Starbucks' Foray into Tea-Drinking India
Case Code: BSTR435
Case Length: 17 Pages
Pub Date: 2013
Teaching Note: Not Available
Industry: Electronic Retailer
Themes: Internationalization, International Management, Joint Ventures
Abstract Case Intro 1 Case Intro 2 Excerpts
On October 19, 2012, Starbucks Corporation (Starbucks) opened its first store in India and soon followed it up with 8 more stores. Starbucks Corporation and Tata Global Beverages Limited had set up a 50-50 joint venture company, Tata Starbucks Limited, to establish the Starbucks coffee outlets. Though India was predominantly a tea drinking nation, Starbucks had tasted success in China (also a tea drinking nation) and this had encouraged the company to enter into the Indian café market.
Starbucks, based in Seattle, Washington, US, was the largest coffee house company in the world. It had expanded its presence all over the world including North America, South America, Europe, Australia, and Asia. Since 2006, the company had been trying to enter into the Indian market. However, with FDI restrictions (then limited up to 51%) preventing it from entering the country, it had to postpone its entry. However, in 2011, the company signed an MoU with India's Tata Group (Tata) to explore the possibilities of making its entry into the country. In January 2012, the company entered into a 50-50 joint venture with Tata and in October 2012, it set up its first outlet in India. By March 2013, the store numbers in the country had grown to nine. While the initial consumer response to its stores was good, Starbucks faced a few challenges in the Indian market such as competition from organized and unorganized coffee (and tea) shops, finding the proper locations and talent pool, pricing, and competitive branding and positioning from its competitors. In the words of Howard Schultz, Chairman and CEO, Starbucks, "The coffee market here is ferocious in terms of competition. There are so many players trying to do what we think we can do better." ...
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