Marketing principle Assignment Help









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Introduction


 

The paper is trying to evaluate the marketing strategiesof Starbucks and their international expansion. The paper would look into different elements of marketing process, focusing on STP strategy, deploying marketing mix elements and using marketing mix elements in different situations for the organization. Present paper would deploy these marketing principles in order to help Starbucks to evolve with exclusive marketing planning process.

Task-1


Start your report by explaining the various elements of marketing process based on the Starbucks

Marketing is nothing but a managerial and social process where in Organizations attempts to develop a strong relationship with customers by offering valuable services to customers in order to earn value from them. It is very imperative to understand what existing and potential customers want to know their needs so that appropriate services can be offered to them and in return value can be generated from customers. And customer relationship management activities (Best, 2004) are a very important tool in this. The process of analysing marketing opportunities, selecting target markets, developing the marketing mix and managing the marketing effort is known as marketing process.Four elements of marketing process for Starbucksinclude:

  1. Analyzing the situation faced by Starbucks at present: Situation analysis can be viewed in terms of analysis of the external environment and an internal analysis by the firm. SWOT (Strengths, weaknesses, opportunities and threats) analysis framework can be used to conduct internal analysis of the organizationfor Starbucks while external analysis depends upon the external environment such as political, environmental, technological, social, economic and legal.

  2. Developing unique marketing strategy for the organization: unique marketing strategy is derived by the organizational objectives of Starbucks. Market Segmentation, target market selection and positioning the product within the target market would be defined for Starbucks and uniquemarketing strategy would be developed.

  3. Develop elements of marketing mix for Starbucks: Based on marketing strategy for Starbucks following actions will be taken on marketing mix elements
    1. Product development

    2. Pricing decision

    3. Distribution contracts

    4. Promotional campaign development


  4. Implementation and control of marketing strategy: Result of the marketing efforts would be monitored closely. With changes in market conditions, marketing mix elements will be adjusted accordingly.

1.1 Prepare a SWOT analysis of Starbucks and explain the importance of using SWOT analysis marketing tool

Starbucks Corporation is an international coffee and coffeehouse chain based in Seattle, Washington, United States. Starbucks is the largest coffeehouse company in the world. SWOT analysis of Starbucks can be given as under:










Strength

Weakness

1.      Global coffee brand built upon a reputation for fine products and services

2.      Image of quality products

3.      Starbucks has a significant geographical presence across the globe (10000 café and 17000 coffee shops in 40 countries)

4.      High profitability ($8.0 m in FY 2013)

5.       Starbucks is known for its highly knowledge base employees.

 

1.      Price of the products of Starbucks is very high as compared to the products offered by its competitors such as Costa Coffee and McDonalds

2.      Competition between two stores of the company is another area of concern

3.      Additional food products such as Salad and Sandwiches are creating low profit.

4.      By aggressive expansion and high saturation due to overcrowding in the market leads to self-cannibalization and diminishes long term growth targets of Starbucks

 

Opportunities

Threat

1.      With increase saturation and self-cannibalization of the US market, Starbucks international strategy becomes very important. Starbucks has made good inroad into many countries by making joint ventures.

2.      Starbucks has leveraged the use of mobile applications and has an investment partnership with Square, a mobile payments app that is integrated with its Starbucks app. This creates an ease of use process for customers, aligns customer loyalty through reward programs.

3.      Adding new products into its offerings to increase revenue.

4.       New distribution channel.

1.      Biggest threat that Starbucks faces with the market being at a mature stage, there is increased pressure on Starbucks from its competitors like Dunkin Brands, McDonalds, Costa Coffee, CCD, mom and pop specialty coffee stores.

2.      High price of Starbucks’s products is a threat to lose customers to its competitors.

3.      Huge investment in large number of stores can leads to financial threat

4.      Rising dairy costs.

5.      Market saturation and economic slowdown.

6.      The shift of consumers toward more healthy products and the risk of coffee culture being just a fad represent a threat for Starbucks going into the future.

 
 

SWOT analysis is animportant framework for generating strategic alternatives from a situation analysis. Identification of SWOTs is important because they can inform later steps in planning to achieve the objective for Starbucks. SWOT is the foundation for evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external environment.

1.2 Next present and evaluate the marketing objectives of Starbucks and explain how defining marketing objectives can help a business to develop marketing strategies. How does this contribute to the benefits of costs such as market orientation as customer satisfaction, desired quality, service or consumer care, relationship marketing etc.

The marketing objectives of Starbucks can be given as under:

  • To reposition their brand:To retain existing consumers and build new consumers base brand repositioning is required to differentiate Starbuck’s brand from its competitors.

  • Promotional Strategies:Starbucks will continue to adopt new promotional outlets in order to reach consumers.An active participation on Web 2.0 platforms, televisions advertisements, and email marketing will all be utilized to promote products and initiatives.

  • Development of new business: Adding new food categories, adding new stores with new national and international locations is imperative toincrease Starbucks business.

  • To develop global marketing mix: Global marketing mix with local marketing strategies according to specific market is very important to become a global brand.

Marketing strategy of the organization is dependent upon the objectives of the organization. Therefore it becomes important that Organizational objectives should be defined properly. By defining marketing objectives for Starbucks their target audience and overall goals would be clear and these would form the marketing mix for the organization.

Market orientation helps Starbucks to collect the information pertaining to customers and fulfilling these needs by making them a part of the overall marketing objectives for the organization (Baines et al, 2011). Marketing strategy would be developed keeping in mind the marketing objectives of the organization hence by fulfilling consumer needs to maintain high customer satisfaction. One of the key costs incurred by Starbucks is the amount invested in training its staff and research to understand the needs of the consumer so that best services can be offered to its consumers.

Understanding consumer needs, providing training to its employees for providing best service experience and maintaining proper supply chain management are necessary steps for ensuring high quality products to its consumers and this is the cost for the organization. Starbucks is able to deliver high quality products to its consumers and this helped Starbucks to create goodwill in consumer’s mind which is helping to emerge as big brand. Starbucks has always given great importance to customer relationshipmanagement strategies which has helped Starbucks to build strong customer portfolio and loyal consumers but yes these strategies are developed by incurring heavy cost (Peter & Donnely, 2007).

Task-2


In the next task you will focus on the concepts of segmentation, targeting and positioning (STP strategy)

2.1 Start this task by analyzing three micro and three macro environmental factors influencing marketing decisions in Starbucks

Three macro environmental forces affecting decision making in Starbucks can be given as under:
1. Political and legal factors:Starbucks needs to import coffee beans from different parts of the world. Starbucks must worry about increases taxes and tariffs from many parts of the world like South America and Africa. Because of the nature of politics, it may be very hard to predict  how reliable their sources of beans are, so Starbucks must continually has alternatives for importing coffee to supply its demands.

  1. Economic factor: Economic factors such as inflation has a big effect on sales in Starbucks, as people shop more and more money this is available. Starbucks must maintain a flexible workforce and an efficient hiring system so that it may expand when the economy is going good, and quickly shed workers when economy is experiencing a slowdown. This is required to maintain the cost effective employee workforce (Chambell et al, 2002).

  2. Social and environment factors:This social and environmental factor affects the business of Starbucks because Starbucks has set itself up as not only a place to drink coffee but as a cultural institution to provide a pleasant environment wherein consumers can sit over a cup of coffee for 5 hours. Therefore any change in societal preference of people and changes in their activities will have huge effects on Starbucks coffee stores.

Three micro environmental forces affecting marketing decision of Starbucks can be given a sunder:

  1. Opportunities: Expanding in emerging markets, Expansion in new international markets, expending product mix and offerings, Technological advances, brand extension, increasing revenue. These all are the opportunities which affects marketing decisions and help in developing marketing strategies.

  2. Threats: Starbucks faces several threats such as increased competition, price volatility in the global coffee market, developed countries market saturation, economy slowdown, changing customer taste and life style, high pricing, brand image dilution. Marketing strategy should be developed keeping in mind all these threats so that business can overcome these threats.

  3. Strength: Strong Market Position and Global Brand Recognition, Products of the Highest Quality, Location and Aesthetic appeal of its Stores, Human resource management, Goodwill among customers, diverse product mix, Use of technology and mobile outlets. All these are the strength of the Starbucks and which further help Starbucks to strengthen its hold on the market.

 

2.2 After that propose which segmentation criteria would be the most applicable for Starbucks to use for their products in different markets using example of at least two different segmentation criteria

Market Segmentation is a process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior that might require separate products or marketing programs is called Market Segmentation (Kotler and Armstrong, 2006).Different segmentation criteria used by Starbucks are demographic, psychographic, geographic, behavioral, multiple variable and by benefits. Out of this segmentation, most benefited segmentation for Starbucks would be demographic segmentation as compared to other segmentation techniques. For example, Starbucks’ main target market is men and women between the ages of 25-40, which accounts for almost half (49%) of its total business. Customers within this range tend to have high income and professional careers. This group grows at a rate of about 3% annually. Young adults, aged 18-24, are the next large group that Starbucks targets. They bring in about 40% of Starbucks’ sales and Starbucks “positions itself as a place college students can hang out, study, write papers, and meet people”. While second segmentation can be done basis the psychographic segmentation of the consumers i.e. targeting customers based on their lifestyle and attitudes about ‘Fairtrade’ food. The core consumer for Starbucks is the ‘serious coffee drinker’ (upscale market), which it tries to reach with adverts and other promotional material that reflect the quality of the coffee that it serves, as well as displaying its dedication to providing its customers with the best coffee. Out of the two criteria demographic segmentation would be more appropriate as it demographic segmentation would be visible and data collection would be easy.

2.3 Thinking about a range of products and services Starbucks offer, choose a targeting strategy for a one of them and propose positioning strategy for this product

Frappuccino, which is a frozen coffee beverage containing ice cream and strawberry is a product offered by Starbucks and used as an example to showcase the target market strategy.Starbucks would be focusing on the concentrated strategy for this product. Starbucks would identify the target segment which would be the customers in age range of 19 to 29 years and belonging to graduate or post graduate degree. Brand experience, brand quality, perceived health and convenient access would be the four different factors which Starbucks would be targeting for this segment. Brand experience at Starbucks includes not just drinking coffee but drinking with emotional surrounding for creating pleasant experience. Brand quality of Starbucks is such that they exceed customer expectation and create loyal customer base. The positioning of the present product would be related with high quality, unique taste, friendly store environment and premium pricing etc (Stevens et al, 2005).

2.4 Demonstrate how buyer behavior affects marketing activities in different buying situations. Provide here two examples of buying situations which marketing managers in Starbucks should in your opinion especially consider

Marketing of the product and offerings services to consumers depends upon the behavior of the consumers in that market. There are mainly four factors shaping buyer behavior and these factors are social, personal, psychological and cultural. Starbucks marketing mix strategies have been framed keeping in mind the consumer preferences for attracting the target market. Positioning of the Starbucks products is important so that buyers can consider them for purchase. Strategy of Starbucks would include the use of products offered, users, pricing, quality, ambience for delivery and benefits offered (Kotler, 2008). Marketing managers of the Starbucks should consider two below mentioned buying situations in order to impact the choice of consumers:

  • Consumer’s looking for high quality coffee with a pleasant environment to discuss personal issue with their friends

  • Young consumers looking for taste of good coffee and premium brand

Task-3


In task 3 you will start analyzing marketing mix elements which are in the heart of all marketing strategies. As before, think about Starbucks while addressing all the elements of this task.

One of the major concepts in the modern marketing is once the company has decided its overall marketing strategy than it should plan the details of the marketing mix. “Marketing mix is the set of controllable, tactical marketing tools (product, price, place, and promotion) that the firm blends to produce the response it wants in the target market” (Kotler and Armstrong, 2006). Starbucks has a made good decisions on marketing mix tool.

Figure 1: Showing the marketing mix elements

3.1 Start by explaining how products in Starbucks are developed in order to make sure that competitive advantage is sustained. You should focus here on differences in products between Starbucks and different coffee shop. Provide at least two examples.

“Product means the goods and services combination the company offers to the target market”. Starbucks has used Brand name, Quality, Variety and Services as their Product tool which can be concluded by this statement, Starbucks with a good Brand name provides best Quality and with the Variety of Products. Initially Starbucks started with the coffee than it has included non-fat milk, cold blended beverages. But later on started with seasonal offerings such as strawberry and cream Frappuccino, gingerbread latte with some food items like cookies and pastries as well. Starbucks consider the cultural impact while developing the product portfolio of the organization so as to sustain their competitive advantage in the marketplace. Complementary products such as bookstore owned in Canada and USA by Starbucks (Laermer& Simmons, 2007) in its product line is as added edge by Starbucks on its competitors like McDonalds, Costa Coffee and CCD wherein major focus is on the coffee only. Product diversification along with product innovation and keeping the local taste in the products is a part of the marketing strategy adopted by Starbucks to gain an advantage over its competitors.

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3.2 Next you are to explain distribution strategies used by Starbucks. Think about customer’s convenience and satisfaction in relation to distribution channel used.

Starbucks has made more than 17000 stores operating in 55 countries across the world till year 2011 and distribution of products and offerings to its customers is done from there stores. In terms of location Starbucks opened the stores in such a way that it can reach to targeted customers Starbucks uses multiple channels (hybrid) of distribution for its products. This means the company utilizes more than one distribution design. Acquisition of Diedrich coffee was done by Starbucks in order to enhance the geographical presence of company. Starbucks struck deal with Green Mountain coffee Roasters in year 2011 to strengthen its presence in North America. Location of the stores of Starbucks is planned very meticulously so that target customers can be reached easily. The distribution strategy of Starbuck is always in line with the marketing objectives of the organization which focus on convenience and customer satisfaction as the focal point. Starbucks has the goal to establish “Starbucks everywhere” so as to provide added convenience to customers of the organization (Baker et al, 2012).  

3.3 In the next part you are to analyze pricing strategies used by Starbucks. Provide an explanation how prices are set in relation to company’s objectives and market conditions (competition, current economic situation etc.)

There are different pricing strategies available to firms and each will be optimal in different situations (Jobber and Fahy, 2006). One strategy is premium pricing, which is also called a high price-high quality strategy, and this allows the firm to charge higher prices because there is something unique about the product. “Price is the amount of money customers have to pay to obtain the product”. Though the Price of the Starbucks was higher than the other coffee shops, the customers were ready to pay the amount because Starbucks has developed a luxurious image with all the facilities inside the store.
Starbucks is able to build high profit business and a premium brand image among consumer by offering high pricing product to its consumers as compared to the competitor organizations.High pricing strategy of Starbucks can be evident from the fact that despite of falling price of coffee in USA, Starbucks does not reduce their prices. Market competitors such as McDonald’scharges significant lower prices as compared to Starbucks and give high competition to Starbucks.

3.4 Promotional activity is a must for every organization. Make a research into promotional activities of Starbucks and illustrate how promotional strategies used by this organization are integrated and related to marketing objectives of the organization

The most common promotional mix elements used by Starbucks are advertising, Internet marketing, personal selling, website, public relations, and sales promotion. Starbucks spends more than 1.6% of revenue towards promotion. Starbucks customers visit Starbucks website to provide valuable feedback about the products and services. This also helps Starbucks to build strong customer relationship management (CRM). Its Internet promotions are often done in a manner that lets customers interact with the product or leave comments, even if they are not directly able to interact with Starbucks staff. Starbucks have used print media for advertisement named “The Time” in order to promote their products and coffee houses. Its Internet promotions are often done in a manner that lets customers interact with the product or leave comments, even if they are not directly able to interact with Starbucks staff. Starbucks have struck a deal with ESPN in order to build sports learning center for attracting sports loving consumers. Starbucks has clearly embraced the digital realm. With a strong presence on multiple social networks, the brand has set a high bar when it comes to being social and engaging its customers. They are at or near the top of nearly every major brand ranking in social media. Further Starbucks need to make use of the integrated marketing communication for promoting their products and services (Reid &Bojanic, 2010).               

3.5 Finally at the end of this task you were asked to provide short analysis of additional elements of the extended marketing mix based on the examples of Starbucks.  

There are basically three added components of Starbucks which are important in order to extend their marketing mix and these elements are processes, physical evidences and People. Starbucks is a very process oriented organization. It invests money and time in framing processes and making sure that all these process are implemented properly in the organization. Starbucks makes use of the blue printing technologies like flow charts and presentations through diagram in order to improve the planning and processes deployed in the organization (Britten, 2012). Starbucks have several processes such as Artificial intelligence, stimulation and forecasting in place so as to improve the overall forecasting and data analysis processes deployed in the organization. Human resources are the vital component of the overall strategy for organization. Starbucks invest lot of cost in hiring right people; make special training arrangements to train the hire people so that they can polish as per the objectives of the organization. Only train staff can offer best services and products to its customers. For that Starbucks has deployed exclusive training program and recruitment program. Some of the additional privileges offers by Starbucks include free Wi-Fi, music, trained employees, art work, comfortable chair and right combination of lighting. All these stuff helps Starbucks in providing a pleasant ambiance to its customers. The store environment in Starbucks is comfortable for students, researchers and readers etc.

Task-4


Last task is to present your ability to use the marketing mix in different contexts.

4.1 To begin with you are asked to plan and prepare marketing mix for two different segments of market in Starbucks. Use here an example of one existing segment and propose the second, new one. Design for both segment marketing mix plan (4P).

The two segments selected in the present context are Segment A and Segment B wherein segment A is existing consumer segment of Starbucks. Segment A consist of young age consumers in age range from 19 to 29 years having educational qualification as graduate or post-graduate and income range in moderate to high range. Segment B for Starbucks would include people in age from 20 years to 45 years, married, graduate or post graduate, high to middle income range, high spending income, working in MNC and brand lovers.

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Marketing mix plan for Segment-A of Starbucks can be given as under:

  • Product: Coffee, tea and CDs with wide availability at different stores in the Starbucks. There would be more innovative products which would be tried by the young aged people as they keep on experimenting with the products (Kent, 2013).

  • Price: Pricing for this segment of consumers should be moderate to high as they would be aware of the competitor brands and can shift in lieu of price difference between the two brands.

  • Place: Starbucks stores would be the ideal place along with online stores and physical stores should be located nearby educational institutes and sports grounds.

  • Promotion: The main promotional tool for this segment would be tie up with ESPN for sports learning centre and associating with sports events.

Marketing mix plan for Segment –B can be given as under:

  • Product: Product for this segment would include coffee, tea, pastries and mugs as wide range of product would be required by this segment of consumers. There would not be much requirement for innovative products for this segment of consumers as they would be more attracted towards traditional products.

  • Price: Pricing strategy used for this segment of consumers should be moderate to premium as these consumers would be brand loyal and insensitive to pricing aspect (Gregson, 2008).

  • Place: These consumers should be catered through both online as well as physical stores. Location of physical stores should be near to corporate offices, movie theatre and grocery store etc.

  • Promotion: Promotion for this segment of consumers should be done by tie up with corporate houses, broadcast media and magazine for business usage.

4.2 Your task is also to illustrate differences in marketing products and services to business rather than customers. Next to Starbucks use here an example of another organization.

To illustrate the scenario, let’s take McDonald as another organization. Let’s try to understand the difference in marketing products and services to business rather than customers.For businesses it is possible that McDonald’s sell a gamut of products wherein pricing would be much lower as compared to the pricing offered to the retail consumers. It is also possible that along with offering coffee to businesses, McDonald’s offer other set of readymade products as well along with the coffee because businesses requires to offer those products to its employees whereas direct consumers of the McDonald’s product may just demand coffee. Also as far as the distribution of the product is concerned, For consumers products like coffee would be distributed from the stores opened by McDonald’s at various location while there are chances that McDonald’s may open a store in particular organization for catering to their employees only (Philip & Gary, 2011). There would also be difference in the promotion strategies. For consumers McDonald’s would make use of the broadcasting, print and sponsorship so as to attract the individual customers through their innovative promotion but for businesses McDonald’s would make use of the personal selling wherein representative from McDonald’s would go to the individual corporate houses for making tie up.

4.3 Finally your report will end with the evaluation how and why international marketing differs from domestic one- use here at least two examples of marketing strategies Starbucks used to market their products internationally.

International market expansion is at the core of the strategy of the Starbucks. North America just counts 20% of the overall coffee demand while Starbucks needs to make aggressive expansion in world market for promoting their products. There are number of factors which differentiate international market and local/domestic markets. Some of these factors are international joint ventures, gender issues, cultural differences, marketing channels and consumer preferences etc. It was in 1996 when Starbucks made an attempt and enter into joint venture with one of the local player of Japan named SAZABY Inc prevailing in market (Nagle and Holden, 2012). Starbucks adopted strategies such as buying out competitor’s lease, intentional operations at loss andclustering of services within a small area. Starbucks make their international foray in UK with buying out Seattle coffee company and impacted consumers through capital and influence of this company. Using local taste, deploying global human resource and mergers & acquisition in international markets are some of the major global strategies deployed by Starbucks in international markets.

Conclusion


This paper has focused on laying down marketing strategies for Starbucks. This paper is highlighting the analysis of internal and external environment, deployment of STP strategy; building marketing mix and analysis of marketing mix in different situations overall marketing planning for Starbucks have been deployed. This would help Starbucks in order to maintain competitive advantage in highly competitive marketplace.

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