While Starbucks is by no means a new company or a new concept, their entrance into Asian markets is a more recent development. They have seen exceptional growth in China over the years; one of 11 Asian markets Starbucks currently operates in. The Chinese people have become familiar with the Starbucks brand and embraced the company as they have grown.
Starbucks now has its sights set on India, as they plan to open over 50 cafes by the end of the year. The Indian market provides its own unique set of challenges and opportunities.
- Compatibility: The primary challenge for Starbucks in India is that the country has not historically been one that drinks coffee, with tea being the dominant hot beverage instead. Starbucks will have to identify a product mix that balances catering to their customers (tea and Indian cuisine) with doing what they do best as a company (coffee first, tea second). The more they focus on coffee initially, the more they risk alienating their customers. On the other hand, if they stray too far from their traditional coffee-centered product mix, they risk not being able to utilize their comparative advantage in that field.
The good news for Starbucks is that if they can overcome the potential compatibility issues, the rest of the market entrance process should only play to their strengths.
- Relative Advantage: At the end of the day, Starbucks is one of the most effective coffee retailers in the world, which is why they are the biggest (and vice versa), and why they should be successful in any market that offers even moderate demand. They thrive off of their brand recognition that results from their scale, as well as delivering quality products and in-store experience.
- Complexity/Trialability: Drinking coffee is not a complicated thing, nor is it something I would expect the Indian people, or any people for that matter, to be particularly against trying once. This should benefit Starbucks in terms of developing a customer base.
- Observability: Another strong suit for Starbucks, as they have become one of the most recognizable brands in the world with "stores on every street corner" as the saying goes. While they certainly don't have that recognition existing in India today, it shouldn't be difficult for their attractive stores popping up to generate intrigue and start ingraining the brand into peoples minds.
Overall I believe that Starbucks in India will be a mix between a long-haul success and a smash hit. The degree of behavioral change for the people is moderate, as it does involve them hopefully embracing the use of Starbucks cafes as a "third place" to spend time, the way so many people in existing markets around the world do. I believe that adjustment is one that will take some getting used to, but is also not a necessity for Starbucks to survive. The degree of product change is a little higher, although more moderate now with the Indianized menu. I believe that over time Starbucks will try to revise the menu to be slightly more conventional as a Starbucks menu and less geared towards traditional Indian fare.
Do you think Starbucks in India will work out or is it too much of a stretch? Long-haul success, smash hit, easy sell, or sure failure? How do you think it stacks up in terms of the 5 criteria?
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