CaseQuestions: CCD-Starbucks Group 4
As a market leader, what are the most important competitive advantages of CCD? What are the biggest competitive challenges CCD might have to face with the arrival of Starbucks in India?
CCD Competitive Advantages : 1. First mover advantage: CCD has the first mover advantage as it was the first to introduce the concept of cafes in India and had no competitors and hence they could sell at a premium price. 2. Advantage in price: CCD did their own sourcing with 3000 acres of plantations; they can source coffee at a much lower rate than the market provided competitive advantage in price. 3. Vertical Integration: They own the chain from top to bottom, which is vertically integrated whereas the competitors often outsource their activities. The quality is excellent and has a variety of in house mixes and recipes, which have helped them, create a loyal customer base. 4. Customer relationships:Its target segment was of youth from age group 15 to 30, of which 60% were its regular customer, this made possible for their staff to make an emotional connect with them to increase brand loyalty. Not franchising their outlets helped them save time in setting up new outlets and also ensure quality Competitive Challenges:
As CCD opened outlets of its own, its setup cost had been high.Renting 1. Costs: As cost had been increasing and hence opening new stores became costly. It became difficult for CCD to keep reasonable footfall round the clock 2. Global presence and competition: A major competitive challenge that CCD has in relation to Starbuck in particular is its lack of global presence and therefore the loss of excitement that Indian culture find in the new experiences. With opening of international market, competition became more intense 3. Change in consumer preferences:With increase in exposure towards luxury, the expectation of costumers to CCD has increased. Café business just like fashion business, menus needs to be revamped more often, as much as once a quarter, unlike once in 2 to 3 years previously. Starbucks have a premium image
and its world no 1, so all the upper segment customer of CCD may get carried away by Starbucks 4. Expansion plans:Lastly the store is concentrated in only two major urban areas in India, with various other metropolitan cities untouched
What are the advantages Starbucks as one of the best global player in coffee retailing? What are the challenges for Starbucks to compete with the dominant player like CCD in India? Is CCD in the direct competition of Starbucks or they are catering to the different segments and which will grow the overall coffee market in India?
We can analyze it based on the STP of both the companies: Segmentation: CCD- Youngsters looking to hang out with friends Starbucks- People looking for coffee with experience Targeting: CCD- College Students and Working professionals Starbucks- Upper middle class Positioning: CCD- A place between office & home Starbucks- Great Coffee; Great Service Initially, Barista was CCD’ s closest competitor. Starbucks, being a premium brand (50% more expensive than CCD) is slightly overpriced for the Indian consumers and thus is not a direct competitor.
CCD will grow the overall coffee market in India, as it is planning to improve both the breadth and the quality of its food and beverage offerings; upgrade interiors, and improve the service levels through training. They are on the right track of targeting the college students and working professionals, nearly 40% of the market. Also another advantage is the fact that the average ticket size is smaller at Rs. 175 and since Indians are a little price sensitive, it works to the company’s advantage.
What leanings from the China can be implemented by Starbucks in India? Or Indian market is very different now as Starbucks is entering after 12 years? Is joint venture with Tata’s a right decision by Starbucks?
Learnings from China: 1. Partnering with the local firms – Starbucks in China partnered with 3 different firms to obtain local expertise
2. Tailor its offerings according to the local taste – Starbucks China introduced beverages using popular local ingredients 3. Education about Coffee – Starbucks China educated the local population about coffee and how to adapt to it in their daily life 4. Service Quality – Starbucks distinguished itself from the rest of the competitors by providing exceptional service standards. 5. In-store experience – It focused on providing the in-store experience to its customers by providing them an upscale ambience. It soon became a de facto meeting place for executives as well as for the gathering of friends 6. Brand Positioning – Starbucks positioned itself as a premium brand to offset the higher cost of dine-in services 7. Talent Strategy – It influenced the parents of their employees by making them hear testimonials 8. Initial focus on high visibility areas – Initially Starbucks opened its stores in international hubs like Beijing, Shanghai and Guangzhou
Partnering with the Tata Group is the right strategy for Starbucks as 1. They are a trusted brand in the country and partnering with the right brand is essential for its success 2. They bring with themselves their supply chain expertise 3. Tata Group already owned the Tata Global beverages which is the second largest branded tea company in the world 4. They had their presence in the catering space which made it easier for them to create an offering for the Indian customers
How should CCD respond to Starbucks in India? What should be their important goals? Should CCD expand aggressively with premium offerings to compete with Starbucks?
CCD should adopt a flank position defensive strategy, and focus on consolidating its share of the young middle and upper class segment through its cafes, and a mature office goer/experience seeker crowd through its lounges and squares. The major goals CCD should focus on are:
Customized in-store experience
Enhanced training and retention measures of frontline personnel
Increase awareness and recall of CCD squares and lounges
Retention of price sensitive customers looking to have a good time
From Exhibit 7, it is seen that the perceived value from a CCD Lounge/square is more with respect to Coffee Xpress or shops. To leverage this, CCD should expand to acquire SEC A1/A2 and B1 customers, who would otherwise be enamored by the affluent experience of Starbucks.
How should CCD handle the breadth of the offerings? What should be the strategy for non-coffee product categories?
