Starbucks' Entry into Tea-Drinking India

IntroductionStarbucks is the world's largest coffeehouse company with a presence in 65 countries around the globe. As coffee shops were nearing saturation in the US and Europe, Starbucks identified the potential for expanding in emerging markets like China and India (Agrawal and Sharma, 2012). Though China is mainly a tea-drinking nation, Starbucks won the Chinese consumer with its localization and customization strategies. Starbucks' success in China encouraged the company to enter India, which too is primarily a tea-drinking nation. India is one of the emerging markets where personal disposable income per capita doubled between 2000-01 and 2009-10, resulting in vastly improved purchasing power (Deloitte, 2011). The upper and middle class segments in urban India were spending more money in coffeehouses. Moreover, Starbucks believed in the size of the Indian economy, the rising spending power of Indians and the growth of cafe culture among the Indian youth, which would hold strong potential for its growth. The company had been planning to enter the Indian market since 2006, but FDI restrictions had dissuaded it from doing so.Eventually, in 2011, the company signed an MoU with India's Tata Group to tap the Indian market potential. In January 2012, it formed a 50-50 joint venture with the Tata and established its first outlet in October 2012. By March 2014, the number of stores had increased to 50. Initially, Starbucks received good response; but then, the company faced several challenges in achieving sustained growth, such as competition from other coffee (and tea) outlet chains, high prices of its products, and obtaining appropriate retail locations and talent pool.Starbucks - The Global Coffee RetailerStarbucks Coffee Company is the premium roaster and retailer of specialty coffee in the world. It was started by Jerry Baldwin, Zev Siegl, and Gordon Bowker in 1971 in Seattle, USA. It is the No. 1 branded coffeehouse chain in the world. Starbucks grew from 17 coffee shops in 1987 to 23,305 stores spread across 65 countries in 2014.Starbucks became the world's largest coffeehouse chain, serving both hot and cold beverages. More than the offerings, the company focused on providing a 'third place' experience, and the stores became places for relaxation, reading newspaper, chatting with friends, conducting business meetings, or browsing the Internet. The 'experience' factor brought tremendous success and reputation, which in turn made it easier for Starbucks to launch itself in new markets (Kapferer, 2008).Starbucks' Success FormulaStarbucks owes its success to its introducing a new way of drinking coffee, and its nurturing of the coffee culture. Some of the secrets of its success are:* Starbucks' mission is "to inspire and nurture the human spirit - one person, one cup, and one neighborhood at a time." Starbucks aspires to establish itself as a place after home and office - 'a third place concept', and describes itself as the neighborhood location where people can drop by to have a cup of coffee and chat with their family and friends.* Starbucks has its own coffee farms, roasters and carefully followed recipes to provide the universally acclaimed Starbucks experience to its customers.* Starbucks outlets maintain an elite and exotic ambience, which is also changed in accordance with the season.* Customer service has always been a top priority for starbucks. A manager at Starbucks receives at least 80 h of training, while a barista receives 40 h of training before being allowed to make drinks.* Starbucks believes that there is a direct relationship between the financial performance and the manner in which the customers are treated. Thus, human resource activities to improve partner (the term used for employees in Starbucks) relations with the company are given high importance (Flamholtz, 2001).* Starbucks attracts both coffee and non-coffee customers by offering a wide variety of products including pastries, tea (Tazo and Teavana) and other refreshing drinks. …