How Does Starbucks's Internal and External Environment Affect Marketing - Essay Example

Poster Presentation: Starbucks I. The business The business that is chosen is Starbucks. The poster chosen is the depiction of actual product of Starbucks with the store and customers behind its background. This poster makes a good poster about Starbuck’s environment because its background is a good representation of the actual environment it operates in. How does the internal and external environment affect marketing? The environment is the “playing field” or market reality of which a business operates in. Environment determines the kind of strategy that marketing will be using for the company to become successful in the market. Accurately determining the environment is therefore critical to a company’s success or failure. INTERNAL ENVIRONMENT SWOT Analysis Strength The main strength of Starbucks is its brand that commands confidence in the market. Its brand allows it to command premium price in the market. Weakness The relatively steep price of Starbucks became its bane particularly during the financial crisis where competitors capitalized on it by labelling as expensive. Opportunity There are still a lot of underserved markets in developing market which Starbucks can penetrate due to its global brand. Threat Competitors are sensing the profitability of Starbucks and are trying to undermine its market share by lowering its price and criticizing the relatively steep price of Starbuck’s coffee. EXTERNAL ENVIRONMENT Micro-environment a. Competitors – competitors are other companies who are offering the same product or services or an alternative to the product or services offered by a particular company. Competitors can either be direct or indirect competitors. Direct competitors are those companies who could offer the same product and services while indirect competitors are companies who could offer an alternative product or services. b. Customers – are the people who have needs and wants where a company’s product or services aims to satisfy these needs and wants. c. Suppliers – are third party entities who provide the materials and services needed by the company to deliver and render its products and services. d. Intermediaries – are links between two parties to consummate a business transaction. In the case of Starbucks, this could be the broker who would source the best coffee bean for Starbucks. e. Micro-environment publics – this is the community where Starbucks franchises operate. Macro-environment Political environment The political environment is the regulatory atmosphere of which Starbucks operate as a business. The political environment could determine whether Starbucks can open a franchise in a certain country or if its bean can be had without any regulatory issue (issue of quota, banned goods, taxation etch.,). Economic environment Economic environment determines the financial capacity of its market. In the case of Starbucks, economic environment made Starbucks reconsider its position in the market when the financial crisis hit in 2008-2010 that companies were compelled to adapt to the new market realities to stay afloat as a business. Social environment Along with the financial crisis is also the changing economic behaviour of Starbucks customers whose purchasing habits changed dramatically along with their choices of coffee products. The “premium coffee” preference suddenly became less a priority and convenience and affordability moved to the forefront. The “prestige orientation” of Starbucks is no longer applicable in the changing behaviour of its customers. Technological environment The use of technology is one of the advantage s of Starbucks from its competitors. Despite the crisis, it still managed to keep in touch with its customers with its web platform where customers can discussed about coffee. This became an online community where Starbucks reinforce with its own ingenuity of sending greetings during the customer’s important personal events such as birthdays. In addition, its Gold Card Holder facility through a cellphone helped maintain customer loyalty during the company’s trying times. II. 7 P’s of marketing The effective use and combination of the seven P’s of marketing which are product, pricing, place, promotion, people, physical evidence and process has been proven to enable the business to perform more effectively in the market (Constantides 2006). a. Product Product is “everything the purchaser gets in exchange for his money” (Rushkin-Brown 2008:168). A product is any object which has a distinctive tangible existence. When applied in marketing however, the meaning of product takes in varied form. The product “may be a good, service or just an idea. Applying to Starbucks, it position its products as high ends with more 30 blends and single‐origin premium coffees along with handcrafted beverages which is a Starbucks signature. The financial crisis change this as Starbucks introduced new product lines that are recession friendly. b. Price Price is the amount that the market is willing to pay for a certain good or service. Price has to be competitive and justifiable by the product. Promotion will come naturally if the product is proven to be reliable with the company having an after sales support like training its end users how to properly wear and repair it (Luan 2010). Pricing is critical because under a perfect competitive market, price can determine demand; a higher price can discourage demand while a lower price can stimulate demand making a business enterprise more competitive in the market (Möller 2006). With regard to Starbucks, it does value pricing which means that value is tied to the “customer’s perception of what the product is worth to them” (Möller 2006: 441). Starbucks was packaged as a connoisseur’s coffee and therefore pricey averaging at $4 per coffee and even more for other product lines. The new economic reality however made Starbucks change this and introduced affordability where 90% of its product lines now costs less than $4 with an average drink prince of under $3. The gap in price between one of its competitor McDonalds has narrowed since then. c. Place Place in Marketing Mix is “the distribution process, interposed within goods flow, has in view the means and operations that assure goods and services to intermediaries or final consumers, leaving them a numerous range of options of time, place, size, choice, price, etc., according to the needs they manifest on the market” (Bălăşescu 2008:735). It goes without saying that the manner of making the product available to its potential consumer is as important as the product itself. d. Promotion Promotion is defined as the coordinated self-initiated efforts to establish channels of information and persuasion to facilitate or foster the sale of goods or services, or the acceptance of ideas or point of view” (Hundekar and Appannaiah 2010:102). Promotion can basically stimulate demand or discourage it through the absence of promotional efforts (Roger et al. 2009). In the case of Starbucks, its promotional effort has changed as its in-house staffs are now trained to communicate to consumers that its prices are affordable. They are now communicating the information that more than 90% of their product lines cost $3 less and this is also being communicated in their advertisements. e. People – is the human resource needed to create the product/service. f. Physical Evidence – the configuration of the product or service. g. Process – the manner the product or service is made. III. Details about the business Starbucks began in 1971. Back then, Starbucks were still a roaster and retailer ofwhole bean and ground coffee, tea and spices witha single store in Seattle’sPike Place Market. Today, Starbucks has grown to nearly 18,000 retail stores in 60 countries serving millions of customers every day (Starbucks 2013). Starbucks operates under the mission of “To inspire and nurture the human spirit – one person, one cup andone neighborhoodat a time” (Starbucks 2013). Starbucks offers a range of exceptional products that customers enjoy in their stores, at home, and on the go. Among these products are; Coffee with more than 30 blends and single‐origin premium coffees. Handcrafted beverages of fresh‐brewedcoffee, hot and iced espresso beverages, Frappuccino®coffee and non‐coffee blendedbeverages, smoothies andTazo®teas. Coffee‐ andtea‐brewing equipment, mugs and accessories, packagedgoods,music, books and gifts. FreshFood baked pastries, sandwiches, salads, oatmeal, yogurt parfaits and fruit cups (Starbucks 2013). IV. Examples of the impact on the business Environment can indeed change a company’s strategy dramatically. In the case of Starbucks, it has to reposition its brand to stay afloat during a financial crisis by responding to the changing behaviours of its customer who are now becoming price sensitive due to the recently concluded economic crisis. The economic environment brought by the financial crisis changed the buying behaviour of its customers contributed significantly for Starbuck’s crossover into affordability market. The social factor also that made customers price sensitive made Starbucks reconsider and reposition its brand in the market. To remain afloat and profitable as a business, Starbucks has to adapt to the changing buying preference of its customers thus its crossover into the lower segment of the market. Starbucks strategy of closing stores and opening fewer ones are its efforts not to erode the product value of its brand which is its strongest quality. In a way, it is doing a damage control not to lose the Starbuck appeal and that customers will still be willing to pay for the brand. Closing non-performing stores is to save the financial reporting of Starbucks not to reflect significant decline that its investors may find undesirable thus lowering its market value. By closing down non-performing stores and opening fewer stores, it minimizes the risk of the company during a crisis. This does not necessarily mean to be bad for business. In fact, this is a good indication that the company can weather the crisis and will not only survive but still profit because it is capable of adapting to the changing environment. The proof is that Starbucks is still existent today and its quality service is still undiminished even if has reposition itself in the market due to the changing environment. Bibliography Bălăşescu Marius (2008). Contribution to the Definition of the Particularities of Consumer Goods Distribution Marketing. Annals of the University of Oradea, Economic Science Series, 17 No. 4 E. Constantinides, “The Marketing Mix Revisited: Towards the 21st Century Marketing”, Journal of Marketing Management, 22 no. ¾ (April 2006): 407-438 Ian Ruskin-Brown, Marketing Management, Thorogood Publishing Kristian Möller, “Marketing Mix Discussion - Is the Mix Misleading Us or are We Misreading the Mix?” Journal of Marketing Management, 22 no. ¾ (April 2006): 439-450 Luan, Y. J., & Sudhir, K. (2010). Forecasting marketing-mix responsiveness for new products. JMR, Journal of Marketing Research,47(3), 444. Retrieved from http://search.proquest.com/docview/346151517?accountid=32521 Roger A. Kerin, Steven W. Hartley, William Rudelius (2009). Chapter 19: Advertising, Sales Promotion, and Public Relations. McGraw-Hill. S.G. Hundekar; H.R. .Appannaiah, P.N. Reddy, Principles of Marketing, Global Media, 2010, 102 Starbucks Company Profile. (n.d.).Starbucks Company Profile. Retrieved March 9, 2013, from http://globalassets.starbucks.com/assets/9 Read More