The Market Trends - Report Example

Running Head Market Trends Paper Market Trends Paper Starbucks is a leading coffee retailer operating on the global coffee market. Starbucks is a market leader specialized in coffee, beverages and whole milk products. Its brand image is based on services and products providers to diverse customer groups. Yet successful marketing requires bridging the gap between expectations and demands of customers. It could even be said that successful marketing is the bridging of this gap (Drejer, 2002). To market successfully, Starbucks must transcend its own internal point of view to understand what the product means, and could mean, to consumers who have their own points of view. Only a product that is meaningful from their point of view will seem relevant to consumers, will seem different from other products, will seem to be reasonably priced. Thus, the goal of understanding consumers is fundamental. Understanding consumers is not just using “marketing research” as an information source, nor is it just performing a staff activity. It is a vital, and may well be the vital, resource factor for marketing. Market Structure Market structure of Starbucks is based on monopolistic competition. The competition covers the application of management techniques in the utilization of marketing resources. It is concerned with the responsibility for planning, organizing, actuating, and controlling marketing activities. It achieves its aims by establishing marketing objectives, policies, plans, programs, and standards, allocating marketing resources, and evaluating the effectiveness of marketing activities. Marketing management, therefore, must use research findings and concepts that will help in determining actual and potential wants and needs as a basis for guiding decisions. Competition is force on this market (Fill, 2001). Impact of New Companies Entering the Market The competition is therefore truly positioned in the `commodity box. The acid test of achieved differentiation is superior market position, volume and/or a price advantage. new companies do not have a great impact on market share of Starbucks positioned as a leader in coffee retailing industry. Thus, pParticular attention is given to selected psychological, sociological, and demographic factors useful in understanding buyer behavior. Consumers occupy a pivotal position according to the marketing concept. Prices For Starbucks, Price is the ingredient of the marketing mix that has enjoyed the most extensive economic analysis. In deciding marketing strategies, however, it cannot be separated from the other components. The importance of price as a marketing factor varies with kinds of products and market situations (Starbucks Home Page. 2008). Sometimes non-price factors become more significant than price ingredients. Pricing programs of firms, even within the same industry, vary greatly. Starbucks’ pricing strategies consider both cost and demand conditions, and the dynamics of markets, thereby accounting for both internal and external variables. Starbucks positions itself as a premium brand thus its price are too high for many consumers (Fill, 2001). Technology Modern analytical tools, new technology (especially data processing), and handling and moving equipment increase services and lower costs. The integration of vehicles resulting in the design of two-level and three-level railroad cars to transport autos, the development of containerization and special loading and unloading terminals, the use of highway transport for local pick up and delivery, and air transportation to eliminate warehouses, are examples. Also, Starbucks relies on the Internet and online ordering system successful in America and Europe (Starbucks Home Page. 2008). Productivity Turnover rates are high and productivity is variable. A small proportion of the sales force is usually highly productive, accounting for a large proportion of sales. Given the supporting expenses required and the salesmans salary, a substantial volume of sales is required just to break even (Starbucks Home Page. 2008). Thus proper recruiting selection and training is important. If management, therefore, can identify significant traits that indicate sales success, and test applicants for them, sales productivity should be increased. To do this, some companies compare the characteristics of their most and least successful salesmen. The law of marginal productivity allows to say that Starbucks should change its input and input in production (e.g. add new sorts of new coffee beans) to remain competitive (Pittengrew et al 2998). Cost Structure Cost structure at Starbucks is based on low cost structure for each location. The main operating costs are cost of sales and wages (labor) costs. The company has a functional and flat structure of organization. The value characteristics of products should also be considered. Valuable items such as jewels and precious metals can bear these costs more easily than can low-value items such as lumber and coal. Variations in product lines and such features as packaging, color, size, style, and variety place a heavy burden on the distribution system. Now more products have to be handled with lower volume per item and higher costs of storage, inventory, and handling (Starbucks Home Page. 2008). Wages and Benefits Starbucks proposes its employees high wages and training programs in order to keep top talents. Society covets optimum economic values for individuals and companies (such as low prices and high profits) as well as conflicting social and ecological standards. Special benefits include maternity leaves and specialized training for women and minorities. Fixed and Variable Costs Fixed costs are equipment and property. Starbucks has high fixed costs because it owns expensive stores in central areas of the main cities around the globe. This, it has low variable costs because of low cost for its main ingredients: mil, coffee beans, water and sugar. This cost difference allows Starbucks to remain competitive and ensure its stable position even if it sales fail (Starbucks Home Page 2008). Price Elasticity and Demand For Starbucks, decisions include determining prices for each product or service, discount structures, price relationships among product lines, and price maintenance levels. Problems encountered in establishing prices relate to the inability to determine costs precisely, the difficulties of dealing with expectations, and the variations in impact of policies on different products in a companys product line. Marketing intelligence is a critical component of effective price determination. Pricing strategies must be perceived in terms of the whole product line rather than in terms of each individual product. For instance, some products are priced to engender prestige for the rest of the line rather than to gain their own sale, as is the case with fine china and silverware (Starbucks Home Page. 2008). Other prices are set to permit "trading up," to establish images, or to meet price lines and price points. Price differentials are competitive weapons. To implement them, markets must be segmented and the bases for differentials established. The former requires consideration of demand elasticities; the latter has legal dimensions (Pittengrew et al 2998). Competitors The main competitors of Starbucks are McDonald’s and Dunkin’ Donuts, Costa Coffee and Caffè Nero. Starbucks, The biggest player in Britains £900m-a-year coffee shop industry offers blander drinks than its competitors Costa Coffee and Caffè Nero and is costlier than most rivals, testers for the consumer group” (Hickman 2008). Supply and Demand Recent years, the demand for special food service has increased. So, Starbucks receives a chance to increase its target audience and attract more customers. Demand in the industry increase supply. retailers, because of the very nature of their business and the impact of location on success, pay close attention to location analysis, and some sophisticated research and models have been developed. The process of locating supermarkets illustrates the application of analysis in reaching rational location decisions (Starbucks Home Page. 2008). Government Regulations Governmental regulations include pressure to prevent price rises, or even to roll them back in basic industries such as steel. Governmental involvement seems to relate price increases to the impact on inflation and increased productivity. Such actions as withholding governmental orders or dumping metals from stockpiles back up such informal price control. Government has the influence to block or roll back price increases. Price differentials are subject to government scrutiny and regulation (Starbucks Home Page. 2008). References Drejer, A. (2002). Strategic Management and Core Competencies: Theory and Application. Quorum Books. Fill, C. (2001). Marketing Communication: Contexts, Contents, and Strategies. edn. Upper Saddle River, NJ: Prentice Hall. Hickman, M. (2008). Starbucks is bottom of high street coffee test. Consumer Affairs Correspondent. 19 December 2008. http://www.independent.co.uk/news/uk/this- britain/starbucks-is-bottom-of-high-street-coffee-test-773150.html Pittengrew, A. M., Thomas, H. Whittington, R. (2006). Handbook of Strategy and Management. Sage Publications. Starbucks Home Page. (2008). 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