Case Study Description of Coffee Wars in India: Starbucks 2012
Starbucks entered India in late 2012. This case explores Starbucks' globalization strategy, its success in China, and its vision for India. The case asks whether Starbuck can replicate its success in China in India.
Swot Analysis of "Coffee Wars in India: Starbucks 2012" written by David B. Yoffie, Rachna Tahilyani includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks India facing as an external strategic factors. Some of the topics covered in Coffee Wars in India: Starbucks 2012 case study are - Strategic Management Strategies, Competitive strategy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Coffee Wars in India: Starbucks 2012 casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing household debt because of falling income levels, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion,
central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Coffee Wars in India: Starbucks 2012
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Coffee Wars in India: Starbucks 2012 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks India, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks India operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Coffee Wars in India: Starbucks 2012 can be done for the following purposes –
1. Strategic planning using facts provided in Coffee Wars in India: Starbucks 2012 case study
2. Improving business portfolio management of Starbucks India
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Starbucks India
Strengths Coffee Wars in India: Starbucks 2012 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks India in Coffee Wars in India: Starbucks 2012 Harvard Business Review case study are -
Ability to lead change in Strategy & Execution field
– Starbucks India is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Starbucks India in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Starbucks India digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Starbucks India has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Low bargaining power of suppliers
– Suppliers of Starbucks India in the sector have low bargaining power. Coffee Wars in India: Starbucks 2012 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Starbucks India to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Starbucks India has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– Starbucks India is one of the leading recruiters in the industry. Managers in the Coffee Wars in India: Starbucks 2012 are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Starbucks India in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Starbucks India is present in almost all the verticals within the industry. This has provided firm in Coffee Wars in India: Starbucks 2012 case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy in the Coffee Wars in India: Starbucks 2012 Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Learning organization
- Starbucks India is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Starbucks India is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Coffee Wars in India: Starbucks 2012 Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Starbucks India has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Starbucks India has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Strong track record of project management
– Starbucks India is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Strategy & Execution industry
– Coffee Wars in India: Starbucks 2012 firm has clearly differentiated products in the market place. This has enabled Starbucks India to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Starbucks India to invest into research and development (R&D) and innovation.
Weaknesses Coffee Wars in India: Starbucks 2012 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Coffee Wars in India: Starbucks 2012 are -
No frontier risks strategy
– After analyzing the HBR case study Coffee Wars in India: Starbucks 2012, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Workers concerns about automation
– As automation is fast increasing in the segment, Starbucks India needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Starbucks India supply chain. Even after few cautionary changes mentioned in the HBR case study - Coffee Wars in India: Starbucks 2012, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Starbucks India vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Starbucks India has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow decision making process
– As mentioned earlier in the report, Starbucks India has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Starbucks India even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Low market penetration in new markets
– Outside its home market of Starbucks India, firm in the HBR case study Coffee Wars in India: Starbucks 2012 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Coffee Wars in India: Starbucks 2012, it seems that the employees of Starbucks India don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Aligning sales with marketing
– It come across in the case study Coffee Wars in India: Starbucks 2012 that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Coffee Wars in India: Starbucks 2012 can leverage the sales team experience to cultivate customer relationships as Starbucks India is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Starbucks India has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Coffee Wars in India: Starbucks 2012 HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Starbucks India has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Coffee Wars in India: Starbucks 2012 HBR case study mentions - Starbucks India takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Coffee Wars in India: Starbucks 2012 | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Coffee Wars in India: Starbucks 2012 are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Starbucks India is facing challenges because of the dominance of functional experts in the organization. Coffee Wars in India: Starbucks 2012 case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Starbucks India in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Loyalty marketing
– Starbucks India has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Better consumer reach
– The expansion of the 5G network will help Starbucks India to increase its market reach. Starbucks India will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Starbucks India can use these opportunities to build new business models that can help the communities that Starbucks India operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Using analytics as competitive advantage
– Starbucks India has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Coffee Wars in India: Starbucks 2012 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Starbucks India to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Starbucks India can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Starbucks India can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Starbucks India can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Coffee Wars in India: Starbucks 2012 suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Low interest rates
– Even though inflation is raising its head in most developed economies, Starbucks India can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Starbucks India in the consumer business. Now Starbucks India can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Starbucks India can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Starbucks India can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Leveraging digital technologies
– Starbucks India can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats Coffee Wars in India: Starbucks 2012 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Coffee Wars in India: Starbucks 2012 are -
Consumer confidence and its impact on Starbucks India demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Starbucks India in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Starbucks India has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Starbucks India needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Shortening product life cycle
– it is one of the major threat that Starbucks India is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Starbucks India.
High dependence on third party suppliers
– Starbucks India high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Starbucks India in the Strategy & Execution sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Starbucks India can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Coffee Wars in India: Starbucks 2012, Starbucks India may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Starbucks India with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Starbucks India will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Starbucks India can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Coffee Wars in India: Starbucks 2012 .
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Starbucks India can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Coffee Wars in India: Starbucks 2012 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Coffee Wars in India: Starbucks 2012 needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Coffee Wars in India: Starbucks 2012 is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Coffee Wars in India: Starbucks 2012 is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Coffee Wars in India: Starbucks 2012 is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Starbucks India needs to make to build a sustainable competitive advantage.