Question

1. Which international strategy did Starbucks use to expand into Asia?

2. Which entry mode did Starbucks use to enter India? Why did it choose that mode of entry?

3. Do you think Starbucks will be successful in India?

Answer 1

Ans: 1

International strategy used by Starbucks to expand into Asia:

• Starbucks International strategy is to use two Expansion strategies what is Licensing and joint venture. The success of Starbucks brand is dependent on its ability to find the right local partners to negotiate local regulations and other countries specific issues.
• Starbucks International strategy can be classified as product differentiation. Product Differentiation  is a marketing strategy that distinguish a company's products from the competition.
• Starbucks follows a two pronged approach to grow its business in the Asian markets. The first approach is to partner with regional players to have an easy access to the markets. The second approach is that Starbucks has successfully implemented in most Asian markets was to tweak its menu to suit the tastes of the local population
• Starbucks knows that Asia is increasingly important to its growth strategy so Starbucks decided to increase the chain of its outlets more in China and India, the two most populated countries.

Ans:2

Entry Mode used by Starbucks to enter India:

There are many entry modes like Licensing, Franchising, Joint venture, Wholly owned subsidiary, etc.

Starbucks tried to enter India by striking an alliance with Kishore Biyani's Future Group, but there plans were rejected by the foreign investment promotion board, the government body that regulates inflow of foreign money into India's factories, shops and mines. This was the first attempt of Starbucks to enter india but was unsuccessful.

In January 2012, Starbucks come into an agreement with the Tata Global Beverages and decided to announce a 50:50 Joint venture. These joint venture was named as Tata Starbucks ltd., A Tata Alliance.

Joint Venture:

A joint Venture is a commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities. A Joint venture has lots of advantages: Both firms share the cost as well as profits, both sides share the risk, by investing in local market the international firm could successfully explore the foreign market.

Starbucks choose joint venture because:

Due to the current legal framework, Starbucks would have come to India without a partner, instead, it chose to enter into the Joint venture with Tata. This is because Tata brings much more deal to the table. Firstly, Tata have developed considerable retail experience through chains like India, Titan, Westside, etc. Secondly, there has been a sourcing agreement in place between Starbucks and Tata Coffee. Starbucks will be working with other group firms such as Taj Catering and the Taj hotel chain. Tata has  large number of outlets available under in different sectors and under different names, some of which could be used to by Starbucks. This provides Starbucks a cheap entry point in India.

Ans:3

Starbucks will be successful in India:

Yes, Starbucks will be successful in India. There are more than 100 stores in India (as per the year 2017) and India is the most important market for Starbucks. Starbucks is only successful in India because of the strong partnership with the Tata Global Beverages. The young population and fast-growing economy provide the strong fundamentals for higher consumption of Starbucks coffee. Starbucks have competition in the Indian market but still it ranks in the top 5 beverage company in Indian market.

Quarters	Growth percentage	Total no. of stores
Q2 FY 2020	26%	163
Q1 FY 2020	23%	151
Q4 FY 2019	30%	146
Q3 FY 2019	30%	136

In Financial Year 2019, Tata Starbucks posts a 30% sales growth in India.

In Financial Year 2020, Tata Starbucks posts a 26% sales growth in India.

From this table we can conclude that Starbucks sales growth percentage is high and is successful in India and also will be successful in future.