TATA STARBUCKS: HOW TO BREW A SUSTAINABLE BLEND FOR

INDIA

Case synopsis

Starbucks entered the Indian market in October 2012 by forming a 50:50 joint
venture with the Tata Group. The Indian Café market offered a lot of potential for
the new Tata-Starbucks alliance. While India was a nation known for its tea
drinkers, sipping coffee and socializing at coffee shops was becoming increasingly
popular. Domestic consumption of coffee had risen up 80% in the past decade. The
joint venture appeared to be at the crossroads of an important strategic decision. It
could either revert to a plan to grow its store count aggressively much like it did in
the US. Starbucks initial launch pricing had been set to be competitive with Café
Coffee Day’s (CCD) pricing (with coffee drinks available for as low as Rs 100).
Alternately, it chose to embrace a premium-priced, niche approach similar to the
one it had used successfully in other Asian countries like Japan and China. The
premium offering would then cater to an older, business elite with higher spending
power. This resulted in rapid growth with a cherry-picked list of high-profile,
business-friendly locations that also allowed it to build a premium brand with
premium pricing.

Moving on to assessing the Internal Environment of the Firm

Value-chain analysis:
​a value chain studies the value added at various intervals through a series of
activities or processes that aim to create profitable value for a product offering.
Starbucks is one company that is interesting to analyze from a value chain
perspective because of the substantial value added from coffee bean procurement
to distribution and from store supply to the customer.
Porter’s analysis of the value chain is divided into 2 different categories:
First is The primary activities and second the support activities
Coming to the primary activities of Starbucks:
● Inbound logistics: The inbound logistics for Starbucks refer to
company-appointed coffee buyers selecting the finest quality coffee beans
 from producers in Latin America, Africa, and Asia. In the case of Starbucks,
the green or unroasted beans are procured directly from the farms by the
Starbucks buyers. These are transported to storage sites, after which the
beans are roasted and packaged. Value is added to the beans through
Starbucks’ proprietary roasting and packaging, which helps to increase their
selling value. The beans are then sent to distribution centers, a few of which
are company-owned and some of which are operated by other logistic
companies. The company does not outsource its procurement, ensuring
high-quality standards right from the point of selection of coffee beans.
● Production: Starbucks operates in more than 80 markets, either in the form
of direct company-owned stores or licensed stores. (Starbucks does not
follow traditional franchising terms.) The company has more than 32,000
stores globally. It is also the owner of several brands, including Teavana,
Seattle’s Best Coffee, and Evolution Fresh. According to its financial
reports, the company generated 81% of its total net revenue during the first
half of its 2020 fiscal year from its company-operated stores while the
licensed stores accounted for 11%.
● Outbound logistics: There is very little or no presence of intermediaries in
product selling for Starbucks. The majority of the products are sold in stores.
However, storage and distribution to retail locations are important.
● Marketing and sales: Starbucks invests more in superior quality products
and a high level of customer service than in aggressive marketing. However,
need-based marketing activities are carried out by the company during new
product launches in the form of sampling in areas around the stores.
● Service: Starbucks aims at building customer loyalty through its in-store
customer service. A signature retail objective of Starbucks has always been
to provide customers with a unique Starbucks Experience. Service training is
a key component of the value chain that helps to make its offerings unique.
A substantial amount of value is created when baristas make drinks for
customers.
Coming to the Supporting activities:
● Firm infrastructure: This includes departments like management, finance,
legal, etc., which are required to keep the company’s stores operational.
Starbucks employs business managers in its corporate offices. It also has
store managers on-site that help to oversee well-designed and pleasing stores
complemented with good customer service provided by the dedicated team
of employees in green aprons.
 ● Human resource management: The committed workforce is considered a
key attribute in the company’s success and growth over the years. Starbucks
employees are motivated through generous benefits and incentives. The
company is known for taking care of its workforce, a key reason for a low
turnover of employees, which indicates great human resource management.
There are many training programs conducted for employees in a setting of a
work culture, which keeps its staff motivated and efficient.
● Technology development: Starbucks is very well-known for the use of
technology, not only for coffee-related processes (to ensure consistency in
taste and quality along with cost savings) but to connect to its customers.
Many customers use Starbucks stores as makeshift offices or meeting places
because of free and unlimited Wi-Fi. Starbucks has launched several
platforms where customers can ask questions, give suggestions, openly
express opinions, and share experiences. Technology helps to implement this
feedback, especially in the area of its rewards program. Starbucks also uses
Apple’s iBeacon system, wherein customers can order a drink through the
Starbucks phone app and get a notification of its readiness when they walk
into the store.
● Procurement: Starbucks handles all of the procurement for its own coffee
beans, which it sees as one of its competitive advantages.
Moving on to the resource-based view of the firm that is the different types of
tangible and intangible assets of Starbucks.
The resource-based view is a strategic management tool and framework that is
used by companies and organizations to identify and exploit the resources available
strategically so as to create a sustainable competitive advantage for the
organization in the long run.
Coming to the tangible resources
Tangible resources include those resources that are physical in nature and can be
easily identified by the organization and competitors.

Land: The land is a tangible resource for Starbucks which includes all spaces
owned and rented by the company for purposes of hosting production units as well
as for warehousing purposes. Additionally, all units owned or rented by the
company for purposes of packaging are also included to be tangible resources
under the land.
Equipment: For Starbucks, equipment is also a tangible resource that includes all
the equipment owned by the company for purposes of production and packaging,
as well as other operational purposes. In this manner, all technological
advancements, and technological integration for improving processes and
operations may also be seen as an extension of equipment that the company
employs to enhance its product line, and incorporate economies of scale.
Materials: Materials include all the raw materials and other packaging materials
that Starbucks uses for the successful production and packaging of its products.
The materials are tangible in nature, and may also easily be accessed by the
competitor players for their own production processes and other purposes.

Moving to Intangible resources

Intangible resources refer to those resources that have no physical value but are
still owned and possessed by organizations such as Starbucks.

Brand reputation: The brand reputation of Starbucks is built over historical

uniqueness where the brand has worked hard to provide high-quality products and
earn consumer trust over decades. The company’s brand reputation is based on its
organizational culture and unique relation with customers cannot be imitated by the
competitors and may become a source of competitive advantage.
Intellectual property: Starbucks’s production processes and its product
uniqueness is safeguarded by intellectual property rights which prevent other
competing players from copying or having access to its unique product blend, and
product ingredients and inputs. This ensures novelty to Starbucks and makes its
products inimitable for competing players.
Patents and Copyright: Starbucks enjoys patents and copyrights not only for its
production processes and product composition but also for research and
development activities that it undertakes for product improvement and
enhancement. These patents and copyrights protect Starbucks against potential
encroachments or imitations.

Moving on to the generic strategies

Starbucks uses the broad differentiation generic strategy for competitive advantage.
In Michael Porter’s framework, this strategy involves making the business and its
products different from other coffeehouse firms. This difference highlights
Starbucks Coffee’s value proposition regarding the high quality and uniqueness of
its products. The company’s emphasis on specialty coffee differentiates its cafés
from many other establishments that offer coffee. However, the broad
differentiation generic strategy extends to other areas of Starbucks Corporation.
For instance, the coffeehouse business uses its sustainable and responsible sourcing
policy to differentiate its products from competitors. Also, the frequent
introduction of new products or variants thereof contributes to the uniqueness and
competitive advantage of the company’s food and beverages. This generic strategy
is also manifested in Starbucks Corporation’s organizational culture. While
competitors like McDonald’s and Dunkin Donuts compete through low cost,
Starbucks emphasizes a warm and friendly ambiance that people enjoy.
An implication of the broad differentiation generic strategy is that Starbucks must
keep innovating to ensure the uniqueness of its products in the long term. In this
strategy, the competitive advantage could weaken when competitors find ways to
match or exceed the coffee company’s uniqueness. To address this issue, Starbucks
keeps innovating its product mix and supply chain. In applying the broad
differentiation generic strategy, the enterprise focuses on specialty ingredients and
products, such as baked goods that do not have high-fructose corn syrup. Starbucks
Corporation also innovates its supply chain to satisfy its generic strategy through a
continuous search for the most sustainable and finest ingredients. Thus, to maintain
a competitive advantage in this generic strategy, Starbucks' strategic objective is to
innovate products and its supply chain.

Moving on to the Industry life cycle

The image on the screen represents the general life cycle of any product or
company.
Coming to Introduction
Starbucks has been and still is considered one of the best Coffee making brands in
the beverages industry worldwide, the first ever Starbucks was founded in Seattle,
Washington, on March 31st in the year 1971. The company was started by 3 people
who were interested to sell high-quality coffee beans and equipment after they
were inspired by q coffee roasting entrepreneur Alfred Peet, who taught them his
style of roasting beans.
Moving on to the Growth stage
This is the stage where sales began to increase. One of the very first campaigns that
boosted Starbucks sales was conducted in 2009 in America where Starbucks
offered American customers a free pastry upon buying a drink before the clock
struck 10:30 A.M., and the campaign succeeded, about one million people took
advantage of that offer and pursued it.
Moving on to the Maturity stage
This is the stage where the sales hit the peak of their highest point. Starbucks has
become a mature brand in the 1990s all the way to the day we are in now,
Starbucks mainly depended on the word of mouth to spread its words more than
advertisements. In 2015, Starbucks gained profit jumped 22% over the ordinary
due to an increase in customer traffic which was equal to 23 million new
transactions.
Moving on to the Decline stage
The fourth stage is the decline stage where a certain company’s product starts to
turn down and reach its diffusion point. Starbucks reported its first-ever decline in
2008, which was caused by a financial meltdown due to increased shares, which
made it very cautious about opening new stores and eventually ended up shutting
down many of its branches and losing up to 28% of its profit.

Thank you!