Coffee and Competitiveness

Much has been talked about competitiveness of Asian economies. Somehow competitiveness of the east has been portrayed to be a direct consequence of half starving men and women working in sweatshop like conditions, scrambling for the dollars and euros thrown at them by “outsourcing” companies. Is that the true source of competitiveness for east?

Starbucks recently opened a coffee chain in India selling cafe lattes and mochas to the populace at Rs.80-Rs.160 per coffee (About $1.5-$3). This price is about 25-50% lower than the prices of UK starbucks stores, which retails about $3.75 per coffee. Western economists will gladly attribute this differential of prices to the conventional sources of eastern competitiveness – low costs, sweat shops, abysmal human rights etc.

The real price comparison, however is the local coffee which the majority of Indians drink at local shops at Rs.10-20 per cup. This unsung drink along with local chai at Rs.5-10 makes it 8-10 times cheaper than the western counterparts. Okay, agreed, unfair game – cannot compare a gourmet coffee (starbucks) with a local coffee, however, even a take away coffee in any cheap local place in the west still costs about 5-8 times a similar coffee in India.

The real source of competitiveness of east is – an alternate way of thinking and life style. East is competitive not because they can offer Starbucks coffee cheaper, it is because they have cheaper alternatives interweaved in the lifestyle that the population genuinely enjoys.

 

 

 

2 thoughts on “Coffee and Competitiveness

  1. Also anything in the west/developed markets needs human labour is relatively expensive. Trade and implied competition keeps cost manufactured goods quite low, while non-trading services keep getting expensive!

  2. Good one! I once watched Gordon Ramsey’s ‘travel to India’ tv program in which he prepares food in a moving train alongside the railway canteen staff . He wondered that all Indian passengers get a royal Maharaja’s treatment as they have been served freshly cooked meals at an affordable cost whereas back in UK, they pay high price for the packaged items.

    The alternatives are not just cost competitive in the east but they provide healthier and better choices. Moreover, these small alternatives serves as backbone of the economy by creating employment opportunities around.

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