Critical Analysis Of The Strategic Issues Faced Starbucks Marketing Essay

Critical Analysis Of The Strategic Issues Faced Starbucks Marketing EssayThe bring forth of this project hatch is to critic every last(predicate)y analyse the strategic issues being set ab forbidden by an organization. The organization chosen for this task is the comp some(prenominal) Starbucks, which give be analysed using relevant concepts reviewed in the module using appropriate theory and models.The digest will imply assessment of the external and internal factors and also the competitive forces influencing the company Starbucks. This will be accomplished by the application of PESTEL analysis and the ostiary 5 FORCES model. A combined analysis would be carried out by undertaking a SWOT analysis for the organization. The project history would also include analysis of the Starbucks Corp using the ANSOFF Matrix and the BCG Matrix to suggest the strategic choices the company needs to make to counter the strategic issues outlined by this report.The report structure would start with a brief introduction to the company Starbucks followed by the strategic issues faced by the firm. The issues are outlined before in the report based on the analysis which has been carried out using the above models. After discussing the trustworthy and recent issues facing Starbucks the company analysis would follow which would be back up with relevant theory and application of suitable models. After completing the manufacture analysis conclusion and recommendations would be provided for Starbucks to counter the strategic problems.STARBUCKS AN INTRODUCTIONThe Starbucks Company was pieceed in Seattle in 1971 by Jerry Baldwin, Gordon Bowker and Zev Seigel with a vision to educate Ameri suffer consumers about the fine chocolate drinking experience. In 1987 Howard Schultz took over the Starbucks Group, he wanted to compose the Italian espresso bar experience in America by creating a personal relationship between the customers and their c moroseee.Just within a couple of lon g time they grew from a small coffee occupancy house to a multi-million dollar player in the industry by buying only the best coffee available and providing the people with an unmatched store experience. As standing, Starbucks is number one in the peculiar(a)ity coffee industry, with more(prenominal) than 12,000 shops in more than 35 countries.The Starbucks foreign mission statement is To inspire and nurture the human spirit one person, one cup and one neighbourhood at a time. Freshly brewed coffee is the main(prenominal) harvest-feast offered by Starbucks along with separate drinks which include cold and hot teas, cakes and pastries. The Starbucks coffee comes in a many varieties each possessing a different taste, tone and flavour.In addition to its extensive product offerings, Starbucks has many brands including Starbucks Hear Music, Tazo Tea, Starbucks Entertainment, , Ethos Water, Torrefazione Italia coffee and Seattles Best Coffee. The successful management of all of these brands pulled together constitutes the Starbucks portfolio.Starbucks is also one of the roughly globally conscious corporations in the arena.In 2006 Starbucks donated $36.1 million in cash and products, volunteered 383,000 hours in local communities, required growers to use strict environmental guidelines, used 20% renewable energy in stores, and actively recycled in almost 80% of stores in US and Canada. Starbucks has established itself as the coffee leader in the humanity and has done so on a socially and environmentally conscious platform.STRATEGIC ISSUES FACING STARBUCKSThe major challenge that Starbucks is dealing with is the current financial crisis in the world economy forcing them to call closures of many stores around the world.A nonher challenge that Starbucks is dealing with is competitors. There are numerous coffee shops all over the world and being able to stand out to generate customers is important. Their main competitors are Dunkin Donuts, McDonalds, and Nes tle in the US and brands desire Costa Coffee and Caff Nero in the UK, the dickens major markets for Starbucks. It is important that for Starbucks to k instanter their competitors and what they are currently doing.Also Starbuck coffees are priced higher than other market competitors because of Starbucks only purchasing the highest quality coffee beans for their product, olibanum increasing the price of the drink giving the competitors a cost advantage over Starbucks.Also Starbucks inadequate marketing strategy on advertising is a hindrance in the business growth opportunities. They prefer to build the brand by promoting the drinks cup-by-cup with customers. The advertisement ends until they drink the coffee, reducing the chances to attract valuable customers.Starbucks also does non emphasize on distributing their products to supermarket because of being concerned with the quality of the coffee if the coffees were packaged into plastic bags.Also the rigorous expanding upon strate gy followed by Starbucks dismiss amaze a toll on the firms brand image. As corporations grow there can be a tendency to focus too heavily on increasing output and locations, and less focus on quality and brand image. Starbucks needs to stay with its values and ideals that thrust made it successful.Also Starbucks policy of not franchising can be a cause of concern for the firm. Franchising would allow the company to open many new stores with less risk, and make considerable profits in doing so. Because of this the firms research and development cost would fall reservation use of the franchisee knowledge of the local market in terms of geographic, , psychographics, demographics, and the local country regulations.STARBUCKS ANALYSISThis donation of the report would analyse the working of the business by application of PESTEL analysis, Porter 5 forces, the BCG Matrix, SWOT analysis and the Ansoff Matrix.PESTEL ANALYSISPOLITICALTaxation policy highschool taxes levied on farmers in th e bean producing countries, would consequently step-up the rate at which Starbuck would buy the coffee beans and any such fluctuations in the taxation policy would sure as shooting be passed on to the consumer, who now would have to purchase the end item at a higher price.International trade regulations and tariffsTrade issues would affect Starbucks at present when exporting and importing replete(p)s. When the disposal of the trading country imposes a tariff it would not only resulting in an efficiency loss for Starbucks but such fully grown income transfers can also become inconsistent with equity. This extra charge would have to be borne by the consumers.Government stabilityA change in government policies has a direct impact on the taxation and legislation framework. Also the countries in political turmoil or civil war should be considered with salient caution when considering probable market ventures.Employment lawReduction in the licensing and permit costs in coffee bean producing countries would consequently lower action costs for the farmers and any such saving would subsequently pass on to Starbucks when purchasing the raw materials and finally to the customers.ECONOMICInterest ratesHigh saki rates would mean putting off the investment and expansion plans of Starbucks, which would result in fewer earnings for the firm. Low interest rates should have the face-to-face effect.Economic GrowthIn periods of negative growth, the consumer incomes would fall leaving less disposable income thereof impacting sales for Starbucks.Inflation ratesBusiness costs will rise in times of inflation which would ultimately have to be borne by the consumer.Competitors pricingCompetitive pricing from competitors would impact Starbucks pricing that would drive put down the profit margin as they try to maintain their market share.Exchange ratesIf the currency value falls in a bean preparation country, Starbucks would get more for the same price, when importing the goo ds. This saving would be passed to the end consumer.SOCIALPopulation demographicsIdentification of the target population at which Starbuck needs to aim their products is a significant factor in the business operations. The marketing campaign undertaken would focus accordingly.Coffee is a luxury product in some ways, so the people with the most amount of disposable income should be targeted.Working PopulationA large number of workers in big cities now go out for lunch and meals. Starbucks can cash this to their advantage and promote the shop as a place where people can meet and eat, boosting the sales.LocationA good location which is easily accessible is vital to ensure that the customers visit the shop.TECHNOLOGICALIT developmentStarbucks launched its first-year-generation e-commerce website in 1998. As a result, scalability and performance have improved, and the company now has the tools it needs to profile and target customers, analyse site data, and deliver new features to the m arket in the shortest time possible.New materials and processesTechnology developments in coffee qualification machines and the computer systems that Starbucks use to operate their cash registers would change the staff to work livelyly and efficiently. This results in customers being served quickly thus creating potential for serving more people in the day.Rate of technological changeTechnology is advancing at an astounding rate. Starbucks will need to invest majorly just to stand their grime in the always expanding and developing market, and also to try to stay ahead of competitors.ENVIRONMENTALPollution problemsStarbucks customers create a lot of groundless by disposing off the cup and the contents incorrectly. The material for the cup should be carefully selected to make it as biologically degradable as possible.Planning permissionsPlanning permission may not be granted to Starbucks if the construction would harm the environment. The land may be protected.Work disposalThere are strict laws in most countries pertaining to waste disposal and non-adherence to these could lead to Starbucks being sanctioned, which would affects them financially and also tarnish the reputation of the brand name.Environmental pressure groupsStarbucks should be aware of the influential and physical advocate of groups such as Friends of the Earth and Greenpeace. Any violation of animal or environmental rights by a company is usually followed by a swift and attention-drawing protest from one of the groups. Brand image and customer bases are often irreconcilably tarnished due to the actions of these groups.LEGALTrade and product restrictionsStarbucks need to follow the trade laws of the countries where they have established businesses. They must ensure that they are not in violation of any local laws. Certain countries impose a tariff that has to be paying(a) accordingly when importing or exporting goods and this must be taken into account as well.Employment lawsEach country ha s different employment laws, like limiting the number of hours a person can work per week, varying levels of minimum wage etc. Starbucks should be aware of such factors when considering business expansion. health and Safety regulationsBy not maintaining high standards they would be liable for damages if found in violation as it is a legal requirement for them to enable that their staff and customers are safe when they are in their stores.Land useStarbucks have to abide by the laws of the twist authorities when constructing shops or altering purchased sites and if found in violation of land rules, it can be panalised by the local authorities.PORTER 5 FORCES ANALYSIS1. COMPETITIVE RIVALRYStarbucks is the leader in retail and roasting of specialty coffee in the world. Major competitors include Costa coffee, Caff Nero, Seattles Best Coffee and secondary coffee providers such as McDonalds, Burger King and Dunkin Donuts. The contender is nowhere approximative to Starbucks volume of ope rations and sales.Consumption of coffee is not dependent on the price of the product but also on the specialization between each product and several value adding variables such as the quality of customer service, brand, brand recognition and image of the company. Hence, Starbucks is not majorly sensitive to movements of other firms in this segment.2. THREAT OF NEW ENTRANTSStarbuck is the world leader in its industry and has controlled access to statistical distribution channels. Starbucks have extreme control over such distribution channels because of setting strict guidelines for the suppliers to follow. Starbucks is also constantly innovating and showing strong product differentiation to hamper the possibility of new entrants.However, the entry barrier for the industry is relatively low and any big firm where capital is not a problem could be a potential entrant. Some of the more current and on-going brats of new entrants include fast food chains such as McDonalds, Burger King an d Dunkin Donuts which can become a major problem in the near future.3. BARGAINING POWER OF BUYERSA big threat to Starbucks is the absence of switching costs in the speciality coffee industry, customers face no switching costs in switching from Starbucks to Costa Coffee or Caff Nero for a cup of coffee. Also a threat to Starbucks is the ability of customers to brew their own coffee. Starbucks tries to counter this threat by offering the Preferred Office Coffee Providers and also provides directions for making the perfect cup of Starbucks coffee at home, the perfect cup of course includes all ingredients which have to be purchased from Starbucks.Also with new entrants and competitors such as McDonalds who claim to offer premium roast coffee of reasonable quality for lower price, thus giving the customers some baradd-oning power.4. BARGAINING POWER OF SUPPLIERSCoffee is the second largest traded commodity in the world. Central and South America produce majority of coffee traded. Starbu cks depends upon both outside brokers and a mutually direct contact with exporters for supply of premium coffee beans.The quality of coffee beans sought by Starbucks is very high, proving to be a potential threat to the company. Only suppliers which meet Starbucks coffee standards are able to supply to the giant company. The supplying industry only has few firms which can deliver the quality giving them considerable bargaining powers.However, Starbucks counters this due to its massive size and being the primary buyer and also because of the importance of Starbucks business to any individual supplier as it would account for a large percentage of the total suppliers sales, thus reducing the bargaining power of suppliers.THE THREAT OF SUBSTITUTION metamorphose products are the products that can pose as a trade-off for the product being offered by a company. In the specialty coffee industry, substitute products can be soft drinks, tea, energy drinks, fruit juices and other caffeinated d rinks.Here innovation would play a huge role. To counter this Starbucks have given their menus a perpetrate revamp and have differentiated so many of their products which are now part of the main product line. The menu includes various teas, hot and cold coffee, scorched goods and various confectionary items.The only true direct substitute for specialty coffee would be the basic coffee, which is of lower quality than specialty and as such does not present any threat.BCG MATRIXRELATIVE MARKET SHAREHIGHINDUSTRYSALESGROWTHRATEHIGHSTARS ( Growth scheme ) international storesMarket Penetration and DevelopmentBackward, Forward or Horizontal IntegrationLOWCASH COWS ( Stability Strategy )Product Development and distinctionDiversificationU.S StoresANSOFF MATRIXPresent ProductNew ProductPresent MarketMarket PenetrationHotels, Grocery Stores, Businesses, Schools, Airlines and Industries CafeteriaProduct DevelopmentNew rash Fresh Lunch Programmes and Salads e.g. fiesta chicken salad, fruit and cheese platterNew MarketMarket DevelopmentOpening of stores all over the world. expansion strategies into Brazil, Russia, Romania and India.DiversificationMusic CDs, Clothing, Coffee Mugs and other accessories.SWOT ANALYSISSTRENGHTSStrong brand nameLarge retail distribution systemQuality productExtensive product listGood supplier relationshipsMassive capital fundingValued and motivated employeesWEAKNESSESDependence on single source of business/incomePrices relatively higher than competitorsStrong dependence on suppliersMerchandise sales in storesOver reliance on home marketAggressive expansion leading to failureOPPORTUNITIESOverseas business expansionBusiness expansion into untapped U.S. marketsExtension of brand name to new products and business linesProduct spue diversification to more food itemsTHREATSStrong competitors with massive capital funding capabilities like McDonalds and Dunkin DonutsEconomic conditions may make consumers unwilling to pay higher prices governmenta l conditions overseas may limit business expansionU.S. speciality coffee industry approaching saturationRECCOMENDATIONS AND CONCLUSIONStarbucks has to effectively pursue a Focus-Based Strategy in conjunction with differentiation and a cost leadership based strategy. Being a lower cost store will increase the dissimilarity between Starbucks and provide it with a competitive edge. At present, Starbucks competitors are attempting to specialize in the coffee business, therefore Starbucks must pursue focus strategy to increase its strength.Starbucks must reduce their product price by producing a new product of coffee using cheaper beans or can come out with special discounts and promotions to reduce cost, thus increasing sales enabling Starbucks to enter new low cost markets and increase profitability. Also needs to focus on building alliances in new markets/countries to reduce management focus and benefit from the local and experience curves.Should focus on advertising the brand throug h internet services for users to access, do road shows, hand out brochures etc. so that consumers become more aware of the brands strong international presence and brand name. Market brainstorm and market development will help increase the sales. Access unexplored distribution channels like making available packaged Starbucks coffee for consumers by displaying it nationwide in various convenience and shopping stores and not only Starbucks stores.Starbucks must adopt twin policies of Product Development and Product-Market Diversification to counter the smashed competition in international markets. It is important to understand this in the product development phase as they would need to focus solely on making their existing products better. The company can demonstrate product and market diversification through research and development coupled with creativity and innovation. Product differentiation has proven an excellent defence against threats such as bargaining power of buyers. De veloping new products will offset such potential risks.A strategy should be formulated to tackle the competition by entering into agreements, long-term contracts, with the food service companies that they are competing against. This way their coffee would be sold at these outlets and they would gain access to new markets and increase sales while decreasing competition.Starbucks should continue to be a first mover into markets with new products and ideas. Being a first mover of new products into new international markets will be an excellent way for Starbucks to build customer loyalty and uphold its image as an in advance(p) company.Starbucks should continue to locate their operations in high traffic areas, high visibility areas. The company should continue to take excellent care in pickax locations. It is extremely important that Starbucks international stores reflect uniqueness in their location and layout. Having locations in a variety of locations will ensure large market expos ure.