Essay on Building and Marketing Starbucks

Executive Summary

Starbucks suffers several policy influences in its macro-economic environment. For instance, the players in the market engage in the importation of coffee-beans from various countries with different levies and tariff regulations. That being the case, organizations like Starbucks have to carefully monitor power failures and changing polices like the choice to take control of foreign organization’s properties. Economically, the 2008 financial crisis posed major challenges to this company where the annual profits dropped and operational expenses risen dramatically. Brown (2011) stated that Starbucks implements a CAFE agenda to address concerns relating to the industry’s corporate social responsibility to support permanence of coffee-bean growers that may produce standard benchmark. The company also purchases non-fat-milk to cater for health-conscious consumers. Additionally, the organization considered integrating CRM system to develop communication system to help manage customer data. At the same time, introduction of modern equipment like brewing machines and coffee-bean roasters plays key role in giving the company a competitive over others. In the recent past, the company has been particularly observant to discover environment-friendly production methods by paying attention to long-term solutions. Starbucks closely complies with regulations of the countries in which it operates. For example, the company spent close to $250million to resolve the customer data security breach (Starbucks, 2011).

Starbucks Strategies for Sustainable Competitive Advantage

According to Mohammed (2018), the emergence of three trends including customers being unhappy with coffee made from cheaper Robusta beans, packed coffee going in supermarket shelves and health conscious starting to eat at home led to the foundation of Starbucks in 1971. The founders soon identified the dissatisfaction and unhappiness of the significant numbers of coffeeholics who were seeking authentic coffee products that were naturally processed and saw the need to come to their rescue. Also being them being coffee lovers, the founders could identify with the challenges experienced by this large proportion of America’s population. They had already sensed the opportunity this market presented and were all set to fulfil it. Taking this into account, they had their initial shop opened in Seattle to market original coffee beans to this small market of pleasure-seeking coffeeholics. Starbucks’ quality coffee then started becoming popular through word of mouth.

Starbucks also used value propositions to gain a competitive advantage over its competitors. Value propositions refer to the distinguishing features used to create and keep the name of the brand in the customer’s mind. From the start, Starbucks held original and high quality as one of the underlying offers. The company used to only sell coffee beans until in mid-1980s. Consumers would purchase and carry them home for grinding in order to make beverages on their own. Every brand has to remain relevant and develop a maintainable competitive edge so as to grow by being able to introduce additional value propositions and expand its market boundaries. And choosing to go forward in the mid-80s, was a right decision for Starbucks. The company first did some research to get an idea its customers’ suppressed needs as well as their perspectives on use of the product. For instance, Howard Schultz visited Milan in the 1980s to examine how the Italian coffee market looked like where he discovered that Italians regarded the coffee outlets as an extension of their homes. This implied a potential coffee market for the company.

Starbucks had long realized that the coffee growers contributed significantly to the success of the brand. Therefore, it had always invested in making the lives of the cultivators better through financial support and training to maintain a sustainable supply of authentic quality coffee. In the past, small-scale coffee cultivators depended on a payment that was made once at end of the harvest season by the companies (Mohammed, 2018). However, they required financing throughout the season to cater for individual and farm-related expenditures. These farmers would always have a very hard time during end season when variations in climate affected the entire coffee farms. To save them from such uncertainties, Starbucks offered them short-term loans while constantly encouraging them to improve on their infrastructure. In addition, through the help of the company’s research team, Starbucks educated the farmers on soil management and crop production techniques. In this way, the growers gained profound knowledge and training on new techniques they could adopt to realize increased crop yields.

The roasting of the coffee is another unique strategy developed by the company to beat its competitors. The installation of a custom-designed roasting facility with an automated patented process reduces emission of greenhouse gases and improve the company’s performances. As a result, high-quality coffee is produced and at the same time offering a flexibility for future requirements. It took 3 to 5 years for a team of experienced experts to come up with the plant implying that it is very effective for use. Unlike its rivals, the company employs a patented process of extraction since the best coffee beans require leading edge technology (Mohammed, 2018). Also, Starbucks has acquired a proprietary process to extract bitter flavors, while keeping the fine and healthy ones. The systems at the roasting facility are so automated such that the beans can never be touched again by humans once they are inside the process equipment.

Starbucks facility has the Clean-in-place(CIP) systems where every equipment gets cleaned upon completion of every stage unlike in several other coffee processing plants where the interior surfaces of machines are only cleaned after all the beans have been processed. In the place of physical switchover, mix-proof regulator machinery enables quick, effective, and exceedingly hygienic procedures. Starbucks has set up state-of-the-art computer linking together production structures that give staff access to on-line data on procedures, maintenance and quality assurance. Practically everything within the roasting plant arrangement is integrally linked to the company’s administrative center network. Starbucks has control rooms where processing plant operations are managed, reducing the workers’ direct involvement with the equipment letting them to revolve around other important things like quality. Integrated mechanization has similarly considerably lowered the demand for huge labor thus saving the company time and operation costs. The roasting amenities hold more sophisticated packaging machines to operate different sizes of packaging. Starbucks’ strict oversight on the roasting process also guarantees that its coffee maintains similar tastes across all of its retail spots.

Segmentation

Segmentation refers to the activity of splitting up a broader market of potential customers into distinct categories with reference to the population’s different needs, characteristics or behaviour (Thompson et al., 2013). Starbucks was originally established as a socioeconomic division on the basis of customer marketplaces as it has focused on societal status especially the business people and employed individuals working from the office and wanted a nice experience with the cup of coffee in a cool place. It is believed that this group of people fall under the Generation Y who were born between 1977 and 2000. The company also had divided its market geographically and demographically by picking out shop location where they can have access to the well-learned and coffee lovers.

Targeting

Kotler (2016) identified market targeting as the process of evaluating the interest of all market segment and identifying an additional segments to penetrate. Starbucks majorly targets middle and high-earning employees wishing to buy high end products. The founder wanted to his company to be the destination where their consumers could chill out, get together and even hold both formal and informal meetings. This made the company to become more vigilant with their quality management and maintain the high standards. According to (Lynn 2011), different segments require a large-scale distribution strategy through planning a well-defined products programs and advertising. The company pay no attention to the disparities in the market segment and employs a single strategy to target the entire market when it comes to homogeneous or mass marketing. Since its establishment, Starbucks applied invariable selling strategy, formed and preserved the marketing mix as they treated the market as one unit (Kotler 2016). The biggest problem with using this target market approach is coming up with the brand that pleases every consumer. Starbucks used their services without compromising on the quality for reaching this approach to go after its customers and determinedly getting bigger in the industry over the decades.

Positioning

The position of a products is the place occupied by the product with respect to competitors the consumers would be having in mind. For this case, the company has cultivated a unique market position for their products because the consumers would have no reason to buy a product if it is to be exactly same like the rest in the market. Starbucks has been able to position itself as a respectable brand in the market. Starbucks has projected its positioning in a manner that differentiates their products from their competitors; and provide them with the best strategic advantage. The company has a meaningfully simple mantra, one person, “one cup, and one neighborhood at a time” to inspire and raise the human soul (Roll, 2017). Starbucks also managed to gain a competitive edge over its competitors through ensuring contentment of both the staff and customers as it already improved its positioning plan inspired by the consumer and delivered an exemplary facility in terms of the design of their stores, furniture equipment to entertainment, and in the context of employee contentment.

Branding

Starbucks has hugely capitalized on crafting a uniform look and feel of its shops and products. Also, its Siren logo is very unique and is globally recognized by coffee lovers. The worldwide expansion approach has a main objective of reinventing the company’s experience in every new market (Roll, 2017). This fundamentally leads to a similar kind of feel in all its stores across the world. Starbucks’ brand strategy has kept track of the changing face of marketing and is putting to good use the emerging consumer engagement platforms. The company is currently operating a website known as mystarbucksidea.com, where customers leave behind their views that would consequently help the company to improve on its products.

Starbucks launched its first international brand promotion named “Meet me at Starbucks” in 2014. The campaign narrates a day in the life of Starbucks Coffee through a mini-documentary presentation. The chronicle was filmed in 59 different shops situated in 28 different countries (Luedicke, Thompson and Giesler, 2010). 39 local filmmakers were present in the event along with 10 local photographers and one director managing the entire team. Roll (2017) indicated that the company is known for brand campaigns and has spent hugely invested in different campaigns since it was started in 1971. Starbucks spent close to $ 200 million on campaigns in its low growth phase in 2008. The opening international brand promotion in 2014 was a move away from the company’s standing communication strategy and brand promotion focusing on their products. But it is worth noting that the campaign still put much weight the customer experience that has a direct link to its core values. According to Morais et al. (2014), brand promotion strategy of this company remains unique is still unique and does not try any advertising models that have never been tried and tested. Starbucks barely uses billboards, magazines, newspapers or even posters for advertising. Its few ads running on the television mostly focus on particular offers of the product emphasizing the Starbucks’ how they prepare them and for marketing campaign purposes.

Starbucks PESTEL Analysis

Regional integration is one of the current developments that stages an opportunity for this coffee company to spread out globally. Besides, majority of leaderships across the globe are developing infrastructure, which presents the breakthrough for the company to easily reach out to other potential consumers and even traders (Roper, 2012). The major economic progress currently being experienced in developing nations along with the decreasing rates of unemployment present opportunities for the company to earn more returns from several other markets around the globe. The company also has chance to multiply its profits through boosting demand for specialty coffee that is posed by the growing coffee culture and the worldwide rise in the number of middle class families. On top of that, Starbucks has the opportunity to broaden its collection of more healthy products to catch the attention of health-conscious customers to their stores. For that reason, this component of PESTEL analysis framework identifies all outside influences that create opportunities for the growth of the organization in future.

Technically, Starbucks can now utilize the opening to build on its smartphone applications and allied provisions to realize additional returns via purchases made online. Also, the company has the shot to upgrade the efficiency of its distribution chain founded on emerging technologies used by coffee growers. The business continuity trend only pays attention to operational practices that guarantee negligible effect on the environment. In connection, accountable sourcing highlights CSR in the distribution chain. There is an opportunity for the Starbucks to expand its operation in such areas. It is worth noting that Starbucks already has reliable sourcing strategies. The company also has the opportunity to consider packaging a better percentage of products in biodegradable materials. Satisfying the product’s safety provisions as well as regulations on ingredients from innately adapted organisms would be a great opportunity for the company to improve its performance.

Recommendations

The above PESTEL analysis identifies that a good number of the outside influences mostly present opportunities to Starbucks’ remote environment. Yuksel (2012) submitted that, however, Starbucks need to put more effort in addressing certain threats particularly the threat of substitution associated with the greater than before obtainability of specialty beverage machineries for use at home. Then again, the company has no much control over the risk of governmental administrative requirements. In general, the PESTEL analysis model reveals that Starbucks Coffee has a huge potential of continuing to penetrate more global markets in the future.

References

Roper, K. (2012, November). BIM Implementation: PESTEL Drivers & Barriers (Cross-national Analysis). In World Workplace 2012. IFMA.

Kotler, P., Keller, K. L., Brady, M., Goodman, M., & Hansen, T. (2016). Marketing Management.

Lynn, M. (2011).Segmenting and targeting your market: Strategies and limitations [Electronic version]. Retrieved from Cornell University, School of Hospitality Administration site:http://scholarship.sha.cornell.edu/articles/243.

Brown, Harold (2011). External Environmental Analysis of Starbucks and the Coffee Industry. Web.

Yuksel, I. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), 52.

Luedicke, M. K., Thompson, C. J., & Giesler, M. (2010). Consumer identity work as moral protagonism: How myth and ideology animate a brand-mediated moral conflict. Journal of Consumer Research, 36(6), 1016-1032.

Roll, M. (2017). The Secret to Starbucks’ Brand Success. Business and Brand Leadership.

Mohammed, S. (2018). How Did Starbucks Build Its Sustainable Competitive Advantage? -Business Strategy and the Key Success Factors.

Morais, U. P., Pena, J., Shacket, K., Sintilus, L., Ruiz, R., Rivera, Y., & Mujtaba, B. G. (2014). Managing diverse employees at Starbucks: Focusing on ethics and inclusion. International Journal of Learning and Development, 4(3), 35.

Thompson, A., Peteraf, M., Gamble, J., Strickland III, A. J., & Jain, A. K. (2013). Crafting & executing strategy 19/e: The quest for competitive advantage: Concepts and cases. McGraw-Hill Education.