Starbucks Market Share and Media Spend - Case Study Example

Starbucks case study Starbucks Corporation is the largest coffee retailer in the world founded in 1971. It is based in Seattle, USA. It is an international company and has set up the largest coffee chain in the world by opening 16,120 numbers of coffee stores in 49 nations. Among these large number of coffee stores 11,000 stores are located in USA alone. Among the other countries, it has opened quite a large number of stores in Japan and Canada. This company mainly sells different types of coffee, particularly drip-brewed-based and espresso-based coffee, along with different types of other cold as well as hot drinks, different types of snacks, coffee beans etc. It started as small company but it grew so rapidly that, in 2004 it had been ranked 25th among the Top 50 S&P 500 companies by Business Week magazine. The company has set itself as an example for the other companies in the SME sectors across the world regarding how to become successful in a short span of time. The period of 1990s seemed to be most successful for the company when on average it had opened a new store almost in each working day. This high pace of growth continued even after its entry into the new millennium also. In fact it had been able to maintain thin momentum until recently. The ongoing global down turn had also affected the company badly like the others. Since 2008, it has closed around 900 stores in the United States as demand has declined sharply. However, it still has a growth plan outside the territory of USA in near future. In fact, it is planning to open as many as 900 new stores in the countries outside the USA. (Starbucks- company Overview, 2009) Very often, this company has faced several types of protests on the grounds of trade related policies, employee relations, impacts on environment, and so on. But in the mid of all these issues it has managed to grow at a very fast rate (Starbucks- company Overview, 2009). There are a number of factors that have helped Starbucks to become so successful. These factors are as follows- Rapid expansion on a global basis: Starbucks had adopted the method of expanding its market not only in the domestic front, but also in the foreign countries. This expansion plan has been able to make the name of the Starbucks known by a huge number of people around the world which simply has resulted in magnificent increase in the customer base of this company. By creating its presence in the global market on strong feet, it has been able to dominate the segment of market it caters to. It has been rated as one of the best company to work with and its pleasant working environment has made the company able to expand at such a high pace, while retaining its customer base at its other outlets. Creation of brand loyalty: One major reason behind its success is that it has been able to create huge brand loyalty among its customers. The company has always been careful in meeting the customers' need and providing them with memorable experiences so that they make a return to this brand again and again. This is why the company has been rates as one of those global brands that have created highest level of impact on their consumers. In 2003, a magazine had considered Starbucks as one of most trustworthy brand. Its recognition as one of the most impactful and most trustworthy brand has enhanced its brand value and has made its logo recognizable by the most. Consequently, it has helped to retain its customer-base. The degree of loyalty of the customers to the Starbucks brand is so huge that even when the customers go any foreign location, they visit Starbucks' outlet to have a cup of coffee that they enjoy in their own home town. Adoption of innovative strategies for business: the company has employed a highly skilled research team for developing innovative ways of attracting more and more customers to its brand, while retaining the existing customers' loyalty towards this brand. For example, in 2004, it introduced a CD burning service in one of its outlets in California. This innovative service allows its customers to make personalized CD whenever they come in that outlet for drinking coffee. It has also utilized its customers' loyalty towards the brand for marketing a coffee liqueur having Starbucks brand name by developing a partnership with Jim Beam Company. Always having a thinking of going big: although, the company had started its business operation in 1971 as a small business venture, but at the very beginning it had big ambitions. Initially, it took some time to grow. In 1982, almost after one decade of its foundation, the company became public. After this humble starting, the company had gathered pace, and now holds around forty percent market share in the specialty coffee segment. The market of specialty coffee is being expected to grow very rapidly in future and this growth is expected to provide the company with new opportunities for further growth in this market segment. The success of Starbucks has not come overnight. But the company has managed to establish itself as such a famous and established brand through its patience, financial strength and smartness in the front of management. Ability to spot every opportunity and to think in a unique way: the company has always adopted the strategy of thinking outside the box. It posses a strong ability of spotting opportunities and to utilize those opportunities even if it needs to debunk the established retail trends. A very interesting feature of this company is that while accepted tenets of retailing in most of the retail businesses ask the company to choose location of stores on the basis of demographic features, pattern of traffic, competitors' locations as well as the locations of own outlets etc., Starbucks instead has made clusters of its stores in the selected areas. Although tradition views on retailing states that this type of clustering may cut sales, Starbucks has chosen such strategy to increase its market share. The risk has well been paid off and in its selected regions it has been able to create its dominance. Smart partnering: One of the important success factors for the company is its strategic initiatives for building partnerships with other firms. For example, it made partnerships with bookstores like Barnes and Noble to make its coffee available in the bookstores in 1993. Following the same strategy it partnered with Chapters, a Canadian bookstore in 1995. It had also make partnerships with the cola brand Pepsi in 1996 to sell its coffee in bottled version. It also went for a setting up of a joint venture with Dreyer's Grand Ice Cream to introduce ice-cream with its own brand name which very soon became the best selling coffee ice-cream in U.S. Forcing customers to spend more money by introducing more and more products. The company knows it very well that when a customer comes to its store to drink coffee, he would also want to eat some snacks with it. Hence, it introduced several snacks that can go along with coffee. (STARBUCKS KEY FACTORS; n.d; Isidro, 2004; Our Starbucks Mission.; 2009) Customers' involvement in product development process: Starbucks has considered a business strategy of involving customers in the process of their product development to increase their customer base. The current economic downturn has affected this company also in form of declining sell. The company has started to feel the effect since the very beginning of this economic slowdown which started with the beginning of 2008. In the first quarter of 2008, Starbucks experienced a fall of 28percent in its earnings compared to 2007. The main reason behind this decline was the customers' less spending on extras, such as specialty drinks. To boost up their sales, the management of this company has devised a plan of involving their customers in the product improvement process by asking their suggestions and innovative ideas. For this purpose it has launched an online social book marking site named 'My Starbucks Idea'. The site has been built on the basis of a social bookmarking model. This site cordially asks the customers to tell what they exactly want from the brand of Starbucks. The customers are also invited to share their ideas regarding how to improve the products. They are also asked to join discussing on different aspects of product development. Apart from this, the site has enabled its users to comment on different Starbucks products that they have consumed. The customers can also vote for their most favorite ideas and the most popular ideas are presented in the front page of this site. Some popular suggestions of the customers include offering of a beverage at free of costs on the birthdays of the customers, launching the facility of web ordering, and of course lowering the prices as many of the Starbucks products are very expensive. The site also invites its customers to share various innovative recipes. Not only that, the company has also taken initiatives through their sites to show the customers the progress level of their ideas. On the site that it has launched, users can view which ideas have attracted the attention of the company or on which suggestions the company is intending to take actions. Recently, a new energy drink based on coffee has been launched by Starbucks on the suggestions of its customers. As a response to the requests of innumerable customers, the company has also introduced at its stores Wi-Fi access at free of costs. The company is also seeking various ideas for recycling. (Eckels, n.d.) BCG Matrix of Starbucks: Market Share High Low STARS QUESTION High Star Bucks MARK Market Growth Low CASH DOGS COWS The BCG Matrix The BCG Matrix represented above shows that Starbucks belongs to the category of high market share-high market growth rate. Looking at the performances of the company over the years it has become clear that although in the initial years the company had slow growth rates, but since 1990s the company has adopted extensive growth strategy by opening more and more stores in its home ground as well as in other countries. Even in the current recessionary phase it will very soon open up another 900 more stores in international location. On the other hand in terms of market share, it is one of the market leaders in food and beverages industry. In U.S. it is one of the top ten restaurant chains with magnificent market share. (Starbucks Market Share and Media Spend, n.d.) References: Eckels, H. J. n.d. Agile Marketing- Starbucks leads the social product development trend. Available at http://www.talkibie.com/agile-marketing/starbucks-leads-the-social-product-development-trend/ [accessed on 10th July, 2009] Starbucks Market Share and Media Spend. N.d. Available at http://www.valuebasedmanagement.net/methods_bcgmatrix.html [accessed on 10th July, 2009] Our Starbucks Mission. 2009. Available at http://www.starbucks.com/mission/default.asp [accessed on 10th July, 2009] STARBUCKS KEY FACTORS. n.d. Available at http://homepages.wmich.edu/'l2tripp/projectVpart2.htm [accessed on 10th July, 2009] Isidro, I. 2004. Learning from Starbucks: 10 Lessons for Small Businesses. Available at http://www.powerhomebiz.com/vol144/starbucks.htm [accessed on 10th July, 2009] Starbucks- company Overview. 2009. Available at http://www.hoovers.com/starbucks/--ID__15745--/free-co-factsheet.xhtml [accessed on 10th July, 2009] Read More