In-Depth Integrative Case 3.1
How Starbucks Convinced Indians to Embrace Coffee
Through superior product offerings, dependable customer service, and an emphasis on
progression, Starbucks has quickly become one of the world’s most recognizable coffeehouse
chains. Aiding Starbucks’ success is a focus on global development, which has served as a
fundamental pillar of the firm’s strategy since the opening of its first international location in
Tokyo two decades ago.1 This devotion to global expansion was further solidified in January of
2012 when Starbucks announced that it would be finally entering India, the fastest growing
market in the world, through a 50/50 joint venture with Tata Global Beverages.2 After almost
five years of unsuccessful entry attempts, Starbucks and Tata’s groundbreaking partnership
would mark the beginning of a period of taste transitions within the nation.3
This partnership also ignited the blending of American and Indian preferences and styles within
the coffee industry. The westernized Starbucks image, mixed with the cultural knowledge and
products of Tata, created a unique consumer experience, one that has become particularly
appealing to the rapidly growing Indian middle class. With a 2012 population of over 1.24
billion people, and an average of 66 percent and 54 percent of these citizens regularly drinking
tea and coffee, respectively, the potential for a reliable coffeehouse chain in India was
Although the Indian coffee market had been attractive for some time, Starbucks’ delayed
entrance can be mainly attributed to the nation’s hefty foreign restrictions. Even today, a
nationalistic sentiment still lingers in the previously socialist India, and many blockades are put
in place to protect domestic firms. Nonetheless, there have been groundbreaking strides in
liberalization within the past few decades, and only recently have partnerships such as Tata
Starbucks been made possible.5
In one of the first public announcements made by the Tata Group on the joint venture, R. K.
Krishna Kumar, Vice Chairman of Tata Global Beverages, spoke highly of the synergies present
between the two companies. He noted that, â€œIt (the joint venture) opens up exciting business
opportunities and new formats for Tata Global Beverages. Starbucks brings unique retail
expertise as well as a shared sense of business values. We are excited about the opportunities
the alliance presents to innovate in the retail space and bring new beverage experiences to
more consumers in India, leveraging the global in-home expertise of Tata Global Beverages and
the global out-of-home expertise of Starbucks.â€6
Although India may still be [a] tea drinking nation, coffee culture is progressing. Guided by
young millennials and a westernized push, coffeehouse experiences have flourished, which in
turn have enabled entrepreneurial partnerships like Tata Starbucks to blossom.7 With such
massive potential within India, and Tata serving as a liaison to these markets, Starbucks is now
primed for rapid growth within the previously locked off nation. As it stands, Starbucks is
positioned to change the mentality and culture of Indian’s coffee industry.
The Starbucks Experience
The Starbucks Corporation has transformed immensely since its opening in 1971, and the
famed cafÃ© was originally a distributor of roasted coffee beans. Being entirely operated by
three former University of San Francisco classmates, Starbucks’ original location in Seattle’s Pike
Place market did not actually sell beverages but was solely a roastery. In fact, much of
Starbucks’ early influence came from a close friend of the founders, Alfred Peet, creator of
Peet’s Coffee. Starbucks originally received both supplies and techniques from Peet himself,
and as the company progressed, the founders discovered their own signature roasting styles
and blends. The superiority of these original practices, and an early commitment to an excellent
product and experience, would come to serve as the foundation for the firm’s renowned
Although Starbucks quickly gained popularity, location and product line expansion were never a
focus for the original founders. This would change when Howard Schultz joined the growing
Starbucks team as Director of Retail Operations and Marketing in 1982. Schultz pushed the
founders to transform Starbucks from a roastery to a cafÃ©, and he even spent time in Europe
observing Italian coffee houses that he hoped the company would mimic. Shultz would bring
these concepts back to Seattle, and in 1984, the first Starbucks cafÃ© latte was sold, marking the
beginning of Starbucks’ modern menu.9
In 1985, Schultz left Starbucks in order to open his own coffee shop, Il Giornale, where he had
hoped to offer a more formal dining experience with a wider menu selection. Shultz’s quick
success at Il Giornale inspired him to acquire Starbucks just two years later, and through this
acquisition, he gained access to the company’s name, network, and reputation.10 Following
this acquisition, Starbucks’ values were modified to emphasize rapid development, expansion,
and customizability, and within a decade, hundreds of new locations and products were being
offered. Today, there are over 29,000 Starbucks Page 414cafÃ©s in 76 countries and the number
of international locations has surpassed domestic ones as of 2018.11
Starbucks was listed on the New York Stock Exchange in 1992 with an initial public offering of
17 dollars a share. Starbucks has climbed since and revenue reached US$24.7 billion in 2018, up
10 percent from the previous year. With a market capital of over US$81 billion, Starbucks is the
world’s largest global coffee chain.12 Measured by outlet numbers, Starbucks is the third
largest global food chain and is only outmatched by [McDonald’s] and Subway.13 Starbucks has
also grown rapidly in areas outside of its core cafÃ© operations, and its volumes rank third in
coffee bean distribution and top ten in domestic tea distribution.14 With operations that
encompass over 277,000 employees, each member of the Starbucks team is guided by the
mission â€œto inspire and nurture the human spiritâ€”one person, one cup and one neighborhood
at a time.â€15
Starbucks’ success can be attributed to more than just its product offerings, and as CEO Howard
Schultz explains, â€œStarbucks represents something beyond a cup of coffee.â€16 While Starbucks
is known for its high quality coffee, the company’s real competitive advantage stems from the
experience associated with its products. Every Starbucks cafÃ© welcomes its customers with
consistent quality, vast customizability, and a friendly and engaging workforce. The culmination
of these ideas has been termed the â€œStarbucks experienceâ€ and has made Starbucks the â€œthird
place,â€ a place that describes a consumer’s third most frequented location outside of home and
work, for many.17 This unique experience has resulted in passionate customer loyalty, positive
brand perception, and a recognizable image.18
Although Starbucks’ growth has been mainly organic, acquisitions have often been a tactic used
to spur the development of lesser established segments. To expand its product offerings,
Starbucks has acquired companies such as Ethos Water and Evolution Fresh, and the purchases
of these premium water and juice distributors has allowed the firm to gain entry into markets
that present strong synergies and opportunities.19 Similarly, in 2012 Starbucks purchased
Teavana for US$620 million. Despite closing all 379 Teavana outlets in 2018, Starbucks has still
managed to successfully funnel former Teavana customers into Starbucks’ cafÃ©s by leveraging
the acquired firm’s expertise.20
Starbucks is equally focused on environmental protection. This emphasis has resulted in
organizational practices, including the development of fully recyclable packaging and the
creation of an initiative that would lower in-store water consumption by over 25 percent within
the next ten years. Starbucks is also a founding member of the Business for Innovative Climate
and Energy Policy (BICEP) and a signatory of the RE100, a corporate commitment program
focused on purchasing 100 percent renewable energy.21
Starbucks is committed to improving the quality of life of the communities it operates in, and
each year over 50,000 Starbucks partners participate in more than 2,800 projects during
Starbucks’ Global Month of Service. Starbucks transmits this commitment onto the
communities it sources from, and through a partnership with the Conservation International,
Starbucks has promised to buy 100 percent ethically sourced coffee. Starbucks also focuses on
improving the education, health, and employability of fledgling farmer populations, and its
Global Farmer Fund Program has invested over US$50 million in financing projects for farming
communities.22 Starbucks’ emphasis on charitable giving has resulted in the company
consecutively ranking among the top ten of the world’s most admired companies.23
Starbucks’ International Outreach
Starbucks has been sourcing coffee beans from African, Latin American, and Asian Pacific
regions since its founding, but it was not until the 1990s that cafÃ©s begun to open outside of
North America. Since then, international expansion has been rapid, and Starbucks now has
locations in every country it sources from.24 Starbucks’ success stems from its ability to
transform the tastes and preferences of the nation it enters. In Mexico, for instance, coffee
consumption has increased an estimated 100â€“150 percent since Starbucks’ first appearance in
Emphasizing localization has been critical to Starbucks’ expansive success. Starbucks has
adapted and rearranged its offerings and strives to cater to the unique history and culture of
each country in which it operates. To appeal to French taste preferences, the firm offers unique
Viennese coffee and foie gras sandwiches. In the Netherlands, Starbucks has constructed stages
inside its cafÃ©s as this promotion of performance is particularly common throughout the nation.
Even within the UK, Starbucks has adapted by allowing over 60 percent of all locations to be
operated as franchises. With an abnormally high number of franchises in this region, Starbucks
hopes to align itself with the UK’s cultural preference for independent, local, and self-sufficient
A strategic focus on cafÃ© location and a careful adjustment of product offerings has allowed for
smooth market penetration by Starbucks throughout the world. â€œStarbucks remains highly
respectful of the culture and traditions of the countries in which it does business,â€ explained
Howard Shultz. â€œWe recognize that our success is not an entitlement, and we must continue to
earn the trust and respect of customers every day.â€ Localizing offerings has allowed the
company to gain this trust, and in turn, has changed foreign perspectives of Starbucks.27
â€¢Starbucks opens its first location in Seattle’s Pike Place Market.
â€¢Howard Schultz joins Starbucks as director of retail operations and marketing.
â€¢Sells first Caffe Latte.
â€¢Schultz leaves Starbucks to open Il Giornale, where all coffee and espresso beverages were
made from Starbucks coffee beans.
â€¢Il Giornale acquires all Starbucks assets and changes its name to Starbucks.
â€¢Opens its first international location in Canada.
â€¢Offers full health benefits to all eligible full- and part-time employees, including coverage for
â€¢Opens its 50th store.
â€¢Expands its Seattle headquarters.
â€¢Becomes the first privately owned U.S. company to offer a stock option program that includes
â€¢Opens its first airport store at Seattle’s Sea-Tac International Airport.
â€¢Opens its 100th store.
â€¢Announces initial public offering (IPO).
â€¢Partners with Nordstrom and Barnes & Noble to open cafÃ©s near their locations.
â€¢Opens its second roasting plant in Kent, Washington.
â€¢Opens its first location on the East Coast in Washington, D.C.
â€¢Opens its 250th store.
â€¢Opens first drive-thru location.
â€¢Through a coalition with Pepsi-Cola, Starbucks begins serving Frappuccino beverages.
â€¢Opens its 500th store.
â€¢Begins selling bottled Frappuccino coffee drinks through North American Coffee Partnership.
â€¢Opens its first overseas locations in Japan and Singapore.
â€¢Opens its 1,000th store.
â€¢The Starbucks Foundation is established.
â€¢Opens stores in the Philippines.
â€¢The Starbucks brand begins selling in grocery stores across the U.S.
â€¢Opens stores in England, Malaysia, New Zealand, Taiwan, and Thailand.
â€¢Partners with Conservation International to promote sustainable coffee-growing practices.
â€¢Opens stores in China, Kuwait, Lebanon, and South Korea.
â€¢Opens its 2,000th store.
â€¢Establishes licensing agreement with TransFair USA to sell Fairtrade certified coffee across
â€¢Opens stores in Australia, Bahrain, Hong Kong, Qatar, Saudi Arabia, and United Arab Emirates.
â€¢Introduces ethical coffee-sourcing guidelines developed in partnership with Conservation
â€¢Introduces the Starbucks Card.
â€¢Opens stores in Austria, Scotland, Switzerland, and Wales.
â€¢Opens stores in Germany, Greece, Indonesia, Mexico, Oman, Puerto Rico, and Spain.
â€¢Opens its 5,000th store.
â€¢Opens two new roasting facilities in Carson Valley, Nevada and Amsterdam, Netherlands.
â€¢Opens stores in Chile, Cyprus, Peru, and Turkey.
â€¢Begins sourcing coffee from India through Tata Coffee.
â€¢Introduces Starbucks Coffee Master Program.
â€¢Opens stores in France and Northern Ireland.
â€¢Acquires Ethos Water.
â€¢Opens stores in Bahamas, Ireland, and Jordan.
â€¢Opens its 10,000th store.
â€¢Announces interest in expanding into Indian.
â€¢Launches industry’s first paper cup containing postconsumer recycled fiber.
â€¢Opens stores in Brazil and Egypt.
â€¢Indian expansion is delayed due to governmental obstacles.
â€¢Opens stores in Denmark, the Netherlands, Romania, and Russia.
â€¢Open its 15,000th store.
â€¢Howard Schultz returns as chief executive officer.
â€¢Acquires Coffee Equipment Company and Clover brewing systems.
â€¢Establishes social media presence through Twitter, Facebook, and independent online
community called My Starbucks Idea.
â€¢Opens stores in Argentina, Belgium, Bulgaria, Czech Republic, and Portugal.
â€¢Introduces first iPhone app with Starbucks card mobile payment option.
â€¢Opens roasting plant in Sandy Run, South Carolina.
â€¢Opens stores in Aruba and Poland.
â€¢Opens stores in El Salvador, Hungary, and Sweden.
â€¢Starbucks and Tata Global Beverages sign a non-binding Memorandum of Understanding.
â€¢Launches first annual Global Month of Service to celebrate the company’s 40th anniversary.
â€¢Opens stores in Guatemala, Curacao, and Morocco.
â€¢Announces 50/50 joint venture with Tata Global Beverages.
â€¢Opens its first Indian cafÃ© within the historical Elphinstone Building of Mumbai’s Horniman
â€¢Announces progressive pay and benefit structure for all Indian employees.
â€¢Opens Starbucks Soluble Plant in Augusta, Georgia.
â€¢Opens stores in Costa Rica, Finland, India, and Norway.
â€¢Starbucks and Tata Coffee open joint roasting and packaging plant in Kushalnagar, Karnataka.
â€¢Expands Indian presence by opening cafÃ©s in New Delhi.
â€¢Enters Pune and Bengaluru, India.
â€¢Expands into Gurgaon, India’s epicenter for financial and industrial business.
â€¢Begin servicing in New Delhi’s Indira Gandhi International Airport and Mumbai’s Chhatrapati
Sivaji International Airport.
â€¢Creates specialty Indian sourced coffee, named India Estates Blend, to celebrate one year in
â€¢Introduces most popular drink, Salted Caramel Mocha, in India.
â€¢Opens farming research and development center in Costa Rica to strengthen ethical sourcing
â€¢Opens stores in Vietnam and Monaco.
â€¢Opens its 30th store in India.
â€¢Begins selling Pour-Over Sets within India in order to expand its in home presence.
â€¢Enters Chennai, India.
â€¢Establishes its first Indian month of community service in September.Page 416
â€¢Launches My Starbucks Rewards loyalty program throughout India.
â€¢Reaches 1,000 partners within India.
â€¢Opens stores in Brunei and Colombia.
â€¢Opens its 20,000th store.
â€¢Opens its 50th store within India.
â€¢Announces that India has become its fastest growing market.
â€¢Begins working with the Food Safety and Standards Authority of India (FSSAI) to ensure and
improve quality standards of Indian offerings.
â€¢Hosts first Coffee Championship within India.
â€¢Sumi Ghosh is elected chief executive officer of Tata-Starbucks.
â€¢Reaches 99 percent ethically sourced coffee milestone.
â€¢Announces the Sustainable Coffee Challenge at the U.N. climate negotiations in Paris, which
would make coffee the world’s first sustainably sourced agricultural product.
â€¢Opens stores in Azerbaijan, Cambodia, Kazakhstan, and Panama.
â€¢Opens its 75th store within India.
â€¢Makes single origin coffee from India available in Starbucks Reserve Roastery.
â€¢Introduces Tata’s Himalayan water throughout all Chinese and Asian Pacific regions.
â€¢Introduces coffee aboard Vistara flights.
â€¢Begins the development of two new Indian plantations.
â€¢Announces five-day work schedule for all Indian partners.
â€¢Opens stores in Andorra, Luxembourg, Slovakia, South Africa, and Trinidad and Tobago.
â€¢Opens its 25,000th store.
â€¢Announces commitment to becoming the â€œemployer of choiceâ€ in India.
â€¢Introduces Teavana specialty tea across India.
â€¢Introduces Starbucks’ mobile app across India.
â€¢Employees become eligible for the Tata Strive program.
â€¢Begins offering specialty Nitro Cold Brew products throughout India.
â€¢Begins offering specialty Indian Spiced Majesty Blend tea.
â€¢Expands hiring commitment to include 10,000 refugees by 2022.
â€¢Kevin Johnson becomes chief executive officer while Howard Schultz transitions to executive
â€¢Opens stores in Jamaica.
â€¢Opens its 100th store within India.
â€¢Enters Kolkata, India.
â€¢Opens Starbucks Reserve Roastery locations in Milan and New York.
â€¢Opens first Signing Store in Washington, D.C.
â€¢Howard Schultz retires from Starbucks and becomes chairman emeritus.
â€¢Opens stores in Italy.
India’s Changing Marketplace
As a result of British colonization and a socialist mentality that lingered after independence,
India remained isolated from most of the world during the majority of the 20th century. Up
until the early 1990s, strict nationalistic regulations were implemented in order to protect local
firms and achieve productive self-reliance. The promotion of centralized planning within India
led to governmental manipulation of company initiatives and firm successes. The Indian
government also strictly blocked foreign competition, and obstructive custom barriers were
implemented in order to deter widespread importation and entrance by foreign firms.
According to scholars on the subject matter, â€œIn this post-colonial context, the development
model of import substitution consisted of four main measures: A large public sector, centralized
planning in which industry and agriculture were favored, high trade barriers, and a restrictive
system of administrative authorization.â€28
In 1973, the Indian Parliament solidified its protectionist mentality through the passing of the
Foreign Exchange Regulation Act (FERA). Under this ordinance, any foreign owned company
within India was required to sell the majority share of its equity holdings to Indian shareholders.
Not only did this deter entrance by foreign companies, but it also led to the withdrawal of many
already established firms such as Coca-Cola and IBM. FERA effectively placed both multinational
corporations and local Indian companies under the control of India’s central bank and therefore
made foreign entrance undesirable and nearly impossible.29
As India’s policies became more protectionist, its economy faltered and annual growth
stagnated at around 3 percent during the 1980s. Decades of poor policy decisions lead to an
inability to pay debt, a lack of foreign investment, and ultimately, a balance of payments crisis.
In an effort to generate relief funding, India began implementing economic liberalization
reforms in 1991. These reforms were meant to globalize the economy and lessen the
government’s control over the private sector. In less than a decade following these reforms,
tariffs had fallen by 120 percent and exports had more than tripled.30 Similarly, economic
liberalization also led to the undoing of FERA policies and some foreign firms were now eligible
to enter India through joint ventures in which the firm could retain a 51 percent majority equity
In the decades following liberalization, India’s economy has flourished. The nation has
consistently recorded annual GDP growth rates of over 7 percent, and India is now projected to
become the world’s fastest growing economy.32 While many Indians may still live below the
poverty line, poverty has nonetheless seen a 10 percent reduction since 2010 and India’s GDP
per capita is up 6.5 times since liberalizing.33 In recent years, India has become a highly
targeted market due to its expanding wealth and population of over 1.3 billion people. With
one of the most rapidly growing middle classes in the world, India will be the third largest
consumer market by 2025. This presents immense opportunities for consumer products such as
India’s increasing growth and fading regulations have led to mounting foreign interest. For
instance, prior to 1991 there were less than 500 foreign-owned corporations active within
India. Today however, there are closer to 4,000 foreign-owned Page 417companies and major
brands such as Walmart, Dunkin’ Donuts, and General Motors are all actively fighting to gain a
foothold in this high potential market.35 India now ranks as one of the top ten most highly
invested in countries, and the nation received over US$40 billion in 2018 investments, up from
as little as US$100 million three decades ago.36
In a foreign market survey conducted by EY analysts, India was titled the world’s most attractive
market. According to this survey, over 60 percent of corporate partners possess a strong
interest to expand into India, and 86 percent of respondents referenced that India’s cheap,
skilled, and trainable labor force was their main driver of interest. However, over 50 percent of
respondents noted that the nation’s legislative and administrative environment was their
biggest deterrent.37 While it is clear that India’s business environment is making significant
developmental strides, moving ahead 28 positions in the 2018 Ease of Doing Business indicator
report, the nation, which ranks 77th overall, still has many hurdles to overcome.38
Starbucks’ Mounting Interest
Policy reform and economic liberalization allowed Starbucks to consider entering India, and the
rapidly growing market that resulted from these reforms furthered the appeal of entrance. In
2006, the year Starbucks first announced its interest in India, the Indian government had
relaxed regulations so that single brand retail outlets could maintain a 51 percent majority hold
over their investment. In 2012, the year of Starbucks entrance, India fully opened its market to
foreign investors, now allowing a 100 percent investment in this same context. By being
classified as a single brand retail outlet, Starbucks was primed for Indian entrance in the early
2000s, something which would have not been possible 20 years prior.39
To Starbucks, the appeal of India was not solely based on relaxed regulations. The profitability
potential of the nation was also a tremendous factor to be considered. India’s average national
income, which peaked at 9.6 percent growth in 2007, had averaged around 7 percent growth
during the first decade of the twenty-first century. This rising rate of personal wealth, mixed
with an increasingly westernized attitude, propelled Starbucks’ interests in the Indian market
further. Additionally, international development, expansion of product lines and experiences,
and diversification of customers had always been some of Starbucks’ core values. India
presented the ideal mentality, opportunities, and population for Starbucks to live out these
values and aid in its mission of converting consumers into coffee lovers.40
Since the 1990s, middle class wealth within India had been growing alongside a falling
population age, and these demographics aligned well with Starbucks’ typical consumer base.
Starbucks generally attracts younger consumers, and over one third of its customers fall into
the 18 to 29 age range.41 With around 40 percent of Indians being under 18 and over 65
percent being under 35, Starbucks should be able to retain, attract, and grow from the
consistently young population that is expected to permeate into India’s future.42
Prior to Starbucks’ entrance, India’s food service market was valued at US$41 billion and was
expected to grow at a rate of 11 percent through 2018. India had become the second largest
producer of food next to China, and food production was estimated to double within the
decade.43 This increase in production was matched with higher consumption, and the market
for retail food outlets, such as Starbucks, has been rapidly growing. Aiding in this market growth
was the growth of the coffee industry, and coffee consumption within India doubled between
2002 and 2012. While Indians may not have been drinking coffee at the same rate as
Americans, the sheer volume of possible consumers, mixed with definitive future growth, was
highly appealing to Starbucks.44
While India was becoming increasingly attractive, growing domestic competition also pushed
Starbucks to look for opportunities beyond its established markets. Within the U.S., Starbucks
had been facing competitive growth from both cheaper national chains, as well as newly
emerging mom-and-pop cafÃ©s. For instance, in the 1990s Dunkin’ Donuts shifted its focus to
coffee and the â€œAmerica runs on Dunkin’â€ tagline pushed consumers to try a cheaper
alternative with a similarly extensive product line. Similarly, McDonald’s $1 coffee had gained
interest from consumers who saw no value in Starbucks’ premiums. Although Starbucks
remains a clear market leader, over the last few decades, domestic consumers have gradually
reevaluated the higher price for quality payoff that Starbucks presents.45
Starbucks’ motivation to enter India was further influenced by the success and profitability that
the firm had already seen in Asian markets. During a shareholders meeting, Howard Schultz had
noted that, â€œAsia and the entire Pacific Rim present one of the most significant growth
opportunities within Starbucks Coffee Company. India being at the core, along with China.â€46
Prior to Starbucks’ Indian entrance, China, and the Asian market as a whole, had become
Starbucks’ most rapidly growing segment. In 2012, Asia has surpassed EMEA in profitability, and
this region contributed to more than 10 percent of global revenue.47 With Asia holding more
than half of the world’s population, and India retaining some of the most densely populated
regions, Starbucks had hoped to enter the nation in order to replicate past successes and to
take advantage of the synergies and insight learned from previous Asian expansions.48
While India did display countless opportunities and large synergistic potential, Starbucks’
delayed entrance was the result of many uncertainties that nonetheless persisted. Regulatory
transparency was Starbucks’ greatest obstacle. While there had been groundbreaking strides in
India’s liberalization, the unpredictability of the Indian government presented a major threat. In
addition to formal barriers, informal perceptions rooted in a xenophobic past remained a
challenge for Starbucks as it would be difficult for the firm to overcome nationalistic opposition
to a completely foreign product. Blockages and barriers deferred early entrance attempts, and
Page 418the company quickly realized that breaking into India would only be possible with the
support of a local partner.49
Irregular and excessive supplier restrictions presented yet another challenge for Starbucks.
Starbucks has generally sourced its high-quality coffee beans from secure locations in Africa,
Asia, and Latin America.50 However, Indian restrictions tightly regulate what countries specific
products could be sourced from, and India’s tariff system has been defined by its lack of
transparency. Tariff calculations are multi-tiered and fall into four segments with certain
products facing additional tariffs from each segment. By emphasizing the protection of the
domestic agricultural industry, India has instilled tariffs as high as 100 percent on specific
agricultural products like coffee and tea. These excessive fees would make it too costly for
Starbucks to source from their typical suppliers, and thus, the firm would be challenged to
invest in costly alternatives.51
Despite the fact that Starbucks had hoped to enter India in order to free itself from competitive
hurdles, the firm would nonetheless have to face already established coffee and tea shops
within India. Companies such as CafÃ© Coffee Day and Barista dominated the Indian market. For
instance, CafÃ© Coffee Day had been present in India since 1995 and had over 1,000 outlets prior
to Starbucks’ entrance. These retailers had been investing in the Indian market for years and
initiatives such as setting up smaller kiosk locations and offering hot coffee through vending
machines had resulted in already established ubiquitous brands. In addition to its full-service
cafÃ©s, CafÃ© Coffee Day alone had set up over 600 kiosks and 30,000 vending machines.52 While
the coffee market may have already had established players, the greatest competitive force
working against Starbucks was chai tea, as chai accounted for an estimated 79 percent of all
nonalcoholic beverages consumed within India. Many local cafÃ©s begun to establish themselves
due to the dominance of the tea market and the growth of coffee, and this growing saturation
of cafÃ©s within India added to Starbucks’ challenges.53
Race for a Strategic Partner
In 2006, Starbucks officially announced its intentions to enter India, and while the firm had
hoped to be established within the nation by the end of 2007, early governmental blockades
delayed progression. Starbucks’ original entrance strategy was to set up a network of
franchises. However, due to strict franchisee regulations, the Indian government suggested that
Starbucks enter under the FDI model instead. With a more definitive approach, Starbucks
submitted an entrance proposal to India’s Foreign Investment Promotion Board (FIPB) in early
2007. Unfortunately for Starbucks, the FIPB immediately rejected the proposal, citing a â€œlack of
clarity,â€ and the firm would spend the next five years reevaluating potential partners and entry
strategies before sanction would be granted.54
In order to meet FDI guidelines, Starbucks initially planned to partner with Kishore Biyani,
managing director of India’s Future Group, and V.P. Sharma, operator of Starbucks Indonesia
franchises. The firm had hoped to leverage Sharma’s experience of Starbucks in Asia and
Biyani’s knowledge of Indian FDI regulations to gain entrance.55 Nonetheless, Starbucks’
following entrance proposal was rejected. This time, the FIPB claimed that the combined stakes
of Starbucks and Sharma breached the 51 percent FDI limit that foreign owners of a single
branded retail venture could hold. A revised proposal where Starbucks noted that it would not
hold any direct equity in its Indian operation was subsequently rejected. By the end of 2007,
Starbucks had announced that it would be delaying its Indian entrance due to consistent
hurdles, a lack of coordination, and faults in its original partnership plan.56
As a result of mounting stakeholder pressure to quickly enter India, Starbucks sought out new
partnership opportunities. This time the firm landed on the Tata Group. The Tata Group, which
was founded in 1868 as a textile wholesaler, is now one of India’s largest conglomerates. Ratan
Tata, chairman of the Tata Group, has been described as the â€œmost powerful business man in
India and one of the most powerful in the world.â€57 This presence can be attributed to the
firm’s core value of expansion, which had led to the development of over 30 companies across
10 verticals. Today, the Tata Group’s product lines range from cars, software, and steel to
chemicals, coffee and consulting.58
The Tata Group’s emphasis on diversification has led to constant acquisition, collaboration, and
partnerships. Consequently, the Tata Group has grown into a global company with a presence
in over 100 countries and revenues exceeding US$110 billion. Global ventures by the firm have
included Jaguar and Land Rover by Tata Motors in the UK and Millennium Steel in Thailand by
Tata Steel.59 The Tata Group has seen much success in its diversified ventures. Taj Hotel
Resorts is India’s largest hotel chain, Tata Consultancy Service is Asia’s largest software
company, and Tata Global Beverages, which operates in tea, coffee, and water, is the world’s
second largest maker of branded tea.60
Tata Global Beverages owns most of its vast supply chain network, which consists of
plantations, processing plants, and packaging and distribution facilities. Products are sourced
from across the world, yet the firm’s most substantial coffee and tea plantations are located
within India. The firm’s close relationship with the Indian government and its dominance over
the beverage market have led to a competitive edge in resource attainment. Furthermore, the
firm’s vision of â€œbeing the most admired natural beverages company in the world by making a
big and lasting difference on tea, coffee and waterâ€ has resulted in a mentality that chases
further market dominance.61
For Starbucks, a partnership with the Tata Group would allow the firm to overcome India’s
regulatory blockades. The Tata Group had past experience forming foreign partnerships and the
company’s established governmental relationships would ensure a smooth entrance process.62
Being Page 419an Indian-founded firm meant that Tata Global Beverages would meet all FDI
The Tata Group also had the ability to provide the cultural relevance crucial to penetrating the
Indian market. Indians are more likely to hesitate when buying foreign goods and more than
half of all Indians note that they are more willing to buy a product that they know was
produced locally. Placing the well-known Indian name of Tata among the Starbucks label had
the potential to create the perfect blend of Western prestige and local cultural significance.64
A partnership with Tata Global Beverages would also mean access to all other business lines
within the Tata Group conglomerate, which would open the door to seemingly limitless
synergistic potential. For instance, Starbucks could easy find retail space within the lobbies and
outlets of Tata’s Taj Hotels.65 Similarly, the partnership would also mean the mitigation of
many of Starbucks’ supplier concerns. Tata Global Beverages owns 19 coffee plantation estates
in southern India alone. It also owns water processing facilities and multiple tea plantations.
Having a domestically established supplier as a partner would provide Starbucks with cheap
Finding a partner who shares similar values was another key consideration for Starbucks as the
firm’s progressive, opportunistic, and excited personality had the potential to cause friction
with less open-minded companies. Starbucks and Tata Global Beverages both share very similar
positions on societal giving, ethical sourcing, sustainability, and employee rights and
improvement. Both firms also follow similar practices when conducting business, and they each
operate with very similar considerations in mind.67 Prior to Starbucks’ entrance, R.K.
Krishnakumar, Chairman of Tata Coffee, noted the parallels between the two companies’
aspirations by saying, â€œwe welcome Starbucks’ entrance into India because of both its unique
experience and its commitment to the societal values that we share.â€68
Presenting a Joint Venture Proposal
Starbucks had been sourcing from India prior to its market entrance. In 2004, Starbucks and
Tata Global Beverages established a long-term sourcing agreement in which Starbucks had
promised to regularly purchase an undisclosed amount of raw coffee beans from Tata’s Indian
plantations at 40 cents over market price. This supplier customer relationship would come to
define how Starbucks would later enter India and this agreement established the Tata Group as
a reliable partner early on.69
Less than a decade after Starbucks agreed to purchase coffee beans from Tata Coffee, the two
firms decided to further their relationship. In January of 2011, Starbucks and Tata Global
Beverages signed a non-binding Memorandum of Understanding.70 This agreement created
areas for collaboration and noted that upon Starbucks’ entrance into India, the firm would
exclusively source from Tata’s domestic plantations and roast green coffee beans within Tata’s
Indian facilities. The arrangement also established avenues to focus on societal cooperation,
and the two would jointly invest in the development of agricultural communities by promoting
responsible agronomy practices and offering training opportunities to local farmers,
technicians, and agronomists.71
After nearly 5 years of repeated attempts, in January of 2012, Starbucks announced that it
would be finally entering India through a 50-50 joint venture with Tata Global Beverages.
Through an initial investment of US$80 million, Starbucks had opened the door to India’s
US$667 million coffee industry and US$140 million cafÃ© landscape. John Culver described
Starbucks’ anticipated strategy within India as, â€œmoving as fast as possible in opening as many
stores as we canâ€ and the joint venture, officially labeled Starbucks Coffee: A Tata Alliance, had
planned to open its first store in Mumbai by the end of the year.72 With a population of 18.4
million people, Starbucks would soon be located in India’s largest city and planned on quickly
embracing the rest of the nation.73
Just weeks prior to Starbucks’ joint venture announcement, the India government had declared
that it would be revoking the FDI ownership limits on foreign retail outlets, meaning that
Starbucks would have had the opportunity to operate in India without a partner. When asked
why Starbucks would enter with a partner given India’s relaxation of FDI regulations, Howard
Shultz responded by saying that, â€œIndia is like no other market in the world. Tata’s position in
India is very unique. It is a company that has unique capabilities in terms of infrastructure. But
mostly their values were so consistent with ours, building a company with a conscience,
treating people well, taking care of the communities, and we thought this was an opportunity
to do something together that we just could not do ourselves.â€74
While Tata Global Beverages had been supplying Starbucks with coffee beans since 2004, the
joint venture agreement called for a modification of how Starbucks typically sourced its beans.
Starbucks had usually leveraged its global supplier network and multiple international roasting
facilities in order to deliver unique, high-quality blends to its customers. However, under this
joint venture agreement, Starbucks agreed to purchase all coffee beans for Indian cafÃ©s
domestically, and Starbucks’ Indian operations mark the only instance in which the company
exclusively sources and roasts the majority of its beans locally. In over four decades of
operations, this was the first time an outside party would roast Starbucks coffee.75
In order to support new Indian demand, Tata Global Beverages agreed to fund the creation of
an improved coffee roasting facility in Coorg, Karnataka. This new facility would have the
capacity to supply an additional 375 tons of roasted coffee beans. With the ultimate goal of
combining the Starbucks experience with an India product, this supplier network would result
in Starbucks being able to expand its capacity through signature Tata blends.76
Other aspects of the agreement focused on building upon the shared synergies and mindsets of
the two companies. Page 420Given the breadth of the Tata Group, the two firms had hope to
take advantage of overlaps such as food production and outlet space. Additionally, Starbucks
and Tata Global Beverages wished to further invest in India through both Tata-owned
plantations and local farming communities. Both companies planned on working together to
promote the Indian coffee industry as a whole.77
With the Tata Group as a guide, Starbucks finally had the opportunity to enter Asia’s fastest
growing market. The joint venture benefited Starbucks beyond simply granting entrance and
this agreement would also lead to the mitigation of supplier barriers, the lessening of
governmental restrictions, and the adding of cultural and regulatory knowledge. The extent of
the Tata Group’s landscape posed many opportunities for Starbucks to easily integrate into the
retail landscape of India.78
Tata Starbucks Takes Off
In October of 2012, Tata Starbucks opened its first Indian cafÃ©. Located within the historical
Elphinstone Building of Mumbai’s Horniman Circle, the 4,500 square foot outlet would serve as
the company’s flagship store and would be used as a baseline for the image Starbucks wanted
to create in India. As a result, this location was decorated in a way that would parallel upscale
Indian culture, and the dÃ©cor included hand carved wooden pillars, tables made out of Indian
teak, and decorative vintage trunks. Howard Shultz, who was in attendance for the nation’s
grand opening, stated that Starbucks’ original Mumbai outlet was, â€œthe most beautiful, elegant,
and dynamic store Starbucks has ever opened.â€79
With people lined up outside the store and queues described as being â€œmiles long,â€ the
excitement around Starbucks’ initial opening attracted thousands of customers in just the first
day. Tata Starbucks would quickly expand its Mumbai presence and within a week, two
additional stores had opened. These outlets included a 1,500 square foot cafÃ© located in the
Oberoi mall and a third cafÃ© situated within the Tal Mahal Palace Annex, a luxury hotel owned
by the Tata Group. The success of these proceeding openings mimicked the first, and in an
earnings call that occurred two weeks after Starbucks’ expansion, Howard Shultz described
Starbucks’ initial Indian success as â€œexceeding the firm’s loftiest expectations.â€80
Although Starbucks did not publicly comment on the initial financial success of their Indian
expansion, Forbes retail experts estimated that the company’s Horniman Circle outlet was
generating around Rs 8.5 Lakh a day (over US$11,000). To put this into perspective, even the
most established Indian coffee chains, such as CafÃ© Coffee Day, were only generating sales
averaging around Rs 1 Lakh a day. While this initial success may have been inflated due to the
excitement generated over the newness of Starbucks, it is nonetheless evident that Starbucks
had quickly integrated itself within Indian society.81
Due to initial positive reception, Tata Starbucks quickly expanded its operations and within a
year, over 30 unique outlets had opened. Starbucks cafÃ©s rapidly permeated shopping centers,
airports, malls, and hotels, and by 2017, the firm had opened its 100th location. With over 45
years of experience, Starbucks’ growth within India has been unprecedented, and India is now
regarded as Starbucks’ fastest growing market.82 As of 2018, Starbucks had expanded into over
125 locations within 7 cities, including Mumbai, Hyderabad, Chennai, Delhi, and Bangalore, all
which have populations exceeding 5 million people.83
Tata Starbucks’ success within India can be attributed to how the firm has modified its
accommodations in order to assimilate within Indian society. By customizing product lines,
interactions, and store atmospheres, Starbucks has encouraged the subtle promotion of Indian
culture within its cafÃ©s. The incorporation of societal twists are most clearly seen through menu
offerings, and the Indian menu has been adapted to honor both local religious and cultural
preferences. Starbucks cafÃ©s within India include both foreign themed dishes and standard
products, and items such as Elaichi Mawa croissants and tandoori paneer rolls are exclusively
served within Indian outlets. As a result of menu modifications, food sales in India are larger
than anywhere else in the world and make up nearly 25 percent of total sales. Due to the
cultural importance of food, emphasis on how coffee can be paired with particular menu items
has been encouraged throughout Indian cafÃ©s.84
In addition to product offerings, both store atmospheres and customer interactions have also
been modified to meet Indian expectations. For instance, Starbucks locations within the U.S.
have increasingly highlighted small, quick, and convenient interactions where customers can
swiftly grab a cup of coffee before work or class. In India, however, this mentality has been
refined and there is less emphasis on the product and more emphasis on the atmosphere.85
Starbucks within India have become a place for customers to relax and hang out, and while
people may come for the coffee, they typically linger for the experience. Starbucks cafÃ©s within
India are built to feel cozy and homely. This adjustment explains why Starbucks invests so
heavily in the decor of Indian cafÃ©s, why these cafÃ©s are typically larger than their American
counterparts, and why food sales are much higher in India. Starbucks has become more of a
cultural phenomenon than a coffee chain, and cafÃ©s serve as a place to socialize, do business,
go on a date, or simply get away from home and work life. Starbucks cafÃ©s within India have
quickly become â€œthe third placeâ€ for many.86
An Expanding Relationship
In 2016, Starbucks announced a set of initiatives aimed at further strengthening its relationship
with the Tata Group. This development would begin with Starbucks selling Indian coffee in its
esteemed Roastery Reserve location in Seattle. The Starbucks Reserve is known for selling the
world’s finest coffee blends, and the contribution of an Indian blend would promote the image
of Indian coffee. Page 421Howard Schultz noted that, â€œStarbucks Reserve Tata Nullore Estates,
highlights the deep coffee heritage and expertise of Tata to source, roast, and distribute the
finest-quality Arabica coffees and elevates the story of India coffee for Starbucks’ customers.â€
This introduction would build upon the legitimacy of Indian coffee, while also adding to the
credibility of Tata’s global coffee image.87
In addition to introducing select Indian blends within U.S. tasting rooms, Tata Global Beverages
and Starbucks have established additional collaborative efforts to build upon many of the
synergies present between the two companies. For instance, Vistara Airlines, a joint venture
between the Tata Group and Singapore Airlines, has recently begun selling freshly brewed
Starbucks coffee on all Indian flights. Vistara Airlines is India’s fastest growing full-service airline
and it runs more than 450 weekly flights. As of 2016, Vistara has serviced more than 2 million
travelers. The exclusivity of selling Starbucks coffee on these flights not only adds to the
airline’s image, but also opens Starbucks’ blends to thousands of new potential customers.88
Further collaborative efforts have resulted in the development of additional product lines
within India. Specifically, in 2016, specialty Teavana tea started being sold across all Indian
locations. Through cooperative efforts, Tata Global Beverages and Starbucks developed
signature Indian flavors, and the firms hope to attract the majority of Indian consumers who
still prefer tea over coffee.89 Similarly, Starbucks also started selling Himalayan Mineral Water
across all Indian and Singaporean outlets. This mineral water is bottled by Tata Global
Beverages, and Starbucks plans to expand its international presence by introducing these
bottles throughout its China and Asian Pacific regions.90
Starbucks and the Tata Group have also begun collaborating on societal interests. In addition to
joint investments in Kenyan and Sumatran production locations, the two firms have ensured
that they will further work together to promote farming communities and the cultivation of
sustainable coffee from new and existing plantations. In 2016, the Tata Group also announced
that it would be opening its STRIVE program, an initiative that empowers struggling Indian
youth with career development opportunities, to Starbucks employees. By expanding this
developmental program, Tata estimates that an additional 3,000 people will be impacted by
2021. John Culver was eager to announce that â€œthis partnership underscores the collective
commitment to lifelong learning and revenant career skills developmentâ€ that both firms
While new collaborative efforts will help ensure the future success of Tata Starbucks, the two
firms must continue to monitor and mitigate current threats. The expansion process within
India may take twice as long as compared to the U.S., and the cost of establishing these
locations has been the company’s biggest challenge in generating sustainable profit.92
Additionally, crafting an Indian Tata Starbucks image has required considerable investment, and
continuous development of this brand is required for further success. There persists a constant
threat that Indian consumers will fail to adopt Starbucks’ modified image or may stop finding
the company culturally relevant altogether.93
While these threats may pose mounting challenges, Tata Starbucks is nonetheless excited about
the future prospects of the company within India. During a 2018 interview, Sumitro Ghosh,
Chief Executive of the Tata Starbucks joint venture, was eager to announce the firm’s
enthusiasm over future expansion plans. He stated that, â€œwe [Tata Starbucks] are happy with
the growth we are witnessing in India. This year, we’ll open more stores than the previous year.
Every market is different, and each market takes its time to mature. We are here for just fiveand-half years, and we are already looking at newer cities, especially tier-II and those with
population less than five million for new stores. We’re confident India will be among the top
five markets in the longer term.â€ Currently, Starbucks’ top five markets include the U.S., China,
Canada, Japan, and the United Kingdom, with the UK having over 900 cafÃ©s. Starbucks India,
with just over 100 cafÃ©s, will have to continuously develop, innovate, and expand in order to
reach its top five market goal.94
In the few years since Starbucks entrance, the increased presence of foreign and local cafÃ©s has
transformed the Indian coffee market. Analysts estimate that this industry will experience
annual growth of around 18 percent over the next five years, and the overall coffee market is
projected to be worth US$855 million by 2025. Due to the firm’s current success within Indian
and sales growth that reached 28 percent in the last quarter of 2018 alone, Tata Starbucks
hopes to rapidly expand its Indian presence. Starbucks now serves over 2.7 million Indian
customers every week, and it aims to grow this number by expanding into 25 new locations in
2019. While Starbucks already has locations in India’s five largest cities, the firm hopes to gain a
foothold in smaller cities and suburbs with populations under 5 million. In order to meet these
expectations, Starbucks anticipates that it will double its number of employees within the next
What Lies Ahead
Indian liberalization has intensified since Starbucks’ entrance, and reforms have been
particularly concentrated during recently elected Prime Minister Narendra Modi’s term in
office. Since 2014, Modi has executed 37 reforms aimed at easing India’s constrictive FDI
policies.96 Modi has targeted historically protected sectors such as insurance, railways, and
retail ecommerce, and he is pursuing initiatives that would allow FDI investments greater than
50 percent in these sectors. Modi has also pushed for the increased relaxation of FDI
regulations on single and multiband retail outlets, and he wants to further reform policies that
were already restructured in 2012. Modi’s administration hopes to eliminate limiting clauses
such as those that force foreign-owned single brand retail outlets to source 30 percent of their
products from domestic manufacturers. Continuous policy reforms have opened the country to
an Page 422influx of foreign business and have increased both competition and wealth within
the nation. As India continues to liberalize, it remains a mystery of how the nation’s culture will
respond to increasingly foreign influences.97
While continuous liberalization presents opportunities for Starbucks’ Indian growth, it is
important that the firm monitors political trends throughout the other regions it operates in.
For instance, Starbucks’ largest market, the United States, has not shared the same mentality as
India, and growing hostilities, tariffs, and trade wars threaten Starbucks’ operations and
relationships. Preferences, tastes, and landscapes are constantly shifting around the world, yet
not all regions are shifting in the same direction. In order to be successful, Starbucks must
constantly monitor these varying movements and must establish a common ground that aligns
well with a universal Starbucks image. As the firm increases its emphasis on international
expansion, it is important that it also monitors foreign landscapes, especially as they relate to
its domestic presence.98
The competitive reaction to Starbucks’ Indian entrance has also been overwhelming, and
Howard Schultz has described the Indian coffee market as â€œferocious in terms of competition.â€
Pre-established firms such as CafÃ© Coffee Day already dominate the market, and easing FDI
regulations have allowed new foreign competitors such as Dunkin’ Donuts to gain a presence
within India. The growth of local, smaller coffee shops that mimic the cultural and atmospheric
feel of Starbucks’ cafÃ©s have also been gaining popularity. According to Starbucks’ Chief
Financial Officer Scott Maw, the greatest competition Starbucks now faces â€œis the collective
group of independent coffee shops out there that are doing a lot of what Starbucks has been so
good at for so long.â€99 These independent locations have been able to foster the same third
place image that Starbucks has built into its brand.
This influx of competition is not unique to India, and both domestic and international
opposition have begun to erode Starbucks’ dominance. Growing competition, especially by
smaller independent cafÃ©s, has had a monumental impact on Starbucks’ bottom line, and this
threat accounts for the company’s slowing development. Additionally, declining revenues can
also be linked to the onset of ecommerce. With fewer people being driven to physical retail
outlets, shopping centers, and malls, restaurants such as Starbucks have been negatively
impacted. As a result, 2018 marked the firm’s worst domestic performance in almost a decade,
and growth dropped to around 2 percent. Historically, Starbucks has seen 7 percent domestic
growth, and this decrease is particularly concerning as the United States accounts for almost 70
percent of Starbucks’ revenues. This lack of revenue stream diversification has prompted
Starbucks to focus on foreign expansion and helps explain why countries such as China and
India have been so highly targeted within recent years.100
Starbucks has reached a point in which the U.S. can no longer support the overall growth of the
company. With over 14,000 domestic locations, Starbucks has become highly saturated in the
American market. CafÃ© cannibalization threatens expansion, and new developments harm
existing outlets. Saturation also threatens Starbucks’ identity as too many domestic stores have
spread the firm thin.101 Once renowned for the exclusivity of its experience, Starbucks is now
becoming nothing more than a â€œfirst placeâ€ coffee provider for many Americans. The Starbucks
image has therefore begun to lose its uniqueness and prestige, and the firm is seeing itself
become associated with the negative implications of fast-food culture. As a result, international
growth has become vital to the longevity of Starbucks’ image. Internationally, Starbucks retains
its reputation, and the rarity of these cafÃ©s has associated Starbucks with luxury. Capitalizing on
this status internationally is an important component of Starbucks’ future success, and a
revolutionary adjustment to its domestic image is necessary to protect the firm from becoming
ordinary and outdated.102 Both domestic and international market shifts also threaten
Starbucks’ way of doing business. Although coffee culture is growing globally, coffee
consumption preferences are changing. Consumers, especially those in the United States, are
increasingly brewing coffee at home. The increased popularity of ready-to-drink coffee
products has altered consumers’ tastes, and while Starbucks is diversifying its retail landscape,
the state of cafÃ© culture is nonetheless shifting.103
Starbucks has entered India during a time primed for growth. If Starbucks and the Tata Group
can continue to leverage shared strengths and synergies, then the firms’ potential success
within India is limitless. Increased relaxation of governmental regulations, growing consumer
wealth, and a changing culture that has created an emerging preference for coffee have
combined to result in an Indian market ready to embrace the growth of Starbucks. While the
Tata Group and Starbucks have aided one another well so far, further expansion of the two
firms’ synergies could permanently change the way Starbucks operates internationally. While it
is clear that Starbucks is primed for international growth, it is vital that the firm continuously
expands its presence abroad. Slowing domestic dominance can only be countered by
international expansion, and this expansion seems to be the firm’s main opportunity for future
Questions for Review
1.What inspired Starbucks to venture into India? What were some of the company’s early
concerns and obstacles?
2.Describe why Starbucks wanted to enter India through a joint venture. Specifically, what
benefits did Starbucks and the Tata Group both gain by partnering with one another? What
synergies were present?
3.How would you describe Starbucks’ approach to entering India?
4.How did national cultural differences between India and the United States influence how
Starbucks adapted its offerings for the Indian market?
5.Do you think Starbucks should be concerned by its lack of financial success within India so far?
6.What is your assessment of the future outlook of Starbucks within India? What areas for
improvement or greater focus do you think would allow the firm to prosper?
7.Do you think Starbucks should continuously enter foreign markets through joint-venture
partnerships? What are some benefits and concerns that Starbucks faces by doing this?
You have recently joined Starbucks’ global strategy team. Given the success that the firm has
seen in developing markets such as China and India, Starbucks is looking to expand into new
emerging economies. Starbucks has targeted Northern Africa, Eastern Europe, and Central Asia.
You have been asked to analyze the specific economic, political, and cultural context of these
regions and to describe both the strengths and weaknesses of expansion. Additionally, you are
asked to make a recommendation on which market presents the greatest chance of success for
Starbucks. Finally, describe what Starbucks should do differently, if anything, in order to be
successful within that market.
Keep in mind that Starbucks’ global strategy team wants to expand into an area where it would
be economically feasible to do so, but perhaps more importantly, Starbucks is also looking to
expand into a region that will accept the culture and experiences it offers.
Prepared by Matthew Sepe of Villanova University under the supervision of Professor Jonathan
Doh as the basis for class discussion.
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September 8, 2016, https://stories.starbucks.com/stories/2016/starbucks-japan-celebrates-20-
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India,â€ Starbucks press release, January 30, 2012,
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5.David, â€œStarbucks Postpones Entry into India.â€
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India,â€ Tata Global Beverages, January 30, 2012,
8.Peter Bondarenko, â€œStarbucks: American Company,â€ Encyclopedia Britannica, November 14,
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25, 2018, https://stories.starbucks.com/stories/2018/howard-schultz-and-starbucks-25-
11.â€œNumber of International and United States Starbucks Stores from 2005 to 2018,â€ Statista,
12.â€œStarbucks Reports Record Q3 Fiscal 2018 Revenues and EPS,â€ Starbucks press release, July
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13.Joyce Chepkemoi, â€œThe World’s Largest Fast Food Restaurant Chains,â€ World Atlas, April 8,
14.Claire Groden, â€œThe 5 Top-Selling Coffee Brands,â€ Fortune, September 29, 2015,
15.â€œOur Mission,â€ Starbucks, https://www.starbucks.com/about-us/companyinformation/mission-statement.
16.Susan Aluise, â€œStarbucks’ Schultz Is Still Dreaming Big,â€ Investor Place, March 23, 2012,
17.Matthew Dollinger, â€œStarbucks, â€˜The Third Placeâ€™, and Creating the Ultimate Customer
Experience,â€ Fast Company, June 11, 2008, https://www.fastcompany.com/887990/starbucksthird-place-and-creating-ultimate-customer-experience.
18.â€œBrand Value of the 10 Most Valuable Fast Food Brands Worldwide in 2018,â€ Statista,
19.â€œStarbucks Company Timeline,â€ Starbucks, https://www.starbucks.com/about-us/companyinformation/starbucks-company-timeline.
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2, 2017, https://www.forbes.com/sites/ronaldholden/2017/11/02/starbucks-unloads-tazo-willconcentrate-on-teavana/#14624c4547ba.
21.â€œStarbucks Social Impact,â€ Starbucks, https://www.starbucks.com/responsibility.
23.John Koetsier, â€œApple Most-Admired Global Company, Says Fortune,â€ Fortune, January 22,
24.â€œStarbucks Company Timeline.â€
25.â€œFact Sheet: Starbucks Latin America,â€ Starbucks corporate press release, July 16, 2014,
26.Jack Flanagan, â€œHow Starbucks Adapts to Local Tastes When Going Abroad,â€ Real Business,
August 21, 2014, https://realbusiness.co.uk/how-starbucks-adapts-to-local-tastes-when-goingabroad.
27.â€œStarbucks Coffee International,â€ Starbucks,
28.Nathalie Belhoste and Jeremy Grasset, â€œThe Chaotic History of Foreign Companies in India,â€
French Institute of National Relations, July 2008,
29.Dennis J. Encarnation and Sushil Vachani, â€œForeign Ownership: When Hosts Change the
Rules,â€ Harvard Business Review, September 1985, https://hbr.org/1985/09/foreignownership-when-hosts-change-the-rules.
30.â€œIndia Exports,â€ Trading Economics, https://tradingeconomics.com/india/exports.
31.Belhoste and Grasset, â€œThe Chaotic History of Foreign Companies in India.â€
32.â€œThese Will Be the Fastest Growing Economies in the World over the Next Decade,â€
BusinessTech, May 4, 2018, https://businesstech.co.za/news/business/242635/these-will-bethe-fastest-growing-economies-in-the-world-over-the-next-decade.
33.â€œIndia’s Poverty Profile,â€ World Bank, May 27, 2016,
34.Kenneth Rapoza, â€œIndia Poised to Be Third Largest Consumer Economy,â€ Forbes, March 21,
35.â€œIndian and Foreign Companies, LLPs,â€ Indian Ministry of Corporate Affairs,
36.â€œIndia Foreign Direct Investment,â€ Trading Economics,
37.â€œEY’s Attractiveness Survey India 2015: Ready, Set, Grow,â€ Ernst and Young,
38.Kirtika Suneja, â€œEase of Doing Business: India Jumps 23 Notches, Now at Rank 77,â€ Economic
Times, November 1, 2018,
39.Chris Devonshire-Ellis and Ankit Shrivastava, â€œForeign Direct Investment in India’s Single and
Multi-Brand Retail,â€ India Briefing, February 2, 2012, https://www.indiabriefing.com/news/foreign-direct-investment-indias-single-multibrand-retail-5232.html.
40.Rucha Kanolka, â€œEssay on the National Income of India,â€
41.â€œShare of Americans Who Visited Starbucks in the Past 3 Months in 2018, By Age,â€ Statista,
42.â€œAge Structure and Marital Status,â€ Indian Office of the Registrar General & Census
43.â€œIndian Food Service Industry,â€ India Brand Equity Foundation, June 2013,
44.Elliot Hannon, â€œIndia’s Coffee Consumption Doubles over Last Decade,â€ National Public
Radio, February 8, 2012, https://www.npr.org/2012/02/08/146565901/young-people-getindia-interested-in-coffee.
45.Liz Wolf, â€œGrowing Competition from Both National Chains and Neighborhood Coffee Shops
Threatens Starbucks’ Supremacy,â€ National Real Estate Investor, July 26, 2018,
46.â€œStarbucks Shop Debuts in India,â€ CBS News, October 19, 2012.
47.â€œRevenue of Starbucks Worldwide from 2012 to 2018,â€ Statista,
48.â€œTotal Population,â€ World Bank, https://data.worldbank.org/indicator/sp.pop.totl.
49.â€œUnsure Starbucks Defers Indian Entry,â€ Economic Times, July 21, 2007,
50.â€œStarbucks Company Timeline.â€
51.â€œIndiaâ€”Import Tariffs,â€ October 10, 2018, https://www.export.gov/article?id=India-ImportTariffs.
52.Deena Shanker, â€œThis Indian Coffee Chain Is Beating Starbucks at Its Own Game,â€ Quartz,
June 1, 2015, https://qz.com/india/416670/this-indian-coffee-chain-is-beating-starbucks-at-itsown-game.
53.Karan Kashyap, â€œStarbucks Is the Company to Beat in India’s 30 Billion Tea Market,â€ Forbes,
July 21, 2017, https://www.forbes.com/sites/krnkashyap/2017/07/21/starbucks-is-thecompany-to-beat-in-indias-30-billion-tea-market/#6c848d7d37a5.
54.â€œUnsure Starbucks Defers Indian Entry,â€ Economic Times, July 21, 2007,
55.David, â€œStarbucks Postpones Entry into India.â€
56.Sindhu Bhattacharya, â€œStarbucks Pulls Back the Cup, Steaming over FDI Rules Fog,â€ DNA
India, July 21, 2007, https://www.dnaindia.com/business/report-starbucks-pulls-back-the-cupsteaming-over-fdi-rules-fog-1110997.
57.â€œOut of India,â€ The Economist, March 3, 2011,
58.â€œTata Group Business Profile,â€ Tata, https://www.tata.com/business/overview.
60.Tata Global Beverages, http://www.tataglobalbeverages.com.
61.Vision statement of TATA Global Beverages.
62.Sonali Krishna, â€œIndia’s Coffee Market competition is ferocious: Howard Schultz, Starbucks,â€
Economic Times, October 25, 2012,
63.Tata Global Beverages 2018 annual report.
64.â€œIndians Prefer Made-in-India Products over Made-in-China Ones,â€ Money Control,
September 13, 2017, https://www.moneycontrol.com/news/business/economy/indians-prefermade-in-india-products-over-made-in-china-ones-survey-2349221.html.
65.Vikas Bajaj, â€œA Starbucks Venture in Tea-Drinking India,â€ New York Times, January 13, 2011,
66.â€œTata Global Beverages and Starbucks Form Joint Venture to Open Starbucks Cafes across
68.â€œTata Coffee & Starbucks Sign Mou for Strategic Alliance In India,â€ TATA Global Beverages,
January 13, 2011, http://www.tataglobalbeverages.com/media/news/detailednews/2015/02/25/tata-coffee-starbucks-sign-mou-for-strategic-alliance-in-india.
69.â€œStarbucks in Pact with Tata Coffee,â€ Business Line, October 19, 2004,
70.â€œTata Coffee & Starbucks Sign Mou for Strategic Alliance in India.â€
71.â€œStarbucks, Tata Coffee Sign Pact for Collaboration,â€ Business Today, January 15, 2011,
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73.Vic Lang, â€œThe 10 Largest Cities in India,â€ World Atlas, March 6, 2018,
74.Sonali Krishna, â€œIndia’s Coffee Market Competition Is Ferocious: Howard Schultz, Starbucks,â€
Economic Times, October 25, 2012,
75.Moninak Mitra, â€œHow Starbucks Is Localizing to Crack the Indian Coffee Chain Market,â€
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76.Vinay Kamath, â€œTata Coffee’s New Roastery to Serve Beans to Starbucks,â€ Hindu Business
Line, July 25, 2012, https://www.thehindubusinessline.com/companies/tata-coffees-newroastery-to-serve-beans-to-starbucks/article23082439.ece.
77.â€œStarbucks to Enter India Market in Joint Venture,â€ CBS News, January 30, 2012,
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