Executive Summary
Starbucks is rated as one of the world’s most valuable brands, with global sales exceeding a whopping $17.01 Billion, the company engages in the manufacture and sales of coffee and tea, and operates in multiple segments, globally, that includes, Americas; Europe, Middle East, and Africa; China/Asia Pacific; Channel Development; and Other.
The target markets of Starbuck are Adults, Young Adults and Kids and Teens, with a focus on both genders, i.e. male and female.
The competitive advantage that Starbucks have against the competition is the status symbol and also the experience that the brand is selling and this can be gauged from the fact that in spite of coffee price going down the company increased their price, besides the products are of extreme quality and the promotional strategy creates a special place for the brand.
The Brand Starbucks is still a symbol of luxury on a global level and the Starbucks logo on the coffee cup s considered a symbol of status.
Starbucks aim to achieve 30,000 outlets globally by 2019 and with plans to grow nearly $30 billion in annual revenue, the 7 step plan announced in 2014 to achieve the aforementioned includes, being the employer of choice, lead in coffee, Increase store footprint, and new occasions to enjoy the location experience, brand growth in packaged goods, invest in Teavana and Digital engagement.
Starbucks
Introduction
There are some companies that create a global buzz and keep on growing, irrespective of the situational changes, and in essence become a company for all seasons; Starbucks is one such company that has carved a special place for its product and services and with its innovative products and marketing tactics the company has been growing incessantly since its launch in 1985.
The global coffee and barista culture was taken globally, by the CEO Howard Schultz, after being impressed by the culture in Italy, this led to the creation of a billion dollar industry that has been growing ever since, with new players entering the sector.
The growth of Starbucks and the industry can be gauged from the fact that the company in 2015 posted a 20th consecutive quarter of at least 5 percent comparable growth, since the company’s strategic intent has been to focus on the large emerging markets, and with a positioning in China as the leading provider in coffee and perceived as a luxury brand, Starbucks is going great in terms of creating more footprints globally in a profitable manner with strong brand equity (Imbert, 2015).
In the 2016 list of Forbes, Starbucks is rated as one of the world’s most valuable brands, with global sales exceeding a whopping $17.01 Billion, the company engages in the manufacture and sales of coffee and tea, and operates in multiple segments, globally, that includes, Americas; Europe, Middle East, and Africa; China/Asia Pacific; Channel Development; and Other.
The brand includes; Starbucks Coffee, Seattle's Best Coffee, Tazo Tea, Evolution Fresh, La Boulange, and Torrefazione Italia Coffee (Forbes, 2016).
Market and Situation Analysis
The market and situation analysis are important factors to understand the dynamics of the environment from and economic, social, technical, industry and competition, that helps in creating a way forward.
Starbucks market and situation analysis are as follows:
Economic Environment
The economic factors can be gauged from the aforementioned fact that, last year Starbucks posted its 20th consecutive year of growth, this trend showcase the fact that irrespective of the environmental factors such as recession; that impacts on levels such as buying power of consumers, with switching to cheaper competition, the Starbucks juggernaut is moving forward in a profitable manner across the globe, as evidenced with the opening of 320 outlets only in Shanghai (Imbert, 2015).
Social Environment
The social environment is very much in favor of the coffee multinational, in view of the fact that, the growth percentage, highlights, the growth in the coffee drinking culture, all over the world, the cafe’s are not only for group of people, students, professionals and all kinds of segments utilize the space to not only have a coffee, but to enjoy music, free internet and many tactical benefits that comes with being a Starbucks consumer. It has to be said that the brand name of the coffee mugs and bags still packs a punch in terms of image for individuals.
Technological Environment
The technology is a major part of the brand extension of Starbucks, and the quarter 4 revenues, in 2015, were impacted highly by technology. The consumer reacted wel to Starbucks latest digital innovation and in US, mobile payment accounted for 21% of all transactions in stores, besides, in October last year, Mobile Order and Pay feature were launched.
Industry Environment
The latest trends in the industry, as illustrated by coffee roaster Jonah Engler, are in relation to three serving options, i.e. Espresso, to be added on the menu on a global level on the menu, as done by Dunkin and McDonald’s recently.
Cold brew will be a hit drink in 2016 with more people enjoying the beverage and draft coffee, i.e. the rage in LA and NY nowadays, it is done by infusing cold blends with nitrogen and is expected to be a big hit on a global level (Charles, 2016).
Competitive Environment
Starbucks main competition are Dunkin Donuts and MacDonald’s, that makes the environment very dynamic, with expansion and new precut development on the menu of all the giants.
The revenue for Starbucks last year was $ 18.5 billion, Dunkin Donuts revenue was, $783 billion, and McDonald’s revenue was $26 billion.
Starbucks have the advantage of an upscale feel and experience, while, Dunkin Donuts is more about an All American experience, while McDonalds, revenue, though substantially better than Starbucks, is known for their fast food, but, the coffee business is growing rapidly, showcasing that the market is big enough for all the major competitors (Hawley, 2016).
The secondary competition comes from Caribou Coffee, Panera Bread, BIGGBY Coffee, Tim Hortons and 7 eleven, to name a few.
In the dry coffee goods, all the aforementioned companies offer coffee beans in retail, however, the two companies that are ruling the dry coffee sector, such as Maxwell House and Folgers, but the competition to Starbucks is minimal since they don’t have physical stores and rely on retail (Hawley, 2016).
SWOT Analysis
Political Environment
The political factors impacting Starbucks, starts with the pressure on the company to strengthen environmental regulation, besides, the law of increasing minimum wage and globally the increase. The unstable coffee prices are also a major factor.
Market Segmentation and Customer Analysis
One of the major reason Starbucks, is a much loved global brand is because the products and services cater to a variety of market segments. As stated in an article by O’Farrell (2015), Starbucks holds around 33% of the market share in the US.
The percentage share showcase the marketing capabilities of the company, besides, the product quality in view of the fact that the focus of consumer segments is primary based in upscale suburban areas and in the city.
Adults
Coffee as a product has an adult primary target audience, and they account for almost 49 percent of the total business of Starbucks. The adults include both men and women and the age range between 25 years to 40 years. The primary aspect of Starbucks is that it appeals with a a symbol of status for consumers, besides, the concept of a place between home and office as a place to relax, think and chill was successful with the adults, showcased by the fact that the growth of adult market audience is approximately 3 percent annually.
Young Adults
The target audience that is popularly referred to as the Millennials, is one of the most important market segment, since they account for almost 40 percent of the sales of Starbucks, and since the age bracket is between 18-24, it is vital for Starbucks to keep a connect with this segments since, they will the majority of the primary segment Adults in the future.
Technological development such as app development for Apple and Andriod users, Starbucks Music, free internet, store design, mobile order and pay and most importantly, Starbucks have a dynamic presence on social media page Facebook and Instagram to keep the connect string through engaging and entertaining this segment. The growth level of young adult is 4.6 annually.
Teens and Kids
The teens and kids consumer segment are also a part of the Starbucks strategy to create a relationship connect with all segments in a profitable manner. The customer’s age in this segment range from 13 to 17 years and the total percentage sales for this segment account for 2 percent.
The kids segment is in essence a secondary audience, since the payment is done by the parents, and specific products such as steamed milk, whopped creams drinks are popular with the kids segment.
The teen segments utilize the Starbucks space as a hangout avenue with friends or utilize the space to study.
Target market/segment characteristics
You can profile your target market/segments using four categories:
Geographic: the geographic location of the market segments are upscale suburban areas and in the city, but have also now targeted small towns, rural communities, stops, and retail markets to provide maximum avenues for the product experience.
Demographic: The age of Adults is 25-40, Young Adults is 18-24 and for teens and kids between 13 to 17 year. Both genders male and female are consumers. The income levels are high and families do visit as suggested for kids segment.
Psychographic: The social class is elite and high earning individuals, besides; middle class are also consumers as it comes with a social status symbol. They are outgoing and want to enjoy the thrills in life, the motivation are taste, and being part of the group, with confident, energetic, expressive personality.
Behavioral: Outlet space, with good coffee and quality service are the key behavioral attributes besides, the companies is providing product benefits, by using it for going green and also, products for health conscious consumers.
Market research findings
The research indicates that Starbucks in view of the consumer segments have developed products suiting the needs and motivation, that basically borders on a rich experience in the store and also having fun and quality time, with multiple locations to give the experience.
The characteristics of all consumer profile have one thing in common, i.e., having fun in their own space.
Objectives and Goals
The mission statement of Starbucks is to connect with the communities in an engaging manner through the coffee cup and ‘to inspire nurture the human spirit – one person, one up and one neighborhood at a time’ (Our Mission, 2016).
Starbucks in 2014 announced a 5 hear growth plan in 2014, with plans to grow nearly $30 billion in annual revenue with more than 30,000 stores globally. The 7 step plan announced in 2014 to achieve the aforementioned includes, being the employer of choice, lead in coffee, Increase store footprint, and new occasions to enjoy the location experience, brand growth in packaged goods, invest in Teavana and Digital engagement (Starbucks Newsroom, 2014).
Strategies and Tactics
The tactics to achieve the objectives will be elaborate with the 7 P’s.
Pricing Strategy
The pricing is based on the experience the company is selling, and is spite of coffee prices going down Starbucks prices has gone up by 5 to 20 cents a cup (Sommer, 2015).
Product Strategy
The product strategy is based on the different market segments and includes, coffees and teas of different kinds, food and nutrition based drinks and food and treats of different kinds (Menu, 2016).
Place Strategy
The placement strategy is focused on outlets, in malls and every avenue that be utilized to maximize the presence, as the plan is to have 30,000 stores globally by 2019.
Starbucks store count over the years as stated in (Starbucks Newsroom, 2014), is as follows,
1971 = 1; 1987 = 17; 1990 = 84; 1992 = 165; 1995 = 677; 1999 = 2,498; 2003 = 7,225; 2007 = 15,011; 2011 = 17,003; Today = nearly 21,700.
Promotion Strategy
The most important strategy to create an emotive connects with the segments, besides, advertising communication, technology is being utilized to connect with the consumers and promote products and services, also, initiatives such as Starbucks card.
There are 8 million My Starbucks members, and 12 million use Starbucks apps (Starbucks Newsroom, 2014).
People Strategy
The culture at Starbucks encourages people to step up and push back ideas against management when they don’t agree, the CEO Howard Schultz, still impulsively micromanages 191,000 employees on a global basis.
Staffers are also a major part as can be evidenced by the feedback given in 2008 that the melted cheese sandwiches were masking the aroma of coffee and the openness of the CEO helped company cross $19 billion in 2015 (Lebowitz, 2016).
Process Strategy
The process strategy is the 7 steps plan to achieve the 2019 objectives, besides, the technology process development has helped the marketing to carve a connect with the intended audience in an effective manner.
Priorities, responsibilities and timeframes (what/who/ when)
At Starbucks, every team has their own set of jobs to accomplish to achieve the objectives, as stated, by Myron Ullman, JCPenney’s chairman and a Starbucks director, told Forbes: “There’s a lot more here than just The Howard Show. Leadership doesn’t have to come from Howard on every topic” (Lebowitz, 2016).
Budgets and Controls
The plan is to be a $30 billion company by 2019, with 30,000 outlets and thus, in view of the 7 steps plans, all the aspects of the operations that includes, labor, materials, production overheads, wages and marketing and most importantly R&D needs to be checked on, regularly, to be able to streamline the budgets and achieve the objectives in an controlled manner.
As stated in Spiderman, with great powers, comes great responsibilities, thus, Starbucks needs to assert more to be able to sort out the weakness by growing evenly globally and also focus on high operating cost due to expansion.
References
Chares (2016). Coffee Industry Trends To Look for in 2016. Galaxie Coffee Blog. Retrieved from http://galaxiecoffeeblog.com/coffee-industry-trends-to-look-for-in-2016/
Forbes (2016). Starbucks. America’s Best Employers. Retrieved from http://www.forbes.com/companies/starbucks/
Hawley, J. (2016). Who Are Starbucks’ Main Competitors? (SBUX). Investopedia.
Retrieved from http://www.investopedia.com/articles/markets/101315/who-are-starbucks-main-competitors.asp
Imbert, F. (2015). Starbucks will continue its fast growth in 2015. CNBC. Retrieved from
http://www.cnbc.com/2015/01/23/starbucks-will-continue-its-fast-growth-in-2015-schultz.html
Lebowitz, S. (2016). 2 brilliant management strategies Howard Schultz used to build the Starbucks coffee empire. Business Insider.
Retrieved from http://www.starbucks.com/about-us/company-information
Menu (2016). Starbucks.
Retrieved from http://www.starbucks.com/about-us/company-information
Our Mission (2016). Starbucks. Mission Statement
Retrieved from http://www.starbucks.com/about-us/company-information/mission-statement
O’Farrell, R. (2015). Who is Starbucks’ Target Audience?
Retrieved from http://smallbusiness.chron.com/starbucks-target-audience-10553.html
Roderick, L. (2015). How Starbucks is using technology to boost revenue. Marketing Week
Retrieved from https://www.marketingweek.com/2015/10/30/how-starbucks-is-using-technology-to-boost-revenue/
Starbucks Newsroom (2014). Starbucks Details Five-Year Plan to Accelerate Profitable Growth at Investor Conference. Starbucks.
Retrieved from https://news.starbucks.com/news/live-blog-starbucks-path-for-growth-outlined-at-2014-biennial-investor-day
Sommer, J. (2015). Why Starbucks Prices Went Up as Coffee Beans Got Cheaper. New York Times.
Retrieved from http://www.nytimes.com/2015/08/16/your-money/why-starbucks-prices-went-up-as-coffee-beans-got-cheaper.html?_r=0
