Global and International Business Contexts - Essay Example

Global and International Business Contexts Global and International Business Contexts PART A: Coffee Industry Globally Coffee is the most widespread drink in the world with a consumption of around half a trillion cups every year (Surana 2009). After petroleum coffee is the most important commodity with the industry employing more than 25 million people from around the world. Talking about the consumption, the chief coffee consumer country in the world is USA with coffee imports of around 1.2 billion kg every year. The major producer of coffee is the same as the major consumer that is USA which produces 70% of world coffee (Surana 2009). Indian Coffee Industry The nation being famous as tea drinker the consumption of coffee was stagnant in 1990s but the trend is changing and the population taste is changing from tea towards coffee. This is mainly because of drinking habits in non-traditional regions, growing culture of cafes and increasing share of instant coffee (Surana 2009). Discussing in detail the coffee market of India, the change in trend towards coffee is mainly due to two reasons, firstly, the entrance of multinational firms which bought the concept of instant coffee that is rising day by day. Secondly, the espresso culture which is encouraging coffee parlours to open up for consumers to choose variety of coffee from there, at the same time providing opportunity to meet people and relax (Sreenivasan 1999). Prime customers These parlours are targeting the people between the age group of 15-29. This identify that the main target market for these coffee houses is youth which is the major population of India therefore the market is huge and the leader can gain a lot out of it. According to the research, 72% of customer or target market is students or young professional who have enough disposable income to spend on. Another target area for these coffee houses is the young people working in call centers due to which a lot of these cafes are located near call centers and big companies offices (Choudhury 2007). Industry Analysis The popularly growing trend of café houses is encouraging the existing players to expand and new players to enter the market as the market being too lucrative for suppliers. The coffee provided in a unique environment contributes 7% to the total consumption industry and is expected to grow at half percent (Shenoy 2005). Retail cafés are now multi-crore industry and has a huge potential of growth locally and internationally (The Indian Institute Of Planning And Management 2006). Currently, there are few key players in the industry: Barista, Café Coffee Day, Costa Coffee, Coffee World, Coffee Bean & Tea Leaf (CBTL) and Qwicky. Among them the top two are Barista and Café coffee day who have captured the major share in the market. PESTLE ANALYSIS Political environment The country is moving towards a stable and conducive political environment as a reduction is seen in internal turmoil due to political influences and moreover, the political parties have shown positive response towards foreign countries and especially foreign investment (Parikh 2009). Macro economical environment The Indian market is a favourable and safe place currently to do business as the economy is less affected from the global economic downturn as compared to developed nations. The economy continues to grow at an average of 7% even after the slump the world is facing and the trend is expected to continue (Parikh 2009). Socio-Cultural Environment The focus towards improving the quality of life is increasing day by day in India leading to higher per capita GDP and improved living standards. This is a positive sign as people are willing to spend money towards luxurious items too considering the fact that coffee is still an exclusive beverage in India. Moreover, the market of cafés is expanding day by day as the consumption have shown an increment by 6% since 2003 and according to research conducted the coffee expenditure is likely to increase at a rate of 9.5%. Even though all these figures highlight a very lucrative market yet the main thing that needs to be taken into account is the fact that Indian consumers are extremely price sensitive (Tuturi 2009). Technological Environment The coffee industry is constantly working on improving the quality of coffee and this is seen from the increasing percentage of coffee exported from India. Therefore the industry is using better and better technology to achieve quality coffee which can be a positive sign for players in market (Tuturi 2009). Legal environment The legal environment is a questionable area as far as India is concerned, even though measures are being taken so as to improve law situation in the country. Yet, the main area of concern is enforcement of copyright laws and trademark protection, as efforts need to be made to improve this area. Moreover, the prevailing corruption in the country is another issue which cause problems for foreign entities as the institutions who are responsible to curtail it are either too weak or are themselves involve in it (Tuturi 2009). Environment The environment in India has lot of problems such as lack of water, electricity issues, etc. but these issues are not big enough for a foreign entity to not to enter the market as they can be easily managed once the company is adjusted with the culture and business methods. PORTERS FIVE FORCES MODEL A detail analysis of Indian coffee bar industry is discussed below in reference with the Porter’s five forces model. Threats of new entrants The threat of new players entering the market is very high as the market is being a growing interest worldwide which is prompting players to consider Indian market and for giants like Starbucks it is a place to capture (Singh 2009). Threat of substitutes Currently, there is no direct threat in terms of the environment provided by these cafés yet if substitutes need to be considered it would be restaurants and ice cream which tends to provide the environment and experience that these coffee houses provide. A major threat could be the case of tea parlours opening up which already will have an edge as India being a tea nation such cafes can easily gain market (Singh 2009). Bargaining power of Buyers The bargaining of buyer is moderate as the consumer base is huge because majority of population is youth therefore there is nothing to worry about the buyer power yet to succeed its necessary to opt for the strategies which suits most of the consumers. Besides all this to stay in market it’s important to know that Indian consumers are extremely price sensitive. Power of Suppliers There is high supplier power in this industry as there is a threat of supplier setting up their independent parlours just the case is with Barista. All those chains which are getting supplies locally are bound to these suppliers power rest have least effect of it. Competition Even though the big giants in the industry are not many yet the competition is intense. Each day the players are opening up new outlets as to stay in reach of customers and gaining more and more market share either through product differentiation or through different useful services. Key success factors for Coffee Houses To achieve success in a dominated tea drinkers nations there are certain factors which needs to be kept in mind. Firstly, the pricing which should be appropriate according to the positioning of coffee house but it’s important to remember that consumers are price sensitive. Secondly, the location is a critical success factor as it provides accessibility and can target larger base. Lastly, providing differentiated products according to cultural requirement and make use of technology would help in capturing loyal customers (Moss 2005). INDIA’S INTERNATIONAL RELATIONS The country is in good terms with lot of developed and developing nations, especially Mexico and South Africa. Moreover, India is also in good terms with the neighbouring countries such as Afghanistan, Maldives, Bangladesh, etc. Furthermore the country is part of many organizations so as to promote trade with in the country. Even though lots of countries are encouraging ties with India yet the most prominent is US. The trade relationship between US and India were problematic initially but are currently improving yet not so high and this could be seen from the value of trade figures which have doubled since 2001. The exports to India from US amounted $8 billion in 2005 where as India’s exports valued $18.8 billion. These figures showed an increase of 30% from 2004, this is supported by the fact that India’s largest trade partner is US. Moreover, US is also the largest investment partner of India as the figures highlight that out of the increase from $100 million in 1990 to $7.4 billion in 2005; about one third of it was made by US companies (Kronstadt 2006). There are certain areas of concern for new and existing operating in India. Firstly, the political environment though improving yet is full of corruption and lot of delays take place in work that need the help of government officers. These delays can actually harm the business and if the company is not in good terms with government official they can face lot of problems. Secondly, the lack of proper infrastructure can damage the business that is lack of electricity, poor road development, water shortage, etc. Moreover, the company needs to assure regular supplies of coffee as the existing players have already booked their suppliers or the suppliers themselves have entered the café’s business, therefore it’s important to identify the source of supply before entering. Another major threat to the company in India is the prevailing employee theft and the likelihood of competitors stealing away the trained personnel, which will affect their business (Parikh 2009). Apart from this the major problem is regarding copyright and trademark laws which hardly exists in the country therefore, chances of copying the recipes and providing it at lower cost can actually harm the consumer base of coffee houses knowing how price sensitive the target market is. BARISTA COFFEE The company owned by Lavazzza Italy’s largest coffee company, started its operation in Feb 2000 as a pioneer to coffee cafe culture in India. The company, apart from India has cafés in Sri Lanka, Oman and UAE (Barista 2010). Marketing Mix The company is selling variety of products and is constantly upgrading the menu so as to cater to consumers according to their requirement. The variety includes different kinds of coffee, pastries, types of tea, etc. As far as the pricing strategy is concern they have opted for skimmed pricing policy, where they started with higher prices and then move towards reducing it due to economies of scale being achieved (The Indian Institute Of Planning And Management 2006). The company has managed to locate its outlets in strategic locations, generally in high street family entertainment centers, inside malls, near cinemas and offices, etc. therefore, the focus is more towards upper middle class. Moreover the promotions used to promote the product are usually in form of entering into co-branding agreement, conducting events, sponsoring programs, etc. furthermore, they provide useful services within the café to attract consumers Barista having its presence worldwide is constantly working on expanding its market not only in India but also in other nations. The main aim is to improve the service level, constantly upgrading the store look and improving the quality of the product (Ghosh 2010). They believe in providing coffee lovers a unique experience. The organization have positioned itself as a premium priced coffee for upper class and is serving those who loves coffee and would like to spend some nice time. In other words the coffee house is not only focusing on selling coffee but also a quality and memorable experience with it which can help in making customer loyal to the brand. The idea is to capture the niche market and provide them a formal yet casual meeting place to socialize with a cup of coffee. The company is constantly expanding its outlets in other parts of India too but at the same time keeping in mind their positioning strategy of serving the higher class, therefore, locating in areas with higher status and disposable income. Part - B Evaluating the Teamwork within the Team One of the first few obstacles in to which the team ran and of which I was a part was the determination of the analysis models to use. The functioning of the team was seamless and experienced little to no obstructions during execution of processes. However, there were conflicts between the perceptions that different team members had about the analysis models that should be followed. While some were in strong support of certain analysis models, others chose to highlight pitfalls and limitations of the standardized models and opinionated that a more freestyle approach should be followed in the research. Therefore, it was not exactly the agenda of the work that experienced obstructions in its establishments but the fact that each team member brought a different perspective to the table. However, it was soon realized that there was a need to revert back to the initial instructions of the report in order to settle upon a criteria that could be trusted to serve as a threshold with regard to which the analysis approach could be selected and justified for the same. If such a project was to take place in the future, I would attempt to save valuable time by establishing standards and criteria for models and approaches to be used by expanding upon the given project instructions in order to allow each participant to have a clear picture of what is acceptable at the discussion table for the project. Personal Development of Cultural Intelligence and International Adaptability This project served to bring a side of Cultural Intelligence and International Adaptability to me that I had previously underestimated. The learning I had acquired from reading about it in books and practicing case studies experienced an entirely new level after the project. I was able to see and be a part of the need to exercise international adaptability and I could highlight areas where it became necessary to adapt in order to allow the project to proceed in its research. For instance, I observed that there was a need to begin each discussion with a specific objective on the table. This allowed each team member to understand what was required from the discussion and what the criteria was for the idea that the discussion was to conclude upon. In instances where objectives were not established beforehand, the discussions would usually continue endlessly without any indication of coming to a productive conclusion since each member would continue to bring justification for his/her proposition. Competencies Needed For Contribution as a Member of an International Team From this particular experience, I learned that there are a number of competencies that should be present in a team member in order for the international team to function adequately. The member has to have patience and should be open to new ideas. In this regard, the presence of respect for other cultures can play a highly influential role. Furthermore, I observed that a member should have the ability to adapt his/her opinions and ideas by making use of communication and listening skills. Intercultural awareness along with relationship development skills can serve as a highly feasible competency if present in the candidate. LIST OF REFERENCES Ambarish, N, Operation Management, viewed March 2010, . Barista 2010, , viewed 14 April 2010, . Choudhury, SI 2007, Coffee retail: More than just a sip, viewed 14 April 2010, . Jain, A, Patel, R & Jodhav, B, Barista Brew it All, viewed 15 April 2010, . Kronstadt, KA 2006, India-U.S. Relations, viewed 14 April 2010, . Larkin, S 2008, Coffee Consumption around the World, viewed 14 April 2010, . Oracle Retail 2009, Lifecycle Space Planning: Aligning Your Store-Specific Space Execution with Overall Corporate Growth, viewed March 2010, . Parikh, B 2009, Starbucks in India: The Time is Just Right, viewed 14 April 2010, . Shenoy, A 2005, Branded coffee houses a rage in India, viewed 14 April 2010, . Singh, P 2009, Sustainable Advantage of Coffee Chains, viewed 14 April 2010, . Sreenivasan, PK 1999, Changing consumer trends in India., viewed 14 April 2010, . Starbucks 2010, , viewed 14 April 2010, . Surana, P, India Study Channel, viewed 14 April 2010, . The Indian Institute Of Planning And Management 2006, Barista Vs Café Coffee Day – A Comparative Study, viewed 14 April 2010, . The Indian Institute Of Planning And Management 2006, BARISTA VS CAFÉ COFFEE DAY – A COMPARATIVE STUDY, viewed 14 April 2010, . tuturi, K 2009, Starbucks in India and Czech Republic, viewed 14 April 2010, . Read More