Marketing Analysis for Starbucks - Essay Example

Marketing Analysis for Starbucks Introduction Starbucks is an international coffee and Spice Company that operates within over 60 countries in the global food and beverages industry. The company has invested in the food and drinks industry, which has become a target by many investors today. The company started from a humble beginning back in 1987 in the US under the leadership of Baldwin, Bowker and Siegel, and now is one of the top international companies that supplies coffee products (Gamble and Thompson 20). The company has faced numerous challenges both from internal and external business environment, which have threatened the development of the company. The company’s management has used a wide range of marketing strategies to promote its product and to resolve its business challenges as market competition evolves. The survival of the company in tough market environment depends on the ability of the managers to design effective marketing approaches to promote its products. Analysis of Starbucks Business Market For an organization to develop effective marketing strategies, it is crucial to understand the market characteristics in which it operates. Over the past ten years, the food and beverages industry has shown an exponential growth and the same is expected in future. Currently, the food and drinks market is valued at about $35 billion and the projection shows that this is bound to rise. By the year 2020, the food and beverages industry is expected to have a total value of $60.0 billion. This growth trend of this industry can be linked with the rising demand of these products and services due to increased rise in social class and growth of population (United Kingdom Food & Drink Report 1-189). However, it is clear that the demand for food and beverages in rising in the developing markets such as India more than in settled economies such as the US. Unfortunately, the competition in the food and drinks and beverages is becoming a great threat to this business. The main competitors included McDonalds and Dunkin Donuts, Costa Coffee, Pete’s coffee and mom and pop coffee stores. Over time, the company has faced a strong competition from Costa Coffee, Nestle, Caribou Coffee Company and the Coffee Roasters. This competition has been accelerated by the poor pricing strategies that Starbuck continues to use over its history. The company’s weakness exists in its inability to effect positive price reduction strategies in markets where price is a major influence of demand (Cardenal Para. 3-4. High prices of products have given the company a bad reputation and promises to be limiting factor in the future of this company. Another weakness emanates from the company’s dependence on coffee as the primary profit reaper. The company has little influence on the coffee prices and the fact the price of coffee is unstable makes the company profits fluctuate. For the company to excel in its business operation it requires reducing its dependence on this product. In future, there are high chances that there will be new market entrants. This implies that competition is bound to rise in this industry and companies must prepare to operate within a very competitive business environment. This sends out a warning to the company to become more vigilant in redesigning strategies to remain marketable in the long-term. The food and beverages market has become more sensitive due to changes in the consumer tastes. Due to the rising standards of living, the public are choosing low priced, high quality services. The global industry is marked by variation of market tastes as people switch to healthier eating (United Kingdom Food & Drink Report, 2014). For instance, the public have become more conscious of diabetes and are abstaining from the consumption of sugary foods and beverages. Therefore, the marketing managers are under pressure to suit these new preferences if they have to sustain their performance. Starbucks has a duty to follow these changes and design strategies to satisfy the dynamic customer demands. Product and Brand Portfolio Starbucks is one of the companies with a wide range of products that target specific market segments across the world. Currently, the organization has over 30 brands of coffee and a wide range of iced drinks. Therefore, the organization marketers have a role to manage a growing brand portofolio under the same umbrella. In its marketing strategy, the organization promotes all products under the same umbrella, while providing details on each product. Its main goal is to help its customer relax after a long day of work with a refreshing cup of a quality made drink. The company uses the customer feedback to design new products that best suit the market requirements. The company has focused on diversifying its products by learning the customer needs (Hunt 10). For instance, after a long debate they introduced the non-fat milk that the customers had shown positive attraction as a complement for coffee. Although this was a challenge for the company, they succeeded after aligning the store activities to meet the rising demand of labour. Later on, they introduced food products that complemented the drinking behavior of their customers. The intention has been to diversify and meet all the needs of the customers in the most efficient manner. The company has suffered criticism for introducing new products that affect their primary products. For instance, the introduction of the sandwiches and breakfast foods spoilt the coffee aroma, which was an essential market tool. Therefore, the company has faced challenge due to poor planning before launching new products. The organization sells beer and alcoholic drinks, a strategy that was launched in 2010, due to the demand of the public as they visited the company’s hotels. In 2013, the company has launched its plan to develop juice products that are coffee flavored, a strategy that is yet to be rolled out (Cardenal Para. 6). Differentiating the company product has helped the organization to reduce it’s over dependence on coffee which at times is unreliable due competition in the market. While product design and development seems to have been a priority for Starbucks, it is clear that the company needs to use customer feedback in designing their [products and considering possible consequences of introducing new products within their stores. Starbucks Objectives The main objectives of the Starbucks company have been to establish the company as the most recognized and respected brand in the international market. The company is based on a number of guiding principles in all its operations, including marketing. First, the company aims at satisfying the customer needs by applying customer-value models to understand customer tastes and strive to satisfy them. Secondly, the organization aims at treating its employees and customers with respect and dignity to enhance their loyalty to the company. In addition, the company is guided by the principles of corporate social responsibility as a way to ensure that the organization transforms the world to become a better place for everyone. From a close look, the objectives of Starbucks are pivotal to its marketing strategies. The organization’s objective is to market its products by building strong customer relations that attract their target customers. Pricing Strategies As the competition grows and the consumer bargaining power rises, Organizations are bound to use pricing strategies to market their products. Starbucks is a master of using price-based models of competition to promote their products. Over a long time, the company has used price-quality balance to promote their products. While it is is acceptable the price reduction is one of the best strategies to attract customers, Starbucks has shown a different side of this notion. In 2013, the organization raised its beverage prices by 1%, while most customers did not realize this change. The objective of the company has been to promote its products by providing affordable products depending on the customer purchasing power. Therefore, the organization’s strategy is not to provide cheap products but affordable products. Although the organization has received criticism for failing to apply price reduction strategies, it is clear that the organization has used quality to attract customers to buy affordable products. Distribution Strategy Distribution strategy refers to all the mechanics that a company deploys to move its products from the production site to customer sites. To distribute its products, Starbucks has used different tactics to reach out for consumers in various market segments. Marketing segmentation is one of the key issues of interest for Starbucks as it rolls out its products and services. Hunt (14-20), in his marketing theory, states that market segments are groups of unique customer tastes that an organization must strive to satisfy. In the food and beverages industry, Starbucks have used different products to target different customer segments. For instance, the “skinny” line of drinks developed in 2008 was a superior strategy that ensured that those who were conscious of sugary foods could enjoy a cup of low sugar drinks with a Starbucks store (Hooley, Piercy and Nicoulaud 8). Starbucks has opened a wide over 600 self-operated stores in various target market segments to ensure that their target customers have access to their services. Therefore, through distribution strategy, the organization ensures that their potential customers have a store to visit as close as possible to their town. Over its history, Starbucks has used positioning strategy to survive in the competitive market. Market positioning helps a company to have a competitive position within the market and to win loyalty from its customers. So far, the company’s unique corporate image has become an important marketing feature. The company is well known globally and this gives it a unique identity in the food and beverages industry. However, the company has risked the loss of identity since the time that the company ventured in the provision of foods and snacks within it stores. The company experienced a heightened business challenge between 2007 and 2008, a time when the company experienced a flat growth rate. One of the reasons is because some of the strategies in this organization turned out against the initial company plans. For instance, the company taste changed when the company started selling foods, which unintentionally changed the coffee aroma that had attracted the customers into the company. The company needs to rebrand its image to ensure that it retains its popularity within the company (Hooley, Piercy and Nicoulaud 23-43). Losing its identity may jeopardize its position in the market, which is crucial if organizations have to remain productive. The 7Ps of Promotional Mix The 7Ps of marketing is a superior approach of analyzing the marketing strategy that a company employs to roll out its products (Smith and Taylor 124). The company has shown commitment to defining high quality products that meet the customer tastes. The “sweet scented’ coffee has been a unique quality products desirable by many customers. The company promotion strategy has been unique all through with the company involving technology and direct marketing strategies in rolling out the products to the customers. For instance, the company’s online presence has helped the company to brand its image in the international scope. In terms of price, the company failed in introducing weak price-based models to reduce the prices of their products. As the customer demand less costly services, it becomes hard to sell expensive products that the company provides. Another important element of the 7Ps marketing model is people. The company has over 6 thousand employees entitle to full employee benefits, which helps to win their loyalty. However, it is clear that the company has yet to satisfy its customers by providing the cheap and quality services. The company has also been poor in collecting customer feedback especially in its online presence. Its ability to streamline its processes with information technology has been an important achievement for the company. The use of the web platform and social media as marketing platform is crucial in this era of technology. However, there is pressure to remain unique due to the evolving social media marketing strategy that demands a two-way communication strategy. Recommendations In the changing market environment, the company has a challenge to use its strength and take advantage of its opportunities to overcome its weaknesses and market threats. To begin with, it is crucial that the company focuses on price reduction strategies to ensure that it provides affordable products to its customers (Zott and Amit 11-14). In a time of economic recession, price is an important factor that customers consider while purchasing from different shops. One strategy to reduce prices would be to employ part-time employees, who work on demand (Gamble and Thompson 14). This will help to reduce the high expenses that the company spends in paying full benefits for full time employees. The company can provide health benefits to win the loyalty of part-time employees. The organization can also reduce its expenses by closing a number of the domestic stores and using fewer stores to cover the needs of the domestic market. Secondly, the company should focus on diversifying its products to meets the diverse needs of the company. It would be a wise decision for the company to shun from selling food products that have jeopardized the company’s unique identity. To maintain the aroma that has been a major strength for the company in its history, the company should consider introducing fruit based drinks that may add to the fragrance of the smell in the company (Lussier 132). This will help the company to attract and retain its customers by positioning its unique products. In addition, this will help the company to edge out its competition with McDonald, which is sells both foods and drinks within its shops. The ability of the company to diversify to more customer-focused products will give the organization an identity and help it to remain profitable through positioning in the market. The company needs to focus on the technology development to ensure roll out its products. Starbucks UK should focus on the use of social media, which has become an important marketing platform (Zott and Raphael 12-39). Since most members of its target class are within the internet age, it is possible to meet them through customized websites and social media sites such as Facebook and twitter. This will help to increase its customers and to improve the organizational productivity. Conclusion In conclusion, Starbucks UK is a company that has employed strong customer and employee-relations to model its internal business environment. Its ability to invest in quality has attracted many customers and helped it survive periods of market crisis. Its ability to remain flexible in product management has helped the company to position itself in the market. However, the company should consider alternative ways of reducing the expenses to be able to launch price-based strategies in the competitive market. In addition, it would be a worthwhile decision for the company to consider social media advertisement. Facebook is one of the business platforms that allow organization to reach out to many target customers in the market. This can help to increase customer awareness and to reduce the company’s expenditure on Television advertisement. This way, the company can position itself in the market, target new markets with superior strategies to satisfy them. Works Cited Cardenal, John. Starbucks SWOT Analysis: A Tasty Coffee Stock. 2012. Accessed from: < http://beta.fool.com/acardenal/2012/11/09/starbucks-swot-analysis-tasty-coffee- stock/16100/> [Accessed on 20th Nov, 2012] Gamble, John, Margaret A. Peteraf, and Arthur A. Thompson. Essentials of Strategic Management: The Quest for Competitive Advantage. , 2015. Print. Hooley, Graham J., Nigel Piercy, and Brigitte Nicoulaud. Marketing strategy and competitive positioning. Pearson Education, 2008. Hunt, Shelby D. Marketing theory: Foundations, controversy, strategy, resource-advantage theory. ME Sharpe, 2010. Lussier, Robert. Management fundamentals: Concepts, applications, skill development. Cengage Learning, 2011. Print. Smith, Paul Russell, and Jonathan Taylor. Marketing communications: an integrated approach. Kogan Page Publishers, 2004. United Kingdom Food & Drink Report. United Kingdom Food & Drink Report, 2, pp. 1-189, 2014 Business Source Complete, EBSCOhost, viewed 27 June 2014. Zott, Christoph, and Raphael Amit. "The fit between product market strategy and business model: implications for firm performance." Strategic Management Journal 29.1 (2008): 1-26. Read More