Starbucks is the largest coffee house chain of the word. It operates in more than 20000 locations all over the world. Since the time of the foundation of the chain in the year 1971, in Seattle, Starbucks has been providing hot and cold beverages in addition to the snacks. This conglomerate organisation has lengthened into the selling of branded products like packaged coffee, other gifts like mugs and coffee machines. The analysis of Starbucks clearly shows that there is much more prosperity in future for this famous corporation.
The Company is not just a passionate purveyor of coffee but everything else which is inclusive of a complete coffeehouse experience. The company also provides a choice of premium teas, tasty pastries and other treats which are pleasing to the person. The music in the store is also appealing and artistic. It is very likely for people to come to the store to chat meet up or even work. The company makes sure that that everything is done on humanitarian grounds. This is the way engagement is done with customers and communities for performing business responsibly and effectively. From the beginning the Starbucks started out as a very different company. The innovation and the continuous efforts of the people at Starbucks is responsible for the brand value of the company.
Despite the inflated prices the brand has been capable of creating create a sense of brand loyalty and variety of followers who are loyal. Coffee is a more or less homogeneous item where Starbucks have been capable of marketing their standards well. They have been successful of portraying a lifestyle of luxury. The operation of Starbucks is in a monopolistically competitive environment and market structure were they were successful in maintaining a control over the inflated prices. With the usage of the Starbucks logo, quality and other trademarks, the company differentiates its coffee with that of its competitors. The strategy of the company to focus on the core competencies and to establish the brand as a powerhouse of coffee is important.
PESTLE Analysis:
The major factor is the sourcing of raw materials and there is also the need to abide by rules and regulations in the countries from where the company sources its raw materials. There are certain authoritarian pressures within the home market in the United States as well. Some other factors worth considering are the tax policy and laws of employment (Tu, Wang, & Chang, 2012).
The financial recession world is the major external financial drive for Starbucks. This factor has reduced the profitability of Starbucks and has convinced the buyers to shift to other cheaper alternatives. The rising labour and economic factors have also to be looked into. Other economic factors are local exchange rates, the local fiscal environment in different markets and the taxation level (Burkitt, 2012).
The major socio cultural challenge that the company faces is the sacrifice of the quality in case it has to offer cheaper products. The social and environmental costs of the brands are also facts of concern. Other factors are the change in the family patterns in USA and Europe, the preferences of the customers, the changing patterns of work, the changes in the lifestyles or population, the education level in the domestic markets and the changing values among the population (Burkitt, 2012).
The company has introduced Wifi capabilities in the outlets. The importance of internet to the customers is extremely important in the present world of technological advancement. Some other technological factors are emergence of innovative technology, the biotechnological developments as well as the developments in agriculture.
Starbucks must not forget to ensure that no laws and regulations are violated. The other legal factors that might impact the organisation are the introduction of much more strict custom and regulations of trade and also the license of regulations which are linked to the industry concerned.
It is an easy yet suitable tool for the analysis of the competition level in the industry which helps in the analysis of the forces which influence the competitive positioning of a business firm.
The threat of new entries for Starbucks is more or less insignificant. The barriers are not very high and it is to be understood that the initial investment for the starting of a coffee brand is not high either. There is the access to suppliers and access to raw materials for Starbucks. These contribute to moderate threat level due to new entrants.
The substitutes for the Starbucks coffee brand is quite high. There are several substitutes available in the market including juices, tea and alcoholic beverages. The homemade products that consumers make are also substitutes to the products of the company.
The suppliers can exert only a moderate amount of pressure on Starbucks. It is because the own diversity policy utilized to select the suppliers is possessed by the brand. The great relationships established by the company with the tea and cocoa farming companies can reduce the mediators and suppliers (Haskova, 2015).
The suppliers can exert moderate to little pressure on Starbucks. There is the brand’s own supplier diversity policy which is used to select the suppliers. The excellent supply chain management has improved the bargaining power of the suppliers and gave it as a low amount.
The intensity of the competition in the industry is comparable as moderate to high. There is monopolistic antagonism in the industry and the brand of Starbucks possesses the highest market share. There is always industry room for new players which is responsible for the intensity of competition.
The analysis of Starbucks Company is presented below:
It can easily be said that Starbucks has been doing the basics right since they manage to create a great brand image for themselves and take home millions of dollars every year. The profits also grow at high rates from year to year.
Quality profitability and ethicality:
Starbucks is responsible for establishing themselves as a premium coffeehouse chain in the world. This has been established despite their presence in comparison to that of other existent fast food chains. The products of the company are of excellent quality, seemingly friendly as per environment standards and also maintain consistency between each of these locations. Because of all these reasons they can charge the customers high prices which maximum of the people are even willing to pay. Not only does this mean there are high profits for the company but they are also globally understood as the most famous coffee shop chains in the world.
Majority of the profits that the company makes is responsible for going straight to the expansion of the business. This is clear from the continually increasing number of locations which the company boasts about. It is extremely clear that there is a well planned growth strategy with the company which is seemingly well working for them (Thompson, 2017).
The most important factor for any company is the way in which it treats its employees. Starbucks is all the more well known as the company treats its employees extremely well being listed as the Fortune’s Top 100 places to work for.
Weaknesses:
It is natural for every company to have some weaknesses. Just like other top companies of the world, Starbucks also has certain weaknesses. The weaknesses are discussed as follows:
The high price point of the company is more of a weakness than a strength. The huge price tags on certain products are responsible for deterring several customers which might otherwise make the Starbucks Company a part of day to day activities. Though the high quality and proper ethical values of the company might be striking some people just do not have that much of money for spending on a cup of coffee (Taecharungroj, 2017).
The frappucinos, pumpkin spice lattes and big chocolate chip cookies that the company is famous for do not possess the most unique market. Several other coffee shops, chains, give similar products but lose out only to Starbucks’ big name.
The global coffee chain does have huge number of opportunities for the future which are explained as follows. The opportunities are:
Starbucks has several coffee houses around the world most of which are situated within the United States. There are several regions which keep profitably branching out as a chance considering India, central Europe and certain regions in Africa.
Starbucks products can be properly introduced in supermarkets all around the world. This procedure has already started. Selling the branded products in the stores other than the own stores of the company is a great way to make the value of the considerable reputation as the maximum. They also possess the chance to unite with other companies and co-brand. The innovation of the company and their ideas need to be respected (Schultz, 2012).
In order to keep increasing in number and retain their position as the top coffeehouse chain of the world, there are few threats which Starbucks needs to address. The possible threats are discussed as follows:
The two major multinational companies which have proper competition with certain products that Starbucks sells are Dunkin Donuts and Mc Donald’s. These competitors of Starbucks do not necessarily contribute to the immense amount of branding by tea and coffee but their other products come for a price which is only a fraction of the price of Starbucks (Lemus et al., 2015).
The success of the Starbucks Company can be credited to coffees popularity, teas and other convenient snacks in the present day society. In case the consumers shift from the products it would leave the Starbucks Company struggling. These are also extremely prone to the effects of the rises in coffee, tea and other dairy products (Wen, 2016).
From the SWOT Analysis of Starbucks it can be concluded that in case the company understands the needs of the customers and shows correct amount of responsibility towards their product launches, as well as understand their customers, the massive brand of the company anf large capital might help them carry out through any sort of turbulence which might happen in the future (Chua & Banerjee, 2013).
Mission and Vision:
The mission and vision statement of the Starbucks reflects the Organisation’s emphasis on the leadership in the coffeehouse industry. The mission statement of the firm serves as an indication of what the company actually wants to do at its business core. The vision statement on the other hand shows what the company desires to achieve in the future.
Starbucks’ Vision Statement:
The Starbucks coffee does not readily present the vision statement but it is quoted as “To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow”. This statement clearly highlights the components of high level purveyance, greatest coffee in the world, principles which cannot be compromised on and ultimately that of growth. The brand aims to achieve leadership in providing the best quality coffee. The company never compromises on the ethical conduct and warm culture which are the desirable factors of the organisation (Boone & Kurtz, 2013).
Starbucks’ Vision Statement:
The Mission statement of the company can be quoted as “To inspire and nurture the human spirit-one person, one cup and one neighbourhood at a time”. This is reflective of Starbucks’ desire to keep the business running. The key components relevant to the brand which can be highlighted are that of inspiring and nurturing the human spirit and appealing to the customers one at a time. A small company culture is maintained by the company giving special importance to warmth and internal rapport (Wen, 2016).
Ansoff Matrix:
Ansoff’s Matrix helps the marketers to find ways to grow the business by means of existing and/ or new products in markets which are new and/ or existing. By analysing Starbucks as a brand, the areas to be note can be suggested.
Porter’s Generic strategies:
Differentiation, focus on attainment of competitive advantage and leadership are the three generic strategies. It is necessary for a firm to win in the existing market. It needs to have a sustainable competitive advantage.
The strategy utilized by the company is that of differentiation. There are several methods to achieve this as differentiation has many bases. The primary bases are quality, durability and functionality. The Starbucks brand has successfully differentiated the products depending on quality and set an entirely different experience of the customers.
The actual basis of differentiation is quality. The quality of the coffee beans is extremely important and the trained baristas also contribute to the quality. As the brand is ready to go to any length to get distinguishably great coffee the rivals cannot match its quality.
Starbucks has been able to create a suitable and moral brand image that concentrates on the ethics inside as well as outside the organisation. Superior experience gives to the customers has been possible due to the brand’s immense effort. In order to create an ethical image the company has focussed on responsible sourcing and assisting the community individuals and farmers by its CSR Strategy (Aiello & Dickinson, 2014).
Market penetration:
The investment of Starbucks in marketing has been very low. The brand basically has marketed itself in great quality products and extraordinary customer service. The expenditure on marketing has changed with time. It helps attract more customers and beat competition.
Market development:
The market development first began in the nineties and since then the number of stores of the company has increased manifold.
Product development:
The company gives immense importance on the development of new products which continues its strategy of innovation. It has continued to add new flavours and varieties.
The marketing strategy of Starbucks is carried out in segmentation, targeting and positioning. The targeting should ideally focus on any differential advantages and adopt suitable positioning with respect to the target segments. The differentiation strategy is what seeks to provide products and services at similar or increased prices.
Segmentation:
Market segmentation is the procedure of diverting a market into demarcated groups of buyers and has several requires characteristics or behaviour which can different products or marketing programs. Starbucks was based on a Socio-economic segmentation as it concentrates on the social class specifically on the business class people. The brand has also segmented the market by geographic and also demographically by choosing the location of store where they have the chance of finding educated coffee lovers (Geereddy, 2013).
Targeting:
After the defining of the segments of market the company can enter one or several segments of a given market and also makes decisions as to which specific customer groups to target. It is a process of evaluation of attractiveness of each market segment and choosing one or more segments to enter. At first Starbucks targeted those people who were already parents and had young children and it became a great idea and it has added more segments as well.
Positioning strategy:
After the decision has been made by a company as to which segments to enter it needs to understand what positions it desires to occupy in each of these segments. The arrangement of the products for occupying clear and understandable position is crucial. The positioning strategy of Starbucks comprised of a customer base so that the best service could be given and it would be even more than what customers expect. Starbucks has been able to gain a competitive advantage over customer satisfaction and has developed its strategy related to the positioning based on those customers who provide utmost facility in cases of layout furniture, music and also caters to employee satisfaction. Starbucks also gives its employees a special security with the freedom to participate in each and every decision of the business in order to make it victorious.
One of the main ideas in the scenario of contemporary marketing is that the company needs to plan the details of the marketing mix. It is a set of controllable, tactical marketing tools which the firm blends in order to produce the retort it desires in the target market. There have been good decisions which have been made by the company on marketing mix strategies.
Product:
Product is the goods and services blend which the company offers to the target market. The product uses quality, variety and services in addition to the brand name. At first Starbucks started with the coffee that has included non-fat milk and cold blended beverages. After that seasonal beverages were introduced such as strawberry and cream, Frappuccino, gingerbread ale, cookies and pastries. Even before the launch of the products, Starbucks received customer approval.
Price:
Price is the amount to be paid by the customers in order to pay to get the product. Despite the fact that the price at Starbucks was higher compared to all others, the customers were ready to pay the price as the brand had established its name and had formed a luxurious image with relevant facilities. It was a good brand and had offered more benefits and facilities and highest product quality to justify costs.
Place:
Proper distribution methods and channelling were available to the Company. Starbucks opened more and more stores in order to reach out to the targeted customers and gives huge stress to providing the best degree of service to the customers by spending lot of money due to the training by its employees. The services which were provided were noteworthy.
Promotion:
At first the advertising tool for promotion was not utilised by Starbucks but it was the public relations and personal selling tool that assisted the company to achieve the target. Several sales promotions were planned all round the country and also in other nations as it hoped that more customers would purchase at times of financial hardships in which the people are less likely to purchase. Different types of promotional strategies are utilised by the company. The coffee house uses different deals in each area to represent the topographical variations in the way in which the customers take their coffee.
The coffee house uses different deals in different countries keeping in mind the special coffee habits of the customers in different places. With proper awareness of the coffee habits of each of the customers and the specially chosen sales promotion, the Starbucks company shows its concerns that are customer centric and company oriented. It simply knows its customers. The relationship is also reflected in personal selling. The company staff are also suitably trained in giving advice and product information. The company knows the way in which an intimate relationship can be built by making all the customers extremely loyal.
Conclusion:
One of the leading companies across the globe, uses a very simple strategy. It believes in the establishment of connection between the brand and its customers. The employees are treated with dignity and respect and the company makes way for the production of good products and services. Starbucks needs to keep the life cycle of the products in mind. The company needs time to relocate to the market and coordinate the strategies. The success of Starbucks has been achieved through outstanding service to the customers which is provided at each of the stores. The excellent quality of the coffee which is brewed at each of the outlets of the brand is another important factors. The increased growth of all the new stores in different parts of the world has also put Starbucks in the global map in a big way.
All the above mentioned factors have not only improved the sales and the reputation among coffee lovers. Starbucks encountered stiff competitiveness in all the existent business performance areas. The existent condition for each of the segments of the business follows high competition. There are several famous corporations and organisations in the competition. Starbucks has a good economic capacity with good strategies and has the chance of overcoming all the existing competitions.
References:
Aiello, G., & Dickinson, G. (2014). Beyond authenticity: a visual-material analysis of locality in the global redesign of Starbucks stores. Visual Communication, 13(3), 303-321.
Boone, L. E., & Kurtz, D. L. (2013). Contemporary marketing. Cengage learning.
Burkitt, L. (2012). Starbucks plays to local Chinese tastes. Wall Street Journal.
Chua, A. Y., & Banerjee, S. (2013). Customer knowledge management via social media: the case of Starbucks. Journal of Knowledge Management, 17(2), 237-249.
Geereddy, N. (2013). Strategic analysis of Starbucks corporation. Harward [??????????? ??????].–????? ???????: https://scholar. harvard. edu/files/nithingeereddy/files/starbucks_ case_analysis. pdf.
Haskova, K. (2015). Starbucks Marketing Analysis. CRIS-Bulletin of the Centre for Research and Interdisciplinary Study, 2015(1), 11-29.
Lemus, E., von Feigenblatt, O. F., Orta, M., & Rivero, O. (2015). Starbucks Corporation: Leading Innovation in the 21st Century.
Schultz, H. (2012). Pour your heart into it: How Starbucks built a company one cup at a time. Hachette UK.
Taecharungroj, V. (2017). Starbucks’ marketing communications strategy on Twitter. Journal of Marketing Communications, 23(6), 552-571.
Thompson, A. (2017). Starbucks Coffee’s Stakeholders: A CSR Analysis. Panmore Institute.
Tu, Y. T., Wang, C. M., & Chang, H. C. (2012). Corporate brand image and customer satisfaction on loyalty: An empirical study of Starbucks coffee in Taiwan. Journal of Social and Development Sciences, 3(1), 24-32.
Wen, S. (2016). Marketing strategies: Starbucks in China.
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