Starbucks: Marketing and Performance Analysis - Case Study Example

Starbucks: Marketing and Performance Analysis Executive summary Starbucks is a leading coffee retailer in the world. It was established in 1971 in America and within very short time period it got immense success at the regional and international level. The key factors contributing to the success of the company includes its strategic management, quality control and distinctive marketing approach.   Analyze Marketing Activities and Performance of Starbucks Company Background Starbucks Coffee Company (NASDAQ: SBUX) was established in 1971. It opened its very first outlet in Market Place, Seattle’s Pike. In 1986 it was acquired by Schultz, who envisioned it as a home coffee shop where people can get the best coffee with other complementary services. The company was expanded with proper positioning and marketing strategies soon after it was acquired by Schultz. Starbucks then reanalyzed its marketing activities which were solely based upon maintaining a personal and cherished relationship between customers and the company. This was done initially by reviving the experience of Italian Espresso Bars. The company’s primary focus was over the quality services extended to its customers and the overall in-store experience. Therefore they bought the best quality coffee and maintain a consummate brand image. The company had a mission statement stating the real purpose of existence i.e. to serve American population. In exact words: “To instigate and nurture the human strength through serving them one cup per person at a specific area” (Charles W. Lamb 22). After having successful business for twenty five years Starbucks expanded its business into the foreign lands. This was initiated through the opening of their first international outlet in Tokyo, Japan. Currently the company has more than 17,000 stores in 49 countries which has enabled the company to become the most recognizable and reputable brand of the world. From the time when it was established in 1971, the company has shown a significantly increasing growth trend which indicates its outstanding performance and enhanced satisfaction level of Starbucks’ customers (Charles W. Lamb 22). Organizational Chart (Starbucks) Product Portfolio Starbucks has a distinctive product portfolio which encompasses a wide range of coffee flavors. It is divided into five categories, namely: Starbucks, Creamice, Fontana, Tazo Tea and Supplies (Products: Our Complete Product Portfolio). Starbucks: It is further classified into ingredients of beverages which are mostly used in production of different drinks and coffees. They also have branded cups with the name of ‘Starbucks’. Additionally they have hot cocoa which is a very unique, high quality chocolate drink and resale merchandize which includes: ceramic cups, roasted dry fruits, biscuits, etc. Creamice: It includes all the beverages which fall into the category of frozen blend. These are served with flavor treats and customized syrups. It has been divided into further categories: Latte, Mango, Mocha and Raspberry. Fontana: It contains a wide variety of syrups and sauces which turns beverages into specialty offering i.e. unique to Starbucks only. The major categories includes: chocolate syrups, fruit syrups and sauces, nuts and essences. Tazo Tea: Coffee and tea are ever best companions and Starbucks has further intensified their relationship. There is a huge variety of tea which is sold in branded packaging. It is artfully blended to give a superior taste to the customers. The extended versions include: Gallon Bulk Iced tea I, Gallon Bulk Iced Tea II, Filter bag and Tea Latte Concentrate. Supplies: They supply a wide range of products concerning coffee and tea. For instance, they have filters of different sizes, cleaning powders, brushes, pitchers, cream dispensers amongst other things. Broadly the supplies are categorized in to airpots and carefes, small wares, cups and cleaning stuff. SWOT Strengths (Starbucks SWOT Analysis): They have a wide range of products which enables them to cater differentiating market. They have secured the leading position of coffee industry. The main product of the company is a key addiction for many customers who can’t withdraw from drinking coffee. The brand is well established and they have copy rights protection, patents and trademarks. Huge number of national and international retail outlets which are operated by the authorized company officials only. The retail outlets are built up at high visibility positions which play a significant role in attracting customers. The company has motivated employees who perform their duties with high regard. Exceptionally good relations with customers, employees and suppliers ensure smooth chain management for the company. They have a very strong management who works on the basis of skills, knowledge and ability. Additionally they have a firm financial foundation. Weaknesses (Starbucks SWOT Analysis): The competitors in the coffee industry are increasing with time. Starbucks has more focus towards the business expansion rather than controlling the internal forces which are affecting the business activities. They have a concept of self-cannibalization which has proved to be their significant weakness. The management works on cross functional basis. They have a very expensive products range which is unreachable to a significant number of coffee lovers. Opportunities (Starbucks SWOT Analysis): They can expand their retail business. The technological advancements are beneficial in reducing overall costs of products hence leading to better profits. They can have relatively novel distribution channels which will help them in increasing their customer volume. New product extensions related to coffee, syrups and tea can be made. They can have brand extensions in future as the company is performing well. The international coffee market is widening its horizon which is significantly beneficial for Starbucks. On the other hand the domestic coffee market is also expanding which is yet another opportunity for Starbucks to excel in coffee business. Threats (Starbucks SWOT Analysis): The most significant threat to the company is the increase in restaurants, street coffee houses and supermarkets which are serving the coffee lovers with less prices and comparable quality. The coffee prices in the developing countries are subject to volatility which has created instability in prices of coffee products. The negative publicity of some supplying countries also effect sales of Starbucks. Due to increased awareness consumers are more inclined to go for products with minimum percentage of caffeine as it has poor long term health effects. The cultural and political instability in some of the foreign countries also affect the overall operations, performance and brand image of Starbucks. Market Analysis Starbuck was initially very conscious in selecting its target market since the coffee trend was declining when the company was established. The primary market of Starbucks is the office employees earning middle or high salaries, who maintain a strong desire of making premium purchases. The real motive of the company was to cater the needs of customers as being a middle point between office and home. Employees can easily manage to get Starbucks coffee which they can enjoy in supremely relaxing and interactive environment far from their home and office. Since the product is made for catering the needs of upper middle and upper class therefore the customers have high expectations from Starbucks. The company has major focus over the quality control and services rendered to the customers. In addition to this they maintain a distinctive store outlet for attracting customers and to influence their sensuality (Charles W. Lamb 22). Competitors The competitors of Starbucks are regional based which influence their activity in specific regions only. They do have some major competitors as well including: Dunkin Donuts, McDonalds, Tim Horton’s, The Coffee Bean and Tea Leaf and Peet’s Coffee. All these companies have a significant potential to challenge the operations of Starbucks in future. However currently, Starbucks is considered the market leader of coffee industry as it has the widest range of international retail outlets and a distinctive product portfolio. But it is expected that the increase in overall coffee consumers might create intensive competition for Starbucks in future (Hennessey 1-5). Branding and Positioning The Branding of Starbucks is done considering the uniqueness of its target market and their coffee needs. Its customers require premium quality products along with unmatched services and overall in-store environment. Starbucks’s branding is done in such a way that it is distinguishable from its competitors and extends high strategic advantage to them in terms of price, product’s class and quality. Starbucks has positioned itself in the market as being the most innovative in-store espresso experience; this is done through maintaining quality of products and the supply chain (Charles W. Lamb 22). Strategic Choices The company has made strategies primarily for international expansion. This is reflected by the very first foreign outlet of the company which was opened within 25 years of its establishment. They have focused more towards the quality of products and the delivery channels. Due to this they have suppliers from renowned coffee cultivators. In order to maintain sound delivery channel they have retail outlets at the most visualized areas (Larson 6-10). Ansoff’s Matrix Market Penetration: Starbucks provides its customers with the reloadable cards which facilitates them to sell more coffee to selective customers who are exceptionally loyal to the company (Charles W. Lamb 22). Product Development: The Company is having related and unrelated diversification. Recently it has developed Liqueur in association with Jim Beam Brands in addition to this it has also introduced instant coffee powder (Charles W. Lamb 22). Market Development: In order to have market development Starbucks has been working on partnership basis with Pepsi Company. Also, it has opened new stores in Chile and Brazil (Charles W. Lamb 22). Diversification: The Company is diversifying its products at different levels. For instance, it has related diversification in supplies by introducing new range of coffee making machines additionally; they have launched a new service which enables the customers to buy ethos water through hearing music (Charles W. Lamb 22). Conclusion Since its establishment Starbucks has maintained a unique style of serving its customers with premium quality coffee and related products. Within a very short time period it has acquired a huge number of retail outlets internationally which clearly reflect the superior performance and successful marketing activities of the company. Starbucks does have certain weaknesses and threats. However, according to its current performance and market share of coffee industry, these threats and challenges are not significant enough to affect its performance and operations. Works Cited Charles W. Lamb, Joseph F. Hair, Jr., Carl D. McDaniel. MKTG 5. 22. Cengage Learning, 2011. Print. Hennessey, Rachel. "3 Reasons Why Starbucks Still Shines, Despite Market Shortcomings. 1-5" Forbes 26 June 2012. Print. Larson, Ryan C. "Starbucks a Strategic Analysis". 6-10. 2008. Print. "Products: Our Complete Product Portfolio." 2012. Starbucks. Web. 1 March 2013. "Starbucks." 14 Jan 2013. The Official Board. Web. 1 March 2013. "Starbucks SWOT Analysis." 2012. Calarosbay. Web. 1 March 2013. Read More