Problems facing Starbucks
Despite being a leading innovator in the coffee industry. These innovations present the largest weakness for the giant. Innovations are risky and present the highest vulnerability for the chain. It has a reputation for creativity and new development which may decline if any of its innovations failed. It may also reduce its current standing if any other coffee chain had a better or a new innovation before the chain’s research and development team developed it.
The coffee chain endeavors to create new innovations and offers its stores all over the world. It creates innovation based on the local needs rather than its entire marketing portfolio. An example is the recent training offered to all its employees in the UK to equip them with skills needed to help out young mothers with their children. This has yet to be seen in any other coffee chain in the UK or in the US, which are two of its largest markets (Dorn, Messner and Wänke 368). In addition, it now offers milk for weaning children where it comes with a heating mechanism and a bottle to help out. This has made it very popular among millennial mothers in the UK.
2. Social, cultural influences
The income distribution is a significant factor used by marketers in the hospitality industry to determine their target market. The income bracket of each target market determines the prices of the products and the promotional strategies for the products. It also determines the ideal locations for stores and shops.
Starbucks has positioned its coffee and beverage brands as a luxury product in line with the culture and attitudes of most of its customers. It should, therefore, offer services that the consumers can use to justify to themselves why they choose to buy a Starbucks coffee as opposed to cheaper brands.
The coffee chain should position itself in areas where the populous has a positive attitude to work and high work ethic. Such an area would have a large pool of potential employees to choose from as well as a large number of potential customers. In such an area, it would target employees on their way to the office and provide a lunch option that is not available in the office canteen.
The level of education and skills determine the brand and food choices for customers. Targeting highly educated customers is an advantage for the chain as this group is more concerned about the quality offered by the brand rather than the steep prices they have to pay. An educated target market is more willing to part with their income for the promise of good and will remain loyal if their expectations are met (Harrington). Educated and people with a high level of skills have more disposable incomes, therefore, they are able and willing to pay for their coffee at the high prices offered by Starbucks.
The age distribution of the market is also a major cause for concern in any market it determines the target market and the promotional strategies. At present, there is a large number of young people and Starbucks is capitalizing on this by targeting college students and young, newly employed executives using social media, rewards and a chance to meet and hang out with their friends at Starbucks (Harrington). It has a propositioned itself as a must have a brand for this age group. On the other hand, the older market is looking for healthier options the chain should seek to provide healthier options to avoid losing this market.
3. Business level strategies
Starbucks applies a different business strategy whereby it offers high-quality products for its customers based on their needs, tastes and preferences. The proven quality allows the company to charge premium prices for its product. It positions its product in a way that increases their perceived value among its customers. The corporation segments its markets based on their diverse needs and preferences. This allows it to provide a wide range of products such as homemade coffee, smoothies, pastries, snacks, hot and cold tea varieties as well as its wide and unique collection of coffee. These strategies have allowed the company to position itself above most of its competitors. To maintain this lead it needs to refine its business level strategies according to the changing market needs and the change in its customer composition.
4. Innovations
In 2016 the chain should look for ways to make the most of their order and operation systems automated. This will increase efficiency, which is the current pressing need for most of its target markets. Despite the common belief in the hospitality industry that people need to have personalized customer service the contrary is true. People require their service to be fast effective. As such the chain should have an automated section where customers who are in a hurry can get their coffee and beverage orders without having to wait in life for a barista. The automated ordering system would be linked to their Starbucks phone application allowing them to make their orders from home on arrival at the coffee shop their orders will be ready, allowing them to get to work on time and with their steaming cup of coffee.
5. Business strategy in China
Starbucks created a demand among the Chines middle class which to start with was more inclined towards taking tea. The chain has used a very smart, creative entry strategy. Rather than use advertisements and other promotional strategies that are quite common in new entrants; the corporation simply positioned its stores in places where it was highly visible and where there was a lot of traffic. A large promotional campaign would have created an uproar among the tea stores in China and created a negative attitude among the Chinese people.
The chain was also careful about ambushing the Chinese consumers with coffee. Instead, it capitalized on the Chinese tea drinking culture, offering beverages such as local green tea using local ingredients. At first, this was the main attraction for the Chinese consumers, but with time, they developed a taste for coffee. The Chinese have the advantage of being the first market entrant as such, it has to generate a massive customer loyalty. To maintain this advantage, it needs to continue generating more demand for its coffee and other beverages based on the changing needs of the Chinese people.
The setting of the Starbucks stores is aimed at creating an exceptional experience for its customers. It markets itself as the brand and positions itself in the Chinese market as a trend that they must embrace to appear cool and prestigious. In addition, it has positioned its beverages that have numerous health benefits which have attracted a significant number of customers. This branding has allowed the chain to have a competitive advantage among any would be competitors (Lee, Eun Jeong 95). To maintain this position, it needs to come up with ways to offer its coffee options and at the same time integrate a local flavor for everywhere it sets up its shops in China.
6. Thinking like an owner
In any business setting the role of the owner is to set the goals, recruit and motivate a like-minded workforce as well as provided direction for the company. As the Starbucks owner, the main agenda is to motivate the employees to come up with new ideas that will help generate a new market and maintain loyalty in the current customer base. Encouraging store managers to take calculated risks for the benefit of their stress and giving them autonomy on how to handle their customers but also providing a basic framework for customer service.
Starbucks as a brand does not franchise its stores as a strategy this prevents the dilution of the brand and allows total control over the menus and store layout. While hospitality experts have criticized this move, it has been hailed by others for ensuring that the store does not change from its best quality coffee (Harrington). The corporation also ensures that its shops adopt local beverages in the countries where it sets up its shops.
7. SMARTER goals
The company sets its goals with a specific number of stores that it wishes to start in mind, for instance, according to the CEO the company sets out to open 150 company operate stores and 350 licensed stores in international markets (Lee, Eun Jeong 98). The goal was measurable because it was set within a period of time that is, by the year 2006. Since it had already set a precedence in its ability to penetrate difficult international markets, this goal was attainable. The use provides a variety of target markets due to its diverse populous as such the goal is realistic as the company has managed to gain loyalty across the US market. The goals are time-based set within an interval of one year. The company offers a chance to re-do the unattained goals using different strategies (Harrington).
8. Strategic direction
The company’s vision, mission and values are clearly stated and intertwined, each in support of the other. The mission statement clearly states the guiding principles of the corporation which encompasses its employees, customers, the community and profitability. It aims at providing a good and healthy working environment for staffs, the highest quality of coffee for its clients and to earn a profit that will sustain its growth plan (Dorn, Messner and Wänke 363-384). It also has a strong strategy for corporate social responsibility.
9. Business strategy for Millennials.
Starbucks has adopted various business strategies to deal with and attract Millennials. These strategies have been successful to the extent that it has become a pacesetter for many corporations on how to attract and resonate with the Y generation. The coffee giant has taken up a digital view of the world that is the Y generation's way of living. It has a relevant reward system, and it has created an atmosphere where Millennials who still embrace, meeting face to face can do so without feeling out of place (Peterson).
The coffee giant has launched an Instagram account, a tweeter campaign and a Starbucks app all of which are in line with its need to attract and maintain a market among the Millennials. Its Instagram account has over two million followers and its Tweet-a-coffee campaign help generate a lot of chatter and business among the Millennials (Peterson). The Starbucks app also creates a platform allows Millennials to communicate and set up coffee dates at its stores.
Starbucks has a reward system that helps to generate and maintain customer loyalty among Millennials who are mainly motivated by receiving awards. The coffee chains reward system works in conjunction with its app whereby it requires every coffee purchase by registered on the customer’s application. Its registers read the bar code on the phones, allowing the customer to accumulate points which eventually lead to a reward such as a free cup of coffee (Peterson).
The coffee chain has adopted Network branding system which creates and ambience in every store that encourages Millennials to meet and interact despite their inclination towards using video calls as a substitute for face to face meetings (Lee, Eun Jeong 108). The coffee chain has long been known to create an instant interactive environment; it has maintained this culture by designing its stores to create an interactive environment.
Work Cited
Dorn, Michael, Claude Messner, and Michaela Wänke. "Partitioning The Choice Task Makes Starbucks Coffee Taste Better. Corrigendum". JMB 1.3-4 (2016): 363-384. Web.
Harrington, Matthew. "STRATEGY: The Starbucks Way: Rediscovering Your Mission | New Directions Consulting". Newdirectionsconsulting.com. N.p., 2016. Web. 10 June 2016.
Lee, Eun Jeong,. "A Study On The Effect Of The Consistency In The Brand Characteristics Consumer Characteristics, And The Visual Identity Characteristics On Thebrand Attachment - Focusing On The Coffee Shop Brand ‘Starbucks’ -". A Journal of Brand Design Association of Korea 10.1 (2012): 93-108. Web.
Peterson, Hayley. "Starbucks Is Making An Unprecedented Move To Hook Millennial Moms". Business Insider. N.p., 2016. Web. 10 June 2016.
