Starbucks: In-depth Analysis of Marketing Strategies, PESTLE, and SWOT

This report provides a comprehensive analysis of Starbucks' marketing strategies, encompassing its mission, value proposition, and environmental factors. A PESTLE analysis examines political, economic, social, technological, legal, and environmental influences, while a SWOT analysis identifies strengths, weaknesses, opportunities, and threats. Porter's Five Forces and Value Chain analyses assess competitive forces and operational activities. The report further delves into Starbucks' current marketing strategy, including segmentation, targeting, positioning, and differentiation, alongside an examination of the 7Ps marketing mix. This detailed overview provides insights into Starbucks' market position and strategic approaches.

Introduction
Starbucks Coffee
Starbucks is an American Corporation founded in the year 1971 in western coast city of
Seattle. Washington state with a mission statement of “To inspire and nurture the human
spirit – 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 assortment
of fresh foods and other beverages. The company sells its products through a variety of
channels like Licences trademark stores, grocery chains and self-service vending machines.
As of September 2020, the Starbucks band has about 349,000 employees across 31,256
company operated & licensed stores in over 75 countries. (Macrotrends, 2020)
The Starbucks Value Proposition
Starbucks brand strategy can be decoded by the mantra, “live coffee” which gave the
meaning to the company’s efforts to keep the coffee culture alive. (Starbucks Coffee
Company, 2016) As a coffee retailer, this meant Starbucks was creating an experience
around its core product offering which is serving coffee. The said experience was so subtle
and 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 colleagues
or just unwind with friends and family. (Mourdoukoutas, 2019) It is well known to
demographic customer segments, that almost all Starbucks stores offer fast and free Wi-Fi
and ergonomically designed and planned seating which are comfortable. All this would factor
in while making the customer to feel that they should extend their current stay or return for
another store visit. It is key to note that either ways, the customer will be making more
purchases with the brand. (Peterson, 2015)
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Environmental analysis
PESTLE Analysis
As discussed by Turner, PESTLE framework stands for the analysis of Political, Economic,
Social, and Technological, Legal and Environmental factors which would help us understand
the market environment in which a company operates. (Turner, 2011) In this study, the
primary 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 and
emerging nations from the around the world. The performance of Starbucks brand is heavily
affected based on the relationship between those countries and the United States of
America, as after all, Starbucks is an American Companies in the eyes of the global
audience. (Dudovskiy, 2017)
Economic factors
The financial performance of the Starbucks is closely related to the economic factors, such
as taxations, tariffs and duties. These could have a big influence on the pricing strategy of
Starbucks and affects the profitability largely. The local market also dictates the pricing
strategies, for example, the Indian market is known to be price sensitive and a premium
pricing would be a demoting factor for potential Starbucks customers in India. (Mahobia and
Jain, 2015)
Social Factors
Various Social factors determine the success and failure of the Starbucks brand. For
example, the United Kingdom, a primarily tea drinking region where in Great Britain alone
accounts for 100 million cups of tea consumption daily compared to the 70 million cups of
coffee. (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, but
Starbucks would need to rethink their portfolio and include more tea options.
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Technological Factors
The current generation is hooked on to the social media and Starbucks has already made
significant strides to improve their presence on various platforms, for example, there was a
campaign in 2001, where customer can purchase gift cards and share it with friends and
family.
Legal Factors
The Legal factors have a direct impact on Starbucks operations as deals with the trade
regulatory guidelines on anti-trust and European Union’s Data Protection Act. Apart from
these, there are a ton of rules and regulations which need to be followed in terms of heath
safety rules, consumer rights, employee rights, and competition rules.
Environmental Factors
Climate change has put coffee suppliers at risk affecting yields and quality of the produce.
Starbucks manages to mitigate different issues based on environmental factors by
implementing Corporate Social Responsibility (CSR) initiatives. These are welcome and
appreciated 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 like
competition, imitation of products and trend of opposing international corporations
operating in local markets. A SWOT analysis of Starbucks would help in identifying
the inventive strategies that could be implemented by using the brand’s strengths to
negate the effect of the weaknesses and to cash in on the opportunities along with
mitigating the threats that exist in the coffee segment.
Strengths
 Strong Brand Image and Financials
 Rapid Growth
 Extensive Global Supply Chain
Weakness
 High Priced Products
 Imitability of Products:
 Non-alignment of products
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 Strong Loyalty Program  Products Recall
Opportunities
 Expansion in Emerging markets
 Product Development
 Price Differentiation
 Online ordering and Delivery
 Coffee Subscription Model
Threats
 Competition with low-cost cafés
 Competition with big brands
 COVID-19 and Recession
 Coffee beans becomes costlier
Table 1: SWOT Analysis of Starbucks
Refer 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 various
external factors and can be analysis using the Porter’s Five Forces analysis. The strong
forces are clearly Industrial competition and threat of substitutes, whereas other forces after
the business every so slightly or moderately. Refer Appendix B for the detailed analysis on
Porter’s Five Forces framework.
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Porter’s Value Chain Analysis
The 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 with
significant competitive advantage to the company. The above figure highlights the different
components of the framework. (Mindtools, 2017) It comprises of two main groups of
activities, Primary Activities and Support Activities.
Starbucks Current marketing strategy
In a bid to be widely identified by the customers and to build a unique identity for the brand
identity, it is very important for companies to execute an effective marketing strategy. In this
section, the current marketing strategy will be discussed based on the segmentation,
targeting, positioning, and differentiation followed by the marketing mix of Starbucks. The
analysis would allow the company, Starbucks Corporation to understand more about their
service they intend to deliver, the type of product they are marketing and to which target
customer base.
Starbucks Core Marketing Strategy
Segmentation
For Starbucks, the main target group is the customers aged between 25 and 40 years with
high paying jobs and more disposal incomes. The secondary target group is the customers
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Figure 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 Y
customers who are aged between the above mentioned are the one who is bringing in the
most profit for the company. As discussed by Rafii (2014), based on the qualitative study on
customer’s psychological characteristics such as lifestyle choices, personals interests, goals
and desires, a vast majority of the customers are from the upper middle class and do have a
college degree.
Targeting
As far as targeting is concerned, the Starbucks brand is positioned between mass marketing
and segment marketing, where some default criteria are being applied like the customer
having higher incomes, lower age. These criteria are used to target Starbucks products
which closely match the lifestyle of those who meet it.
Positioning
From the above map, the positioning of Starbucks compared to its competitors, based on the
customers’ perception on the product. While buying at Starbucks, Customers are making a
purchase decision for a tangible product which is of high quality. On the other hand, there
are other intangible products such as the store experience, warm hospitality by well trained
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Figure 2: Positioning Map of Starbucks

baristas and personalization on beverages, which benefits Starbucks in maintaining its
premium status and helps to fend competition from other players. (Haskova, 2015)
Differentiation
Starbucks’ Unique selling proposition is clearly the customer experience and that helps to
differentiate from the competitors. Customers who come into one of Starbucks store are
aware that they would receive exceptional customer service and good overall in-store
experience. The customer is free to choose to either spend time in the store enjoying the
benefits of a fast and free Wi-Fi, and a cosy café environment or make their purchase in the
form of a takeaway and be on their way. It is key to note that, in either of the scenarios,
Starbucks is committed to delivering a unique and delightful experience cater both segments
each time.
Currently, where technology has made it possible to deliver a more efficient customer
service in all industries, but Starbucks embraces some form of human intervention along
with the technological advancements in order to make the experience more personal. As
explained by Sanburn (2012), customers do feel neglected and lack of warmth in the whole
experience when Starbucks opened 1,500 in quick time with more technology taking over
most of the human interactions hence making it more like an experience one would get from
a fast food chain. This clearly contradicts Starbucks Unique Selling Proposition which gives
the brand a competitive edge over its industry rivals.
Starbucks 7Ps Marketing mix
As explained by McCarthy and Perreault (1987), the marketing mix is a set of controllable
variables that are available to organisations that can be coordinated in order to satisfy the
customer base. The marketing mix of Starbucks comprises of the 7Ps of marketing, which
are namely Product, Price, Place, Promotion, People Process, and Physical evidence. There
has been a clear focus on Product and Place components of Starbucks’ Marketing Mix for
gaining competitive advantage.
Product
To justify the premium brand positioning of Starbucks, the product quality of its drinks and
services are expected to be high. Starbucks has always maintained their promise of
delivering high quality products and services every time for all its customers.
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Price
Pricing plays a vital role in the overall strategy, and it is known that Starbucks prices varies
geographically and there is evidence that Price Point Perspective is being applied to make
the product more appealing cost wise to the customer.
Place
The Place component of Starbucks’ marketing mix is a competitive advantage for the brand,
as stores are typically located in location where there is high footfall and increased visibility.
This would promote impulse decisions on customers to visit the store upon seeing the brand.
Promotion
Starbucks deploys an array of elements in the marketing Communications mix ranging using
various channels. These include direct marketing, public relations, Sales promotions, print
media, advertisements and events. The intended marketing message is targeted at the
segment who perception is closely aligned with Starbucks products.
People
Starbucks brand’s competitive advantage is their superiority in providing a good customer
services experience and it brings immense value to the brand image. Starbucks prides itself
for providing the best training for its frontline employees, they in turn put their exceptional
customer service skills to practice while serving customers. This gives the customer a
personal touch and overall positive experience. (Panopto, 2018) Starbucks recognises the
workforce is key for-profit maximization.
Process
The success of Starbucks brands can be attributed to a variety of processes that include
hiring, market research, Human resource management, Sales and Research &
Development. Aditionally, Approval process, Quality Assurance, Inventory processes are
also critical. (Dudovskiy, 2017)
Physical Evidence
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Physical evidence denotes the elements which are related to the Brand recognition of
Starbucks. The logo which is primarily green in colour consisting of a partially nude siren. It
has never been changed largely but slightly from time to time to match its diversifications
into other product lines and international markets. The comfortable ambience and unique
store designs forms another physical evidence element. (Dudovskiy, 2017)
Starbucks New marketing strategy
The marketing strategy of creating more business through loyal customers and creating an
experience for customers every time they visit is key to Starbucks’ success. As 2020 brought
in more challenges, Starbucks must look ahead and plan for new set of challenges and keep
an eye for disruptive ways to stand out from competition and remain as premium brand.
Recommendation 1: Extending Digital Engagement
There has been a surge in digital engagement in the recent times, the bulk of brands
mentioned on Twitter belong to the food and beverage industry, which accounts for 32% of
the tweets. (Bach, 2015) User of social media platforms like Instagram Facebook and Twitter
are the one who love food and beverage brands. This creates a set of channels which are
effective to leverage as part of the marketing strategies. (Digitalsilk, 2016) The Partnership
with Apple allowed Customers to integrate Apple Pay features with the Starbucks and
receive exclusive discounts
More investment with start-ups like Takt, could be made in the field of big data, machine
learning and artificial intelligence for developing real-time personalized marketing solutions.
(Schubarth, 2016)
Recommendation 2: Subscription model for coffee
A Subscription model would allow Starbucks to lock in customers for a longer period to
create an experience and leave a positive impact. This would lead to expansion of the
customer base and makes it cost effective than selling multiple times and guarantees a
steady income. With this business model, focus now shifts towards the customer retention
rather just client acquisition. For the subscription business model to be successful, customer
experience and relationships need to be sold to consumers rather than mere transactions.
(Fox, 2020)
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Conclusion
The Starbucks brand can be identified as good example for building their marketing strategy
based on the consumer and ethical behaviour instead of advertisements which do not carry
significant social benefits. The major competitive advantage for Starbucks that there has
been a consistent demand for coffee in the markets they operate.
They are also demand generated by people who frequent cafes on their way to work or to
get some work done in a cosy and upscale environment. Most company’s target consumers
are aged between 18 and 40, which presents a serious case for deploying different
strategies. Also, the people in this generation are the ones who are referred to as the
millennials, are willing to try out fresh, new and creative beverages with a sizeable disposal
income along with a spending behaviour.
The Starbucks company sells a social image apart from the core offering which is
beverages. The social image is important as the masses (i.e. customers) would want to be
associated with this brand in order to be perceived as a person from the upper middle class.
On the environmental and sustainability front, Starbucks has managed to execute several
Corporate Social Responsibility initiatives thereby creating a good PR among the
demographic audience.
To Summarise, the Starbucks brand must constantly push its innovations and drive product
development to stay ahead of its rivals. It is important to invest in latest technological trends
and investigate the strategic fit for Subscription Business model with its future operations.
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