Business Problem

Topics: Statistical hypothesis testing, Coffee, Starbucks Pages: 15 (4725 words) Published: February 17, 2008
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...
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