(PDF) Case study: Starbucks
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Added on 2021-06-08
(PDF) Case study: Starbucks
Added on 2021-06-08
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IntroductionStarbucks CoffeeStarbucks is an American Corporation founded in the year 1971 in western coast city ofSeattle. Washington state with a mission statement of “To inspire and nurture the humanspirit – one person, one cup and one neighbourhood at a time.” (Starbucks UK, 2020)Primarily the product line-up includes handmade roasted premium coffee, tea, an assortmentof fresh foods and other beverages. The company sells its products through a variety ofchannels like Licences trademark stores, grocery chains and self-service vending machines.As of September 2020, the Starbucks band has about 349,000employees across 31,256company operated & licensed stores in over 75 countries. (Macrotrends, 2020)The Starbucks Value PropositionStarbucks brand strategy can be decoded by the mantra, “live coffee” which gave themeaning to the company’s efforts to keep the coffee culture alive. (Starbucks CoffeeCompany, 2016) As a coffee retailer, this meant Starbucks was creating an experiencearound its core product offering which is serving coffee. The said experience was so subtleand would weave into the fabric of the consumer’s daily lifestyle. (Wirtz and Lovelock, 2018)Starbucks has truly positioned its to be acting as the “third place” away from home and work,where customer can enjoy a peace and relaxing ambiance to get work done with colleaguesor just unwind with friends and family. (Mourdoukoutas, 2019) It is well known todemographic customer segments, that almost all Starbucks stores offer fast and free Wi-Fiand ergonomically designed and planned seating which are comfortable. All this would factorin while making the customer to feel that they should extend their current stay or return foranother store visit. It is key to note that either ways, the customer will be making morepurchases with the brand. (Peterson, 2015)1
Environmental analysisPESTLE AnalysisAs discussed by Turner, PESTLE framework stands for the analysis of Political, Economic,Social, and Technological, Legal and Environmental factors which would help us understandthe market environment in which a company operates. (Turner, 2011) In this study, theprimary competitors are Costa Coffee, Pret a Manger, and Caffe Nero. Additionally,Starbucks faces competition from McDonald’s McCafé. (Taylor, 2018)Political Factors:Starbucks has faced a few political issues as the coffee beans are grown in developing andemerging nations from the around the world. The performance of Starbucks brand is heavilyaffected based on the relationship between those countries and the United States ofAmerica, as after all, Starbucks is an American Companies in the eyes of the globalaudience. (Dudovskiy, 2017)Economic factors The financial performance of the Starbucks is closely related to the economic factors, suchas taxations, tariffs and duties. These could have a big influence on the pricing strategy ofStarbucks and affects the profitability largely. The local market also dictates the pricingstrategies, for example, the Indian market is known to be price sensitive and a premiumpricing would be a demoting factor for potential Starbucks customers in India. (Mahobia andJain, 2015)Social FactorsVarious Social factors determine the success and failure of the Starbucks brand. Forexample, the United Kingdom, a primarily tea drinking region where in Great Britain aloneaccounts for 100 million cups of tea consumption daily compared to the 70 million cups ofcoffee. (UK Tea & Infusions Association, 2018). As the younger generation prefer coffee,tracking closely with American trends in the coffee at any time of the day culture, butStarbucks would need to rethink their portfolio and include more tea options. 2
Technological Factors The current generation is hooked on to the social media and Starbucks has already madesignificant strides to improve their presence on various platforms, for example, there was acampaign in 2001, where customer can purchase gift cards and share it with friends andfamily. Legal FactorsThe Legal factors have a direct impact on Starbucks operations as deals with the traderegulatory guidelines on anti-trust and European Union’s Data Protection Act. Apart fromthese, there are a ton of rules and regulations which need to be followed in terms of heathsafety rules, consumer rights, employee rights, and competition rules. Environmental FactorsClimate change has put coffee suppliers at risk affecting yields and quality of the produce.Starbucks manages to mitigate different issues based on environmental factors byimplementing Corporate Social Responsibility (CSR) initiatives. These are welcome andappreciated by customers for doing the right thing. SWOT Analysis of Starbucks All companies in the coffee chain industry are faced with same set of challenges likecompetition, imitation of products and trend of opposing international corporationsoperating in local markets. A SWOT analysis of Starbucks would help in identifyingthe inventive strategies that could be implemented by using the brand’s strengths tonegate the effect of the weaknesses and to cash in on the opportunities along withmitigating the threats that exist in the coffee segment. StrengthsStrong Brand Image and FinancialsRapid GrowthExtensive Global Supply ChainWeaknessHigh Priced ProductsImitability of Products:Non-alignment of products3
Strong Loyalty Program Products RecallOpportunitiesExpansion in Emerging marketsProduct DevelopmentPrice Differentiation Online ordering and Delivery Coffee Subscription ModelThreatsCompetition with low-cost cafésCompetition with big brandsCOVID-19 and RecessionCoffee beans becomes costlierTable 1: SWOT Analysis of StarbucksRefer Appendix A for full detailed SWOT analysis of Starbucks.Porter’s Five Forces analysis of Starbucks:The intense competition which is present in the coffee industry can attributed to variousexternal factors and can be analysis using the Porter’s Five Forces analysis. The strongforces are clearly Industrial competition and threat of substitutes, whereas other forces afterthe business every so slightly or moderately. Refer Appendix B for the detailed analysis onPorter’s Five Forces framework.4
Porter’s Value Chain AnalysisThe Porter’s value chain framework is used to analyse the business operations of Starbucks.It can be helpful in identifying the various activities that bring value to the table along withsignificant competitive advantage to the company. The above figure highlights the differentcomponents of the framework. (Mindtools, 2017) It comprises of two main groups ofactivities, Primary Activities and Support Activities. Starbucks Current marketing strategyIn a bid to be widely identified by the customers and to build a unique identity for the brandidentity, it is very important for companies to execute an effective marketing strategy. In thissection, the current marketing strategy will be discussed based on the segmentation,targeting, positioning, and differentiation followed by the marketing mix of Starbucks. Theanalysis would allow the company, Starbucks Corporation to understand more about theirservice they intend to deliver, the type of product they are marketing and to which targetcustomer base. Starbucks Core Marketing StrategySegmentationFor Starbucks, the main target group is the customers aged between 25 and 40 years withhigh paying jobs and more disposal incomes. The secondary target group is the customers5Figure 1: Porter’s Value chain (Mindtools, 2017)
are aged between 18 and 24 and belong to upper middle class or the richer income families,who could afford such premium lifestyle. As asserted by Fromm (2014), the Generation Ycustomers who are aged between the above mentioned are the one who is bringing in themost profit for the company. As discussed by Rafii (2014), based on the qualitative study oncustomer’s psychological characteristics such as lifestyle choices, personals interests, goalsand desires, a vast majority of the customers are from the upper middle class and do have acollege degree. TargetingAs far as targeting is concerned, the Starbucks brand is positioned between mass marketingand segment marketing, where some default criteria are being applied like the customerhaving higher incomes, lower age. These criteria are used to target Starbucks productswhich closely match the lifestyle of those who meet it. PositioningFrom the above map, the positioning of Starbucks compared to its competitors, based on thecustomers’ perception on the product. While buying at Starbucks, Customers are making apurchase decision for a tangible product which is of high quality. On the other hand, thereare other intangible products such as the store experience, warm hospitality by well trained6Figure 2: Positioning Map of Starbucks
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