Business Problem

Business Problem Paper

The team has submitted a business proposal that discusses the business decisions and subsequent decline of Starbucks Coffee's stock price over the last 12 to 24 months. Starbucks is a publicly traded company that offers a variety of products, including: brewed coffees, Italian-style espresso beverages, cold blended beverages, roasted whole bean coffees, tea products, sodas and coffee liqueur (Datamonitor, 2007). The company also offers food items and gift ideas such as coffee mugs and music CD's. With India being one of the largest growing economies in the world (see Appendix A), second only to China, and the second largest population (1.1 billion people) the team believes that Starbucks should be targeting the markets where their upscale and modern coffee shops would be successful (CultureGrams, 2007).

This paper will discuss the dependent and independent variables of the team's study as well as the primary and secondary data used to support the study. The team will state the applicable null and alternate hypotheses as well as the methodology used to test the team's hypotheses. An appropriate sample size will be used to ensure that the team arrives with a representative sample that will be sufficient to use when analyzing the sampling data to make informed business decisions off of the statistical data gathered during the proposed study. Finally, the team will make recommendations to Starbucks based off of the sample data gathered and analyzed.

The team has gathered data for several cities within India relative to gender, level of affluence and cultural preferences. The company also has data related to city population, education level, different languages, religious affiliations, natural resources and major industries that support the local economy. The data also supports the competitive nature of the Indian markets which should be reviewed by Starbucks. Furthermore, the team has acquired data supporting monthly income, infrastructure, number of local restaurants, along with information related to competition within the coffee industry. Finally, since India is one of the fastest growing global markets (see Appendix B) with a projected 1.4% increase in population each year (see Appendix C), Starbucks should survey some of the cities within the country to determine which market(s) they should target (Datamonitor, 2007). In order to do so, the company will need to gather additional data through survey and sampling methods.

The independent variable used for this project will be gender (male/female) and the dependent variables will be population size and level of affluence (per capita income). Refer to Appendixes D and E for population and per capita income maps of India, respectively. The key to using these variables are accurate and reliable data. Valid data is also reliable data, but reliable data is not always valid data (Cooper & Schindler, 2003, p. 235).

Primary data will be taken from survey results, CultureGrams and the Research Simulation, which provides detailed information regarding some key cities within the Indian Markets. The high-level data for Mumbai and New Delhi include meaningful insight into the population base, lifestyle, and relative level of affluence. Several of the smaller and less affluent cities appear less attractive as potential launch sites for Starbucks. For example, the city of Agra with a population base of approximately 151,000 people would provide fewer potential consumers than a city like Delhi with population base over 20 times as large as Agra (Apollo, 2004).

In addition, by selecting the cities with the most disposable income and a more modern culture the business manager increases the potential for successful marketing and sales in India. The cities matching the criteria include: Mumbai, Delhi, Bangalore, and Chennai. Including at least two less optimum cities provides comparative data that should help in determining the candidates with the most promising attributes (Apollo, 2004).

Secondary data can save a firm a time and money by using publicly available information as well as information already in the firm's database that was collected for other purposes but which can be used for the project at hand. However, the use of secondary data must be carefully considered and used only when applicable to the research question. To tap effectively into the Indian markets, Starbucks will need to gather accurate and reliable secondary information, which can either be sub-contracted out to a firm that specializes in market research or they can form an internal survey team to explore the opportunities the Indian markets present to the growth of their overall business. A key concern for the validity of data is the age of the data. All the data is sensitive to the effect of time so any action being taken by the company must account for the changing nature of the environmental landscape. Starbucks should use accurate, reliable and timely data in their decision-making processes.

The demographic data, from the secondary research survey, allows the business manager to target candidates in India that match up with the consumer base in the US and Europe. Although culture and habits may differ in India, the selection of cities with a western-type and more modern culture improves the odds of matching consumers to Starbucks premium product line. Leveraging the set of leisure and lifestyle data enables the business manager to judge the receptivity of consumers to Starbucks mall-based sales outlets. The final key piece of secondary research data relates to the current competitors in the coffee and premium coffee market segments. The number of coffee outlets provides insight into both the strength of the competition and the receptivity of Indian consumers to coffee products. Starbucks primary competitor in India is the Barista Coffee Company.

Organizing and comparing all the secondary research data along with the population and per capita information provides the consumer critical economic and market segment data needed for crafting effective sales and marketing strategies for potential coffee consumers in India. Data analyses indicate that Starbucks should open premium coffee outlets in Mumbai and Delhi, future expansion will depend upon the marketing successes in affluent areas with larger population bases, The company should be cognizant of the impact to their profit and revenue streams, assuming they are favorable, they should consider opening several outlets in these high-potential cities to maximize exposure and minimize logistical expenses.

Starbucks has placed several constraints on the research efforts that could affect the organization's decision to enter the global marketplace; however, the selection of India, resources, including budget constraints,