Marketing Strategy for Starbucks in Trinidad and Tobago - Research Paper Example

? Marketing Strategy for Starbucks in Trinidad and Tobago AFFILIATION: Executive Summary Starbucks is the top-ranked specialty coffee shop that has received huge appreciation from its target market. It has the aim of providing high quality beverage products especially coffee at premium prices along with a rich experience that will enhance the customer’s experience in the outlets. Starbucks has capitalized its unique positioning in the market by developing outlets that are furnished with the finest quality furniture which is comfortable for the customers along with supporting amenities such as music, Internet facilities and handicapped access so that the customers are provided a sensational feeling of enjoyable ambiance in the outlet. Starbucks has successfully created its position as the best place for socializing other than office and home. The only way to enter the new markets is to implement the same global marketing strategy that it has been following for each of its expansion plan. Hence, it should slowly enter the markets of Trinidad and Tobago so that the customers in the region accept the concept of specialty coffee shops and enjoy the amazing ambiance of the outlet. Table of Contents Executive Summary 2 Table of Contents 3 Introduction to Starbucks 5 Situational Analysis of Starbucks 5 Current Marketing strategy 5 Segmentation, Targeting and Positioning 7 Strengths and Weaknesses 8 PESTEL Analysis 9 SWOT Analysis of Coffee Franchises in Trinidad and Tobago 10 PESTEL Analysis of Trinidad and Tobago 11 Political 11 Economic 11 Social/Cultural 11 Technological 12 Environmental 12 Legal 12 ANSOFF Matrix 12 Recommended Objective and goals 14 Recommended Marketing strategies and Programs 14 Conclusion 15 References 16 Introduction to Starbucks Starbucks started as a small coffee shop in 1971 by Gerald Baldwin, Ziey Siegl and Gordon Bowker and it has completely revamped its image by growing into the number one coffee retailer for people who want specialty coffees. It is present in more than thirty countries and has been doing expansion on a continuous basis. There are more than 10,000 coffee shops of the company worldwide and about 60% are owned by the corporation and remaining are franchised and licensed. The primary aim of Starbucks is to establish itself as “a highly respected and recognized brand in the international market” (Starbucks, 2012). Situational Analysis of Starbucks Current Marketing strategy After careful analysis of the marketing strategies highlighted by Michael Porter, cited by Alison (2010), Starbucks is following a differentiation strategy. Initially, the main element of its business activities was to focus on particular aspects with strong emphasis on creating differentiated products within the target consumer market. However, the company soon realized that it needs to strengthen its position in the market by developing a differentiation strategy and the success of Starbucks is evident from the fact that it has developed an excellent marketing mix for its customers. In order to expand its operations in the international market, it is offering same “coffee experience” to the international customers by providing them premium quality products and aesthetically designed ambiance (Tu, Wang & Chang, 2012). It has ensured that there is uniformity in its marketing activities by using only third party mediums for promoting its product and service offerings. According to Michelli (2007), Starbucks has allocated only 4% of its total cost on the advertising budget. One of the key elements of differentiation strategy is to introduce new and innovative products in the market and Starbucks has been exceeding its customers’ expectations by offering them products that are totally different from existing ones (Parayani, 2011). The innovation element of its marketing strategy gives it a competitive edge in the specialty coffee industry. In order to ensure that it develops entirely new offerings, a huge amount of money is invested in research and development. Most importantly, Starbucks has earned the reputation of possessing an excellent distribution network within the specialty coffee industry and it is apparent from its growth strategy. When it plans to enter into any new country, it first conducts an in-depth market research so that it is able to penetrate easily and effectively to get the attention of its target market (Boyd, Mullins & Walker, 2006). The key factor that has become a Unique Selling Proposition (USP) of Starbucks is the excellent customer service as it creates the ultimate ambience for the customers to give them an exceptional coffee experience. The experience that is given to the customers is the basis for customers that attract them to the outlet so that they can have an amazing time with their friends, families or even enjoy quiet and a soothing environment alone in the outlet. The marketing mix is the basic pre-requisite of developing a marketing strategy. It is manifested in the efforts of Starbucks that it aims to provide a wide range of high quality products and services so that the customers can get value for their money, the prices of the products is high but it is compatible with the exceptional service quality provided to the customers, the store is present in each neighborhood so that everyone can go to the coffee shop easily and conveniently and promotional mediums used are website, banners, posters, billboards and Starbucks cards (Thomson, Trickland & Gamble, 2007). Segmentation, Targeting and Positioning Starbucks is the leading name in the market as it has been striving hard to capture the market share of the specialty coffee industry. According to a survey by Paryani (2011), the market share of Starbucks in the coffee retail industry is 33% in USA and it has increased its efforts to enhance it by expanding its operations worldwide. One of the key factors that have been a source of Starbucks success is the creation of brand image as “the best place for socialization between work and office”. The strategy has proved to be beneficial for the corporation and this image along with perception of an affordable luxury brand has allowed it to avail the opportunity of charging premium prices from the customers. The target market of Starbucks can be described as: Age: 18-40 years Gender: Male and Female Occupation: Depending on life-stage but mostly students, faculty members, managers, executives, housewife and business person Lifestyle: Adventurous, Fun-loving, Love for socializing, Value excellent customer service, Thinkers, Achievers, Innovators and Experienced Income level: Depending on life stage but slightly on higher range Technology: People who are technology savvy come to the coffee shop for carrying on their important work and like to use iPad, Tablets, Mac and many more. Starbucks always wanted to position itself as the upscale brand and it is offering a rich experience in addition to an exclusive range of coffee products. The initial target market of Starbucks comprised of young college going students, neighborhoods and social classes who are willing to buy a cup of coffee i.e. $3 and want to have a fun-filled time with their friends and family. As a result of continuous expansion and growth, its target market now comprises of every individual of every age group and it is targeting every rural community, small town, ethnic neighborhood, highway rest shops and etc. Starbucks has positioned itself as a place where people like to spend their time besides home and work. In order to create a soothing and calm ambiance, the outlets were furnished with comfortable furniture and light music is played to enhance the mood of the customers. In the last few years, Starbucks has included other offerings such as complimentary books, wireless Internet, common areas for collaboration and handicapped access. The stores of Starbucks have been positioned in the locations where very customer can have a contented setting and all of its products are positioned as having premium quality and prices. Strengths and Weaknesses The main strengths of Starbucks are as follows: 1. Existing market share – It has a good market share in all of its regions, well-built customer base and has ample amount of finance that allows it to do expansion in other markets easily. 2. Strong brand image – Starbucks is perceived as the premium quality brand that offers exceptionally high quality products and services. 3. Unique value proposition – The value proposition that Starbucks has created is the experience that is given to the customers by providing them a superb ambience in the outlet. 4. High ethical and professional standards – Starbucks has a highly efficient workforce that strives to enhance the reputation by strengthening the ethical values and improved commitment to the community activists and environment. The weak areas of Starbucks that need to be improved are following: 1. Too much presence in domestic market – Starbucks has three-fourth of its cafes in domestic market i.e. USA and it needs to expand in the international market strategically so that it can grow in other regions conveniently. 2. Innovation in the beverage industry – There is too much dependence on innovation in the beverage industry so it can fall over time as it will have to introduce new and innovative products at an accelerating rate. 3. Less options for diversification – Starbucks has limited options when it wants to diversify in the coffee retail industry. It can significantly lower its diversification speed. PESTEL Analysis The PESTEL Analysis of Starbucks shows that it is operating in a stable political environment but there are some strict legal requirements that the companies have to comply with for operating their business; economy is recovering from the recession and people have good amount of money to spend on luxury items; and social factors of the customers are changing as they like to socialize a lot and are looking for avenues that can help them in having exceptional time with their friends and families. The technological innovations are happening at an accelerating pace and Starbucks is offering all services for the latest technological gadgets; Starbucks is an environmental friendly company as it has undertaken various initiatives to demonstrate its responsibility towards protecting the society; and there are various laws that need to be followed by Starbucks to ensure compliance with all business ethical and professional code of conduct so that it does not violate any of the government rules and regulations. The main competitors of Starbucks are McDonald’s, Rituals, Dunkin Donut, Peets Coffee and The Coffee Bean and Tea Leaf. Almost all of the coffee shops are offering similar products so the only way of gaining competitive edge is to provide customers a highly exceptional and customized service with soothing and attractive ambiance. In the next few years, the competition in Trinidad and Tobago will get intensified as McDonalds has opened three outlets and there are more than forty-one outlets of Rituals in the region. Hence, Starbucks will have to compete effectively and strategically. SWOT Analysis of Coffee Franchises in Trinidad and Tobago Strengths Attractive policies for coffee franchises Awareness about benefits of coffee Growing trend of coffee lovers and coffee shops Natural producer of coffee that is of premium quality Huge amount of cultural diversity Weaknesses Too stringent policies for foreign investors as most of them are beneficial for domestic companies Inconsistency among concerned authorities The compensation schemes for industrial workers are too poor Increased degradation of terrestrial environment Opportunities Growing demand of fine dining culture that comprises of specialty coffee shops Tourism industry is growing at an accelerating pace so franchises can avail the opportunity of expanding business in this area Construction of five star hotels provide new avenues for development of coffee shops Threats Intense competition from foreign investors Climatic change can affect production of coffee beans PESTEL Analysis of Trinidad and Tobago Political In Caribbean, the Republic of Trinidad and Tobago are located that comprise of two islands with population of more than 1.3 million; both of these islands are at Venezuela’s north east cost in the Caribbean Sea. The government of Trinidad and Tobago is functioning under a democratic parliament which is similar in various aspects to the government of UK. The political environment in the region is stable and the government is very supportive for foreign investors. All new entrants especially foreigners can take advantage of favorable political policies of the government and occupy a good position in the respective industries. Economic The economy of the Republic of Trinidad and Tobago is too strong and has a constant GDP rate since last few years. It has been recognized as the best region for investment as it has the highest rates of growth along with rising per capita incomes especially in Latin America. The primary reason for such robust growth is the huge amount of investment in steel, Liquefied Natural Gas (LNG) and petrochemicals industries. It is ranked as the leading producer of oil and gas and it accounts for approximately 40% of GDP and about 80% of exports. It is also the largest exporter of manufactured goods especially beverages, coffee, cement and foods. Social/Cultural The culture in Trinidad and Tobago is very rich and it has attracted a lot of tourist attraction in the last few years. The people of the region love to display their heritage and culture and love to get indulged in music, exciting events, sports and other forms of thrilling activities. Since people are lively and love to get involved in various activities, they have desire for trying out new things. As the region has natural production of coffee and other organic food items, there is high demand for such stores in the areas. Technological As technology has become a vital aspect of every industry worldwide, the technological development in Trinidad and Tobago are also taking place at a fast pace. According to Hann (2011), a science park ‘Tamana Intech Park’ is created to develop an industrial park in an eco-friendly way which focuses on four sectors i.e. technology advanced manufacturing plants, Information & Communication Technology, enterprises based on agro industry and blend of mixed area. Environmental In order to ensure that the environment is protected from any kind of harmful business activities, there are certain laws related to environment protection. Every organization operating in the region has to ensure that the products and services offered to the customers are environment friendly and extensive care is taken in providing consumers with healthy and nutritious food items along with genuine services. Legal The legal system is appropriately developed and every foreign investor will have to ensure compliance with the regulatory requirements so that the business operations can be conducted in efficient manner. There are certain authorities that are promoting the region for attracting various investors to make valuable contribution and boost the country’s economy. ANSOFF Matrix The Ansoff Matrix comprises of four grids i.e. market penetration, market development, product development and diversification. Starbucks is following all of these strategies for varying markets so that it can continuously meet the expectations of its target market. Within US, Starbucks opens outlets in new areas so that it can offer appropriate products and services to them which is the ‘market penetration’ strategy. It invests heavily in research and development to identify new demands of the existing market and offers them to the consumers if it is feasible for the corporation; it is its ‘product development’ strategy. (Source: Boyd, Mullins & Walker, 2006) In order to enter new markets, it offers similar range of offerings but modified according to the culture of the respective market, this is the ‘diversification’ strategy. Finally, it offers various loyalty programs and attractive packages to existing markets on existing products so that it can exceed their expectations level successfully; this is ‘market penetration’ strategy. Hence, Starbucks can diversify into Trinidad and Tobago region as there is a high demand for specialty coffee shops and it can reap huge amount of benefits as well. Recommended Objective and goals As Starbucks is planning to enter Trinidad and Tobago, it has to ensure that it enters the market by following the same strategy that it has followed in all its international expansion projects. Considering the marketing strategy, PESTEL analysis and strengths and weaknesses of the coffee shop, following are the recommended objectives: 1. To open four outlets in Trinidad and Tobago (two in each region) by the end of May 2013 to get 5% of the retail coffee shop’s market share. 2. To introduce a new product line of beverages and fast food items in the outlets by August 2013. 3. To open four new outlets in each Trinidad and Tobago with the aim of capturing 10% market share of specialty coffee industry by November 2013. Recommended Marketing strategies and Programs In order to successfully enter the market, the marketing strategies and programs that will be implemented in the respective new markets are as follows: 1. During the first year of expansion in Trinidad and Tobago, the company will organize an event in which people of the regions will be asked to visit the venue and interact with its workforce. The visitors will be given free samples of the products so that they can test their quality and taste. 2. On the outlets, customers will be given 10% discount on buying more than two cups of beverages and 15% discount on their third visits. 3. Advertisements will be done in the form of billboards and posters along with inserts in the local newspapers so that more and more customers are attracted to the outlets. 4. On Internet, social networks will be developed so that all the customers can interact with each other and discuss about the brand. On Facebook, LinkedIn, MySpace and other social networking sites the Starbucks fan page will be created so that the customer base in the region can widen with the passage of time. 5. In the outlets, all offerings from products to services such as soft drinks, hot and cold coffees, light snacks, smoothies, tea, Internet facility, each and everything will be provided so that the customers are given a sensational experience at the outlets which is the company’s USP. Conclusion Hence, Starbucks can follow the same expansion strategy that it has implemented in its other growth plans when launching its products in international market. It will have to develop the concept of specialty coffee shop in Trinidad and Tobago as these regions have low trend of these shops. Starbucks will slowly penetrate in the market so that its idea is accepted by the target market and people are looking forward for its new outlets and new offerings. It will have to monitor its performance on an ongoing basis so that it is assured that it will manage its marketing strategy of differentiation effectively and successfully. References Allison, M., 2010. Starbucks has a new growth strategy — more revenue with lower costs. [Online] Available at: [Accessed 1 Dec 2012] Boyd, H.A., Mullins, J.W. and Walker Jr., O.C., 2006. Marketing Management: A Strategic Decision-Making Approach. 6the ed. New York, NY: McGraw-Hill. Hann, P. (2011, April 21). Doing business internationally: Trinidad and Tobago. [Online] Available at: < http://www.helium.com/items/2142897-doing-business-internationally-trinidad-and-tobago> [Accessed 1 Dec 2012] Michelli, J.A., 2007. The Starbucks Experience: 5 Principles for Turning Ordinary into Extraordinary. New York, NY: McGraw Hill. Paryani, K., 2011. Product quality, service reliability and management of operations at Starbucks. International Journal of Engineering, Science and Technology, 3(7), pp. 1-14. Starbucks (2012). Company Profile. [Online] Available at: < http://www.starbucks.com > [Accessed 1 Dec 2012] Thompson, A.A., Strickland, A.J. and Gamble, J., 2007. Crafting and Executing Strategy: Text and Readings. Boston, MA: McGraw-Hill/Irwin. Tu, Yu-Te, Wang, Chen-Mei and Chang, Hsiao-Chien, 2012. Corporate Brand Image and Customer Satisfaction on Loyalty: An Empirical Study of Starbucks Coffee in Taiwan. Journal of Social and Development Sciences, 3(1), pp. 24-32. Read More