Marketing And Management For Multinational Coffeehouse Chain – An Analysis

Situation Analysis

Describe about the Marketing and Management for Multinational Coffeehouse Chain.

Starbucks is an American multinational coffeehouse chain, which was founded on 1971 in Seattle, Washington and stretched its operations in more than 23,768 locations globally. It is a publicly traded organization headquartered from Seattle, Washington to operate efficiency in the international business environment through its numerous subsidiaries that include Ethos Water, Tazo, and Hear Music. Coffee and beverage items are the main products of Starbucks while the product portfolio also includes baked foods, sandwiches, teas, and smoothies (Chua & Banerjee, 2013). Considering such information, the product mix strategy of Starbucks principally specializes in coffee and related beverages, but in addition, company provides increasing attention to some different range of products as well. From the study of Hill, Jones, and Schilling (2014), the business expansion of Starbucks depends on other categories of products like Tazo tea and Espresso apart from coffee and beverage products. Taking such identifications into the account, this report is based on analysing the international and external environment of the chosen company to explore the whole situation surrounding the business.

External Analysis

In order to analyse the industry, in which Starbucks operates, the five forces analysis indicated by Porter is applied and the implications are demonstrated in the following section:

Competitive Rivalry (Strong) Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper

·         The competitive rivalry is high in the coffee shop industry due to the fundamental influence of the competitors on each other. ·         Large number of firms from the competitive environment. ·         Low brand switching cost among the customers within the industry ·         A large variety of firms also provide influence to the rising level of competitive rivalry to a certain extent.

Bargaining Power of Buyers (Strong)

·         Individual group of customers from the identified industry have their strong bargaining power over the operating companies. ·         Customers enjoy a low switching cost to swap from one brand to another brand. ·         A large number of substitutes are available in the chosen market causing a high threat for the organizations. ·         Relatively a small number of individual buyers associated with the industry are also denoted as the factor having limited influence in the particular context.

Bargaining Power of Suppliers (Weak)

·         Suppliers have their highly limited influence over the identified industry thereby causing weak bargaining power. ·         A high variety of suppliers exist in the chosen market causing them to have limited influence or control over the sector. ·         Great sources of supplies are also available for the participatory companies ·         The individual size of each suppliers is noted to be moderate within the industry

Threat of Substitutes (Strong)

·         Due to the large variety of substitute goods, the coffee shop industry experiences a strong threat from the substitutions. ·         Low switching cost and offering alternative products in the low and competitive price ranges by the substitutes contribute to the strong level of threats for the associated companies.

Threat of New Entrants (Moderate)

·         The impact of new players or entrants within the specific market is considered to be moderate due to a number of factors. ·         The cost for developing a venture within the industry is termed as moderate ·         Cost associated with the supply chain of a business is also categorised to be moderate ·         Business needs to incur high amount of cost for developing its business and improving the brand name

Table 1: Porter’s Five Force Analysis regarding the Global Coffee Shop Industry

(Source: Ebert & Griffin, 2015)

The overall commodity chain of coffee can be adeptly categorised in different small divisions, such as producers, agents, exporters, importers, roasters, retailers, and consumers (Wu, 2013). These particular areas are fundamentally catalogued in three primary segments known as growers, roasters, and retailers. Payne and Frow (2013) have argued that the appropriate distinction between the interactions of various players associated with each segment of the market should need to be necessarily investigated for understanding the underlying economic structure of the coffee shop industry. The result of the study developed by Chernev (2014) indicates price elasticity of demand as one of the significant factors influencing the global coffee industry due to the consistently increasing demand in the international environment. The chosen factor helps to determine the roles of the consumers in the particular industry, as the buying behaviours of the consumers are extensively influenced.

Apart from that, being coffee classified in the luxury category of goods, different economic situations and criteria deeply affect or hamper the growth of the global coffee market (Kotler, et al., 2015). For example, economic crisis of 2008 had greatly diminished the rate of coffee consumption to affect the entire marketplace.

External Analysis

With reference to the suggestion provided by Ling (2014), it can be stated that the speciality coffee industry has travelled a long way since 1987 regarding both the variety of products and competitive rivalry. With the help of the study, it is also acknowledged that the global progress and industrial development has inflicted Starbucks to compete against multiple organizations of different sizes and exposures unlike the early days of its operation when it used to compete with against the small-scale and local specialised coffee retailers. Considering the contemporary market environment, all the primary competitors of Starbucks are serving speciality food and beverage products, which are different from the product rages of the company in different ways (Jacobs & Chase, 2013). As a result, the firm faces strong level of competitive pressure from the rival players.

Caribou Coffee, which is a Minneapolis-based coffee shop classified as one of the main regional competitor of Starbucks with its similar set of approaches to create an exceptional brand presence (Liebowitz, 2013). In addition, Wilson and Gilligan (2012) indicate McDonald’s as one of the primary competitors of Starbucks from the global environment due to the offering of coffee drink named as McCafe. The other categories of foods like Frappuccino also provide a significant level of competitive threats to Starbucks.

Based on the concept obtained from the work of Peñaloza, Toulouse, and Visconti (2013), no factors can beat the fragrant smell of roasted coffee irrespective of the locations of consumption. The same study also signifies that the population from the global environment are typically driven by the tastes of specialised coffees to spend increasing money annually. Based on the large variety of global customers, consumers can be segregated in four distinct categories, namely drip coffee drinkers, coffee shop lovers, speciality coffee drinkers, and whole bean buyers (Kotler, et al., 2015). The drip coffee drinkers are the consumers of coffee products on a daily basis, where they are basically students or business workers. Alternatively, coffee shop lovers are the individuals who like to spend time as the cafes or hubs with the interest on consuming speciality and regular cups of coffee. The certain customers fundamentally belong to the age group of 18 – 24 years. On the other hand, Qian and Xing (2016) point out speciality coffee drinkers tend to consume special cups of coffees like espressos, cappuccinos, mochas, and lattes. The study also suggests that whole bean buyers are also found in the coffee market, as these customers want to make coffee at their homes or offices. Starbucks mainly prioritises the drip coffee drinkers and coffee shop lovers throughout the global environment to expand its business (Lim, Chae & Jeon, 2014).

Environment	Key Environmental Trends identified for Starbucks
Political/Legal	The western politicians as well as the sourcing country provide an increasing level of attention to sourcing of raw materials (Kreutzer & Land, 2015). Regulatory rules and regulations like taxation policies and employment legislations of individual countries are another important political factor.
Economic	One of the primary economic drivers of Starbucks is the global economic recession hampering the buying behaviour of the customers. Additionally, exchange rate of local currencies, local economic environment, and taxation system of various countries influence Starbucks dramatically (Qian & Xing, 2016).
Socio-cultural	Starbucks is forced to offer quality products according to the socio-cultural trends of different countries at the affordable or cheaper price ranges (Wilson & Gilligan, 2012). Additionally, the changing family patterns of USA and Europe and customer perceptions and lifestyles have their pivotal influences over the strategy of the organization.
Technological	The emerging mobile wave technology is adequately introduced by Starbucks due to the collaboration with Apple (Peñaloza, Toulouse & Visconti, 2013). In addition, the emerging progress of biotechnology and agriculture provide advantage to the growth of the firm.

Industry analysis

Table 2: Macro environmental analysis of Starbucks

(Source: Wilson & Gilligan, 2012)

Operational analysis

With the help of 4-P framework, the key operations of Starbucks can be demonstrated:

Product

Starbucks uses to capture market with the help of innovative product mix, which includes some of the primary category of products: ·         Coffee ·         Tea ·         Pastries ·         Smoothies ·         Frappuccino

Place

Starbucks typically offers its large variety of products through multiple cafes, as the marketing mix determines the venue of offering certain products primarily include: ·         Cafes ·         Online Stores ·         Retailers ·         Starbucks App

Price

Advertising is the primary tool for promoting the products of Starbucks. Apart from that, promotional mix includes: ·         Sales promotions ·         Public relations

Promotion

·         Starbucks uses premium pricing strategy to offer its products. ·         Pricing strategy tends to take advantage of the behavioural approaches of the customers regarding their tendency to purchase expensive products.

Table 3: 4P Analysis of Starbucks

(Source: Chernev, 2014)

The key financial areas associated with the operations of Starbucks can be highlighted through the use of a table:

Particulars	FY 2014	FY 2015
Revenue	16448	19163
Cost of Revenue	6859	7788
Operating Income	3081	3601
Return on Invested Capital	30.79%	35.86%
Total Cash Position	1708	1503

Table 4: Key Financial Areas associated with the Operations of Starbucks; figures in million USD

(Source: Ling, 2014)

It can be observed that Starbuck has demonstrated a better financial performance in the financial year ending 2015 than 2014. The same fact can be judged by looking at the increasing revenues, operating income, and return on investment. However, the company needs to leverage more focus on its business proceedings for enhancing the liquidity position of the business.

As dictated earlier, premium products are offered by Starbucks with the aim of approaching and attracting the premium segment of the market (Hill, Jones & Schilling, 2014). As part of the process, they tend to position themselves in the market by continuously leveraging on innovation and delivering high quality products. Relating to the scenario, Lim, Chae, Jeon (2014), Starbucks has strategically expanded its product categories for maintaining the existing momentum satisfaction level of the customers. For example, Tazo Tea, developed by the company through integrating innovative models, is dedicated to the tea lovers of India. Additionally, the existing products offered by Starbucks include Frappuccino, strawberry cream, and different lattes (Payne & Frow 2013). Moreover, the company needs to use extensive innovation for developing its future range of products according to the rapidly changing tastes of global consumers.

SWOT analysis

Strengths	Weaknesses
Strong financial position supporting the acquisition of leading spot in the different markets Valuable brand presence and values among the mindset of customers Largest coffeehouse in terms of size and volume It is the pioneer in the people management process	Heavy dependency on its primary input, i.e. coffee beans Reducing demands regarding the coffee intake due to growing procurement practices in the recent social environment Due to the premium prices of products, a large market segment is refrained from the consumption
Opportunities	Threats
Expansion of supplier network for ensuring diversification of inputs Expansion of business in the emerging and promising marketplaces across the world Maximising the product offering to cover the full spectrum food and beverage retailers like Burger King and McDonald’s	Increasing price of coffee beans is attributed cause supply chain risks regarding the price fluctuations The business is plagued by the infringements related to trademark and copyright Intense competition from the local players

Table 5: SWOT Analysis of Starbucks

(Source: Liebowitz, 2013)

	Opportunities	Threats
Strengths	SO Strategies: ·         Setting up practical marketing team strategically ·         Improving the management practices ·         Generating a long-term vision and making effectual decisions	ST Strategies: ·         Developing an investment worth $40 million annually for increasing employee base ·         Enhancing satisfaction among the customers ·         Eradicating issues in offering fast services and added values to the customers
Weaknesses	WO Strategies: ·         Providing better training to the partners for treating customers proficiently ·         Definition of great service from the perspective customers ·         Decreasing possible delays during the preparation of beverage	WT Strategies: ·         Providing discounts and offers to the customers ·         Utilising the promotion strategy capably ·         Establishing proper brand image within the customers’ mindset

Table 6: TOWS Analysis of Starbucks

(Source: Wu, 2013)

Reference List

Chernev, A. (2014). Strategic marketing management. Cerebellum Press.

Chua, A. Y., & Banerjee, S. (2013). Customer knowledge management via social media: the case of Starbucks. Journal of Knowledge Management, 17(2), 237-249.

Ebert, R. J., & Griffin, R. W. (2015). Business Essentials.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Jacobs, R., & Chase, R. (2013). Operations and supply chain management. McGraw-Hill Higher Education.

Kotler, P., Keller, K. L., Manceau, D., & Hémonnet-Goujot, A. (2015). Marketing management (Vol. 14). Englewood Cliffs, NJ: Prentice Hall.

Kotler, P., Burton, S., Deans, K., Brown, L., & Armstrong, G. (2015). Marketing. Pearson Higher Education AU.

Kreutzer, R. T., & Land, K. H. (2015). Confidence: The Latest Currency in Marketing and Management. In Digital Darwinism (pp. 147-161). Springer Berlin Heidelberg.

Liebowitz, J. (Ed.). (2013). Big data and business analytics. CRC Press.

Lim, S., Chae, H., & Jeon, H. (2014). The Effect of Experience Marketing on Brand Attitude and Brand Loyalty of Beauty Salon Franchise Stores. Fashion business, 18(5), 42-55.

Ling, L. W. (2014). A Study on the Successful Strategies (Strategic Management and Marketing Strategies) of Starbucks Hong Kong: A Case Study.

Payne, A., & Frow, P. (2013). Strategic customer management: Integrating relationship marketing and CRM. Cambridge University Press.

Peñaloza, L., Toulouse, N., & Visconti, L. M. (Eds.). (2013). Marketing management: A cultural perspective. Routledge.

Qian, Y. A. N. G., & Xing, T. U. (2016). Starbucks VS Chinese Tea—Starbucks Brand Management Strategy Analysis in China. International Business and Management, 12(1), 29-32.

Wilson, R. M., & Gilligan, C. (2012). Strategic marketing management. Routledge.

Wu, C. L. (2013). The Research of Brand Image, Experiential Marketing, Customer Satisfaction and Customer Loyalty-Example of Starbucks Coffee.