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SB and Tata
SB and Tata
SB and Tata
HISTORY OF STARBUCKS
The first Starbucks location outside North America opened in Tokyo, Japan,
in 1996. Starbucks entered the U.K. market in 1998 with the $83 million
acquisition of the then 60-outlet, UK-based Seattle Coffee Company, rebranding all the stores as Starbucks. In September 2002 Starbucks opened its
first store in Latin America, in Mexico City. In August 2003 Starbucks opened
its first store in South America in Lima, Peru. In November 2010, Starbucks
opened the first Central American store in El Salvador's capital, San Salvador.
On March 17, 2011 Starbucks opened its third restaurant in Central America
and its first in Guatemala City, Guatemala.
LICENSING:
Licensing involves a licensee and licensor tied together by a certain
agreement which stands to benefit both sides. The licensor will sell its
know-how right to the licensee, usually for a period of time. The knowhow refers to intangible properties such as patents, inventions, formulas,
processes, designs, copyrights and trademarks. The licensee needs to pay
the royalty fee in order to have the agreement with the licensor.
FRANCHISING:
Franchising is a similar entry mode to licensing. By the payment of a
royalty fee, the franchisee will obtain the major business know-how via
an agreement with the franchiser. The know-how also includes such
intangible properties as patents, trademarks and so on. The difference
from the licensing mode of entry is that the franchisee must obey certain
rules given by franchiser. Franchising is most commonly used in service
industries, such as McDonalds to cite an example. However the licensing
entry mode is frequently used by manufacturing firms.
JOINT VENTURES:
A joint venture is a typical entry mode used world-wide. Literally, it
means two or more individual and independent firms join together in an
alliance in order to achieve better position in the market. Often the joint
ventures are a 50/50 venture. It is a method that both sides hold
relatively the same percentage of shares in the venture.
The joint ventures operation is separate from both companies, and often
the same role is shared by both managerial teams. It could be possible
that one firm invests more in order to gain the larger percentage of
shares and hold tighter control of the joint ventures operations. Likewise,
a lower investment percentage will usually lead to less control.
From a quick analysis, it can be seen that from all of these above
mentioned entry mode options, Joint Venture seems to be a feasible and
constructive option, as such; Starbucks Coffee should opt for this method
for entering India. In fact, Starbucks Coffee has tied up with Tata Coffee
to enter India on a Joint Venture Model.
Lets move on with a quick history of Tata Coffee.
Tata Coffee is Asias largest coffee plantation company and the 3rd largest
exporter of instant coffee in the country. The Company produces more
than 10,000 MT of shade grown Arabica and Robusta coffees at its 19
estates in South India and its two Instant Coffee manufacturing facilities
have a combined installed capacity of 6000 metric tonnes. It exports
green coffee to countries in Europe, Asia, Middle East and North America.
In 2006, Tata Coffee acquired Eight 'O Clock Coffee Co., a segment leader
in the US coffee retail market for US$ 220 million.
Tata Coffees other areas of business include tea, pepper, timber and
hospitality in the form of Plantation Trails which recreates the
plantation lifestyle of yesteryears. Tata Coffees farms are triple certified:
Utz, Rainforest Alliance and SA8000 reinforcing its commitment to the
people and the environment.
SO, IN A NUTSHELL
Joint Venture works quite well because,
Provide companies with the opportunity to gain new capacity and
expertise
Allow companies to enter related businesses or new geographic
markets or gain new technological knowledge access to greater
resources, including specialised staff and technology sharing of risks
with a venture partner
Joint ventures can be flexible. For example, a joint venture can have
a limited life span and only cover part of what you do, thus limiting
both your commitment and the business' exposure.
In the era of divestiture and consolidation, JVs offer a creative way
for companies to exit from non-core businesses.
Companies can gradually separate a business from the rest of the
organisation, and eventually, sell it to the other parent company.
Roughly 80% of all joint ventures end in a sale by one partner to the
other.
In the areas of sourcing and roasting, Tata Coffee and Starbucks will
explore procuring green coffee from Tata Coffee estates and
roasting in Tata Coffees existing roasting facilities. At a later phase,
both Tata Coffee and Starbucks will consider jointly investing in
additional facilities and roasting green coffee for export to other
markets.
Tata Coffee has rich expertise in the bean-to-cup value chain, with
an unyielding focus on quality. It has won global accolades for its
premium coffees. Over the years, Tata Coffee has further
strengthened its Arabica coffee production base by producing
premium specialty coffee. The company has an internationally
certified (ISO: 22000) Roast & Ground unit at Kushalnagar in the
Coorg district of India, and is a dedicated supplier to cafes across the
country and specialty roasters across the globe. Tata Coffee has
rapidly transformed itself by adding to its portfolio through
acquisitions, becoming a more vertically integrated business
Starbucks Coffee Company is the premier roaster and retailer of
specialty coffee in the world, headquartered in the United States, in
Seattle, Washington. The company manages over 16,000 stores and
operates in more than 50 countries. Starbucks sells a wide variety of
coffee and tea products with a range of complementary food items,
primarily through retail stores. Starbucks has a long association with
India. For the last seven years, the company has been ethically
sourcing coffee beans from India and contributing to several social
programs in the country. Starbucks believes in doing business
responsibly to earn the trust and respect of its customers, partners
and neighbours.
Tata Coffee, with its large Arabica coffee production base spread
over different growing districts of South India, has supplied
premium coffee beans for Starbucks in the past and is now building
a structure for a long-term relationship.
India is one of the most dynamic markets in the world with a diverse
culture and tremendous potential. This MoU is the first step in
Starbuckss entry to India. They are focused on exploring local
sourcing and roasting opportunities with the thousands of coffee
farmers within the Tata ecosystem. India can be an important
source for coffee in the domestic market, as well as across the many
regions globally where Starbucks has operations.
Tata Coffee is trading higher by 4% at Rs 987 on reports that
Starbucks will soon turn its memorandum of understanding (MoU)
with the company into a full-fledged joint venture (JV), in which it
will initially hold a 26% stake.
The JV will then open outlets in all major metros. Within a year,
Starbucks, the American coffee maker will raise its stake up to 51%.
The government allows up to 51% foreign direct investment (FDI) in
single-brand retail, the newspaper report suggests.
A partner like Starbucks would also help Tata Coffee tap the
domestic market opportunity. Currently, almost 65% of Tata
Coffee's sales come from its Eight Oclock Coffee Co. unit in the U.S.
CONCLUSION
So keeping in view all these aspects, its safe to declare that a Joint
Venture will the most feasible and low risk option that Starbucks
can adopt to enter the Indian market. However keeping in view the
dynamic nature of the domestic markets and world economy, this
may not be considered as the final option.
REFERENCES
Business world
Malardalen University-Sweden, Master Thesis on International
Business.
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