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CCD currently holds a 70% market share in India's coffee market but faces a threat from Starbucks' entry. Starbucks has opened 11 stores in 6 months between Mumbai and Delhi and plans 600 more in the next 6 years. CCD must consider Starbucks a strong threat and adopt an aggressive strategy. In the short term, CCD should make internal improvements, boost employee benefits to reduce attrition, focus on menu and store quality, and expand to urban areas. In the medium term, it should focus on loyalty by expanding lounges and squares, and penetrate tier 2 and 3 cities. In the long term, it needs to expand internationally first in Southeast Asia and then Europe to strengthen its global brand.
CCD currently holds a 70% market share in India's coffee market but faces a threat from Starbucks' entry. Starbucks has opened 11 stores in 6 months between Mumbai and Delhi and plans 600 more in the next 6 years. CCD must consider Starbucks a strong threat and adopt an aggressive strategy. In the short term, CCD should make internal improvements, boost employee benefits to reduce attrition, focus on menu and store quality, and expand to urban areas. In the medium term, it should focus on loyalty by expanding lounges and squares, and penetrate tier 2 and 3 cities. In the long term, it needs to expand internationally first in Southeast Asia and then Europe to strengthen its global brand.
CCD currently holds a 70% market share in India's coffee market but faces a threat from Starbucks' entry. Starbucks has opened 11 stores in 6 months between Mumbai and Delhi and plans 600 more in the next 6 years. CCD must consider Starbucks a strong threat and adopt an aggressive strategy. In the short term, CCD should make internal improvements, boost employee benefits to reduce attrition, focus on menu and store quality, and expand to urban areas. In the medium term, it should focus on loyalty by expanding lounges and squares, and penetrate tier 2 and 3 cities. In the long term, it needs to expand internationally first in Southeast Asia and then Europe to strengthen its global brand.
Coffee Wars in India - Caf Coffee Day Takes on the Global brands
Managerial Communication 2 - Project Submission
Coffee Wars in India - Caf Coffee Day Takes on the Global brands Page 1 Coffee Wars in India - Caf Coffee Day Takes on the Global brands Problem Analysis With the arrival of global coffee chain Starbucks in India, market leader Cafe Coffee Day CCD! stands to lose out on some of its higher end customers" This has forced the senior management, CCD #ounder and Chairman, $"G" Siddhartha and Director, $enu %adhav of CCD to contem&late how CCD can retain its market leadership position in Indi and ward o any threat to their market share by Starbucks" CCD, the first mover in coffee retail and coffee chain brand in India, is currently leading 'ith ()* market share" It o&erates Cafes +))-,))) s- ft!, .ounges ,/))-0))) s- ft!, S-uares 0/))1 s- ft! and 23&ress outlets offering variation of coffee, snack, and meal o&tions at a com&aratively affordable &rice, in Tier-, 4 Tier-0 cities in India" They currently have close to ,/)) stores and ,))) takea'ay, and have &lans to o&en another 5)) stores in ne3t 6) months" Target segment for CCD is middle and u&&er middle class, aged ,/ to 6)" Indian coee market has huge potential o growing7 o'ing 'hich CCD has further e3&ansion &lans in &lace" There already e3ists a small &resence of foreign Coffee chain stores in India, such as Costa Coffee 89!, .ava::a Italy!, Gloria ;ean<s =ustralia! and Coffee >ean and Tea .eaf Southern California, 8S!, but these &layers have struggled to make significant in-roads in the Indian market due to their small scale of economy and the disadvantage of entering India at the &eak of reality &rices" Starbucks, though, is in a different league due to its international image and joint !enture with "ata #roup" Starbucks has o&ened ,, &remium coffee stores in ( months, s&lit bet'een %umbai and Delhi and &lans to have 6)) stores in ne3t 6 year" Currently Starbucks and CCD are locking horns only for the ?remium segment but due to "ata group$s access to premium realty space and own coee plantation% there are strong chances of Starbucks targeting regular coffee chain segment as 'ell" Decision Analysis Page 2 Coffee Wars in India - Caf Coffee Day Takes on the Global brands CCD must consider Starbucks a strong threat to their market leadershi& and ado&t an aggressi!e approach to'ards Global e3&ansion and Customer @elations" It must decide on a short term, medium term and long term strategy to tackle Starbucks and creating an international image for itself" CCD could also choose to go for Aa slight course correction< a&&roach by concentrating solely on im&roving their &rocesses and offerings and res&onding to 'hat Starbucks bring on to the Atable<" In order to Bustify the need for an Aaggressive< a&&roach, it is im&ortant to look into follo'ing &arametersC #rowth Potential o Coee chain market in India& D'ing to its global brand recognition, Starbucks has attracted enormous media coverage and long -ueues of customers at its launch" It comes 'ith an international image 'hich is very &o&ular in Indian youth culture current target segment of CCD!" =lso, CCDAs first mover advantage in terms of access to &remium real estate at relatively chea&er &rice and, successfully 'orking back'ard integrated model could be nullified by Starbucks< association 'ith Tata Grou&" Tata Grou& o'ns coffee &lantation and &remium retail s&ace, similar to 'hat CCD o'ns" India is a gro'ing retail market and Indian Coffee retail 4 Coffee chains market is no e3ce&tion" Since both CCD and Starbucks have means, it gives them an e-ual o&&ortunity to increase their share of the bigger pie. So it comes do'n to the -uestion that 'hich, out of the t'o, can ca&italise more on this o&&ortunity" Access to premium realty space ' raw material& >oth CCD and Starbucks in turn Tata Grou&! o'n &remium realty s&ace as 'ell as Coffee &lantation and hence ca&able of fully Page 3 Coffee Wars in India - Caf Coffee Day Takes on the Global brands back'ard integrated o&erations model" =gain, this gives both CCD and Starbucks an e-ual o&&ortunity and a stand a&art from other foreign and local coffee chain retailers" CCD$s #lobal aspirations& CCD has long term ambition to be recognised as an international &lan" They as&ire to be number 0 or 6 in 'orld in ne3t 0) years" Starbucks success in China& Starbucks comes to India on the back of its success in establishing itself as a big &layer in China" %any 'ere sce&tical 'hen Starbucks entered China but it &artnered 'ith local firms, as it associated 'ith Tata Grou& in India, in order to obtain local e3&ertise about consumer tastes in various regions" It 'as also able to educate Chinese consumers about Coffee and influence the culture of Chinese &eo&le 'orking at coffee bar" This indicates that Starbucks has the e3&ertise and vision of re&licating its successful Chinese &olicy in India" (uality and Ser!ice& CCD<s service and -uality is at a decline, as Starbucks has been able to &oach ,/-,E* of the CCD staff though no one from CCD management yet! for higher salaries" Dn the other hand, Starbucks, even though only at ,, stores currently, has sho'n its focus on service and -uality already" Action Plan CCD should continue s&eciali:ing in its &articular strengths and resist tem&tations to mimic Starbucks< o&erations" S&ecifically, in the short run , -0 years! CCD shouldC %ake internal im&rovements to training centres to increase em&loyees< customer service skills, >uild loyalty and commitment among its em&loyees by introducing some em&loyee benefit &rograms like &roviding health insurance to hel& control attrition rates, Page 4 Coffee Wars in India - Caf Coffee Day Takes on the Global brands Concentrate on maintaining an u&dated menu and store a&&earances 'ith consumer &references, and .ook to e3&and ne' cafes in the urban areas of metro&olitan cities" CCDs market leadershi& &osition is o'ed to customer loyalty so in the medium run 0-/ years! CCD must establish and retain customer loyalty by o&ening more lounges and s-uares increase from e3isting 6* to 0)* of stores &ortfolio! to maintain customers that are aging from teens and 0)s into 6)s and 5)s" CCD should also consider increasing their &enetration further in Tier-0 and Tier-6 cities as they are unta&&ed by Starbucks and other foreign brands as yet - D&en E)) more stores in ne3t 6) months, including 6)) in tier 6 cities" It should also increase visibility of the CCD brand and hence increase advertising budget from F6m to F/m" In the long run /-,/ years!, it must e3&and internationally in e3isting and ne' foreign locations, and establish itself as a Global brand" 23am&les of China and India, 'hich 'ere &redominantly tea drinking countries, turning out to be big Coffee chain market suggests that com&lete =sian market is yet to be ta&&ed" So they should first target e3&anding in South and South-east =sia in ne3t /-+ years 6)) ne' stores! and then e3&and in 2uro&e to strengthen their brand" Page 5