marketing plan for starbucks星巴克市场分析.docx

Project 3 The growth strategy of the company

Starbucks 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,

List of Contents

1. Introduction……………………………………………………………………………………………………..…. 3

2. Problem formulation………………………………………………………………………………………..….3

3. Methodology and Limitation………………………………………………………………………………..3
4. Macro and micro Analysis………………………………………………………………………………..…..4
- 4.1 Country profile……………………………..………………………………………………………………....4
- 4.2Company profile…………………………………………………………………………………………….....5
- 4.3 Final Decision…………………………………………………………………………………………………..7
5. Recommendation……………………………………………………………………………………………………….….7
- 5.1 Entry mode………………………………….…………………………………………………………..……….7
- 5.2 Segmentation and target market……………………………………………………………….……….9
- 5.3 Suggested position and location………………………………………………………………………..10
- 5.4Suggested Value chain…………………………………………………………………………………..…..11
6. Conclusion………………………………………………………………………………………………………..….12
7. Reference……………………………………………………………………………………………………….…….13
8. Appendix ………………………………………………………………………………………………….…….……14

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?
· 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.

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 ownership Fact book CIA
. 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 Data monitor/ Database/ bon online
. Per capita income at current prices was estimated at Rs29,642 in 2006-2007 Euromonitor/ Database/ bon online
, compared to Rs25,956 Euromonitor/ Datebase/ bon online
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 laws
The 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% Euromonitor/ Database / bon online
. This new system Businesses will consequently have to raise prices to compensate for higher production costs and this will affect consumer spending.
Competitive landscape
International companies such as Nestle India and Hindustan Unilever are the leaders in the coffee industry in India. Domestic players such as Tata Coffee or Barista Caffee are active in fresh ground coffee. No other domestic player was able to become established as an
0-14 years: 30.5% (male 187,197,389/female 165,285,592)
15-64 years: 64.3% (male 384,131,994/female 359,795,835)
65 years and over: 5.2% (male 28,816,115/female 31,670,841) (2009 est.)
“Geographically speaking, India is located in South Asia in the Eastern Hemisphere. There are 25 states and New Delhi is the capital. The national language is Hindi and about 83% of the population speaks it. Other than that, India has 18 official languages primarily associated with the different states” Wikipedia
.

4.2 Company profile
Starbucks was established in 1971, Inspired by coffee bars in Milan, Italy, Howard Schultz The CEO of Starbucks
wanted to introduce the coffee bar culture to America. Starbucks mission statement is to “establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow”.

Expansion
Starbucks has grown at incredible rate since the opening of its first coffee bar. Now Starbucks has more than 16,000 retail outlets in more than 50 countries. Starbucks owns more than 8,500 of its outlets, while licensees and franchisees operate more than 6,500 units worldwide, primarily in shopping centers and airports. Starbucks specializes in quality coffee and other related beverages. “They sell quality coffee, Italian-style espresso beverages, cold blended beverages and complementary food items, a selection of premium teas and coffee related accessories and equipment” Business description of Starbucks: Datamonitor

Swot analysis
The Starbucks brand gives the company a distinct competitive advantage over lesser known coffee brands. However, Starbucks’s business is highly sensitive to changes in customer traffic, and the current economic downturn would put downward pressure on the company’s margins. Therefore we need to analyze the company’s performance, both internal and external. An excellent tool for that is SWOT. (Appendix 2)

Current financial situation
The general financial performance for Starbucks in 2008 was declining from previous years. The company recorded revenues of $10,383 million.
Although the sale was increased in the last 4 years, the net profit income has decreased with 53.1 percent over 2007 Starbucks annual report/
.
Year
2008
2007
2006
2005
Sales
10,383,000
9,411,497
7,786,942
6,369,300
Net Income
315,500
672,638
564,259
494,467

Starbucks operates in three segments: the US, international and global consumer products group. However, the company reported its revenues by product type in 2008. The Four Categories are:

Beverage
Food
Coffee-making equipment and other
Whole bean coffees
64.2 %
14.5%
11.8%
9.5

During the year 2008, the beverage division recorded revenues of $6,663.3 million, an increase of 10.5% over 2007. The food division recorded revenues of $1,511.7 million in 2008, an increase of 13.4% over 2007. The coffee-making equipment and other division recorded revenues of $1,220.2 million in 2008 an increase of 7.4% over 2007 Data montior/ database
. The whole bean coffees division recorded revenues of $987.8 million in 2008, an increase of 8.2% over 2007.

Global Responsibility
Starbucks is committed to being a deeply responsible company in the communities where it does business around the world. The Company’s focus is on ethically sourcing high-quality coffee, reducing its environmental impacts and contributing positively to communities. Starbucks Global Responsibility strategy and commitments are integral to the Company’s overall business strategy. As a result, Starbucks believes it delivers benefits to the Company and its stakeholders, including employees, business partners, customers, suppliers, shareholders, community members and others.

4.3 Final Decision
Considering India a very attractive and growing market and the analysis of the country and company profile, we have decided that Starbucks should enter the Indian market. We will analyze furthermore the strategies Starbucks should apply in order to enter the Indian market.

5. Recommendation
5.1 Entry mode
Starbucks’ international strategy adapts to different markets to satisfy needs and requirements from every market, respecting its cultures and traditions. In order to enter Indian market, we are going to use the Root entry mode (Appendix 4). The model is divided in four groups: Internal, external factors, desired mode characteristics and transaction- specific behavior. Under the four groups there are 16 factors. We have decided to only look at most relevant factors for Starbucks, which are international experience, product differentiation advantage, intensity of competition and Market potential.

· Market potential:
India has become one of the most exciting economies in the world with a huge increase in foreign investment and consumers who are willing to spend and spend. Due to massive outsourcing on the part of foreign companies especially from the United States, educated Indians are now presented with exciting career opportunities, excellent pay, and the confidence to spend more money. Time magazine reports that these new consumers command $10.5 billion in cash to burn. There could not be a more suitable time for the Starbucks to enter the Indian market.

· International experience:
Starbucks is operating in more than 16000 locations in over 50 countries. Starbucks uses three entry modes that are joint venture, licensing and wholly owned subsidiaries.

· Product differentiation advantage:
Starbuck should keep focusing on high-quality, because for our target group, price is not the most important thing which they might concern, a cup of fantastic coffee and a relaxing environment will impress them much more than a low-price. Starbucks also invests in extensive research and development efforts to develop new flavors, blends or even roast fusions.

· Intensity of competition:
India coffee market is a growing market with large potentials, and because of that, it attracts lot of companies to enter, so the competition in the market is quite intense. The major competition for Starbucks in India at the moment is the Barista Coffee Co., which is an existing coffee shop branch in India, but Starbucks is expected to gain its market share for several reasons. The international popularity of the Starbucks brand will help the company step into the country.

Suggestion:
Based on the analysis we made, we suggest Starbucks should apply joint venture. There are three main reasons. First, Starbucks lacked knowledge of the Indian market, so the company needs a partner who provides it country specific knowledge. Besides, Starbucks should have a fast expansion in India after the first test coffee house’s success ,so they need an international strategy that enabled its internationalization in a short period of time, the wholly-owned subsidiary strategy was unsuitable. Lastly, the Indian market is growing fast with several significant competitors ，Starbucks needs an entry mode that allowed higher control in order to face the competitive situation. Therefore, Starbucks should chose joint venture as entry mode.

5.2 Segmentation and target group
· Profile:
Age: under 16, 16-25, 25-35, 35-45,over 50
Social class: upper, middle, skilled worker, unwaged
· Behavioral
Benefits sought: low-cost, low-calories, health-oriented, taste-oriented, environment – oriented
Purchase frequency: occasionally, loyal, during tour
· Psychographic:
Geograohic: urban, country

Target group:
Since Starbucks has a wide product range, which includes hot drinks like coffee, tea, cold drinks like Frappuccino, coffee beans, hot and cold sandwiches, pastry and snacks, and the target group varies between different products, for instance, tea is mainly consumed by the health-focused people while Frappuccino is trying to catch the young people who value the taste most. However, because of the words limits, we will just focus on Starbucks main product—coffee.

The target group in India market is the young both male and female from the ages of 16-35 which come from middle class to upper middle class population. This market is well educated and gourmet. The geographical position of the target market is the consumers who live or work in the vicinity of the proposed locations for the Starbucks Coffee shops.

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.

5.3 Suggested Position and location
Starbucks coffee shops should be located in centre urban, near to center locations, technology companies, major tourist hot spots, colleges and universities, and shopping centers, where are near the population centre, so the target group can get Starbucks easily.

Suggest location: New Delhi as the capital city and the centre of economy, culture and polity of India, would be the first choice for Starbucks to launch. The Starbucks in New Delhi should be located in Connaught Place, a large commercial shopping area in New Delhi. Most of the call centers and big companies are also in the Connaught Circle. New Delhi is the nearest big city to the world famous Taj Mahal, therefore also being the popular place for tourists from all over the world.

5.4 Suggested value chain
Inbound Logistic: The coffee beans and tea will be bought from local Indian farmers in order to support the local agricultural economy, save money in transportation and avoid tariffs. But high-quality should be ensured to maintain Starbucks brand name. These goods will then be transported to the Starbucks roasting plan