Corporate Strategy Management - Case Study Example

Introduction Strategic management in a company deals with formulation, implementation and evaluation of cross-functional resolution which will ensurethat a company achieves its stated objectives. It involves the company specifying its objectives, formulating company’s policies and strategies to attain these objectives. The company also has to allocate resources which will be used in attaining the objectives stated. Thus, strategic management consist of diverse activities and functions in achieving the company’s objectives. Strategic corporate management is a continuous corporate process which examines the corporate business status and the industry competition in which the corporate is operating in, assessing the competition and setting goals and strategies to meet new challenges. (David, 1989) This paper will therefore look into a mini case for Starbucks Company which is trying to enter the Indian market. The main issues that will be addressed by the paper will be; entry problem and market entry analysis using porters 5 forces model. It will finally give a briefing note on the case. A mini case In the recent past, trading has become increasingly global in some way because of the need to gather and increase the company’s financial base. To achieve greater investments and better market opportunities in the international market, companies are opening new branches in different countries. Starbucks Company is one of the companies that are expanding its market and it has targeted the Indian market. Profile of Starbucks Company Starbucks Corporation is an American company based in Washington, which buys makes and sell coffees and coffee drinks in many of its international retail outlets chains. Starbucks started as a seller of packaged high quality coffee, today Starbucks has developed to become one of the best companies known for its coffeehouses, giving its customers a place to buy beverages and other food items in addition of the packaged whole bean coffee. The company is given credit on changing how people in America and the world all over perceive and take coffee. (Business Week, 2007) Opening a branch in India In relation to its expansion plans Starbuck has been eyeing the Indian market which is among the biggest markets in Asia because of the high population the country has. However, the government of India have been taking time in allowing the company to enter the Indian market. Starbucks Company had intended to have a joint venture with an Indian company named New Horizon. New Horizon Company already operates 45 Starbucks retail outlets in Indonesia. The joint venture was a market entry strategy undertaken by Starbucks as it is a more easy way of entering into a new market. (Ratna, 2007) According the business reports, Starbucks long awaited entry to India market was delayed again June, 2007 and the company had to withdraw its application of operating a single brand retail outlet in India. The ministry of Foreign Investments Promotion Board and Commerce rejected the earlier application from Starbucks without giving clear reasons. (Ratna, 2007) Further reports confirmed that Starbucks had chosen to have a joint venture with New Horizons; a business company which is marketed by Pantaloon Group’s Kishore Biyani and VP Sharma of Indonesia, however, the joint venture violated the Indian’s foreign investments laws as Starbucks have no equity in New Horizon. Thus the plans of having an outlet by the end of the year (2007) in India will have to be moved to probably up to 2008. (Indiaretailbiz, 2007) The intention of Starbucks is to first open a store in New Delhi and another store in Mumbai, this is according to Sharma one of the owners of the New horizon. If Starbucks opens an outlet in India it will have to compete with well established local companies such as Barista and Café Coffee Day retail coffee shop. Barista for example has 100 outlets and it intends to expand them to 225 by the end of this (2007) year. (Indiaretailbiz, 2007) Brief Introduction From the above it is clear that one of the shortcoming of carrying out business in India especially when it applies to Beverage industry, is the complexity and dissemination of the government bureaucracy which deals which food and beverage trade and in particular importation of beverages and food to the country. The high number of government entities and government-quasi official who have jurisdiction or semi jurisdiction over tariffs, licensing, tariffs, quality control and verification of origin is a bit confusing. Starbucks Company needs to redefine its market entry strategy in to India especially concerning the barrier of entry, rivalry from established Indian company after starting the outlet. To analyse the issue well, we shall employee Porter’s 5 forces model in examining this case. Porter generic strategies Porter generic strategy; this is a strategy on the dimensions of the strategic scope meaning the market penetration and strategic strength referring to the company. For porter a company is impacted by five forces. (Porter, 1985) Rivalry In a convectional economic setup, competition among rival companies reduces profits of the companies to nil. However, competition can not be perfect and companies are so sophisticated to counter competition by gaining competitive advantage over their rivals. Competition varies depending on the different industries. In the beverage industry the competition is high as there are many companies offering the same services. In pursing the competitive advantage the Company is seeking to expand it retail channel of distribution through joint venture and opening up more branches in India. This of course will at the same time create rivalry with local companies for example Barista and Café Coffee Day retail coffee shop (Porter, 1985) Threat of substitutes Substitutes in an industry according to porter are products from other industries. A threat of a substitute will occur when the demand of the product is affected by changing of price of a substitute product. The price elasticity of a product is directly affected by the availability of substitutes. Since availability of substitutes will make the demand of a product to be more elastic. Starbucks has built a strong brand name, good customer orientation and product mix. This has given Starbucks distinctive advantage and has been able to keep its market share and as its beverage services has continued to attractive high demand. (Porter, 1985) Buyer power This is the impact that buyers have on a specific industry. Generally if there is a strong buyer power, the relation between the industry and the buyer is termed as “monopsony” such a condition happens when there is one buyer and many suppliers. Starbucks is banking on its brand name to influence Indian buyers has taking Starbucks coffee is consider a class above the rest. (Porter, 1985) Supplier power Each industry needs raw material, components and labour and other provisions. This need creates supplier-buyer relationships between the companies which provide the raw material and the industry. Starbucks is a main buyer in the industry and it will use its economics of scale to source for better deals to ensure that it gets the best quality of raw material at the best prices. (Porter, 1985) Barriers to entry Apart from rivals posing threat to existing companies, new entries in the industry also pose a threat the existing companies and increases competition in the industry. In practice any company should be able to enter and leave the market. Nevertheless, industries have features that protect high profits of the companies in the industry and restrain additional competitors from entering the industry. The beverage industry has remain open for any player to enter as the there is free and liberal market. However, India has protected its market by use of taxes that are exercised by the Indian government which foreign investors and businesses should pay when they trade in the country. Shipping requirements and policies between the U.S and the Indian government is also a factor that hinders Starbucks Company. (Porter, 1985) Conclusion This study can deduce that in order to achieve and maintain the objectives a company strategic management remains a vital aspect for any company. It is also clear that when entering a new market proper market analysing have to be undertaken especially on the entry method and barrier that can hinder a company from doing business in another country. For Starbucks to achieve greater investments and better market opportunities in the Indian market, it is necessary that primary and secondary market research is done, market analysis and country analysis are also done to ensure that information regarding the country, competitors and possible challenges are availed before making any commitments. Marketing analysis can be carried out using Porters 5 forces model which is a good market analytical tool. However, it remains certain that Starbucks will have to wait a bit longer to final open its retail outlet in India. References; Business Week (2007): Planet Starbucks; September 9, David, F (1989): Strategic Management, Columbus; Merrill Publishing Company Indiaretailbiz (2007): Starbucks’ to enter India with Pantaloon owned JV; retrieved from: www.indiaretailbiz.worldpress.com , on December 7, 2007 Porter, M.E. (1985): Competitive Advantage: The Free Press, New York Ratna, B (2007): Starbucks set to finalise India JV; in The Times of India; http://timesofindia.indiantimes.com Read More