Terms of Reference
This marketing plan looks into steering the Starbucks coffee company to be the best coffee retailer in the whole world, while maintaining the originality and observing the already laid down principles. The plan also focuses on keeping the pricing policies, while still diversifying on the market base and product range. This will promote the organization’s profitability, and hence, secure its future. The companies’ intentions in the near future also include upgrading the quality of its products and hygiene, creating a loyal customer base by improving their taste, as well as improving employee commitment and motivation by promoting their dignity. These objectives are intended to be achieved within five years assuming that there will be no extraordinary issues to hinder the plan (Paley, 2000).
Starbucks coffee company also intends to invest in ensuring that their products are more health oriented. The challenge is to achieve this without distorting the pricing policies which could have a significant impact on the customer base. Market share should be expanded to involve not only the wealthy and educated businesspeople, but also the average and low income earners. This category of customers is known to be the largest, and the diversifying market to involve them would ensure the company’s profitability in the future. The aim of motivating workers and promoting their dignity is also double faceted. This will ensure that working in Starbucks creates and develops careers just like working in any other large organizations. Employees’ motivation is also expected to multiply their productivity and increase the quality of services offered by the Starbucks coffee company. This will be extremely detrimental in attracting and retaining customers, hence beating the competition in the market (Mooradian et al, 2012).
Executive Summary
Starbucks grew from a small coffee shop to what one knows today as the Starbucks coffee company. This company has been referred to as the best retailer of coffee in America. The business was initiated in 1971 by Gerald Baldwin, Zeiv Siegl and Gordon Bowker in Seattle, Washington. The company has since then diversified into other foods and refreshment items that come with soothing music among other forms of entertainment. Today Starbucks coffee company operates almost seventeen thousand cafes located in fifty different countries within the United States, Canada and United Kingdom, accommodating almost thirteen thousand cafes.
Starbucks Company is currently focusing on expansion which means opening new retail cafes in different parts of the world. The company is also investing in the innovation of services, to be in line with the organization’s long-term objective. According to the organization’s chairman Howard Schultz, Starbucks company intends to create a chain of coffee shops that would be considered in America as a third place of spending time away from home and work. The idea is a place where people could meet and relax, while enjoying their favorite beverages. This place, therefore, seeks to provide a cooling point where individuals can come and leave all their frustrations. In a bid to achieve this, the company intends to undertake the following activities.
Business Mission
The company’s mission statement is to establish Starbucks as the best retailer of the finest coffee in the world, while still maintaining exceptionally high standards in all aspects of business. Their growth has always been guided by the following principles.
Starbucks coffee company is truly committed to the environmental leadership role which can be attained by developing highly creative and innovative solutions aimed at bringing about changes in the organization. They also strive to deal with only environmentally friendly materials by understanding environmental issues and sharing information with partners. The organization has also instilled some responsibility to the local environments. They also keep on measuring and evaluating the progress of such programs, and encourage partners to take part and share in them (Paley, 2000).
Starbucks’ success can also be associated with factors, like creating customer loyalty, being sensitive to the communities they serve, striving to attain a strong reputation not only in America, but also in the entire globe, placing its customers before the products etc. Their objective of making stores not only coffee outlets, but also relaxing points, has promoted the growth in customer base, which has made their target of twenty thousand dollar weekly sales for every store achievable. The organization is also aiming at serving the smaller markets surrounding the cities by opening small cafes in those regions. This is in line with expanding and diversifying their customer base to include the low and middle income earners (Mooradian et al, 2012).
External Marketing Audit
There are numerous environmental factors that affect Starbucks as a company. The external environmental factors can be categorized as social-cultural, economic and political (Kerin et al, 2009). These factors need to be properly addressed, if the organization is to achieve it objects. Economically, the organization must consider the cycles of the economy, since their demand is heavily dependent on them. A slight recession tends to badly affect this business due to its luxurious nature. Other problems include increasing cost of capital at the time that they are planning to expand their operations. This makes their financial manager particularly keen on designing capital structure, given that the organization operates at a low return on investment.
Political and legal issues are also becoming a point of concern due to venturing in different countries. This calls for a lot of interest in the legal frameworks of those foreign countries among other regulations that must be adhered to such taxation. The company also invests a lot in observing the social-cultural values, in order to blend well and compete with the local restaurants.
Starbucks serves an unusually extensive market in different parts of the world with their most recent expansions aimed at opening stores in both Egypt and Brazil. However, about 75% of their market is located within the United States, Canada and United Kingdom. These countries are responsible for the incredible growth of about 30% of the net earning every decade. A reported issued in 2006 showed that Starbucks enjoyed an almost eight billion income level, which puts them ahead of every other competitor. The company enjoys the lion’s share of market in the United States, but faces strong competition elsewhere (Mooradian et al, 2012).
Some of the company’s competitors include Sodexho Alliance, which mainly operates in the food industry, Caribou Coffee Company, Inc which also specializes in retail coffee and other beverages, and is considered the second best after Starbucks and the Tim Horton’s Inc in Canada, a quick service restaurant that has gained a lot of reputation in the country. There is also a lot of competition in the fast food sector, since these two seem to sometimes substitute each other (Ruud, 1987).
Internal Marketing Audit
The main objective linked to marketing is the global venturing. The environmentally friendly objective, coupled with the marketing goal to raise the sales revenue per store to twenty thousand dollars in a week, calls for several strategies.
The organization’s marketing mix is also designed to be in line with these strategies. Their product range includes brewed coffee, whole bean coffee and espresso. The beverages are also available, both hot and cold ones, and can be served with sakes, including sandwiches, Panini and salads. They also sell branded mugs and CDs as a marketing strategy.
The prices are always extremely competitive, and are also regulated according to the preferences of the customers. The company also has invested more in one-to-one promotion techniques with a lot of care not to allocated large budgets for promotion. They issue cards and gifts on occasions which have helped a lot in promoting their popularity. The market is segmented into three social classes, which include high, middle and low income earners. The organization wishes to serve all the segments without diluting the quality and standards of their products. This can be achieved given their superb and diverse knowledge on the coffee products. This strategy though has been pioneered in the three main countries (Paley, 2000).
SWOT Analysis
Just like any other business, Starbucks coffee company has its strengths, weaknesses, opportunities and threats. The appreciation of these factors in the company’s environment will help the management not only take some advantage of market opportunities , but also prepare for unfavorable environmental conditions. Some of the company’s strengths include the ability to take advantage of opportunities, due to their strong financial base. For instance, the company’s net earnings increased by 46% in 2004 which shows how reputable company was performing financially. This organization has also an excellent reputation globally, with its products being exceptionally well recognized. This has promoted its strong customer base and brand loyalty creation. The company is also among the most preferred by people seeking jobs, and this has made it easier to attract and maintain the best talents (Ruud, 1987).
The company, though, suffers from the following weaknesses. The organization has over relied on beverage innovation, which makes it particularly vulnerable to future market failure. The company has also invested extensively in the US, with about three quarters of its outlets being based in the country. They need to spread their risks by also investing in other countries. Employee’s efficiency in this company has not been optimal, which calls for better human resource management to improve their productivity. The company also operates with one of the lowest return on investment in the industry.
The company’s opportunities include the CD-burning technique that they use to provide customers with their own music CDs. The organization also can expand its revenues by investing in different countries of the world. Coffee is consumed in all countries and cultures of the world, and Starbucks coffee company has the capacity to expand its operations, which means that they can grow indefinitely, if are properly financed. However, the company faces several threats in the environment, from which the management is forced to keenly safeguard the organization. The market environment is highly dynamic, and there are no guarantees that in future people will still be drinking coffee. It could be replaced by new, upcoming beverages and leisure activities. The competition is also extremely stiff, with coffee shops being opened every day offering almost copycat services. The organization also faces a strong competition from restaurants, and ease of starting a restaurant of a coffee shop worsens the situation. The market in this industry is also known to be highly volatile due to weather and economic conditions. Increasing costs of raw materials have also challenged the ability to keep prices down. For instance, dairy products are becoming more expensive, and they are considered to be one of the most relevant materials in the beverages.
Marketing Objectives
Starbucks coffee company has outlined the following market objectives to help in steering the organization towards its overall goals. These objectives include;
Financially, the company intends to open as many stores as possible with the lowest cost, yet offering the same quality. Their estimated cost of opening a store is $315,000. They also have targeted $20 000 revenue for both established and new stores.
Core Strategy
The organization intends to diversify its customer bases to include the low, middle and income earners. This expansion strategy has called for investment in even small towns surrounding the big cities. The organization also plans to venture in different parts of the world, in order to become a global corporation. Currently, they are investing in Egypt, Africa and Brazil. Their activities in Europe are also being expanded. All these expansions areas are aimed at increasing the organization’s customer base both locally and internationally (Wisconsin, 2000).
The company uses its vast knowledge and experience in coffee products to beat competitors in the market. They are known to produce the finest coffee in the whole world, which puts them at an advantageous position over companies like Sodexho Alliance and Caribou Coffee Inc. This has always been the reason why people would prefer buying from their shops, rather than just eating from fast food stores and other restaurants. The quality that they offer is just exceptional.
Marketing Mix Decisions
The products offered by Starbucks coffee company include coffee beverages, like dip brewed coffee and whole bean coffee, which are the main products that the organization has specialized on. This has made the organization attain a high reputation for coffee products, due to its standards in roasting and processing the coffee. They also provide other cold and hot drinks and beverages to ensure that all the customer preferences are considered. Beverages could also be sold with snacks. These snacks are in most cases sold as fast food, and they include sandwiches, pastries and salads among others. Other branded products include music CDs and mugs (Wisconsin, 2000).
These shops are spread in more than fifty countries in different parts of the world. However, the United States, Canada and United Kingdom house three quarters of them. The company keeps prices as low as possible in all these countries. For instance, a person can have a drink with as low as three dollars, and it has also been made cheaper to take coffee in the stores where with one dollar one has a cup with subsequent refills going for half of the price. These innovative techniques were introduced to favor the low income earners and include them in the customer base (Ruud, 1987).
The promotional techniques include:
Seasonal induction has been reported as the best tactics of attracting customers. Though, the organization appears to use an expensive marketing strategy of one-on-one rather than electronic advertising, they also try to maintain promotional costs among other minimal costs.
Organization and Implementation
This organization has been considered one of the world’s most effective marketing organizations, due to its smaller divisions. Instead of a strategic marketing group, the company has a market research group responsible for collecting and analyzing data, a category group which develops new products and manages the menu, and a marketing group responsible for developing promotional plans on quarterly basis. All these divisions, however, collect information about the market to ensure that there are no emerging issues being overlooked.
The marketing is also supported by a student project team, ‘Stores of the future’ that was established in 1995. This team is mandated with coming up with suggestions about the organization’s future.
Control
Starbucks coffee company exercises several control measures to ensure that progress is in line with the set objectives. The management does frequent evaluation on the new established coffee shops, and sets various targets for them. The targets are unusually short-term to ensure that complete control is exercised, and stores do not lose track of their vision. Employees are also encouraged to set their higher targets, and compelling rewards are given to motivate them. This has ensured that the company, though with numerous stores all spread in different countries, achieves the performance it plans. This cannot be that easy with the level of diversity that they have achieved (Wisconsin, 2000).
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