Marketing and Operation Management: Starbucks - Assignment Example

?Table of Contents Table of Contents Starbucks Background 2 Marketing Activities, Tools, and Strategies of Starbucks 2 Market Environment 3 SWOT Analysis 3 Strengths 4 Weaknesses 4 Opportunities 5 Threats 5 Marketing Tools Used by Starbucks 5 Marketing Mix and the 4Ps 6 Product 6 Place 6 Promotions 7 Price 7 Recommendations 7 Operations Management Performance Objectives 8 Operations Management Performance Objectives 8 Order Qualifiers and Order Winners of Starbucks 9 Recommendations 10 Works Cited 11 Marketing and Operation Management: Case study on Starbucks Starbucks Background Starbucks is a global coffee retailer opened in 1971. It started as a small coffee shop, which was initially owned by Gordon Bowker, Gerald Baldwin, and Ziev Siegel. The first location was at Seattle, which was followed by opening up of a coffee shop in Japan in 1996 after which numerous coffee shops were opened worldwide. Initially, Starbucks dealt with sale of freshly brewed coffee, selling coffee beans brewing and roasting accessories in addition to selling gourmet coffee beans. Starbuck is currently on of the largest coffee retailers dealing with roasting and selling of coffee beans in addition to selling brewed coffee, coffee-related equipment, Italian-style espresso beverages, other cold blended beverages, as well as a number of food items. In the 1980, Starbucks started to expand further but was still within the United States. By 1996, Starbucks started its venture towards becoming a global retailer by opening a coffee retail shop in Japan, which was followed by expansion to other regions such as Britain, Asia, and Hawaii. By 2007, Starbucks had 13,165 coffee outlets globally 9,400 of which were located within United States while 3,765 were located within 38 other countries. Starbucks aims at providing the finest coffee globally while providing an excellent environment amongst all it stakeholders. Additionally, Starbucks embraces diversity, which is characterised by the diversity of its workforce. Another principle that Starbuck upholds is ensuring unrelenting customer satisfaction in addition to contributing towards improving the welfare of the society as well as that of the environment. To achieve the above the company is always in constant search of other opportunities to expand its operations as well as improve the quality of its services. This paper will focus on the marketing activities undertaken by Starbucks as well as how Starbucks manages its operations. On marketing activities, the paper will examine the marketing strategies employed by Starbucks, the marketing environment that it has created to advance it operations as well as its aims and objectives, in addition to the marketing tools that Starbucks uses to increase its sales. On how Starbucks manages it operations, the paper will address the issue of how the management of Starbuck operates and how it manages to meet its objective. Additionally, the paper will include recommendations on how Starbucks can improve on its marketing activities and strategies as well as its management operations (The Chartered Institute of Marketing , 2009, Web). Marketing Activities, Tools, and Strategies of Starbucks Most retailers make use of advertisements to create awareness of their products. However, Starbuck rarely uses this strategy irrespective of it being a global coffee and coffee accessories retailer. To create awareness of its existence, Starbucks relies on the visibility of it coffee shop, which are located in places such as shopping malls, supermarkets, and other numerous places where people are likely to go for relaxation. Another strategy that Starbucks uses to market itself hence its products is custom music CDs that it sells in its shops in addition to allowing customers to download freely(The Chartered Institute of Marketing , 2009, Web). Market Environment To create appropriate market environment for its operations, Starbucks has signed numerous agreements as well as memorandum of understanding with different organizations. Starbucks signed an agreement with Fair Trade Labelling Organizations International, which has enabled it enter into agreements mainly licensing ones with fair trade organization in the nations where it has retail shops. This has enabled it sell Fair Trade Certified coffee, which is trusted by most people. In addition, Starbucks signed an agreement with Trans fare Canada, which has given it the right to access Fair Trade Certified coffee for its coffee retail shops located within Canada (Paryani, 2011, 1-14). Another strategy that Starbucks has employed to improve its market environment is emphasizing on dedicating itself towards improving the welfare of countries that produce coffee. This has enabled a good relationship, which make it easy for Starbucks to access quality coffee beans. Another way that Starbucks has used to establish apposite market in United States is through its commitment to SCORES, which is a not-for-profit youth organization. This has helped increase its acceptability in US. Another strategy involved the move to repurchase about 10milion Starbucks by the board of directors (Paryani, 2011, 1-14). Starbuck currently owns over 10,800 coffee shops globally. Of these coffee shops, about 4, 200 are franchised and licensed while the rest 6,000 are owned and operated by Starbucks. Expanding to other regions outside United States has been beneficial since the US market is quite saturated. To explain how Starbucks has managed to remain successful irrespective of not using advertisements to market itself, this paper will make use of the Swot analysis to show the strengths, weaknesses, opportunities, and threats faced by Starbucks. Additionally, the 4P’s of Starbucks will be analysed to demonstrate the tactics applied by Starbucks to market their products (Paryani, 2011, 1-14). SWOT Analysis This entails the examination of factors that have enabled Starbucks to achieve its objective, which will be discussed as the strengths. Weaknesses are those factors that are slowing down expansion of Starbucks or those areas that Starbucks needs to work on to maximise it profits. Opportunities are the aspects that Starbucks has not exploited fully. Exploiting these areas would lead to improved operations. Threats are the issue that are challenging the management and other operations of Starbucks. Strengths One of the major factors that have contributed to the success of Starbucks is its marketing policy. The marketing policy has enabled employment of personnel from varying diversity in terms of ethnicity, social class, as well as age. This has enabled its coffee shops attract customers from all diversities. Additionally, Starbucks ensures that their retail shops are structured and operated differently depending on the culture of the people where the coffee shops are located. This is because the interests and tastes of people vary depending on culture as well as age (The Chartered Institute of Marketing , 2009, Web). Another strategy that has contributed to success of Starbucks is its investment toward supporting community activities such as sponsoring youth activities, which has attracted more customers. Community Social Responsibility (CSR) is one of the aspects that enables businesses gain acceptance in different regions. Starbucks has demonstrated CSR by not just supporting community activities but by participating in activities that help reduce climate change. This has enable it remain popular irrespective of there being other competing coffee retailers. Starbucks retail shops are located in highly visible places, this attracts customers easily even without having to incur any costs for advertisements. Additionally, Starbucks is an old coffee retailer with a deep-rooted logo, brand, trademark, and charters. Moreover, the Starbucks website is well established. The above aspects add to the popularity of Starbucks in many regions of the world (The Chartered Institute of Marketing , 2009, Web). Another strength that Starbucks has is motivated employees who have enabled it gain customer loyalty. The Starbucks has been in existence for a long time, which has enabled it have a competitive advantage over other coffee retailers. Additionally, it sells a wide variety of coffee products and has remained consistent for a long period hence gaining the loyalty of both the suppliers and customers (Khattab, Aziz and Naguib, 2005, Web). Weaknesses One of the faults facing Starbuck is its lack on focus on internal matters. Starbucks pays little attention to problems facing its already existing retail shops but tends to overemphasize on expanding its operations. Another challenge is the increasing number of coffee retailers, which pose a great threat to Starbucks. Additionally, Starbucks products tend to considerably expensive which makes them inaccessible to a large population. The ever-growing size of Starbucks retails is a source of management struggles, which are likely to affect its progress as well as the quality of its products. This would affect its market negatively (Starbucks.com, 2012, Web; Paryani, 2011, 1-9) Opportunities Starbucks should consider improving its services as it expands its retail shops. This would enable it have a competitive advantage over other coffee retailers without compromising on the quality of coffee and coffee accessories products or services. One of such aspect is technology which would enable it apply aspects such as online advertisements to enable them reach out to more clients. Online marketing will help them create awareness on the wide variety of products it offers. Another opportunity is brand extension that would allow Starbucks to include other coffee products and accessories. Diversification of Starbuck products to include a wider range of foods will enable it access a wider market. Moreover, Starbucks can start selling its music CDs in other places such as restaurants and clubs. Additionally, Starbucks can get into licensing agreements with additional companies to enable it distribute it products at a reduced cost (The Chartered Institute of Marketing , 2009, Web). Threats One of the major threats that are likely to affect Starbucks market is competition. Over the recent past, the number of coffee retailers has been increasing steadily. These include supermarkets as well as restaurants just to mention but a few. A good example is McDonalds, which focuses on retailing products that are almost similar to those sold by Starbucks. Another threat is associated with the impact that pesticides used by coffee farmers have on the environment. Environmental activists feel that the impact of pesticides and herbicide use in coffee farming are too grave. Additionally, there have been many speculations on the effect that the pesticides may have on coffee consumers as well as farmers. People are moving away from caffeine containing products to more healthy beverages. This is likely to affect the coffee market negatively. Another threat is the saturation of coffee retailers in United States market, which is the major market for Starbucks (Paryani, 2011, 1-14). Marketing Tools Used by Starbucks To market as well as establish its brand, Starbucks came up with a web page referred to as “My Starbucks Idea” that helps them collect market opinions on their products from people. Additionally, people are able to appreciate the service offered as well as point out on the areas that the Starbuck management requires to change. Additionally, people who visit this site are free to give ideas on the community activities that Starbucks can support. Another important marketing tool is Twitter where Starbucks keeps people updated on their operations and activities. Unlike other marketing tools such as television commercials that make people feel like they are being pressured to buy products, using social networks make people feel like they are being given a choice to use or not use a product. Using internet to market its products and accessories is an appropriate option since the target clients are young people who are likely to be attracted through online sites (Khattab, Aziz and Naguib, 2005, Web). Marketing Mix and the 4Ps Marketing mix refers to the approaches as well as activities that a company undertakes to enable it sell its goods or services. The 4Ps stand for stand for Product, Place, Promotion, and Price. Each of the above is crucial in development of a marketing plan. Product The product refers to the entity that is being sold or a service being offered. Starbucks is involved in selling brewed and branded coffees, cold blended beverages, compact discs, teas, coffee related accessories, as well as certain food types. Additionally, Starbuck outlets offer seasonal novelty items as well as pastries. Another activity that Starbucks involves in is roasting coffee beans, which it sells in its worldwide outlets. According to Starbucks, their products are not targeted towards any specific group of people. The many clients are people wanting to take a break from their work or after work as well as people desiring caffeine stimulant. To satisfy their clients, Starbucks focuses on obtaining high quality coffee beans, which produce excellent coffee beverages. For easy marketing, Starbucks lays a lot of emphasis on proper packaging in case of take away products. Additionally, Starbucks uses environmentally friendly or biodegradable coffee mugs to prevent excessive environmental pollution (Khattab, Aziz and Naguib, 2005, Web). Place Starbucks sells its products either through licensed franchises as well as its own operated coffee shops. The outlets are located in all the 50 states in US in addition to other 34 countries. As a marketing strategy, the coffee shops are located in places where they are easily accessible and visible. The main places where the Starbucks retail shops are located include areas with high traffic, institutions such as Universities, and suburban retail centres (Paryani, 2011, 1-14). Promotions Starbucks has standardised it operations throughout the world. It promotes it market by having different coffee shops sell different foodstuffs depending on the culture of the people in the locality. Currently, Starbucks is attempting to promote new Tazo green tea. Another promoting factor is the pleasant atmosphere, good quality services as well as the worldwide reputation (The Chartered Institute of Marketing , 2009, Web). Additionally, the Starbuck outlets are designed in such a way that they easily attract people who want to spend time away from work and home but still enjoy the comfort. The comfortable chairs as well as tables depict this. Additionally, the coffee outlets offer free electricity to the customers who can freely carry their convenient music devices as well as laptops and enjoy their own stuff. Additionally, some coffee outlets, particularly those likely to attract businesspersons offer wireless internet though not free. Price The prices of drinks at Starbucks outlets range from $1.00-$4.20 per drink. Though the above price may appear quite high, it is lesser compared to its competitor coffee retailers. In comparison with the prices in other coffee outlets, the price at Starbucks coffee shops is about 4% lesser. Additionally, the price of other drinks, the iced beverages, is about 30% lesser at Starbucks as compared to its rival outlets. Nevertheless, the price at Starbucks is considerably high as compared to that in restaurants by about 16%. The prices as Starbuck outlets are expected to be hiked due to the increased prices of green coffee as well as milk, the chief ingredients used in its coffee outlets (Khattab, Aziz and Naguib, 2005, Web). Recommendations To increase their market, Starbucks should try to diversify its products to include other food options. The branding should also be consistent globally to help customers identify with their products. It is important that Starbuck improve on its marketing strategies to deal with the increasing competition from coffee retailers such as McDonalds. This could be by considering use of commercial advertisements or sponsoring more activities such as college games to create awareness on their products. Promotions will enable Starbucks be more competitive than its counterparts. Additionally, the plan to hike prices might have negative impacts and clients might start opting for other options such as restaurants (Paryani, 2011, 1-14). Another aspect that Starbucks ought to focus on is the quality of its products. It important that the management ensures that Starbucks does not compromise on the quality of the products as it seeks to expand the operations (Starbucks.com, 2012, Web). Additionally, Starbucks should consider promoting its existing products through offers. Agod example could be allowing clients to use free internet on certain days. Critical Evaluation of the Marketing Strategy of Starbucks Operations Management Performance Objectives Starbucks has dominated the coffee retail market over the last few decades. The main objective of Starbucks management has been to expand its operations from United States to other regions of the world. The rapid expansion strategy worked well for Starbucks since it obstructed other competitor retailers. Additionally opening up many retail coffee shops helped prevent clustering of customers in a single outlet making their operations more dependable. However, the other competitors seem to bridging up the gap characterised by the decline in Starbucks sales irrespective of the fact that Starbucks is quite cheaper than its competitors are. Additionally, competition between the Starbuck retails started building up. Another strategy applied was the Ansoff Matrix in which they aimed at first making a product popular in the market before diversifying the range of products in addition to expanding to new unexploited areas. (Starbucks.com, 2012, Web). Another marketing strategy employed was the “grab and go” coffees particularly in outlets located near or within office buildings. This will help in improving time management and prevent overcrowding. Operations Management Performance Objectives Coffee retail is quite a competitive industry, which requires Starbuck to have clear objective to compete effectively. Currently, the Starbucks management has come up with it objectives which include providing appropriate working environment for its employees, increasing the prices of their products slightly, in addition to being more flexible by introducing more food stuffs into their menu. Additionally, Starbucks hopes to improve the standards in purchasing, roasting, as well as sale of coffee to satisfy the customers. This will enable them retain or even improve the quality of their coffee and other coffee accessories. Starbucks hopes to increase its participation in community. This will be through the “Make Your Mark” program that was introduced in 2006 (Starbucks.com, 2012, Web). An extra operation objective that Starbucks management has is transforming its supply chain to ensure it is simple but more functional. Additionally, the supply chain is aimedat ensuring timely and quality processing of Starbucks products. Another objective that has already been implemented is in regard to disposal of paper cups. Starbucks has already come up with cups made up of biodegradable material. Additionally, they have been offering discounts for persons who reuse their cups. Another marketing objective that Starbucks should focus on is building a good relationship with clients in the existing store even as it continues expanding its outlets. This is by being more dependable in terms of the services and products being provided. Additionally, they should ensure that they do not compromise on the quality of their products. It should also be more flexible and diversify on its products, which will provide more opportunities for increment of customers. Starbucks management should work on dealing with its weaknesses as well as recognising and addressing the needs of their customers. Recommendations Instead of adding on the prices, Starbucks can focus on something like reducing the size of coffee mugs and other packages slightly. Additionally, Starbucks should ensure that the quality of their products remains excellent since this has been the main factor that has enabled them to retain their clients. However, they should be a bit flexible and consider introducing more than one product at a time to attract more clients. Additionally, time management is an aspect that Starbuck should focus on. In some outlets customers have to queue for too long which is demotivating. They should thus consider altering their strategy of serving the customers. Starbucks should also consider acquiring some of its competitors to gain more dominance in the industry. A good example is Caribou that is currently selling some of it stock at a considerably low price. Order Qualifiers and Order Winners of Starbucks Order qualifiers and order winners are the factors that give a firm a competitive advantage over its rivals. Order qualifiers are the least features of a corporation or its products that are deliberated on as a basis or cause of purchase. Order winners are the features of a corporation that make it different or distinguish it from its rivals and make people choose to purchase from it other than from the competitor firms. The order qualifiers or aspects that make customers consider buying Starbucks products include it long history since it was started when coffee shops were rare. This makes customers view their products as credible. Additionally, Starbucks uses technologically advanced equipment’s in processing its products, which are also packages properly. Most customers have rated the taste and quality of Starbucks high, which makes them recurrent clients (Starbucks.com, 2012, Web). The winners of Starbucks are the low prices of its products as compared to other coffee shops. Additionally, its agreements with coffee fair trades enable it access high quality coffee. Having had an early start helped Starbuck since people gained confidence in its products. Starbucks has invented a wide range of beverages and foodstuffs that attract customers. The foodstuffs are characterised by reduced fats and calories, which makes them, meet the needs of the customers. Participation in community activities has helped Starbucks earn the confidence of the people. Additionally, Starbucks has set its different coffee outlets depending on the needs and culture of the people, which gives it a competitive advantage over other coffee shops that have similar services and products everywhere (Starbucks.com, 2012, Web). Recommendations There is need for Starbucks to re-examine the preferences of people in different parts before determining their lines of diversification. The increased awareness on health issues have reduced caffeine intake, which requires that Starbucks come up with way to counteract possible reduction of coffee consumption. Additionally, fiscal responsibility, which might become effective soon, will require that Starbuck come up with ways to deal with disposal of the wastes that could be unfriendly to the environment (Paryani, 2011, 1-14). Works Cited Khattab, T, Ehab A, and Bassem N 2005, CairoStrategic Analysis for Starbucks. Viewed 10 Sep 2012 . Paryani, K 2011, "Product quality, service reliability and management of operations at Starbucks." International Journal of Engineering, Science and Technology, Vol. 3, No. 7. Pg 1-14. Starbucks.com, 2012, Ethical Suppliers & Products.Viewed 10 Sep 2012 . The Chartered Institute of Marketing March 2009, Starbucks Case Study. Viewed 10 Sep 2012 . Read More