Contemporary Marketing 16th Edition by Louis Boone,David Kurtz

Exercise 12

Although India has long been a tea-drinking culture, the country's southern area is home to huge coffee farms. And thanks to a growing youth market and increasingly comfortable middle class, more of India's 1.2 billion people are discovering the joys of coffee every year.
Enter Starbucks.
The U.S. coffee giant is making a later debut in the Indian market than it planned, after outlasting the government's reluctance to upset local firms by allowing foreign business ownership. To comply with regulations, Starbucks has signed a 50-50 partnership with Tata Global Beverages, the country's largest coffee producer and owner of a hotel chain and in-flight food service, which opens two more business avenues for its U.S. partner
Starbucks is focusing initially on retail stores and hopes to open 50 cafés in Mumbai and New Delhi in its first year. In its favor are huge momentum from its U.S. success, its status as an "aspirational brand" that represents affordable luxury to many Indians, and the desire among India's youth for an inexpensive place to socialize away from home and parents. Tata's local expertise will help Starbucks overcome some deficiencies of the country's infrastructure, such as still-developing road and rail systems.
Challenges Starbucks faces in India include the success of a home-grown competitor: Café Coffee Day recently expanded to 1,200 stores in 175 cities. Other opportunistic competitors include Lavarazza from Italy and Coffee Bean Tea Leaf from California. Starbucks will also have to overcome price resistance; Café Coffee Day sells its small cappuccino for about $1. Finally, as one industry analyst observed, "There are certain things that different cultures never accept." Starbucks will need to correctly adapt its business and customer strategies, and its product offerings, to India's unique and vibrant culture.
Starbucks is pinning its hopes on the 25 percent growth recently observed in India's coffee-drinking market. The head of one Indian consulting firm sees no reason why the chain could not successfully expand to 5,000 stores over the long term. If Starbucks targets only the top 20 percent of India's population, he says, that market is the size of the United States.
QUESTIONS FOR CRITICAL THINKING
1. How can Starbucks best adapt the U.S. model for its cafés and menus to a young and middle-class Indian market?
2. What can Starbucks do to compensate for competitors taking advantage of its late entry to the Indian market?