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Diploma in Business (Marketing)
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Unit 4 Marketing Principles SWOT analysis
Marketing principles SWOT analysis unit argues about the marketing strategies of Starbucks. Initial part of the unit discusses about the SWOT analysis of Starbucks and describes the importance of SWOT analysis as a marketing tool. It follows with discussing the overall market segmentation of Starbucks in national and international marketing with its positioning and targeting strategies. Further, the unit continues with explaining the promotional tools that have been used by Starbucks. The last part of the unit argues about different aspects of marketing mix of Starbucks as well as the strategies that have been used by the organisation for its international market.
Marketing is the basis for any product-based business. Marketing refers to creating awareness about the product among the masses. Marketing is the initial step for selling a product. It is the communication tool that has been used to communicate with the customers about the product. Marketing is the one-way communication method in which the organisation conveys its part to the customer. There are different tools that can be used for the marketing purpose like advertising, public relations, promotions, campaigning etc. Many analyses have been done before selecting a method of marketing products. SWOT analysis is one of them. (Cahill, 2006).
SWOT analysis of Starbucks:
Starbucks is among one of the leading coffee house businesses in the world. Company has grown with consistent pace and have competitive advantage over others. Below is the SWOT analysis of the company that describes its strengths, weaknesses, opportunities and threats.
Starbucks believes in building image of the brand rather than using promotional tools to market its product. It commits to provide quality products to its customers and hence, develop loyalty among customer towards the brand. Starbucks has an extensive global supply chain and uses other subsidiaries to expand and diversify their business. (Arslan and Reicher, 2011)
Starbucks charge higher prices than its competitors do for the same types of products. Most of its products have the standard taste and form that may not be accepted by ever customer type. In addition, Starbucks used to imitate the products. All these factors act as the weaknesses for the company as it is needful to take steps regarding these weaknesses to attain success.
The company has the opportunity to expand its business in Asia and Africa as they have very little presence there. Starbucks already has diversified but products but there is still an opportunity to enter into new product lines for the sake of expansion. Partnership with other firms may help Starbucks to expand their business in the areas where the only coffee business is not acceptable. (Christy, 2004).
Starbucks has the threat from the organisations like McDonald’s who sell coffee at very low prices. One more threat to the Starbucks business is that others can imitate the business like the one in the Palestinian Territories by the name star and bucks.
SWOT analysis has been used as a marketing tool because it helps in analyzing the outer as well as inner situations of the business. The results of this analysis help in formulating the marketing strategies. It also let the company know about the opportunities for the firm so that it can take steps to utilize those opportunities as well. (Kerin, 2006).
Starbucks have been growing in its filed with the consistent pace but it has been analysed that there is a need to evaluate the marketing objectives of the organisation to develop the marketing strategies. The objective of the company is the expansion of business at global level. This includes expanding foreign stores, with aid of partnerships that share risk and costs, selling VIA instant coffee and other products in retail and convenience stores, and reinvigorating the Seattle’s Best Brand coffee. As the business has the marketing objective of global expansion, it decided to adopt international marketing strategies. The advertising strategy of the company is unique as it focuses on using stores as the brand ambassadors rather than conducting campaigns. It has rapidly focuses on expanding the outlet number with such apace that no other business can imitate them. Another strategy that has been focused upon was to localize the product offerings according to the local taste. Removal of standardization helps the company to achieve its objectives. (Kotler, 2000).
All these strategies contribute to the cost benefit market orientation. Market orientation refers to the business orientation that focuses on customer needs and satisfaction. Strategy of localization and expansion by Starbucks helps in satisfying the customers by the local product taste. Commitment of Starbucks to provide quality product develops the loyalty among the customers and builds a relationship with the customers.
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Micro environmental factors: These environmental factors are very close to the company. Three micro environmental factors have been discussed below that have their impact on the marketing strategies of the company. (Kotler and Armstrong, 2006).
Customers: Starbucks has the market orientation approach that focuses on customer need and satisfaction. This leads to formation of marketing strategies according to the target customer. Starbucks used the strategy of localization to deal satisfy the customers of different regions. It used to offer local taste touch in its product according to the customers it is serving. Customers become the basis of some of the marketing strategies used by Starbucks.
Competitors: Competitors refers to the companies of the same industry that act as the rivals for the organisation. As far as Starbucks is considered, it has many competitors like CCD, Costa coffee etc. there are some other providers of coffee like McDonald’s who believes in low cost differentiation. To compete with these customers Starbucks used the approach of building brand image and commitment of providing quality products to the customers. (McDonald and Dunbar, 2004).
Intermediaries: Intermediaries act as the mediator between the organisation and the customer. Starbucks involve intermediaries to support the expansion plan by selling Starbucks coffee in united airlines and distributing the coffee beans in the supermarkets.
Macro environment that affect the marketing decision:
Macro environment involves the external factors that affect the business of the organisation. These factors are not closely related to the organisation but affect whole of the industry in the same way.
Some of those factors are discussed below in the case of Starbucks:
Segmentation is the process of dividing the customers according to some basis. The customers can be divided based on their age, sex, culture etc. the segmentation technique helps the organisation to target its most important customers. A market can be segmented in the groups sharing the common interests in one or the other way. Market segmentation helps in making appropriate marketing strategies for every segment according to their interest because it is not possible to attract all the customers with same type of strategies. People have different choices and preferences. (Ryan and Jones, 2009).
The choice of type of market segmentation depends on the business strategies as well as the position of the business in the market. Some organisation chooses to segment their market according to the socio economic factors while other chooses to segment the market according to the geography of the customers. As far as Starbucks is considered, it should segment its market according to the socio economic factors. This is because Starbucks offered high price products that can be affordable for the business class and official class people only. Therefore, Starbucks needs to divide its customers according to the socio economic factors and then develop different strategies to target customers of their interest. Division of the customers according to socio economic basis also helps the organisation to develop different strategies to include other class of the people in their target customer segment. (Sweeney, Dorey and MacLellan, 2006).
Another type of segment that would be appropriate for Starbucks is the geographic segmentation. Geographic segmentation allows the organisations to segment their customers according to the geographical region. As Starbucks is the brand of class, so it needs to target the customers from urban area. Starbucks has their stores at elite places like big shopping malls. This enables them to target the people of that particular geographic region only.
After segmentation of the market on different bases, organisations take decision over target marketing. Organisations decide which market to target and what would be the strategies to target this market segment.
Targeting can be done by adopting three different strategies:
Starbucks used to follow the undifferentiated approach as they have single strategies for every segment of the market. However, the best approach that needs to be followed by the organisation should be differentiated approach. This is because; this approach helps the organisation to target more than one segment in an efficient way. The most important product of Starbucks is coffee so, it can have the opportunity to target many segment, as coffee is the product preferences of many customers from different segments. (Arslan and Reicher, 2011).
The positioning strategy that Starbucks is using is one of the most appropriate strategies for the company. It is using brand image to position its product in the market. It is continuously focusing on opening new stores to build a brand name across the places. This strategy differentiates the brand from others as well as acts as the competitive advantage for the organisation.
Buying behaviour of the consumer involves the factors that influence the customers to buy a particular product. Many factors affect the buying behaviour of the customers. The customer follows a decision making process that helps the customer to take decision over buying a particular product. Customers do not think much on buying the products with low cost or the products that needs to be bought on regular basis. Due to this reason, organisation or manufacturers need to apply marketing strategies according to the behaviour of the people. (Haskova, 2015) The first situation that needs to be considered by marketing mangers in Starbucks is at what time the customer is buying the product. Suppose, if a customer has entered the Starbucks outlet in morning then he should be offered with complementary snacks in addition to coffee. This marketing strategy has somehow affected the customer in positive way. Customer’s social culture also affects his buying behaviour. The type of coffee that has been liked by a student may not be preferred choice of a businessperson. The marketing manager should plan packages or combos according to the preferred choice of the particular group of customers.
The new positioning strategy that can be used by Starbucks for positioning of coffee is to reduce the price of the product and offering coffee in variable cup sizes.
Product is one of the factors that have been considered in the marketing mix of the organisation. Marketing mix is the business tool that involves product, price, place and promotion that will be discussed in the later part of the question. Product is the tangible thing that has been offered by the manufacturers to it consumers. (Kerin, 2006) The main aim of the manufacturer is to satisfy the customer needs by the product they have been offered with. Starbucks has offered the customers with many innovative products. Starbucks used to follow the strategy of introducing and innovating products in phases. This strategy allows the customers to notice all the products and make their favourite list accordingly. Customers do not get the chance to miss out any of the product by this strategy. Some of the products offered by Starbucks are:
Comparison between products of CCD and Starbucks:
Starbucks commonly used the franchise approach as the distribution method. Starbucks prefer to sell their products from its own stores so that they can be in direct contact with the customers. Starbucks uses the strategy of opening more and more stores to expand its business and therefore, customers can easily enjoy the products directly from the exclusive outlets. Some of the distribution channels that have been used by Starbucks other than its own outlet are: (Plog, 2005)
Starbucks started selling its coffee products in united airlines. It has also used the medium of internet to offer people to purchase its products online. It has collaborated with some of the movie theatre brands and supermarkets to sell their products. These are some of the distribution strategies that have been applied by Starbucks to expand the business and it builds its brand.
Pricing strategy is another factor that has been considered in the marketing mix of the product. The pricing strategy of an organisation depends on many factors like the choice of the customer, market condition, economic condition etc. Starbucks always maintained consistency in pricing strategy. It has always used premium-pricing strategy that conveys that premium price provides premium quality. As Starbucks need to maintain its brand image, it is necessary to maintain the consistency in pricing also. The target customers of Starbucks belongs to high and upper middle class background and prefers to buy high quality products with premium prices to show maintain their image. Starbucks is considered as a luxury brand and hence used premium pricing as the pricing strategy. (Ritzer, 2010)
Pricing strategy has been affected by many factors like competition; market condition etc. if the competitor has dropped its prices down, then the organisation has to take some steps in modifying its pricing strategies so that it can compete with the competitors and maintain its customer base. Another factor that may affect the pricing of the product is the economic condition. If there is rise in the economy and people have increased buying capability then premium- pricing is the best strategy to be used.
Promotion is the subset of advertising. It is a tool that has been used to market a particular product. Promotional tools are very important for the organisations in this competitive world. It is must for the organisations to use some or the other promotional activities to attract their customers according to the market conditions and according to the competitor’s steps for promotion.
Starbucks uses unique strategies towards promotion. It does not believe on promoting the products but believes in creating brand image by using its stores as the brand ambassador. It never goes for any promotional activities among public but tries to capture market by opening more and more stores as soon as possible to make people aware of the brand and not just the products. (Cahill, 2006)
Marketing mix earlier consists of 4 P’s, further; it has been extended to seven P’s.
Below is the other 3 P’s discussed in relation to Starbucks.
For socio economic segment: this segment includes people with class, who can afford the pieces of Starbucks and believes in high value with high price approach.
For demographic segment based on age: Starbucks should target youth from urban areas
Marketing products and services to business includes activities like; direct client meetings and presentation while in case of customers marketing is done to cover the masses in one go. The buying organisation behaviour of the people in both the cases is very different as people from business thinks about long term profit before buying product while people from customer class thinks about satisfactions before buying a product.
Starbucks has always made single strategy to attract both the groups. It goes for building image by using its stores as the brand ambassador but further it started approaching airlines and other retailers to distribute their product to the customers. (Kotler, 2000)
CCD is one of the biggest competitors for Starbucks. It uses different strategies t target the group of business customers and general customers. CCD offers products directly in stores for the general customers and it goes for selling coffee machines of their own brand to attract the customers of business. This leads to businesses keeping CCD coffee machines in the office premises for their employees.
Domestic marketing refers to conduct marketing activities inside a geographical area. Small area has been served under domestic marketing. There is less communication barriers in domestic marketing as compared to international marketing. This is because; a marketer needs to cater different customers with different languages and thinking. In domestic market, the nature of the customers is almost same so there is no need to adapt different strategies to market but in international marketing, different approaches and strategies need to adopt to serve people with different choices and tastes.
International strategies by Starbucks:
This report concludes that Starbucks has grown with a consistent pace and tries to cover the market by using unique and different approaches of marketing. It is product-based organisation that believes in customer satisfaction. This organisation deals with a particular class of customer and maintain it image by providing products with premium prices. Starbucks use the socio economic approach to segment its products and believes in promoting the brand by using its stores as the brand ambassadors rather than using other techniques of marketing.
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