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Marketing Of Starbucks In Global Economy

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Question:

Discuss about the Marketing of Starbucks in Global Economy.
 
 

Answer:

Introduction

This report is related to the strategic marketing plan of a company for next three years. For the discussion, the famous company Starbuck Corporation has taken. It is well known that Starbucks is operating at global level. Starbucks is well-settled Washington-based Company which is famous for its good taste of coffee. It is one of the fastest growing companies in the United States. The company has started operating in 1992 and over ten years company has set new revenues with the growth rate of 20%. This report considers the competitive position of Starbucks and defines three year marketing strategy for the company. Along with this, competitive advantage, current position, future desired position and about the advantages which can be achieved by the Starbucks to get desired position in the market (Aiello & Dickinson, 2014). During the past year, the stock of Starbucks has declined in terms of value. Now, Starbucks is improving its financial position by store sale. Primary strategy of Starbucks is to expand its higher as compared to the competitors. Although Starbucks has faced many difficulties due to many factors these challenges i.e. financial downturn in US which affected the business of Starbucks. After the crisis, company has added total estimated 338 million to the UK economy. Based on the current research, total consumption of coffee in world is 2.25 billion. There is about 22.1 gallon of coffee per capita consumption in US in which 4% of sales is helpful to get higher rates for Starbucks. It is expected that Starbucks will be largest coffee chain in 2020 (Latif et al, 2014).

Where are we now

From the analysis of the surroundings of Starbucks, it is clear that for Starbucks, technological, environmental and sociological factors are favorable and on the other hand, economic, legal and political factors are unfavorable for the Starbucks (Gupta, Sahi & Chahal, 2013). In terms of competitive advantage, the company has major threats i.e. legal issues, and threats of new entry etc. But, Starbucks has strong competitive advantage among the customers. Competitive advantage can be achieved by doing something better and innovative as compared to the competitors. If the number of small advantage can be combined than company can be able to achieve competitive advantage in the industry (Baines, Fill & Page, 2011). Competitive advantage is important or necessary to develop and impellent the winning strategy and to achieve growth and profits. Starbucks is doing different practices as compared to the competitors (Khan, 2010).

Starbucks has strong brand name among the customers. Brand name can be described as the specific term, name, symbol, sign, design, which is used to differentiate itself from its competitors. The green and white logo of Starbucks is the symbol of high brand awareness among the customers. Most of the international tourists have visited in the Starbucks by identifying its logo in another country. Company has positive brand image which impact the decision making process of the customers and build customer loyalty to the Starbucks (Geereddy, 2015).

 

Product and service standardization:

Quality of the product can be described as the perception of the customers by the degree of excellence of the characteristics. Quality is the main factor in the relationship marketing which impact the customers’ satisfaction (Cadogan, 2012). There is loyalty reward program offered by the Starbucks which improves the purchasing behavior of customers towards the products. Starbucks is doing well in brand building. Having good taste of coffee, Starbucks provides different type of experience to the customers. Starbucks is famous as ‘third place’ where people can meet with friends and business partners. This is the position which improves the sales of the company (Boychenko, 2012).

Starbucks is well known as the innovator having good management of innovation for the high sales and success in the market. The aim of Starbucks is to provide good taste of various coffee brands in one store. The company has ability to do new innovations in the products which is considerable in the competitive strength.

Starbucks has adopted the changing preferences and taste of customers. Flexibility is the part of success of Starbucks. So, the company has introduced almond milk in stores and non-dairy alternatives such as soy milk and coconut milk. According to a research, there are 49% of consumers who consume non-dairy milk products. So, it is estimated that sales of dairy milk will decrease by 11% by 2020. So, Starbucks is focusing on non-dairy milk products (Marchi, Maria and Micelli, 2012).

With the tasty coffee, Starbucks is social conscious as compared to the other companies. It is the proof that how the company treats with the employees. This is the reason, the company has low attrition rate. In America, Starbucks has announced a program related to economic development for the low medium income communities. According to Starbucks, it is the job opportunity for many people to grow the business (Bose, 2012).

Where do we want to be

Starbucks is continuously delivering high financial performance. Customers experience different types of coffee and good environment in the stores of Starbucks. Company has strong position in the market. Now, Starbucks want to gain some more positions with new strategies. In upcoming years, Starbucks has some new goals for upcoming years. In the year of growth and profitability, Starbucks is now planning to get higher standards in the coffee industry. The strategy of Starbucks is to develop its core competencies to add more values in the products and establish the image of the company as luxury and stylishness for the customers. According to Hamel (1990), core competencies can be defined as the collective learning of the organization to coordinate different production skills and implement various streams of the technologies. The core competencies of the Starbucks can be seen in its capability, superb market strategies, operational efficiency, human resource management and management capabilities (Lapersonne, 2013).

Further, another strategy of Starbucks is to maintain the competitive advantage by cost leadership, focus and differentiation. Cost leadership includes the strategy in terms of producing low-cost with high quality products. It also includes reducing operational cost in all area of operations. With this, strategy of Starbucks is to adopt differentiation of the products. By differentiation strategy, customers perceive the products to be unique and value added. Starbucks has the strategy to reduce the cost of the products for the growth and profit. The aim of the company is to expand the stores effectively. Basically, strategy is to focus on cost efficiency. To reduce the cost, there is one way i.e. specialize and focus on the core marketing of the coffee. Further, long term strategy of Starbucks is to build and retain the customer loyalty in the market (Hooley, Piercy & Nicoulaud, 2012).

 


Along with this, next objective of the Starbucks is to look good location for its stores. This strategy of Starbucks is based on traffic pattern and demographic criteria. Company is willing to open the outlets based on the plan and criteria i.e. weather condition, customers’ behavior, taste and preferences. The long term objective of Starbucks is to provide convenient place for the overworked people in every country. The management team of the company is focusing on more efforts. Image building is the core objective of the company by creating a revolution in the business world (Seaford, Culp & Brooks, 2012). Starbucks is planning to invest heavily in improving and creating brand image of the company as comfortable coffeehouse where consumers can enjoy luxurious moment away from stressful environment of the workplace. From starting, Starbucks has become recognized company in the coffee industry which is providing immersive coffee experience to the customers. The aim of the company is to provide ‘Starbucks Experience’ across the world. By achieving this objective, the plan of the company is to provide roaster experience to the entire world (Lynn et al, 2011).

In current time, marketing is more dependent on the technologies.  Starbucks is also trying to adopt new technologies for the suitability of the customers. The objective of the company is to improve the customers’ base by social media and online marketing. Now, Starbucks is offering largest and most robust mobile ecosystem as compared to other companies in the coffee industry. Company is planning to improve its mobile app and by mobile app, customers are able to order their desired products by call or message (Fitzgerald, 2013).

How will we get there

This is the final section of the report which provides the plans related to the strategies to make Starbucks successful. In this section, plans will be explored to execute the strategy and to achieve objectives. On the basis of these plans, the marketing mix of the Starbucks is helpful for future success. Marketing mix of a company can be described as combination of principles purpose the creation of demand for the product and service of the company (Cravens & Piercy, 2013). Marketing mix of Starbucks is as follows:

Product- Product is the most important factor of any company. By the product-mix, Starbucks has become more competitive against its competitors. The products of Starbucks include hot chocolate, brewed coffee, teas, and espresso. Along with this, Starbucks offers blended beverages to target non-coffee drinkers including juice, oatmeal, salads, sandwiches, muffins, cakes, and ready-to-eat pastries to satisfy the customers. The products of the Starbucks can be divided into two catagories i.e. standardize or differentiate. Starbucks always use standardization in the products. Starbucks changes its products catalogue based on the demands of the customers in various countries (Forbes, 2013).

 


Price- To differentiate the company from the competitors, Starbucks uses main factor of ‘premium price’. So, the prices of products in the Starbucks are slightly higher as compared to the competitors. Customers are ready to spend money for high quality services and products so they consider the products of Starbucks. But in some cases, company has dropped its prices. For example, in Japan, company has dropped the prices from 230 yen to 190 yen as coffee industry in Japan has deflation prices and tough competition so it is the big challenge for Starbucks to keep the customers loyal in such kind of situation (Dawson, 2013).

Place- Key factor in the place-mix of Starbucks is its stores which can be found in any surrounding. Starbucks provides better environment to the customers to enjoy their reading, free Wi-Fi, meeting and listening the music. On the basis of demand, Starbucks is able to keep its competitive position by managing grown crowd of the customers and proving good services in the stores. Along with this, Starbucks is implementing entry mode strategies including licensing, wholly-owned subsidiaries and joint ventures (Forbes, 2016).

Promotion- Promotion can be described as the marketing activities to encourage the actions of customers to buy the product in order to achieve the target market sale. Starbucks has lower advertisement cost than its competitors such as Subway, KFC and McDonalds. Starbucks has sixth position in the market share in terms of advertisement cost and it is spending less on the media advertisements. Starbucks has its own way to maintain strong relationship with the customers i.e. Starbucks cards, internet, social network and so on. Along with this, information technology plays an important role in the strategy of Starbucks by website, My Starbucks idea, Starbucks Gossip, Newsroom, Starbucks melody and Starbucks homepage in every country (Dibb et al, 2012).

 

Conclusion

From the above analysis, it has observed that Starbucks has strong position in the coffee industry. It is clear that after the crisis in US economy, Starbucks has adopted new strategies to get high share prices in the market. From the situation analysis, it is observed that technological, environmental and sociological factors are favorable and on the other hand, economic, legal and political factors are unfavorable for the Starbucks. Further, there are some strategies of Starbucks for next three years i.e. to maintain the competitive advantage by cost leadership, focus and differentiation, to look good location for its stores and to adopt new technologies for the suitability of the customers. To achieve the strategic objectives, Starbucks is implementing effective marketing mix strategies in its business operations.

 

References

Khan, S. (2010). Starbucks International Marketing Strategy. Retrieved on 25th April 2017 from https://www.slideshare.net/sk_prince/starbucks-international-marketing-strategy-3900413

Baines, P., Fill, C. & Page, K. (2011). Marketing. (2nd). New York: Oxford University Press

Boychenko, M. (2012). It's Not Just Coffee, It's Starbucks. Retrieved on 25th April 2017 from https://thecoffeeteam.blogspot.co.uk/2012/02/3-more-ps.html

Cadogan, J. W. (2012). International marketing, strategic orientations and business success: International Marketing Review, 29(4), 340-348

Bose, T. (2012). Market Segmentation and Customer Focus Strategies and Their Contribution towards Effective Value Chain Management: International Journal of Marketing Studies. 4(3). 113-121

Cravens, D., & Piercy, N. (2013). Strategic Marketing. (10th). Singapore: McGraw-Hill

Dawson, T. (2013). How Starbucks Uses Pricing Strategy for Profit Maximization. Retrieved on 25th April 2017 from https://www.priceintelligently.com/blog/bid/184451/How-Starbucks-Uses-Pricing-Strategy-for-Profit-Maximization

Dibb, S., Simkin, L., Pride, W. & Ferrell, O. (2012). Marketing Concepts & Strategies. (6th). Hampshire: Cenage Learning EMEA

Fitzgerald, M. (2013). How Starbucks has gone digital: MIT Sloan Management Review, 54(4), 1-8.

Forbes. (2013). Starbucks And McDonald's Winning Strategy. Forbes.  Retrieved on 25th April 2017 from https://www.forbes.com/sites/panosmourdoukoutas/2013/04/25/starbucks-and-mcdonalds-winning-strategy/

Forbes. (2016). Let's Look At Starbucks' Growth Strategy. Retrieved on 25th April 2017 from https://www.forbes.com/sites/greatspeculations/2016/09/19/lets-look-at-starbucks-growth-strategy/#7c1724f33d71

Kotler, P., Keller, K., Brady, M., Goodman, M., & Hansen, T. (2012). Marketing Management. (2nd). Essex: Pearson Education Ltd

Gupta, M., Sahi, G., & Chahal, H. (2013). Improving market orientation: the theory of constraints-based framework: Journal of Strategic Marketing. 21(4). 305-322.

Geereddy, N. (2015). Strategic Analysis Of Starbucks Corporation. Harvard. Retrieved from https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf

Latif, M., Qurat-ul-ain, H., Gulzar, H., Bukhari, S. R., & Sameen, S. N. (2014). Starbucks sustained during economic crisis: International Journal of Accounting and Financial Reporting. 4(1). 307-321

Lynn, David J, C.R.E., Wang, T., & Mehlum, C. (2011). Investing in emerging markets: China, india and brazil: Real Estate Issues. 36(2). 21-26.

Hooley, G., Piercy, N., & Nicoulaud, B. (2012). Marketing Strategy and Competitive Positioning. (5th). Essex: Pearson Education

Seaford, B. C., Culp, R. C., & Brooks, B. W. (2012). Starbucks: Maintaining a clear position: Journal of the International Academy for Case Studies. 18(4). 39-57

Marchi, V., Maria, E. and Micelli, S. (2012). Environmental Strategies, Upgrading and Competitive Advantage in Global Value Chains. 22(1), pp.62-72.

Lapersonne, A. (2013). Managing Multiple Sources of Competitive Advantage in a Complex Competitive Environment. FSRJ. 5(2). pp.221-251.

Aiello, G. and Dickinson, G. (2014). Beyond authenticity: a visual-material analysis of locality in the global redesign of Starbucks stores: Visual Communication. 13(3). pp.303-321

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