Marketing History of a Starbucks Company - Essay Example

Starbucks Company Profile The brand of Starbucks was born in the year 1971 with just one store in Seattle. Initially, Starbucks’s offerings included tea spices, ground coffee, roasted coffee and aromatic coffee beans. Presently, Starbucks has spread in more than a hundred and fifty countries with 17000 or more number of its coffee stores. Now customers are offered tea and coffee in different flavors, styles and aroma with confectionary items such as sandwiches, muffins, cakes, pastries etc. Starbucks is not like any regular coffee house; it represents a platform where people indulge into the real coffee experience which they have always longed for. Starbucks is known as the largest purchaser of the real coffee beans (Coffee.org). Starbucks has conceived its logo from Greek mythology. A woman like creature that dwells in deep seas or a mermaid with twin tail represents the logo of the company. Starbucks follows strong ethical standards for delivering the best coffee experience to its customers around the globe. The coffee beans are selected using the best of the selection techniques followed by high quality roasting techniques. The perfect blend of flavor and quality is what every cup of beverage at Starbucks deliver. The ambience of Starbucks is suitable for groups of friends and family who want to enjoy a casual drink with light snack. Those who want to spend some quiet time with themselves or a good book also choose their nook at Starbucks. Being a responsible company, Starbucks ensures that it maintains its image as an environmentally friendly company and makes it mandatory to involve in the communities for their welfare. Mission Statement The mission of Starbucks is to inspire and nurture the human spirit: one person, one cup and one neighborhood at a time. Starbucks wants to establish itself as the top suppliers of coffee while ensuring that its aims and goals are not compromised. At Starbucks, the employees are treated with dignity and regarded as the heart of the company. The customers of Starbucks are treated in the best possible way so as to win their loyalty and satisfaction. Halevy (2011) suggested that for maintaining premium quality standards, the coffee is purchased from the finest of the farms and delivered to the customers after passing through the modern roasting and grounding methods. The company has global presence which it cherishes. Starbucks knows that its sole aim is to make profits while ensuring a satisfactory market share and customer response. Starbucks wishes to be known as an environmentally responsible company so it offers recyclable cups and active participation in community and social events, majority of which are targeted at environment safety. PESTEL Analysis According to Bowhill (2008), PESTEL analysis gives the company a very clear idea of the external environment where it wishes to carry its operations so that it could clearly set up its strategic direction. Political Coffee is mostly produced in small countries of Africa. Usually very high tax has to be paid by the government to the farmers of coffee beans. Due to this, the farmers offer coffee beans at further high rates to the large customers such as Starbucks. Ultimately, when Starbucks will buy coffee beans at high taxes, the effects will be directly or indirectly passed on the customers of Starbucks. In case the taxes fluctuate, the end user of coffee that is the customer has to pay its price. Bowhill (2008) argued that political stability is one of the main concerns for a globally operating company such as Starbucks. When a country where Starbucks operates or purchases coffee beans and related items, suffers from political instability then the company cannot make as good profits as it should be making. Sometimes the company is compelled to pull itself from a country where there the political factors do not allow it to operate smoothly and negatively impacts its strategies. Due to political instability, the progress of Starbuck’s global expansion also suffers. If the employments laws are not stringent in a company where high quality coffee bean is manufactured, then there is a clear possibility that the production costs will also be low. This would mean savings for Starbucks and the benefits will be passed on to the customers. Also the flexible licensing agreements help improve the business for Starbucks. The taxes and tariffs imposed on Starbucks and its suppliers of coffee at international level also affect the profit generation capacity of the company. Economic Factors When the interest rates set up by the country where Starbucks has its operations, are fairly high then this results in low profitability. This is because people will be saving much less money to spend on luxury purchases. Since coffee is regarded as a luxury beverage which one sips in order to relax when alone or in a group so if the customers will mainly focus on food items which meet their basic needs. In the same fashion, inflation is one of the economic factors in the external environment of any company specifically Starbucks which impacts its profitability. (Lynch, 2007). If the prices of daily use items are high in a country then it is explicable that Starbucks will also has to revise its menu in terms of price. This will be due to the fact that the basic materials for making coffee and snack items come at a higher price so Starbucks balances it with the high price customers pays for its offerings. Globalization is the recent economic trend that impacts the sales of Starbucks like any other company. Lynch, R (2007) argued that globalization has opened up doors for prosperity across the borders. Poor farmers consider it as a great opportunity to increase their lifestyle so they tend to shift their focus from growing coffee beans to other businesses which ensure larger profits. As a result, there will be few coffee bean producers left which means that Starbucks would experience strong power from suppliers and ultimately, it would sell coffee products at a higher price to cover up its cost structure. Exchange rates are very important determinants of the economic atmosphere of Starbucks because it carried out international operations. When the exchange rate falls internationally, this could means savings for the company and gains for the customers. Sometimes, the price wars among competitors in an economy could also compel Starbucks to revise its pricing strategy. Price has to be set at a level where a stable market share could be maintained (Oxlade, A., 2010). . Social Factors Coffee certainly contains a small amount of caffeine and as from the health point of view; an increased intake of caffeine in the shape of tea or coffee is not safe for health. Many people are therefore avoiding coffee and replacing it with fresh fruits juices, energy drinks or milk shakes. Keeping this change in the social trend into consideration, Starbucks offers a wide variety of beverages which are caffeine free and go well with the routine snacks. A thorough study on the type of customers that are loyal to Starbucks revealed that people in their middle ages are more likely to drink coffee at Starbucks. This class is more mature and has made coffee as its signature drink. However, the people who are in their late teens or early twenties prefer other form of drinks and do not serve as the direct market of Starbucks. Starbucks has introduced various kinds of cold and hot beverage to entice the less targeted class so as to strengthen its market share. Coffee is seen as a luxury drink that people like to enjoy with family, friends or even alone. This means that the customers of Starbucks are significantly those who have a little above than average income level. It could mean that Starbucks should open more and more stores in those areas where people with disposable income pass by often. Starbucks also needs to locate more stores in places where there are office buildings. In lunch breaks, people prefer to have a light snack somewhere away from their local canteens. So presence of Starbucks in the vicinity will not only satiate the taste buds of the office employees but also contribute to the increase in the profits of the company. In addition, the location of Starbucks stores should be in areas where people are educated and possess sufficient operational skills so that not enough money is spent on their grooming and training. The employees are usually chosen for the stores locations that are close to their homes so that commute could easily take place. This will be of benefit to both the company and employees. Technological Factors Starbucks realizes the fact that by incorporating technology into their cash and operations, they will save the time of the employees and customers and also earn the badge of being the quick coffee providers. When the software system is upgraded, the employees will simply enter the numerical values and the system will do the billing calculations itself. This system also ensures that the inventory level is maintained. When the inventory level falls, the system notifies the suppliers and the supplies then reach the stores as soon as possible. Starbucks has its own website where customers are given complete information on the wonders of the original Starbucks coffee sip, the flavors, promotional events, special discount offers etc. When new drinks or improved snack items are introduced, the news goes on the web for the customers to read. Bloggers then provide reviews for each Starbucks product so that the customer could make quick choices from the menu. Because technology keeps on upgrading at a very rapid speed so Starbucks needs to invest heavily on the improvement of its technology. The technological systems that worked for Starbucks five years ago may be considered outdated today and might have lost their efficiency. Since the customers are tech savvy, therefore Starbucks will need to take the development of technology very seriously. Legal Factors Being a global company, Starbucks has its stores in various countries of the world. Ference, Thurman (2009) explained that the legal requirements of every country are different from the others. Starbucks has to follow legal standard of every country or else it will not be able to operate internationally. In the case of imports and exports, Starbucks has to follow the laws for taxes and tariffs as set up by each country or else its business will suffer. Starbucks also has to consider the national and religious holiday of countries where it operates. Employment laws of each region vary from the other. The working hours of European and a developing Asian country cannot be the same. However, Starbucks could make a global standard, negotiate it with the legal authorities of its operation countries and implement them as its own benchmark. Environmental Concerns There is usually a lot of waste gathered up in the Starbucks waste baskets at the end of the day because mostly the beverages and snacks are offered in disposable cups and plates. Starbucks has to ensure that this waster is recyclable because if it is the opposite, then the pressure from environmental groups will put the image of Starbucks at stake. Starbucks should dump and process the waste in a specified area which is away from the town and cities. The recycling process needs to be free of pollutants so that no pollution or harmful chemicals are emitted. Recycling should be done in a way that the natural ecosystem does not undergo any disorder. Being a responsible company, Starbucks should participate in community events, most of which are aimed at improving the environment. This will not only improve the image of Starbucks as an environmentally friendly company but also create more customer loyalty. Segmentation The website of Starbucks gives a clear message that Starbucks appreciates the concept of diversity. The values of Starbucks are such that everyone whether they are the internal or external customers, they are treated with equality and respect (Lamb, C, Hair,J, McDaniel, C, 2012). Market segmentation also helps a company offer the best products and services to the segment which ensures maximum profitability (Croft, M, J, 1994).The target customer of Starbucks is mainly the mature class who is not narrow minded and even the management understands that global expansion is not possible if Starbucks do not treat all ethnic or religious groups as one. Probably this is very the strategies of Starbucks are broad and successful. Even in its advertising campaigns, Starbucks ensures that none of the visual or printed materials should reflect anything that may catch the pleasure of one community and extreme displeasure of the other. The diversity inside the company helps employees exchange their skills and knowledge in various areas and thus, yield maximum efficiency. Target Market According to Pinson, L, Jinnett, J (1996), identification of a target market helps a company to direct its efforts to a specific group which promises long term benefits. The traditional target customers of Starbucks include professional people who are educated and possess an income level of above average. These customers dwell mostly in urban areas. The marketing communication techniques adopted by Starbucks are very intense and successfully compel the customer to choose coffee from Starbucks than from an ordinary coffee stand even it is a mile’s walk. Coffee is generally attributed as the drink of the people who are in their middle ages. The customers who are students of colleges and universities prefer to drink icy cold drinks or juices. So in order to increase its customer base, Starbucks has not only polished its marketing campaigns but also launched a number of beverages in various flavors for the young taste buds. Market Positioning After identifying the market segment and target customers, it is really important for the company to decide how it wants to be perceived by the customers in terms of quality, features, class etc. This is the basic concept of market positioning as suggested by Porter (1980). If we look at the position of Starbucks on a perceptual map, we will see that it wants to be known by the customers as a superior quality product which is priced a little higher than the ordinary coffee stores (Czinkota, M, R., 2007).  Moreover, Starbucks has shifted its focus to relationship marketing which means that maintaining strong customer relationships and having satisfied employees is what the company is striving for through its marketing and human resource strategies. (Thomas P Ference, Paul W Thurman, 2009).  Cagan, J and Vogel, C (2010) wrote in one of their books that Starbucks is also partnering up with book stores such as Barnes & Nobles so that customers could enjoy reading their favorite book with a cup of Starbucks coffee. This positioning strategy is of much appeal to the fine readers and educated class. Strategy West,D, Ford,J, Ibrahim, E proposed that when a company is launched it has to have a clear strategic direction in mind. When Starbucks was launched, it did not have a clear target market in mind so it adopted undifferentiated or mass marketing techniques in order to gain profits. Eventually, the pattern of customer purchases revealed that middle aged people make two third market share of the company. So Starbucks then decided to switch to differentiated marketing. Dransfield (2001) proposed that in the case of differentiation marketing, the offerings of the company stand out from those of competitors in terms of quality, pricing, customers’ perceptions etc. The coffee of Starbucks comes with exotic flavors and aroma which no other coffee could offer. The ambience and quality also differentiate it from the competitors (Espresso & Coffee Guide). As discussed by Mullins (2010) that at an international level, Starbucks knows that it could purchase coffee houses which are selling off at low interest rates or it could even take advantage of merger and acquisition strategies. When Starbucks came to UK, it purchased small coffee houses and then by the extensive use of its marketing and advertising techniques, the name of Starbucks rose to a point where it has become a part of daily life essentials and customers cannot think of giving a kick start to their day without drinking a cup of Starbucks coffee. Marketing Mix for Starbucks Morgenstern, K (2010) explained that the dour factors of product, pricing, placement and promotion help a company in its strategic implementation. Product The product we have chosen to introduce in the marketplace is called VIA ready brew. With VIA ready brew, customers will no longer have to wait in long queues just to grab a cup of time. They could save much time by getting the same Starbucks flavor and aroma by emptying a sachet of VIA in their cup of hot water (Charles, 2009). This product will appeal those who have a busy work schedule. At breakfast, an instant dose of Starbucks coffee will be favored by the customers. Travelers will also find VIA ready brew a great solution to quench their thirst for coffee anywhere they wish. Starbucks VIA comes in different flavors of coffee such as Columbia (walnut flavored), decaf Italian roast, Vanilla Latte and Veranda blend. Pricing The price of Starbucks VIA ready brew will be forty pence for a cup. Usually the sachets will be sold in set of twelve which would cost almost four pounds. Lindsey Goodwin suggested that the price is very affordable so that the target customers could enjoy the instant, smooth and well balanced cup of coffee right away. Placement Starbucks stores are mainly located in urban areas usually near offices or in supermarkets. The location of Starbucks stores in busy areas will mean that more customers would be present in that area who would want to relax with a cup of Starbucks coffee. Promotion Although competitors of Starbucks are making good profits by retaining a strong image in the market but with this one product VIA ready brew, Starbucks could win the lead. By the use of extensive advertising campaigns such as posters, visuals in busy markets, advertisements on the internet, newsletters and directly giving free samples to the customers in shopping malls and other public places, Starbucks could create good brand awareness. Starbucks has always believed in its philosophy of marketing through word of mouth. Social media provides a great platform for advertising of VIA ready brew. A good idea could be to launch a photo contest where customers will send in their pictures and videos in which they would be sipping VIA ready brew in places they like. The best entries could win a free supply of Starbucks VIA for a couple of months to a year. POP advertisements if carried out in the Starbucks stores with a dollar off coupons could catch the eyes of customers standing in long queues (Slide Share). Reference Bowhill, B. (2008). Business Planning and Control: Integrating Accounting, Strategy, and People. West Sussex: John Wiley & Sons. p331-349. Charles, G. (2009). Starbucks to launch Via instant coffee in UK.Available: http://www.marketingmagazine.co.uk/article/881700/starbucks-launch-via-instant-coffee-uk. Last accessed 8th April 2014. Coffee.org. (n.d.). History of Starbucks. Available: http://www.coffee.org/history-of-starbucks. Last accessed 9th April 2014. Dransfield, R (2001). Corporate Strategy. Oxford: Heinnemann Educational Publishers. p39-46. Espresso & Coffee Guide. (2011). Canadian Savour Fine Lattes and Cappuccinos,. Available: http://www.espressocoffeeguide.com/2011/06/Starbucks-canada-2011/ . Last accessed 8th April 2014. Halevy, A (2011). The Infinite Emotions of Coffee. Alon Halevy. p92-102. Cagan, J and Vogel, C (2010). Creating Breakthrough Products: Innovation from Product Planning to Program Approval. New Jersey: Prentice Hall. p48-54. Lamb, C, Hair,J, McDaniel, C (2012). Essentials of Marketing. Mason: South-Western, Cengage Learning. p273-275. Lindsey Goodwin. (n.d.). How Much is Starbucks Coffee?. Available: http://coffeetea.about.com/od/orderingcoffee/a/How-Much-Is-Starbucks-Coffee.htm. Last accessed 10th April 2014. Lynch, R (2007). Corporate Strategy. 4th ed. 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(n.d.). Diversity and Inclusion. Available: http://www.starbucks.com/responsibility/community/diversity-and-inclusion. Last accessed 7th April 2014. Starbucks. (n.d.). Our Company. Available: http://www.starbucks.com/about-us/company-information. Last accessed 10th April 2014. Starbucks. (n.d.). Starbucks VIA® Instant and Microground Coffee.Available: http://www.starbucks.in/coffee/via. Last accessed 7th April 2014. Starbucks. (n.d.). Starbucks VIA® Ready Brew Decaf Italian Roast.Available: http://www.starbucksstore.co.uk/starbucks-via-ready-brew-decaf-italian-roast/011020596,en_GB,pd.html?start=1&navid=search. Last accessed 6th April 2014. Ference, Thurman. (2009). MBA Fundamentals Strategy. New York: Kaplan Publishing. p170-190. West,D, Ford,J, Ibrahim, E (n.d.). Strategic Marketing: Creating Competitive Advantage. 2nd ed. Oxford: Oxford University Press. p3-33. Read More