Role of Marketing Information - Case Study Example

Consultation to Starbucks for retail marketing in India Executive summary The environment in India is largely conducive to globalisation and the consumer tastes are increasingly moving towards ‘value for money’ and the appreciation of intangibles. Branding is becoming more and more important. The political climate is becoming more and more friendly. The vast Indian market and India’s improving status as an economic power and a preferred destination for FDI make it a logical step for Starbucks to enter in. Marketing mix must be a combination of premium locations and strong media with a local cultural flavour. Table of contents Introduction………………………………………………………………… 3 Marketing Environment…………………………………………………… 3 Role of Marketing Information…………………………………………… 5 SWOT analysis theory and marketing strategy…………………………. 5 The role of branding in India ……………………………………………. 8 Conclusion…………………………………………………………………… 8 Introduction Starbucks is a well known international brand of coffee established in 1971. It is the world leader in roasting and retailing of branded coffee with approximately 33 million customers each week. Howard Schultz bought the company in 1987 and since then it has had a fairy tale like success story. Consistent growth and low employee turnover have been the patterns in this company. Net revenues from their company operated retail as well as from their speciality has been $6.36 billion up from $5.29 billion last year (Starbucks, Annual report, 16th Dec 2005). In 1996, Starbucks went international. The first overseas location was Japan. Currently apart from the United States which is the home market for the company, they also operate in 34 international locations both through direct company operated stores as well as joint ventures and licensed locations. In the United States, they have 4666 company-operated coffeehouses and 2222 licensed locations. Outside the US they have 1049 company-operated stores and 1734 joint venture and licensed locations. The company was listed in Fortunes best hundred places to work in 2005 (www.starbucks.com, 2006) Marketing environment The country which we are advising Starbucks on is India. Following is a PEST analysis for India with respect to the entry of Starbucks into the country. PEST analysis with the standpoint of Starbucks entry into India Political India has been in the process since 1991 of opening up its markets to international competition and in general is taking steps towards loosening of control and gunning towards becoming a free market. Being a democracy in which (especially in recent times) coalition governments are the order of the day, the ruling party has to contend with partners which have left leanings. An issue which is the centre of a political debate is Foreign Direct Investment in retail. The left opposes it fearing that local small retailers will be hurt. But pundits agree that it is a matter of time before the government opens up the ceiling for FDI in retail beyond the 49% level and eventually it is expected to open up completely. Economic Following the process of economic reforms India has seen an extremely healthy GDP growth in recent years. This growth has maintained a rate of 7% to 8% making India one of the fastest growing economies of the world. The middle class in India is itself more than the entire population of the United States making it a huge market. A survey of executives by a global consulting firm AT Kearney shows that India was ranked as the second best destination for Foreign investment after China, making it a better destination for investment than the US (www.atkearney.com, 2006). Social Thanks to this upsurge in the macro economic condition of the country there is a substantial upswing in the standard of living especially in the urban centers of the country. The disposable income levels of the middle class has gone up and spending on luxury products and services is at an all time high. Indians are becoming more and more conscious of high quality leisure activities and are more willing to spend on them. This is indicated by the increase of cinema multiplexes which are growing exponentially, as well as the concept of coffee bars. There are atleast two well established local coffee bar chains doing well in India namely Barista and Café coffee day. Estimates say that the average Indian consumes only 54g of coffee per year that is 10 cups a year. In the US the per capita consumption is around 14000g (Harish Bijoor, 2001). This is a big opportunity for good marketing. Technological India is graduating from the concept of tea or coffee for sale which is made on stoves in roadside eateries to the concept of vending machines. These machines operated by the various local and national promoters are becoming more and more commonplace. More and more corporates have opted for vending machines to be installed at the workplaces for the benefit of employees. Currently this technological change is concentrated in the urban centers but it is only a matter of time before they penetrate into rural India. Role of marketing information Marketing information plays a crucial role in any marketing decision. India has several market research houses who are regularly employed by the corporates for marketing data. There are also centralized databases of economic data which are available on a subscription basis. In India which is geographically vast and socially as well as economically diverse, marketing information will help in the choice of markets to enter. It will also help in making decisions on channels for distribution of products and the methods most suitable. SWOT analysis theory and marketing strategy We will use the SWOT to put together an expansion strategy for Starbucks Strengths The strong brand built over a period of time Vast financial resources accentuated by the consistent growth of business and profits Experience and know how in the operation of high quality retail chains in varying operating environments Low employee turnover Strong social commitment. Weaknesses Being a strong brand and a financial powerhouse Starbucks tends to make enemies among social and political groups. Since there are already coffee chains operating in India Starbucks will not have the first mover advantage and will have to contend with competition which has established brands in the country. Opportunities The economic upswing and urbanisation that is taking place in India has made it an ideal destination for a concept like Starbucks. Brand consciousness is on the increase. The large Indian market with a total population more than a billion people is waiting for a concept like Starbucks. Threats Instability in government policy is not uncommon in Indian politics. Currently, the left will fight against Starbucks and may win some. The left has forced the government to roll back certain reforms measures and that can happen with retail. Social nationalist movements can create a nuisance. Strategy Considering the above Starbucks can take a leaf out of McDonalds and use the franchise method (something that has already been done in other countries) since FDI is still under debate. Starbucks could consider acquiring premium locations (which is possible considering it’s financial strength) in all the metros of India namely Mumbai, New Delhi, Kolkotta, Chennai and Bangalore. Ensure that the outlets are spacious outlets – considered to be a sign of well being in India. Once operations are ready to commence in all 5 major cities, use heavy media promotions and advertising to boost the brand. Pre launch media does well in India with the film industry successfully using it. Hype the launch date and make it an event to remember in the outlets concerned. To soften the nationalists, let the media have a distinct Indian flavour within the cultural context, while yet projecting the worldwide popularity of Starbucks. Target the urban population. Recruit high quality manpower which should not be a problem given good HR history. In the second phase, increase outlets within the metros at a fast pace to keep up with the brand recall as well as in keeping with the Starbucks philosophy of blanketing. Role of branding in India India is moving from being a price sensitive market to becoming a value for money market. The Indian consumer has begun to recognise the value of intangibles and is now increasingly willing to pay for them. Coffee has been noted in India to be price inelastic, with habit being the driver for consumption (Venkatram and Deodhar, 1999). However Barista which is a coffee retail chain in India did experience an increase in footfalls to its outlets when they dropped price (T R Vivek, 2004). The way to go would be to secure brand loyalty by making the whole experience affordable in order to generate trial. Once loyal customers are created, price will be less of a deterrent. The brand will not suffer because the media has already ensured a strong branding. the spearheading product must be researched well to cater to Indian taste. Tata coffee (a coffee company) has a brand called Mr. Bean which is a blend 53% coffee and 47% chicory. Another product to consider promoting would be tea, which has a much higher consumption in India than coffee. The rest of the proposed marketing mix has already been outlined above : product to cater to Indian tastes, distribution through big sized outlets in premium locations in the top urban centres, pricing to be affordable so as to woo loyal customers and later to increase, media to have an Indian cultural touch, cross promotions with other strong brands and localised promotions in other entertainment centres like multiplexes can also be effective in brand building. Conclusion With the macro indicators as described above and the marketing mix prescribed, it must be expected that in the first two years of its launch into India Starbucks can become a brand to reckon with in this country. List of references Starbucks, 2006, Company overview, [Online] Available: http://www.starbucks.com/aboutus/overview.asp. [1 January 2006] Annual Report, 2005, Summary of STARBUCKS CORP, Yahoo finance, [Online] Available: http://biz.yahoo.com/e/051216/sbux10-k.html [2 January 2006] ATKearney, 2005, Current News releases, ATKearney, [Online] Available: http://www.atkearney.com/main.taf?p=1,5,1,169. [2 January 2006] Bijoor, Harish, 2001, Special chat, India Infoline, [Online]. Available: http://www.indiainfoline.com/chat/habit.html. [1 January 2006] Vivek, T.R, 2004, Footfalls rise by 20% at Barista, [Online] Available: http://www.rediff.com/money/2004/feb/16barista.htm.. [2 January 2006] Venkatram, R. and Satish.Y. Deodhar, 1999, Dynamic Demand analysis of India’s domestic coffee market, [Online]. Available: http://www.iimahd.ernet.in/~satish/coffee.pdf. [1 January 2006] Read More