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In order to understand the position in the market of Starbucks or any organisation a SWOT analysis is fundamental in order to know the actual position, the weaknesses and the improvements it requires, the threat of it and also the opportunities it might have.
One of the Strengths Starbucks has is strong market position on the global market. It maintains a 37 percent of sales growth in the United Kingdom in 2013 and it operates in more than 60 countries. Also it has been recognized as being one of the leading brands in the coffeehouse sector with a rating of 91st in the best global brands in the year 2013. The high quality production of the products and services avoids standardization of the quality.
Another Strength of Starbucks is the location of its shops. Being in high streets, malls, prestigious locations, in office buildings help the company to sustain on the modern competitive edge and stay active in the prime markets. Being environmental friendly and being visually ‘cool’ and fresh reflects the unique character of the brands. The provision of free wi-fi, nice music, excellent customer services, warm atmosphere and inimitable products make the ‘Starbucks experience’ absolute. The main objective of the firm is to make the stores the next place after home and work. The exceedingly professional employees provide top class services which is a fresh experience for all the customers. Being on the 91st rank in the list of best 100 places according to the Fortune Magazine is like a boost that puts the organisation in a great leading position. The great mix of products offered by Starbucks comprehends all age groups demographic factors. The widespread investment in technologies such as Starbucks App helps the company to be one of the top coffee shops and provides a sustainable profit each year. Loyalty of the customers can be noticed as strength of the company, for the reason that the Starbucks cult established through Starbucks Card offers gifts and increase the frequency of the customer return along with Starbucks app.
Weakness in case of Starbucks:
The main weakness of the organisation is the price of the products. Even though the policies of the organisation differs as compared to the market competition, in period of economic difficulties different policies should be implemented in order to keep the loyalty of the customers. The year 2007/2008 had been difficult for the organisation but various lessons had been learned. Also the price of coffee beans is difficult to estimate as it is not a commodity which depends on the estimation of Starbucks. As a result of hedge funds, the condition of the weather and other factors, the price of coffee is difficult to estimate and also the profitability. The overdependence in the UK Market means greater profits are made in the UK and this makes it very volatile linked with the UK’s economic prospects. If the economic situation in United Kingdom is difficult then Starbucks will get negative effects which will impact its profits. Another weakness is the image of a large corporation which is negative. It has been underlined the minimal efforts to become more environmental friendly and also the bad treatment of certain suppliers.
Improvements by expansion:
The extension of the supplier network is one of the opportunities Starbucks have and should consider it as being connected with South America and Africa makes them dependent of either good or bad harvest. An expansion of the suppliers in Asia would be ideal as it provides a good outlook of the suppliers and also would help the company to save money on transport. Another opportunity Starbucks have is the expansion in the new markets such as China and India. In these countries the number of the coffeehouses is not at its potential. Also maybe the increase in variety of products would not be such a bad idea, as this means having products for a broader area of customers. Moreover, as the brand also sells its products, such as varieties of coffee in the supermarkets then an expansion should be considered for the products offered, as potential customers will be attracted towards the company, its products and services, consequently greater revenue can be expected.
Threats associated with Starbucks, UK:
Starbucks meets some strong threats such as- rising prices as a result of dependency on the coffee beans as this factor cannot be controlled by the Company or estimated. In the field of coffeehouses the competition is extremely tough and Starbucks finds great competition made by the local coffeehouses or from the specialized coffeehouses chains. A lower price can cause Starbucks to lose considerable amount of market share in the competitive market and also meets great competition. The illegal use of the trademark makes Starbucks pay costly law suits and it requires greater time period. The time and the finances used on the law suits could be used in marketing and in the expansion of the brand. The market of coffee houses in the developed countries is almost saturated and as a result it would be difficult to infiltrate in a developed market. A greater treat for Starbucks would be the supply disruptions as a result of
More specifically the exchange rate and the relationship between countries could cause greater loss.
Marketing Objectives: The marketing principles of Starbucks could be identified in the company’s statement of the mission such as “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow”. The marketing campaign Starbucks have clearly has been a success as a result of the great expansion in the world and the profits that the company manages to get. The main marketing objectives are the provision of an excellent working environment while treating others with great respect, the inclusion of diversity in the company as a result of the implications in a few countries globally.
Standard: The provision of the best standard from the purchasing the coffee beans, to their roasting and the delivery of fresh coffee all the time is another marketing objective the organisation strictly considers. The contribution in the communities Starbucks has been established is important for the company and as a result different strategies are implemented so the global environment will benefit as a result of Starbucks’ involvement. Moreover, the recognition of chasing profits as a key figure for the future success of the company is a marketing objective. By emphasizing on the company’s profits means every store has a target of 20,000 dollars every week and also opening new stores at a minimal price such as 315,000 dollars on average. Building a new image, a separate vision from the already existing smaller coffeehouses and chains has been a simple objective but harder to implement as great resources were necessary to extrapolate the existing images for other chains and then to draw a possible market strategy for Starbucks. In order to build trust and gain the loyalty of the customers, the values of the organisation and the involvement and commitment had to transmit to the customers which have also involved an extensive financial contribution. In this instance, the money spend in this tactic had resulted in more customers which means higher profits.
By defining the objectives of an organisation makes it easier while developing the market strategy as it has recognized what to emphasize on. Also by having a better and well established strategy, it is easier to prevent any waste in regards to any spontaneous situations. A clear strategy and organisation on a corporation is also seen by the customers who are vital for any retailer, therefore customer satisfaction. Furthermore in this manner the desired quality will be always in first line for the company, the customer service will be kept as high standards by analyzing the customers experience at the stores.
One macro environmental factor that influences the market decisions in Starbucks is the political situation in US and also the geopolitical situation between the countries that Starbucks is dealing with by either having chains in them or using them as suppliers. If having any major political issues then either tariff would be implemented or in the worst case scenario, a partial or total disruption of the businesses could occur. Another macro environmental factor is the economy of countries. If any major problems would happen in any country (especially in the UK) then Starbucks would strongly feel it in its sales and profits. Cultural differences needs to be considered especially in the food beverages industry as it can have a great impact on the sales in certain areas. The natural factors such as earthquakes in Japan could not be prevented and such natural disasters need to be considered in the organisation as these factors are influencing the policies of Starbucks.
Micro environmental factors
In regards to the micro environmental factors that are influencing the marketing decisions in the corporation, the following factors would be discussed: the suppliers, the competition and the customers.
The suppliers are one of the corn stones of the company as their harvest is the fundamental product of the company. If not keeping them happy or satisfied then less suppliers means a higher price for the coffee which would most likely result in a loss of customers. Competition in the coffee industry is very high as there are a few chains which offer fantastic products and services at great prices. In this situation Starbucks needs to think about the existing competition in short and long run in every country they are and they wish to expand as if not, they would register a loss rather than profits.
The customers are the micro environmental factors which could be argued as being the most important element. Without the customers Starbucks would not exist so keeping them happy and building trust should be one of the main objectives and market strategies.
Age group Factor:
A fantastic segmentation criteria would be demographic segmentation which involve emphasize on different age groups, occupation and education level. Starbucks focused on the age group 18-34 which allows them to develop certain beverages as they require more than just beverage. In the market of gourmet Coffee the 18-34 year old wishes different, unique and exclusive products such as Caramel Macchiato but also Gingerbread Latte. The Brewed Coffee would be preferred by those older in age and those being in a hurry. The bottled coffee is specifically for the people on the go and there is found in the grocery stores. The 18-34 customers are requiring a ‘skinny platform’ which means low calories in the coffees and in the products. This is achieved by using sugar free syrup and skim milk which means 90 calories per drink. This segmentation criterion is fundamental if wishing to expand the business and gain more customers. It could be argued that behaviour segmentation is in place in Starbucks as non coffee gourmet drinks are available for those who do not make a habit out of coffee. Green Tea Frapucinno, Tazo Chai Latte, Blended smoothies, iced teas and also hot chocolates are available in Starbucks for that divided group of customers which holds a negative attitude towards coffee.
For Starbucks the geographic criterion of segmentation is very important if wishing to comprehend more clients and as a result of the global spread of the organization. It needs to be considered the specific criteria of the states such as difference in cultures, languages and neighbourhoods. Used in combination with demographic, segmentation it will give a complete market strategy for optimizing and maximizing the profits.
Wide array of products: A range of products that Starbucks offers and could be elaborated further is the low fat beverages (90 calories per drink) which had been developed for the 18-34 age group. In order to have only 90 calories there is used no added sugar syrup and also skin milk but no cream. In the category of low fat beverages would be a variety of products which would differ based on the season such as fresh and fruity drinks during the summer and more unique drinks during the winter such as gingerbread skinny latte.
Introducing new products: When the new products would be implemented in the market advertising would be necessary to make the customers know about the new products. These products would be fantastic for the Greater London consumers especially for the age range as in most of the locations the vast majority of the customers would be in the age group of 18-34. A more purposeful look in this age range would be targeting the students of London which has been proposed as a policy. Students would be great targeted groups in the whole population as they would prefer buying something on the go rather than preparing it at home. Also the young professionals would consider as preferable to spend 2 pounds and have a great and productive day rather than skipping an already made routine. If it is considered opening new stored in London than analyzing those close to universities and if would be possible in this range to catch some tourists then it would be great for the revenue the braches would gather. As a result of great competition from the companies with a similar target population and services such as Costa, Café Nero, Pret a manger an emphasize should be put on extending the loyalty cards so that the customers can get great deals. Through the loyalty cards it is assumed that customers will come back for the benefits from the deals that are being offered and in this situation it can be assumed that the volume of sales for the new products would be high, as expected.
Language barrier and behaviours of customers:
Buyer behaviours needs to be considered in the marketing logistics as different countries would have different behaviours in regards to the customer’s needs and expectations. The main marketing activity which needs to be considered is the native language of the consumers and it would be vital in a multicultural environment to have employee with an extensive knowledge of at least more than one language.
For example- in London as a result of a great number of tourists most of the employees would know a second language too. This is important as some tourists do not speak English so the customers would not be lost as a result of language barrier. Also most of the employees are from a vide background which means bringing diversity in the locations and it will give the customers a great multicultural experience. Surely the social and cultural factors need to be considered in different contexts such as Asia and Australia as there are variations in the customer expectations and behaviours.
The psychological factors such as positivism of advertisement can influence the buyers’ behaviour. Knowing the way the customers see themselves (such as the self-esteem, self-image) is vital in knowing the customer service they expect to receive. Most of the consumers are choosing goods and services as those reinforce the buyer’s self-concept. An example that could be used in this instance is packaging of the products needs to reflect but not conflict with the needs and the self-image the customer has. Because buying a cup of coffee is considered as routine behaviours, an ‘automatic buying’, and it could be considered an inexpensive purchase it does not hold great risk and does not require effort at all.
In order to make the employees more approachable and to break the language barrier, the employees should be provided badges with the languages they speak too. Also it has been proven that an employee with a badge with their name on and the languages they talk help them present a more approachable look and the company would get benefitted as a result of it.
Development of new products:
The New product development involves the product design and the extensive market analysis. It has been argued that since creating the Blueocean or bringing quality Starbucks managed to uphold the competitive advantage. The consumer-oriented culture and the great innovation in regards to the new products (new drinks, new muffins, new cakes and flavours which added to a 87.000 possible combinations made the customers feel relaxed, comfortable and the places itself have become a renowned places for spending some quality time.
In order to avoid the industry competition (such as McDonalds in the United States) and manage to expand the revenue of the corporation then it will be necessary to create incentives for valuable innovation “enhancing the customer experience by investing in online content and interactivity”. It would be advisable to emphasize on the loyal customers and in the promotion of the brand further as this strategy would separate the brand from its competition rather than creating new products.
Starbucks is using multiple channels for distributing the branded products. The variety of distribution designs helps Starbucks to be more effective and increase the profits. The main method of distribution that Starbucks have is selling the products in the company-owned coffeehouses in the prestigious and wisely chosen locations. The coffee used is mostly bought from Asia and South America. This means the coffee is imported, then is processed and in the next stage the coffee would be branded by Starbucks and sold in their own stores. Another distribution strategy is selling the branded products in supermarkets and in prestigious shopping centres. Furthermore, Starbucks managed to extend its distribution strategy by making agreements with airlines, hotels and office coffee suppliers. Through the distribution channels that Starbucks managed to develop it reaches a wider range of population both numerically and culturally which helps the organisation to reach its ultimate goal: expanding and increasing profits. For the consumers these channels of distribution could only be seen as positive as good quality coffee would be brought closer to them such as office buildings but in distributing in different ways such as in supermarkets is great as in this case the consumers can enjoy fresh and quality coffee in their houses too.
Pricing strategy according to quality and services
It could be argued that the price strategy used by Starbucks is the ‘Premium Price for Premium Product’ and the customers are paying not just for a good coffee but also for the combination of quality, authority and relative value. One of the pricing strategies that are used in Starbucks is quality as the customers will feel they get a good deal for the prices they pay. For Starbucks quality of their coffee and services is the key. As a result the prices are mirroring the objective of the company and that is quality of products and services.
Creating a Difference
Another strategy is differentiation where it is wished to create a clear distinction between them and the competition. The designs, the music played and also the willingness of the use of extensive technology is a means of differentiating themselves from the competition. It had been the case when Starbucks was the first brand who introduced the location-based promotions and mobile payments in their stores. As a result Starbucks is seen as a great innovative brand and the customers are even willing to pay more than the prices in order to benefit from the Starbucks experience. Also when a new product is introduced on the market the customers are willing to pay more than the actual price even though the products haven’t been tried by the customers. The reason behind this attitude is that Starbucks is associated with the higher quality. This pricing strategy is called ‘Value for Authority’. The relative pricing has been justified through assessment.
One of the market objectives of Starbucks is about gaining customers’ trust and loyalty. In order to do so, the organisation undergoes a large programme of vouchers so that customers will either buy more such as ‘Buy 3, get 1 free on Starbucks whole bean and ground coffee’or the customers would be given a loyalty card which will allow them having a free drink when 8/10 drinks have been purchased. In addition to this, Starbucks has promotions, either through vouchers or through promotional prices on seasonal beverages. This has a positive impact on the company itself as it coincides with the aim of marginalizing revenues and also getting hold of loyal customers who will come back to experience the Starbucks deal. Also with promotions such as ‘Monday promotion’ Starbucks has managed to recover from the tax avoidance allegations which shows the ability of enhancing more customers and building strong connections.
Marketing mix with help of vouchers and loyalty cards
An extended marketing mix is the physical layout which is an important feature for Starbucks as they emphasize on quality of the stores, employees and also the way the customers remark them. In order to create a good outlook of the business, the customers’ expectations need to be met. As a result, the employees’ works are needed to be impeccable, the store needs to be clean and it needs to give the customer great quality experience. When talking about Starbucks and the physical layout the website is crucial as one of the brands objectives is to keep it up with the technologic advancement. This is a great way of expanding the business as more people will consider Starbucks if they are reminded about the vouchers and loyalty cards. In these situations more consumers will be gained. However, the investment in new technologies could be costly and it also requires time to implement all the necessary gadgets.
An excellent provision of customer service is one objective of the company. It has been assumed that customers would be more likely to be loyal to those organisations that are treating and serving them as if they were the most important client in the store. The front line personnel are vital for the way the company is seen by the customers and as a result it is necessary to enforce good training of each of the employees. Also the employee needs to be treated in a good manner such as being comprehended with their problems, creating a good work environment etc. It has been proven that if the employees are given responsibility, if the company understands their problems and if there are clear targets then the employees tend to work harder and take care of the organisation in their turn.
Processes would be a fundamental marketing mix in order to keep the organisation organized and up-to-date with all the necessary information. Also by processing different complains, requirements, handling order Starbucks would benefit from as the priorities will be established while the customers complains and requests would be listened and considered properly.
The low fat skinny latte is an existing product in Starbucks and it has been popular through the countries where Starbucks exists. These products are present in the entire organisation but these are more popular in the areas such as London where the physical look and the promotion of low fat are a part of the routine. As the price is 1.59 pounds which can be easily accessible for enjoying a coffee from a prestigious company. The promotions that Starbucks make use of for the seasonal products are always extensively used by the customers. By attracting the students of London, strong coffee in a friendly environment in a pleasant morning would be an ideal strategy. By adding more strong coffees on the menu and also having promotions in the mornings would be a great opportunity for those students who require a strong start in the day. As the products would target the students then special vouchers for students could be implemented as it builds trust and loyalty in the customers. By emphasizing on students, it would be beneficial for the organisation in both short and long term basis as if the customers would be happy with the services they receive then they would return where they are valued.
A business which could be used to illustrate certain differences could be McDonalds as the advertising in McDonalds is used in all the means compared with Starbucks which emphasizes on mouth to mouth advertisement. Also it could be argued that McDonalds is using a more elaborate marketing strategy as it has more promotional strategies with resources and each store has the ability of improvising different types of promotions.
In international marketing the politics of the countries, the economics the existence or the nonexistence of tariffs can be the decisive while deciding to open or to implant different market strategies. Also the culture of the countries involves in the scheme due to its greater importance as some countries with extreme religions could find it difficult to open themselves up in the globalized market.
The domestic policies are more concerned with the customers rather than supplies and the tariffs. In case of the domestic marketing mix, promotions through individuals are given much importance and it is considered as the best strategy for advertisement of the products.
Ahmad Jammoul, Zia Lennard, Laziza Sebti, Marketing of Innovation, University of Nice Sophia Antipolis
Brad Smith, The two marketing Channels that are Starbucks Blueprint for growth
Chen, J. (2013). 2013, The Year of Starbucks. Available at: http://seekingalpha.com/article/1103821-2013-the-year-of-starbucks
Interbrand (2013). Best Global Brands 2012. Available at: http://www.interbrand.com/en/best-global-brands/2012/Best-Global-Brands-2012.aspx
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