Opportunity in Social and Cultural Environment - Case Study Example

Case Study: Starbucks Total Number of Words 085 Opportunity in Social and Cultural Environment Tradtional marketing activities like conducting a market research, advertising, and promotional activities are among the least important factors that could significantly affect the creation and development of customer value (Kumar 2004, p. 5). Therefore, Starbucks decided to improve its social and cultura environment as a way of capturing more customers and making a large group of individuals loyal to the company. As part of Starbucks’ strategy in enhancing its social and cultural environment, the company acknowledges the importance of proper recruitment process and training of the right people by improving their interpersonal skills and aptitude. This strategy creates new business opportunity for Starbucks. By increasing the efficiency of the baristas in terms of delivering the order of its valued customers within the shortest period of time possible and maintaining the cleanliness and friendliness of the staff who are working within Starbucks coffee shops also creates competitive advantage for the company. Significant Changes in Starbucks’ Competitive Situation Almost a decade ago, Starbucks has been focused on saturating the domestic market in the U.S. Since the company has already saturated the U.S. market, Starbucks began expanding its business within the global markets. Since anybody can easily establish their own coffee shop, competition within the coffee industry is very tight. As explained by Porter (1998, p. 1), competitive advantage is referring to the “search for a favorable competitive position within a particular industry”. Using the four major assumptions we have mentioned earlier, Starbucks management was able to successfully develop a competitive advantage in terms of improving the quality of services the company has been extending to its valued customers. There is a very tight market competition with regards to domestic and global markets of coffee products. In line with this, rivalry within the coffee industry is tight due to the fact that the capital requirements in putting up a coffee shop are not so expensive. This makes barriers to entry within the local and international coffee industry low. Since anybody can easily sell brewed coffee, the threat for substitute products is very high. Improving Starbuck’s services increases its market share within the coffee industry. Therefore, the company has gained more power over its suppliers. Since the company is able to purchase its raw materials by bulk, Starbucks is able to purchase its raw materials at a relatively low price. Considering that there are a lot of existing coffee shops around the world, the bargaining power of the buyers becomes high. Even though the company has more bargaining power with regards to its accredited suppliers, Starbucks is facing a serious challenge in terms of maintaining the loyalty of its customers because of the low barriers to entry, high substitution, and high bargaining power among its existing and target customers. Upon analysizing all aspects that could increase Starbucks’ customer satisfaction rate, the coffee company is able to sell its retail coffee at a premium price as the company maintains its hold onto its loyal customers. Basically, maintaining a good quality customer service combined with opening at least three new stores each day are some of the main reasons why Starbucks has been successful despite the tight market competition within the coffee industry. Changes in Starbucks’ Marketing Strategies There are a lot of marketing strategies that contributes to Starbucks’ competitive success in the United States. In line with this, Howard Schultz’s firm decision to dominate the entire U.S. coffee retailing market through the implementation of a massive expansion of Starbucks’ coffee outlets attracts the attention of local investors nationwide (Video Case Study (Starbucks), 2010). As a result of saturating the local market, Starbucks started to expand its business in different countries worldwide. In the case of Starbucks, the company does not focus more on selling its coffee products at the lowest price possible. Considering that there are so many similar food and beverages companies that are also selling coffee, Starbucks management thought about maintaining a high quality service in order to keep their loyal customers away from patronizing the products and services offered by other similar companies. As a result, Starbucks coffee was able to successfully sell retail coffee at a premium price (Video Case Study (Starbucks), 2010). When marketing for a service company like Starbucks, it is necessary to use 3P’s known as: physical evidence, people, and process (Vandermerwe and Rada, 1988). Because of the rapid changes and tight competition in the local and global markets, the use of a typical marketing mix alone is not suffient in terms of increasing a company’s competitive edge over its rivals within the same industry. As part of using the marketing mix as a way of capturing a bigger domestic and global market share, the company’s value proposition is focused on three main factors: (1) high quality coffee as the product; (2) maintaining customer intimacy as the main focus of its service; and (3) maintaining a pleasing coffee ambiance or store atmosphere. Demands of Starbucks’ customers changes constantly. Because of the tight competition within the local and global markets, marketing managers are slowly becoming more “market-oriented, market-driven, and customer-focused” (Kumar 2004, p. 5). When we talk about being customer-focused, Starbucks’ management examines all aspects that could increase the customer satisfaction. This is one reason why the company exerts effort in receiving customers’ feedback with regards to how the company is maintaining the cleanliness of the store, how Starbucks’ baristas is treating the customers, how friendly are the staff, the quality of coffee taste and flavor, efficency of the services, freshness of coffee, and comment about the market price of Starbucks’ coffee among others. Recommended Solutions Starbucks should continuously exert extra effort on improving not only the inside and outside physical appearance or ambiance of its coffee store but also the overall physical apprearance of Starbucks crew who are directly serving its valued customers with coffee. Starbucks has been making each of the Starbucks employees as ‘partners’ by providing them with health insurance and stock options. By doing so, the company will be able to avoid experiencing high employee turnover. Likewise, the company will be able to increase the level of customer satisfaction. It is also advisable for the company to conduct customer survey regarding their personal opinion with regards to the services given to them by the baristas, the freshness of the coffee served, the cleanlines of the coffee shop, and the ability of the baristas to deliver their drinks on time. Regularly gathering the customers’ feedback will enable Starbucks management maintain a high quality customer service. *** End *** References Kumar, Nirmalya. (2004). Marketing as Strategy: Understanding the CEOs Agenda for Driving Growth and Innovation. HBS Press Book. Porter, Michael E. (1998). Competitive Advantage – creating and sustaining superior performance. New York: The Free Press. Vandermerwe, Peter and J. Rada. (1988). Servicitization of business: Adding value by adding services. European Management Journal , Vol. 6, No. 4, pp. 314 - 324. Video Case Study (Starbucks) (2010). Retrieved June 12, 2010: http://wps.pearsoned.co.uk/ema_uk_he_hollensen_globalmark_4/64/16425/4204825.cw/content/index.html/ Read More