Domestic (India)

International

This case provides an interesting situation for management students to discuss and analyze. It addresses a number of marketing and strategic issues like branding, brand extension, international expansion, distribution, franchising, pricing and positioning to name a few. What is very interesting about this case is that it identifies typical problems associated with formulating strategies in a fast evolving market with competition expected from all over the world. With each new entrant, the industry structure and market dynamics changes. What is introduced as an up market product does not remain one or does not want to remain one because of loss of volumes to new players who have introduced cheaper products. This happened in the auto industry and it is happening in the coffee café industry in which Barista is participating..

Another interesting issue for management students to discuss and analyze is how fast a company should try to grow? Should volumes be the key focus? It is felt that a lot of companies in an effort to increase their volumes try to dilute and/or tamper their positioning resulting in serious problems.

The case also deals in a small way with the entry of strategic investors who have their own agenda. Also, there could be some cultural issues involved. Of course, a case study is like a pandora's box. I have seen students identify issues which I have never thought of before and come up with interesting alternative solutions.

Competitives strategies proposed by Porter, Ries and Trout as well as the concept of positioning can be very effectively applied to this case.

March-April 2003: The top management of Barista is under a lot of pressure from different directions. Some of the pulls and pressures are:

• To increase volumes by cutting prices by nearly 25%. For instance, the price of standard cappuccino coffee should come down to Rs. 30 from Rs. 40, Frappe from Rs. 55 to Rs. 40 and classic cold coffee from Rs. 45 to Rs. 33. Such a step could send confusing message to the market as Barista had increased prices in middle of 2002.
• To change the brand positioning of Barista from "indulgence" to a "hangout," that is, as a meeting place for an increasing number of people. In order to attract large numbers, it is being argued by some that it is imperitive to make the menu affordable. They suggest introduction of low priced drinks in line with the new positioning. Some feel that by diluting the premium position, volumes and share will increase.
• To introduce specialty teas in order to increase its client base among the tea consuming regions.
• With a "hangout" positioning, to open outlets in middle class localities as well as B-class towns.
• Adopt the franchise route to increase the number of outlets more rapidly while reducing its capital investment in new stores especially the real estate.
• Reduce costs and deliver profits.
• The average bill size has not increased. A lot of people are coming in to "recharge and unwind" but how to make them spend more and make them upgrade to more expensive blends. Almost 50% of their sales are from Rs. 30 cappucino coffee.

Top management is concerned. Many of the pulls and pressures have conflicting objectives. It is not sure what it should do. Also, it feels that competition is hotting up. For instance, Coffee Day has set up its outlets next to Barista's in Delhi with a cheaper menu.

In addition, the case includes detailed description and situation of the competition on which cases can also be developed by instructors. In fact, one of the interesting way to handle the case could be to form groups to discuss and write about what strategies each of the player in the coffee café industry should adopt.

General Motors is seriously considering relaunching the Matiz car in India. The first strategic decision that GM has to take is whether it should bring the Matiz car back or not. This would depend on whether GM should enter the small car market or not? Also, does the existing manufacturing capability and vendors offer any cost advantages to effectively compete in this segment. Second, if it decides to relaunch the car, it has to decide how it should do it considering the history and negative image of Daewoo. Should it launch the car under a new brand name or use the old brand name? Will the past positioning of Matiz be a hindrance taking into consideration that the automobile market has changed considerably.

There are a lot of companies which decide to relaunch a product with new positioning. Does it make sense to do so? Companies think it is easy to market a product with a brand name which already exists as they think it would be less costly to do so. However, they don't realize that they have to spend as much money changing the positioning of the product as they would have to spend to build a new brand. In fact, changing the positioning of a brand can be more difficult than establishing a positioning of a new brand.

There are two reasons for developing this case study.

First, it seems most people do not understand the concept of core competence. I think it is important that every management student understand what it means.

Second, Reliance Industries Limited is the largest business group in India and has time to time by pursuing controversial strategies tempted management gurus and experts to comment on the core competence of Reliance.

Financial highlights
The Reliance Group is India's largest business group in terms of all major financial parameters, including sales, exports, profits, net worth, assets, and market capitalisation.

Areas of Interest
Exploration and production of oil and gas * Refining and marketing of petrochemicals (polyester, polymers, and intermediates) * Textiles * Financial services * Insurance * Power * Telecom * Infocom * Life Sciences * IT Services

Reliance has emerged as India's Most Admired Business House for the third successive year in a TNS Mode survey for 2003. It is India's largest private sector company and the only one to be listed in Fortune 500 Global Best Companies.

Reliance contributes over 3% of India's GDP, approximately 5% of India's total exports and nearly 10% of the Central Government's indirect tax revenues. Its market cap is roughly 7 per cent of that of BSE.

Even though, the case was developed before the group was split into two groups, both the groups headed by two brothers are very big and diversified even today. The discussion that this case study would generate would be applicable to the two new groups also. The above information relates to the Reliance Group before the split.

There is a lot of speculation in terms of what makes this group succeed and what are its strength and core competence(s). A number of articles have been published on this issue. I believe to understand the concept of core competence, Reliance Group offers the best example.