Tuesday, January 31, 2012

Starbucks Finds a New Market

Recently, this article explained that with an ever expanding global consumer, Starbucks is ready to take on India. There has been a drastic increase in the amount of coffee shops in India in recent years and Starbucks, noticing the trend, is happy to take on another market. Starbucks currently resides in 57 countries with 17,000 stores. Basically, Starbucks is taking over the world, one country at a time. The interesting concept here is that Starbucks is actually taking on an equal partnership with Tata Beverages. This company initally invested 80 million dollars to lure Starbucks into its grasp, giving incentive a global carnivore, like Starbucks, would not refuse. The real question is why would Starbucks be successful in India?
According to the article, "Tata Starbucks Ltd., as their venture is known, hopes to capitalize on the rising aspirations — and fattening wallets — of many Indians, who are eager to partake of the global latte life." This is rather interesting considering the Indian market has always consisted of tea drinkers. However, I posed the initial question "How can Indian consumers afford the ridiculous prices of Starbucks coffee? I soon found the answer to my question. Indian civilization does not give its population any place to socialize, regardless of age. Coffee Shops, renowned for their social atmosphere, provide the perfect setting for people to 'hang out'. India has changed from a poor, uncivilized country into a modern metropolis of civilized people. India is finally on the same page as the rest of Asia, a task many thought to never see.
What economic implications does this new introduction provide? Well, obviously Starbucks is going to profit even more because it will take the urban areas in India by storm, while also giving tourists a familiar place to 'call home.' In my opinion, Starbucks has once again used their powerhouse status to change another country. Economically, Starbucks is providing an outlet for the consumer, while also giving Indian poeple a chance to manifest their long-awaited civility. Starbucks epitomizes what capitalism can create, both positively and negatively. On the bright side, Starbucks will continue to rule the coffee market, monopolizing the industry. On the dark side, Starbucks is gaining too much power in too many different countries, essentially limiting any government action to limit their influence. Once a company goes global, it is expanding its own success at the expense of everyone else in the market. However, Starbucks continues to increase global demand, a feat most companies would kill for. Who can blame them? Starbucks seems to have all the cards and is playing them without hesitation.


Smith said...

Took the words and question right out of my mouth; do you think Starbucks is expanding too rapidly?

D.McKee said...

I personally believe that Starbucks is not expanding too rapidly yet. If you look at their profit margins, there really is a lot of room for fiscal risk. I understand that no company wants to lose money, but how could they? Starbucks charges an average of four dollars for a cup of coffee. In addition, they are such a large company now (17,000 stores) that they can force their growers to rock bottom prices. The really interesting thing is that they have so many investors and so much consumer demand that they do not have any chance of dying out any time soon. However, I was reading an article the other day showing how popularity fades. Starbucks has really only become internationally demanded in the past decade. We cannot predict the future. Maybe coffee shops will lose their popularity, forcing Starbucks to ‘trim the fat’. I really want to see if Starbucks can find a place in India. If they can find a place in India, I believe that they can find a place anywhere. Only time will tell if Starbucks can profit from their introduction into India. As of right now, Starbucks is just taking advantage of their ‘pro status’, which in my opinion, is a very intelligent business decision.