Marketing planning for Starbucks - Essay Example

?Marketing planning Table of Contents Marketing planning Table of Contents 2 Introduction 4 Section Marketing Audits 4 Organizational Audit 4 SWOT Analysis 4 Value Chain Analysis 7 BCG Matrix 9 Environmental Analysis 10 PEST Analysis 10 Competitive Analysis 12 Porter’s 5 Force Model 12 Section 2: Barriers to Marketing Planning 13 Barriers to marketing planning and overcoming barriers for Starbucks 13 McDonald’s ‘Ten S’ approach 14 Section 3: The Marketing Plan 16 Why Starbucks needs to be innovative 16 Pricing, distributing and communicating new products within Starbucks 17 Marketing plan for new product of Starbucks 18 Section 4: Ethical Issues 20 Reference 21 Bibliography 23 Introduction With the hope to be the third place for the people between home and workplace, Starbucks opened its first shop at Seattle’s market in the year 1971. The company believes that the people not only comes for the coffee at Starbucks but also because of the atmosphere they create is an add-on for their success in the market. People enjoy coffee while reading books, listening music or just gossip with friends and family. Specifically matching the regional culture and taste, the company strategically placed their products. It was one amongst the Fortune 100 top companies in the year 2005 to work for (Williams & Curtis, 2007, p. 221). Section 1: Marketing Audits Organizational Audit In order to understand the company’s strength and weaknesses, opportunity and threats the SWOT analysis of the firm has been performed to find the internal and the external environmental situation of the company. SWOT Analysis Strength Product diversification- huge range of products like coffee, baked foods, music cds etc. Well known developed brand image with online presence and copyright logo. The company has their own retail and international stores and don’t depend on franchisee. The locations of the stores are very strategically placed to attract more customers. With good working environment the company possess valued and very motivated workforce. The company have good relation with the suppliers of Coffee and other requirements. Starbucks is the market leader of the Coffee industry. Customers are loyal to the brand The company is located internationally Starbucks has a very strong financial establishment which helps the company to invest in the process of expansion. Weaknesses The company is less focused in its internal processes rather it mainly concentrates on the expansion plans. The growing market and modern lifestyle of people are growing demand for new competitors in the market which can’t be controlled by the company. Too many shops within a small area can affect the business. The products offered by Starbucks are little expensive than its competitors thus it’s a weakness for the company to grab the budget market. Opportunities The company has great opportunity to enter the retail market with its expansion plan. Technological advancement can bring new techniques to manage their processes. The company can introduce new distribution channel and start delivery service for the customers directly to their place. New product development is another opportunity for the firm to grab the market with its new launch. Emerging market outside the country into developing nation can be a very good prospect for the company. Starbucks can expand in many more areas even within the country thus domestic market can also be a good opportunity for the firm. Threats The growing competition from restaurants, supermarkets, and other coffee shops offering same kind of products to the customers and other coffee products are the major threats for the company. The U.S market is reaching its saturation point which will restrict the firms plan for farther expansion in the market. The instability of the Coffee price in developing countries can be difficult for the firm to maintain its price policy constant for all the countries where the company operates. In supplying countries of coffee beans the farmers are not well treated and thus results in negative publicity for the farm. The modern world consumer trend is changing drastically and they are moving towards healthier drinks and moving away from coffee. The cultural and political differences in foreign market can be a hindrance for the international expansion plan for the company. Value Chain Analysis The part of operation of the firm that creates value for the firm is evaluated by Value Chain analysis. Figure 1: Value Chain Model (Source: Hitt, Ireland, Hoskisson, 2009, p. 85) Inbound Logistics In order to get highest quality beans the company collaborates with mill of small towns. Special operations like buying entire stock from the suppliers gives huge discount for the company. Operations The computerised system of operation for coffee making gives a perfect blend for the customer and if the blend is not perfect the company never hesitate to discard the whole batch to maintain its quality. Procurement The company purchased Coffee Connection in 1994 and UK’s SEATTLE Coffee and then reopened under the name of Starbucks. Technology The Starbucks website allows customers to avail direct order placement through internet. Administration Starbucks don’t follow any hierarchy in the structure of the organization. BCG Matrix The BCG Matrix will help the company to understand the contribution of the different business units to the organization. Accessing each department can find the market share of each SBU of the company and the manager will be able to understand the requirement of more financial support for the weak SBU of the company (Griffin, 2006, p. 219). Figure 2: BCG Matrix (Strategy, n.d., p. 11) Environmental Analysis PEST Analysis The PEST analysis is conducted to understand the Political, Economical, Social and Technical, Legal and Environmental factors which are influencing Starbucks in their business process. The probable and possible effect of the environment will help the company to cope with critical situations that might arise in future. Improving the business process according to the situation is very important for successful and sustainable growth of the firm. Political: The taxation policy of the government with the countries producing coffee beans is affecting Starbucks as they have to pay more for their purchases. Any change in the taxation policy directly affects the pricing policy of the product which in turn affects the end users of the products. Economical: Due to rise in the interest rate the company’s expansion plans and investment are stopped by the company resulting in falling sales for the company. With rise in the price and less disposable income the consumers spend less on luxury items like coffee. Social: Population is an important factor which Starbucks identified and the taste of the customers at the region which helped them to aim their product. The company should target the age group of 30 to 50 while on the other hand the company should also target the age group of 18 to 25 as this group can be the prospective customer for long period of time in future. Technological: With the advancement of technology Starbucks is constantly improving its service and introduced the internet use in their business with the introduction of eCommerce. Analysis of the site data and new production process will help the company to manage its customers in a more efficient way. Competitive Analysis Porter’s 5 Force Model The Porter’s five force model is used by the company in order to understand the competitive advantage of the firm and find the opportunities and the possible threats from its competitors. For entering into new market or operating into the existing market the model will help to understand the potential of its opportunities in the particular market. Though Starbucks have many competitors in the market but being the leader in the market the competitors are nowhere compared to the size of operation of the firm. In smaller cities the location of the shop is a vital aspect which the company need to understand. If the shops are not developed at proper place then the competitors will get an advantage over the company. Starbucks is also very well known for its innovation of new product development. The new Starbuck repaid debit card soon after its launch is a very successful venture for the company but the company need to be careful about the new entrants for similar services to constantly innovate new processes to continue its leadership position (Gibson, 2007, p. 5). With the growing competition in the market buyer’s power are increasing in developing countries and low cost coffee shops are in demand. The suppliers bargaining power is limited as there are many suppliers of coffee adding to it being the market leader Starbucks have relationship with many suppliers which limits the bargaining power to great extent. As the price of coffee is increasing at developing countries people are moving towards the substitute of the products. People are moving towards healthier drinks than coffee which can be a possible threat from the substitutes. Section 2: Barriers to Marketing Planning Barriers to marketing planning and overcoming barriers for Starbucks Planning is a process of deciding the approaches to successfully implement strategies for the particular market. To achieve competitive advantages the company plans the pathway and defines the direction and marketing objectives for the products to be launched in the market. Planning process comprises of several steps before the implementation stage. The companies SWOT analysis, PEST analysis and competitive analysis helps to know the market scenario and then implement strategies according to the demand and need of the market (Beamish, Ashford, 2007, p. 11). But in order to implement the planned marketing techniques the Starbucks faces several challenges from the different dimensions which the company need to overcome. These barriers in most cases are from the human managerial aspects. Though marketing plans are formulated for the benefit of the organization but changes in marketing plan can also change the organization structure and system and processes which will lead to considerable changes in the staffing process. The cultural practise of the firm may also be not amenable to the marketing plans of the organization. Starbucks international expansion plan can face this barrier as their marketing plan for US may not be applicable to foreign countries due to this cultural barrier. The power and political influence for the implementation of their own planning can result in ego clash between the employees (Donnelly, Harrison, Megicks, 2009, p. 23). Analysis of the different data is also very important for the company and much time must be spent by the company of research and development process of the marketing plan. Only after proper understanding of the planning system then only Starbucks should implement its strategies to the market. Resource management is another issue for the management which can be a prospective barrier for the company. Starbucks should understand the capability of its resources and workforce and implement strategy in accordance with the available resources. False estimation may lead to the wrong implementation and can withhold the marketing planning process. Skill of the manager is also needed for proper application of the planning. Without proper forecasting, and project management the company may fail to identify the opportunity of the firm in a prospective market (Drummond, Ensor, 2005, p. 26). To overcome these barriers the management need to evaluate mainly three aspects of the business. These three dimensions can be referred as analytical dimension, behavioural dimension and organizational dimension. The analytical approach will help the company to identify issues and solve them in a more tactful way. The behavioural approach of the management will cope with the support and motivation to the employees and address the behavioural factors of the organization. On the other hand the organizational factor of the company will help the management to understand the organizational style and structure requirements of the company. Organizational factor will address the information flow control and defining the responsibilities of the individuals in an organization (Dibb, Simkin, 1996, p. 154). McDonald’s ‘Ten S’ approach For a strategic implementation and overcoming the barriers to the marketing planning McDonald’s ‘Ten S’ approach can be very useful for the management to evaluate the different aspects of the organization. Figure 3: McDonald's 'Ten S' approach (Source: Salicru, n.d., p. 2) The model comprises of several steps which the organization should follow to effectively implement the strategy for the marketing planning. 1. Strategy – The tactics which are designed by the organization for superior performance. 2. Situate – The marketing plans devised within the operations of the firm. 3. Shared – The marketing values and ideas should be a shared idea for the firm. 4. Structure – The structure of the market should be understood by the management. 5. Scan – Scanning the environment is very required by the manager to understand the situation of the market. 6. Summarize – All the information are then summarized and the SWOT analysis is done to understand the strength, weaknesses, opportunities and threats to the firm. 7. Skills – The Company’s skills and knowledge of the resources are evaluated to understand the feasibility of the marketing planning. 8. Systematise – The process of implementation is designed. 9. Sequence – The sequences of processes are set with objectives for the application of the designed process. 10. Style – Style and culture of the market and the organization is taken care of while implementing the marketing planning. Section 3: The Marketing Plan Why Starbucks needs to be innovative Starbucks being the leader in the coffee market has a great advantage over its competitors for its quality of service and the environment provided by the company to its customer. But the growing numbers of competitors like McDonalds, Costa Coffee and Cafe Nero are operating in the market with a wide range of products and services for which to maintain its leadership position in the market Starbucks need innovation of new products in their product line to differentiate from the others (The Cyber Nation of Freedom, 2002). Techniques Starbucks could use for developing products The strategy followed by Starbucks is mainly marketing through quality products and their in-store experience by the customers and the company is not involved in marketing through tradition way to reach to the customers. The company at present offers 20 to 25 types of coffees along with various other products like music cds, gift items etc (Karolefski, 2002). But the competitors on the other hand offer wide range of coffees and its substitute to the customers. Thus understanding and research of the market can help the company to innovate new products with new techniques of operation like online order placement to enjoy coffee at home and could also diversify the product line to new food and book selling section. This product line can be very attractive for the customers. New technology can increase the efficiency of service and will build relationship with the customers in a better way. Pricing, distributing and communicating new products within Starbucks The new product development of Starbucks should be targeted keeping in mind the pricing of the competitors. Though the company believes to offer quality and are not very concerned with the price but targeting a wider range of customers need the company to evaluate its pricing policy. The company supply coffee at grocery stores at a very competitive price almost similar to that available at local stores for other brands (Tewell, Odom, Snider, 2006, p. 4). Cost leadership strategy for new products of the company can be very useful for the company to grab the lower segment of the market. The new flavours of coffee should be available at every store of Starbucks so that every customer can avail those new products especially in countries where customers are more prices sensitive. Proper distribution and availability of products will facilitate the process of advertisement for the firm as the company are not into tradition advertisement techniques thus it is very important for the company to successfully launch its new product. The word of mouth communication technique is mainly done through individuals experiencing the products or services (Merton, n.d., p. 1). Only if the customers are satisfied with the service and the product quality then the products has a much higher chance of grabbing the market and take an extra edge over its competitors. Marketing plan for new product of Starbucks Starbucks introducing its new product Dark Knight, a pure combination of dark chocolate and coffee and will be served as cold chocolate shake. The new drinks is not a new product for the company but also has a great potential in the market due to its ingredients like pure coffee beans mixed with dark chocolates and cream. Dark Knight is also healthier due to the consumption of high cacao of chocolate which has a positive impact on the health. Dark Chocolate also transiently improves DNA resistance in state of oxidative stress (Robbins, 2011). This new product will not only attract the customers within the age group of 18 to 25 which should be the target market for this new flavour due to its taste but also due to its health benefit can also attract customers of the existing products for the age group of 35 to 50. To continue its competitive advantage for its new product Starbucks should follow the Porter’s Generic Strategy. The new flavour of the company can be targeted with the product differentiation strategy and which not only carries the brand name but also a new type of benefits from its ingredients which is different from the products available in the market. Figure 4: Porter's Generic Strategy (Source: Kossowski, 2007, p. 6) Pricing strategy can be mainly of three different types, skimming strategy, market penetration and comparable pricing strategy (Centre for Business Planning, 2011). The pricing policy for Starbucks can be comparable pricing strategy. Since it’s a new product in the market the price can be kept high but on the other hand to grab the lower segment customers who are to some extent price sensitive can also be attracted if the pricing is kept comparable to the other available products. As the promotional strategy Starbucks follows the unpaid form of advertisement i.e. word of mouth strategy (Armstrong, Gary, 2005, p. 29). The company believes in maintaining quality which in turn will automatically increase the loyalty customers and advertise their products in the market. The product availability is another important issue which the company should look after. The new product should be available on every store of Starbucks especially at regions where the demographic factors matches with the target age group of the product. Section 4: Ethical Issues Starbucks have the belief for conducting its business and marketing process in an ethical manner. It’s the main support for the success of its business process and this culture in the organization help the investors and partners to ethically decide in their work environment (Starbucks, 2011). This ethical practise of the organization is also reflected in their marketing process of the products. The Fair-trade relation with Starbucks helps them to promote their business and the company also take the advantage of this relation being the world’s largest single buyer of coffee from Fair-trade. Many companies like Cadbury expend a huge amount on the campaigns through advertisements and different marketing tools for their products where as this new campaigning style of Starbucks with their own certification system from in-house brought an interesting turning point for the competitors. Starbucks is also in to social campaigns by helping more than 100,000 coffee farmers and the communities related to it (Trading Vision, 2009). This relation with the coffee suppliers maintains their corporate ethical culture and this social responsibility are expected to increase the sales of the company to great extent. Again the promotional technique of the company is another dimension of their ethical practice in their business. The company is not involved into traditional promotional practice like that of McDonald who are into advertisements in different media for the promotional activities of their products. On the other hand Starbucks follow their own Word of mouth technique just by maintaining the quality of products which ensures a promotion of their product which is best believed by the customers (Michelli, 2007, p. 103). This belief of the customers on the company helps gain loyalty of the customer and marketing process is easier for the company even at a very low cost. Reference Armstrong, Gary, A. (2005). Marketing. Pearson Education India. Beamish, K. & Ashford, R., (2007). Marketing planning, 2007-2008. 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