This HNC business marketing principles assignment based on Starbucks expanding strategy to other left major countries of the world.
Assignment 1- Short Report
The first part of the report is an introductory small report in which we will have a look on the SWOT of Starbucks and also on the PESTLE analysis in terms of Starbucks. These two marketing principles will help us in knowing the internal and external environment of the organization which can impact its future strategies. All the strategies in the next part of the report will be dependent on these two principles:
Starbuck’s SWOT analysis
|Strengths Ø As we all know that Starbucks is the best brand in Coffee sector. Its huge brand name is always an advantage for it. Ø It always believes in opening its own stores and hence it is able to maintain best quality across all its stores. Ø Employees of Starbucks are its strength. They are very knowledgeable and motivated (Michille, 2006). Ø Strong relationship with the suppliers and partners of the organization is also one of its major strengths.|
|Weaknesses Ø It usually focuses on external issues but is not able to find our internal weaknesses. Ø It does not have any strategy to deal with external environment like competition. Ø Business Marketing activities are weak in the organization.|
|Opportunities Ø There are lots of countries which are not captured by Starbucks. So there is huge opportunity of increasing the market share by entering into these countries as organization has suitable resources and experience in international expansion. Ø It can also expand its product portfolio and can use its successful brand name to enter into new sectors.|
|Threats Ø Competition from other major players like Café Coffee Day. Small street vendors or coffee shops can also be a threat to the organization. Ø External environmental factors like earthquake, tsunami etc. Ø External economic factors like recession, economic slowdown etc. can also be a threat to the organization’s international expansion strategy.|
PESTLE analysis for Starbucks
PESTLE analysis includes the macro-environmental factors which can impact organization’s business strategy:
|Political Ø Before entering into any country Starbucks has to understand its politics and it should have good relationship with the political leaders. Ø Starbucks has always followed all the political rules and regulations in any country and it has to follow it in future also. Ø It has to be aware of any political disturbance and a conflict happening in the country and it has to amend its strategy according to that. For e.g. Iraq war had a negative impact on Starbucks business.|
|Economical Ø Economic stability of the target country is very important. Growth, GDP, inflation etc. decides the purchasing power of the country’s population (DUNN, 2001). Ø Disposable income of the citizens also depends upon the economy of the country. Ø Economic slowdown in 2000 impacted Starbucks business in many countries. Ø Starbucks has to stay away from countries which are more prone to the economic slowdowns and recessions.|
|Social Ø Locality and the society near the stores can also impact its business. Ø Starbucks has to understand the society before entering into new country. Ø Society also includes the supplier, farmers and the customers. Ø Starbucks has to involve in some CSR activities for the society.|
|Technical Ø Technology dependency is increasing these days. So Starbucks has to implement software packages like CRM, SCM etc. for better running of operations and for better relationships with customers and suppliers. Ø Newly updated machines should be implemented to reduce manual effort and to reducing waiting time of the customers.|
|Legal Ø Legal constraints can come in the path of Starbucks expansion in any country. So all the legal policies should be understood and known beforehand. Ø Legal policies or issues include health and safety of the locality, pollution check, customer protection etc.|
|Environmental factors Ø Every country wants to have better environment. Starbucks has green logo so it will be beneficial and it has to involve in some go green activities like growing trees etc. Ø It also has to be ready for any environmental disaster like earthquake, tsunami, floods etc. Ø It should try to use renewable sources as much as possible. Ø Starbucks has plans to save water consumption by 25 % till 2015.|
Micro Environmental factors impacting Starbucks
|Suppliers The entire business depends upon the relationship with suppliers and quality of beans provided by the suppliers. Any misunderstanding or conflict with them can put a full stop on Starbucks business.|
|Buyers Buyers are the customers and they are always important for any business. Customer satisfaction is very important. Starbucks need to do research to understand the buyer behaviour where it is planning to expand.|
|Competition We can never ignore and underestimate our competitors. Starbucks has to do competitors analysis and should try to achieve competitive advantage by providing better quality products and services to the customers. Knowing the price, product quality and promotional strategies of the competitors is very important.|
Assignment 2: Report
Explain the various elements of the marketing process and evaluate the benefits and costs of a marketing orientation for the selected organization.
Marketing includes various models or elements. The two most important are Stakeholder’s analysis and Porter’s Five force model.
If the Starbucks plan to expand to new country to develop its market share it will have impact on lots of people (Chakravorti, 2010). Major stakeholders will be as follows:
- Citizens, government and locality of new country
- Other marketing or advertising agencies
Starbucks always believe in maintaining long term relationship with all the stakeholders and believe in mutual growth.
Porter’s Five Force Model
Porter’s five force model is used by the organization to study the competitors and customers of the organization.
|Suppliers Starbucks get its best quality coffee beans from the farmers and they are the major supplier of Starbucks (MacDonald, 2007). Starbucks has always maintained strong relationship with the farmers.|
|Buyers Starbucks has strong brand name which has helped in having strong customer base and customer loyalty.|
|Potential New Entrants Entering into luxury coffee market requires lots of money and resources and hence threat from new entrants is very less for Starbucks.|
|Substitute products Substitute products for Starbucks are low-cost coffee makers, restaurants and hotels.|
|Competitors McDonald’s Mccafe and Dunkin Donuts and major competitors of Starbucks|
Cost and benefit analysis
Cost and benefit analysis for Starbucks international expansion strategy is as follows:
- Cost will be incurred on new infrastructure in new country.
- Advertising and promotional activities also require money.
- Cost will also be incurred on market research activities and to acquire new partners in the country.
- Hiring and recruitment will also require money and time.
- Raw material cost will also be included in the cost for Starbucks
- Increased profit, revenue and market share.
- Increased brand name and customer loyalty will lead to increase in number of customers.
- Starbucks will be able to make strong relationship with the government and locality of new country.
Following the SWOT analysis identify a product/service that can be marketed to two different segments. Justify your reason for the proposed segmentation criteria. Choose a target strategy for the chosen product/service. For the chosen strategy discuss how the buyer behaviour affects marketing activities in different buying situations. Discuss the buyer behaviour in relation to the segmentation criteria you have identified.
SWOT analysis helped us in knowing that Starbucks has huge brand name and it has lots of products to be sold to the new market. Starbucks has to sell all the products from its portfolio in the new country and every product can be sold to different target market based on the quality and special attributes of the products (Thompson, 2004). Brand name will help in increasing the awareness through word of mouth. The two different segments will be people above 25 years of age and people below 25 years of age. Both the products can be targeted to people between 20-30 years of age as there is no demarcation between the two segments. The product which will be targeted to people above 25 years of age is “Iced tall sugar-free caramel, Non-fat, Light Ice, Starbucks double shot on ice”. This product will be positioned as healthy and energetic drink. The other product will be positioned as tasty and chocolaty product for children and the product is “Oreo Frappuccino”
Buyer behaviour can be defined as the different way of buying a product. All the customers have different choices and preferences from each other. Marketing and promotion activities depend a lot on the buying behaviour of customers. Starbucks has to hire a market research agency and should do a complete research to the preferences and choices of the customers. Market research should also focus on knowing the average disposable income of the potential customers where we are thinking of implementing our store. We have seen the promotional offers and discounts always attract customers. So in the first month Starbucks has to give discounts or combo offers to increase the awareness. It should also implement these promotional strategies during weekend and special occasions like festivals, public holidays etc. Social media is also very helpful in knowing the behaviour of the customers. Youth can give their feedback in these sites and even Starbucks can get its questionnaire of market research filled from the users if these social networking sites. Users of these sites are majorly youth which are potential target customers of Starbucks.
Suggest a range of positioning options for your selected product. How the product is going to be developed to sustain competitive advantage
Positioning is defined as the way we want customer to perceive the product we are selling (Ries, 1986). For example electronics products are usually positioned as durable products. Durability is the positioning strategy used by the companies selling their products. In case of Starbucks the above selected products can be positioned in two different ways. The first product will be positioned by communicating some health benefits. For e.g. it is cholesterol free and it helps in keeping good body shape. Low fat can also be used as a positioning strategy for this product. Other product i.e. Oreo Frappuccino will be positioned as a finger licking or very tasty product. If you have one you will not be able to resist yourself from having other one. These types of taglines can be used while advertising these products. Positioning strategy also says that the customer should be able to connect itself with the product. Customer should be able to see benefits in the product and it should be worth buying. Customer should be able to see a value in the product.
Competitive advantage is defined as the internal capability of the organization which makes its products or services better than the competitors (Warr, 1994). Internal capability includes the quality of the raw material used to make the product or the process involved in making the product. The process is internal to the organization and it will not be shared with any of the external entity. Starbucks is known for the quality, taste and service offered to the clients. Starbucks has to maintain these things and this can be done by providing proper training to the new employees of the new organization. New employees should be taught by experienced employees and the process should be standardized in all the locations. Quality of the product can be maintained by having control on the suppliers. Coffee beans which comes from farmers should be fresh and of best quality. Ambience in the stores and service provided by Starbucks will also help in maintaining competitive advantage.
How distribution is going to be arranged to provide customer convenience and how you would set the price of the product to reflect organization’s objectives and marketing conditions
Distribution is the way to make product accessible to the customers. There are various distribution channels used by the organizations to make its product available in the market. Selling the product directly to the end user is called retailing and own stores and shops are used for this. Selling the product to any company which will sell it to the end user is called wholesaling and it will be done through warehouses. Distribution channels are very important for the success of the organization and for customer convenience. Starbucks usually have its own stores to sell coffee and other products. Its stores are actually its face value. Green coloured stores and logo has become brand value for Starbucks. Starbucks can also think of concept of franchise and partnership to sell its products in the target country. Starbucks should target college campuses, private organizations, shopping malls, metro stations etc. to open its stores. Cinema theatres can also be one of the options. Starbucks can have partnerships with public or private sector organization and can sell its product in bulk to the vendors in these organizations.
Setting the price of the product to maintain suitable profit and to cover all the cost is called pricing strategy (Titus, 2013). Pricing strategy requires lots of research. We need to know costs incurred on human resource, raw material, infrastructure, advertising etc. and then on the basis profit margin percentage we have set the price of our product. Starbucks has to follow the same pricing strategy i.e. premium pricing which they are following in countries like USA and UK. They have to look for customers with higher disposable income and with higher lifestyle. Starbucks coffee is like a status symbol and people with higher disposable income are always ready to pay more to maintain higher lifestyle. Strong brand value and name will also help in keeping the prices higher but Starbucks has to be at par with the other competitors like CCD. When customers pay for better infrastructure and ambience then this type of pricing strategy is called skimming the market. The other pricing strategy which is used by Starbucks is value based pricing. Customers are able to see value in the product and this value is not just coming from product but also from service and ambience provided by Starbucks. Friends can sit in very comfortable ambience and can chit chat for longer time.
Plan and recommend marketing mixes for the two different segments. Include an analysis into the additional elements of the extended marketing mix, providing your marketing plan
The two different segments are customers between 20-40 age groups in the existing countries and new segment will be the new country with people of all age groups.
4P’s for existing segment
|Products Products for this segment are: Ø Oreo Frappuccino Ø Apple Pie Frappuccino||Pricing 3-4 euros per cup and premium pricing and value based strategy will be used to cover all the infrastructure and service costs. .|
|Promotion Ø Promotion and advertising will be done with the help of social networking sites, radio, pamphlets, newspaper etc. Ø Other way is to open the stores near the colleges and organizations.||Place Countries in USA and UK.|
New country like India will be the new segment and 4P’s for this segment are:
|Products All the products in the product portfolio of Starbucks||Pricing Around 80-111 Rupees per cup will be charged|
|Promotions Ø Television Ø Radio Ø Hoardings Ø Facebook, twitter||Place Major cities of India which are: Ø Delhi Ø Chennai Ø Kolkata Ø Hyderabad Ø Mumbai|
There are some other additional extended elements of marketing mix which are as follows:
|Physical presence Physical presence is the way by which organization can reach out to its customers or customers can reach out to the organization. Starbucks has to make a website especially for the new country users. For e.g. if it is entering India it can have a website named StarbucksIndia.com where customers can find out the products sold by Starbucks. Other way to have its physical presence is through its own stores in all the major locations.|
|People Employees, customers and the suppliers come under this marketing mix element. All these stakeholders should find some value and growth and they should be satisfied with the Starbuck’s strategies. Mutual growth has always been one of the important agendas of Starbucks’ CEO.|
|Process Way of preparing and delivering the product to the customers come under process (Kindberg, 2002). How employees are preparing coffee comes under the process. Process should be standardized in all the stores and it can help in fast delivery with the use of technology. It also includes other parts of service like dealing with customer and pouring coffee into the cup is not the only thing in service.|
For the segments you have discussed above clearly explain the marketing mix with including the promotion element. You should discuss how the promotional activity is integrated to achieve marketing objective.
We discussed that marketing is creating, communicating and delivering value to the customer. Without communication we cannot be successful. Advertising and promotional strategies are very important to communicate the worth or value of the product to the customer. And when we promote the product to the wholesaler it is called push strategy. It is also called B to B marketing. Starbucks has been spending around 1.4 % of its revenue on promotional activities every year. Sales promotion can also be done by providing discounts and offers on some special occasions. Starbucks is also using social networking sites for promoting its brand.
What differences are there if you market your products and services to an organization? Suggest on implementing a marketing strategy to market abroad. What would be different from international marketing to domestic marketing?
Selling a product to the end user is very much different from selling a product to a business. Retailing comes under B to C marketing and selling product to any other business is called B to B Marketing (Brennan, 2010). Starbucks has presence in both the categories. It sells coffee directly to the end users through its stores and also to other businesses like hotels and restaurants. Number of customers is less in B to B marketing as compared to B to C marketing but value of one customer is much higher in B to C marketing as compared to B to C marketing because revenue generated from one customer in B to B marketing is much higher. So, there is a strong need of building stronger relationships in B to B marketing.
Domestic marketing is different from international marketing. Selling a product in new country comes under international marketing. International marketing requires lots of research which includes pestle analysis. Micro and Macro environmental factors need to be analysed. Starbucks is using various strategies like mergers and acquisition and licensing and franchising to expand internationally (Robert, 2008). Starbucks acquires Seattle in 1998 to expand its business in UK. Employees in the organization might also feel some issues to work in a new country so organization has to hire local employees which is also very challenging.
See here: UKCBC Marketing Principles Assignment
There are various important elements of marketing which we study considering international expansion strategy of Starbucks. Starbucks has been successful in using all the above mentioned marketing principles properly.