PESTEL and SWOT Analysis: Starbucks in India

PESTEL and SWOT Analysis Starbucks in IndiaStarbucks is the number unrivaled medium drinking chocolate retailer in the homo. The fraternity wants to bear the finest coffee berry tree crossways and offers handcrafted bever elds. Starbucks is non only(prenominal) approximately drinking coffee merely about a unique experience. The club follows an international expansion strategy by strategical alliances. Starbucks wants to prevent competitors from having a head start, build upon the developing cheer for western sandwich markings and take favor of the spiriteder(prenominal) coffee purpose rates. aft(prenominal) building a successful brand in Japan and mainland China Starbucks wants to enter the Indian mart. Starbucks found a local supplier for their coffee, Tata. However, the lodge has not yet found a give wayner to enter the Indian market with.In this report we go forth give an outline of rough of the challenges Starbucks might grammatical case when entering the Indian market. We will give an digest of the external surround in India. Later we will describe the strengths and weaknesses of the society and the opportunities and threats the Indian market offers. We will combine the internal and external abstract to propose four potential strategies to cross the Indian market.PEST(LE) AnalysisThe ponderer compend is a tool which provides insight of the external environment in which organizations operate or will operate and aids the strategy homework of those organizations. Considering the fact that Starbucks is planning to enter the market in India, the PESTLE analysis is going to evaluate favorable and unfavorable conditions in the rurals political, economic, social, technological, legal and environmental setting.Political factorsThe political factors leave strong invite upon the regulation and compulsive of agate line and the spending power of consumers and other businesses. We must consider those factors as rattling substan tial and even crucial depending on the political dodge of the coun deliver we ar operating in and the political condition of the acres as a whole.The Indian economy has been subject to series of appointed economic reforms since 1991 which had take a leakd a better working environment for abroad companies and has make it possible for foreign investors to operate in the nation more easily. The reforms prepare likewise resulted in amplyer growth rates, lower inflation and change magnitude and ease of the foreign investments. The current Indian government United Parties conglutination (UPA), headed by the Indian National Congress party (INC) has shown more valuation reserve towards foreign countries in general and towards FDI in numerous economic sectors. These reforms clear placed India in a favorable position in the world economic stage. fetching into consideration the political environment in India as a whole, the bureaucracy complications and the regulatory FDI contro ls and regulations, it is safer for Starbucks to enter India via a joint sham or a strategic alliance with an Indian company that understructure provide a buffer from possible political tension. Furthermore, Starbucks apprize face some opposition from the be competitors (CCD, Barista, etc.) through the custom of political influence and delaying tactics. Although situations like these are possible to happen, the chance is low taking into bank note that the Indian market is large enough to hold more companies and the leaders in the Indian gourmet coffee industry will not be strongly affected by Starbucks inlet.Economic factorsIn economic price India is experiencing emergence gross domestic mathematical product with levels reaching 7.4% for 2009 and 8.3% for 2010. The GDP per capita has also been estimated to take stable growth in the last few twelvemonths, reaching $ 3500 in 2010.1Additionally, the postgraduate levels of inflation, which peaked at 11% in the beginning of 2010, reached stable wholeness digit figures by the end of the year as a result of the Indias central bank interest levels adjustment. prospering environment for Starbucks entry are provided by the vauntingly cities in the country. Mumbai is regarded as the countrys financial center and accommodates many foreign financial organizations as soundly as many IT companies. Delhi and Bangalore, other major cities with people totaling just beneath 20 million, are centers of call-center hubs and international IT companies.Apart from that, The Indian Government is compose working on improving unfavorable factors such as far-flung poverty, inadequate physical and social infrastructure, bureaucracy, limited non-agri pagan employment opportunities, regulatory and foreign direct investment controls, insufficient access to flavor basic and eminenter education, and the imbalance of rural-to-urban migration. Furthermore, the government strives to reduce its fiscal deficit in 2011 to 5.5% of GDP from 6.8% in previous age.Socio-Cultural factorsAs one of the main characteristics of the company, the ethical onward motion towards internal and external stakeholders is almost a trademark for Starbucks. The company is replete(p) known for its humane approach towards sourcing its coffee and related products and towards converting its employees to skilled baristas and devote brand ambassadors. In accession to that the company plays an measurable role as sustainable leader on the market and conveys all through its agreeable business strategy.This military position as sustainable business player is crucial facet for the Indian market and its many socio-cultural dimensions. It gives Starbucks position with regard to an important cultural trend that with the ontogeny employment rate of young people, their available income also grows and they become a very doughable target audience. harmonize to sources the population of the country consists of more than 60% of the peop le between the age of 15-59. Also with the westernization of the social trends more and more young people avow western brands and prefer foreign goods. They also go for the kindred trends and try to mimic the same status of exclusivity young people in the US and Europe look for. This places Starbucks at a very dynamic position, where it has a good hazard and much misfortune to capture quick customers. The only problem is that they will not be the first on the market with specialty coffee offering and their otherwise leadership position could strongly be undermined and only sustained by their brand cipher.Next to that, the refinement and cuisine of India poses a very interesting challenge. The mix of traditional tea-drinking population together with the various divagations between Muslim and Hindu and the growing difference among various regions of the country, make it extremely to divide and place is concrete consumer groups. quiesce the most obvious separation with regard t o coffee consumption is evident in the city versus rural areas separation with the urban population having intelligibly high-pitcheder preferences for coffee. Still the numbers of coffee consumers remains low with wispy negative growth figure between 2000 and 2005 6.7% and 2.0% respectively.Technological factorsIn 2004 Starbucks entered into a strategic alliance with Tata Coffee LTD., the largest coffee producer in India. With signing this agreement, Starbucks finally found the partner it needed. A company which met all the conditions and standards followed by Starbucks. Tata proofed its graphic symbol standard by winning a bullion medal for the best Robusta coffee in the world.The factor of quality is very important at the Indian market as high quality coffee beans are easily available. With this strategic relation with the Tata Group, the company, Starbucks, might be able to succeed with matched pricing in India.Another important technological factor is the lack of infras tructure in India. However, having such an go through local partner, Starbucks does not face any problems with this issue.Legal factorsThe legal environment in India might not be viewed as positive as the one in USA or Europe in the eyeball of global business. Corruption in the country is high and it raises concerns.Starbucks has already go through some drawbacks from the legal environment in India. The case of Starstruck is being mentioned as an example of weak copyright and trademark protection in the country. thus far though, the business opportunities still remain enthralling since India has shown signifi foundationt improvement in reforms towards international business and investment. Due to these improvements the countrys has attracted FDIs. Lower tariffs and lower barriers to enter have make the Indian market extremely promising and willing to change.environmental factorsThe Starbucks coffee is for a large part dependent on the quality of coffee beans. Several environmen tal factures must be taking into bankers bill for growing coffee. Sufficient water and trees and a diverse flora and savage are important for growing coffee beans.The rapid growth of the population and economic development will lead to a number of environmental issues like uncontrolled growth, urbanization, industrialization, intensification of the agriculture and destruction of the forest. The growing population has an indecent effect on natural resources and the environment. at that placefore, it is very important that India grows in a sustainable way.External factorsOpportunitiesFollowing Indias economic liberalization in 1990 the country experiences accelerated growth which reaches an average of 7% in the years later on 1997. This, alongside with the increasing levels of GDP, results in growing disposable income of consumers. In a country where cultural trends play important role in golf club growing income and standards of living creates demand for western goods.In recent years there has been a growing number of department stores. They accommodate mainly the high-income and the upper-middle segment, which happens to be the target group of Starbucks. Placing coffee-bars in such places is a big opportunity for achieving high profits and is definitely something that Starbucks has experience with.Another opportunity on the Indian market is the growing sizing of Starbucks target group. In 2006 the middle class in India was estimated at around 250 million and it is growing in urban areas. All, these factors show that Starbucks has a large enough target group which is willing and able to pay premium price for a high quality western brand. Starbucks has the potential to skim the Indian market, because of its positioning and brand image.ThreatsThe coffee retail market in India consists of mainly native brands. The biggest ones are Coffee Caf Day (CCD), followed by Qwikys and Barista Coffee. These companies are considered as threats to Starbucks entry in th e Indian market because they are offering similar and sometimes identical products.CCD, for instance, the company which pioneered the concept of specialty coffee in India, has wide regurgitate of caf formats with almost identical concept used by Starbucks. Besides, CCD has front end all around the India. The same company also sells merchandise and is complex in heavy selling, such as establishing relations with the Indian characterisation and television series industry. Furthermore, CCDs best-seller the cold Frappe is a direct contestation to Starbucks Frappuccino.It is also mentioned that the infrastructure in India is weakly developed, which might result difficulties or larger amounts of costs incurred in the business operations of Starbucks. In addition the retail environment in India is largely unorganized and dominated by small and individually owned businesses.The threat from substitute goods in India should also be considered. The Indian population is still heavy tea drinkers. The consumption of tea per person in 2000 was reported to 44 liters in relation to 1.2 liters of coffee. Another good, which is considered a substitute, is the ostentation coffee. It is reported that 65 % of households bought instant coffee and only 18 % bought filter coffee.Internal factorsStrengthsTaking into consideration the coat and market power of Starbucks as a leader in specialty coffee retailing, the brand equity of the company is one of the most worth(predicate) assets they have (Interbrand Top 100 Most Valuable Brands N 97 estimated brand value $ 3.339 m). This strength also has the highest rate in the strengths separate because through its consistent and innovative marketing strategy and exclusive product positioning Starbucks managed to maintain throughout the years its brand integrity and unploughed on its very consistent mission and vision. The strong joint ventures and strategic alliances that the company has establish all over the word made it possi ble for them to create and develop a sustainable supply chain of high quality.Moreover, Starbucks has also placed great attention to the well-being and satisfaction of their employees. The company ranks at N 98 Fortunes 100 scoop up Companies To Work For. Another very important strength of Starbucks is their financial stability. Taking into account that the companys total net revenues for 2010 increased 17.2%, compared to 2009, to $2.8 billion, the pileus availability that Starbucks has is making it easier for them to manage their expansion in other revolutionary markets like India.WeaknessesBecause of the high quality exclusive products that Starbucks is offering their price range is also very high compared to their competitors. It is a weakness of the company but at the same time it is not addressed heavily because it is part of their exclusive image.Entering the Indian market, Starbucks are not the first movers in the coffee retail industry there are already constituted lead ers on the market and thus Starbucks are market followers. Because of this high competition Starbucks is also facing a problem regarding their suppliers. They signed a supply deal with Tata Coffee which is actually co-owner of the main competitor on the market.Strategic factorsTOWS MatrixThe TOWS matrix, serves as a framework for organizations to assess the compounding of external and internal factors. The matrix helps companies to decide on approaches depending on the opportunities and threats the business environment has to offer and how the company is going to take advantage on them depending on their internal capabilities.Maxi-maxi strategyThe growing Indian economy provides attractive opportunities for a company such as Starbucks. These favorable economic conditions create an environment in which exclusive and sumptuousness products such as Starbuck coffee will be in growing demand. The international popularity of the Starbucks brand will help the company to position itself on the Indian market. Starbucks in one of the best known American brands in the world and it is also attached with positive affiliations on the market. With its strong and distinctive brand image the company is able to take advantage of the growing demand for branded, western and luxury products.On the other hand, in order to gain market share, Starbucks can reduce the prices, but not below the competitions levels and by maintaining healthy profit margins. This is possible since Starbucks has at its disposal coffee from a local supplier. superstar way the firm could protect its position involves developing a marketing campaign emphasizing its superior customer service in resemblance to its competitors.Maxi-mini strategyThe high brand equity and recognition of Starbucks products is definitely the biggest advantage they have over their competitors. Taking into account the size of their Indian competitors and the size of the market as a whole, Starbucks has to put more emphasis on its marketing strategy and try to stress on the promotion of its exclusiveness and premium product portfolio in order to differentiate its brand in the consumers mind.In order to grow and outperform its already existing competitors Starbucks must also emphasize on the companys points of difference, which allow in the brand experience as a whole, the brand quality that they are offering and also the convenient access to their locations.Starbucks is well known for its high quality and distinctive products, so substitute products cant deliver to the customer the same exclusive level of high quality and cannot fit the customers needs and wants as Starbucks does. In order to create and retain a position in the customers mind Starbucks must extend their product portfolio so that it can match the local preferences. For example, they can offer special Indian tea and other typical for the region herbal mixes.Mini-maxi strategyAs a company that offers specialty coffee the limited portfolio of Starbucks, in terms of non-coffee products, can be considered as exclusive offering. Therefore, the company is in a good position to take advantage of the growing opportunity that the cultural westernization is offering and minimize the impact of their weakness. As exclusive product, Starbucks specialty coffee can give the targeted consumers the desired social status.Mini-mini strategyStarbucks should keep its prices high as the alternative can undermine the exclusivity and top quality image of the coffee. Thus, Starbucks has the ability to minimize the impact of their high price weakness on the India market and deal the pressure from competition which is a definite threat. eve though, the main competitors have similar, and even more extensive product portfolios, Starbucks has the competitive advantage of its exclusive brand image.Moreover, Starbucks should slightly try to extend their product line portfolio in order to answer the consumers existing demand for instant coffee.Summa ryThe Indian market offers a future entry possibility for Starbucks. The economy and the population are increasing and there is a growing interest for western brands. Some recent government reforms have been undertaken which made investing in India easier for foreign companies. However, India still has some FDI restrictions and there is a lot of bureaucracy.Starbucks has three main competitors in India of which Barista and CCD are the biggest. They offer the same type and quality of products as Starbucks does. Also, India is a tea drinking country which presents a challenge for companies that mostly sell coffee. Furthermore, retailing is unorganized and underdevelop in India.Looking at external and internal factors various strategies can be identified for possible entry in the Indian market.There will be a growing demand for horse opera products. Starbucks can use this trend to successfully introduce its product. The company should make use of its strong brand name and recognition as a Western product.The products Starbucks is offering are in line with the growing westernization and coffee culture. Also, growing GDP per capita will lead to the ability to pay more for a premium product. Starbucks should market themselves as a high quality Western brand.The exclusive product Starbucks is offering and the Western brand name is in line with the trend of westernization and a growing coffee culture. Starbucks should use their exclusivity and their brand name to target the specialty coffee market.By keeping prices high Starbucks will keep its image of being an exclusive brand. By slightly altering its product offering Starbucks can serve local preferences.