Strategic Marketing: Starbucks Assessment Answer
Strategic Marketing: Starbucks
1.0 Introduction: Business definition and scope statement
1.1 Mission/ vision
Starbuck Company is an American coffee organization and it was established in the year of 1971, in Seattle, Washington. The mission of the company is to inspire and nurture of a human spirit that signifies “one cup, one person, and one neighbourhood at a time”. The vision statements of the Starbucks Coffee is clear, inspiring and concise to achieve the premier and good position in the coffee industry (Forbes, 2014).
1.2 Market definition
A market where sellers of specific goods and services can get a chance to meet with buyers of those particular goods and services. It makes a potential situation for a transaction to occur. The buyers can offer for exchanging of any product with something to make a successful transaction market. Foodservices and Cafes, specialist retailers, convenience stores, distribution channels, product type etc. divide coffee market.
1.3 Product definition
The Customers of the organization enjoy the exceptional product of the Starbucks Company in their store, at home. More than thirty blends of coffees, iced and hot espresso beverages, cold coffee, nitro, Cold Brew, non-coffee blended beverages, are available in store of the company. Besides tea- brewing and coffee equipment, accessories, books and gifts, packaged goods are the merchandise of the company (Sakal, 2018). Baked pastries, salad and grain bowls are very much popular product of this organization (HSPH, 2014). Hot and cold sandwiches, oatmeal, fruit cups are favourite items of the consumers of the Starbucks Company (Kayak, Kozak, & Moslehpour, 2013).
There are many competitors of the company namely Costa Coffee or McCafe, Tim Hortons, Dunkin Donuts, Lavazza. They are famous for the glorious position as the king of coffee for several years.
1.5 Strategic decision making (6 Criteria’s of Decision Making)
- The Starbucks Company carries and offers premium design for its product and service. In the case of other company, like as manufacturers, are also involved in the making of some materials like the mugs of Starbucks. Starbucks tells about the assurance about its goods and services that inspire and reflect the company’s brand image.
- The Starbuck Company maintains its coffee bean to the Coffee farmers who observes the quality standard of the Starbucks (Elliott, 2014). The farmers who are certified from CAFE, the Starbucks Coffee and farmers Equity program is preferred for the Company to buy coffee. In the decision area of the strategic management, the company uses high quality to connect with the company’s premium brand image (Martínez-Torres, Rodriguez-Piñero & Toral, 2015).
- Capacity efficiency and the process management is one of the most important factors behind the success of the Starbucks Company. The processes and capacity utilization are very flexible to meet the sudden increase in requirement during in pinnacle hour. In this decision part of strategic management, the Starbucks fixes its goal to maximize the cost effectiveness through the processes and the efficient workflow.
- The Starbucks’ location strategy is based on especially on urban area where the upper and the huge middle class population stay. The Starbucks uses the strategic procedure for clustering of cafes so that the market demand would go in high.
- The organizational structure of the company supports the warm and friendly culture of the company and the layout structure enhances the workflow efficiency.
- Starbucks uses the CAFÉ program to ensure the continuation of its development and the Coffee’s chain is globally approved (Aiello, & Dickinson, 2014). This decision area of strategic methods of Starbucks combines the corporate responsibility and the ethics with the supply chain capability.
Starbucks is a popular coffee company in the coffee industry and the corporation has grown to sell its unique and best quality product throughout the world. At present, the company operates several stores and the production of the organization is recognizable in the coffee industry for its uniqueness. Now a day, the popularity of the Starbucks Company has come in the global business market, which will expand more in the near future as expected. The Company has the chance to more investment on several marketing campaigns to spread to strengthen its image and customer base across the world.
Part 2: Situation Analysis
2.1 External Environment Analysis: Remote (Macro) Environment Review
2.1.1 PESTEL Analysis
Figure 1: Pestle Analysis
(Source: Author’s Creation)
Political: The regulatory pressure from the government can impact the business of Starbucks. There is higher scrutiny of business processes in different countries due to which it is important for companies to abide by the rules and regulations set by the government (Philip, 2011). Moreover, a stable government in countries considerably support companies to grow. In context to Starbucks, the company needs to adhere to the rules related to sourcing of raw materials and adhere to Fair Trade practices.
Economic: The inflation rate in the country has a severe influence on the firm’s performances and business. For instance, in the US, the inflation rate has come down to 1.9% in 2018 which was 2.1% (Amadeo, 2019). This helps companies to increase their productivity at low cost. Starbucks would also be able to increase its business performances and can increase investment in different portfolios to boost revenue and income.
Social: There is a significant demand among young generations of quality coffee and speciality coffee. In addition, consumers are becoming more health-conscious due to which they seek authentic and quality products which are ethically sourced (Mai & Hoffmann, 2012). Starbucks is also significantly focuses on providing quality and premium coffee products to its consumers. Moreover, the organisation is regularly focusing on making modification in product offerings that can attract consumers of different generations.
Technological: The use of advanced technology largely support companies to increase their business efficiency and operations (Yaghoubi & Bahmani, 2010). It has been identified that Starbucks have move towards adopting mobile based online payment techniques for easing the payment procedure for consumers (Chua & Banerjee, 2013). Moreover, the company make significant usage of social media platforms such as Facebook, Instagram, Twitter, etc. to promote its products and services among the targeted consumers.
Environmental: It is important for companies to abide to the environmental law set by the governments. The study of Wang, K.Y. Chen and S.C. Chen (2012) also indicated that it is expected from companies that they use available resources and materials in a sustainable manner. In addition, firms need to control their carbon gas emission and production of wastage so that environment quality can be improved. Starbucks is using fuel-efficient equipment and bio-degradable material for reducing gas emissions and recycling purpose (Kuruvilla Norton & Gee, 2017). Moreover, the company is making continuous effort to make maximum usage of renewable energy.
Legal: Organisations operating in countries are required to fulfil product safety regulations and employees’ health and safety. Therefore, Starbucks also need to ensure that all legal regulations incorporated by the governments are effectively followed.
2.1.2 Opportunities and Threats of Each Factor Identified
Political: The regulatory pressure from the governments indicates a threat for Starbucks. In that connection, it is to be mentioned that the organisation would require to make considerable changes in its business policy and models, which may hamper its existing business performance (Philip, 2011). However, it has been noticed that the firm is engaged in Fair Trade practices, which would create opportunity for the organisation to attract potential suppliers and farmers from across the globe who can provide quality coffee beans at reasonable rates.
Economic: The low inflation rate in the developed countries provides better opportunities to companies like Starbucks to increase its production and can source raw materials at lower costs. Moreover, low inflation in the country enable consumers to spend more on the desired products and services (Frank & Goyal, 2009). However, the inflation rate in developed nations like India is high is a threat for the organisation. Starbucks would require to make high investment to source the products and materials, which can directly impact on the revenue and income of the business. Therefore, it can be mentioned that the economic condition of a country significantly influence organisations either in positive or negative way.
Social: The increasing numbers of health conscious consumers and rising demand for quality products creates an opportunity for Starbucks. The organisation can increase its customer base and can encourage customers to consume quality coffee, which would also contribute in boosting the sales and brand image (Chua & Banerjee, 2013). On the other hand, the company can face threats in terms of spending by older customers. In that connection, it can be indicated that the baby boomer generating is retiring due to which there can be major decline in the spending by older buyers, thereby affecting the consumer base.
Technological: The use of social media provides significant opportunity to Starbucks to strongly establish its brand identity and products and brand awareness among the consumers globally. This can help the company to gain competitive benefit over competitors and can create a loyal base of customers. Nevertheless, the threat is that the organisation can face competition from companies investing largely on social media platforms. As a result, Starbucks may find it difficult to regularly and uniquely develop marketing and promotional events and campaigns to maintain market share.
Environmental: The development of environmental policies and regulations can create opportunity for Starbucks to attract potential investors which can help the company to adopt sustainable practices in each business activity. The organisation can face threat if it fails to fulfil the environmental protection law developed by the governments, which may result to shut down of business operations in different locations (Philip, 2011).
Legal: By abiding to the legal rules related to product safety, employees’ health, consumer protection and others can enable Starbucks to receive support from the government of different countries to open new outlets in various locations, thereby helping to increase productivity and organisational image. On the other hand, if the governments can make strong changes in the process of sourcing raw materials then it can increase the cost of the company.
Table 1: Rating of Each Factor (Remote Environment) Impacting Starbucks
|Factors||Double-digit (10-20)||5-point Scale||Degree of Significance||Probability of Occurrence |
|Regulatory Pressure||Threat: 17|
|Government Stability||Threat: 14|
|Health conscious consumer and Change in taste and preferences ||Threat: 11|
|Fulfilling environmental law||Threat: 15|
|Fulfil product safety regulations and employees’ health and safety||Threat: 12|
(Source: Author’s Creation)
2.2 External Environment Analysis: Near (Macro) Environment Review:
2.2.1 Porter’s Five Forces
Bargaining power of buyers: Buyers’ bargaining power is moderate to high in case of Starbucks. The availability of numbers of coffee shop provides more power to consumers to easily shift from one company to another (Reinecke, Manning & Von Hagen, 2012).
Bargaining power of suppliers: Suppliers’ bargaining power is low to moderate for Starbucks. The organisation works with a wide number of suppliers globally due to which suppliers are less likely in position to bargain (Carvalho, Paiva & Vieira, 2016).
Threat of Substitutes: It has been determined that all products served by the organisation such as coffee, tea and food items have substitutes. However, these products have substitutes like drinks, juices and other beverages. Consumers can get similar products at low cost, which makes the threat of substitutes high (Reinecke, Manning & Von Hagen, 2012).
Threat of New Entrants: It is not easy for new firms to enter the coffee industry to setup the business. In addition, significant technology, infrastructure and investment are required which may difficult to arrange (Howard & Jaffee, 2013). On the other hand, Starbucks is a well-known brand, due to which new entrants may not pose high threat.
Competitive Rivalry: The competition in the industry is considerably intense. Competitors like Dunkin Donuts, McDonald and local coffee-houses are continuously working to specialise, innovate and come with unique marketing strategies to attract more consumers.
2.2.2 Opportunities and Threats of Each Factor
Buyers’ Power: Starbucks has the opportunity to retain and hold consumers who are mainly quality sensitive and willing for paying higher costs for premium quality coffee. Therefore, even if prices of products increases slightly, certain consumers will continue to buy from Starbucks. Apart from that, though consumers have high power then if competitors provide similar products at reasonable prices then Starbucks would lose its consumers.
Suppliers’ Power: Starbucks has a strong brand image globally, which provide it a strong opportunity to negotiate with suppliers present in different parts of the world. Therefore, the company would be in a better position to obtain the required raw materials for its each store in a bulk amount. On the other hand, the firm can face threat if it does not engage with suppliers who ethically source materials. This in turn, can result to shift of health conscious customers to companies dealing in ethical and sustainable manner.
Threat of Substitutes: The organisation has the opportunity to regularly focus on producing new products that can help in maintaining and increasing the customer base from all generations. Moreover, the company would need to regularly ensure quality offerings to its consumers. The organisation also has the opportunity to make investment on developing superior customer service and ambience. The increasing product substitutions in the form of juices and other flavoured beverages can pose threat to Starbucks, which can directly affect its business performances. The company would find difficult to attract consumers, thereby impacting their overall revenue and income (Carvalho, Paiva & Vieira, 2016). In addition, the competition level would also increase that can hamper the market share and productivity of the organisation.
Threat of New Entrants: The organisation has the opportunity to allow the new entrants to use the franchise name for starting the business in a specific location. This can help Starbucks to expand its business strongly in the market, thereby achieving higher business success and developing strong image in the industry. On the other hand, the organisation also has the opportunity to increase its access to better quality coffee and a wide number of suppliers globally (Howard & Jaffee, 2013). As a result, the company would be able to counter the threat of new entrants strongly and will always have edge over them. In context to threat, it can be indicated that the organisation would face problem to identify the numbers of new entrants present in the market. Moreover, the company would not be able to challenge the low cost offerings by the new firms, which can impact its income.
Competitive rivalry: The intense competition in the industry would provide opportunity to Starbucks to make considerable investment in the development and training of employees, who can largely contribute in providing quality and timely customer service. Moreover, Starbucks can penetrate the online platform strongly as it can largely support in reaching to maximum numbers of customers that can further help in building loyal consumer base. Apart from that, the organisation has the opportunity to directly source materials from farmers, which can help in controlling operational costs and gaining competitive benefit (Reinecke, Manning & Von Hagen, 2012). It is to be further mentioned that the promotional and advertisement activities of rivals are developed uniquely and on regular intervals then it can overshadow the image of Starbucks, which can pose threat to the company to attract and retain the customers.
Table 2: Rating of Each Factor (Near Environment) Impacting Starbucks
|Factors||Double-digit (10-210)||5-point Scale||Degree of Significance||Probability of Occurrence |
|Bargaining power of buyers||Threat: 14 |
|Bargaining power of suppliers||Threat: 12|
|Threat of Substitutes||Threat: 16|
|Threat of New Entrants||Threat: 14|
|Competitive rivalry||Threat: 18|
(Source: Author’s Creation)
2.3 Critical Success Factors
2.3.1 Strategic Plan (Goals and Objectives)
The goal of continuous improvement in offering premium and quality coffee products will help the organisation to determine its success in meeting the expectation of consumers.
The goal of obtaining raw materials in an ethical and sustainable manner from farmers and suppliers on regular intervals will assist in determining the success of the company.
The objective of reducing cost by sourcing materials directly from farmers and enhancing business efficiency will help in achieving higher growth and attaining better image and competitive benefit in the market.
The objective of developing quality customer service team will enable the organisation to meet the customer satisfaction, which would further support in creating a positive organisational culture. This can help Starbucks to meet its vision and mission in a most effective way.
2.3.2 Decisions from the Situation Analysis
In consideration to the developed situation analysis, it can be mentioned that when the organisation is able to offer quality products on a continuous basis then it will help the firm to maintain the pace with the changing demand and preferences of the consumers. Moreover, by making investment on advanced technology and business process will enable the firm to increase operational efficiency in sourcing materials and providing expected service to consumers. It is to be further mentioned that the organisation can achieve higher success by establishing long-term relationship with both suppliers and consumers. This can support the organisation to not only enhance the internal business performance but also establish strong brand image globally.
2.3.3 Monitoring the Action or Implementation Plan
The progress in the performance of team by providing training to the team and fulfilling the responsibility as per assigned will help in determining whether the team members have been successful in monitoring the action plan. Furthermore, setup of a proper database infrastructure and engaging skilled and capable employees will help in successful monitoring and implementation plan.
2.3.4 Frequent Group Meetings
The engagement of team members in the decision making process and groups meeting will help in determining the effectiveness and growth of each employee in meeting the required objectives or fulfilling the job requirements. Moreover, providing clear job role and setting proper team groups will support in providing better customer service.
2.3.5 Meeting Deadlines
Employees able to meet the set work deadlines as per expectation and with quality will assist in identifying the growth of organisation in enhancing internal and external performance.
2.3.6 Utilise Skills, the Budget and Resources
Leaders of the organisation able to convert the efforts of employees into real productivity will help to ascertain their capabilities in enhancing workplace culture and producing new and quality products, which can best meet the expectation of consumers. In context to the budget, it can be indicated that the employees able to carry out the work within the set budget will demonstrate that they have been successful to utilise the budget in a best possible way. Furthermore, the utilisation of resources in a sustainable manner will also help in determining the success of the company.
2.4 Internal Capabilities Review
2.4.1 Key Capabilities
Starbuck is one of the booming coffee brand throughout the world. The global present of the company is remarkable and the premium quality products is wealth of the organization for customer satisfaction. The company has a status of leadership in the coffee market for its quality, customer service and the chain management (Gallaugher & Ransbotham, 2010). The product has got its popularity and a large customer base environment throughout the world. This differentiates the company with the competitors of the coffee industry. The capabilities and the major resources play a great role that have helped the company for building a strong and concrete competitive environment in the coffee marketing sector.
Brand Equity: Starbucks is famous for its strong brand image and is customer centric. The way customers of the Starbucks like the brand and differentiate from other competitors is the main observable protocols of Starbucks. Several factors that enables the company to set up a unique strong brand. Customer loyalty and the customer centricity are the main key points of the strong brand of Starbucks (Susanty & Kenny, 2015).
Supply Chain: The company sources its product cocoa from best suppliers in the world. The organization has set up a strong supply chain from some responsible suppliers who provide the best quality of coffee bean. The Starbucks works to increase its suppliers and always help them to continue provide their best product.
Global Representation: The key factors for the strength of the Starbucks is its extensive global presence. According to the report of 2017, the company has higher than 27 thousand stores and maximum stores are located in America (Knoema, 2018). In Middle East and Asia Pacific, the brand has also established its uniqueness. In Asia pacific, the number of stores of the company is 7,479.
Talent Management: The Starbucks Company always tries to find out the talent who are very much technically skilled and the interaction with the customers are effective. The Company also organizes the training program so that the appointed employees can get the sufficient grooming for giving the best customer service. The Supervisor panel of the company observes about the performance of the employees so that they are always dedicated to give their best level for the customer satisfaction.
2.4.2 Strengths and weaknesses of Each Factor
Brand Equity: When the customer have the favourable brand perception with a continuous better experience then it is expected that those customer will remain attach to that brand. They remain loyalty to that particular product also. So, the company will get the loyal and stable customer satisfaction for the unique product of the company.
Once the brand of the company shows a negative impact for any reason, it will be not good for the daily customers. The consumers then will want to move for another brand equity and the ideas of the previous product will go about worse impact (Susanty & Kenny, 2015). This can hamper the whole market potentiality.
Supply Chain: A supply chain with well-coordinated system can cheap the costs and will be capable for better customer satisfaction. There will be no any bottleneck like no idle or extra labour, unhappy customer and lost sales that help to increase the entire growth of the company. With the strong supply chain, the company is able to coordinate the labour and market analysis effectively
The limitation of the supply chain plays a major role in company’s reputation. Say for instance if there is no any suppliers then the machine will not work, website and the sales will also crash, the whole system of the production will go in a worse case and that will not lead to a continuous growth of the company (Garthwaite, Busse, Brown & Merkley, (2017).
Global representation: The global presence of the company gives major impacts for continuous growth of the organization always. If the company is able to spread its market in a global market then new product brand may be opened for the organization that will be benefited. With the help of website or internet the enhancement of the market of the product may be spread globally that can reduce the costs value also.
Although the global representation can help the development of the organization, the limitation of the strategy is also there. The main factor may be the cultural differences that is not same with the other companies. This derails the marketing efforts of the company.
Talent management: The company can get the super quality talent or skilled employees for their company by the talent management strategy. In the competitive market, there are so many competition among the industry and the employees also (Maria-Madela & Mirabela-Constanţa, 2009). If the Company is able to find out the skilled and strong employees for the customer service it will bring a positive impact of the company.
In terms of resources, time and financial costs, the implementation of talent management may be an expensive procedure. Lack of support or lack of supervision from the most of the manager may hinder the performance level and commitment of the employees. These factors hampers the entire growth of the company.
Table 3: Rating of Key Capabilities of Starbucks
|Factors||Single-digit (1-9)||5-point Scale||Degree of Significance||Probability of Occurrence |
|Brand Equity||Threat: 4 |
|Supply Chain||Threat: 2|
|Global representation||Threat: 6|
|Talent management||Threat: 4|
(Source: Author’s Creation)
Part 3: Problems and Opportunities Statement
3.1 Key Strategic marketing-related issues
It has been determined that the organisation would find challenge in developing unique marketing and promotional activities that can support in strengthening brand image. The presence of numbers of competitors in the coffee industry are significantly investing on different marketing activities that can help them in establishing strong customer base. Competitors like McDonalds, Dunkin Donuts and other are largely available on digital and social media platforms and regularly post details about new offerings, discount, etc. In that connection, it can be mentioned that Starbucks would require to come up with unique promotional and marketing ideas such as distributing coffee to disable people, providing jobs to disable people, opening stores with only female employees, etc. that can help in retaining and increasing its market share in coffee industry globally.
Another marketing-related issue identified is the duplication of products offered by Starbucks. There are numbers of local coffee houses across the world, which utilise the similar formula like Starbucks to produce coffee at low costs. As a result, the organisation has no control over such firms, which impacts on the marketing of products and services. It is imperative for the organisation to ensure that its employees are barred from disclosing the coffee preparation formula with any external parties. Apart from that, it is observed that the organisation less likely take initiative to come up with unique content to attract the attention of consumers. As an outcome, consumers may not be aware about the products and services or may lose interest on the coffee product line offered by Starbucks in the long-run.
The Starbucks Company is a famous corporation in the coffee industry for its unique product and the customer satisfaction. Although there are several number of positive point about the growth of the company, some challenges are also there like economic, political, competition market issues. The rules and regulation of the Government and the regulatory pressure brings a major impact to the company. The competition among the growing companies and the already existed renowned company is so high, that the Starbucks Company may face multiple number of challenges for continuous growth. The skilled employees and the groomed workers are other factors to continue business and to stay in any sector with a profit. The Starbucks also finds the talent and skilled person to give the best customer service but there are also others competitors of Starbucks Company that has more groomed employees. Consequently, there are the range of customer service depends on the quality of the employees’ ability and it plays a great role for the Starbucks Company. International and modern technology is used for the service of the Company, besides other famous company uses the more technology for the better performance. This challenge is also an important point to execute the topic successfully.