Starbucks Marketing Report - Essay Example

? Starbucks Marketing Report Table of Contents Introduction 3 External Environment Analysis 3 PESTLE Analysis 4 Competitor Analysis 6 Profile 7 Product Strategy 8 Pricing Approach 8 Place Access and Distribution 9 Promotion and Advertising 10 Impact of “e” Marketing and Social Media 11 Conclusion (SWOT Analysis) 12 Recommendations 13 References 15 Appendices 16 Introduction Starbucks is the leading roaster, brand and retailer of specialty coffee in the globe. The organizationj is operating in more than 60 countries with its 20,000 coffee houses. The organization is the number one coffeehouse chain in the globe (Perrey and Spillecke, 2013, p.21). The name of the organization is Strabucks Corporation headquartered in USA. The organization is used to operate under Restaurant and Coffeehouse industry. The organization has started its operation in the year 1970 (Figure 1). The organization has its business footprint in Latin America, North America, Middle East, Europe and Pacific Rim. In the year 1998, the organization has successfully entered in UK market through the acquisition of 65 Seattle Coffee stores. Two organizations have shared a common culture. Moreover, the organization has focused on greater commitment by providing superior quality customised coffee. Starbucks has 149,000 employees according to the survey of 2012. In the year 2012, the organization has able to generate revenue of 13.29 billion US dollar. In terms of profit, Starbacks has achieved 1.38 billion US dollar. The operation market of Starbucks is very much potential as well as competitive. External Environment Analysis It is feasible that Starbucks has successfully entered in several potential international market places with proper realization and understanding of the impact of external environment factors on the business practices. In order to reveal the impact of several external environment factors on the business operation of Starbucks in global market, a PESTLE analysis has been undertaken. PESTLE Analysis PESTLE analysis will determine the impact of political, economical, social, technological, legal and environmental factors on the business operation of Starbucks. Political The political stability of a country is very much important for a global business organization in order to run the business successfully. It has evidenced that; the organization has chosen every single international market place after understanding and examining the political stability of each and every specific country. Moreover, the organization has effectively followed specific industry regulations and rules in every foreign country apart from USA in order to avoid the international political business threat. It has evidenced that, Strabucks has maintained high-level relationship with the government of every business operation and coffee beans producing country. Economical The European financial crisis in 2008-09 and global recession in 2007-08 has affected the global economy drastically. The condition of global economy has suffered from several reasons, such as high taxation level, reduced consumer buying power, low exchange rate of currency in global market place, economic slowdown of several developed and developing country and low disposable income of middle class people. However, several developing countries, such as BRICK Countries has not affected much from the affects of Recession and Financial crisis due to sufficient natural resources and highly controlled administration. Presently, the global economy is recovering from the effect of these economic downturns. The local economic situation and environment within each operation country is shifting towards growth. Therefore, the business output of strabucks is gradually increasing. Social It is becoming global trend to have the taste of coffee in a coffee chain. Moreover, the changing of family patterns in UK, USA and Asian countries have influenced the buyers to consume high quality coffee. Due to high customer preference, the organization is effectively doing their business practices. Moreover, now-a-days, several senior business executives and managers used to complete their business meeting in a coffee chain. Changing life style, level of education and social values among the global population has increased the trend to consume coffee in a coffee chain outlet. Due to these reasons, Strabucks has become popular and successful in global market. Technological High and superior technology is required in order to process and manufacture coffee products. It is the major efficiency of the organization that, they have selected the international markets that are technological developed. Moreover, they have access to those countries that used to produce coffee beans with the help of superior technology. Adoption of advanced technology has eased the business process of Starbucks. Emergence of advanced & innovative technology, biotechnological development in the operating countries and technological developments in the agriculture sector has supported Starbucks to operate successfully. Environmental It is necessary for every global business, that that should follow the environmental regulations and rules of specific countries. Several issues have affected this Particular industry. Increasing carbon emission and environmental disasters in coffee beans producing countries have restricted he business process of the players within the industry. Several issues in global level, such as global warming have limited the reputation of brand. However, strabucks has adopted several business sustainability strategies in order to reduce the environmental threats. They have organized several environmental promotional campaigning and have implemented green strategy in their business process in order to ring environment sustainability. These strategies have increased the brand reputation of Starbucks in global market place. Legal The government health authorities of several countries have introduced several health policies and regulations about production and consumption of Caffeine. Moreover, implementation of strict trade and custom regulation has challenged the international logistics and supply chain. However, Strabucks has effectively followed these policies, rules and regulation like licensing, Zero solid waste, Water recycling in order to avoid several global legal and environmental threats. Competitor Analysis The major competitors of strabucks are McDonald’s McCabe, Dunkin Donuts and Caribou Coffee. In terms of number of stores, Starbucks is just behind McDonald’s. The organization has almost 20,000 stores, while McDonald’s used to operate with more the 31,000 retail stores. In terms of product differentiation Starbucks has more differentiated products comparing to other competitors. In terms of pricing, Starbucks has implemented competition based pricing strategy. Though in several markets, the cost of McCafe is slightly less comparing to the products of Starbucks. In terms of business operation, Strabucks used to develop their own business stores in operation countries. On the other hand, competitor like McDonald has undertaken franchisee basis business strategy. It has increased the core competency of McDonald’s (lussier, 2011, p.131). In terms of distribution strategy, the organization has implemented customer based intensive channel strategy. On the other, other hand competitor like McDonald’s and Dunkin Donuts have implemented vertically integrated distribution structure. Similar to the other competitors, Starbucks has their own distributers in order to limit the distribution cost. Last but not the least; Starbucks has extensively focused on online and internet promotional marketing strategy. On the other hand, competitor like, MacDonald’s has significantly concentrated on other traditional promotional strategy. Customer Profile The global trend is rapidly changing. People of UK, US and Asia used to take coffee in a coffee chain store as it is an example of their traditional socio-cultural activity. Now-a-day, the young college student and people of all ages tend spend their quality time in leisure hours with their friends, relatives and sub-ordinates. In terms of age, people of all ages try to consume coffee from the stores of Starbucks. In terms of gender, both male and female are the target customers of Starbucks. In terms of income segment, people of middle, upper-middle and upper income level are the target audience of Starbucks (Darroch, 2009, p.66). People with god standard, young college goers, busy office executives and managers, and people of well education background are the potential target audience of Starbucks. Product Strategy Product strategy is an effective part of a marketing plan. Both product and market development is essential for the product strategy. Starbucks used to provide several non-durable and convenience products in the form of coffee. In terms of product delivery, the organization has continuously differentiated their product line in the form of smooth, bold and mild categories. The organization has effectively increased their product line. Moreover, they used to offer gifts, fresh foods and merchandise in order to increase their product range or product mix for several potential and competitive international market (Bussing-Burks, 2009, p.52). The organization has effectively entered in the European market segment, but these kinds of strategies are costly enough. Due to these strategies, the organization has affected during the European Financial Crisis and Global economic Recession as that point of time, the organization has failed to manage their operating cost due to decrease in sales. The organization has heavily exposed to Britain and US. Here the spending and disposable income of people has decreased due to unfavourable economic condition. Pricing Approach The major competitors of Starbucks within the Coffee chain segment are Coffee Nero and Costa Coffee. Pricing approach and strategy used to play an important role in the consideration of both consumers and marketers. In order to compete with the potential competitors in the market place, the organization has implemented competition based pricing strategy (Zeithaml, 2012, p.731). Though it is risky to setting up low prices comparing with one or two competitors, but Starbucks has able to achieve huge competitive advantages through this pricing strategy in global market place. Structure of the competitive market and perceived value of product has influenced the organization to setting up this strategy. Most significantly, the organization has differentiated their product line keeping the core value in every differentiated product. Due to several and many differentiated products comparing with its competitors with effective value addition, Starbucks has able to maximize its customer base and increase its brand value in global market place. According to magazine survey, it has revealed that, depending upon the global economic situation, the competition based pricing strategy has become the right tactic. Place Access and Distribution Starbucks used to utilize their own distribution channel in terms of global business operation. Starbucks have applied consumer channel strategy in their distribution system in which the manufacturer can make direct contact with the end customers. The organization has used this strategy in order to reduce the product distribution profit margin (Zikmund and Babin, 2009, p.16). The consumer and manufacturer of Starbucks used to deal directly with each other. According to the organization’s management, direct selling is more effective and profitable comparing to the involvement of outside distributors. The organization has almost 20,000 retail outlets in global market place. Moreover, the organization has coffee stores in every effective part of UK. However, intensive product distribution strategy is not an effective option to undertake. Basis on the present economic situation it is costly and it is not time effective. Lack of franchisee can affect the business process of Starbucks in global market place. As the organization is expanding their business rapidly in international market, franchisee model will help them to maximize profit and revenue. In terms of franchisee, the local franchisee owner can understand the proper value of local business area. Regional or national advertising undertaken by the owners of franchisee can play in effective role in the strong brand identity building. Promotion and Advertising Promotional mix involves personal selling, sales, advertising, and promotions, direct marketing, online or internet promotion and public relations. These strategies can easily make aware the target audience of an organization’s particular brand or product. The benefit of an effective promotional strategy is that, they organization can effectively communicate with the group of target customers by these strategies. Strabucks has effectively implemented all the ingredients of effective marketing communication and promotional strategy in order to target their audiences. They have effectively implemented online and internet promotional marketing strategy in order to target the global customers. They have effectively put their promotions in social media networking sites like Facebook and Twitter. Moreover, the organization used to highlight traditional social and cultural aspects in their promotions in each and every specific operating country. Recently, the organization has implemented green business strategy by initiating Shared Planet campaigning in the tear 2008. According to this initiative, the organization has committed that by the end of 2015, Starbucks will provide ethically sourced coffee. Moreover, they should use recyclable cups to sustain the environment, society, economy as well as their business. The organization has implemented these kinds of strategies in order to avoid the environmental threat. Moreover, it is assumed that, the organization can able to increase its brand reputation, image and value through these promotional activities. In terms of traditional promotional activities, the organization also used to utilize print and digital media in order to promote their product (Waters and MacDonald, 2011, p.54). Impact of “e” Marketing and Social Media Starbucks has effectively branched out in the digital territory with a strong presence in several internet sites and numerous social networks (Figure 2). In terms of customer engagement and content quality, the brand has developed high bar for other competitive business. The following is the reason of undertaking internet online and social media marketing strategy. This strategy motivates the customers to share their experience about the product or services. Social media is a huge space in which huge number of global people is being connected with each other (pride and Ferrell, 2012, p.302). According to Starbucks, this e-marketing and social media campaigning has helped the organization to increase their brand awareness and brand image in global market place. Social media and e-marketing strategy can significantly increase he customer base of an organization. The existing customers can share their views regarding any product or brand directly through a Facebook page and the new customers can share their experiences through sharing and commenting in a post. It will help the marketing individuals of the organization to keep track and monitor the satisfaction level of existing and new customers (Funk, 2012, p.243). Customized coffee for the consumers is an effective brand strategy of Starbucks. They used to promote their differentiated product line with possible information about the product (Dann and Dann, 2011, p.79). It has helped the organization to make the people aware about new product and service information within a limited period of time and with a low cost. Conclusion (SWOT Analysis) According to the objective of the study, the study will conclude by a SWOT analysis of Starbucks. Starbucks’s internal strengths, weaknesses and external opportunities and threats will be determined through this strategic analytical tool. SWOT Analysis Strengths Leading brand in global market and high brand image. Effective employee management and superior PR strategy. Sound financial records and largest coffeehouse chain in global market. Superior product quality and effective product differentiation strategy. Significant online and internet promotional activities. Weaknesses Negative publicity. Volatility in product pricing strategy. Lack of Franchisee system in global market place. Costly and time consuming distribution strategy. Opportunities Business expansion to emerging countries. Implementing and expansion of retail business operations. Quality control of product and services. Extension of the range of the suppliers. Threats Economic slowdown of several developed and developing countries. Trademark infringements. Low disposable income of middle class people. Disruption in product supply. Saturated and matured market in developed BRICK Countries. High competition and increasing number of local coffee chains. Rising prices of dairy products and coffee beans. High oil price is affecting international logistic and supply chain system. Recommendations Starbucks is one of the leading coffee chains around the globe. The organization has successfully operated in several potential developed and developing countries apart from US. Beside of their huge success story, few issues and challenges are affecting the global business process of Starbucks. Several recommendation plans have been provided below in order to overcome those issues. Firstly, the organization has to implement franchisee system in potential international market. It will help the organization to maximize its profit. As the local franchise owners will understand the local busies situation and criteria in better ay, therefore it is recommended that, the organization should change their old and traditional international business strategy. The organization need to fix the price of their products. Ups and downs in the price range of products can create a negative perception in the mind of target audience. Due to this strategy, the organization may lose its huge market share and customer base. As the organization has constantly differentiated their product range, therefore, it is necessary for the R&D team to monitor and control the quality of their diversified products. The organization need to keep their high product value in all the product lines. As the global environmental pollution and increasing carbon emission is threatening the business process of multinational firms, therefore, Starbucks need to implement total green strategy in their business process. It will help them to avoid legal and environmental threats. Last but not the least; the organization should decentralize its manufacturing and distributing system. Depending upon the current economic downfall situation, this strategy will help the organization to reduce operational cost and time. References Bussing-Burks, M., 2009. Starbucks. California: ABC-CLIO. Dann, S., and Dann, S., 2011. E-Marketing: Theory and Application. London: Palgrave Macmillan. Darroch, J., 2009. Marketing Through Turbulent Times. London: Palgrave Macmillan. Funk, T., 2012. Advanced Social Media Marketing: How to Lead, Launch and Manage a Successful Social Media Program. New York: Apress. Lussier, R., 2011. Management Fundamentals: Concepts, Applications, Skills and Development. Stamford: Cengage Learning. Perrey, J., and Spillecke, D., 2013. Retail marketing and Branding: A Definite Guide to Maximizing ROI. New Jersey: John Wiley & Sons. Pride, W., and Ferrell, O., 2011. Pride & Ferrell Marketing. Stamford: Cengage Learning. Waters, J., and MacDonald, J., 2011. Cause Marketing for Dummies. New Jersey: John Wiley & Sons. Zeithaml, V., 2012. Services Marketing. New York: McGraw-Hill Education. Zikmund, W., and Babin, B., 2009. Essentials of Marketing research. Stamford: Cengage Learning. Appendices Appendix 1: Starbuck Map Appendix 2: Starbuck’s Social Media marketing Read More