This is a market strategy paper I wrote for my marketing class as part of a group. We were assigned Starbucks as our company, and were required to write a minimum of 10 pages on the marketing strategy being pursued by Starbucks, and changes or suggestions we as a group have for the company. The raw draft of the paper ended up being around 28 pages, and after we cut down on some unnecessary data, the final paper ended up being about 22 pages. This was a group paper, and in total there were 5 people in the group including me. I am not attaching any of the references, but if you guys would like to have a look at the references I would be more than happy to provide them.
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Starbucks Market Strategy Paper in its Full Form - Starbucks Marketing Strategy
Starbucks Marketing Strategy
Proper implementation and execution of a strategic marketing plan is essential to the success of any company. A company may have an ideal product, but without proper positioning, identification of a target market, and a proper marketing plan a company would not be able to successfully market its products to consumers. Starbucks has been successfully able to convert an activity carried out at home to a commercial success through proper implementation and execution of its strategic intent. The firm has been able to convince consumers that its stores provide more than just coffee, but rather a rich experience that they should indulge in on a recurring basis. The company has been able to translate this consumer "experience" of its products into a highly profitable business.
This paper will discuss the marketing strategy being implemented by Starbucks, and will evaluate the company's current marketing plan, including positioning strategies, targeting strategies, competitive environment, and various other factors that affect its marketing strategy. The paper will further attempt to provide recommendations to Starbucks on the course of action it should purse to remain viable and maximize profitability - whether it is through improvements to its existing marketing strategy or implementation of a new strategy.
The marketing principles, or the four P's, also follow the differentiator marketing strategy. Starbucks is competing in an industry where marketing principles has to follow the differentiator strategy, or it risks losing market share. The company must create value to its customers, or the customers will find another place to spend their money. The marketing principles of Starbucks, can be argued, are the basis of the company's competitive advantage within the industry. Starbucks products are associated with quality, and the company has differentiated itself during the years as being committed to producing high quality products. Because of this association with quality, Starbucks has been able to charge a premium for its product.
Until recently, Starbucks did not face the type of competition it is experiencing today. Not too many companies that were as large as Starbucks were in the gourmet coffee business. Starbucks, though its promotions was able to create a perception of a premium gourmet coffee. Originally, this was what gave Starbucks a huge advantage over any potential competitors. The place or location of each outlet is also in line with the company's differentiator strategy. With 17,000 outlets worldwide, Starbucks individualized each outlet based on the surrounding communities. In addition, Starbucks also prides itself on innovation of new products, which further differentiates it from other competitors. Each of these aspects of the marketing principles that Starbucks utilizes helps to contribute to its differentiator strategy.
As we recommend strategies to orchestrate a turnaround for Starbucks, we will accomplish this in two forms. First, we will identify the particular strategy that will be addressed, and then we will provide specific scenarios where it is appropriate. The three strategies that we will address are the corporate strategy, business strategy and the marketing strategy.
In our attempt to orchestrate a turnaround, we first examine the Corporate Strategy. We identify Starbucks as existing in the service industry, particularly the "Fast Casual Restaurant "sector. This is a highly competitive and fragmented industry. While there are major players in this sector such as McDonalds and Dunkin Donuts, no one is in the competitive position to set industry prices for products. The customers are price sensitive and brand loyalty is normally low. Because Starbucks has established a strong brand and a moderate amount of brand loyalty, we recommend focusing on increasing profitability and return on investment. We have chosen this particular action because we want to strengthen our recognition as a provider of premium beverages.
Another corporate strategy that we recommend for the turnaround of Starbucks is the strategy of acquisition. The strategy of acquisition would allow us to purchase other competitors in the fast casual industry that will allow us to increase profits and gain market share (Mullins, 2009). Organizations such as Caribou Coffee currently have market capital of $170 million dollars and are currently trading on the stock market at less than $8 per share ("Caribou Coffee Company, Inc."). By acquiring Caribou Coffee, Starbucks can take advantage of several factors. First, Starbucks can merge administrative costs of both organizations into one. Second, since there is low R & D in the beverage industry, Starbucks can merge that operation in addition to their distribution system. Marketing functions will originate from one central location. Caribou Coffee can be repositioned in the market below Starbucks. The lower price point of their products would serve a larger market than the market segment that Starbucks would target, therefore, the higher volume revenues can be generated and directed towards the parent company.
We will now make our recommendations regarding the business strategy of Starbucks. We recommend the "differentiator "and "defender "strategy to be pursued at Starbucks. The fast casual sector of the industry has products and services that are provided in high volume and low profit margin, which contributes to the low brand loyalty. As a defender, Starbucks will try to protect its domain by providing higher quality and superior service therefore maintaining a secure position (Mullins, 2009). We recommend that Starbucks differentiate themselves from the others in the market. The differentiation strategy would allow Starbucks to establish a clear difference between themselves and their competitors. They must create a perception that the customer is actually receiving superior value from a Starbuck's product that cannot be provided by Tim Horton's, Panera Bread or Dunkin Donuts. This can be accomplished by focusing on providing superior customer service and reinforcing the idea that they are providing the highest quality products in the industry. Differentiating themselves successfully from the competition will provide Starbucks with a competitive advantage and allow them to charge a premium for the products and services.
The product market that we recommend Starbucks focus on is high quality brewed coffee, coffee beans, select food items, branded equipment and providing food service. We do not recommend that Starbucks attempt to provide full line of food items which would create a situation that may make it hard for the customer to distinguish between themselves and Tim Horton's or McDonalds. Their products and services should continue to support a feeling of exclusivity.
Our final recommendations would apply to the area of marketing strategy. Our recommendations attempt to address each one of the four P's. Regarding the product, we recognize and would continue the practice of carrying an extensive line of coffee and coffee beans. We recommend extending the line of food that is offered at the retail stores. The focus should concentrate on fresh baked goods, sandwiches and pastries with natural ingredients such as blueberries and nuts. New and different combinations should be introduced in limited markets and the products that deliver the best results should be retained and added to the permanent menu. The line of personal equipment products by Starbucks can be extended and offered at the retail level or on the company's web site. We recommend that Starbucks introduce a line of premium fruit drinks. New flavors of energy drinks should be introduced and marketed towards teens.
We recommend that the price for Starbuck's products and services be set approximately 10% higher than comparable products of their competitor. In establishing Starbucks as a provider of premium products and pursuing a differentiator strategy, the organization must not try to compete on price against organizations such as McDonalds. The price should be reflective of an exclusive product of high quality. Although we do recommend that Starbucks create greater value by packaging brewed coffee products and fresh baked goods and sandwiches.
In our attempt to analyze the issue of place, we recommend that Starbucks focuses on exclusivity. By this, we mean in order to establish yourself as premium, and different, you must reduce the accessibility of the product and service. This would require Starbucks to reduce the number of stores that it has in operation. The practice of having multiple stores existing in a 1-mile radius must be cease. The strategy of rapid expansion can no longer continue at this point. We recommend that stores in high volume and business districts be redesigned. These new designs should incorporate a comfortable feel for the customer and encourage large gatherings. In the targeted areas, the new store should be able to accommodate a small conference of up to 15 people. Ultimately, what you want Starbucks to do is be able to host gatherings for business meetings, college student groups, book signings, etc.
The final area of our recommended strategy changes would apply to promotion. To differentiate themselves from the competitor, Starbucks must conduct more aggressive promoting. Customers can be rewarded with free cups of coffee for accumulating a certain amount of points on their Starbucks card and coupons could be issued. We recommend that television commercials be created perpetuating a distinct difference between Starbucks and their closest competitors. The point must be driven that premium coffee shipped from around the world cannot be substituted by McDonalds or Dunkin Donuts. We further recommend that Starbucks sponsor events that are in line with the interests of customers who purchase premium products. This would include sponsoring professional golfing events, college games, the arts and business conventions. College students, young professional adults and those with more disposable income should be targeted. In order to increase traffic into the stores, we recommend that they focus on promoting some of their existing products at a limited time rate. This would include allowing customers the opportunity to use the Wi-Fi service free with the purchase of a premium sandwich and specialty beverage for an hour. We recommend allowing the purchase of new release music at a discounted rate on release day through their website.
Since a few have requested a reference list, I have added my works cited to Starbucks Marketing Strategy article.
Allison, Melissa. "Starbucks tests new names for stores." 16 July, 2009. The Seattle Times. Retrieved on November 3, 2009: http://seattletimes.nwsource.com/html/localnews/2009479123_starbucks16.html
Boyd, Harper A., John W. Mullins and Orville C. Walker Jr. (2006). Marketing Management: A Strategic Decision-Making Approach. Sixth Edition. New York, NY: The McGraw-Hill Companies Inc.
"Caribou Coffee Company, Inc." Yahoo! Finance. Retrieved on November 11, 2009: http://finance.yahoo.com/q?s=cbou
"Company Timeline."Starbucks Corporation February, 2008. Retrieved on November 3, 2009: http://www.starbucks.com/aboutus/Company_Timeline.pdf
Edwards, Marce. "New tea drinks coming to a Starbucks near you." 30 December, 2008. The News Tribune. Retrieved on November 3, 2009: http://blogs.thenewstribune.com/business/2008/12/30/new_tea_drinks_coming_to_a_starbucks_nea
"Fiscal 2008 Annual Report." Starbucks Corporation. Retrieved on November 3, 2009: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTExNzN8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1
"Facts about Starbucks Coffee Company." Starbucks Corporation. Retrieved on November 3, 2009: http://me.starbucks.com/NR/rdonlyres/6CEA4E20-1253-4252-820B-2C2579355147/8117/FactsaboutStarbucksMiddleEastENGLISH.pdf
"FY 2008 Global Responsibility Report." Starbucks Corporation. Retrieved on November 3, 2009: http://www.starbucks.com/sharedplanet/customGRPage.aspx
Jargon, Julie. "Starbucks Takes New Road With Instant Coffee --- Company Launches Marketing Campaign and Taste Challenge to Tout Its Portable, Less Expensive Product Via." 29 September, 2009, pg. B.8. Wall Street Journal. Retrieved on November 3, 2009: http://proxy.lib.wayne.edu/login?url=http://proquest.umi.com.proxy.lib.wayne.edu/pqdweb?did=1867970661&sid=1&Fmt=3&clientId=14288&RQT=309&VName=PQD
Jennings, Lisa. "Upscale brands positioned as less luxury, more valuable." 8 March, 2009, v43 i10 p1(2). Nation's Restaurant News. Retrieved on November 3, 2009: http://galenet.galegroup.com.proxy.lib.wayne.edu/servlet/BCRC?vrsn=unknown&locID=lom_waynesu&srchtp=glbc&cc=1&c=52&mode=c&ste=72&tpc=Products+%26amp;+Services&tbst=tsCM&tab=2&ccmp=Starbucks+Corp.&mst=starbucks&n=25&docNum=A196051969&bConts=13247&finalAuth=true
"Starbucks Corporation Fiscal 2008 Annual Report." Starbucks Corporation 24 November, 2008. Retrieved on November 3, 2009: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTExNzN8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1
"Starbucks Corp: Long-Term Growth Goal Raised To 30,000 Stores World-Wide." 15 October, 2009. Wall Street Journal. Retrieved on November 11, 2009: http://proquest.umi.com.proxy.lib.wayne.edu/pqdweb?index=11&did=712815501&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1257307349&clientId=14288&cfc=1
"Starbucks Posts Strong Fourth Quarter and Fiscal 2009 Results." Starbucks Corporation 5 November, 2009. Retrieved on November 11, 2009: http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-newsArticle&ID=1352048&highlight=
"Starbucks testing $1 coffees with free refills." 23 January, 2008. The Seattle Times. Retrieved on November 1, 2009: http://seattletimes.nwsource.com/html/businesstechnology/2004140618_webcheapdrip23.html