Case Analysis 7 Page Paper - Creating an alternative strategy and implementation for Starbucks in India known as Tata Starbucks.

TATA STARBUCKS

Essay requirements:

• Statement and description of central issue (1 page; 2 minutes) • Identification/description of alternatives (2 pages; 4 minutes) • Rationale for selection of best alternative (3 pages; 6 minutes) • Description of implementation plan (1 page; 2 minutes) • Conclusion (1/2 page; 1 minute)

Case analysis: how could the company maximize the long-term success of the venture in India? Doing so would mean going beyond “the westernized and the wealthy” targeting that had worked so well in relatively older and more affluent Asian markets. While the partnership with Tata was occasionally helping in negotiating for good real estate, starbucks needed to figure out how to leverage the partnership to win over the larger young and middle-income demographic segments. Store financials needed to be managed to maintain profitability. These issues would need to be addressed quickly as the company prepared to expand into the next tier of Indian cities.

Alternative Plan:

· Increase brand awareness by contributing a percentage of our revenue or profit to colleges/universities (since that’s our target market)- do this by reducing advertising cost while investing more in the community

· Have a rewards program ( https://templatearchive.com/punch-card/ - cost effective)

· Gain a bigger partnership with Tata Group so that we can gain real estate opportunities like CCD’s revenue-sharing deal - (page 5)

· Maintain current 50 main locations but instead have (see next bullet)

· Have more locations are colleges/schools (rent-free with the percentage being given to them - like the revenue-sharing deal)

· Have starbuck’s vans - brings exposure, accessibility, can move around to different and local places (add more benefits that having a van will do)

INCLUDE:

· Vision, mission, goals and objectives

· Why is this plan better than their previous one?

· Statistics of coffee drinking in India and why Starbuck continue in that geographic area

· The history Starbucks partnering with Tata Group

· Why it is necessary to donate to colleges and universities

· How will this bring exposure to Starbuck?

· Why we should adapt to culture changes and the indian’s taste preferences like starbucks did in China

· Some outside data (include others that will make the paper better):

· What’s their wealthy commercial capital?

· Is India price sensitive?

· What are their preferences in coffee or tea? Bitter, sweet? Why is this important?

· International traveler rate to India (since this is a major part for them going into the market)

Outline of major parts of the article

History:

Starbucks coffee was intorduced to the Indian market in oct. 2012 - inital investment $80 million.

Inida was a nation known for its tea drinkers (1)

Company overall mission was to inspire and nurture the human spirit one person, one cup, and one neighborhood at a time. (2)

Starbucks began planning expansions into countries with more entrenched cultures and large, diverse populations (3)

Between 1996-1999, starbucks expanded to additional markets in countries that had high number of international travelers and a growing segment of westernized and wealthy locals. (look up trends) (4)

Joint Venture:

Tata Group - gained access to locally produced premium-quality beans from tata-owned plantations - strategic asset for starbucks (6)

Challenges:

Success was hard due to two challenges - competition and profitability (1)

High real estate costs and rental rates, along with compeititve pricing pressures and india’s specific cultural preferences - this made it hard for coffee companies to recover their initital investment (1)

Starbucks was unable to use its name to secure any discounted rates in renting real estate (1)

Competition:

CCD had been the market leader since 1996 - mission of the company was to provide a world-class coffee-house experience at affordable prices (7)

CCD had found a way around real estate rates by entering into a revenue-sharing deal, paying 10 to 20 percent of a unit’s proceeds as a fee. (7)

QSR - Mcdonalds & Dunkin Donuts - lower priced options for drinking coffee - advantage was the already existing network of locations in the country (larger footprint) - brought down establishment cost (7)

Suggestion on strategies:

Original intent - it could revert to a plan to from its store count aggressively (like US) (1)

Since the real estate for the first store was obtained from the Tata Group, certainly that store, at least, was brewing a healthy profit (7)

“Abbreviated stores” that would be smaller in size and stores at college and school campuses. (8)

Local innovations in the food menu - India Estates Blend (8)

Target:

Youth segment (exhibit 1) - allow them to tap into a large demographic segment - critical for success (1)

Middle-income target (8)

Is it necessary?

The first store was located in a Tata Group-owned 4k sq ft site (1)

Statistics:

Tata Starbucks reported losses of Rs 51.87 crores, more than half its total sales of 95.42 crores during the same period (1)

Typically monthly rental market rates were 200-300 rupes per sq ft

Fun facts about starbucks:

Did not allow smoking (3)

The company recognized there was a universal need among individuals to be respected for their differences and to feel connected with others (3)

Tea was a much larger crop grown in the north of india and coffee was grown mostly in the south of india (6)

Prefer the sit-in concept (7)

Where they went wrong:

Look at Japan for an example - turned its first profit in 2000, nearly 4 years after its initial launch - was more committed to win the market over the long haul - lead to it growing over 1k stores - for a while sales volume was twice as high as US. (4)

By 2015, tata starbucks expanded to 50 locations - short of their initial expectations - they expected 50 stores by the end of 2012 launched year (NEGATIVE) - not a realistic goal - reason for losses (1) - need to look at japan strategy for an example (4 years to gain profit and awareness)