Marketing Strategy

10 October 2016

Starbucks, a leading specialty coffee retailer in the world has been selected because of its strategic approach in responding to external pressures as well as their strong capabilities in sustaining themselves in a highly competitive environment. Their approach to product development, technological advancement and in providing a unique experience would lend to them establishing themselves in Trinidad and Tobago. As the foundation for investigation, analysis, Porter’s 5-forces Model and Value Chain have been applied.

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They were used to analyze the macro, micro and internal factors with the given limitations for each odel. The report found that the major areas of threats are dependency on suppliers, price sensitivity that is affected by the global economic recession and competition. Despite the threats, the report focuses on Starbucks competencies in product innovation, set distribution channels, providing quality service and experience and technological advancements to enter into Trinidad and Tobago’s market through Market Development Strategy (Ansoff 1968). This will allow for Starbucks to expand and build its brand while increasing its position. Background

Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world operating in the specialty eatery industry. It was founded in Seattle, Washington in 1971. Starbucks has 18,066 stores in 60 countries around the world and has 160,000 employees. (www. nasdaq. com). They sell freshly brewed coffee (over 60 blends), a selection of premium teas (over 20 blends), Italian styled espresso beverages (over 30 blends), Frappuccino blended beverages (over 30 blends) inclusive of both hot and cold blended beverages and a variety of complementary food items.

They have also diversified into the bottled water industry and the music retailing industry (www. starbucks. com). Introduction The purpose of this report is to evaluate and analyse the marketing strategy of Starbucks and the internal and external factors that influence it. The SWOT framework would be utilised to summarise these factors to identify ascending and inner environments respectfully. (Part 1) The second part of the report analyses Starbucks’ objectives, marketing mix, STP and recommendations based on these fundamental results have been proposed to improve performance. Part 2) Part 1:Current Situational Analysis This section is devoted to analyse Starbucks position as it seeks to enter the Trinidad and Tobago market from the evaluation of macro, micro and internal factors that would influence its performance. 1. 1 Macro Environmental Analysis The PESTLE will be used to analyse the macro environment of Starbucks as it looks at the potential impact on which it would operate and to build on the vision for the future. It allows for the identifying of opportunities and threats that lie within.

Thereby, taking advantage of said opportunities and minimising threats. (Hamilton 2009). However, the weakness of this method identifies actuality at a particular instant without providing additional inferences. Political * Government Stability: Trinidad and Tobago has a stable government with elections being held every five years. This stability auger well for Starbucks who operates in 60 countries and is important for performance.

Limited producers/suppliers of high grade coffee which influences price. Coffee supply is also affected by environmental conditions that affect their yield which can increase its cost. Therefore, the BPOS is high. The suppliers of technological products such as automated coffee, latte and espresso machines have moderate power because not too many suppliers exist and can provide this equipment. Bargaining Power of Customers This is low because customers possess minimal or no switching costs because they have no influence on the price or products.

There are also other alternatives available for them such as Nescafe instant coffee, vending machines and breakfast shops that offer coffee. Also, the downturn in economy has affected customers’ spending patterns. Threats of Substitute Products As Porter says, “A substitute performs the same or a similar function as an industry’s product by a different means”. These can be divided into direct or indirect. Direct substitutes would be traditional coffee houses (Rituals, McCafe) and indirect substitutes are those products that provide the same need such as instant coffee, vending machines etc.

Substitute products can be tea, juices, water. Substitute places can be bars, restaurants, cafes etc. This threat is therefore high. Competitive Rivalry within an Industry This is high because Rituals has established itself as the market leader with over 41 stores operating in Trinidad and Tobago (www. ritualscoffeehouse. com). The major threat to Starbucks is supplier power and competitive rivalry. It does not have a production warehouse in Trinidad and Tobago and has to import its coffee and other ingredients.

However, this can be dealt with by forming strategic alliances with suppliers inclusive of local producers to manage the fluctuating prices of coffee beans. Starbucks will be able to compete with their competitors and any new competitor that may enter the local market because of their financial capabilities and their market leader position in the global market. 1. 3 Internal Analysis Porter’s (1985) value chain (Figure 2) will be used to analyse the internal factors that influence Starbucks. It analyses activities through which a firm can create competitive advantage.

There are primary activities which deal directly with the creation of products and services and support activities which can be used to obtain or increase competitive edge in the market (Hollensen, 2010). These activities are coordinated to create value for its product that exceeds the cost of value activities. Figure 2 Primary Activities Inbound Logistics: This involves agents choosing coffee producers from mainly Africa, Latin America ensuring that it meets the required standards, establishing relationships with suppliers and organisation of supply chain management system.

Operations: Starbucks operations are conducted in over 60 countries under direct operation by company and franchising (www. starbucks. com). Beans are roasted and stored in regional distribution centres in the US, Europe and Asia while maintaining its freshness and quality. Outbound Logistics: Starbucks normally sells its products through its coffeehouses but has since started selling its products through leading supermarkets. Products are shipped through central distribution centres to the various coffeehouses maintaining quality and freshness.

Marketing and Sales: Starbucks does not invest heavily in marketing but relies on word of mouth which is achieved through its high grade products and level of customer services. There are other marketing activities which involve sampling of new products within the stores. Direct selling via retail stores/groceries, e-commerce also advertising via billboards, internet, television and radio as well as other sales promotions to promote their products.

Service: Starbucks provides superior customer services by ensuring that employees are trained extensively in providing the highest quality products while ensuring high customer satisfaction. Support Activities Infrastructure: Starbucks possesses a divisional organisational structure that includes general activities such as accounting, finance, etc. that support the work of the entire value chain (Hitt et al 2009). Human Resource Management: Starbucks workforce is seen as its most valuable asset. As such, there is a wide array of training and development programs available to employees.

They are also motivated by incentives- tangible and intangible. In the UK, employees are entitled to free drinks during their shift. Technology: Starbucks depends on technology for ensuring the consistency of premium products, a high level of customer experience as well as cost saving drives. The use of computerised roasters has ensured that taste has been consistent which has contributed to the levels of customer retention of Starbucks. Procurement: This process involves purchasing items needed for the production of final products or offering of services.

This would entail coffee beans and other food items, as well as equipment and buildings etc. 1. 4 S. W. O. T Analysis The table shows the results of the internal and external environments of Starbucks. Strengths| Weaknesses| * Global brand recognition * Unique and established experience * Wide product range * Highly trained staff * Use of high quality raw materials * Large financial resources| * High prices * No or low switching costs for customers * Negative corporate image (www. marketingweek. om) * Unhealthy products| Opportunities| Threats| * Adapt products that are healthier to local markets * Focus on growing local economy * Incentives for new businesses * Technological advancements * Increase licensing relationships to further brand strength * Purchase from local suppliers| * Increased coffee prices * Global Recession * Increase in number of substitute products * Climate/environmental changes where coffee is grown| The possibility that the main threats Starbucks is facing are economic factors.

This negative impact increases because of the high dependency on suppliers, the climate change that affects coffee production and price sensitivity of consumers. Despite this, Starbucks is able to benefit from strategic alliances with local suppliers, technological advancements, product adaptation, global brand recognition and experience to develop its market share. Starbucks weaknesses is its premium prices for its products, low switching costs for customers and perceived unhealthy products which may have negative consequences.

However, Starbucks is entering a new and emerging market which would only serve to enhance its global brand which may bring positive growth for the company. Conclusion Starbucks global brand is the result of their investigative approach in entering new markets and finding solutions to satisfy their customers, some of which have been identified in this report. Starbucks attempts to respond to changes in the business environment by observing the internal and external environments. In considering the threats and weaknesses identified above in the SWOT analysis, areas for improvements have been identified to hich recommendations will be made accordingly. Part 2: Recommendations Starbucks seeks to continue to provide quality coffee and value and further improve on its profitability and performance.

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