Strategic Management Of Starbucks Marketing Essay

Strategic Management Of Starbucks Marketing EssayThe aim of this project pass over is to critic exclusivelyy analyse the strategic issues being faced by an organization. The organization chosen for this task is the company Starbucks, which will be analysed using relevant concepts reviewed in the module using appropriate theory and models.The report structure would start with a brief introduction to the company Starbucks fol down(p)ed 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 current and recent issues approach Starbucks the company analysis would follow which would be supported with relevant theory and application of suitable models. After completing the industry analysis conclusion and recommendations would be provided for Starbucks to counter the strategic problems.The Starbucks Company was founded in Seattle in 1971 by Jerry Baldwin, Gordon B owker and Zev Seigel with a vision to educate Ameri goat consumers about the fine coffee drinking experience. In 1987 Howard Schultz took over the Starbucks Group, he wanted to create the Italian espresso bar experience in America by creating a personal relationship between the customers and their coffee. equitable within a couple of years they grew from a small coffee business ho wont to a multi-million dollar player in the industry by buying however the best coffee gettable and providing the people with an unmatched gillyflower experience. As standing, Starbucks is number one in the speciality coffee industry, with more than 12,000 shops in more than 35 countries.The Starbucks 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 product offered by Starbucks along with some other drinks which involve cold and hot teas, cakes and pastries. The Starbucks coffee comes in a many variet ies each possessing a different taste, aroma and flavour.In addition to its extensive product offerings, Starbucks has many inciters 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 most globally conscious corporations in the world.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% re naturalable 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 world and has done so on a socially and environmentally conscious platform.STRATEGIC ISSUES FACING STARBUCKSThe major contest that Starbucks is dealing with is the current financial crisis in the world economy for cing them to call closures of many stores around the world.Another 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 Nestle in the US and brands resembling Costa Coffee and Caff Nero in the UK, the two major markets for Starbucks. It is important that for Starbucks to know their competitors and what they are currently doing.Also Starbuck coffees are priced higher than other market competitors because of Starbucks besides purchasing the highest quality coffee beans for their product, thus increasing the price of the drink giving the competitors a cost advantage over Starbucks.Also Starbucks inadequate merchandising 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 d rink the coffee, cut the chances to attract valuable customers.Starbucks also does not 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 elaborateness strategy followed by Starbucks can take a toll on the firms brand image. As corporations grow there can be a dip to boil down too heavily on increasing output and locations, and less focus on quality and brand image. Starbucks inevitably to stay with its values and ideals that have a bun in the oven made it successful.Also Starbucks policy of not franchising can be a cause of concern for the firm. Advantages of Starbucks franchising would be to open hundreds of new stores with less risk to the company, and knead profits in doing so. In addition Starbucks would have less research and development costs because the franchisee would have greater knowledge of the local market in terms of demographics, psyc hographics, geographic, and local/state/country regulations.Consumption of coffee is not dependent on the price of the product but also on the distinction between each product and several value adding variables such as the quality of customer services, 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 distribution channels. Starbucks have exhibited this control over distribution channels by setting guidelines for their 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 dominance entrant. Some of the more current and on-going threats of new entrants include fast food chains such as McDon alds, Burger King and Dunkin Donuts which can become a major problem in the near future.3. BARGAINING billet OF BUYERSA big threat to Starbucks is the absence of slip 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. Another threat to Starbucks is that their customers have the ability to brew their own coffee. Starbucks has tried to counter this threat by offering Preferred Office Coffee Providers as well as directions on how to make the perfect cup of Starbucks coffee at home, called the Four fundamental principle of Coffee. The perfect cup of Starbucks Coffee includes, of course, Starbucks ingredientsAlso with new entrants and competitors such as McDonalds who claim to offer premium roast coffee of reasonable quality for begin price, it is clear that Starbucks customers have some bargaining power in the industry.4. BARGAINING POWER OF SUPPLIERSCoffee is the worlds second larg est traded commodity. South and Central America produce the volume of coffee traded in the world. Starbucks depends upon both outside brokers and direct contact with exporters for the 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 who can meet Starbucks coffee standards will be able to supply 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 magnificence 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.Starbucks has to efficaciously come after a Focus-Based Strategy in conjunction with differentiation and a cost leadership based strategy. Being a lower cost store will increase the difference 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 through internet services for users to access, do road shows, hand out brochures etc. so that consumers become more aware of the brands strong international strawman and brand name. Market penetration and market development will help increase the sales. Access unexplored distribution channels like m aking 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 victimisation and Product-Market Diversification to counter the stiff 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 creative thinking and innovation. Product differentiation has proven an pure defence against threats such as bargaining power of buyers. Developing 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 w ould 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 touch its image as an innovative company.Starbucks should continue to locate their operations in high traffic areas, high visibility areas. The company should continue to take excellent care in picking locations. It is extremely important that Starbucks international stores reflect uniqueness in their location and layout. Having locations in a variety of locations will run into large market exposure.