Executive Summary
This paper will highlight the macro-environment and situational analysis of the establishment of Starbucks in Bangladesh. The situational analysis of this report has been conducted with rigorous in-depth research which highlights all the factors, impacts and implications which will allow the expansion of Starbucks in Bangladesh to be successful. The models and tools that have been implemented to ensure the most critical analysis are the Porter’s Five Force, the marketing mix, SWOT analysis and the PESTEL analysis. The analysis of the external and internal environment has brought on the realization of the business opportunities that the Bangladesh market has to offer through a VRIO analysis. Bringing that as the basis of chance, it will definitely be a big opportunity to monopolize the market and be the first retailer selling speciality coffees. With all analysis and findings, strategies were formulated to enable market penetration. As an international marketing manager, the expansion of Starbucks will be a rewarding endeavour due to the country’s rapid economic development.
1.0 Introduction
The significance of this report is to provide a clear description and analysis with the aim of enabling Starbucks to penetrate the markets of Bangladesh. Marketing theories such as the marketing mix (7Ps) and Porter’s Five Forces will be used to understand better the probable chance and position in which Starbucks will be successful in Bangladesh. Starbucks is popular globally established franchise retailing speciality coffee. The main objective of the corporation is to maintain the position of the brand as one of the most respected and recognized in the world. With coffee being one of the most highly traded commodity globally, it is without a doubt a product which many people enjoy. In order to achieve this objective, they have continuously pursued global expansion of the store base by adding stores in existing markets and also developed markets. They have also ventured into newer markets which are known for expected economic growth. With their expanding ventures into newer markets, Bangladesh. With the known cultural difference of Bangladesh as the people are more inclined towards tea, it is especially important for the marketing managers to understand that factor and work a way around it to create a new culture of other hot or cold beverages made from coffee.
2.0 Analytical Models
Under this heading, the validity and the usefulness of the chosen marketing theories and models will be blatantly and critically discussed, including its description, objectives, strengths and weaknesses. The models that will be used in this report are PESTEL, Porter’s 5 Force, Kotler’s marketing mix and the SWOT analysis.
2.1 PESTEL Analysis
PESTEL analysis is a concept based on marketing principles. It is used as a tool by companies to track macro-environmental changes to aid in existing and planning of businesses. The name of the analysis denotes for Political, Economic, Social, Environmental and Legal. It provides a view from many angles of a whole environment. To ensure the full benefit of this analysis, it is always recommended that it is conducted on a regular basis to keep track of changes and trends in all aspects. Without this, there may be chances that certain external factors are overlooked which may cause severe consequences to the objectives intended for the business.
The PESTEL analysis brings many benefits to a business. First being, it provides managers a framework which is simple to adhere. Also, it involves a cross-sectional research on the whole environment which will enable managers to see the changes overtime and make smart decisions from the findings. Likewise, ensuring the reduction of potential threats and effects of negatives on the organization. With this, it encourages the development of strategic thinking and planning to exploit opportunities found in new markets. With the simplicity of the framework, it leads to a risk of oversimplifying the research, therefore causing critical information to be slipped. This will cause a chain of events that will not favour the business. The other downfall to this analysis is the probable fact of the lack of information available to conduct the analysis. Despite the downfalls, the benefits outweighs it ten folds.
2.2 Porter’s Five Forces
Based on Michael Porter’s, “How Competitive Forces Shape Strategy” (1979), it describes the tool as the most powerful planning model. He explains and discusses its effectiveness of enabling the understanding of the strength of the current competitive position of the company and also the strength of the position that is intended to be achieved. With a clarified and in-depth understanding of the strengths of the business, it will enable the company to take advantage of the opportunities found in the situation and also improve weaknesses by taking proper steps after forming strategic plans. On usual cases, this tool is used to identify the probable profitability of new products and services in a new market space.
The model identifies five important forces that determines competitive power in a business situation; supplier power, buyer power, competitive rivalry, threat of substitution and threat of entry. With all the benefits that this planning tool brings, there are many considerations to take note of. The model only provides a snapshot of the environment, information is only obtained by means of statistics, not experiences. The other factor is that the model only look at simple market structures without considering other non-market forces. Basically, the model is based on the ideas of competition. With a parallel combination of the Five Forces and PESTEL analysis, the analysis will be beneficial.
2.3 SWOT Analysis
Albert S. Humphrey (1960) created this tool and it has proved to be very beneficial then and also now. It is a structured planning tool which provides a method for evaluating the SWOT of the business ventures. The most beneficial aspect of this framework is that it aids in the uncovering of opportunities that can be exploit to bring the company competitive advantage and value and also eliminating threats. Better than that, it allows a space for strategy creation that will allow managers to distinguish the business to other competitors to enable successful transition into a market. SWOT is a flexible and neutral framework that can be applied to any form of an organization as it is able to support many forms of project objectives. For example, acquisitions and mergers, partnerships and others.
With all the advantages listed, the only few downfalls of this tool is that it does not provide any weighting factors that will allow to rank the level of importance of the findings. The other downfall is that the analysis may be too one-sided and only views the problem being analysed. Biasness is also a problem as the researcher may look at relevant sources but may not look for other comparable data, as one seeks for favourable analysis. All-in-all, this tool is a reliable one to use as it will bring a level of clarification of the position in which the business is at.
3.0 Analysis and Findings (Situational Analysis)
3.1 Company Analysis
Starbucks Corporation is an authentic American coffeehouse franchise established all around the world including countries such as Japan and the United Kingdom. It was first founded in Seattle, Washington in 1971. Most Starbucks locations serve various types of hot and cold drinks made with whole-bean coffee or loose-tea leaves. Most of their stores also serve pre-packaged food items, either served hot or cold. Also, their Starbucks merchandise have become a fad for collectors around the world. Their personalised customer satisfaction schemes have brought them much success over the many years of their operation. Based on the company’s efforts on corporate governance, Starbucks maintains their control of their production processes by ensuring strong relations with farmers and also in-turn enriching their lives.
Under their current CEO Howard Schultz, they experienced increasing success, it was reported that the corporation had an estimated revenue of USD 19 billion in year 2015; a 16.5% increase over a span of a year.
3.1.1 Mission and Vision
The mission is to launch the Starbucks franchise in Bangladesh. The aim is to serve the people of Bangladesh Starbucks’s signature coffees and their quality customer service which has been the corporations’ trademark from the very beginning. This report will bring life to the efforts which will be focused on bringing Bangladesh the best and successful store by meeting all the local customer needs while ensuring the corporations’’ core principles are met. The company’s corporate social responsibility will be maintained by adhering to environmental values and also to create positive impacts to create a large number of repeat customers.
Vision
“To inspire and Nurture the Human Spirit- One Person, One Cup and One Neighbourhood at a Time.”
Mission
3.1.2 SWOT Analysis
The SWOT analysis in Figure 1 of the appendix, is conducted upon the basis of the corporation itself. With the combination of the analysis, Starbucks will be able to use its strengths and opportunities to counter its weaknesses and also form strategies that will eliminate threats such as competitors and the falter of innovative ideas that keep the franchise alive. Based on evaluation through cultural differences, the corporation needs to be able to counter the fact. With methods which are yet to be discussed, these issues will be reduced significantly.
3.2 Macro-Environment Analysis
PESTEL Analysis
Based on the Figure 2 in the appendix, Bangladesh has a lot to offer as it is a rapidly economically developing country. The political unrest may hinder the economic development of the country as it will not give businesses a stable platform to carry out daily processes easily but other than that, it is fairly easy to carry-out businesses if adhering to the proper system. Based on the social and economic factors, launching Starbucks will be a great opportunity for the corporations as the economy is rapid growing and is inviting towards foreign businesses. Also, their westernized influences has brought the people to a level of more liberal open-mindedness which will allow a business such as Starbucks to flourish, therefore providing an opportunity to build awareness and start trends within the community.
3.3 Competitor and Industry Analysis
Porter’s Five Forces
Based on Figure 3 in the appendix, the expansion of Starbucks to Bangladesh is a great opportunity as the threat of other entrants is low due to the unique selling points in which Starbucks upholds. This provides the corporation the upper-hand to be the leading coffee retailer in the country, therefore increasing competitive advantage. Based on the issue of the bargaining power of the suppliers, efforts need to be placed in order to ensure that supplies can be bought and produce at a high quality with reasonable but also brings benefits to the community and economy of Bangladesh. Therefore, CSR efforts must be increased by providing local farmers land and training which will aid them in producing high quality coffee beans and also tea leaves
3.4 Customer Environment (Customer Analysis)
This section will discuss the customer analysis in which will impact the expansion of the corporation is Bangladesh
3.4.1 Target Market
Starbucks Corporation aims to bring high quality products and services that will best fit all consumer needs. The traits and characteristics of the target market are:
Both Male and Female
Ages 15-45
Middle income working class
Customers who enjoy more than just coffee but an outstanding customer service experience.
The inner city residents.
3.4.2 Segmentation
Demographic
Age group 15-40. The age group can be split into two groups, 15-25 and 26-40. Based on other factors which form demographic, it can deduced that the age group 15-25 are more likely to be lower income and are students. Based on the generation, the setting of the coffee house must be trendy. Whereas for 26-40, are working class and has higher income. Between the two groups, the buying behaviour may be differ as the students may opt to sit in the shop whereas the workers are on-the-go.
Psychographic
Based on the eating lifestyle of the people, it is found that, culturally, they are brought up drinking tea and coffee is not a norm. With this, it gives Starbucks the opportunity to start an attractive trend and also ways to accommodate the indicative lifestyles.
Behavioural
This segment depends heavily on the attitude of the grouped customers or users. The introduction of free WIFI in the coffeehouse may attract all customers from all groups as everyone needs to work or for leisure. Also, Bangladesh is a place of culture and celebrations, Starbucks can take note and provide special products on those days. This may draw in new and repeat customers.
3.4.3 Positioning of the Brand
The positioning of Starbucks needs to be clear and understood among the target market of Bangladesh. Its distinct position shows the quality of the coffees and the personalised customer service that brings all existing and new customers satisfaction in their first visit. With their mission statement, “we inspire and nurture the human spirit- one persona, one cup and one neighbourhood at a time”, this is exactly what needs to be upheld to keep the image and position of the corporation in the minds of the target and potential customers.
3.5 Collaborators
This section will discuss and highlight the supply chain of the expansion of Starbucks in Bangladesh.
3.5.1 Distributor
The store will be located in the inner city, the posh area of Dhaka. This area has the highest number of citizens that fit the target market profile. The specific location of the stores is yet to be determined.
3.5.2 Suppliers
Other than the imports of the official Starbucks merchandise, the corporations efforts in its corporate social responsibility will and must be extended to the well-being of the local agriculture and also economy. Training and involvement of local coffee bean farmers will be provided to enrich their harvest to provide the Starbucks branch high quality and rich locally grown coffee beans and tea leaves that will help boost the local economy.
3.5.3 Government Agencies
The creation of alliances with government agencies will provide the establishment of Starbucks the credibility and trust among the people. This will allow greater conviction of the quality of the service and product. Also, the collaboration of the corporation of the local government will allow efforts to enrich the local economy and the well-being of the people. Thus, the value of the company will be elevated in the eyes of the society which in-turn will increase revenues.
4.0 Strategy Formulation
The formulation of the strategies are based on the on the findings and analysis conducted.
4.1 Marketing Objectives
The marketing objectives are planned with the SMART framework; specific, measurable, attainable, realistic and timely. The objectives are:
With the intention of succeeding these objectives within the first year, there is a possibility of failure due to certain macro-environmental changes. With this finding, it is essential that a regular check of the changes with the aid of the analytical models.
4.2 VRIO Analysis
Core Competencies of Starbucks:
Store Ambience- Music, atmosphere, design and free WI-FI.
Valuable- Place where consumers prefer to hang-out.
Rare- Unique and comfortable environment.
Costly to imitate- Corporation has sufficient monetary funds for global expansion.
Exploited- Ensure capabilities of attracting consumers.
Awareness- Brand, organizational culture, product placement, merchandise.
Valuable- Brand is well-known and is more valuable than their competitors.
Rare- Very few companies have the same reputation, Dunkin Donuts.
Costly to imitate- Plenty of financial support and increased market share within the corporation.
Exploited- Well exploited globally.
Based on the analysis, the corporation should exploit their globally-known reputation and penetrate the market. With little to almost no competition, the possibility of the chain being successful is highly probable. Based on the product-life cycle, the corporation is at the mature stage. This gives the corporation a big chance to leap into the Bangladesh market and monopolize the market with speciality coffee.
4.3 Market Entry
Awareness will be established as the establishment is built. Awareness will be built through traditional and current social media coverage such as Facebook Adverts, television advertisements and local news. The mode of entry is through licensing and franchising by employing store managers that are capable with the management and integrity of the brand itself. A licensee will be identified during the process, it may be a joint-venture between more established local shops which know the culture; this will bring competitive advantage due to realisation of the importance of diversification.
4.4 Marketing Mix Strategy
Based on Figure 4 in the appendix, it shows the 7Ps of marketing. Based on the pricing, the price skimming strategy. The prices will be at their highest; the standard of what is usually charged but as the business is progressing within the environment, the price will be lowered and promotions will be set up every few months to keep up the interest of the target consumers.
The promotion such as “Buy 1, get 1 free” will be communicated to consumers through word-of-mouth and through social media platforms such as Facebook. This is the best method, as the target market are constantly on these modes of communication.
5.0 Recommendations
Based on the situational analysis conducted above, it is recommended that the endeavour is carried forward as it is a good time to penetrate the market due to the fact that there are minimal threats of new entrants which will give the corporation a chance to monopolize the market for the time being before other entrants enter the market. Also, it will also give the company a chance to increase its credibility and value in the country within a year. With the cultural differences, it is essential that managers conduct thorough analysis which will aid them in the penetration of the market through culture and respect. The marketing objectives established must be carried forward and altered according to the macro-environment when the business has already penetrated the market due to the fact that every environment is subject to change.
6.0 Conclusion
In conclusion of this report, the marketing theories have been clear described with critical and analytical comments have been conversed which settles the rationale of its use. With the chosen tools and models, a situational analysis was conducted and the findings are presented in the form of graphs and descriptions. In summary, it is found that it is the opportune time for the corporation to penetrate the market and seize all opportunities to ensure the success of the business. Also, a customer environment analysis was conducted to ensure that the products and services available are attracting the right customers. By doing so, some tactics and strategies have been discussed.
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Appendix
Figure 1
PESTE Analysis
Figure 2
Porter’s Five Forces
Figure 3
Marketing Mix (7Ps)
Figure 4
