This strategy has low risk and costs. However, it also has low control over the channel members. More importantly Indian laws levy high tariffs on imported goods, tariffs progressively increase for processed goods. It is not a feasible option as Starbucks has to have control of the new entry unit to explore the market first hand for its future diversification plans.
Contractual Entry Modes.
In this mode of entry risk is lower but control is higher through licensing, franchising, and other options. However, then again franchisees may not be available for India and neither parties who would want to buy licenses because of the high tariffs imposed on imports of trade-secret goods, finished goods or raw materials.
Foreign Direct Investment in terms of opening up a wholly owned subsidiary incorporated in India is a better option to explore for Starbucks. Since Indian laws do not impose restrictions on this mode. It will also result in lower costs associated to tariffs to bring materials from US.
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