Module 09: Decision-Making for Entry Strategies and Organizational Structures

Institutional Affiliation’s

Course

Date
 Introduction

Starbucks entry into India was a success due to various factors such as localization of its

products, integration of Indian culture in its business, forming a joint venture with Tata Company

and supporting farmers in India in producing quality coffee beans among other things (Luthans

& Doh, 2018). In this context, this paper is going to analyze factors that inspired Starbucks entry

into the Indian, some of the early concerns and obstacles. More so the paper will evaluate the

entry strategy used by Starbucks in its venture into India, the challenges, benefits,, opportunities

or joint venture partnership and describe the best entry strategy for expanding the market

internationally.

Factors that inspired Starbucks to venture in to India and he company’s early

India being a very populated country offered Starbucks an opportunity and potential to

sell coffee to a large number of consumers. Nevertheless, India had experienced a populist

political swings since it achieved independence from Britain and this was a major concern to

Starbucks as it was discouraging entry into the market (Luthans & Doh, 2018). However,

recently there were encouraging signs as some foreign food retailers were now entering the

market. Eating at the restaurants was not so popular among the Indians and Starbucks feared that

it would not attract many customers. However, with rise in urbanization, higher salaries and

small families was expanding the menu selections. The increased popularity of cooking TV

episodes led to a significant increase in the number of local and multinational food companies

for both fine dining and fast food. Starbucks saw this as an opportunity and great promise in the

market.
 Starbucks would therefore express some interests in the Indian market in 2007. But due

to some home challenges in the U.S, it sets its foot in India in 2011. It made some arrangements

with Tata Global Beverages to purchase some roast premium coffee beans at a facility in

Southern India (Luthans & Doh, 2018). This would later be expanded to an $80 million retail

joint venture and Tata ended up being valuable partner as Starbucks was introduced to many

consumers. Starbucks also realized the need for it to expand worldwide so that it would be able

to create large target market. It had maintained some growth and revenue during hard economic

times in their main market and diversifying into various markets would enable the company to

smoothen its revenue and increase profitability.

Starbucks’ approach to entering India and how Starbucks was influenced by

Starbucks preferred a strategy of premium prices using store layout and menu that were

modified for the local states. This way, the company was able to penetrate into the Indian

market. Nevertheless, initially foreign and local specialty coffee retailers were putting up a stiff

competition. Starbucks also formed a partnership with Tata which connected the company with

its consumers through it luxury Taj hotels (Luthans & Doh, 2018). Tata’s experience and

expertise in local tastes as well as in market conditions made the company learn much about the

business in India. More so, Tata was able to help Starbucks customize its menus by adding some

ice cream and pastries which helped modify the store layout to ensure that locally sourced

furniture and interior decorations were included. This helped solve any logistical challenges that

hindered the sale of food. Employees of Starbucks were also given some practical raining and

refresher workshops. An employee referral program was also initiated to train and ensure that
employee needs were being met. Such strategies helped the company thrive within a short period

in the new market (Berger & Blake, 2016).

Starbucks also made sure that it incorporated the Indian culture. It made the design of the

stores very Indian. The main reason behind this was that it would make Indians very comfortable

and have some community feeling and belonging inside the Starbucks outlets. Mumbai stores

had great wooded tables and wooden carvings that honored the Indians cultures. More so, the

Pune stores had some copper artifacts that honored the copper culture of the Pune (Berger &

Blake, 2016). With effective localization, Starbucks was able to adapt to the tastes of various

cultures and eventually was able to manage the consumers in other locations to buy and have

coffee. This was very impressive in India where tea was most preferred drink to coffee.

Starbucks prevailed as it did not make a cultural misstate of imposing Western ideologies,

values, cultural practices and norms but rather ensured that its products were well aligned with

the Indian cultures which produced a positive reception.

Starbucks entry into India through a joint venture, benefits Starbucks and the Tata
Group both gained by partnering with one another, synergies were present and the
conflicts occurred and how were they resolved

Starbucks utilized the synergies of forming partnership. Specifically, Starbucks entered

into a partnership with Tata to ensure that it benefited from Tata’s vast market and expertise in

the Indian Market. The Partnership with Tata was very beneficial and consistent with the ethical

initiatives of Starbucks with regards to outsourcing (Jiang et al., 2018). The joint partnership

helped establish Cape Practices program for instance that helped local farms in improving the

quality of coffee beans and receive better prices for their coffee beans. The partnership also

offered seasonal loans to the farmers and reduced the impact of the environment on farming.
Such activities offered through joint venture made Starbucks look very Indian and local

attracting it to many consumers.

Starbucks partnership with Tata was also important in the success of Starbucks as it

provided a medium through which the company could reach the market easily. Tata for

introduced Starbucks to its Taj restaurants which provided the market for coffee.

Initially, Starbucks had proposed a bigger shareholding in the joint venture with Tata.

Therefore the company would not be in agreement with Tata which created some

misunderstanding and conflicts. The initial proposal according to the officials didn’t not comply

with the rules of investment in India that limited a foreign company to own more than 51% in a

single brand retail. To solve this problem an equal joint venture partnership was proposed

(Rajasekaran, 2015). Today Tata and Starbucks own 50/50 share and therefore the conflict

became resolved through equal ownership of the venture.

Benefits and challenges of expansion into foreign countries through joint-venture

partnerships

Through the Joint partnership such as the one with Tata, Starbucks would have a number

of opportunities as well as benefits. A joint partnership is a better way of experiencing

internationally as see in the case of Starbucks. It enables the growth without having to borrow

funds or look for outside investors. It leads to access to new markets and distributions networks.

Starbucks was able to get many distribution networks and markets through Tata partnerships. It

could sell through Tata Global Beverages and was even able to open Starbucks Coffee shops

across the country through this partnership (Al-Tit et al., 2019). Joint partnerships also help in
sharing the risks or the liabilities with the partners. Tata partnership with Starbucks would shield

Starbucks from risks of failure and cultural mistakes that would lead to the fall of business and

therefore are critical in its expansion and growth. More so, joint venture leads to increased

capacity and access to greater resources. It was through this partnership that Starbucks was able

to link with farmers for between quality coffee beans.

Despite these benefits and opportunities, joint partnerships has several challenges and

disadvantages. Partnering with another business may be complex endeavor. The contractual

limitations of the venture may pose a risk to a partners core business operations. The various

management styles and cultures would also pose a barrier to the success of the business and to

cooperation (Al-Tit et al., 2019). Additionally, if communication breakdown between the

partners happen, which is more likely in joint venture partnership, the foreign company may end

up being affected most and may eventually not be able to penetrate the market. Joint venture

part ships also may lead to unequal distribution of resources and unclear objectives in the long

run (Ahsan & van Wyk, 2018).

For the success of any business a good joint venture partnership would be the most

appropriate entry strategy. However, the success of any joint venture would depend on a

carefully planned relationship of a joint venture and a clear agreement. More so for international

expansion, it would be imperative to study the culture of the people and integrate them in the

business model as it was done by Starbucks. Culture is critical for any company that plans to

make an international market entry (Rajasekaran, 2015). Culture shapes the corporate identity

and therefore would help in paving the way for a lasting legacy and success. Starbucks did not

ignore the Indian culture and to help in adapting effectively and fast, it formed a joint venture

with Tata which helped it in integrating some culture aspects I its business including stores
layout, menu and working culture. A joint venture partnership would therefore serve as the best

entry strategy that helps company learn quickly the norms, culture, working ethics and values of

a foreign population.

Conclusion

It is apparent that Starbucks success in India was due to various factors discussed in this paper.

One of the factors being the entry strategy that the company used to get into India. The joint

venture partnership played a big role in influencing the success of the company as it helped it in

adapting well with the culture of the new market. Starbucks partnership with Tata opened new

markets, enhanced its localization and provided both existing customers of Tata as well as its

expertise and experience in the market. The other factor was integration of the Indian cultures in

its stores and in its products which made Indians accommodative.

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