Starbucks chooses strategic alliance in bid to enter the Indian market

A significant example here of strategic choice when it comes to evaluating the options for growth. Starbucks has opted to enter into a strategic alliance with Tata Group as it attempts to establish a position in the Indian market.

On 31 January 2012, Starbucks announced its objective to open 50 outlets in India by the end of 2012, through a 50-50 joint venture with Tata Global Beverages. The two partners will invest a total of $80million initially.

Perhaps somewhat unusually, the stores will be cobranded “Starbucks Coffee: A Tata Alliance.”!

According to the Huff Post:

Long known as a nation of tea drinkers – despite a rich tradition of coffee in the south – India has embraced coffee house culture with a vengeance.

Last year, India had 1,600 cafes, up from just 700 in 2007, according to Technopak Advisors, which expects India’s $170 million cafe market to grow 30 percent a year, adding up to 2,700 more outlets over the next five years.

“We’re going to move as fast as possible in opening as many stores as we can so long as we are successful and so long as we are embraced by the Indian consumers,” said John Culver, president of Starbucks China and Asia Pacific.

The need to address and respect potential cultural issues seems to have been a key factor in deciding to use the joint venture route rather than set up a separate Starbucks subsidiary in India:

“We never considered 51 percent,” Culver said. “When we looked at the opportunity to enter India, understanding the complexities of the market and the uniqueness that is India, we wanted to find a local business partner.”

Here are some video news clips which provide more background and explanation for the move by Starbucks.