Strategic Marketing Starbucks Essay

Strategic Marketing Starbucks Strategic Marketing Plan for the Starbucks Coffee Company Table of Contents Introduction and background 3 Company mission, company objectives 3 Market definition and product or brand background 4 Evaluation of results and conclusion about problem 5 Situational Analysis 5 Internal analysis 5 Customer analysis 7 Industry analysis 8 Competitor analysis 11 Distribution and supplier analysis 11 SWOT analysis – Confrontation Matrix 12 Choice of option 13 Marketing objectives/ expected results 13 Marketing strategy 13 Target audiences 14 Brand and product position 14

Decisions regarding marketing mix elements 15 Objectives for marketing mix elements 15 Strategies and tactics for marketing mix elements 15 Financial indicators and budges 16 Evaluation criteria 16 Sources 16 Introduction and background Company mission, company objectives The first Starbucks cafe was opened in 1971 in Seattle’s historic Pike Place Market. It was only a small cafe, but it offered some of the world’s finest fresh-roasted whole bean coffees. The company’s name derives from Moby Dick, the novel was written by the American author Herman Melville in 1851.

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Starbuck is the first mate on a whaling ship named ‘Pequod’, he is an intelligent Quaker (religious group) and he is from Nantucket. The name evoked the romance of the high seas and the seafaring tradition of the early coffee traders. Starbucks chairman, president and chief executive officer, Howard Schultz, walked in 1981 into the first Starbucks cafe and was so enthusiastic about the coffee and the company that he joined the company a year later. Schultz travelled a couple of years later to Italy and when he came back he was inspired by the Italian coffee bars and the romance of the coffee experience.

He wanted to create this atmosphere is the US too. The cafe should be a third place between home and work. Starbucks’ mission is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”. Worldwide there are at the moment 16,706 stores of which 8,850 are company-operated stores and 7,856 are licensed stores. These nearly 17,000 stores are located in more than 50 countries. Value strategy Starbucks is operating under the value strategy of product leadership. Innovation plays an important role in the corporate culture of the company.

Starbucks is listening carefully to its customers and tries to recognize trends early in order to use them in its advantage. Objectives In the process of formulating objectives it is important to keep in mind, that objectives need to be SMART (specific, measurable, ambitious, realistic, and timed). * In the long term, the company strives for 30,000 selling points which will bring Starbucks near close to the size of McDonald’s. * By 2015, all of our coffee will be grown using ethical trading and responsible growing practices * It is Starbucks goal that by 2015, 100% of its cups will be reusable or recyclable.

It will also work to significantly reduce its environmental footprint through energy and water conservation, recycling and green construction. * By 2015, we plan to contribute one million volunteer hours each year to our communities. All these goals are SMART and can be evaluated properly. Market definition and product or brand background The market definition should be contained in the mission statement. The mission statement of Starbucks is: “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”. The mission is rather broad and does not give any information about the market definition.

Starbucks’ core business consists of coffee and tea products in all sorts and sizes, but the company also provides special services for its customers, like wireless internet access (in cooperation with T-mobile). Products range: * Whole bean coffee * More than 30 blends and single-origin premium Arabica coffees * Made-to-order beverages * Fresh-brewed coffee, hot and iced espresso beverages, coffee and non-coffee blended beverages * Frappuccino beverages * Smoothies * Vivanno™ smoothies * Bottled beverages * Fresh Food * Baked pastries, sandwiches, salads, oatmeal, yogurt parfaits and fruit cups. Boxed tea * Tazo® teas * Merchandise * Home espresso machines, coffee brewers and grinders, coffee mugs and accessories, packaged goods, music, books and gift items * Consumer Products * VIA™ Ready Brew coffee, bottled Starbucks Frappuccino® beverages, Starbucks Discoveries® chilled cup coffee (in Japan, Taiwan and Korea), Starbucks DoubleShot® espresso drinks, Starbucks® Iced Coffee, whole bean coffee and Tazo® teas at grocery and a line of super-premium ice creams. * Brand Portfolio * Tazo tea, Ethos water, Seattle’s Best Coffee and Torrefazione Italia Coffee.

Over the years Starbucks product range grew hugely. First it served only coffee, then tea was introduced and the different kinds of coffee beverages were developed (e. g. Frappuccino) and so the process continued. Evaluation of results and conclusion about problem The Netherlands is a country in which’s culture the coffee is deeply rooted. The drinking of coffee is often a social act with friends, family or co-workers. Due to this there are many coffee stores and cafes. How can Starbucks compete with these competitors and get ahead of them by using which marketing strategies?

In order to answer this question properly a situational analysis will be performed to get a thorough overview about the internal and external environment. A SWOT confrontation matrix will visualize the situation and its possibilities. With the use of this matrix strategies will be developed. Situational Analysis Internal analysis The internal analysis focuses on the internal factors of the organization. The results of this analysis will form the strength and weaknesses of the SWOT analysis. The internal analysis will focus on three areas, the organizational structure, the product and the financial situation.

The financial situation Starbucks has generally been at a financial upward movement since its foundation in the 70’s. The Company is a corporation, which means that one can buy shares. The share of Starbucks today stands at 28. 84 US Dollars. Right now there are 742. 60 Million shares available. The revenue in 2009 was 9. 77 billion US Dollars. Starbucks has a rather positive financial situation and the predictions for the next years are promising as well. Therefore it can be concluded, that the company is able to enter new markets. The organizational structure

Most organizations are structures in a hierarchical order and this order is usually shown in an organizational chart. This is not the case at Starbucks; the company avoided a hierarchical organizational structure and has no formal organizational chart. Starbucks understands the importance of its employees and their essentiality to its success. Starbucks honors this by calling its employees partners. This communicates clearly the importance and the status an employee has at Starbucks. The different corporate levels: Starbucks is a polycentric organization, which means that there is more than one head-quarter.

This is necessary because of Starbucks huge size. The “home” of Starbucks is the United States of America, in specific Seattle, since the first store was opened there. The headquarter for Europe, Middle East and Asia is located in Amsterdam, the Netherlands. The top corporate level is the board of directors, which is responsible for the strategic planning and consists of 12 members. The Board is responsible for overseeing the exercise of corporate powers and ensuring that the Company’s business and affairs are managed to meet its goals and objectives.

Strategic planning involves organizational objectives, fundamental strategies, and long term planning and is done by the board of senior officers as well. This board is divided in different areas like finance, management, marketing, new markets, Starbucks Entertainment, store development, etc. The operational planning is done by the supervisory management at the Starbucks stores. Employees or better partners have a relatively high level of involvement in the rather flat organizational structure. The product Image Starbucks is a world-wide known brand and therefore has a global image. The Company is growing constantly throughout the world.

Its innovation and always growing product portfolio, its service and close customer-relation are the reason the company stays ahead of its competitors and maintains its positive image. Another important factor is its social responsibility; Starbucks has a “corporate social responsibility annual report” with information about the company’s policy towards fair-trade, community interest and the environment. All this should contribute to the good image: it is popular to visit Starbucks. Quality Qualitatively high coffee has always been to idea of Starbucks, this quality needs to be paid, which is the reason for Starbucks rather high prices.

To justify the high prices of Starbucks products, the company simply must strive to maintain the known high quality of its coffee. This is also directly connected with the Starbucks image. Quality comes from the ingredients (exclusively grown coffee beans), the way of crafting and customer service. Three aspects Starbucks customers values highly. Innovation Innovation is an important factor in the success of the Starbucks brand. Not only is the company continuously exploring new products, store concepts and facilities and services, it is also innovating in terms of social responsibility.

The company was the first in its business to actively lead and participate in several community and environment programs. Consumers’ motives Consumers of Starbucks are attracted by the concept of Starbucks, with its broad range of exclusive, high quality products. Basically, a Starbucks customer wants to enjoy the combination of the image, the quality and the innovation of the Starbucks brand. Customer analysis With the help of market segmentation the total market is divided into different segments. With this information, the company eventually knows where to find customers and potential customers and how to attract them.

The Segmentation will be based on a combination of demographical, psycho-graphical, behavioral and geographical criteria. Demographical criteria In the Netherlands, coffee consumption is part of the social aspect of life. From teenager to senior, from regular working class to CEO, male or female, almost every person with a middle or high income is a potential consumer of Starbucks. However, in the following criteria, this broad, diverse group will be reduced to closer specifications. Psycho-graphical criteria A Starbucks customer stands in the middle of the ever changing society with self-conscience and self-confidence.

This person considers him- or herself a dynamic person with an eye for trends and taste and is willing to pay extra for something which fits this image. In the Netherlands, these people can be found within the groups of students, (young) urban professionals, tourists and modern-thinking (retired) seniors; all higher educated. When implementing benefit segmentation, people can be divided in groups in which people share certain product advantages. For Starbucks, these are: convenience, variety, exclusiveness, quality and social status.

Dutch people who are more interested in drinking their good old cup of coffee in an old fashioned, low profile coffee house with a familiar menu, will not be attracted to Starbucks. People who like to try new tastes, who like to be given a wide range of possibilities and who like to be seen in a dynamic, international environment, will most likely not choose the coffee house next door; they will probably choose Starbucks. Behavioral criteria Starbucks is a worldwide acknowledged company. Most people will have heard of Starbucks.

Those people who fit the criteria described in the category above will most likely step into one of the stores for a nice cup of coffee. Nevertheless, there are still people in the Netherlands who are unfamiliar with the Starbucks brand. Considering people with no “Starbucks-experience”, it is important to question their will to purchase a Starbucks product. In the Netherlands, people willing to try new things without arguing the price are, again, well-educated people with relative high incomes. An important factor for people in this group is the time and will to visit their nearest Starbucks store.

Geographical criteria As mentioned before, the Netherlands is a country with a long history of coffee consumption. Coffee is being consumed at a high rate throughout the country. However, potential consumers of Starbucks (as described in the other criteria) are to be found in the larger cities of the Netherlands, because large cities are crowded, easy to reach and packed with shopping and business facilities. The following cities are in this case relevant: Amsterdam, Rotterdam, Haarlem, The Hague, Utrecht, Eindhoven, Groningen, Arnhem and Nijmegen.

These are the places with a high rate of urbanization, where large amounts of people work and study. These are also the places that are most visited by tourists. However, the ideal place for Starbucks to find their potential customers would be Schiphol, the main airport of the Netherlands and a large transportation hub, centrally located in the country. Conclusion consumer analysis The consumers on which Starbucks should focus are the following: High educated people with above the average incomes, studying, visiting, living or working in large cities.

This profile covers the following consumer groups: * (young) urban professionals * “trendy” retired people with money and spare time * students * tourists * emigrants Industry analysis The industry is best analyzed by using the DESTEP model, which gives an overview of the macro-environment of a company. In addition Porter’s Five Forces model gives a good additional view. DESTEP stands for: demographically, economic, social/cultural, technological, ecological and political factors. Demographical aspects The Netherlands is a rather small country with a relatively high population. With about 16. million inhabitants, it has the ninth-largest population in Europe. It has only a slightly increasing growth rate each year. Due to the high emigration rate, the population will decrease and the average age will increase. According to the Central Bureau of Statistics the greatest part of the population is living and working in the western part of the country (over 7. 6 million people). Economic aspects The Netherlands economy is noted for stable industrial relations, moderate unemployment and inflation, a sizable current account surplus, and an important role as a European transportation hub.

After 26 years of uninterrupted economic growth, the Dutch economy – which is highly open and dependent on foreign trade and financial services – has been hit hard by the global economic crisis. The GDP contracted 4. 3% in 2009. Exports declined nearly 25% in 2009 due to a sharp contraction in world demand. Social/ cultural aspects The Dutch are known as enthusiastic coffee drinkers; coffee is the second-most consumed beverage, after tap water. Drinking coffee is very often a social activity and therefore people take their time to drink the coffee and socialize.

This is part of the Dutch culture and can be observed in leisure time as well as during work. Drinking coffee is an accepted form of relaxation and social conduct. Technological aspects Within the last decade the process of brewing coffee did not change very much, but the technological aspect of it changed drastically. It is no longer simply putting the coffee powder in a coffee pot or cup, boiling water and pouring it in the pot. Advanced technologies and innovations have now entered the coffee-lovers’ households. People are able to buy luxury, easy-to-handle espresso machines with a wide range of accessories.

Starbucks has followed this trend by selling luxury coffee equipment in its stores. Ecological aspects The Dutch weather climate is a varying one. From one moment to the other there can be a shower. This cannot cause any bigger problems for Starbucks. It might turn into an advantage; people might step into the store to escape the rain. Since the coffee is imported, the climate of the Netherlands has no important role to the failure or success of Starbucks. Political aspects The Netherlands is part of the European Union. This has advantages like the lack of trade barriers and the free movement of goods.

Basically, import and export have become less complicated (Starbucks would not have any problems concerning export at all, because of its roasting plant in Amsterdam). Also, the Dutch ways of social conduct and doing business can well be compared to those of the United States of America. Porter’s Five Forces model The Five Forces model of Michael Porter illustrates the competitive forces in the environment of the company. This model describes the force of competitors, substitute products, suppliers, consumers, and potential new entrants in the market (Alsem, 2007, p. 22). In the middle the level of competition and that is influenced by buyers and suppliers/competitors and then there is the threat of substitute products entering the market as well as new competitors entering the market. Competitor analysis Due to coffee being an essential part in the social culture, there are many coffee houses and cafes throughout the country, which offer hot and all kinds of other beverages and in addition a cozy or trendy location/atmosphere. An important point to consider is that a lot of competitors have simply copied the core Starbucks concept.

Starbucks entering the Dutch market was the “arrival of the real thing”, which many people appreciated. However, not every coffee house offers the concept which Starbucks’ consumers wish for. This does not mean that a traditional Dutch coffee house cannot cause a potential threat as a competitor. Companies in the Netherlands which follow the coffee-to-stay concept can all be considered potential competitors. Competitors are: * Bagels & Beans, market leader with 26 stores throughout the country * Cafe DE, Sara Lee’s coffee-stores Espressamente , a concept of Illy (Italy), which emphasizes on Quality coffee * Piacetto, a concept of the large company Tchibo (Germany) * Coffee Company, originally a Dutch concept; now supported by Mexx founder The common Dutch, non-franchised, coffee houses in the large cities * Douwe Egberts * Australian Distribution and supplier analysis Today, Starbucks has a large amount of stores throughout the world. The policies of the company towards the usage of its brand are quite clear; the company does not work with franchises but, in many cases, it finances its development with its own money.

For their international operations, Starbucks currently uses two business strategies: licensed and company-owned stores (Starbucks, 2009, “Company-profile-feb10”, p. 1). Distribution The distribution of Starbucks products to the (potential) store locations is relatively easy. With the Starbucks coffee roasting plant located in Amsterdam every spot in the country can be reach easily. Possible transportation methods are the road and train networks. SWOT analysis – Confrontation Matrix | Strengths | Weaknesses | S1 Good Image – Highly innovating range of qualitative products and servicesS2 Information rich and attractive company website, in addition many other websites (Starbucks idea, Starbucks gossip, Starbucks workers union)S3 Clear organizational structureS4 Positive working environment due to the company’s emphasis on the importance of employees (partners)S5 Strong and flourishing financial situationS6 Strong environmental engagement | W1 Relatively high prices of productsW2 Due to the extension of the product/service portfolio, the company gets further away from its initial core-concept Opportunities | | | O1 Authentic coffee culture and big market in the NetherlandsO2 Worldwide recognition and positive reputationO3 High economic level in the NetherlandsO4 Good distribution possibilities | S1 O1 Invest in the Dutch market to serve the customer need for good coffee | W1 O1 increase MKT communication and start events to emphasize strengthW2 O1 O2 Communicate and emphasize core concept (back to the roots) W1 O2 Emphasize quality and the desirability of products | Threats | | |

T1 Development of ambitious competitors in the marketT2 Criticism against the “evil” corporate character of Starbucks, often called “McDonald’s of coffee” | S1 T1 T2 increase PR/communication to strengthen and improve image | W1 T1 lower price W2 T2 diminishment of overall product range | Choice of option | Invest in the Dutch market | Increase MKT communication/events | Lower price | Sustainability (match environment/solve problem) | + | + | + – | Feasibility(can you do it? Money? People? Competence? Knowledge? | + | + | + | Acceptability to the stakeholders, shareholders

Profit/risk | + | + | – – | (Matrix according to Porter (Alsem, (2007), p. 183/284) This clearly shows that option three, to lower the price is not acceptable, therefore the strategies to be carried out will be the investment into the Dutch market and the increase of marketing communication and to organize some kind of marketing events. Marketing objectives/ expected results The objectives are of course to make more sales, make more profit, satisfy customers to the fullest and attract more customers and therewith increase market share. In the long term, the company strives for 30,000 selling points which will bring Starbucks near close to the size of McDonald’s. * By 2015, all of our coffee will be grown using ethical trading and responsible growing practices * It is Starbucks goal that by 2015, 100% of its cups will be reusable or recyclable. It will also work to significantly reduce its environmental footprint through energy and water conservation, recycling and green construction. * By 2015, we plan to contribute one million volunteer hours each year to our communities. Marketing strategy

From the past until today, Starbucks has implemented diverse business strategies to stay ahead of its competitors and to keep innovating towards consumers. This can be described with the help of the Ansoff growth model. Starbucks has the following growth strategies: Market Penetration * Starbucks adapts products to local taste * Links Starbucks logo to customer satisfaction * Convenient access, open late night Market Development * International Expansion * Supplies specialty coffee to supermarkets Product Development * Increase in food sales and non-coffee sales Diversification Launch new products (Frappuccino etc. ) Target audiences Coffee-to-go or coffee-to-stay, both styles are served by Starbucks. The company aims its activities especially at the coffee-to-stay market. The consumer group of Starbucks is very diverse, because the products of Starbucks are easily available and interesting for almost all kinds of people. For young people, with or without a lack of financial means, the image of the product often weighs heavier than the price. Elderly with enough money and spare time tend to interrupt a day of sightseeing with a nice cup of coffee.

High-educated people and students are known for their will to spend money on new products and their critical view on the quality of a product. As well as locals who like to find themselves drinking coffee at Starbucks during their shopping, travellers from abroad enjoy taking a break from city-touring at a familiar coffee store. Basically, people from every layer of society are possible Starbucks customers. Though, specialty coffee stays a luxury product, and therefore aimed at people with an average to high income level. Brand and product position

Because of the dominating position in its line of business, Starbucks is often criticized for its “dubious” ways of entering a new market. In practise, Starbucks’ market-entry strategy would mean finding a market’s leading independent coffee house at first, and then going to the landlord of that coffee house and buying the lease out from under them, replacing the store with a Starbucks store. If Starbucks cannot buy the lease, it will open several establishments around the shop and heavily promote to attract the customers.

The entry-strategy is efficient and effective, but also questionable in terms of fair business and morality; Starbucks has the advantage of its near-monopolistic status. Decisions regarding marketing mix elements Objectives for marketing mix elements Marketing Objectives * To create a Starbucks experience that makes people come for the coffee, stay for the atmosphere and environment, and return for the connection * To maintain the good image Starbucks has worldwide * To clearly communicate the values and commitments of the Starbucks business to their customers

Strategies and tactics for marketing mix elements Product Starbucks core product is coffee and tea but over the years the range of product grew and grew. Different sizes were introduced to satisfy to huge or the small thirst. Starbucks introduced little snacks that can go along with a coffee or a tea. Price Due to the high quality Starbucks need and is able to charge relatively high prices for its products and services. Due to the fact that people are paying these prices it makes them reasonable expensive, which means that Starbucks can continue its pricing strategy this way. Promotion

The huge amount of success Starbucks has had cannot be attributed to promotion, since there is hardly any advertisement for the brand. The success needs to be attributed to the good quality of the products and services. Starbucks became successful because of its ability to learn what the customer wants. Place Good places to open Starbucks stores are the bigger cities in the Netherlands like Amsterdam, Rotterdam, The Hague, Groningen, and Utrecht. The reason to open stores there is the population size, tourists that are visit the cities, students that are studying in these cities.

Financial indicators and budges No data available Evaluation criteria No data available Sources Alsem, K. J. (2007). Strategic Marketing – An applied Perseptive. New York, McGraw-Hill CIA world fact book (2010). Retrieved November 16, 2010 from http://www. theodora. com/wfbcurrent/netherlands/netherlands_economy. html Starbucks Annual report 2009 Retrieved November 02, 2010 from http://investor. starbucks. com/phoenix. zhtml? c=99518&p=irol-irhome or http://media. corporate-ir. net/media_files/irol/99/99518/SBUX_AR. pdf Starbucks Corporation (2010). Retrieved November 02, 2010 from http://www. starbucks. com