Starbucks Marketing Strategy Analysis

Introduction

A company's success in marketing its products and services depends on various strategic factors both internally and externally (Perrey and Spillecke 2013). The company's strengths, as internal factors, are crucial to the strategic marketing efforts which determine how services and products are successfully marketed. To effectively achieve marketing goals, firms need to learn about and understand the various internal and external issues facing them. This understanding is essential, and for those seeking guidance, marketing dissertation help can provide valuable insights. The report, therefore, presents a situational analysis of Starbucks Corporation where the internal and external marketing environment of the firm is analysed. Starbucks is headquartered in Seattle, Washington, the United States (Starbucks Corporation 2017 ). The company is a world leader in retailing specialty coffee and currently operates in over 75 countries worldwide (Starbucks Corporation 2017 ). Starbucks purchases and roasts high-quality coffees which are sold along with tea, handcrafted coffee, and other beverages as well as fresh food items. The strategic tools for analysis used include SWOT, PESTLE, and Porter's Five Forces analysis.

SWOT Analysis for Starbucks

Strengths (Internal strategic marketing factors)

The internal strategic factors are primarily concerned with the company's marketing environment. Starbucks is a top ranking as well as strong and popular coffee brand the world over. Also, the company boasts an ever-growing consumer population who prefer the company products to the competition because of high-quality and famous brand image. Coupled with an extensive supply chain worldwide, Starbucks has a robust and comprehensive supplier network implying that customers can always get the variety of products they seek. Additionally, Starbucks has grown to acquire other firms in the industry including Teavana, and Ethos Water among others to increase its global market share (Starbucks Corporation 2017).

Weaknesses (Internal strategic marketing factors)

Despite having the strengths indicated above, Starbucks also has some internal inadequacies which bring about challenges to the company’s marketing efforts. The weaknesses under consideration undermine the effectiveness of the company's marketing strategies and could, therefore, lead to inefficiencies in marketing operations (Helms and Nixon 2010). The primary weaknesses include higher, than the competition, prices of products and services, products which are easily imitated by the competition and the fact that the said products are produced based on generalised standards. General corporate standards, as a basis for most of the company's services and products, make it difficult for Starbucks to design and conduct appealing advertisements to the dynamic cultural practices of different markets. Consequently, it becomes challenging to market the company products when other companies can easily imitate them.

Opportunities (External strategic marketing factors)

The Starbucks Corporation can employ the advancement in new marketing technologies to achieve its strategic marketing goals. The advanced internet and other communication technologies provide a conducive environment for Starbucks to strategically market its products and services globally (Narula 2003). Also, strategic alliances are possible ways of diminishing competitive forces which undermine the company’s competitive advantage. The company is also faced with expansion opportunities, to new markets which are a conducive environment for popularising the Starbucks Coffee brand.

Threats (External strategic marketing factors)

All of the three major threats facing Starbucks are as a result of growing competition in the food and beverage industry (Euromonitor 2017). The products are difficult to market when their prices are higher than the competitions. Additionally, the fact that the competition can easily imitate them, marketing becomes challenging because the brand could appear similar to those of the competitors in the industry. Lastly, recent movements in different countries which advocate for independent coffeehouses threaten the marketing campaigns of the company. In areas where the movements are strong, the company is most likely to face adverse challenges in executing its marketing plans.

PESTLE Analysis for Starbucks Corporation

The pestle analysis is useful to the enterprise in understanding the various external factors that should be addressed while formulating marketing strategies and policies. The factors are discussed as follows:

Political factors

The primary political issues facing the company in its different countries of operation are concerned with regional markets’ integration, government support to businesses through improvement of infrastructure and government regulations (bureaucracy) in the developing countries. Regional integration, which is the recent trend for most regional economic blocks, and increased government support for businesses are favourable political factors for the company (Gillespie 2007). The primary challenge Starbucks is facing is the bureaucratic rules (too much red tape) and business regulations in developing countries. The above is a hindrance political factor to the corporation's operational efficiency.

Economic factors

Declining unemployment rates in the developed countries, like the UK, and the growth of these economies like in the Middle East are among the primary economic factors shaping the company’s marketing environment (Euromonitor 2017). The factors provide opportunities for the company to extend its operations globally to the growing economies. The factors mentioned are an opportunity for Starbucks to benefit from increasing revenues because of growing purchasing power of its existing and potential customers. Despite the above, the company still faces some challenges as far as the cost of labour is concerned. There is a trend of rising cost of labour worldwide, and this is a threat to the company because it is likely to affect the costs of operation adversely.

According to the World Vision (2014), there have been rising concerns that coffee farmers around the world receive an insignificant percentage (7% – 8%) of the total retail price of processed coffee as their payments. The above has led to the farmers to languish in poverty raising concerns over the ethical production of coffee World Vision (2014). That is, companies dealing with coffee trade should ensure that the coffee products they sale are as a result of fair trade and ethical cultivation practices. Therefore, the company operates in a modern economic environment where the cost of operations rise because of fair trade where farmers need to be fairly compensated. The international standards regarding the ethical cultivation of coffee and dealing with fair trade coffee has influenced Starbucks to adopt accountability and transparent practices in dealing with suppliers (Starbucks Coffee Company 2017). Therefore, in its marketing strategies, the company has to take into consideration, the ethical cultivation and fair trade coffee standards to succeed in marketing its products. This is because every consumer of coffee in today’s modern world will be motivated to purchase a fair trade cup of coffee as compared to other types of coffee (Fairtrade Foundation 2017).

Social factors

As regards to the sociocultural factors that influence the company's marketing environment, a growing coffee culture, and the expanding middle class provide marketing opportunities for the firm. Around the world, there is a growing health consciousness regarding the fact that coffee consumption is a healthy feeding habit (Starbucks Corporation 2017 ). The three identified social/cultural factors present opportunities for the company to shape its marketing strategies around the discussed perceptions. Therefore, the company could market its products as healthy and ones which conform to the modern culture as far as coffee consumption is concerned.

According to Al-Taie, et al. (2015), individuals are changing their feeding habits and lifestyles by moving to organic foods which have been facilitated by growing health and environmental awareness. The high rates of consumption of organic foods imply that the company is faced with a challenge to ensure that all of its products adhere to organic standards. The above social factors can be considered as the main reasons why Starbucks is concerned with the reduction of agrochemical use the production of coffee (Starbucks Coffee Company 2017). The above are critical factors influencing the marketing strategies of Starbucks which should take into consideration the shifting lifestyle of consumers.

Technological factors

In general, the technology advances witnessed in today's world provides the company with significant opportunities to create a conducive environment for marketing. New technologies, particularly digital innovation, are a chance for the business to design and create technologically oriented marketing strategies. Technology will enable the company to operate efficiently, and at the same time effectively communicate its products and services to consumers spending less than before (Song 2012).

Legal factors

Among the major legal factors affecting the marketing environment for Starbucks are safety regulations, regulations on GMO products, particularly in the U.S. and employment regulations’ increase. The implication of the above is that the company, to perform well and improve in performance, it has to adhere to the product safety, and GMO regulations. The above is important to avoid civil and criminal cases which might lead to losses. The increasing regulations regarding employment in different regions also affect the company's employment policies and have an impact on its marketing strategies as well because, in every market, the company has to employ some local marketers (Koehn 2002).

It is important to that the legal environment is concerned with government, international, and other independent certification and accreditation bodies regarding lawful business operations. Therefore, from the perspective of coffee business operations, the legal factors influencing the operations of Starbucks can give rise to some of the economic and environment factors affecting the company’s operations. In this case, we are concerned with standards and regulations regarding fair trade coffee and the ethical cultivation/production of coffee. The company should adhere to fair trade practices which ensure that there is greater equity in the international coffee trade through transparency and respect. The legal factors have influenced the company to adopt fair trade practices in its supply chain, ensuring that it ethically sources its coffee (Starbucks Coffee Company 2017).

Environmental factors

The growing trend regarding sustainability in business, support for responsible sourcing and the need to produce environmentally friendly products are critical factors impacting on Starbucks’ marketing environment. Governments and businesses around the world have shown greater concerns on the need for businesses to be sustainable as regards to environmental management. Therefore, the company has to take the concerns into consideration and ensure that its operations have no or insignificant impact on the environment. Therefore, the company should be socially responsible in producing its products (use environmentally friendly production methods) and be selling the said products (using packages that can be recycled) (Schwartz and Carroll 2003).

The growing concerns of environmental conservation can also be a factor influencing the popularity of fair trade and ethically cultivated coffee (Al-Taie, et al. 2015). From the environmental perspective, Starbucks faces a marketing environment which is required to adhere to environmental standards promoting the safety of the human environment. On the same note, the company has taken the role of being an environmental leader, ensuring that coffee production is environmentally friendly thereby encouraging biodiversity preservation (Starbucks Coffee Company 2017).

Porter’s Five Forces Analysis for Starbucks

Competitive rivalry

The competitive environment for Starbucks is composed of many firms, and low switching costs which are strong forces as far as competitive rivalry for the company is concerned. Companies like Dunkin Donuts, McDonald's and others in the industry are aggressively competing with Starbucks. Also, it is easy for the Starbucks' customers to purchase coffee products from other companies, mainly because they are highly priced at Starbucks (Roy 2011).

Bargaining power of customers

The company’s customers have a very high bargaining power because of the availability of substitute products (Euromonitor 2017). Also, customers find it affordable to go for alternatives hence a competitive disadvantage for Starbucks. Therefore, the availability of substitutes and low switching costs for the consumers are among the primary factors that increase the bargaining power of Starbucks’ customers.

Bargaining power of suppliers

The company is facing the weakest supplier bargaining power force because of the insignificant influence of the said suppliers on its operations. The above is because of the highly differentiated suppliers to the company and that its supply chain is enormous as well as utilising services of small-sized individual suppliers (Starbucks Corporation 2017 ).

Threat of substitution

As discussed before, the company’s products have many substitutes in the market hence Starbucks experiences the strongest substitution force in the market (Koehn 2002). As discussed in the SWOT analysis, some of the weaknesses and threats for the company are related to high prices for its products as compared to low prices at the competition. Therefore, because of the availability of lowly priced substitutes and low switching costs for the company’s customers, Starbucks faces a significant threat of product substitution.

Threat of new entrants

It is costly to develop a brand in the consumer industry and that opening a new firm is also expensive because of high costs of doing business (Koehn 2002). Given the above, the company is facing a considerably weak force regarding the entry of new firms into the industry.

Conclusion

The selected internal and external factors are the ‘Starbucks' popular and strong brand' and ‘economic factors' from the SWOT and PESTLE analyses respectively. For the company to effectively market its products, there is the need to set the right price for the high-quality product, sell in the right place, and also promote the products through advertising. Having a popular and strong brand implies that most of the customers prefer the company's products in the market. The above is a strength for the enterprise regarding the execution of its marketing strategy. With a strong and popular brand, it is easy and less costly for Starbucks to market its products thereby can effectively promote, and sell the products in many places. Consequently, the company only needs to use a few people as marketers and sales representatives, because the brand is already popular/developed. Regarding the physical evidence aspect of the seven P's of marketing, the popularity of the brand allows the company to imprint the brand on every packaged product. The fact that the brand is already strong and attractive, pricing is no longer considered to be a major factor in influencing Starbucks' customers purchasing decisions. The above is among the various factors that affect the company to price products higher than most of its primary competitors (Perrey and Spillecke 2013).

Regarding the economic environment, it is evident from the analysis that, the company is faced with positive economic factors. The factors allow the firm to grow through expanding the sales and distributions of its products. Therefore, as regards to the marketing strategy, because of favourable economic factors, the company sets high commodity prices and strives to sell the products in markets of different countries. Despite the above, Starbucks faces challenges regarding the employment of people who are responsible for running and managing the processes through which quality products are designed and sold to consumers. Therefore, the increasing costs of labour in the world economy are likely to influence the high prices of goods (Perrey and Spillecke 2013). The costs of operations could also be high because of high costs of labour and thus adversely impact on promotional activities. The above is because the corporation can cut spending on promotion (because the brand is already developed) and meet more costs of production. The efforts to reduce costs also adversely impact on the company's marketing strategy regarding the employment of adequate staff to market and advertise (promote) its products. Given the critical analysis, it is evident that the selected factors are crucial to Starbucks performance. The company, therefore, if can adequately address the said factors, performance is likely to improve. Whereby the factors are not well understood and considered in strategy formation, this can lead to dwindling performance.

References

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