MM III- Barista Coffee Company- Group E2

1. MAJOR ISSUES
The key issue for Barista is deciding upon a strategic way forward in a market such
as India where tea is a preferred beverage and coffee, largely consumed in South
India, is usually had at home
Barista has positioned itself as a coffee experience and is facing competition from
coffee pubs such as Caf Coffee Day that, due to lower prices, are able to attract
greater footfall and expand into smaller towns and cities.
Barista hence needs to reevaluate its STP and pricing strategy as well as determine
whether its key competitor is Starbucks or coffee pubs such as CCD.
The pricing strategy conundrum also includes a decision on reducing prices or
engaging in location based discriminatory pricing.
Furthermore, Barista has to decide on its model and speed of expansion. It needs
to choose between expanding rapidly through a franchise model or maintaining
control through owned stores. It also needs to decide whether it should focus on
the top line through expansion or the bottom line through optimizing its supply and
processes.
With the popularity of food in its outlets, Barista needs to determine whether to
stick to its core product of coffee or expand into food products to boost revenues.
However by introducing more food, it would face further operational challenges and
run the risk of becoming more like a restaurant than a caf.
Barista is also contemplating the merits of international expansion
2. ANALYSIS FOR RESOLVING THE ISSUES
STP
In order to shift coffee from a commodity product to an experiential product, it
needs to focus on a clientele with high disposable income as well as a latent need
for the Third Place hence its current targeting is appropriate.
It also needs to focus on a single competitor and plan its strategy accordingly.
Considering the number of coffee pubs and the minimal coffee culture in India,
Barista should focus on developing its coffee experience and leverage its first
mover advantage against Starbucks instead of engaging in price competition with
coffee pubs.
Pricing Strategy
Barista is focusing on a coffee experience where the customer is made to feel
special through the ambience, service and variety of products. A major part of this
experience includes the intimacy, exclusivity and a certain snob value attached to
being a discerning coffee lover. Its current pricing, as evidenced by 76% repeat
customers, plays a part in maintaining this positioning. Similarly, while expanding
into smaller towns, it should maintain its pricing as discriminatory pricing would
lead to dilution of the brand identity.
3. RECOMMENDATIONS/ INFERENCES ON THE MAJOR ISSUE
Barista should focus on its differentiating factor- the coffee experience, and align
its strategy accordingly. Prices should be maintained as is with a focus on
improving the coffee experience through ambiance and the consumers interaction
with the products and employees. This would drive the coffee culture by
developing long-term relationships with existing customers and generating positive
WOM due to the aspirational quality of the experience.
Expansion should be carried out cautiously with more focus on building the brand
than the reach. Franchisee model should be avoided, as it would result in a loss off

control, which could be disastrous for a business model based on consumer

experience rather than just the product.
International expansion should be avoided for the time being as focus should
remain on gaining a strong position in the Indian market before competitors such
as Starbucks arrive
Rather than expanding its product mix, Barista should focus on a limited menu of
quality food products that would prevent alienation of those not interested in coffee
without diluting the brand focus.