The Launch of a New Line of Organic Products for Starbucks UK - Essay Example

?Starbucks Executive Summary This marketing plan aims to discuss, analyze and evaluate the planned launch of a new line of organic products for Starbucks UK. For the purposes of effectively meeting the objectives of this marketing plan, the tools of PESTLE analysis and SWOT analysis have been employed in order to examine the internal and external environment in which Starbucks operates. Furthermore, the report also undertakes an assessment of Starbucks’ marketing strategies in the UK such as its product offering, market segmentation, market targeting and positioning. Analyses indicate that the current state of the UK economy and growing demand for organic products within the UK are two highly optimistic factors which are favorable for an organic product launch. Furthermore, the report provides a discussion of the marketing mix and possible strategies that should be employed in order to ensure that the launch of a new organic product line by Starbucks in the UK is successful. Table of Contents Executive Summary 2 1.Introduction 3 2. Situation Analysis 4 2.1 PESTLE Analysis 5 The rise of health conscious consumers in the UK means that the organic food industry is no longer categorized as a niche market but has recently become a market that is targeted towards the masses. According to IBISWorld, sales volumes of organic products in the UK are expected to rise by 2.6% resulting in financial growth of ?2.02 billion (PRWEB 2013). Certainly, this trend reflects increased consumer awareness regarding food products and the benefits of organic produce on health. 6 2.2 SWOT Analysis 7 3.Market Summary 8 3.1Segmentation 8 3.2Targeting 9 3.3.Positioning 10 3.3 Competition 10 3.4 Market Growth Potential 11 4.1 Marketing Objective 12 4.2 Target Market 12 4.3 Product Offering 12 4.4 Marketing Program 13 4.4.1 Marketing Mix 13 4.4.2 Marketing Communication Mix 13 References 15 PRWEB (2013). UK Organic food industry is moving from niche to mainstream markets [online] available from [24 June 2013] 15 The Asset (2013). Strong UK GDP growth through Q3 seen, SWIFT Index predicts [online] available from [24 June 2013] 15 UKTI (2012). Finance, grants and incentives for businesses in the UK [online] available from [24 June 2013] 15 1. Introduction Starbucks started its operations in 1971 with a sole location at Seattle’s Pike Place Market engaging in the buying and selling of ground coffee and whole bean (Starbucks 2012). The business started with Howard Schlutz’s vision of taking the European coffeehouse experience and translating it according to the requirements, demands, needs and wants of the American customer (Kotler 2010). According to Kotler (2010) the success of Starbucks which is reflected in the existence of 17,651 stores (as of July 2012) across the globe (Starbucks 2012) has been its ability to integrate a rich experience and successful product to provide the Starbucks Experience. Starbucks made entrance in the European coffee market in 1998 as a consequence of its acquisition of 65 Seattle Coffee Company outlets located in the United Kingdom (Starbucks 2013a). Analysts note that Starbuck’s entrance into the UK market via this strategic business decision was aided by the similarities shared by the two companies it their culture, values and commitment towards the customers (Starbucks 2013). 2. Situation Analysis According to the financial results of Starbucks in the last 5 years, the company has experienced significant growth in its earnings per share which is a positive sign. Under this consideration financial analysts can make accurate evaluations regarding the financial state of the company and the performance of the sales department in particular. According to reports, the earnings per share of the organization have increased on a consistent basis from $0.87 in 2007 to $1.62 in 2011 and $1.79 in the year 2012 (Financials Morningstar 2013). The improved performance of the company suggests that it is an appropriate time for Starbucks to advance expansion plans. Therefore, the possibility of introducing a new line of organic products in the UK must be evaluated by Starbucks and readily acted upon to reap further advantages and benefits that can be gained as a consequence of this action. Furthermore, Starbuck’s impressive economic contributions within the United Kingdom in the form of local sourcing of dairy produce, value creating relationships with suppliers and a countrywide apprenticeship program (Starbucks 2013b) assert that the company should extend its UK operations by launching a new product line. 2.1 PESTLE Analysis POLITICAL Effective from April 2013, the government has announced the rate of corporation tax of 23%, which is expected to stand at 20% by the year 2015, being the lowest of all G8 nations (UKTI 2012). This notion implies that Starbucks would not be taxed heavily for an increase in sales as a consequence of launching a new organic product line in the UK. Additionally, Starbucks is expected to pay minimal social security contributions for its employees with regards to its UK operations thereby, reducing company costs and enhancing savings that can be used towards the betterment of marketing functions and other measures to ensure that the organic product line is a success. ECONOMIC Examinations into the rate of UK’s economic growth and GDP calculations have been highly positive thereby, raising business optimism and investor confidence in the economy. Furthermore, the economy has been improving on a quarterly basis as reflected by The SWIFT Index predictions that suggest extensive economic recovery through Q3 (The Asset 2013). These postulations indicate that owing to a growth in the economy and positive observations with regards to the external environment, marketing strategies such as product line extension and launching new product lines would prove to be a success. SOCIAL The rise of health conscious consumers in the UK means that the organic food industry is no longer categorized as a niche market but has recently become a market that is targeted towards the masses. According to IBISWorld, sales volumes of organic products in the UK are expected to rise by 2.6% resulting in financial growth of ?2.02 billion (PRWEB 2013). Certainly, this trend reflects increased consumer awareness regarding food products and the benefits of organic produce on health. TECHNOLOGICAL As one of the most critical aspects for the food industry, technology in collecting organic produce must be used effectively and efficiently such that it does not intervene in the purity and freshness of organic produce and enhances its quality, availability and accessibility to the general public. ENVIRONMENTAL It is one of the core commitments of Starbucks to engage in business practice that is not harmful to the environment but in fact contributes towards the betterment of the environment. Activities such as cup recycling, building greener stores and using environment friendly materials in the production of cups and other materials is readily practiced at Starbucks to ensure that the company plays its part in safeguarding the environment. These practices are conducted on the basis of environmental rules and regulations prescribed by the EU and UK authorities for conducting business operations and activities. LEGAL Legal considerations with regards to Starbuck’s operations in the UK are extensive and can significantly impact the company’s operations and plans for product line extension. Bergin (2012) reports that while Starbucks has been projecting its financial position to be stable and even flourishing, some analysts fear that it is engaging in unsatisfactory disclosure of its financial records. This view stems from the understanding that under the implementation of policies that are considered permissible and legal, the company may be participating in tax avoidance. Over a course of 3 years the company has conducted 1.2 billion pounds worth of sales within the country but has paid no income taxes (Bergin 2012), this act by Starbucks has been made possible by the implementation and avoidance of laws and regulations governing UK businesses and has been a fundamental contributor towards a sound financial performance. Henceforth, if legal policies governing Starbucks’ actions regarding tax avoidance are tightened then the company could face potential difficulties in extending its product line and opting for expansion in the United Kingdom. 2.2 SWOT Analysis STRENGTHS: 1. Recognizable brand name 2. Consumer loyalty 3. Strong financial position for investing in extension and expansion plans 4. Food menus are adopted in accordance with local preferences and tastes 5. Strong support garnered through apprenticeship programs 6. Creation of viable value chain and delivery network 7. Locally produced and supplied produce WEAKNESSES 1. Some analysts claim that Starbucks financial position within the UK is indeed weak 2. Allegations of tax avoidance 3. Not as strong a position in Europe as enjoyed in North America OPPORTUNITIES 1. Growth of organic produce market from niche to mass market 2. Increased consumer awareness regarding organic products 3. Favorable market situations 4. Economy showing signs of recovery and growth 5. Economy expected to grow further in Q3 THREATS 1. Competitive pressures 2. Relative inexperience in organic products 3. Market Summary 3.1 Segmentation Kotler (2010) notes that the market for a product can be segmented on the basis of variables such as geographic, demographic, psychographic and behavioral. The geographic segmentation of the UK market can be conducted according to urban centers, towns and cities that boost of greater populations. It is understood that consumer awareness regarding organic products is most observable amongst members of the urban population. The urban population the UK stands at 80% (CIA Factbook 2013) which is reflective of an extensive market with potential for further expansion. Major urban areas according to the population are London, Birmingham, Manchester, West Yorkshire and Glasgow (CIA Factbook 2013). 3.2 Targeting The market being targeted by Starbucks with the launch of a new line of organic products are men and women who belong to the age group of 25-40 and reside in urban areas and centers that were identified in the preceding section. Furthermore, the target market can be precisely defined in terms of the age group categories of adults and young adults. Taking into account psychographic factors the lifestyle of the target market would be health conscious and individuals who avoid consuming products that are processed and manufactured. Additionally, behavioral factors of the target market include benefits sought, loyalty towards product and usage rates, where consumers seek health benefits from consumption, are strong loyalists of the product and brand name of Starbucks and are categorized as medium to heavy users. 3.3. Positioning The products within the new organic product line are positioned in a way that they are able to secure a strong and relatively worthy position in the mind of the consumer in comparison with the products being offered by competitors (Kotler 2010). Once the organic product line is introduced by Starbucks it would be priced in accordance with other product ranges of the business rather than being priced higher or lower than other Starbucks products. High Quality Starbucks Costa Coffee Caffe Latte Low Price Caffe Nero Whitebread’s High Price Independent Coffeehouses Low Quality 3.3 Competition The main competitors of Starbucks in the United Kingdom are as follows: 1. Costa Coffee 2. Caffe Nero 3. Whitebread’s 4. Caffe Latte 5. Independent Coffeehouses Further analysis of the competitive environment indicates that Starbucks also faces stiff competition from independent coffee houses that provide personal services to their customers. Usually located in much smaller and prime locations, customers enjoy the privilege of knowing the owners of independent coffeehouses who are locals and individual’s belonging to the neighborhood. This essentially creates a unique selling point (USP) for independent coffeehouses that operate exclusively in certain locations. However, Starbucks can differentiate itself by the means of providing what is known as The Starbucks Experience to the customer, such that the customer enjoys not only the product but the ambiance and feel of the environment. This factor has been one of main reasons behind Starbuck’s global success and must be taken advantage of in the UK market as well. 3.4 Market Growth Potential The market growth potential is a mixture of two components: a) economic growth in the UK and b) growth of organic food market from a niche market to a mass market. The SWIFT Index forecasts states that the economy of the United Kingdom is expected to grow by 1.1% with faster increases expected in Q3 and Q4 of this year (The Asset 2013). Additionally, the UK organic food industry is expected to grow by a mean percentage of 2.6% thereby, transitioning from the category of a niche market to a mass market. 4.1 Marketing Objective The marketing objective for Starbucks for its organic product line follows the aims and goals of Starbucks in the UK market. Starbucks currently operates 17,651 stores across the globe primarily in the continents of Asia, North America and Europe (Starbucks 2013a). Starbuck’s commitment to the UK market which began in May 1998 states that the company aims to develop extensive and loyal relationships with its UK customers, suppliers, partners and apprentices to create a value chain network that is able to assist the achievement of Starbuck’s long term aims and goals of expansion, growth and provision of The Starbucks Experience. 4.2 Target Market The target market of Starbucks is men and women in age of group of 25-40 and 18-24 who are health conscious and have awareness regarding the benefits of consuming organic produce and products. 4.3 Product Offering The products offered by Starbucks provide variety, convenience, taste and service to customers by providing a ‘third place’ away from home and work (Kotler 2010). 1. Drinks – Bottled Drinks, Brewed Tea, Espresso, Frappuccino, Chocolate Beverages, Filter Coffee 2. Food – Cakes and Cookies, Muffins, Pastries, Donuts, Salads, Sandwiches, Fresh Fruit The aforementioned products constitute of the product offering of Starbucks at its outlets in the United Kingdom. Furthermore, the popularity of these products means that they are also offered on Starbucks’ worldwide menu. Starbuck can launch a full-fledged organic menu or organic platter by choosing products from both drinks and food category and incorporating organic raw materials. 4.4 Marketing Program 4.4.1 Marketing Mix Product Organic products selected from Drinks and Food category to create platters of organic food for example Coffee and Sandwiches, Brewed Tea and Pastries/Muffins/Donuts Price Effective pricing that is affordable and can be paid for by consumers who appreciate organic produce. Starbucks will not deviate from its usual pricing strategies by charging very high prices. Place Starbucks outlets across the UK Promotion Promotion strategies include Television programs, Fliers, Street Boards. The Television campaign should focus on the provision of healthy products that use ‘organic’ ingredients this essentially shows that Starbucks cares for the wellbeing of its customers and aims to fulfill its commitment 4.4.2 Marketing Communication Mix Starbucks Marketing Communications for Launch of Organic Product Line in the UK Advertising Television commercials and advertising in newspapers (electronic and print media), focusing on the organic and health aspect of products. Hiring a famous brand ambassador to be the face of organic products. Brand ambassador must be health conscious individual. Sales Promotion Offering discounts, coupons, two for the price one strategies, distribution of coupons to public and individual during rush hour or peak timings for maximum exposure. Direct Marketing Online, internet-based, forums, blogs and email marketing tactics to directly communicate with potential customers and present the idea of organic products. Also offer delivery services of organic produce for homes across the UK. Word-of-Mouth Enhancing consumer awareness and information regarding products, engaging customers and employees by informing people about the benefits of organic products. Initiating healthy debates and conversations about new product line to generate hype and interest. References Bergin, T. (2012). Special Report: How Starbucks avoids UK taxes. Reuters, London. Kotler, P. (2010). Principles Of Marketing: A South Asian Perspective, 13/E. Pearson Education India. Morningstar (2013). Starbucks Corporation SBUX [online] available from [24 June 2013] PRWEB (2013). UK Organic food industry is moving from niche to mainstream markets [online] available from [24 June 2013] Starbucks (2012). Starbucks Company Profile [online] available from Starbucks (2013a). Our Company [online] available from [24 June 2013] Starbucks (2013b). Our Contribution [online] available from [24 June 2013] The Asset (2013). Strong UK GDP growth through Q3 seen, SWIFT Index predicts [online] available from [24 June 2013] UKTI (2012). Finance, grants and incentives for businesses in the UK [online] available from [24 June 2013] Read More