In 2012, American company Starbucks and Indian Tata Global Beverages began their joint venture in the Indian coffee market. The companies’ alliance was successful, and Tata Starbucks became a profitable business by 2019. However, the company is still far from being financially stable in the Indian market and is exploring further improvement opportunities. This paper analyzes aspects that led to the company’s past success and its actions and external factors that caused challenges. It examines issues from the CEO’s perspective and suggests how Tata Starbucks could improve in the future.
Factors that Enabled the Company to Deliver Strong Performance in the Past
Starbucks is a globally famous company with an exceptional reputation. It is a responsible employer providing its workers with healthcare coverage and other benefits. Apart from excellent working conditions, Starbucks is recognized for hiring refugees and buying ethically-produced coffee beans only. Therefore, the company’s name and reputation are one of the primary reasons for its success in India as people recognize Starbucks’ achievements, bringing loyal customers worldwide. Another reason for the company’s strong performance is its choice of the international expansion strategy. The company chose a multi-domestic strategy characterized by “customizing products and marketing strategies to specific national conditions” (Jones & George, 2022, p. 233). Tata Starbucks customized its menu to local demands and culture. Indian population prefers drinking tea over coffee, so the company introduced “18 diverse varieties of tea to serve the Indian market” (Dess et al., 2021, p. 114). They also found that their prices are above the local average coffee prices, and citizens are not willing to pay more. Therefore, the company focused on serving clients with above-average income, selecting locations in premium places visited by tourists and wealthy, westernized part of the population.
Important Issues Confronting the Company
However, Tata Starbucks faces external challenges due to high competition and the consequences of its wrong internal actions. Indians are a tea-drinking nation as “for every cup of coffee, an Indian drinks 30 cups of tea” (Dess et al., 2021, p.120). Local tea is also cheaper than Starbucks coffee and citizens are much more willing to buy tea, preventing Starbucks coffee from bringing expected revenues. The company overlooked or did not consider local preferences before coming to the region and is currently facing a challenge due to this internal action. Meanwhile, the main external threats are such competitors as Chai point or MacDonalds. Both places offer beverages for a lesser price than Tata Starbucks and have the relatively same quality, which is more appealing to the customers.
Actions Addressing Tata Starbucks’ Issues
As a company CEO, I would suggest improving advertising and opening more branches in places popular among travelers and the wealthier part of the population. Currently, Tata Starbucks target middle-aged citizens, so they could invest in advertising their coffee to teenagers and young adults by using popular platforms like TikTok or Instagram. Advertising beverages to the younger population would attract more customers and allow the company to expand. However, there is a risk that younger people will not be able to afford Starbucks coffee, and money spent on advertising is wasted. Opening more outlets in premium places would allow the company to get more clients from its target audience. Tata Starbucks can open new branches in airports as many tourists and wealthy citizens visit it. The company has already announced its plan to open 40-50 more outlets (Roy & Kalra, 2021). The potential risk of this action is that the company overestimates the need for new branches, and some do not attract enough customers.
Conclusion
Tata Starbucks is a promising company that can continue its expansion in the future. The company was successful due to its brand name, premium locations, and Indian-specific strategy. The company is facing challenges associated with high competition and local preferences. However, these issues can be addressed by improved advertising and opening more outlets. Tata Starbucks has much potential and can succeed in the Indian market in the following years.
References
Dess, G. G., McNamara, G., Eisner, A. B., Lee, S.-H., & Sauerwald, S. (2021). Strategic management: Text & Cases(10th ed.). McGraw-Hill Education.
Jones, G. R., & George, J. M. (2022). Contemporary Management (12th ed.). McGraw-Hill Education.
Roy, A., & Kalra, A. (2021). Starbucks Eyes Faster India expansion with new store formats. Web.