Unit 4 Marketing principles and Business Practice

Introduction

In the entire marketing principles business practice assignment report we will study various marketing principles and relate them to Starbucks Corporation. We will study Starbucks international expansion strategy and will see how the various marketing principles can be helpful in expanding globally. The first and basic step is to do SWOT analysis. The target country will be selected and then Starbucks has to do environmental audit which includes PESTLE analysis. Marketing principles also include other concepts like marketing mix, extended marketing mix for service industry, segmentation, targeting, positioning, advertising, promotion, international marketing, buyer behaviour etc. We will study all the above mentioned marketing principles keeping Starbucks in mind. Porter’s five force model and Stakeholder’s analysis are the two other important aspects of marketing. Starbucks has a great presence in coffee retails sector. It sells premium coffee and snacks. It has huge brand name and value. It started its operations in USA in the year of 1971 and after that it started expanding in other major countries of UK. Starbucks has become beacon for all the coffee lovers in most of the parts of this world. It is known for the quality of product, genuine service and inviting atmosphere.

Task 1

Two most important elements of marketing process

We will start our study by doing marketing mix and Starbuck’s five force model for understanding the business in a better way.

Marketing mix of Starbucks: Here we will be discussing about the 4 Ps

Product: The main product of Starbucks is the coffee and related beverages. The main product of Starbucks includes coffee, Italian-style espresso beverages, cold blended beverages, premium teas. Along with these products it also deals with selling some coffee related accessories and equipment.

Price: Starbucks has set its price as premium price as the product is considered to be best among all. In the recent times it has raised its price in Sept 2010 as their raw material price went up. They also follow the business strategy to keep the price of their most popular beverages a bit low so that its popularity increases and always remain secure and does not get affected due to price.

Place: The main backend company for Starbucks is located in New York. It also has branches at Toronto, Ontario, Delaware, Argentina, Australia, Chile, Singapore, Japan and the UK.

Promotion: For promotion Starbucks has its website, it seeks the customers’ feedback and improves accordingly. They also have some reward programs which help them to promote their brand. They focus in providing quality experience to their customers and they believe customers.

Prepare a SWOT analysis of Starbucks and explain the importance of using SWOT analysis as marketing tool.

Using the SWOT analysis as a marketing tool is very important as it is the first and foremost step to create and implement any marketing strategy. It helps in knowing the internal strengths and weaknesses of any organization and external threats and opportunities can also be noted down with the help of SWOT analysis. On the basis of SWOT analysis we can find out how the strengths can be used to capture opportunities and how we can create strategies to improve on our weaknesses.

SWOT analysis of Starbucks is as follows:

 Strengths

  • Brand name and brand value is very big in coffee retail market.
  • It is known in all over the world for best quality products and services.
  • Atmosphere and ambience in its stores is one of its strengths.
  • Employees in the organization are very motivated, encouraged and knowledgeable.
  • Starbucks has very strong relationship with its suppliers.

Weaknesses

  • It is not able to find internal issues.
  • It depends on word of mouth marketing and does not have strong advertising strategy.
  • No strategy to deal with competitors and other external issues.

Opportunities

  • The biggest opportunity is international expansion on which we will focus in our entire report. There are many countries which are not captured by Starbucks so it should enter in these countries to increase market share and growth.
  • As it has already developed brand it can also focus on developing its product portfolio.

Threats

  • External environmental factors like tsunami, earthquake etc.
  • Economic factors like recession, economic slowdown etc.
  • Competitors like Dunkin Donuts and Café Coffee day can be major threats to the organization.

Explain or define marketing orientation

Marketing objective of any organization should be aligned with the mission and vision of the Starbucks. Starbucks mission is to be very famous brand in the entire world and its marketing objectives should help it in increasing its presence in the entire world. The mission can be achieved by having short term and long term goals and objectives for the organization (Koehn, 2008). Sum of these goals and objectives should become the mission and vision of the organization. Following are the main objectives of Starbucks are as follows:

  • The main objective is to give better customer service and acheive customer loyalty. It can be done by maintaining the quality and service in all the stores irrespective of the country it is operating.
  • Starbucks believes in mutual growth so it also wants its employees and suppliers to grow with it. It wants employee satisfaction and also wants to have long term and strong relationship with its suppliers.
  • Expanding internationally and having its own stores in all the major countries is one of the most important objectives of Starbucks. Own stores and infrastructure will help in maintaining the products quality which is the key behind its success.
All the above mentioned marketing objectives will help Starbucks in creating and implementing various business strategies.Its objective is to be seen as a third place to sit around and chit chat with the friends. People should not come for just having coffee. They should come to spend some quality time with their friends or lovers. Customers should feel relax and homely in the ambience of Starbucks.

Explain the benefits and costs of a marketing orientation to Starbucks

Employees in the Starbucks should be taught to be very humble and co-operative with the customers as service is very important part of Starbucks business. Being a market oriented company also means that organization cares a lot and understands its market very well. Starbucks is one of the best market oriented companies. Starbucks need to understand its market completely before implementing any marketing strategy. Costs and benefits are also associated with market orientation. Following are some of the cost and benefits for Starbucks when it is try to expand its business and is try to being more market oriented in other countries:

Costs: Finance will be needed for market research and also for advertising and promotional activities in the new country. Infrastructure development will also require money and time. Hiring and developing new employees will also be a challenge and time consuming for Starbucks. Starbucks has to find out new suppliers and making strong relationship with them and bargaining will become a challenge. Benefits: Starbucks will be closer to its mission and vision of globally recognized organization. Customer base will increase which will lead to increase in revenue, growth and profit. Brand value and name will spread all over the world. Market share will increase. Employees and suppliers will grow with the growth of organization. Target country will also develop with the entrance of Starbucks in their country,

Task 2

Three micro and macro environmental factors influencing marketing decisions of Starbucks

Study of macro and micro environmental factors of the target country is very before implementing expansion strategy. Let us suppose that India is the target country in this case where Starbucks wants to expand. I have chosen India because it is developing very fast and disposable income of customers is increasing. PESTLE analysis helps in understanding the macro environmental factors. The three important macro environmental factors are:

Economy of the country

India’s GDP is growing at a much faster rate. Around 65 % of the people in India are below 35 % of age (Ahluwalia, 2012). Hence Starbucks can get major chunk pf customers in India. IT sector is huge in India where major young population is employed. Starbucks needs to study the threat of recession, inflation etc. Economic recession which came in 2000 impacted Starbucks business in most of the countries.

Political factors

Starbucks has to have support of political leaders and ruling government in the state and also in the country. Starbucks has to stay away from the countries which are politically not stable. India is very stable and safe and it is good decision to choose India as its expansion strategy.

Social factors

Starbucks should also try to understand the society of the target country and on the basis of that it can decide on its marketing strategies. Its marketing strategies should not hurt any emotional or religious sentiments of local citizens. It should also try to get involved in CSR activities to attract more and more customers.

We have already studied porter’s five force model which helps in analysing the micro environmental factors. The three major micro environmental factors which can impact Starbuck’s marketing strategies are as follows:

  • Suppliers i.e. farmers
  • Buyers or customers
  • Competitors such as Café Coffee Day and Dunkin Donuts

Suggest which segmentation criteria would be the most applicable for Starbucks to use for their products in different markets.

Segmentation is defined as dividing the entire market into sub-markets. All the potential customers in a segment should have some similarity. For e.g. people from one location can be considered as one segment or people from one age group can be considered as one segment (Clarke, 2005). Segmentation can be done on the basis of following factors:

  • Geographic segmentation i.e. on the basis of location or region
  • Demographic segmentation i.e. on the basis of age group of customers
  • Behavioural segmentation i.e. on the basis of lifestyle of people
  • Psychographic segmentation i.e. on the basis of attitude of the potential customers
  • Segmentation by benefits i.e. on the basis of customer’s preferences

We need to suggest segments for two different products of Starbucks and the two products which I have selected are Iced-tall sugar free caramel and Oreo Frappuccino. In India first geographic segmentation will be done and four major metro cities will be selected and then within these segments demographic segmentation can be done for two products (Howard, 1994). As we can see that word sugar-free is there in first product so it will be targeted to customers above 30 years of age who are very health conscious and other products is tasty and chocolaty and it will be targeted to customers of 20 to 30 years of age.

Thinking about a range of products and services Starbucks offer choose a targeting strategy for a one of them and propose a positioning strategy for this product.

After selecting the segments we need to have separate target strategies for each segment. We need to find out the preferences of customers within a segment and on the basis of that distribution and promotional strategies are developed. Starbucks need to position its products in such a way that customer should be able to connect itself with the product and customer should find it worthy to buy the product at the given price. Positioning is defined as the way organization wants the customers to perceive its products for e.g. customer should buy the product for its quality and for its low price. Here Starbucks has to position its products on the basis of quality and benefits from the products as its prices are higher. First product i.e. Iced-tall sugar free caramel can be positioned as healthy product as it will keep the customers from danger of diabetics and diabetic’s patients can also enjoy this drink. Other product i.e. Oreo Frappuccino should 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.

Demonstrate how buyer behavior affects marketing activities in different buying situations.

I suggest the two ways which can be used to influence the buyer behaviour for Starbucks products. Starbucks should give discounts and promotional offers during the start of its stores and also during some special occasions like festivals, holidays etc. It should also use social media to influence and attract more and more customers or youth.

Propose new positioning for a selected product/service

Apple Pie Frappuccino will be the first product to be sold in the new market and now we need to develop a positioning strategy for this product. Positioning strategy should be such that customers can relate it to their daily life and they can see some benefits in the product. Positioning strategy will help in making the product popular. As we know that the product is very tasty and has it a base of Frappuccino cream and on the top of this base we have apple juice. . This makes it very stylish and tasty drink. There are other ingredients also which added to this product are cinnamon, whipped cream etc. Name apple is attached to the product and we know that if we have one apple a day it can keep doctors away from our life and hence it can also be positioned as a very health product for the target market of 25-40 years of age. The tagline which I will use to promote this drink will be “Be healthy with delicious coffee”.

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Task 3

How products in Starbucks are developed in order to make sure that competitive advantage is sustained.

Competitive advantage is defined as the advantage over competitors and which occurs when the organization acquires or develops some attributes which are not possible by competitors to copy. Competitive advantage helps in increasing the profit and number of customers in the organization (Barney, 1991). Starbucks has maintained competitive advantage and to make it sustainable in longer period of time Starbucks has to follow some of the following techniques:

  • Starbucks should focus on the use of technology and it can implement software packages like CRM, SCM etc. to be better than the competitors.
  • Suppliers or farmers of Starbucks supply the best quality beans which help in maintaining the quality of its coffee. Starbucks should maintain these relationships in the longer run.
  • Service and the atmosphere of its stores also provide competitive advantage. It makes the coffee worth buying for the customers.

Channels of Distribution used by Starbucks

The network which helps the producer to put its product in the market is called distribution channel. This is the very important part of marketing as it helps in delivering the product to the customer. There are following four types of distribution channels which are generally used in marketing:

  • Direct Selling
  • Selling through intermediaries
  • Dual distribution
  • Reverse distribution

Starbucks is using direct selling and selling through intermediaries or partners to sell its coffee to the end users. Selling the coffee through its stores directly to the end users is called direct selling. It is the main distribution channel as it has lots of stores in all the major countries. The other way of distribution used by Starbucks is to sell its coffee to shopping malls, theatres, restaurants, and school or college campuses etc. which then sell the coffee to the end users. It also gives franchise options as its international marketing strategy.

Strategies used by Starbucks.

Methods used by the organizations to set the price of the products of services are called pricing strategies. Pricing strategy depends on the total cost incurred by the organization and also on the expected returns. It also considers marketing objectives and demand and supply of the product (Dolgui, 2010). To be sustainable in the market pricing should be done keeping competitors pricing for the same products. Our prices should not be much more as compared to the competitors. If prices are higher organization should be able to justify the difference either by some extra benefit from the product or by providing better service as compared to the competitors. Pricing strategy used by Starbucks is called skimming the market as it follows the premium pricing strategy. Value based pricing is the other pricing strategy used by Starbucks. Starbucks gives an opportunity to the customers to spend a quality time with their friends in Starbucks’ stores. Economic factors like exchange rate, inflation, interest rate, recession etc. should also be considered while setting the pricing.

Discuss promotional activities of Starbucks and explain how promotional strategies used by Starbucks are integrated and related to marketing objectives of the organization.

Promotion and advertising is very important and vital part of marketing as it helps in communication the value of the product or services to the customer. All the promotional strategies used by the organization should be integrated which means that promotional strategies should be aligned with the marketing objectives which in turn should be aligned with the mission or vision of the organization. The three important promotional ways used by Starbucks to promote its brand are word of mouth, social media and viral marketing. The viral social media campaign has been successful in creating a community around the brand. Individuals are allowed to give their feedbacks and to share their experience on the social networking sites like Facebook. Twitter and on other blogs. These promotional strategies have helped the organization in becoming $4.1 Bn Company. Starbucks is using print media, advertising, and media marketing to increase the awareness of its brand. Starbucks is spending 1.4 % of its revenue every year on advertising.

Additional elements of the extended marketing mix.

Marketing mix is one of the very important marketing principles which includes four P’s which we will discuss further. There are three other extended elements of marketing mix which are applicable to the service sector organization. Starbucks also provide service to its customers (Rafiq, 1995). Following are the three extended elements of marketing mix:

  • Physical evidence

Customers should be able to connect with the organization. Customers should know where they have to go to avail service or product from the organization and that is done by having physical presence. Starbucks own stores and website come under this category

  • People

People include the employees, customers and suppliers. Starbucks want everyone to grow and believes in maintaining long term relationships.

  • Process

It includes the way of preparing coffee and delivering service to the customer.

Task 4

Marketing mix for two different segments of market in Starbucks

Marketing mix can be defined as a tool used by marketers to determine a product or brand’s offer. In this part we will compare the marketing mix for the two segments. First segment will be the existing marketing and second one will new country such as India. 4 P’s for both the segments are as follows:

4 P’s Existing Market New Market i.e. India
Product Oreo Frappuccino Apple Pie Frappuccino All the products in the product portfolio of Starbucks
Pricing 3-4 euros per cup and premium pricing and value based business strategy will be used to cover all the infrastructure and service costs. Pricing: Around 80-111 Rupees per cup will be charged
Promotion Promotion and advertising will be done with the help of: Social networking sites Radio Pamphlets Newspaper etc. Other way is to open the stores near the colleges and organizations. Promotion will be done through Television Radio Hoardings Facebook, twitter.
Place Major cities of USA and UK. Major cities of India will be chosen initially which are: Delhi Chennai Kolkata Hyderabad Mumbai

Explain differences in marketing products and services to business rather than consumers.

There are two types of marketing i.e. B to B marketing and B to C marketing. B to B means business to business and B to C means business to customer i.e. end user. Selling the product directly to the end user is called B to C marketing and selling the product to the business which will sell your product to the end user is called B to B marketing (Ranganathan, 2002). Starbucks is involved in both types of marketing as it sells its coffee and snacks directly to the end user with the help of its stores and it also sells its products to restaurants, malls, cinema halls, campuses etc. which will sell it further. Both the marketing are very much different from each other. Number of customers is less in B to B marketing. Buying process is very long as revenue generated from one customer is huge as compared to the one customer in B to C marketing. It takes days to sell product to one customer in B to C marketing as buying process involves number of steps.

How and why international marketing differs from domestic one.

Domestic and international marketing are different from each other in many ways. Expanding globally i.e. entering into a new marketing requires lots of effort, research, money and analysis. A complete PESTLE analysis should be done on the country we are entering (Clarke, 2005). Society and culture of the culture should also be researched.

Conclusion

Marketing is one of the very important departments of any organization. It helps in communicating the features and specifications of the product to the customers. Customer can know about the product without going to the organization himself. We studied various important marketing principles considering the expansion strategy of Starbucks. PESTLE and SWOT helps in knowing the micro and macro environmental factors impacting the business of the organization. We also studied the concept of segmentation, Targeting and positioning. Advertising and promotions are also very important to stay competitive in the market. Starbucks has been using all the marketing elements in a very efficient way. Important elements are SWOT analysis, PESTLE analysis, macro and micro environmental factors, promotion and advertising, segmentation, targeting, positioning, 4 P’s, extended P’s for service industry, B to C and B to B marketing, domestic and international marketing, stakeholders analysis, porter’s five force model etc. Starbucks has been successful in using all the above mentioned marketing principles properly.

References

Ahluwalia, I. J. 2012. India's economic reforms and development: Essays for Manmohan Singh. Oxford University Press. Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of management, 17(1), 99-120. Clarke, G. 2005. International marketing environment analysis. The Marketing Review, 5(2), 159-173. Dolgui, A., & Proth, J. M. 2010. Pricing strategies and models. Annual Reviews in Control, 34(1), 101-110. Donaldson, T., & Preston, L. E. 1995. The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of management Review, 20(1), 65-91. Howard, J. A. 1994. Buyer behaviour in marketing strategy (2nd ed., pp. 41-48). Englewood Cliffs, NJ: Prentice Hall. Koehn, N. F., Besharov, M., & Miller, K. 2008. Starbucks Coffee Company in the 21st Century. Harvard Business School, Case Study, 9-808. Neal, W. D. 1999. Satisfaction is nice, but value drives loyalty. Marketing research, 11(1), 20-23. BTEC HND Assignment Experts

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