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Critical Analysis FROM THE Strategic Issues Faced Starbucks Marketing Essay

The aim of this project survey is to critically analyse the tactical issues being faced by a business. The organization chosen for this task is the business Starbucks, which will be analysed using relevant ideas assessed in the component using appropriate theory and models.

The analysis will include analysis of the external and interior factors and also the competitive causes influencing the business Starbucks. This can be accomplished by the use of PESTEL analysis and the PORTER 5 Makes model. A mixed evaluation would be carried out by undertaking a SWOT evaluation for the organization. The project record would also include analysis of the Starbucks Corp using the ANSOFF Matrix and the BCG Matrix to suggest the tactical choices the company needs to make to counter the proper issues specified by this record.

The report framework would start with a brief introduction to the business Starbucks accompanied by the proper issues experienced by the organization. The problems are layed out before in the record based on the analysis which has been carried out using these models. After talking about the existing and recent issues facing Starbucks the business evaluation would follow which would be reinforced with relevant theory and program of ideal models. After completing the industry examination conclusion and recommendations would be provided for Starbucks to counter the proper problems.

STARBUCKS - AN INTRODUCTION

The Starbucks Company was founded in Seattle in 1971 by Jerry Baldwin, Gordon Bowker and Zev Seigel with a eye-sight to teach American consumers about the fine espresso drinking experience. In 1987 Howard Schultz took over the Starbucks Group, he wanted to create the Italian espresso bar experience in America by creating a personal relationship between your customers and their caffeine.

Just within a year or two they grew from a small caffeine business house to a multi-million buck player in the industry by purchasing only the best coffee available and providing the people with an unmatched store experience. As standing, Starbucks is number one in the speciality caffeine industry, with more than 12, 000 outlets in more than 35 countries.

The Starbucks quest statement is "To motivate and nurture the real human spirit - one person, one glass and one neighbourhood at the same time. "

Freshly brewed caffeine is the primary product made available from Starbucks and also other drinks such as cold and hot teas, cakes and pastries. The Starbucks coffee will come in a many types each possessing another type of tastes, aroma and flavour.

In addition to its intensive product offerings, Starbucks has many brands including; Starbucks Hear Music, Tazo Tea, Starbucks Entertainment, , Ethos Water, Torrefazione Italia espresso and Seattle's Best Espresso. The successful management of all of the brands pulled jointly constitutes the Starbucks portfolio.

Starbucks is also one of the very most globally conscious firms in the world. In 2006 Starbucks donated $36. 1 million in cash and products, volunteered 383, 000 time in local areas, required growers to utilize strict environmental rules, used 20% green energy in stores, and actively recycled in almost 80% of stores in US and Canada. Starbucks has established itself as the coffee leader on the globe and has done so on a socially and environmentally conscious platform.

STRATEGIC ISSUES FACING STARBUCKS

The major task that Starbucks is dealing with is the existing financial crisis on the globe economy forcing those to call closures of several stores throughout the world.

Another obstacle that Starbucks is coping with is opponents. You'll find so many coffee shops all over the world and being able to stand out to create customers is important. Their main competitors are Dunkin Donuts, McDonald's, and Nestle in america and brands like Costa Caffeine and CaffЁ Nero in the UK, the two major market segments for Starbucks. It is important that for Starbucks to know their opponents and what they are doing.

Also Starbuck coffees are charged higher than other market competitors because of Starbucks only purchasing the highest quality coffees for his or her product, thus increasing the price tag on the drink providing the competitors an expense benefits over Starbucks.

Also Starbucks limited marketing strategy on advertising is a hindrance available development opportunities. They opt to build the brand by promoting the beverages cup-by-cup with customers. The ad ends until they drink the caffeine, reducing the probabilities to catch the attention of valuable customers.

Starbucks also does not highlight on distributing their products to supermarket because of being concerned with the grade of the coffee; if the coffees were packaged into plastic handbags.

Also the demanding expansion strategy accompanied by Starbucks can take a toll on the firms brand image. As businesses grow there may be a tendency to target too greatly on increasing result and locations, and less give attention to quality and brand image. Starbucks must stay with its prices and ideals which have managed to get successful.

Also Starbucks insurance plan of not franchising can be considered a cause of matter for the organization. Franchising would allow the company to open up many new stores with less risk, and make appreciable profits in doing so. Because of this the firm's research and development costs would fall taking a franchisee understanding of the neighborhood market in conditions of geographic, , psychographics, demographics, and the neighborhood country laws.

STARBUCKS ANALYSIS

This part of the record would analyse the working of the business by application of PESTEL research, Porter 5 forces, the BCG Matrix, SWOT evaluation and the Ansoff Matrix.

PESTEL ANALYSIS

POLITICAL

Taxation policy

High fees levied on farmers in the bean producing countries, would consequently raise the rate at which Starbuck would choose the coffee beans and any such fluctuations in the taxation policy would certainly be passed on to the consumer, who now would have to purchase the finish item at an increased price.

International trade rules and tariffs

Trade issues would affect Starbucks directly when exporting and importing goods. When the federal government of the trading country imposes a tariff it could not only leading to an efficiency damage for Starbucks but such large income transfers can also become inconsistent with collateral. This extra charge would have to be borne by the consumers.

Government stability

A change in authorities policies has a direct effect on the taxation and legislation construction. Also the countries in political turmoil or civil battle is highly recommended with great extreme care when considering possible market endeavors.

Employment law

Reduction in the licensing and permit costs in coffee bean producing countries would as a result lower production charges for the farmers and any such saving would subsequently pass on to Starbucks when purchasing the recycleables and lastly to the customers.

ECONOMIC

Interest rates

High interest levels would mean putting off the investment and enlargement plans of Starbucks, which would bring about fewer earnings for the organization. Low interest levels should have the contrary effect.

Economic Growth

In durations of negative progress, the consumer earnings would fall departing less throw-away income thus impacting sales for Starbucks.

Inflation rates

Business costs will go up in times of inflation which would ultimately need to be borne by the buyer.

Competitors pricing

Competitive rates from competition would impact Starbucks rates that would lower the profit percentage as they try to maintain their market talk about.

Exchange rates

If the currency value falls in a bean offering country, Starbucks would get more for the same price, when importing the products. This cutting down would be handed to the finish consumer.

SOCIAL

Population demographics

Identification of the mark population at which Starbuck needs to target their products is an important factor in the business operations. The advertising campaign undertaken would target accordingly.

Coffee is an extravagance product in some ways, so the people who have the most amount of throw-away income should be targeted.

Working Population

A large number of workers in big cities now venture out for lunchtime and meals. Starbucks can cash this to their advantage and promote the shop as a place where people can meet and eat, maximizing the sales.

Location

A good location which is easy to get at is essential to ensure that the clients go to the shop.

TECHNOLOGICAL

IT development

Starbucks launched its first-generation e-commerce website in 1998. As a result, scalability and performance have better, and the company now gets the tools it requires to account and focus on customers, analyse site data, and deliver new features to the marketplace in the shortest time possible.

New materials and processes

Technology developments in caffeine making machines and the computer systems that Starbucks use to use their cash registers would allow the personnel to work swiftly and successfully. This ends in customers being dished up quickly thus creating potential for serving more people in the day.

Rate of scientific change

Technology is advancing at an astounding rate. Starbucks will need to invest majorly merely to stand their floor in the always broadening and expanding market, and also to try to stay ahead of competitors.

ENVIRONMENTAL

Pollution problems

Starbucks customers produce a lot of waste products by disposing off of the cup and the articles incorrectly. The materials for the cup should be carefully selected to make it as biologically degradable as is possible.

Planning permissions

Planning permission may well not be awarded to Starbucks if the development would harm the environment. The land may be secured.

Work disposal

There are demanding laws generally in most countries regarding waste removal and non-adherence to these could lead to Starbucks being sanctioned, which would influences them economically and also tarnish the trustworthiness of the brand name.

Environmental pressure groups

Starbucks should become aware of the influential and physical power of organizations such as Friends of the Earth and Greenpeace. Any violation of creature or environmental privileges by the company is usually followed by a swift and attention-drawing protest in one of the categories. Brand image and customer bases are often irreconcilably tarnished because of the actions of the groups.

LEGAL

Trade and product restrictions

Starbucks need to follow the trade regulations of the countries where they established businesses. They must ensure they are not in violation of any nearby laws and regulations. Certain countries impose a tariff that needs to be paid accordingly when importing or exporting goods which must be studied into account as well.

Employment laws

Each country has different work laws, like restricting the number of hours a person can work per week, varying levels of minimum income etc. Starbucks should be aware of such factors when contemplating business development.

Health and Security regulations

By not keeping high standards they might be responsible for damages if within violation as it is a legal requirement of them to enable that their staff and customers are safe when they are in their stores.

Land use

Starbucks have to abide by the laws and regulations of the building government bodies when constructing shops or altering purchased sites and if within violation of land rules, it could be panalised by the neighborhood authorities.

PORTER 5 Causes ANALYSIS

1. COMPETITIVE RIVALRY

Starbucks is the leader in retailing and roasting of specialty coffee on the globe. Major competition include Costa caffeine, Caff Nero, Seattle's Best Coffee and secondary coffee providers such as McDonald's, Burger Ruler and Dunkin Donuts. The competition is nowhere near to Starbucks volume of procedures and sales.

Consumption of espresso is not dependent on the price tag on the product but also on the differentiation between each product and several value adding factors like the quality of customer services, brand, brand acceptance and image of the business. Hence, Starbucks is not majorly sensitive to moves of other businesses in this segment.

2. THREAT OF NEW ENTRANTS

Starbuck is the globe head in its industry and has controlled access to distribution channels. Starbucks have extreme control over such circulation programs because of arranging strict guidelines for the suppliers to follow. Starbucks is also constantly innovating and demonstrating strong product differentiation to hamper the probability of new entrants.

However, the accessibility barrier for the industry is relatively low and any big company where capital is no problem could be a potential entrant. A number of the more current and on-going risks of new entrants include junk food chains such as McDonalds, Burger King and Dunkin Donuts which may become a problem soon.

3. BARGAINING POWER OF BUYERS

A big menace to Starbucks is the lack of switching costs in the speciality coffee industry, customers face no turning costs in transitioning from Starbucks to Costa Espresso or Caff Nero for a cup of coffee. Also a danger to Starbucks is the power of customers to brew their own caffeine. Starbucks attempts to counter this menace by offering the Preferred Office Espresso Providers and also provides guidelines for making the perfect cup of Starbucks espresso at home, the perfect cup of course includes all materials that have to be purchased from Starbucks.

Also with new entrants and competition such as McDonalds who lay claim to offer superior roast caffeine of reasonable quality for lower price, thus giving the clients some bargaining vitality.

4. BARGAINING POWER OF SUPPLIERS

Coffee is the second largest traded item on the planet. Central and South America produce most coffee bought and sold. Starbucks depends after both outside broker agents and a mutually immediate contact with exporters for supply of premium coffee beans.

The quality of coffees desired by Starbucks is high, proving to be always a potential menace to the company. Only suppliers which meet Starbucks coffee standards have the ability to supply to the large company. The supplying industry only has few companies which can deliver the quality giving them extensive bargaining powers.

However, Starbucks counters this because of its substantial size and being the primary buyer and also because of the importance of Starbucks business to any individual supplier as it could account for a large percentage of the full total supplier's sales, thus lowering the bargaining vitality of suppliers.

THE RISK OF SUBSTITUTION

Substitute products will be the products that can cause as a trade-off for the merchandise being made available from a company. Inside the specialty coffee industry, alternative products can be carbonated drinks, tea, energy beverages, fruit drinks and other caffeinated drinks.

Here technology would play a huge role. To counter this Starbucks have given their selections a total revamp and have differentiated so many of their products which are actually part of the main product line. The menu includes various teas, hot and frigid coffee, cooked goods and various confectionary items.

The only true immediate substitute for niche coffee would be the essential espresso, which is of lower quality than niche and therefore does not present any threat.

BCG MATRIX

RELATIVE MARKET SHARE

HIGH

INDUSTRY

SALES

GROWTH

RATE

HIGH

STARS ( Expansion Strategy )

Global stores

Market Penetration and Development

Backward, Front or Horizontal Integration

LOW

CASH COWS ( Balance Strategy )

Product Development and Differentiation

Diversification

U. S Stores

ANSOFF MATRIX

Present Product

New Product

Present Market

Market Penetration:

Hotels, Grocery Stores, Businesses, Academic institutions, Airlines and Business Cafeteria

Product Development:

New Daring Fresh Lunch Programmes and Salads e. g. fiesta chicken salad, super fruit and cheese platter

New Market

Market Development:

Opening of stores all around the globe. Extension strategies into Brazil, Russia, Romania and India.

Diversification:

Music CD's, Clothing, Espresso Mugs and other accessories.

SWOT ANALYSIS

STRENGHTS

Strong brand name

Large retail circulation system

Quality product

Extensive product list

Good provider relationships

Massive capital funding

Valued and encouraged employees

WEAKNESSES

Dependence on one source of business/income

Prices relatively higher than competitors

Strong reliance on suppliers

Merchandise sales in stores

Over reliance on home market

Aggressive expansion resulting in failure

OPPORTUNITIES

Overseas business expansion

Business expansion into untapped U. S. markets

Extension of brand to new products and business lines

Product range diversification to more food items

THREATS

Strong opponents with substantial capital funding features like McDonald's and Dunkin Donuts

Economic conditions may make consumers unwilling to pay higher prices

Political conditions overseas may limit business expansion

U. S. speciality caffeine industry approaching saturation

RECCOMENDATIONS AND CONCLUSION

Starbucks has to effectively pursue a Focus-Based Strategy in conjunction with differentiation and an expense leadership established strategy. Being truly a lower cost store will improve the difference between Starbucks and offer it with a competitive edge. At present, Starbucks competitors are attempting to specialize in the coffee business, therefore Starbucks must pursue focus strategy to increase its durability.

Starbucks must reduce their product price by creating a new product of espresso using cheaper beans or will come out with discount rates and promotions to reduce cost, thus increasing sales allowing Starbucks to type in new low cost marketplaces and increase success. Must also focus on building alliances in new markets/countries to lessen management concentration and take advantage of the local and experience curves.

Should give attention to advertising the brand through internet services for users to gain access to, do street shows, give away brochures etc. so that consumers become more aware of the brand's strong international existence and brand name. Market penetration and market development can help boost the sales. Access unexplored distribution stations like making available packed Starbucks caffeine for consumers by exhibiting it nationwide in a variety of convenience and shopping stores and not only Starbucks stores.

Starbucks must take up twin insurance policies of Product Development and Product-Market Diversification to counter the stiff competition in international markets. It's important to comprehend this in the merchandise development period as they might need to target exclusively on making their existing products better. The business can demonstrate product and market diversification through research and development coupled with creativity and advancement. Product differentiation has proven a fantastic defence against threats such as bargaining vitality of buyers. Developing services will offset such potential hazards.

A strategy should be formulated to tackle your competition by getting into agreements, long-term contracts, with the meals service companies they are competing against. In this manner their espresso would be sold at these retailers plus they would access new market segments and increase sales while lessening competition.

Starbucks should continue to be an initial mover into market segments with services and ideas. Being a first mover of services into new international market segments will be a fantastic method for Starbucks to develop customer loyalty and uphold its image as an impressive company.

Starbucks should continue steadily to locate their procedures in high traffic areas, high visibility areas. The company should continue to take proper care in picking locations. It is extremely important that Starbucks' international stores mirror uniqueness in their location and structure. Having locations in a number of locations will ensure large market exposure.

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