Starbucks - traditional coffee market - Case Study Example

These products are marketed through retail stores. It also markets coffee and tea products through other channels of distribution. Starbucks relies chiefly on an efficient market system and product improvement. The traditional market for coffee is not in maturity one, and today it offers a limited opportunity for high profits, so it sets about developing products, that are both distinctive and could be sold at a premium price. A specialized product range, namely coffee beans necessitated a clear identification of target market.

The original mission had made it clear that it was in the relatively unexploited 'adult' sector that Starbucks saw its clearest opportunity for innovation. Starbucks set out to create a range of high-quality products that were distinctive in shape, and especially appealing to people who had acquired a taste for coffee. A wholesome, appetizing and, at same time, slightly exotic taste experience was what Starbucks wanted to offer. An insight into possible consumer reaction to product and packaging was obtained by arranging for big groups, drawn from the relevant market segments, to meet in a social setting where reactions could be observed and impressions and comments recorded.

The favours were often an 'acquired' taste and the products were typically consumed with alcoholic beverages, at the night clubs and restaurants, including fast food.Starbucks has maintained high-speed growth through continuous optimization of is product mix and constant technological innovation. It has also realized rapid expansion through capital injections. In addition, it had begun to follow a strategy of withdrawing from small markets with limited potential for its core products and to look for markets in countries with a major growth potential for coffee products.

The main markets of Starbucks are the United States, Denmark, Finland, Holland, Germany. If there are few, large competitors in the industry, it is likely that this is due to high entry barriers. Conversely, an industry of many, smaller competitors is likely to be the result of lower entry barriers. The nature of competition for Starbucks differs from other industries. The main competitors of Starbucks are: tea, juice, soft drinks, and alcohol products. Competitive rivalry on both a price and a non-price basis is higher in the industry comprising the more, and smaller, competitors.

If the product is mature and the industry is subject to 'shake-out', then competition will be more intense. The main competitors in the industry are Peet's, Caribou Coffee, the Second Cup, Coffee Station, etc. In general, Starbucks is well-positioned to take on this important global leadership role. It has the global resources and certainly has the technological capability. Clearly, some comapnies in the same industry are more successful than others, lending support to the view that competitive advantage is largely internally developed.

Equally, however, there is a danger of ignoring the environment, as customers and their needs, competitors, changes in technology, etc., can play an important role in determining competitive success.Bear in mind Porter's 5 P's or five "competitive forces" which include: the threat of entry of new competitors (new entrants); the threat of substitutes; the bargaining