Pearson BTEC HNC/D Diploma Business – UKCBC unit 4 : Marketing principles 3
1: Start your report by explaining two elements of Marketing Concepts Assignment based on the example of Starbucks. You are to prepare a SWOT analysis of the effective organization and explain the importance of using SWOT analysis as a marketing tool. Next present and evaluate the marketing objectives of Starbucks and explain how defining marketing objectives can help a business to develop marketing strategies.
This section will discuss the SWOT analysis and the business decision marketing objectives of Starbucks. The SWOT analysis is a very popular and systematic approach and it is also very appropriate analysis which helps the company to devise a strategy on the basis of the factors like the strength and weakness of the company and also recognizing opportunity and threat of the company (Amin et al, 2011). Analyses of the market can effectively be done by recognizing the strength and weakness of the company in the market and it will also help in identifying the poten
tial opportunities for the company where the company can expand and also the potential threat for which company can prepare itself (Yangdong et al, 2010). Apart from this, this section will also discuss the marketing objectives of the Starbucks. Marketing objectives is an essential part of any organisation as it gives direction to the people and the motive to achieve those objectives. This section of report will also discuss how marketing objectives helps any organisation in devising the perfect marketing strategies and principles for the organisation: –
SWOT Analysis of Starbucks
1. Sound financial records
2. Emerge as a number one brand in coffee house segment
3. The experience of Starbucks
4. Largest chain in the world
5. Effective employee management
1. Major profit comes from coffee bean price and business
2. High product pricing
3. Negative publicity
1. Large amount of supplier range
2. Uplift of many developing countries and economies
3. Diversified and large product range
4. Expansion of retail operations
1. Expensive coffee and other dairy products
2. Saturated market
3. Fierce competition
4. Trademark breach
5. Supply disturbance
Finding of SWOT analysis
- Sound financial records: the profitability of the company has been rising from past few years. The company saw a slowdown in 2008 but with proper strategies and planning the company revived from those losses (Civi, 2013). It is one of the most profitable businesses in the market.
- Emerge as a number one brand in coffee house segment: the brand value of this coffee house is very strong. People perceive it as number one coffee house and the quality of the coffee served is of very high quality and they also have a strong customer service. This brand is the most valued brand in the business decision making(Civi, 2013).
- The experience of Starbucks: people value the strong experience which they have while having a Starbucks coffee and the ambience of the coffeehouse which is cordial and with friendly staff the warm atmosphere cannot be compared with any other coffee house.
- Largest chain in the world: the company has its existence all over the world with twenty thousand coffeehouses in almost sixty countries (till 2013) (Civi, 2013). This makes it largest coffeehouse in the world.
- Effective employee management: the company also make sure that the employees are treated well in term of a range of benefits and higher pay in comparison to the competitors.
- Major profit comes from high coffee bean price and business: the major chunk of profitability come from the price of the coffee beans which is not in the control of the company and coffee prices are highly dependent on the coffee beans.
- High product pricing: the coffee offered by the company is great and is of very high quality also the customer experience is what stand the company apart from the competitors but the high price of the coffee is the main roadblock which comes in between the success of the company as the other competitors premium coffee price is lower than the Starbucks normal coffee (Civi, 2013).
- Negative publicity: there is always a debate about the company’s corporate social responsibility and many environmentalists complain about the lack of efforts by the company towards greenery and issues related to it.
- A large amount of supplier ranges: the company doesn’t produce coffee beans but they get it from suppliers which are mainly located in South America, Arabia and Africa. The company must increase it supplier network so that they can also import coffee from Asia.
- Uplift of many developing countries and economies: countries like China and India can be a major market for the company as coffee consumption is quite higher and there is less number of players in the form of competitors in the market (Ferrell, & Hartline, 2012).
- Diversified and large product range: the company must diversify in their coffee offering with the introduction of new products in the coffee business.
- Expansion of retail operations: the company also sell its products to various retailers apart from coffeehouse and franchise business (Civi, 2013). The company must explore this area even further with making the partnership with more retailers.
- Expensive coffee and other dairy products: the biggest threat is that the company has no control on prices of coffee beans and the dairy product which are the determining factor of prices of coffee.
- Saturated market: the market of the company is quite saturated in the developed countries. The competition is fierce and because of this the company is facing an intense competition in the market especially in developed markets. The growth of the company can face adverse effects due to this reason.
- Fierce competition: competition is also there from local café which offers great coffee at lower prices and the options which these coffee houses offer are to the customers is more suited to customers taste and Starbucks has to face intense competition from these coffee houses also as they target market share of this coffee house (Ferrell, & Hartline, 2012).
- Trademark breach: the company has to face many legal cases against them as they have too many people has complained against them for illegal use of a trademark which is detrimental to the image of Starbucks and also the company has to bear the cost of such cases (Ferrell, & Hartline, 2012).
- Supply disturbance: as the company export its coffee bean from various countries, the company has the threat to face political, economic and weather condition which can be a threat to the company.
2: Next present and evaluate the marketing principles of Starbucks and explain how defining marketing objectives can help a business to develop marketing strategies.
The mission of the company is inspiring people with the taste of the coffee they offer and it clearly says one person, one cup and one neighbourhood at a time (Ferrell, & Hartline, 2012). The company is in the business from more than twenty years now and it has reached its mature stage. So the company is now focussing on spreading its wings in international business activities and strengthening the international partnership because it is giving enormous opportunities to the company.
The objective to grow in an international market has helped the company various marketing strategies. The company appointed multilingual and multinational managers to work towards the worldwide expansion in an effective and planned manner (Slater et al 2010). The motive of these people are developing new business for the company, looking after financing and also planning new stores all over the world, these people are held responsible for operations management and logistics of the business and in the last the main motive of this group was promoting and training new managers internationally for managing business in various countries (Ferrell, & Hartline, 2012).
Marketing objectives is an essential part of any organisation and setting an objective is the core of the success and failure of the business. It is also important to understand that objective plays a very crucial part in setting marketing strategies. It is a part of corporate business objectives and it should be kept in mind while forming a strategy. Following are the various benefits of the marketing objectives: –
- Marketing objective provides a motive to the organisation and also ensure that all the functions and efforts of the organisations are targeted towards attaining those set targets (Slater et al 2010).
- Marketing objective also provides a direction of the employees.
- Marketing objectives is also a source of motivation for the leaders and employees (Slater et al 2010).
- Marketing objectives also provide proofs and support to the organisations when the success or failure of the project is evaluated.
SWOT analysis and marketing objective both are very crucial for formulating marketing strategies (Amin et al, 2011). In the case, Starbucks is going through major changes and they need to formulate a strategy which is effective and at the same time give support to the slow growth of the business. For which the task one has analysed the business from two angles. First a SWAT analysis is conducted which defined how the company can make use of opportunities and analyse the threats and weaknesses and take corrective measures in order to overcome the weakness and be careful from the weaknesses. The next section of the task discussed the advantages of marketing objectives and how marketing objective can help the organisation to devise some effective marketing strategies (Slater et al 2010).
STP marketing is a three step approach which can be defined as segmentation, targeting and positioning which help in building the marketing planning (Turnbull, & Valla, 2013). This process helps the business in formulating a marketing strategy which is more focussed on customer behaviour and his or her expected buying behaviour (Turnbull, & Valla, 2013). This section will discuss in detail about the micro and macro environmental factors which influence the marketing decisions in Starbucks. This task will also discuss most appropriate segmentation criteria which can be applied to the company in different markets. Then this section will also discuss in detail about the targeting strategies and finally, this section will cover and understand the importance of buying behaviour which affects the marketing activities.
1: Start this task by analysing three micro and three macro environmental factors influencing marketing decisions in Starbucks.
Following are three micro environmental factors which influence the marketing decisions:
- The supplier is very important part of the company since the coffee bean is not produced in the country but they are imported from countries like Africa, Arabia and South America. So the price of the coffee is highly dependent on the price of coffee beans which make it little expensive in comparison to the competitors like McCafe (Ferrell, & Hartline, 2012).
- Another important micro-environment factor which influences the marketing decisions are its employees (Douglas & Craig, 2011). The company spent a lot in training the employees and the company are also known for its work culture. The company’s success highly dependent on the experience they provide in the form of the service and for which efficient employees are very important (Ferrell, & Hartline, 2012). The company make sure that the employees are happy and satisfied and that can be seen in their performance and happy customers.
- The customer is another internal factors which are the most important factors and the basis of all the decision is the customer behaviour (Douglas & Craig, 2011) and their response towards the services and the product offered by the company.
As far as macro environment factors are concerned they are basically external factors like political, economic, social and technological factors. Following are three macro environmental factors which influence the marketing decisions:
- First very important macro environment factor id economic factors and features like recession have made a huge impact on the company. The company’s growth slowdown like any other company in 2008 and the impact of the recession did hit the company performance. It was when the company decided to major changes in their marketing decisions.
- A social factor is another which contributed the most to the marketing decision of the Starbucks (Ferrell, & Hartline, 2012). The company is the largest coffeehouse chain in the world and it is important to understand the culture before entering into the business in any country and the company exactly have to do that.
- Competitors are other aspects of the coffee market which help the company to take many crucial decisions. The coffee market is booming and the competition is fierce so the Starbucks has to make strategies keeping in mind the actions of the competitors.
2: After that propose which segmentation criteria would be the most applicable for Starbucks to use for their products in different markets.
Segmentation is basically a process of dividing the market into different segments based on customer behaviour and needs (Weinstein, 2013). The company’s segmentation criteria are discussed as follows: –
- Initially, the company visualised their potential customers in affluent people and well-educated customers but slowly they realised that coffee consumption is also very popular among youngsters and the less educated people (Ferrell, & Hartline, 2012). The company pushed their product among these segments also.
- The company usually open they’re a store in big cities because according to the company coffee drinker is usually found in this area and that too in large number.
3: Thinking about a range of products and services Starbucks offer to choose a targeting strategy for a one of them and propose a positioning strategy for this product.
Following are the targeting strategy and positioning strategy for the product offered by the company: –
- Since the local coffee market is getting very strong in many countries, the company mainly focuses on an amalgamation of two cultures by focusing on local taste and also promoting the American flavour of coffee all over the world (Ferrell, & Hartline, 2012). At the same time, they modify themselves according to the local taste as well.
- The company believes in the effective visibility of the coffee houses that is why they choose the most premium location in the country and also focus on the infrastructure and architecture of the coffee house. Not only this, they never introduce all the flavours in one go. Rather they introduce it one by one and this way each product gets the much-needed visibility and each product gets the chance to establish themselves
4: Finish Task 2 by demonstrating how buyer behaviour 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.
Buying behaviour is mostly concerned with the process which involves people buying tendencies and usage of product (Kotler, 2011). Buying behaviour is directly related to the designing of marketing activities and it is a major factor which contributes to marketing decision making. Be it any type of business a multinational coffeehouse or a local coffee house, understanding the buying behaviour become crucial for everybody. Organisations indulge in various activities like market research and survey to understand the customer’s inclination and the pattern of their response to various things and, of course, it also directly affects the marketing activities.
Factors like pricing of the product, it’s advertising, the complete packaging and the way the whole product is marketed affect the consumer buying patterns. Following are two incidences which manager of the Starbucks must consider: –
- Pricing: as discussed pricing to an extent is not in control of the company as it is impacted by coffee beans and dairy product and both these are outsourced (Kotler, 2011). The pricing of the basic coffee in Starbucks is higher than the premium coffee offered by McCafe. This does affect the buying pattern of the customers
- Local competitors: there are many local cafés functioning in multiple countries that know the taste of local people and their menu suits the taste and preferences of the people. So, the manager should first invest some time in understanding the local preferences and then modify the menu as per customer demand. Also social media plays a crucial role these days so the company must increase its reachability to the customer through various social media network. This networking helps in changing the buying behaviour of the customer.
Understanding the market is very important before establishing the business. It became even more important for a multinational company because they have to work even harder to know the taste and preferences of the people (Kotler, 2011). Initial few months are the trial months because, in this time, the customer just try the product and decide whether they like the product or not. Starbucks is spread worldwide and it is so popular because of this reason. They spent time in understanding their targeted audience and bring modifications accordingly.
In task 3 you will start analysing 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.
The marketing mix is the heart of any marketing strategies. Marketing mix helps in putting the right product or service in front of the customer, at the right time, at the right place (Kotler, 2011). Companies spent a lot of money and hard work in deciding a basic and simple question; what customer wants? All the elements should fall at the right place to change the mind of the customer and even if one element goes wrong, the complete marketing strategies will fail. The marketing mix is consisting of four elements or four Ps and these four Ps are product, place, price and promotion (Kotler, 2011). This section of the report will discuss the various marketing mix and how marketing strategies of Starbucks is affected by this.
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 the differences in products between Starbuck and different coffee shop. Provide at least two examples.
The USP of Starbucks is their unique taste and the quality of coffee beans. The company spent a lot of money in getting the best coffee beans making the coffee unique and very different from other coffee offered by other coffee houses. Also, the company also spent money in creating a perfect ambience for the coffee consumer where the customer gets the perfect atmosphere to have coffee with friendly staff (Ferrell, & Hartline, 2012). When people explain about the coffee of this company, they talk about the whole experience and that is what the main focus of the company is. The main motive is creating a perfect business environment with the perfect coffee so that people can sit and relax and have their coffee.
2: Next you are to explain distribution strategies used by Starbucks. Think about customers’ convenience and satisfaction in relation to distribution channels used.
The coffee houses are available all across the world and Starbucks coffee house is quite popular everywhere. It is quite obvious the distribution channel is quite strong (Ferrell, & Hartline, 2012). They import their coffee beans from specific countries like Africa, South America and Arabia. The company is also trying many manufacturers in various part of Asia as well so that the distribution channel can be strengthened.
Apart from this, the coffee beans and other products are also available in various retail store so that people can buy the coffee beans also to have the coffee experience at home. They have their existence all over the world and they specifically have worked on the visibility of the coffee houses at premium locations.
3: In the next part you are to analyse 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.).
Starbucks is known for employing a value based pricing strategy which focuses on earning maximum profits. The company conduct proper research and analyses techniques to decide the price. The price is set in a way that will not affect the buying behaviour of the customers and even attract more customers (Ferrell, & Hartline, 2012). The company follows profit maximization policies and a company decides the price of the product and the output level which generate the maximum profits. Usually, a company follows a strategy where they cut the price to attract customer but there are rare companies who are based on deep analysis and calculating the real customer foundation (Gordon, 2012). Starbucks in its complete lifespan never decreased the price. The price of coffee only increased and the increase in price has not impacted the buying behaviour. The company is more dependent on those customers who have a strong taste of the coffee and liked the quality the company offered (Civi, 2013). Many customers obviously switched but many stayed because the taste is what matter to them not, the price. The company stick and rather reinforced the premium image of the brand. They also applied price hike on specific flavours and the sizes instead on the complete menu.
4: Promotional activity is a must for every organization and behaviour. 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 company promotional strategy is something to study for. They have very few promotional advertisements for Starbucks coffee in newspaper, magazine or television advertisement (Gordon, 2012). Starbucks mainly depend on word of mouth promotion technique where the quality of product and the perfect ambience speak for itself. The company promoted the best services and these strategies helped the company to a great extent (Civi, 2013). The employees are trained in a way that they now just make the perfect coffee but also provide a legendary service in their language to the customers. This strategy includes various things like:
- Personalized service by knowing the customer’s names.
- Customized and specific coffee preferences.
- Knowing the customer’s work and nature of work.
- Also indulge in customer’s personal information like family and friends.
5: Finally at the end of this task you were asked to provide a short analysis of additional elements of the extended marketing mix based on the example of Starbucks.
The additional elements of the marketing mix are physical evidence, people and process. Starbucks provide physical evidence in the form of experience to the people which take back with them and this is the reason they come back to the same brand to have coffee. The company spent a lot on its people. They recruit and train the employees carefully. The company is known to be most ethical company and they make sure that the employees stay happy so that they can convert it into their performance. In the end process, include the perfect process which the company follow which the employees execute in making a perfect coffee and providing a perfect ambience to the customers.
The marketing mix is an essential activity for any small business enterprise and Starbucks follow it in a perfect way (Gordon, 2012). They make sure that no stone remains unturned and they cover all the aspect of marketing mix perfectly.
More than understanding the Marketing mix, it is more important to execute it perfectly. In this section of the report, we will discuss the application of marketing mix and how they are executed in practical. This section will also discuss the difference between the international strategies and the domestic ones.
1: To begin with you are asked to plan and prepare marketing mix for two different segments of the market in Starbucks. Use here an example of one existing segment and propose the second, new one. Design for both segments marketing mix plan (4P).
The existing segment of the Starbucks is the affluent class who can afford the price of the coffee the company offer. Following is the detailed discussion: –
- Product: the company offer a high-quality coffee and people come back because of the taste of gourmet coffee and the experience they have while having a coffee in the Starbucks.
- Price: the company never believed in decreasing the price and this existing class is ready to pay the price for the coffee the company offers.
- Place: the company always target a premium location of the city for building their coffee house.
- Promotion: the company believe in the word of mouth promotion and they don’t indulge much in another form of promotion because word of mouth promotion has made them the world-class company.
The new segment, which can be proposed for Starbucks, is the younger generation who have started exploring different taste and also look for a perfect hangout place. Following is the detailed discussion:
- Product: along with premium quality, the company must also try to make it tastier by adding various ingredients to it. The company must also focus on introducing more products which can attract the younger generation.
- Price: the price set should suit the young people pocket and it should also help them to bring more people to have this coffee.
- Place: the company as it is focused on premium location which is the main attraction for the young people.
- Promotion: the word of mouth strategy could also work in this case as this strategy is very strong in bringing more people and having the experience.
2: Your task is also to illustrate differences in marketing products and services to business rather than consumers. Next to Starbucks use here an example of another organization.
Marketing products and the services of Starbucks can be clearly compared with McCafe which is also very popular and quite different from Starbucks. McCafe sells little cheaper coffee and the class which have at McCafe is entirely different to that of people at Starbucks (Civi, 2013).
There is the difference in price, products and even the services are quite different in both the organisation. Starbucks service is more personalised while McCafe services relatively less personalised and professional.
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 Starbuck used to market their products internationally.
International marketing is quite different to that of a domestic one. The simple reason for this is while entering into a new market, the culture and taste and preferences of the customers completely differ (Luan & Sudhir, 2010). The company need to take into consideration the taste and culture of new market and modify accordingly. Following are two marketing strategies which Starbucks used to market the product: –
- The company analysed the local market and modify their menu accordingly according to the taste and preferences of the customer in that respective country.
- Another strategy which the company adopted to enter the international market is that Starbucks does not introduce all the products in one go. Instead, they focus on introducing one product at a time so that the customer can adapt the new product easily and quickly.
Application of marketing mix is the most crucial activity in the marketing process and of this is done in a proper manner than the company can succeed (Luan & Sudhir, 2010). So this step should be taken very carefully and after much analysis.
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