Challenges and Strategies of Starbucks in the Indian Market

This report analyzes the challenges faced by Starbucks while entering the Indian market and the strategies they implemented to compete with competitors. It also highlights the impact of values, ethics, and diversity on the organization's culture.

Managerial Perspective

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Executive Summary
Starbucks Corporation was founded in 1971 and the headquarters are located in Seattle,
Washington. Currently, it operates in more than 66 countries having 21000 retail stores. This
report presents an analysis of the case study of Starbucks entering the Indian market. The
main purpose of the report is to highlight the challenges that have been faced by the
organisation while entering into the new market. Also, it covers the different strategies that
have been followed by the organisation to capture the market and compete with the
competitors. Starbucks make several changes in their strategies, culture, processes and values
in order to expand their business and target the Indian consumers

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Table of Contents
Introduction................................................................................................................................4
Company background................................................................................................................4
Roles and responsibilities of managers......................................................................................4
Challenges and risks faced by Starbucks...................................................................................5
Governance framework..........................................................................................................5
Different culture.....................................................................................................................5
Policy environment................................................................................................................5
Joint ventures.........................................................................................................................5
Business Risk.........................................................................................................................6
Existing competitors...............................................................................................................6
Bargaining power of suppliers...............................................................................................6
Strategies of Starbucks...............................................................................................................6
Global standardization strategy..............................................................................................6
Cost leadership strategy.........................................................................................................6
Segmentation of products.......................................................................................................7
Selecting venues.....................................................................................................................7
Role of ethics and ethical practice.............................................................................................7
Organisational change................................................................................................................7
Impact of values, ethics and diversity on culture.......................................................................8
Conclusion..................................................................................................................................8
References..................................................................................................................................9

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Introduction
Organisational change refers to the process in which the strategies, procedures, culture and operations
of the organisation can be modified or changed. It can be done for improving the image of the
organisation. In this report, the case of Starbucks is considered while entering into the Indian market
and it highlights the several challenges faced by the organisation and different strategies developed in
order to deal with them. Starbucks is worldwide known for its coffee and built a global coffee empire
by providing quality coffee to its consumers. It is beneficial for Starbucks to enter into a new market
especially India as it becomes the most growing coffee consumption market. Moreover, it also
highlights the ethical principles that have been followed by the organisation and the impact it has on
the organisation.
Company background
Starbuck is a well-known American based company dealing in the retail industry and delivered
quality coffee to the consumers. The company opened its first store at Pike Place Market in 1971 in
Seattle. The original name of the organisation is Starbucks Coffee, Tea and Spices. Later, in mid-1980
Howard Schultz introduced the idea of Coffeehouse to the founders of Starbucks. After the success of
the idea, the founders of the company sold it to him and become Starbucks.
Organisational structure plays a very important role in managing the issues of the organization and
provides appropriate solutions to solve the issues. The organisational structure of Starbucks is similar
to the other giant companies. The headquarters of the organization is located at Seattle, Washington
from where the Board of Directors controlled the operations and functions (Tucker, 2017).
Challenges and risks faced by Starbucks
The several challenges that have been faced by the company and managers while entering
into the new market are as follow:
Governance framework
One of the biggest challenges for the organisation is the unique rules and regulations by the
Indian government. The reasons behind this structure are state laws and the incentives which
are structured to attract the investors can be seen as critical in order to drive the economic
growth of the nation (Logan, 2016). The rules and regulations are changed at regular
intervals. Thus, the organisation has to make its strategies accordingly and make the
necessary changes in order to enter successfully in the Indian market.
Different culture
Expanding business in India means dealing with different culture, different languages,
different etiquettes and different practices. The organisation has to develop the strategies

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which are accepted and fitted into the Indian culture. In India, the organisation must keep in
mind that the people of India do not spend much on beverages such as coffee. As the prices
of products are very high because the organisation focuses on providing high quality to
customers, still they have to make a competitive advantage in order to compete with the
Indian coffee market.
Policy environment
The policies of the Indian government with respect to the foreign organisation are modified
and updated on a regular basis and the foreign organisations have to follow these policies to
start their business. Starbucks also face difficulties in order to penetrate its market in some
particular areas. The customs duties and excise duties create confusion for the business which
they have to understand and make their pricing strategies accordingly in order to have good
return through Indian market.
Joint ventures
It is difficult for organisations to select the most appropriate entry mode in order to enter into
the Indian market. The company has to select a partner, who must have a popular image in
the coffee market so that it could be beneficial for Starbucks to expand its strategies
accordingly. The mission and vision of the partner company should be similar to the
Starbucks, which helps in achieving the objectives of the organisation in an effective way.
Business Risk
While entering into the Indian market, Starbucks must take care of the risks related to
financing such as foreign exchange risk as the currency fluctuations may affect the partner
company of the Starbucks (Chang & Lin, 2015). The political and legal risks can also affect
the organisation as because of regular changes in policies such as trade barriers, limiting the
international trade, rise or decrease in export and import duties.
Existing competitors
The existing coffee market in India is growing at a fast pace. The consumption of coffee gets
doubled in the last few years. The young urban population prefers cafes to the traditional
coffeehouses. The leading coffee chains such as Cafe Coffee Day and Costa Coffee have
already captured the market and are making effective growth (King, 2016). Starbucks needs
to capture the new market as well as compete with the existing completion in order to expand
the business.
Bargaining power of suppliers
As Starbucks provide products with quality and follows their rule and regulation and also
encourage the suppliers to follow the set standards by the organisation. This is the reason that

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Starbucks announced guidelines for purchasing the coffee in order to take control over the
suppliers and get the material as required (Kang, & Namkung, 2018). When the suppliers are
not able to meet the guidelines into the new market, it would be difficult for the organisation
to find a new supplier.
Strategies of Starbucks
In order to enter into the new market, the organisation has made several changes in their
existing strategies after understanding the nature of the Indian market.
Global standardization strategy
Starbucks followed global standardisation strategy, which helped it in increasing the
profitability. Organisation did market research and conducted different R&D programs to
bring required changes in their strategies such as selecting the locations in the Indian market
(Lemus, von Feigenblatt, Orta & Rivero, 2015). It also helped them in understanding the need
and preferences of Indian customers. The organisation perfectly maintained its quality level
while entering into the market while having the same taste that enable them to attract new
consumers.
Cost leadership strategy
Starbucks followed the cost leadership strategy, which ensures that reducing the cost of the
unit can be maintained by increasing the production amount. The organisation provide quality
product at an adequate cost, especially as per the demand of consumers (Hossain & Islam,
2015). This has helped the organisation in capturing the market, where demand for low price
product was high and gained adequate response from the consumer.
Segmentation of products
The company focus on segmenting their products in order to meet the needs and requirements of the
consumers. Starbucks also focus on differentiating the products by focusing on the preferences and
choices of the consumers (Susanty & Kenny, 2015). It displays the coffee with other products that
add values to the choices of consumers while maintaining the taste of coffee.
Selecting venues
The other most effective strategies applied by the company are selecting the venue for the stores. The
organization opened its outlets according to the consumer base. They also have opened their outlets
nearby the other and this enables them to divide the traffic, in case, if not handled by single outlet
(Bromiley, Rau, & McShane, 2016). While selecting the location of the store, several aspects that
are kept in minds such as weather conditions, preferences of the consumers and their behaviour.

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Role of ethics and ethical practice
Ethics play a very important role in achieving the goals and objectives of the organization while
meeting legal obligation. It allows company to focus on its future rather than fear from the legislation.
Several countries have their own rules and regulations that are needed to be followed by
organizations. The global ethical principles remain the same for all organization, when they deliver
their products and services at a global level (Lakshminarayanan, Maggio & Best, 2017). Starbucks
places the ethical principles at a high stage on its value chain system and allows fair trade partnership
with consumers. The internal environment of the company allow every staff members to be treated
equally and fairly (Koutroumanis, Alexakis, & Dastoor, 2015). The company make sure that the
contribution of the individual must be rewarded according to their efforts.
Roles and responsibilities of managers
The founder of Starbucks, Schultz follows their own style and believes in doing impossible things for
the betterment of the organisation. This attitude of the founder helps the organization in solving all
their issue that occurs in their journey. The role of managers is to provide an effective environment
for the team members so that they are able to complete the given task on time and provide excellent
services to the customers (Kang & Namkung, 2018). The role and responsibilities of the managers
are to communicate the needs of change with the employees and make them prepared for the
upcoming change. The manager is responsible for managing the providing excellent services to the
consumers in order to retain them by offering products and services according to their preferences. He
is responsible for maintaining the operations of the store and provides effective training to the partners
so that they become able to achieve the goals and objectives together (Kim & Vasileva, 2017). It is
necessary for the managers to build a strong relationship with the Joint Ventures Partner in order to
maintain the long-term business in the new market.
Organisational change
It is necessary for the organisation to change their internal environment as well as their culture
according to the new market. In order to run business successfully in India, Starbucks concentrated on
the food or beverages, which is popular among Indians. Starbucks has made changes in their products
offerings as per the region, like south Indian consumers like to have coffee. On the other hand, North
Indians prefer tea over coffee. The organisation made changes in their product according to the needs
and wants of the consumers. Starbucks applied Kurt Lewin change theory model which involves three
stages such as unfreeze, change and freeze. This theory helps in gaining a high level of change in the
organisation and meets the consumer's needs and requirement (Makinde & Opeke, 2018). It allows
the managers to unfreeze the barriers and challenges that occur and change them according to the new
conditions and apply them, which refer to freezing.

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It was necessary for the organisation to develop a new organisational structure and add new values
according to the new market. In order to enter into Indian Market, the organisation has made a
partnership with the Indian company. Thus, the company did a Joint Venture with Tata Coffee as it
already captured the Indian coffee market in an effective way (Chang & Lin, 2015). The values and
ethics principles of both companies are similar and provide quality product and services to the
consumers.
Impact of values, ethics and diversity on culture
Values that shape the culture of the organisation is its commitment towards farmers and helps them to
grow by becoming partners with them. Starbucks and Tata Coffee help them in cultivating quality
beans for the coffee. It enables them to be available for consumers and provide them with effective
services while maintaining transparency and treating customers with respect (Hutt, 2016). The
company follows the practices of keeping the customers happy and deliver excellent customer
experience by adapting the Indian culture. Through this effort, managers become able to provide
effective products according to the needs and requirement of the consumers (Taecharungroj, 2017).
This has put a positive impact on the values of the organisation as it reduces the wastage of the
products. Starbucks is dedicated to serving customers within three minutes after entering the store,
which reflects that company value the time of its customers. (Martínez-Torres, Rodriguez-Piñero
& Toral, 2015). Therefore, these values and ethical principles helped the organization in providing
excellent culture to employees and customers.
Conclusion
It has been concluded that Starbucks faced several challenges that help them in making their brand
image in the Indian market. After changing the organisational structure and operational strategies,
they become able to enter into the Indian market successfully and giving tough competition to other
coffee companies. Therefore, it is essential for the organisation to follow the home culture of the
market as it helps in improving customer relations. For global companies such as Starbucks, it is very
important to develop effective entry mode while entering into the new market, which helps in building
long-term operations as per the respective country.

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