Marketing Plan for Starbucks - Research Paper Example

Marketing Plan for Starbucks Introduction Starbucks is an international coffee house chain based in the U.S. The company has become the leading quick-service in the United States and offer coffee, pastries and other hot drinks to customers. In this report the marketing plan for Starbucks has been proposed. In consideration to the findings of environmental analysis, internal analysis and SWOT analysis, the marketing plan has been proposed. PESTLE Analysis  PESTLE analysis has been conducted to determine the various factors in the company’s macro-environment, which can impact the operations of the company and creates opportunities and threats. Political The relationships between coffee producing companies and the United States also impact the operations of Starbucks. For example, Ethiopian coffee is used by Starbucks because of its high quality however, concerns are being raised by the farmers that international companies like Starbucks offer them very little margin. A representative of Oromia Coffee Farmers Cooperative Union. Tadesse Meskela argues that Starbucks sells its coffee in the market for $14 per pound whereas; it buys coffee for only $1.20 per pound which is even lower than production cost (Hot News, 2010). Such concerns are being discussed at political and national level. Coffee producing nations can also impact the operations of the company and can threaten United States to stop trade of coffee. For the Ethiopian farmers trade marking has become very important therefore, Ethiopian government asked Starbucks to sign an agreement of ownership in Coffee however, Starbucks refused to sign it (Oromoindex, 2009). Such concerns can directly influence operations of company. Economic Increasing inflation has increased the cost of coffee, thereby, affected the revenues of coffee companies. Starbucks’ first quarter sales increased by 2.9 percent because of higher coffee prices (Singh, 2009). The growing demand for energy and other beverages and food can influence the demand of coffee in the U.S. According to 2009 trends, consumption of coffee remained consistent at 54 percent of the total adult population partaking (National Coffee Association of USA, 2009). Changing disposable income also affects the demand of Starbucks’ products. Discretionary spending in U.S. for year 2010 is $1.39 trillion and 38 percent out of total spending. Around $844 billion was spent on security and $553 billion was spent on agriculture ($25 billion) (Amadeo, 2010). Social Consumer’s preference for Coffee is increasing such as professionals prefer taking coffee in the morning when they reach at their workplaces. According to Market Force Information, three consumer-preferred companies in the United States include Starbucks, Dunkin’s Donuts and Krispy Kreme (World Franchise Associates, 2010). Technological The development in technology creates more opportunities for Starbucks to increase its operational efficiency. Technological developments have also enhanced the capability of Starbucks to increase its green practices. For example, at several stores of Starbucks, the company is experimenting compact fluorescent lights and energy saving fixtures (Allison, 2008). Legal Starbucks has adopted a franchise expansion strategy in the United States, therefore, like other organizations; Starbucks has to follow Company Law and legal aspects of franchising. Food safety standards are very important for companies operating in Food and Beverages Industry of U.S. Environmental Environmental protection programs and practices are very important for the companies operating in the United States. In order to become a socially responsible organization, Starbucks has established strong relationships with coffee farmers. To improve the working conditions for suppliers and to improve their contribution towards environmental protection (Hot News, 2010). Industry and Competitive Analysis Competitors The two major competitors for Starbucks include the coffee shops and the restaurants and the coffee manufacturers in the United States. Although Starbucks is facing huge competition in the United States market however, the company has been able to keep its market shares because customers prefer product quality, price and service and convenience and Starbucks offer what customers actually want (Wikinvest, 2009). Dunkin Donuts and various other quick restaurants are the competitors of Starbucks. The competitive matrix below shows that Starbucks has the highest ranked position in the competitive matrix. This matrix has been made on the general assumptions which an average customer has in his mind for a particular brand. Competitive Matrix Factors Starbucks Dunkin Donut Mc Donald’s   Weight Rating Weight Rating Weight Rating Superior Quality 0.2 4 0.2 3 0.2 3 Convenience 0.1 4 0.1 4 0.1 2 Brand Name 0.1 4 0.1 4 0.1 2 Price competitiveness 0.1 2 0.1 2 0.1 2 Financial Position 0.1 3 0.1 2 0.1 3 Loyalty of Customers 0.2 3 0.2 2 0.2 3 International Expansion 0.1 3 0.1 4 0.1 2 Customer Service 0.1 4 0.1 3 0.1 2   1 3.4 1 2.9 1 2.5 The table below shows the Generic Competitive Strategies. The current strategy of Starbucks is focused differentiation strategy. Generic Competitive Strategies Competitive Advantage Market Target Lower cost Differentiation Broad target Cost leadership Broad Differentiation Narrow target Focused low cost Focused Differentiation Starbucks is pursuing focused strategy because it is serving a niche market. The performance of Starbucks is better as compared to its competitors as evident from competitors’ analysis. Starbucks pursues differentiation strategy because the company is offering the products which are targeting the distinctive preferences and needs of the targeted segment. Therefore, the competitive strategy of Starbucks is focused differentiation strategy. By adopting this strategy, Starbucks offer a different environment to make its services different from its competitors and concentrates on high income niche markets. Starbucks has been better able to pursue its strategy as compared to its competitors and it is evident from the market shares of the company. The niche market segment is large enough to offer profitable operations to Starbucks. The company has been able to develop customer loyalty through its offers. Its competitors are still not able to replace Starbucks products because they are targeting multi-segments and Starbucks only focuses on its niche segment. Porter’s Value Chain Analysis The Value Chain Framework presented by Michael Porter has been used to analyze the activities of Starbucks so that the process, through which company creates value and achieves competitive advantage, can be evaluated. Inbound Logistics Starbucks is using Oracle’s automated information system for manufacturing or GEMMS. The aim of using this system is to manage inventory, distribution planning, schedule of manufacturing and other processes (WPS Pernhall). The well organized coordination between supply of products through multi-channels and its demand has allowed Starbucks to efficiently operate its inbound logistics. Operations In the United States, Starbucks has the speciality stores which are the licensed retail stores of the company. In the Consumer Package Goods (CPG) segment of company, packaging of coffee tea and other branded products is done (Reuters). Company has been always trying to improve its operational efficiency to improve the quality of its services for example, in 1995; company reported a savings of around $250 million through global purchasing leverage, logistic cost reductions, lower level inventory and lower conversion cost (ThinkOr, 2008). Outbound Logistics Starbucks is using a multi-distribution strategy to deliver its products to its customers. The company is not only selling coffee and food to customers but it is also offering beans and ground coffee to superstores, airlines and supermarkets etc. The company is also using electronic sources and direct mail to sell its products (WPS Pernhall). Marketing and Sales Although the company is not heavily investing on marketing and sales however, the company has made an effective strategy to promote the offers and services to its target market. Service The retail service strategy of Starbucks also gives it an additional advantage. The level of comfort which the customers feel at Starbucks outlets is not available at any other outlet. Company aims to focus on niche market to offer the customer highly customized service. Through licensing of retail speciality stores, Starbucks has controlled its expenses. Procurement Starbucks is relying on coffee producing economies for raw material especially Quality farmers of Ethiopia. Although conflicts with the suppliers do sometimes create problem for the company however, the company has established good relations with a number of suppliers. Moreover, the efficient Oracle system of the company has made it capable to improve its procurement process and reducing the level of raw material. Technology Development Starbucks gives great consideration towards technological development. It is evident from the fact that company uses developed software systems to manage its demand and supply. To make its processes efficient and to improve green practices, company is highly focusing on energy efficiency technology. Human Resource Management The organizational structure of Starbucks is not the latest one however, it does highlight the kind of organizational structure company has. Starbucks actually have a functional structure and relatively flatter. Organizational Structure of Starbucks Source: Tuck School of Business at Dartmouth The company has established efficient human resource policies such as skilled labour is hired and staffing process is a major barrier to ensure this. Semi annual performance appraisals are conducted at company based on which the salaries are also raised. Firm Infrastructure Starbucks has been also able to keep a consistent performance in the market because of its infrastructure. The company has developed a supportive management team which provides support to all speciality stores of the company. Moreover, quality management department of the company and other departments and people also appear as major assets for Starbucks. Marketing Objectives and Plan Core Competencies of Starbucks A strong name when it comes to Coffee A strong focused strategy whereas, other companies are having multi-segment strategy Quality of products because of quality of raw material and value chain process Efficient processes has helped company to maintain quality of services Marketing Objectives The overview of Porter’s value chain analysis and PESTLE analysis clearly shows that Starbucks has been able to achieve its current marketing position because of its value chain process. On the other hand, the major problem for the company today is the economic recession, which has changed the patterns of consumers. As mentioned above that trend of Coffee in 2009 shows that consumption of coffee remained consistent. Secondly, because of increasing competition Starbucks is threatened as company is currently lacking innovation. Therefore, the marketing objectives of Starbucks will be as follows: Target customers should be aware of the fact that Starbucks offer quality products and products should not be promoted as luxury products To create awareness that products of Starbucks are available at grocery stores to increase convenience of people To promote that people can have same quality of coffee taste at their homes if they go for Starbucks Target Marketing Demographic segmentation strategy will be used to segment the market. The following table shows that market will be segmented based on age and salary. Actually age is considered as a very important factor in the coffee industry of US. These two variables have been selected based on the trends of age and salary in the coffee trends report. The target market will be from 26-56 and above years of age and with the income of above $51000.   Salary (000) Age Read More