PESTLE Analysis of Starbucks - Essay Example

Business Marketing Assignment (Starbucks) Table of Contents PESTLE Analysis of Starbucks 3 SWOT Analysis of Starbucks 5 Four Fundamental Areas 7 SMART Marketing Objectives 8 Two Examples of Various types of Marketing Strategies 8 Appropriate Strategy for Starbucks 9 Five Marketing Programmes 9 Justification of Choosing Marketing Actions 9 References 11 PESTLE Analysis of Starbucks PESTLE analysis is an important external marketing audit tool. This analytical tool will help to determine the impact of several external environmental factors on the business performance of Starbucks. Starbucks is the leading global US based coffeehouse chain headquartered in Washington. This organization has strong presence in several emerging global places. Starbucks is operating its business practices in several global countries with its 20,891 retail coffeehouse chains. Political Terrorism is the major political threat affecting the business performance of Starbucks in several global market places. Several terrorist groups are targeting the customers of Starbucks Cafe in order to achieve their political goals and demands. For example, terrorist attack in Africa and Middle East took the lives of several in-store customers. These kinds of terrorist activities have negative effect on the business operation of Starbucks. The impact is affecting the overall sales and profit of the organization. Starbucks are selecting politically stable countries for their business operation. This strategy will help the organization to maximize business growth and market share. Economical Recent financial crisis and global economic recession has reduced the purchasing power of people. Low disposable income, increasing unemployment rate, high interest rate and low per capita income reduced the consumption activities of people. Costa Coffee, JD Wetherspoon and McDonalds are the potential competitors of Starbucks. These competitors implemented competitive pricing strategy in order to achieve potential competitive advantages. Low pricing strategy of the competitors is affecting the business performance of Starbucks. Social The organization is one of the leading employers around the globe. Starbucks has developed ample job opportunities for the job seeking applicants in their coffee shops. This organizational process is helping in economic development and employment opportunities. Moreover, the organization has developed respectable and better social hubs where the people can visit with their friends and relatives. Effective workplace diversity motivates the employees to perform significantly. The organization promoted valuable respect and diversity leading to effective social lifestyle and significant internal stakeholders’ contentment. Technological Starbucks is capitalizing on the potential opportunities that developed due to the implementation of advanced technology. Phone applications, Starbucks cards and payment through online eased the business functions of Starbucks (Armstrong and Gary, 2004, p.72). The organization has implemented advanced technology in their business process in order to bring pace in their logistics and supply chain process. Legal Starbucks focuses on the health and safety aspects of their employees. The organization sincerely follows the health and safety regulations in order to avoid several legal threats. Moreover, they offer health insurance and compensation plans for the employees in case of any workplace hazard. On the other hand, the organization provides compensation to the potential customers in the case of gift card violation. Environmental The organization majorly focuses on business sustainability than financial growth of the organization. Zero solid waste, water recycling, reduction of carbon emission, implementation of green strategy and several CSR activities increased the brand reputation of Starbucks in global market place (Brassington and Pettitt, 2006, p.76). They try to follow ethical business process in order to develop cleaner environment by reducing the level of pollution. SWOT Analysis of Starbucks SWOT analysis is an important strategic marketing tool that evaluates an organization’s internal strengths, weaknesses and external opportunities and threats. Strengths Starbucks is the most recognized coffeehouse chain brands in global industry. Significant financial stability and significant business revenue helped the organization to attain effective financial profitability comparing to its other competitors. Loyal customer base and supreme quality of the products are the major strengths of the organization. Innovative vision, significant brand extension strategy and quality leadership strategy increased the brand value of Starbucks in global market place (Pride and Ferrell, 2011, p.469). Weaknesses Retailing of coffee is the major competitive advantage of Starbucks. This business process can slowdown several business diversify activities. The organization is failing to target health conscious customers as few products of Starbucks contain high level of fat and calories. Poor quality of products can affect the brand image of Starbucks in global market place (Pham-Gia, 2009, p.27). Starbucks implemented aggressive global business expansion strategy. This strategy can dilute the business experience of Starbucks as this can lead to cannibalization. Premium pricing strategy is stopping the organization to target the people of middle class income level. Opportunities Quality is the major concern of a product. The organization should try to resolve the issues to meet the market demand. Starbucks should continue with their global business expansion strategy in emerging global economies. Effective customer service will help the organization to develop potential client base in global market. The organization should focus on operational cost reduction. This strategy will help to adopt competitive pricing strategy. The organization can target the people of middle class income level through this pricing strategy. Threats Various legal and employment policies in different countries can poise real threat to Starbucks. Several potential competitors have implemented low pricing strategy. It can affect overall business performance of Starbucks. High raw material cost can reduce the sales and revenue of the organization. Recent financial crisis and global recession reduced the purchasing power of middle class people. Low disposable income of people can reduce the sale of products. Starbucks is known for its high quality coffee products. They implemented effective global business expansion strategy in order to achieve huge market share. In addition, they are trying to conduct sustainable business practices to reduce several environmental and legal issues. Recent economic slowdown affected the business performance of Starbucks (Ottman, 2011, p.28). On the other hand, several potential competitors have implemented low pricing strategy for the products to grab the global market share of Starbucks. The organization needs to reduce their business operation cost. This strategy has several positive consequences. First of all, operational cost reduction will help the organization to implement competitive pricing strategy. Moreover, the organization can target middle class people through this strategy. Four Fundamental Areas It is clear from the SWOT analysis that Starbucks is facing several external environmental challenges that can reduce the business performance of Starbucks in near future. The marketing objectives of Starbucks can be developed based on following aspects. Effective international business expansion in emerging global economies. Introduction of healthy coffee drinks. Unique promotional strategy to enhance the brand awareness of products. Implementation of competitive pricing strategy through reduction of operation cost. SMART Marketing Objectives SMART stands for specific, measurable, attainable, realistic and time. SMART marketing objective will help the organization to overcome recent issues. Specific- Sales of the new coffee products will grow at 15% on yearly basis for next three financial years. Measurable- Organization will expand business operation in five emerging economies in next three years. Attainable- Sales of products will be increased by 10% in next two quarters. Realistic- Attain a net profit margin of 25% in next three years. Time- Organization will grab 20% market share of global coffee chain industry by 2015. Two Examples of Various types of Marketing Strategies Starbucks can implement several types of marketing strategies in order to overcome recent issues and meet the SMART business objectives. Porter’s generic strategy will help the organization to implement cost leadership strategy. This strategy will help the organization to reduce business operation cost and implement competitive pricing strategy. On the other hand, effective positioning strategy will help Starbucks to position their products according to the market demand. Appropriate Strategy for Starbucks According to the current business scenario and business environment, it can be stated that Porter’s generic strategy will be helpful for Starbucks. The organization is facing huge challenge from its competitors regarding the pricing strategy of products. Cost leadership strategy will help the organization to cut down unnecessary business operation cost. Therefore, the organization can implement low pricing strategy. It will help Starbucks to target price sensitive customers. Five Marketing Programmes This part of the report will propose a series of five different marketing actions that will help the organization to meet business objective. Appropriate Marketing Action Preferred Date Social media promotion. January 1, 2014. Offering free trial of new products to the customers with existing regular products February 21-March 15, 2014. Evaluation of customer idea and preference. March 16- April 31, 2014. Customer loyalty plan through retail stores or company website to increase brand value. From May 2014. After successful introduction the products should be launched in various potential international market based on market demand. October 1, 2014. Justification of Choosing Marketing Actions Aggressive business expansion strategy is the major competency of Starbucks. First of all, they should promote their products through social media networks in which they can create huge brand awareness. Then the organization should give free trail to get the r5espoinse of customers on the new product. Organization should consider the opinions and feedback of potential customers about the products. It will help to improve the quality of products according to the market demand. Introduction of customer loyalty plan will help to develop potential customer base in global market. Lastly, the organization should think about international diversification of the product based on the product performance. References Armstrong, G., and Gary, A., 2004. Marketing. New Jersey: Pearson. Brassington, F., and Pettitt, S., 2006. Principles of Marketing. New York: Prentice Hall. Ottman, J., 2011. The New Rules of Green Marketing. London: Routledge. Pham-Gia, K., 2009. Marketing Strategy of Starbucks Coffee. Berlin: GRIN Verlag. Pride, W., and Ferrell., 2011. Marketing. Stamford: Cengage Learning. Read More