Case Study On Starbucks: Strategies For Revenue Generation

External Analysis

Describe about the Case study on Starbuck?

This study focus on the company named Starbuck who is specialist as a coffee provider and its expertise in providing special blend of coffee. This company has its presence in almost 65 countries and all aims at providing personalized services to its customer base (Peng & Chun, 2012). There is a massive audience for star buck in its stores who desire to consume products irrespective of any price. Almost 9 million daily visitors want to spend their family time with a cup of coffee. Moreover, this particular study brings forward the various strategies made in order to increase in the revenue generation. Customer satisfaction is always a major issue that actually is the reason behind any success rate in an organization.

Nowadays, the people find ways to spend their money to get the best of the quality and coffee often treated as a habit by most of the individuals. Starbucks is making ways to understand the spending habit of the individual so that they can come up with new initiative plans. As compared to other business enterprise like Mc Donald’s, they are putting more emphasis on bridging the gap between the coffee as well as price. Their strategy is to provide with the same quality in coffee but at a lower price so that the customers gets attention. Starbuck takes some of the initiative measures so that they can improve in their quality and it is mentioned below with proper justification:

Branding strategy- Star buck has put emphasis on coming up with premium products that the consumers are willing to purchase the product even it is high on cost. This helps in maintaining a high market share because the vendor believes in high quality of products.

Groupons- This is an initiation that the star bucks has recently come with, to introduce with a groupon to 1.5 mm customers within the period of 24 hours. This strategy was made to compete with other business like, Mc Donald’s, who also came up with the same kind of policies.

Launching of the in store bakeries in the section of premium- the focus of this business is to have the expertise in both like baked goods as well as sugary donuts that make it unique as compared to other business (Smith et al. 2015). This also helps in enhancing the revenue pattern because more customers are found interested in the product that will ultimately be directed towards increase in per ticket as far as revenue is concerned.

Porter’s five forces model

System on Verismo- There is another incentive taken by SBUX in order to satisfy the needs of the customers and it came up with new premium products that will be responsible in enhancing the sales (Mathew, 2014). This concept is majorly concerned from the point of view of demographics because the companies failed to reach a type of customers who has a tendency to brew them by their own.

Loyalty cards provided to the customers by SBUX was a great success and it was approximately $3 billion, according to a recent survey conducted (Pace, 2014).

Rivalry among the existing competitors is relatively higher because it competes with competitors like, McDonald’s, Costa, Dunkin Donuts, etc and they have small shops of coffee as well as cafes.

The customers of Starbucks are found to have the bargaining power as because cost are not incurred for switching and abundance amount of offers are already available to them that makes the selection more easier (Gawer & Cusumano,  2012). The bargaining power of respective buyers is noticed to be higher because the offerings exceed the demands. There is no cost that is required in order to switch to other product for any valid reason.

There is a threat of relative substitute based on products and services because Starbuck makes substantial amount of products available. There are many substitutes to Starbuck‘s coffee like tea, energy drinks, juices etc. the places like pubs and bars also can be termed as a substitute because individuals can spend their quality time with family as well as friends (Aminattaheri et al. 2013). The threats that can be noticed with the arrival of substitute products are significant as because there is an increasing range of energy drinks that are made available to the consumers. There is also an issue of increase for content that was popularized among media coverage (Wahler et al. 2014).  

It is found that even the supplier of Starbuck has the higher bargaining power as because the demand is high for the coffee even at the global level. It should also be understood that the coffee beans could be produced in specific geographical areas that will make the demand for the product higher (Yu, 2014). In this company, it was noticed that the bargaining power of suppliers are strong because it is limited to specific geographical locations as far as raw materials are concerned. There is fierce competition among the different coffee chains present in the global market (Brizek, 2014).

Key Success Factors

Lastly, it can be said that threat of new entrants as far as industry is concerned are lower as compared to other business enterprise (Ling, 2014). Another reason is the saturated market in United Kingdom. In case of renting as well as leasing purposes, it is important to view at the significant changes in order to notice the capital requirements (Lang, 2014).

Some of the key factors are skill related that includes talent of workforce, that provide the knowledge of the product. Innovation is made by this company to improve in the product development scheme. For instance, Starbucks introduced Frappuccino in the year 1997 and Chai Tea Latte in the year 1998.

Another key success factors are related to organizational capacity that aims at providing superior quality in employing Internet commerce in order to conduct the business activities. This company allows the Ecommerce so that the products can be purchased online.

Marketing is also gets connected with the key success factors in a way to provide customer services in a courteous way. It also depends on the breadth of the relevant product line as well as selection of a particular product.

Convenient locations are selected that will attract the customers to visit the store as per their convenience. Starbucks has approximately 1364 stores in North America in the year 1991 (Hill et al. 2014). The company aims at providing a pleasant environment for customers to come their time with friends and family members.

Political- Starbucks aims at getting the political stability after the war that was held in the year 2009.The problems that are faced is the government intervention in the running of the business enterprise. It is noticed that the foreign investments are encouraged by the government. Another facility is the tax policy that is incurred for the benefits of the investors.

Economical- It aims at developing the tourism industry especially in Sri Lanka. There is often an issue regarding the high inflation as well as change in rupee value.moreover, the GDP rate is 7.2% till the year 2012.

Socio cultural- The culture followed by Starbucks is the tea centred because it has a presence in most of the cities that are popular in nature. Nowadays, it is a common phenomena that the young individuals are interested in adopting the western culture.

Technology- There is found an excessive use of internet as well as the mobile networks to stay connected with its customer base. The usage is making it easier to connect with the customer and know their needs and requirements.

PESTLE Analysis

Environment- This Company is trying its best to adopt the eco friendly environment so that no one can get harm with the products produced. For ideal coffee, the temperature required is the tropical rainy climate.

Legal- There is an indulgence of strict labour policies as well as safety regulations for food. Other rules that are indulged are the laws on environment as well as regulations on advertising. Bribery, corruption are some of the issues that needs proper attention by the company.

Competitor	Quality	Price	Service	Awareness
Coco Veranda	Good	High	Average	Average
Barista	Good	High	Very good	Very good
McDonald’s	Average	Low	Average	Average
Coffee bean &Tea leaf	Average	High	Average	Very good
Bread talk	Good	High	Very good	Average
The commons coffee House	Average	High	Average	Poor
Choco luv	Average	Average	Poor	Average

Geographic location- The business has its operations in main cities.

Demographics-

Age- Children between the age group of 13 to 17

Young adults between the age group of 18 to 24

Adults between the age group of 25 to 40

Matured between the age group of above 40 years.

Gender- Both male and female

Income- Low income starts from the range below 25000

Middle income starts from the range of 25000 to 40000

Higher income starts from the range of above 40000.

The star bucks aims at targeting the following:

Age group- 18 to 40 years

Lifecycle- young as well as adults

Gender- both male and female

Occupation- Specially the college goers, executive, position on managerial and professional level.

Income- Targets the middle as well as high income earners.

Location- this company mainly has its presence in main cities like Colombo, Galle areas that are used for commercial purpose.

SWOT Analysis

Strength- Starbuck is a company who aims at providing various benefits in terms of improved in profit margins, recognition, improved in the economies of scale. Most of the revenue of this company comes from American markets (Civi, 2013). Maturity of business activities are present as well as it aims at sustaining with the operating margin of profits. Starbuck is considered as one of the leading retailers as far as production of coffee is concerned. It aims at offering comprehensive options to the customers so that they can easily get the desired facilities as far as possible.

Weakness- This Company is indulged in additional expenses due to product recall that means providing low quality that affects the brand image of any products. The financial as well as operational performance can be adversely affected, if there is issue on low quality and misrepresentation for the same (Shankar, 2012).

Opportunities- These companies are often found to indulge in inorganic materials that prove to be an opportunity for survival strategies (Roper & Hodari, 2015). Japan is considered the second largest market as far as retail sales are concerned. Several plans are made to enter the market of Columbia, Panama as well as Bollvia by way of getting the licensed agreements to become the business partners (Lee et al. 2013). This company has its presence globally and the main motive is to serve the customers as per the requirements.

Threats- With the change in trends and fashion, it is difficult to understand the requirements of the customers. The preference of the customer can change time to time and the reason can be taste, packaging, dietary habits etc (Borza & Borza, 2014). the company should make ways to understand the changing preferences of the customers so that they can increase on the demand part. Another threat is that the entire process depends on the availability of the high quality of coffee beans. Most of the production is affected badly because of the intervention of economic or political factors (Tu et al. 2012). Further, increase in cost can be noticed if the company need to continue changing the market due to unavailability of resources.

As we all know that Starbuck is an internationally recognized brand, but it is capable of coming up with more innovative plans so that the success rate is higher as compared to its competitors. This company should think to have an online presence so that more customers can avail the services without wastage of time.

It is known that star buck has millions of customers who are interested to consume the product in spite of high cost. So, efforts are required to grab the attention to the fullest so that Starbuck become the only leading provider in the coffee sales chain.

Starbucks have a huge craze in the market as well as fan following and it acts as an asset to the organizational culture. Efforts need to be made in order to retain the existing customers because retaining old customers requires less cost as compared to acquisition of new customers.

Companies should follow the policy that people need to be aware of all the products made available to them so that they do not face any difficulty in the near future. Complaints need to be addresses of the customers so that they feel happy to consume that product as well as recommend that services to it family and friends. Good word of communication is very important for a company to rise in the future.

Another recommendation for the improvement is to build a specific audience that is segmentation, after that target a customers and finally giving full attention to retain those as far as possible by providing various additional facilities provided to them.

This company should build more business platforms to gain in the strategy because several alternatives are also available to the customers.

Another issue that needs proper attention is the content is noticed to be personalized as the issue of promotional content.

Cards should be given to the customers that will help them to save in energy and time because they need not stand in the line to get the coffee in hand.

Starbucks misses the advantage issues that need proper attention by its customer base. Personalized experience was lacking that means individual customer’s tastes and preferences.

As far as long-term goal is concerned, this particular business cannot only depend on the party platforms of other by way of social networking sites like Face book.

Conclusion

At the end of the study, it can be noticed that Starbucks has its customer base all over the world and they are interested in consuming the product, as they are brand loyal. This company does several promotional measures in order to make aware the customers about various offerings and additional benefits. This study has listed the SWOT analysis that will make it easier to understand where the improvement is required. This company should make strategies to retain the existing customers because they will spread a good word of mouth that will be beneficial for the company in the long run.

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