Unveiling The Latent Potential

Q1. Opportunities

There exists a vast untapped market of coffee in South Asia. The coffee chain market in India is currently less than 30% of the total coffee market, and estimations are made that it would grow by Compound Annual Growth Rate of 20% (Mahobia and Jain, 2015). In the emerging coffee markets in South Asia like Afghanistan, Palestine, Sri Lanka, Bangladesh and Bhutan were some decades ago there was no culture of consuming coffee, the popularity of coffee is observed to be growing with the creation of market niches. For businesses looking in place to capitalize on this specific trend, seeking business dissertation help could provide the required insights into market entry strategies and consumer behavior analysis.

Second, South Asia`s low per capita consumption of coffee also provides an opportunity for Starbucks. Per capita consumption implies the average use of a single person belonging to a particular nation that is derived from the total use that is known and the total population. India, one of the countries in South Asia has a per capita coffee consumption of only 100 grams per year and is ranked at number 134 in the world (Lakshminarayanan, Maggio and Best, 2017). It is worth noting that the 100grams are a 40% increment over the last decade. The low per capita consumption indicates there is still space for growth.

Additionally, India has a huge youth population. It is observed that the youth population dominates the customers of Starbucks. That a demographic would help in the sale of Starbucks coffee in India. Across India, the youth population who also make up most of the middle class has also been seen to grow (Paramasivan and Kumaresan, 2016). These are factors that will ensure that Starbucks has a target group that is large enough and that would be both willing and able to pay the premium price for the Western brand whose quality is rather high. Because of its brand image and positioning, Starbucks has some excellent potential for skimming the market in India.

Threats

The low per capita incomes across most of the countries in South Asia presents a risk for Starbucks. Income per capita is the measure of the amount of money each citizen in a country earned in a year on average (Cherodian and Thirwall, 2015). The figure is used to assess an area of wealth or lack of wealth. The high prices of coffees in Starbucks could lead to lowered sales of their few items as there are higher prices pegged to them in comparison to the costs attached by rival coffee shops. That would restrict the South Asia market to the niche segment of high-income holders. Times of India (2018) reported that during the last fiscal year ended March 2018, the per capita income of India had grown at a slower pace of 8.6 per cent to Rs 1, 12,835. That is an indication that India`s per capita income is still meagre.

The South Asia market also happens to be easily penetrable which makes it very easy to penetrate the market. That would increase the competition. Easy penetration will eventually lead to saturation of the market according to Lavasani et al., (2016), a situation whereby the volume of coffee in the South Asian markets will be maximised. Saturation definitely would make business hard as it would lead to lowered demand for Starbucks. That would force Starbucks to invest heavily on new product improvements, taking existing market shares from its competitors to increase consumer demand in general.

There are also numerous food and restaurant joints exploring the coffee business in South Asia. Restaurants like Burger Kings, McDonald's, Madover Donuts and Dunkin Donuts have been seen to venture into production of tea and coffee items which increases the competition for Starbucks. There are also numerous local coffee and tea shops across South Asia that are quite popular. These local coffee shops are observed to attach rates that are affordable to their products which are crowd pullers, and Starbucks finds it rough competing with them (Berger and Blake, 2016).

Q2. Supply chain management

Starbucks supply chain transformation in Europe included reorganisation and simplification of the supply chain with functional roles that were defined clearly, reducing on costs while at the same time improving on service levels and creating a base for sustenance and enhancement of supply chain capabilities into the future (Ivanov, Tsipoulanidis and Schonbeger, 2017). The main difference between Starbucks and other coffee shops is that Starbucks uses several channels for distribution which sees them also sell ground coffee and beans to supermarkets, ice-cream makers, airlines and department stores.

Newmarket entry points tend to be challenging for any organisation and as such Starbucks could also potentially experience such challenges. When expanding to markets outside Europe, the establishment of healthy and well-tuned supply chain management systems would facilitate entry into the new markets as a result of enhanced sales, product volume, cash flow and scale forecasting capabilities (Lee and Vachon, 2016). On sales, it will be necessary to excellent tune order quantities, and types and that would require carrying only what is needed to fulfil orders regularly, do away with the physical inventories carrying costs on the production floor, warehouses and even retail shelves. If smaller product volumes are forecast, Starbucks could consider adoption of higher frequencies and smaller deliveries that would put them in a good position to adjust the quantities of their products and further keep pace with dynamic product requirements and changing demand. Forecasting scale would also be necessary because the high volume and large volumes of orders would imply lowered prices with better conditions and terms. Finally, most of the prerequisite capital required for delivering, financing and transporting inventory assets to sellers are usually offloaded through careful planning of delivery terms and policies (Ayers and Odegaard, 2017).

Q3. Divergence, Convergence, Crossvergence

Ralston et al. (1997) advanced the divergence theory and posited that one system always has to drop its value to adopt the other systems values. In the event of Starbucks, it will be necessary that they adapt to the local needs and drop its global knowledge organisations that are culturally divergent are seen to maintain the heterogeneous local culture which would see them come up with fresh ideas and thoughts that could not possibly have been obtained from the conventional multinational company culture. On the other hand, the theory of convergence requires the combing into one of the organisations existing value systems. Lack of convergence tends to make sharing of information between the parent company and its subsidiaries. Whenever a subsidiary and its parent company share the same culture, there would be goodwill between them, and that would help the Starbuck`s subsidiary in India to embark on entrepreneurial activities that would see their products and business processes evolve in contexts that are local. Crossvergence, on the other hand, would see Starbucks develop new cultures, values and beliefs that are unique and different from the values of their parent company.

Q4. Tax issues

India`s system of taxation is quite complex, and Starbucks needs to be verse with all its tax obligations to avoid attracting fines. To achieve that, they would need to undertake tax planning and structuring that is proper. Whenever Starbucks is making payments to Indian vendors, it will have to withhold taxes at the source, and in this case, it will be required that they register with the necessary authorities in charge of income taxes and subsequently remit the taxes they withheld. Also, in cases where Starbucks will be receiving payments from India taxed at source, it will be necessary that they obtain account numbers that are permanent and further register with the income tax authorities. In the event Starbucks fails to adhere to this, they may be liable to additional withholding tax rates. Starbucks will also have to file its annual income tax returns each year. Foreign companies are also liable to pay corporate income tax in line with the Income Tax Act of India, 1961 (Muller and Kolk, 2015). It is worth noting that across the globe, India is among the countries that charge the higher corporate tax even though the effective taxes liable tend to differ across sectors and industries. A flat rate of 40% in addition to education cess, surcharge and secondary and higher education cess usually is applicable for non-resident companies that are involved in activities that generate incomes for them. Foreign companies surcharge stands at 2% in the event the companies income exceeds Rs 10 million and at 5% if the income of the company is more than Rs 100 million. The secondary and higher education cess is pegged at 1% while the education cess stands at 2%. Starbucks will also have to pay taxes on the dividends it will receive from India. Because Starbuck`s investment in India is in the form of a two-tier structure where it works with TATA, that will attract a double burden of taxes. Today, all foreign companies operating in India are customarily taxed on their inter-corporate dividends at a 25% fixed rate which compares quite unfavourably with other countries` tax provisions.

Q5. Market challenges

There presently exists a lot of competition from other coffee shops like Café Coffee Day, Indian Coffee House and Barista. There is already a lot of competition from these coffee shops in South Asia that are old there and also have a strong presence in the market. For example, Café Coffee Day who were the pioneers of specialty coffee across India have quite a wide range of Café forats whose concepts are in many ways identical to the ideas Starbucks adopts. The company is also involved in heavy marketing of its products that have seen it build relations with the television and movie series industry in India and also sells merchandise. The COLD Frappe which is considered to be the shop's best-seller is in many ways just the same as Frappuccino made by Starbucks (Gonsalves and Dias, 2015).

Market benefits

The brand visibility of Starbucks across the globe will be a plus for them. In terms of the number of stores, Starbucks is considered to be the largest coffee chain across the world having close to 23,000 stores (Tu, Wang and Chan, 2012). The Starbucks brand is also favourite amongst lovers of coffee in the world, and these factors will help Starbucks easily penetrate and gain popularity across India`s local markets.

Competing in a global context

Global companies involve themselves in marketing strategies that are innovative so that they can be able to gain a strong foothold in the marketplace globally and also meet the requirements of consumers abroad. Businesses that aspire to pursue global marketing strategies also need to globalise their approach for pricing and distribution, communication setups, segmentation and positioning if at all they want to compete in the worldwide context (Adeloka and Sergi, 2016). Global companies are also seen to utilise the resources of those societies in which they operate in for purposes of gaining surplus and productivity. That puts such organisations in a state of interdependency with the communities.

To stay competitive in the global market, organisations must embark on innovating to differentiate. An organisation can only stay ahead of the game if it succeeds in offering its customers products and services that are different. People are observed to be more willing to pay higher prices for products and services; they feel that what they receive is worth the money they spend. It is also essential for organisations to know their customers well and be verse with what they want (Peng, 2016). Once an organisation finds and understands a void in the wants and needs of people that aren`t being met, they are in a better position to exploit such gaps. Finally, it is also necessary for a business to always continuously reinvent itself. While starting a business is good, the ultimate goal is ensuring it lasts for as long as possible and in good health.

Key Business functions in an organisation

Management strategies are normally aimed at ensuring apt performance of key business functions effectively and efficiently so as to support the overall intentions of the business. Key business functions are always at the core of the business and that is regardless of the location, size, and length of existence and purpose of a business. While in small businesses the key business functions will be carried out by just a few of the employees in large businesses, entire departments and divisions for example the marketing department or finance department are normally staffed by large numbers of people who perform the same specific function. Operations, human resources, finance and marketing are the key business functions in any business and managers are normally tasked with making decisions on how best they can coordinate and administer these. The specialist managers in finance will be tasked with budget allocation and keeping of financial records. In human resources, the managers will be concerned with recruitment, training, and drafting of employment contracts and subsequent separation of such employees who are required for successful running of the operations of the business. In operations, the focus of managers is to come up with strategies that would see the improvement of the processes of production so as to create a business layout that is ideal. In marketing managers would be tasked with determining the most appropriate markets for their business products and deciding on product features, pricing, channels of distribution and promotion.

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