Change Processes of Starbucks in Emerging Markets: A Case Study

This case study analyzes the change process of Starbucks Corporation in different countries, with a focus on its expansion in emerging markets like China and India. It discusses the challenges faced by the company in establishing its market in India and provides probable solutions and change management strategies.

Running head: LEADERSHIP
Leadership
Name of the University:
Name of the Student:
Author Note:

1LEADERSHIP
Introduction
Founded in the year 1971 in Seattle, Starbucks Corporation has become the world’s
largest coffeehouse company with its presence over 60 countries all across the globe. As the
coffee shops were nearing to the saturation level in the Europe and United States, Starbucks
identified its expansion potential in the emerging markets of China as well as India.
Starbucks won the hearts of Chinese consumers, even when it is mainly a tea-drinking nation
(Qian and Xing 2016). However, in India the company is facing certain challenges in
establishing their market. The company has been facing problem initially at the time of
entering the Indian market because of FDI restrictions. In the year 2011, Starbucks
Corporation signed a memorandum with the Tata Group in order to tap the potential of the
Indian Market. Initially, the company was facing good response from its target consumers but
afterwards, it faced several challenges in achieving the sustainable growth as the competitors
are strong (Starbucks.in 2018). The purpose of the report is to analyze the change process of
the Starbucks Corporation, which it needs to undertake in different countries.
Change Processes of Starbucks
The world’s largest coffeehouse chain’s mission statement is ‘to inspire as well as
nurture human spirit, one cup, one person and one neighbor at a time. It aspires to become the
world’s leading coffee company and win the hearts of several customers. Good customer
services have always been on the top of their priority list. The company conducts daily
training sessions in order to serve the customers with their best drinks. Moreover, it attracts
both the coffee and non-coffee customers by offering them with a wide variety of products
like tea, pastries and other refreshments. In addition to this, Starbucks also sells their unique
range of drink-ware like mugs, tumblers and cups and equipments like grinders, kettles,
teapots, coffee makers and others (Starbucks.com 2018).

2LEADERSHIP
In order to lure the customers, the company also offers them with lucrative discounts
and offers. In addition to this, Starbucks’ gift cards and gift products are also loved by its
target consumers. However, the company on expanding its business in China faced some
issues at the beginning because of their tea-drinking habits. Later on, it managed to win the
hearts of many people as well. The company is facing main issues in the Indian market
because of its age-old competitors like Café Coffee Day and Barista Lavazza. These major
players have already established their business at college campuses, airports, highways,
hospitals and many other places.
In addition to this, these competitors have also marked their strong presence by
strengthening their supply chain procedures, providing improved and innovative experiences
to the Indian customers and enriching their menus. The Café Coffee Day is considered to the
Indians favorite coffee shop. It established in the year 1996 and till now it remained the
youth’s favorite meeting place (Cafecoffeeday.com 2018). Moreover, Barista Lavassa entered
the Indian markets in the year 2007 and marked its presence with its brand equity. Starbucks
entry to the Indian market has given the company with enormous growth opportunities
(Barista.co.in 2018). Moreover, along with Tata’s joint venture, the company has also
introduced a wide range of menus especially for their Indian customers like Tandoori Paneer
Roll, Murg Tikka Panini and Elaichi Mawa Croissant.
The stores are also providing its Indian customers with free wi-fi in order to compete
with its competitors. However, the basic challenges faced by the company in the Indian
market are its tea culture, huge competition from the local players, high priced menus,
location, format of the store, low promotional strategies, brand positioning and others.
Indian customers love tea over coffee. The country is predominantly a tea drinking nation.
In addition to this, it is one of the major tea producers all across the globe and over 70% of
the production is being consumed within the country itself.

3LEADERSHIP
Therefore, several Indians have the mindset that is deeply rooted into Indian
culture and majority of them regards coffee as not their cup of tea. In addition to this, the
company is facing huge competition from the well established brands like Café Coffee Day
and Barista Lavazza, which has over 2000 outlets all over the country. This intense
competition has severely marred the business reputation of the Starbucks Corporation
(Schlegelmilch 2016). Moreover, the Indian consumers are highly price-sensitive. While
the roadside stalls charge Rs.10 for a cup of tea or coffee and Café Coffee Day may charge
around Rs.60, Starbucks seem to be very expensive as a cup of coffee is worth Rs.200.
Thus, it can be stated that the price is a major competitive advantage that Café
Coffee Day has adopted against Starbucks Corporation. In addition to this, the company
has only 72 outlets all across seven states of India. The store format is also single and there
is no outside sitting, lounge, regular café, vending machines like its competitors.
Furthermore, the company has very poor brand promotional strategies, with mere presence
over the social networking sites and less advertisements (Taecharungroj 2017). Therefore,
this are the major changes, which the company needs to undertake in order to get
benefitted on the long run.
Probable Solutions and Change Management at Starbucks
The company’s alliance with Tata has enabled it in expanding its business into the
Indian markets; however, the change is not noticeable enough. The company needs to
develop their branding strategies, brand promotional strategies and lastly, the brand
positioning strategies (Wen 2016). The company has focused on changing their menus to
cater to the taste of the Indian customers. However, Indian customers love feeling special and
a dash of belongingness, which they do not get at Starbucks. The staff members do not even
cooperate at the stores of India, which is different at Café Coffee Day or Barista. The

4LEADERSHIP
company has experiences in providing a sophisticated atmosphere to its customers, good
interior design and artwork. However, it needs to change its culture and make the customers
feel valued or special, especially in India (Armstrong et al. 2015).
In addition to this, the prices are too high, which cannot be afforded by many
Indian consumers. In this context, the company can introduce a specific range of menus
for catering to the most number of customers. Café Coffee Day had introduced combo
meals starting at just Rs.60, which is being loved by the consumers. Therefore, a similar
initiative can be taken by the Starbucks Company as well, in order to grab the attention of
the most number of customers.
Moreover, the company’s poor marketing and promotional strategies have also led to
the downfall of their business. Majority of the Indian customers have not even heard the
name of Starbucks Corporation. Therefore, strong promotional and marketing strategies are
needed to be undertaken by Starbucks. This can be done by taking help of the social
networking sites and company’s official websites. In addition to this, the company should
take initiatives of opening its stores in the rest of Indian States, which can benefit the
business on the long run. Furthermore, the store format also needs to be changed like
introducing a lounge, outdoor seating and other options (Knutson 2017).
There are several opportunities for the company as the coffee consumption in India is
being expected to grow at an annual growth rate of 6%. In addition to this, the increased
interests of the Indians in Western brands would also prove to be beneficial for Starbucks.
Moreover, the youth population is immense as well as growing rapidly, who might show
interests in the café culture (Schlegelmilch 2016). Therefore, through these considerations the
company can move on to their brand positioning and brand equity strategies.

5LEADERSHIP
However, there are major threats to the business as well. The intense competition
from the established competitors will pose a great challenge for the company’s expansion
methods. Moreover, there is a major threat of the substitute product, tea. In addition to
this, individuals’ increased health concern about the ill effects of coffee can harm the
business and prove to be disadvantageous for their profitability. Therefore, proper
marketing strategies must be undertaken by the renowned brand. The marketers should
consider the psychographic variable which impacts the consumers’ lifestyle as well as
interests (Solberg 2017). Furthermore, proper selection of the target market is also
necessary for their expansion of the business. The pricing strategy must be undertaken on
the basis of the target market selection.
Conclusion
To conclude, Starbucks Corporation needs to have a clear strategy of branding and
product marketing for the Indian customers. The report discusses in detail regarding the
major challenges faced by the company in the Indian market. Moreover, it gives a brief idea
of how the consumers of another tea-drinking nation, China, has adapted to the coffee culture
and loved Starbucks. The company needs to do the same in India as well, for business
expansion. Several strategies are being given, which can be undertaken by the company for
its own benefit. In addition to this, the company can segment and prioritize its market on the
basis of psychographic variables; rather than only the demographic characteristics.

6LEADERSHIP
References
Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction.
Pearson Education.
Barista.co.in (2018). [online] Available at: http://barista.co.in/ [Accessed 24 May 2018].
Cafecoffeeday.com (2018). [online] Available at: https://www.cafecoffeeday.com/ [Accessed
24 May 2018].
Knutson, B.J., 2017. The foundation of twenty-first-century hospitality marketing
strategy. Routledge Handbook of Hospitality Marketing.
Qian, Y.A.N.G. and Xing, T.U., 2016. Starbucks VS Chinese Tea—Starbucks Brand
Management Strategy Analysis in China. International Business and Management, 12(1),
pp.29-32.
Schlegelmilch, B.B., 2016. The Future of Global Marketing Strategy. In Global Marketing
Strategy (pp. 221-249). Springer, Cham.
Schlegelmilch, B.B., 2016. Global Marketing Strategy. Switzerland.
Solberg, C.A., 2017. International Marketing: Strategy development and implementation.
Routledge.
Starbucks.com (2018). [online] Available at: https://www.starbucks.com/ [Accessed 24 May
2018].
Starbucks.in (2018). [online] Available at: http://www.starbucks.in/ [Accessed 24 May 2018].
Taecharungroj, V., 2017. Starbucks’ marketing communications strategy on Twitter. Journal
of Marketing Communications, 23(6), pp.552-571.

7LEADERSHIP
Wen, S., 2016. Marketing strategies: Starbucks in China.