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Transcript of Starbucks in India

Project 3 The growth strategy of the companyStarbucks in India

We aren t in the coffee business, serving people, We are in the people business, serving coffee" ------------- Howard Schultz CEO

MC1y2, 2nd Semester AP Degree Marketing Management 2010 Counsellor: Gitte Ovesen Beierholm Group members: Cristina Alexandra Grindei, Alisha Khatri, Yunjing Lu,


Li1. Intr ducti n 2. Pr bl

C.. . 3 .. .3 ..3 .. ..4 .. ....4 .....5 ..7 . .7 . .. . .7 .9 ..10 .. ..11 .. .12 . . . .13 14

3. Methodology and Li itation 4. Macro and micro Analysis 4.1 Country profile 4.2Company profile 4.3 Final Decision

5. Recommendation 5.1 Entry mode 5.2 Segmentation and target market 5.3 Suggested position and location 5.4Suggested Value chain

6. Conclusion 7. Reference 8. Appendix

r ul ti n


1. Introduction:Starbucks Corporation has been the most successful coffee chain in the past years. The company has focused on creating a network of stores in US while opening new locations around the world. Nowadays, the recession is effecting the economy of the entire world badly, no exception for the coffee market. Starbucks, as the coffee chain giant, is seeking for a new market in order to keep the leader position in the industry. Meanwhile, at the other side of the world, in India, a country known for the tea consumption, coffee is becoming more and more popular. According to Euromonitor International, in 2009, the total volume of coffee in the Indian market was 44,209.8 tones, the fifth largest coffee consumption country in the world. So is India a possible future market for Starbucks?

2. Problem formulation:

Starbucks is considering going to India. How can Starbucks enter the Indian market? y y Is India an attractive market for Starbucks? What could be the best entry mode for Starbucks in India?

3. Limitation and Methodology:The limitations of the project are the page limit and the restriction in contacting the company. Regarding the company data, the limitation is in focusing on the entire product range of Starbucks, so as a consequence we have choose to focus only on the two main products: coffee and tea. We have applied secondary data sources/quantitative data sources. The research method was the desk research. The theories used in the project are: the micro and macro analysis, the SWOT analysis, the entry mode analysis, segmentation and positioning, target market and value chain. We have used the theories to create an overview of the subject field and apply it for solving the project problem formulation.3

4. Macro and micro analysis

4.1 Country profile

Economy In 1991, the Indian economy experienced a dramatically growth after the government liberalized number of industries open to foreign investment, loosened approval requirements and allowed majority foreign equity ownership1. The economy had a growth rate of 5-7% in average since 1991 till 2007, but an industrial slowdown early in 2008, followed by the global financial crisis, led annual GDP growth to slow to 6.1% in 2009 (Appendix 1), but it is still second highest growth in the world among major economies.

Income The income per capita of Indians increased by 14.2% in 2006-2007 2. Per capita income at current prices was estimated at Rs29,642 in 2006-2007 3, compared to Rs25,956 4 for the previous year. As a result of the increase in total income, the mean annual disposable income also increased by almost 150% from 1995-2007. Government and lawsThe introduction of VAT in India has been a key development. In April 2005, it was the vat was implemented in at a standard rate of 12.5% 5. This new system Businesses will consequently have to raise prices to compensate for higher production costs and this will affect consumer spending. Competitive landscape Inte national companies s ch as Nestle India and Hindustan Unileve are the leaders in the coffee industry in India. Domestic players such as Tata Coffee or Barista Caffee are active in fresh groundFact book CIA Data monitor/ Database/ bon online 3 Euromonitor/ Database/ bon online 4 Euromonitor/ Datebase/ bon online 5 Euromonitor/ Database / bon online2 1


coffee. No other domestic player was able to become established as an