Ccd Starbucks

CaseQuestions: CCD-Starbucks

Group 4

• As a market leader, what are the most important competitive advantages of CCD? What are the biggest competitive challenges CCD might have to face with the arrival of Starbucks in India?

CCD Competitive Advantages:

1. First mover advantage:CCD has the first mover advantage as it was the first to introduce the concept of cafes in India and had no competitors and hence they could sell at a premium price.
2. Advantage in price: CCD did their own sourcing with 3000 acres of plantations; they can source coffee at a much lower rate than the market provided competitive advantage in price.
3. Vertical Integration:They own the chain from top to bottom, which is vertically integrated whereas the competitors often outsource their activities. The quality is excellent and has a variety of in house mixes and recipes, which have helped them, create a loyal customer base.
4. Customer relationships:Its target segment was of youth from age group 15 to 30, of which 60% were its regular customer, this made possible for their staff to make an emotional connect with them to increase brand loyalty. Not franchising their outlets helped them save time in setting up new outlets and also ensure quality

Competitive Challenges:

1. Costs:As CCD opened outlets of its own, its setup cost had been high.Renting cost had been increasing and hence opening new stores became costly. It became difficult for CCD to keep reasonable footfall round the clock
2. Global presence and competition: A major competitive challenge that CCD has in relation to Starbuck in particular is its lack of global presence and therefore the loss of excitement that Indian culture find in the new experiences. With opening of international market, competition became more intense
3. Change in consumer preferences:With increase in exposure towards luxury, the expectation of costumers to CCD has increased. Café business just like fashion business, menus needs to be revamped more often, as much as once a quarter, unlike once in 2 to 3 years previously. Starbucks have a premium image and its world no 1, so all the upper segment customer of CCD may get carried away by Starbucks
4. Expansion plans:Lastly the store is concentrated in only two major urban areas in India, with various other metropolitan cities untouched

• What are the advantages Starbucks as one of the best global player in coffee retailing? What are the challenges for Starbucks to compete with the dominant player like CCD in India?

Advantages of Starbucks

1. Starbucks’ international appeal:  Indians have a tremendous curiosity of foreign brands. They like to seek out and experiment with any new brand that enters the country.
2. Attracting tourists: Since Starbucks is 50% more expensive than CCD in India, it will attract tourists and well- traveled people who’ve been to Starbucks elsewhere. They will differentiate themselves around being an exclusive premium provider.
3. Relatively lower rents: Some malls and prime locations such as Delhi airport had invited Starbucks to be an anchor tenant at relatively lower rents because they felt that its presence would result in more walk-in customers.
4. A joint venture with the Tata Group:  Starbucks had entered India through a joint venture with the Tata Group, India’s largest business conglomerate, giving it access to coffee plantations as well as premium real estate.

Challenges for Starbucks to compete with CCD

1. Market Share: By April 2013, CCD was India’s leading coffee chain, with over 60% of the market. India’s Economic Times had named CCD as one of India’s most trusted brands—ranked No. 2 in the Food & Beverage segment. The company’s bright-red logo, along with its popular tag line, “A lot  can happen over coffee,” is familiar across urban India
2. Experience: Siddhartha and the director of CCD, Venu Madhav, had plenty of experience beating global brands in India in café Market
3. Real Estate Prices: High (some people would say exorbitant) real estate prices in India remained a challenge for everyone in the retail industry in India’s major cities. CCD executives felt that the company had an advantage because it got into many high-street locations early, at relatively low prices.

• Is CCD in the direct competition of Starbucks or they are catering to the different segments and which will grow the overall coffee market in India?

We can analyze it based on the STP of both the companies:

Segmentation: CCD- Youngsters looking to hang out with friends

                   Starbucks- People looking for coffee with experience

Targeting: CCD- College Students and Working professionals

              Starbucks- Upper middle class

Positioning: CCD- A place between office & home

                Starbucks- Great Coffee; Great Service