturing of products.
Internal and external logistical structures, namely the processes of receiving the coffee beans from suppliers,
storing them and the procedures to be followed until the end user receives the purchased product.
The service, which covers all activities that enhance the value of the product. In this area the staff is included,
which ensures that every customer who visits Starbucks has a unique experience, thanks to the friendliness of
staff, their efficiency of service and product quality.
All these create the competitive advantage of the company, which offers the added value to consumers /
customers. The fundamental capabilities provide businesses significant competitive advantage through the
activities, skills and expertise and general knowledge to produce the product. The comparative advantage of
this offers increased value to customers. The goal is for Starbucks to focus their attention on the fundamental
skills that really affect their competitive advantage. For Starbucks, this includes knowledge about the best
grown coffee beans, what is the best way to prepare the final product in order to make the best cup of coffee,
but also knowledge of how best to approach a foreign market. The comparative advantage of high value and
has helped them both to diversify their product and to assume leadership in the field of coffees and drinks.

Top Ten Green Coffee Producers 2011

(millions of metric tons)




















World Total
UN Food & Agriculture Organisation (FAO)[1]

Read more:



Areas of business
Tata Coffee is arguably the largest integrated coffee plantation
company in the world. Tata Coffee has a hand in every aspect
of the coffee making process, with business activities ranging
from growing and curing of coffee and tea to the manufacture
and marketing of value-added coffee products. Tata Coffee
grows coffee on its own estates, processes the beans, exports
green coffee, manufactures and exports Instant Coffee and
retails coffee with its own branding in the domestic market.
Tata Coffee owns 19 coffee estates located in ideal coffee
growing highlands of Southern India, with fertile soils and
invigorating climate. Spread over 8037 hectares in Coorg,
Chickmaglur and Hassan districts of Karnataka and in Valparai
district of Tamil Nadu, Tata Coffee produces 10,000 metric
tonnes of natural shade grown Arabica and Robusta coffees, in
both washed and unwashed forms.
These estates are located at various altitudes, and the coffee
produced possess distinct cup characteristics.
Tata Coffee's uniqueness lies in its ability to produce large
quantities of estate specific, strain specific, speciality and
premium coffee, while maintaining strict consistency in quality.
Apart from coffee and tea, pepper and cardamom are also
grown as inter crops on its estates.
Monsoon Malabar, Mysore Nugget Extra Bold, and Robusta
Kappi Royale are three of the prominent specialty grades of
Indian coffee it grows and processes apart from estate specific
coffees. Mr. Bean, a quality Roast & Ground product made

from the finest coffee beans at its plantation.

Coffee curing
The company has the largest curing facility in the country at
Kushalnagar with an installed capacity of 20,000mt. The coffee
is cured in the company's state-of-the-art curing facility at
Kushalnagar in Kodagu district. It has been awarded the
prestigious certificate of approval for quality ISO-9002 through
certification by Bureau Veritas Quality International,
Netherlands. This unit is the first curing facility in India to
receive ISO-9002 certification.
The company also owns 7 tea estates which spans 4755
hectares in Coorg and Chickmagalur districts of Karnataka and
Annamalais district of TN and produce 7.5 million kilograms of
Estate supplies
Tata Coffee also deals in plantation requirements such as
fertilisers and chemicals, estate implements, and tyres and
tubes through it's Estate Supplies Division
Instant Coffee
Tata Coffee also has the capacity to produce 8500 metric
tonnes of Instant Coffee per annum, for which it has a sizable
export market. International Tata Caf, Mysore Gold and
Malabar are the popular Instant Coffee brands which are
Tata Cofee has abundant reserves of timber, which is grown
for shade. The company's timber resources on its estates
include Rosewood, Silver Oak, and other softwood trees.
The Coorg district of Karnataka, India, is one of the main
coffee-growing regions in India and the main plantation
operations of Tata Coffee are around Pollibetta, in the
Southern part of Coorg. The company owns 19 coffee estates
and 7 tea estates located in the districts of Coorg, Hassan and
Chickmagalur, including one recently acquired coffee estate
and five tea gardens in the Annamallais region of Tamil Nadu.
The coffee grown on these estates are naturally grown, in a
mixed shade of two tiers. The plantation's head office is at
Pollibetta, Coorg, Karnataka.
Instant Coffee
Tata Coffee has two Instant Coffee manufacturing facilities,
one at Toopran near Hyderabad and the other at Theni near
Madurai in Tamil Nadu. The combined installed capacity of

these two plants is 8500 metric tonnes.

Corporate office
The company's marketing and corporate functions are based
out of it's corporate office located in Bangalore.
The company's shares are listed in the National Stock
Exchange, Mumbai, Bangalore Stock Exchange Ltd., Madras
Stock Exchange and Hyderabad Stock Exchange.

Caf Coffee day

CCL Products India

CCL Products India, also known as CCL Products (India) Ltd. is an India-based, 100% Export
Oriented Unit (EOU) of instant coffee. CCL Products India was established in 1995 at Duggirala

The main business activity of CCL Products India involves manufacturing of instant or soluble spray
dried coffee, agglomerated or granulated coffee, and freeze dried coffee. CCL Products (India) Ltd.
is headquartered in Hyderabad, India. CCL Products India exports its products to the United States
of America and the United Kingdom. CCL Products (India) Ltd. is equipped with a state-of-the-art
research and development center which is working aggressively on product development. Further,
the manufacturing facility of CCL Products (India) Ltd. is an ISO 9001:2000, HACCP, and BRC
Quality Management System certified center. Further, it is also 'Kosher' certified. CCL Products India
is a public limited company and its shares are listed in the Bombay Stock Exchange and the National
Stock Exchange of India.
CCL Products India registered net sales of ` 39050.66 lakh for the year ended 31st March, 20062007 and the company's net profit stands at ` 3802.89 lakh for the same period. CCL Products India
is headed by Mr. Challa Rajendra Prasad, Chairman and Managing Director of the company.
Products offered by CCL Products India are as follows

Freeze dried instant coffee

Spray dried powder

Agglomerated spray dried granules

Camellia Overseas Private Limited

The chief area of focus of Camellia Overseas Private Limited is manufacturing superior quality tea
and coffee in order to attain the global standard. It has a strong presence in the tea industry of India,
Vietnam and Georgia. Other countries which have the units of Camellia Overseas Private Limited
are Sri Lanka, Iran and Dubai. Packaged tea, bulk tea, and coffee are the chief products

A Short Note on Camellia Overseas Private Limited-

Camellia Overseas Private Limited deals with tea production and marketing has acquired around
four years of experience in the tea industry in India, Vietnam and Georgia.
The company is also involved in the production of coffee.Camellia Overseas Private Limited has
acquired suitable markets overseas by producing excellent quality products and has also set up a
number of sister concerns in some countries worldwide namely Sri Lanka, Iran and Dubai. The
company has also got a presence in various countries around the world such as North Africa, The
Gulf Countries, Central Asian Republics, countries of the Levant as well as the Sub-Continent. The
units of the company that are being set up in all these places have gained immense popularity by
ensuring the best quality products as well as excellent service. The filtration system of the products
manufactured by the company is way too strict as compared to other companies in the tea industry.
The products manufactured in this company are supplied directly from the unit and before they reach
the market, the products undergo a rigid testing by experts. Camellia Overseas Private Limited never
compromises on the quality of its products whatever might happen. The company is also working
hard on expansion of tea plantations and production. It has ensured bigger investment opportunities
in the tea plantation industry in India.
Products and Services of Camellia Overseas Private Limited-

The products manufactured

Packaged Tea:-




String & Tag tea bags

Floating pot tea bags in different shapes and sizes

Packaged Loose Teas



Green Teas

Duplex cartons

Metal caddies






Wooden presentation packs

Ceramic caddies

Flavored Tea


Bulk tea:

CTC teas

Orthodox teas

Green Teas

Coffee:Arabica and Robusta coffee beans.

Contact Details of Camellia Overseas Private Limited

199 Bengaluru,

Caf Coffee Day



Indian Coffee House

Early 1940s


Caf Coffee day

India Coffee House
Hindustan Unilever

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Coffee Brands in India

Tea and coffee are the two most common beverages in India. Found in almost every Indian
household coffee has become a part of the Indian culture. With the influx of coffee joints like Barista,
Starbucks and Caf coffee day drinking coffee has also become a style statement. Known as one of
the most common hang out drinks today coffee is also enjoyed by school kids and teenagers.

According to a study conducted by the International Coffee Organization, India is the fifth largest
coffee producer in the world. Karnataka alone is responsible for producing 70% of the total coffee
India is responsible for producing only a meager 4% of world coffee output and the industry directly
provides employment to about 6 lakh people. In the 11th five year plan the Coffee Board in India has
proposed coffee expansion plans in Andhra Pradesh and the northeastern regions in India.





The major players in this segment are:


Tata Coffee


Nescafe by Nestle India clearly dominates the Indian coffee market. Apart from establishing
numerous manufacturing units the company has also gone a step ahead and installed numerous
coffee machines in various public places. The company has a record of selling almost 700m cups of
hot and cold coffee per day. Enjoying almost a monopoly status in the Indian coffee market, Nescafe


Among the top coffee brands in India Tata Coffee is one of the largest integrated coffee producing
companies in the world. Tata Coffee is involved in every aspect of coffee production right from
growing and curing of coffee to the marketing and sales of the product. Tata Coffee owns 19 coffee
estates where they grow coffee, located in South India which serve as ideal destinations for the

Another significant coffee brand in India Bru is one of the most sought after brands produced by
HUL. Introduced in the year 1969 the brand became the pioneer of instant coffee in India. Positioned
as a family coffee brand Bru even managed to push Nescafe to the second position in 2008.
Currently among the top coffee brands in India Bru accounts for 49.6% market share of the coffee
industry in India

SWOT Analysis for a Coffee Cafe

by Lynda Moultry Belcher, Demand Media
Opening a coffee shop is more than knowing the difference between a mocha latte and a caramel
macchiato. Before you pick out your theme and the catchy phrase your staff will chant when greeting
customers, you must strategize your operational plan. Creating a SWOT analysis -- identifying the
good, bad and potential ugly -- for your business is essential before moving forward. No matter if you
create a formal plan or scratch some ideas on a napkin, know where you stand within the industry and
against your competition.


Your coffee shop needs to stand out from the rest as you compete with several neighborhood favorites
and the giants like Starbucks and Dunkin Donuts. Identifying your strengths is where you pinpoint your
niche within the market such as serving homemade desserts or having distinctive ambiance. Identify
at least one or two things that will drive customers to your caf repeatedly. Consider that one of your
strengths may simply be on an impeccable location where you're the only game in town. Use
opportunities such as those to your benefit.

Every business has a weakness. It could be that due to your budget, you'll have to keep your location
small or that you won't be able to order premium blends from overseas. Your weaknesses are those
areas that you either do not perform well in, are missing the mark on or at an overall disadvantage. It's
easy and enjoyable to focus on the dynamic products and services you'll offer, however, it's just as
necessary to consider those that could pose a problem.
Related Reading: How Do the Functions of a SWOT Analysis Work Together?

Creating new opportunities is where you can plan for growth in products such as adding a "coffee of
the month" and special discounts for frequent customers. List both short-term and long-range goals so
that you can anticipate logistical needs for all aspects. Some physical growth, such as opening a larger
or additional location, may be in the works and therefore you should plan ahead for what is needed to
reach those goals.

Your competition is an obvious threat to your business, but there are other key factors you should take
into account. Ask yourself questions such as "Will customers continue to frequent coffee shops or is
this a fad?" and "How will product costs affect my business?" Write down a list of your threats such as
your location flooding when it rains to how your limited menu causes customers to go elsewhere. Mull
over all of your potential threats to complete your plan.