starbucks case study

1. Coffee Wars In India: Café Coffee Day 2013
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3. CONTENTS
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 Case Synopsis
 StarBucks Diamond Strategy
 Porter’s Forces Analysis of StarBucks
 Competitive Advantage of CCD
 CCD’s Competitive Challenges
 Response of Siddharth and Madhav

4. Case Synopsis
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Tea as hot beverages – a part of Indian tradition
Coffee took the first seat in south India
To spread the coffee culture in India – CCD took the lead
Coffee Consumption annual growth was 6.8% , tea having
only 3.6%
Indian per capita coffee consumption was around 110 grams
4887 crores by 2015

5. Café Coffee Day
• Founded in 1996
• V.G. Siddhartha-Founder and
Chairman
• 1454 café’s, 919 express kiosk and
428 retail stores as of April 2013
• Vertically Integrated
• Short purchase cycle.
• catering the young population
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6. STARBUCKS
• Founded in 1971
• Howard Schultz- Chairman and CEO
• Joint venture in India with Tata Group
• 32 outlets as of April 2013
• Value-ensuring quality
• Long purchase cycle.
• Brand Positioning- A premium café
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7. Q1. Strategy of Starbucks in India
Economic Logic:
1. Premium pricing for
providing high value-based
services.
2. Access to raw material at
lower cost, thanks to Tata’s
coffee plantations.
ARENAS:
1. Main target segment: High Income groups
2. Will also attract foreign nationals.
3. Placed in upmarket locations.
4. Larger and more lavish stores.
VEHICLES:
1. Joint venture with Tata, which
facilitated in quicker store openings
(organic expansion).
2. Able to acquire locations with high
footfalls, because of the Tata’s influence.
3. Has access to Tata’s coffee plantations
and catering servicing (TAJ SATS)
DIFFERENTIATION:
1. International appeal, and associated with a premium brand like Tata.
2. Pricing higher than the competitors as it is an exclusive, premium customer service provider with
global standards.
3. Bringing its own global service practices to India, attributed to highly motivated staff.
4. The Starbucks Experience – ambience and furnishing in line with brand’s positioning.
4. Inclusion of regional cuisines alongside their standard menu.
STAGING:
1. Calculated expansion in urban
areas at premium locations like
airports, malls, etc. (opening
about 2 stores per month)

8. Assessing the quality of Starbucks’ strategy
• 1. Does the strategy fit with what’s going on in the environment?
• Huge market as India is 2nd most populous country with a growing
middle class and increasing spending power.
• More proportion of younger population, especially in the working
segment.
• Appetite for coffee has increased at a CAGR of 6.8% between 2001
and 2011.
• More scope for market growth, as Indians consume only ~110g of
coffee per person, compared to 4.5kg per person in the USA.

9. 2. Does your strategy exploit your key resources?
• Brand value of Tata, a renowned local brand and Starbucks, an
international brand, is an added advantage.
• Access to coffee plantations of Tata, thus ensuring raw material at
reduced cost and market security.
• Providing real estate at lower costs in the premium market segments.
• Providing better customer experience via through world-class
customer service, and conducive and likeable ambience in the stores.

10. 3. Will your envisioned differentiators be sustainable?
• World-class customer service , which is difficult for competitors in
India to replicate.
• Starbucks will have to frequently revamp their menus and the design
of their stores to match with the tastes of the customers. With the
support of TajSATS catering service, this can be sustainable.
• As per Starbucks, they will provide premium services at higher costs
in the future also. But, they need to analyze the willingness to pay of
the customers through proper research and introduce new products
at reasonable prices.
• Capital outlay will be higher to create the store ambience and
furnishing in line with its brand positioning.

11. 4. Are the elements of your strategy internally consistent?
• As Starbucks is aiming for a premium customer segment (arenas), it
has set the prices of the items in their menu higher (economic logic)
than the competitors and providing a world-class experience
(differentiation).
• Also, by setting their stores at premium locations (staging) with high
footfalls (malls, airports, etc.), there will be a natural segmentation of
the type of public entering their stores.
• Also, with the help of Tata’s influence in the country, they were able
to acquire posh locations in the cities to set up their stores (vehicles).
• With the organic expansion of Starbucks stores in India (vehicles),
they could efficiently control the store’s operations.

12. 5. Do you have enough resources to pursue this strategy?
• Starbucks and Tata, both are well-established brands.
• Starbucks is managing 16000 stores worldwide. It has a lot of human
potential placed around the world who have excelled in the field of
hospitality, customer service, etc who can train the newly recruited
staff in new Indian stores.

13. 6. Is your strategy implementable?
• Well-trained staff.
• Easier raw material and real estate availability.
• High operational abilities across the globe.

14. Vision of Starbucks- A Tata Alliance
“To establish Starbucks as the premier purveyor of the finest coffee in the world
while maintaining our uncompromising principles while we grow”
Core Values:
With our partners, our coffee and our customers at our core, we live these
values:
-> Creating a culture of warmth and belonging, where everyone is welcome.
-> Acting with courage, challenging the status quo and finding new ways to
grow our company and each other.
-> Being present, connecting with transparency, dignity and respect.
-> Delivering our very best in all we do, holding ourselves accountable for
results.
-> We are performance driven, through the lens of humanity.

15. Porter’s 5-forces analysis for competitive
environment in India
THREATS FOR NEW ENTRANTS:
1. Huge capital outlay needed for start-up.
2. Limited real estate.
3. 51% FDI allowed in India in retail
BARGAINING POWER OF SUPPLIERS:
1. Not much bargaining power with the suppliers, as the
buyers are very huge.
THREAT OF SUBSTITUTE PRODUCTS/SERVICES
1. Tea culture predominant in China, took a long time for
Starbucks to overcome this. In India, coffee culture was
existing, but tea is still the preferred choice.
2. Upcoming hangout places like pubs, bars etc.
BARGAINING POWER OF BUYERS:
1. In the past, buyers had not much choices, and thus less
bargaining power as there were no major food retail giants.
2. With a lot of choices available now, consumer has choices
according to their willingness to pay.
Rivalry:
CCD and it’s huge presence in
India.

16. Factors for Starbucks’ success in China
• Local taste adoption.
• Concept of dine-in services.
• Better ambience and comfortable outlets.
• Good customer service.
• Premium segment brand.

17. Why Starbucks’ Chinese strategy could not
work in India
• Price-sensitive market in India.
• High competition.
• Low per-capita income, compared to that of the Chinese.

18. Q2. What are CCD’s most important competitive
advantages?
First mover advantage
Advantage in price
2.Vertical Integration, well
established supply chain Network
2.Customer relationships.

19. What are CCD’s most important competitive
advantages?
Diversification in Business
Lower Setup times
Personal Appeal: Lot can
Happen over coffee
Good customer base in Tier-2
cities

20. What are CCD’s Biggest competitive challenges?
1. High Fixed Cost
High Fixed Cost

21. What are CCD’s Biggest competitive challenges?
Competition for real estates
Dynamic Market
Competition from other players
Entry of Starbucks

22. What are CCD’s Biggest competitive challenges?
Difficulty in maintaining higher
standards
Uneven Footfall
Talent Retention
Low financial leverage.

23. Strategies in China
Economic Logic:
1. Premium pricing for providing high value-
based services.
2. By sourcing raw materials locally, they
could keep the costs lower.
2. Medical benefits to it’s partners and their
families. (Starbucks China Parent care
program)
ARENAS:
1. Targeting the youth culture.
2. Targeted those areas where the orientation was more
towards luxury brands. (like Chengdu)
3. . Initially, it focused on high-traffic and highly visible
locations in the cities. .
4. Larger and more lavish stores, with plush interiors and
furniture matching the Chinese culture.
VEHICLES:
1. Entered into partnerships with various local coffee companies and
caterers.
2. Used intellectual protection laws to prevent its business model
and brand from being illegally copied in China.
DIFFERENTIATION:
1. Giving more attention to, and executing their operations around the Chinese
culture.
2. Main emphasis on family, the strongest and weakest link a person can have.
3. Starbucks slowly created a demand for coffee, in a place where tea is the norm.
4. Reputation for being consistently higher quality products than their Chinese
counterparts.
STAGING:
1. Slowly started with Green tea, as the Chinese has a
tea-drinking culture.
2. 1 store per day, aims for 5000 stores in the next few
years.
3. Gave the customers a wide portfolio of choices.
4. Long-term commitment, took 19 yrs to take off their
business in China.