Business Management: Analysis of Business Positioning Strategy of Starbucks

This article provides an in-depth analysis of the business positioning strategy of Starbucks, including its existing market segmentation, marketing and promotional strategy, sales techniques, and competitive advantage.

Running head: Business management
Business management
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Part – 1
Introduction
Operational concept of the business
Based in United States, Starbucks is one of the largest coffee house companies across the
globe. Founded in the year of 1971, the company opened its first outlet at Western Avenue of
Seattle and later shifted in Pike Place. The company started expanding its business outside of
North America in the year of 1996, in Tokyo, Philippines and Mexico respectively
(Starbucks.com, 2018). Beside of coffee, during late 1990s, the company also had started
experimenting with eateries and achieved success in conquering international markets. Presently
Starbucks is spread among 20891stores over 64 different countries across the world. Starbucks
holds the leading position among the coffee houses all over the world. The company has gained
reputation of the premium coffee house for its quality product delivery at a premium price range
since it founded.
Product/s and service/s offered to guests/customers
The Starbucks is mainly well known for serving coffee. However, the company offers
other hot and cold beverages, whole bean coffee, instant coffee which is well-known by
espresso, caffe latte, full and loose leaf teas, Teavana tea, Frappuccino beverages, Evolution
fresh juices and snacks. La boulange pastries are the most popular among snacks offered by
Starbucks. Apart from that, Starbucks also serves different types of crackers, chips, sandwiches,
ice-cream and so on (Starbucks.com, 2018).The most attractive part is that the coffee mug in
which the company serves coffee is incripted with the customer’s name.

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Geographical location/s of operation/s
The oldest and main retail outlet of Starbucks is in Seattle in the United States of
America. As of 2017, there are more than 13000 retail outlets of Starbucks in United States of
America, out of which 8222 stores are owned by the company and rest 5708 stores are company
franchise (Starbucks.com, 2018). Apart from that, Starbucks has stores in every metro city across
the world. The company designs its product range keeping geographical locations of the stores in
mind (Statista.com, 2018). For example, the company’s outlets in the Asian countries have
designed their menu keeping the taste of the Asian people in mind. However, some signature
dishes are same in each outlet.
Key market/s and segments
Type Criteria Segment
Geographic Region
Density
United States, Asia,
Middle East, Europe, L. America
and Asia Pacific.
Urban
Demographic Age
Gender
Occupation
18 – 60
Both male and female
Students and
professionals, mainly the target
customers are from the affluent
class.
Key markets US, China, Japan, Canada, United Kingdom, Thailand, South
Korea, Mexico, Philippines and Turkey.

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Source: (Created by author; Starbucks: international and U.S. stores, 2017 | Statistic,
2018)
Part - 2
Business positioning strategy
The study aims to give thorough analysis of the business positioning strategy of
Starbucks. Thus, in order to discuss that the paper sheds light on the existing market
segmentation of the company inclusive of market size, location, customer base and trends. The
study further elaborates on the marketing, promotional strategy and sales technique of the
company. The study also additionally highlights the existing capabilities of the company and
other aspects related to positioning strategy like leadership, competitive advantages, competition
and so on. Finally, the study concludes by summing up the whole discussion.
Existing markets and segment
Starbucks mainly targets the premium customers by offering quality products as well as
service. By discussing the segmentation and market in which the company operates in, it can be
understood that who are the target customers of the company and how the company positions its
products in the global market. The positioning strategy and target market of Starbucks is as
follows (Martinroll.com, 2018):
Demographic segmentation
Age
25-40 years – 49%

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18-24 years – 40%
13-17 years – 2%
As per the annual report of the company, the target audience rate increases by 3% every
year (Annual reports, 2018).
Gender
Both male and female customers are the target customers of company (Starbucks.com,
2018).
Occupation
The company targets the students as well as professionals and the white collars as it
offers products at a premium price. 12-ounce “tall” brewed coffee costs around
$1.75 and $2.15which are not affordable by the customers of lower middle class in a regular
manner (Starbucks.com, 2018). Thus the people of affluent class are the major customer of the
company out of which business professionals are the primary target customers of the company.
Geographic segmentation
Starbucks holds 33% market share from Unites States of America solely (Statista.com,
2018). However, more than 13000 coffee shops under the brand name are scattered in more than
30 countriesall over the world (Starbucks.com, 2018). Aiming to become one of the most
recognized coffee shop brands across the world, Starbucks uses effective positioning strategy
(Statista.com, 2018). The company presently relies on the expansion strategy in addition with the
strategy of innovation in terms of service and products in order to achieve further growth and

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success of the company (Forbes.com, 2018). Presently, the company is focusing on Asian
markets seeing the potential of the Asian market (Pinto, 2018).
However, in terms of positioning, there types of positioning are followed by the
company: mono segment positioning, adaptive positioning and standby positioning.
Mono segment positioning: The coffee house company exclusively targets the affluent
people so that they will be able afford to pay for their premium priced products in a regular
manner (Rothaermel, 2017).
Adaptive positioning:Since health trend is one of the major concerns for food and
beverage industry, Starbucks gives special attention to that. Thus, keeping in mind the health
trend in mind, the giant coffee chain company added less calorie products in its menu like Café
Misto does not contain more than 63 calories, Chai Tea Latte containing 103 calories and
Americano is the beverage that contained least amount of calorie (Rothaermel, 2017).
Standby positioning strategy: Starbucks considers the demand in market and then adds
new products to its menu. The demand of the customers or the product customers want the
company to introduce in market is researched before a product is launched by the company
(Rothaermel, 2017). For example, the product called Frappuchino had to wait for too long before
it was launched in the market. Even after it was launched it had been gone through many changes
and innovations to meet the demand of the market.
Marketing and promotion strategy i.e. marketing mix; promotional tools; distribution
channels; use of intermediaries

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In order to discuss the marketing and promotional strategy of Starbucks,the 4ps model
will be discussed which will include products, place, promotions and price.
Products - Possessing and strongest brand image as a premium coffee house chain in the
beverage industry, Starbucks’s marketing mix reveals effective marketing strategy which not
only supports brand development of the company but also helps the company to meet the
expectations of the customers. Starbucks gives special attention on the product innovation of the
company so that it can maintain its hold over the market (Gillespie & Riddle, 2014). The major
categories of products offered by the company are as follows: coffee, tea, pastry, Frappuccino,
smoothies and merchandises. This product mix of the company is constant over the years as of
now and over all the countries in which it operates in. For example, Frappuccino is one of the
signature beverage items of Starbucks and is available over all the retail outlets of company. It
also deserves mention that the signature beverage was added after the company obtained the
honor of Coffee Connection in the year of 1994 (Forbes.com, 2018). Apart from that, the
company undertakes an ongoing process of product innovation throughout the year depending on
the demographic variables of each country so that beside of holding the existing customer base,
the company can also create new customer base in the market.
Place - The above mentioned products are offered by the company throughout all the
cafes of the country. The retail outlets of the company are spread all over the United States like
the prime places which receive major footfall. There are three major places through which the
US customers can access the products of the company (Gillespie & Riddle, 2014). The places
are: retail cafes, online stores and mobile application. Mainly the most of the products are sold
over the retail cafes of Starbucks all over the country. However, in the era of modern technology
the company has made its products accessible over the online store and the mobile application of

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the company (Business Insider.com, 2018). The merchandises such as mugs are offered by the
company over all the three places. Thus, it reveals that how the company has been modifying
with the time and technology in order to attract the customers.
Promotion - In terms of promotion, the company follows multiple ways of promoting and
marketing products. This refers to the strategy as to how the company makes communications
with the customers in order to promote sales margin of the products. The promotional activities
of the company are done in the three ways: public relation, sales promotions and advertising
(Gillespie & Riddle, 2014).
Starbucks advertises its products through advertising where it features its products over
television, newspapers and over social networking sites (Pymnts.com, 2018). The public relation
is also followed by the company meanwhile (Gillespie & Riddle, 2014). For instance, the public
relation campaign of the company called Starbucks’ Race Together can be mentioned in this
regard even though the promotional campaign had been widely criticized and resulted in failure.
Apart from that, the sales promotion is followed strategically in order to attract the attention of
the customers (Forbes.com, 2018). For instances, Starbucks card is offered to the customers so
that they can avail special offers on the products served by the company (Investors.com, 2018).
In addition, different discounts and offers are given occasionally by the company in order to
increase sales margin and brand recognition in the industry.
Pricing strategy- Starbucks exclusively follows premium pricing strategy. The strategy
takes advantages of the general behavioral attributes of the customers in order to buy more high-
priced products based on the correlation among the high value and high price (RIS News.com,
2018). The beverages offered by Starbucks are generally expensive than that of the other rival

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brands. While Starbuck’s Caffe Latte of tall size costs $2.85, Mcdonald’s McCafe’s Latte costs
$2.39 in the regions of United States of America (Starbucks.com 2018). Through the pricing
strategy Starbucks maintains the image of a premium brand (Miller, 2018). This marketing
strategy is also connected with the company’s generic strategy.
Sales techniques e.g. retailing; merchandising
Starbucks follows unique techniques in terms of selling of the products such as
merchandising and relating (Rothaermel, 2017). As part of the merchandising, the company
offers customized drink ware for every type of beverages. For example, the drink wares are
different for cold beverages and hot beverages. Starbucks also offers reusable tumblers with the
technology of double wall along with commemorative mugs that have been specially designed to
use in any season (Starbucks.com, 2018).
The retailing strategy is nothing but the selling of products over the retail outlets of the
company. The ‘lean retailing’ is one of the noteworthy sales techniques of the company through
which the company maximizes the product sales while minimizing the time consumed by the
workers who produces the beverages in the retail outlets of the company (Forbes.com, 2018).
Existing capabilities i.e. resources and competences leading to unique selling points and
means by which value is generated; brand promises and standards
While other coffee brands claims to be offering great coffees to the customers, Starbucks
establishing its unique selling point by stating that they make customers’ visit to their retail
outlets an experience. The company presently has more than 13000 cafes offering different types
of beverages and snacks over more than 50 countries in all over the globe which generated
revenue of $2,238.7 crores USD in the year of 2017 (Annual reports, 2018).

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Competitive advantage
More than focusing on lowering the economic costs to the company following the cost
leadership strategy, the company emphasizes on the product differentiation in order to remain
ahead in the competition with rival brands. For example, a wide variety of coffee has been added
to the menu of the coffeehouse chain like holiday special beverage New Toasted White
Chocolate Mocha so that a large number of customers can be reached out(Forbes.com, 2018).
Existing competition i.e. strengths/weaknesses; opportunities/threats; current position;
The main competitor of Starbucks isMcdonald’s McCafe in US which is a popular coffee
brand and aims to be a global coffee brand with innovative product range (Business Insider,
2018). .
Strength
Starbucks offers more premium products
than Mcdonald’s McCafe.
Starbucks offers low calorie products
which Mcdonald’s McCafe does not.
Weakness
The price range of Starbucks is higher than
Mcdonald’s McCafe.
The product range of both the companies is
similar to a quite extent.
Opportunities
Starbucks can introduce more products
other than coffee and tea in order to hold its
position in the US café industry.
Threats
A wide range Mcdonald’s McCafe’s coffee
products with snacks draw customer attention
giving a competition to Starbucks.
Source: (Created by author; Forbes.com, 2018)
Methodology

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Below the research result has been given which shows McCafe is preferred by most of
the participants who has taken part in the survey and the major reason of their choice is the low
price and more option in product range. As per the survey result, 53.33% of the sample size
prefers McCafe while only 33.33% of respondents prefer Starbucks. The survey was conducted
over 15 people belonging to different age groups. 6 out of 5 people were from the age group of
18 to 23 years while 5 people were from the age group of 28-35 years old age. Out of 4 people
belong above the age of 41 years old (Refer to the appendix section).
4ps of McCafe
Products
McCafe offers a wide range of coffee products including cappuccino, latte, fruit
smoothies, hot chocolate and premium teas. Chocolate Raspberry Rumble, Chocolate Carmel
Peanut Pie, muffins, scones and so onand other beverages like lemonade are also offered
(McDonald's Corporation, 2018).
Price
In order to reach out to maximum customers McCafe has set a reasonable price range
keeping the purchase capacity of teenagers and customers of middle income group. For instance,
while Starbuck’s Caffe Latte of tall size costs $2.85, Mcdonald’s McCafe’s Latte costs
$2.39(McDonald's Corporation, 2018).
Place
Mcdonalds make the products available over the retail stores as well as mcdelivery, the
online delivery option. The flagship store in Chicago attracts major customer visit while the

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online store make available the coffee products to the customers anywhere anytime
(Mcdonalds.com, 2018).
Promotion
In order to promote its products and brands, McCafe prefers advertisements over
television or print media (Mcdonalds.com, 2018). Digital marketing and public events are also
held by the company to promote its branding.
Hence, it is seen that McCafe is considered as the main competitor of Starbucks since it
offers products in lower price range and the coffee products are accompanied by bestselling
snacks of Mcdonalds which are offered at reasonable rate.
Part - 3
Existing and future development strategy
This section intends to give a description of the existing and future strategy of the
company in terms of development. While discussing, the paper sheds light on the existing growth
strategy of star bucks covering the aspects like market penetration, market development, product
development or diversification. In addition, existing operating model of the company will also be
highlighted in the course of the discussion and finally this part of the discussion concludes by
some possible suggestive measures regarding future development of Starbucks.
Existing growth strategy i.e. market penetration, market development, product
development or diversification

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The giant beverage chain Starbucks follows intensive growth strategy which includes
three major areas such as market penetration, market development and product development.
Market penetration – The main part of the intensive growth strategy of the company is
the market penetration. By following market penetration,Starbucks further intensifies the growth
of the firm while maximizing the revenue from the existing markets (Forbes.com, 2018). The
company already operates in over 50 countries across the world. However, in order to maximize
the revenue assuring further growth of the company in these countries, it develops more retail
outlets by intensifying the market penetration strategy (Martinroll.com, 2018). Apart from that, it
increases the number of franchises in these markets so that product sales can be maximized. Such
a country where the company increases its franchises is Dominion Republic (Annual reports,
2018).
Market development – The secondary part of Starbucks’s growth strategy is the market
development. Market development strategy refers to the growth of the company by generating
revenue in the markets other than the existing markets. For instance, the company presently
focuses on opening stores in the Asian countries, mainly in countries like India (Pinto, 2018). In
addition, the company also tries to expand its business in the countries of Middle East and Africa
(Forbes.com, 2018).
Product development – Starbucks also gives special attention on the product
development strategy in order to accelerate the growth rate of the company in a more integrated
manner. In order to obtain more revenues the company focuses on developing more products
(Forbes.com, 2018). Thus, the Research and Development department of the company focuses
on the market trends and the product range of other companies and develops, bring changes or

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modifies the product range of Starbucks. The continuous innovation in the product mix of the
company thus deserves mention. For instance, after acquiring the Coffee Connection, the
company introduced Frappuccino in order to meet the market requirement. In the year of 2014,
sodas have been included in the offered items of the company (Forbes.com, 2018). Hence, it is
seen that through the intensive strategy of product development the company assures further
growth of the company.
Existing operating model
The company mainly follows the single ownership in terms of operating the business in
not only the home country but also in the international countries. However, in the meantime the
company also gives franchises in mainly the developing countries so that more revenue can be
generated (Forbes.com, 2018).
Recommendations regarding future development directions
From the above business analysis, it can be seen that the strategy taken by Starbucks
helps the company to sustain the competitive advantage as compared with the other rival
companies in the industry. However some positive measures can still be recommended in order
to further improvement keeping the growth in consideration.
In order to accelerate the growth of the company in a more integrated manner, Starbucks
can make alliance with other snacks brands so that beside of beverages customers will be able to
relish the most desirable fast food items while increasing the product sales of the company. For
instance, over the online stores and mobile application, a combo offer comprising of
MacDonald’s mcburger and Starbucks’s coffee can be given on offer which will further increase

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the sales of the company. Similarly bakeries can also be partnered with for the purpose of
accelerating the sales growth.
Meanwhile, the company needs to give attention on the product diversification strategy.
Apart from coffees, more beverages on tea can be included so that a wide range of customers can
be targeted. On the other hand, the company can include more baked snacks items in its menu in
order to assure further growth.
The expansion strategy needs to be accelerated in the developed countries in order to
assure that the company develops stronger business network across the every corner of the
world.

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Appendix

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