Starbucks Delays India Entry - Case Study Example

?Business, Essay Table of Contents Answer 3 Answer 2 4 Plan for Next 10 years 5 Internal Resource 5 Answer 3 8 Core Competency 9 Decision Model 10 Within Company Strategy (Home Country) 11 Work Cited 14 Answer 1 Starbucks is one of the major retailers and roster of coffee bean in the world. They sell coffee in their retail shops along with a variety of other espresso beverage, cold blended beverage, teas and snacks. It has more than 17,000 licensed coffee shops in 40 different countries. The stores of Starbucks have Wi-Fi internet connectivity for its customers to surf internet. The closest competitors of Starbucks are the other coffee shops in US, doughnut shops, and restaurants (Tata Global Beverages “Tata Starbucks readies for Indian market entry by end of October”). Starbucks is planning to expand aggressively, by adding 3500 stores round the world. It has also planned to increase the number of shops in US to 20,000 and then eventually 40,000. (Starbucks Newsroom “Tata Starbucks Limited Readies for India Market Entry by End of October”). Starbucks planned its roadmap to venture in India with Tata Global Beverages, though according to the present legal framework of the country, Starbucks could have entered India without any partner, yet the company is planning to enter into a 50-50 joint venture with TATA Group. As far as marketing strategies of Starbucks are concerned for India, the strategies that they have formulated for the US target market would not assist them to be successful in India because India is a culturally rich country and the people belonging to any class have strong attachment to the culture. In India coffee is preferred, but tea is preferred more than coffee. Moreover, the food offered in Starbucks in USA is completely different from the taste and preferences of Indian consumers (Knowledge Wharton Today “Starbucks Comes to India, Selling Coffee and Atmosphere”). The Indian consumers do not give much importance to salads or related items when they visit restaurants, while customers visiting restaurants in US or UK might order salads with beverages for as snacks. So Starbucks would have to maintain the standard quality of its coffee as it is the core product of the company (Singh “Tata Starbucks Readies for India Entry by End of October”). Starbucks is also well-known for its high quality coffee bean, so the Indian customers would expect to receive similar high quality and tasty coffee and tea from Starbucks, but the other menus such as snacks or meals which is also sold in Starbucks stores have to be absolutely Indian or balanced combination of Indo-American dishes, as the Indian customers have varied taste and preferences and they welcome different food items and menus from different countries too (Ahmed “Starbucks Delays India Entry”). Starbucks’ step to choose TATA for entering India is a very intelligent decision because TATA as a brand has high goodwill in India. TATA is denoted as another name for India values, relationship and high quality product. Apart from this, TATA also has the experience of understanding the Indian customers better than any other company. So it can be said that two strategies would assist Starbucks to successfully enter and set business India; firstly the joint venture with Tata Group, and secondly the marketing strategies which would include understanding the Indian culture, their values, taste and preferences, and then design the menu and the ambience or culture of the coffee shop accordingly. Answer 2 First Solar Inc. is an American company which manufactures photovoltaic films or modules which is popularly known as solar panels. It is one of the largest manufacturers of solar power modules which are used to convert the sunlight into electricity. The customers of First Solar are the solar project developers, independent producers of power, and system integrators. Initially the company sold its products in Germany, Spain, Italy, France, Italy, but later it expanded its markets to China, India and also in other parts of US. The company competes with competitors belong to various industrial segment. Two key industry segments in USA can be explained by the following table. (Source: Menenberg, Lacy and Balayan) Solar power industry is complemented by various threats like dwindling supply of nonrenewable energy and rising price. In the USA market, First Solar Inc is facing competition from players like Sun Power Corporation, MEMC Electronic Materials and others. USA government has imposed anti-dumping tariff for solar power companies which decreases competitive threat for Sun Power Corporation and FSLR. Although solar module of SPWR is more efficient in comparison to FSLR but its high price can be a competitive advantage for FSLR. Plan for Next 10 years Internal Resource First Solar Inc has increased their capacity to produce clean energy over the course of time and on the due course they have also achieved the advantage of economies of scale. Economies of scale for the company can be explained by the following diagram. (Source: First Solar) The diagram is showing that economies of scale have decreased 50% of module cost for the company. The company has created three types of financial resources such as strong cash flow, high profitability and financial strength. Current ratio for the company is 3.5 which is way above than industry average. Gross profit margin for First Solar Inc is more than 45% which is also higher than industry standard. The company has also created a strong repository of physical resources such as photo voltaic module and PV module in last ten years. They can formulate adaptation, aggregation and arbitrage strategy on the basis of physical resources. home Base Strategy Portfolio Strategy Hub Strategy Platform Strategy Mandate Strategy First Solar should adopt this strategy (only exporting) for countries associated with rigid trade policies for foreign players. First solar needs to increase capacity of their production system in next ten years in order to adopt this strategy for foreign market First Solar can establish regional hubs in the south east Asian countries (India) in order to achieve economies of scale throughout the country operation First Solar can adopt this strategy in order to distribute fixed cost over various regions of a country. They need not to adopt this strategy because it will complicate future business activities First Solar can adopt this model for China with an intention of mandating supply of particular product region. They can use Aggregation model as a part of home based strategy. The company should adopt Adaptation strategy to achieve economies of scale in South Asian market. First Solar needs to adopt Arbitrage model as a part of mandate strategy to earn profitability in China. Answer 3 Zara has been selected by the study to understand decision dynamics regarding outsourcing activities. Zara has integrated value chain in a demand specific manner in order to fulfill demand of the customer in shortest possible manner. Zara has synchronized various value chain activities like stock replenishment, sourcing, manufacturing and retailing in order to decrease turnaround time. Value Chain Activities Design Sourcing and Manufacturing Distribution Retailing Zara replenishes stocks at time period of 14 days. Creative team of the company consists of fashion designers, sourcing specialists and NPD personnel. Fashion designers of the company changes the style and supply mix according to the seasonal trend Zara sources raw material from continents like Asia and Europe. Suppliers for the company are situated in different regions such as Europe (95%), Asia (4%) and America (1%). Zara manufactures’ 60% of its collection through in house production departments. Zara banks on centralized distribution system in order to offer manufactured items to customers. The company has established large procurement hub inside Spain while four satellite spokes are located in countries like Mexico, Brazil and Argentina. Zara displays the latest fashion collection inside the store in order to lure customers. Zara’s retail strategy is based on the freshness of collection. Zara creates an ambience of trendy fashion inside the store and rapid product turnover triggers a sense of fashion scarcity in the mind of customers. Competitive Advantage Quick stock replenishment helps Zara to avoid stocking of outdated fashion material. High dependency on in house production helps the company to incorporate latest Fashion trend in collection and also helps them to decrease lead time. The centralized satellite model has helped Zara to decrease lead time and offer collection to customers at a shortest possible time. This model decreases the scope of product diversification for competitors. (Source: Palladino) Core Competency Shortest lead time helps Zara to refresh collection twice a week in normal season and thrice a week in festive season Shop mangers of Zara uses PDAs as part of IT integration in order to streamline fashion. PDA has helped Zara to collect information regarding product design in fastest possible manner. IT integration has enabled Zara to design and manufacture 10,000 new cloths every year. Decision Model The study will compare benefits of two activities such as outsourcing and within the company in order to recommend viable option for Zara. Advantage Within the Company Outsourcing Disadvantage Zara can control the designing process and channelize the process through PDA or personal digital assistant platform. Designing the collection by in house fashion designer Designing the fashion apparel by external fashion designer Zara will lose its centralized control over product design and they might fail to integrate PDA system in designing. In house activity will decrease lead time for Zara and helps the company to produce new collection in 14 days while industry standard is six months. Manufacturing 60% of apparel collection within the company. Outsourcing 100% of manufacturing to low cost Asian countries. This will surely decrease the production cost but outsourcing activity will increase lead time for Zara. Increase in lead time means Zara will lose one of its core competencies and also there is no guaranty that manufacturers of low wage countries will retain the quality of Zara products. Centralized hub spoke model has helped the company to apply Just in Time (JIT) in supply chain in order to decrease turnaround time. Zara has established a centralized distribution model. Zara will establish a decentralized model Decentralization will decrease Zara’s control over inventory and also value chain cost. After doing the above analysis it can be inferred that Zara should rely on within company activities instead of outsourcing in order to retain its core competency. Within Company Strategy (Home Country) Design Zara needs to design fashion apparel for two seasons like fall/winter and spring/summer. Local designers need to communicate with store managers about customer demand and they need to convert the suggestion into product design. Sourcing and Manufacturing Zara needs to start procurement and manufacturing activities at least five months prior to selling season and this can be done by in house manufacturing functions. Zara should not complete more than 20% of manufacturing before start of selling season. They need to complete 55% of production at the time of start of selling season. Home country (read Spain) production will help Zara to manufacture 75% of cloths in accordance to ongoing fashion trend. Advantage of home country production can be explained by the following diagram. (Source: Palladino) Work Cited Ahmed, Rumman. “Starbucks Delays India Entry.” The Wall Street Journal, 13 September 2012. Web. 8th December 2012. First Solar. “Global Energy Summit First Solar Bringing Clean, Renewable Energy to Nevada.” n.p, (2011). PDF file. Knowledge Wharton Today. “Starbucks Comes to India, Selling Coffee and Atmosphere.” Wharton University of Pennsylvania, 1 February 2012. Web. 8th December 2012. Menenberg, Alexander, Meredyth Lacy and Levon Balayan. “Strategic Report for First Solar, Inc.” Oasis Consulting (2009). PDF file. Palladino, Amalia. “Zara and Benetton: Comparison of two business models.” Organizacion de Empresas (OE) (2010). PDF file. Singh, Namrata. “Tata Starbucks Readies for India Entry by End of October.” The Times of India. 28 September 2012. PDF file. Starbucks Newsroom. “Tata Starbucks Limited Readies for India Market Entry by End of October.” Starbucks Corporation, 27 September 2012. Web. 8th December 2012. Tata Global Beverages. “Tata Starbucks Readies for Indian Market Entry by End of October.” Tata Sons Ltd, 28 September 2012. Web. 8th December 2012. Read More