TABLE OF CONTENTS

S. No. Description Page No.

1. Introduction of Industry 1

2. Porter Five Forces Industry Analysis 2

3. Starbucks- Introduction 4

4. SWOT Analysis 7

5. Marketing Mix 8

6. Generic Strategy Model 9

7. Product Description 10

8. Brand-Equity Model 12

9. Success Factors 13

10. PESTEL Analysis 13

11. BCG Matrix 16

12. Competitor Analysis and Recognition 17

13. Recommendation 18

14. Conclusion 19

15. Bibliography 20
  Coffee Shop Industry

“Coffee shop provides the friendly and comfortable environment to the customers, where
customers can get quality food and coffee; the efforts are there to provide the entertainment
and best services at the reasonable prices, to all the stakeholders

People across the countries are becoming addicted to coffee; coffee is in business from past
several years and coffee chains are becoming popular among the people of different age
group, where people can go and enjoy coffee.
Coffee is in trend; around 30 million of the Americans are drinking coffee on the daily basis.
There are expected increases in the coffee prices, as the demand is increasing day by day.
The productivity and success all depends on “does the coffee shop understand the proactive
risk related to the consumer choices, taste, and preferences?” If not then there could be long-
term issues and financial losses.

Maturity and trends: In the coffee industry, there is the considerable market power; the
industry is at the maturity stage, there are many competitors in the market, including,
Starbucks and Dunkin donuts, they are getting about 60% of the market share in the coffee
industry. People in the US prefer the coffee consumptions, people are shifting towards the
healthy eating, and therefore, per capita, coffee consumption is expected to increase in future
(Grant, 2016).

And whenever coffee shops are discussed, “STARBUCKS” is a place called heaven for it.
With apparently good marketing strategy and goodwill, Starbucks has achieved recognition
in this industry.

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  PORTER FIVE FORCES INDUSTRY ANALYSIS

“LOW THREAT OF NEW ENTRY” “MILD BARGAINING POWER OF

BUYERS”
 New Companies need to
spend so much on branding.
Threat of  Product differentiation is low.
 Have to work much for
New Entry  Switching cost is low.
product differentiation.  Buyer is involved in quality
 New entrants need to invest service only.
high to meet funds of  Buyer has the perfect
Starbucks. knowledge of the product.

Supplier Competitive Buyer

Power Rivalry Power

“HIGH BARGAINING POWER OF SELLER” “LOW THREAT OF SUBSTITUTION”

 Industry is important to the  Better price performance.

customers.  Low cost of switching with
Threat Of various satisfactions.
 High quality with kept secret
ingredients.
Substitution
 Very less substitutes.
 Highly fragmented sector.

“MILD COMPETITIVE RIVALRY”

 Low fixed cost.

 Slow growth of industry.
 Branding creates a massive success in operating.

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 STARBUCKS

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  Starbucks Corporation

Headquarters Seattle, Washington, U.S.

Revenue for 2017 US$ 22.387 billion

CEO Kevin Johnson

Total Stores 28,218

Company Started March 31, 1971

Product Sold include Beverages, Pastries, Whole coffee beans

Bowker recalls that Terry Heckler, with whom Bowker owned an advertising agency,
thought words beginning with "st" were powerful. The founders brainstormed a list of words
beginning with "st", and eventually landed on "Starbo", a mining town in the Cascade Range.
From there, the group remembered "Starbuck," the name of the chief mate in the book Moby-
Dick. Bowker said, "Moby-Dick didn't have anything to do with Starbucks directly; it was only
coincidental that the sound seemed to make sense."

Mission Statement in 2008: “To inspire and nurture the human spirit – one person, one cup
and one neighborhood at a time.”
With the impact on coffee, partners, customers, stores and neighborhood the company also
focuses on the environment factors like measuring and monitoring progress to look out for
the efficiency and encouraging every customer to employee to work for environment benefit.
Starbucks has agreed to a partnership with Apple to collaborate on selling music as part of
the "coffeehouse experience". In October 2006, Apple added a Starbucks Entertainment area
to the iTunes Stores, selling music similar to that played in Starbucks stores.
Company is having objective to establish Starbucks as the most recognized and respected
brand in the world.
“Starbucks believes that every dollar earned passes through employees’ hands”. As the
employees are the only great relation of interaction and best quality service that is being
served to the customers.
Current Strategies Using:
 Market Penetration
 Product Development

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 Employees We seek out and engage partners who are as diverse as the communities
served.
Customers Aim to provide an exceptional customer experience by connecting with
the customers in a culturally relevant way.
Community Invest and save all the community ethics as it’s our Moral who establishes
a business.
Suppliers Through supplier diversity program, increase relation with minority and
women-owned suppliers.

LOGO is the important factor in branding, it helps consumer to identify the brand.

The company started with their logo of an image of a "twin-tailed mermaid, or siren as she's
known in Greek mythology". The image also had a rough visual texture and has been likened to
a “Melusine”. The image is said by Starbucks to be based on a 16th-century "Norse" woodcut,
although other scholars note that it is apparently based on a 15th-century woodcut
in Dictionary of Symbols. With upcoming growth and ruthless feedbacks for inappropriate logo,
in 1987 the logo was edited with hair in front.

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In 1992, the logo was further touched and the tails were cropped. In January 2011, Starbucks
announced that they would make small changes to the company's logo, removing the Starbucks
word mark around the siren, enlarging the siren image, and making it green.
With not much of a reference to the coffee, the sea mermaid has prompted to be a logo
representing the finest coffee brewed in the world till this century.

 Timeline:
With the opening of first store in the market to becoming the most famous coffee store
throughout the world, Starbucks has achieved a great and impressive timeline when inculcated.

1998: 2000:
1971:Starbuck Extends the Acquires Tazo 2015:
opens first Starbucks brand Tea. Launches Cold
store in into Brew iced &
grocery channel Howard Evolution Fresh
Seattle’s Pike Schultz left
Place Market. s across the handcrafted
U.S. Strabucks smoothies.

2006:
1996: Launches the 2012:
1984:
Begins selling industry’s first Introduces
the first
bottled paper beverage Starbucks®
Starbucks Caffè
Frappuccino cup with post- Blonde Roast.
Latte is served.
consumer
recycled fiber.

1991: program 2007:

first licensed 1992: makes 2 2008:
airport store at Completes percent milk Chairman
Seattle’s Sea- initial public the new Howard
Tac International offering standard for Schultz returns
Airport. (IPO). espresso as CEO
beverages.

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  SWOT Analysis

Strenghts:
Expansion in retail operation.
Product Development and quality service
Employees Stock Ownership plan.
Product differentiation.
Peaceful environment.
Employees training benefit.
Weakness:
Lack of employee compensation and benefit.
Sales saturation.
Less spending on advertising.
Decrease in sale of per store.

SWOT
Opportunities: Threats:
Direct relationship with coffee farmers.
Anti-Globalization movement.
Unroasted beans.
Less profit from Joint Ventures.
Espresso bar concept.
Substitutes.
Providing organic product.
Misuse of brand name.
Market expansion(Pacific, North West & California,
Boston) Labor and real estate prices.

OUTCOMES:

1. Use Espresso bar concept in the world market which will ultimately differentiate the
product from other coffee providers.
2. Can create customer loyalty by adding extra after sale services.
3. Avoid misuse of brand name by using Employee Stock Ownership Plan.
4. Increasing sales my selling out and developing more advertisements.

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  4 P’s Of Marketing Mix

 Starbucks Coffee Company’s Products

The company adds or modifies product lines, with the aim of expanding its market reach and
growing its market share. The following are the main categories of Starbucks products:

1. Coffee
2. Tea
3. Baked goods
4. Frappuchino
5. Smoothies
6. Other foods and beverages
7. Merchandise (mugs, instant coffee, etc.)

 Place in Starbucks Coffee Company’s Marketing Mix

Starbucks offers most of its products at cafés or coffeehouses. However, there are various
other places or channels of distribution available for these products. In this case, the
following are the main venues or places that Starbucks Corporation uses to reach its target
customers:

1. Coffeehouses/Cafés
2. Retailers
3. Mobile apps

The company offered some of its products through its online store. This approach served as a
major integration of e-commerce into the company’s strategies. However, Starbucks ended
its online store operations in 2017. The strategic change reflects the company’s shift to focus
on in-store experience in brick-and-mortar coffeehouses. Nonetheless, some of Starbucks’
merchandise items are available through retailers. On the other hand, mobile apps allow
customers to conveniently place their orders online so they could easily get their food and
drinks at the company’s coffeehouses. This part of Starbucks’ marketing mix shows how the
firm adapts to changing times, technologies, and market conditions.

 Starbucks Promotions (Marketing Communications Mix)

Starbucks Corporation promotes its products through interpersonal relations and
communications, although advertising is also part of the promotional approach. In this case,
Starbucks’ promotional mix is as follows:

1. Word-of-mouth marketing
2. Advertising
3. Sales promotions
4. Public relations

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Starbucks became popular primarily through word-of-mouth marketing. In the marketing
mix, word-of-mouth usually focuses on providing the best customer experience in order to
encourage people to spread positive words about the business. The company also advertises
its products through television, print media, and the Internet. Sales promotions are used in
Starbucks Rewards, which is a program involving freebies that customers can avail after
purchasing a certain amount of the company’s products. The corporation infrequently uses
public relations, which has not always been successful for the business. The company focuses
less on advertising, which is a downfall eventually.

 Prices and Pricing Strategy of Starbucks Coffee Company

Starbucks uses a premium pricing strategy. In the marketing mix context, this pricing
strategy takes advantage of the behavioral tendency of people to purchase more expensive
products on the basis of the perceived correlation between high price and high value. The
company’s coffee products are more expensive than most competing products, such as
McDonald’s Premium Roast. Through this pricing strategy, Starbucks maintains its high-end
specialty image. Still, the company strives to develop and actually provide high quality
products and satisfactory customer experience in its coffeehouses. This part of the marketing
mix directly relates to Starbucks Corporation’s generic competitive strategy, in helping the
business maintain its premium brand image.

Differentiation: Good research, Cost Leadership: Starbucks follows

development and innovation.ability this concept as it has access to the
to deliver high-quality products or capital needed to invest in
services as they focus on quality technology that will bring costs
and not the price. down.

Generic Strategy
Model

Differentiation Focus: Good Cost Focus: The Starbucks focuses

research, development and
innovation. Effective sales and
marketing, so that the market
understands the benefits offered by
the differentiated offerings.
more on the diffrerentiation than
the cost as the comapny focuses on
creating the branding more than
the revenue objective. And also it
got broad market strategies.

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 Brand Equity Model

The concept behind the Brand Equity Model is simple: in order to build a strong brand, you
must shape how customers think and feel about your product. You have to build the right type
of experiences around your brand, so that customers have specific, positive thoughts, feelings,
beliefs, opinions, and perceptions about it.

Salience: Starbucks satisfied the demand of people’s high quality coffee products.

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Performance: Starbucks baristas, enthusiastic of coffee, were one of the key aspects of success
in performance level. Of course, Starbucks’ wide range of quality coffee bean offerings with
stability in supply and taste was imperative in satisfaction of this level.

Imagery: Starbucks coffeehouses are seen as a convenient place to get good coffee and have a
little snack.

Judgment: Starbucks’ continuous offering of high quality coffee drinks along with supporting
products such as desserts, snacks and made it ”the number one” in the world.

Feeling: Starbucks coffeehouses provide a relaxing, convenient environment to the customers.

They feel Starbucks as a “personal treat” for a refreshing break or a place to relax. Therefore,
people feel it as a comfortable, social gathering spot.

Resonance: Starbucks became a “Third place”, bridging workplace and home, for its highly
loyal customers.

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 Some Noticeable Key Factor of Success

1. The combination of knowledge and enthusiasm in its Baristas helped Starbucks

greatly in creating a loyal customer base. As this enthusiasm encourage advertising
through word-of-mouth and it also increases the company’s goodwill as the more
good things are said, a good image is created among the customers.
2. Offering high quality coffee when the coffee industry was at a fall with cheap rate and
low quality coffee service. This increased the customers’ interest again in the coffee
service market.
3. The third point for Starbucks’ success is the cozy, relaxing coffeehouse environment.
As Howard Schultz says, ”each Starbucks store is carefully designed to enhance the
quality of everything the customers see, touch, hear, smell or taste”.
4. The constant innovation and investment is another key aspect as innovation is the
necessity of success. Starbucks invented a special vacuum packaging system called
FlavorLock.
5. The company recruited senior executives from innovative corporations such as Nike,
Macy’s and Deloitte & Touche, enabling fresh and creative perspectives.
6. Even critics agree that Clover was one of the successful equipment preserving and it
enhances the taste of the coffee bean.
7. The company overtook various brands like Ehos Water, Product Red, Reconstruction
of New Orleans and Sparkhope.

 PESTEL Analysis

 Impacts of Political Factors on Starbucks

The main political factor is about sourcing the raw materials. This has gathered a lot of the
attention from politicians in the West and from the source countries. For this reason, the
company wants to adhere to social and environmental norms. It is willing to follow the
sourcing strategies. It gives importance to fair trade practices.

Another impact is the need to follow the laws and regulations in the countries from where
Starbucks buys the raw materials. Activism and increased political awareness in developing
countries have made his essential.

The regulatory pressures within the home market in the US are also a factor. Multinationals
based in the US are now subject to greater scrutiny of the business processes. The company
must monitor political stability within the country as well.

Some other factors to consider are:

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  Tax policy
 Employment laws

 Impacts of Economic Factors on Starbucks

The ongoing global economic recession is the prime external economic driver for Starbucks.
As I already mentioned, this factor dented the profitability of Starbucks. This has convinced
buyers to shift to cheaper alternatives. As they did not quit buying coffee, Starbucks should
seek an opportunity here.

The company has to deal with rising labor and operational costs. The inflationary
environment and falling profitability is causing a lot of stress.

Some other economic factors which can affect Starbucks are:

 Local currency exchange rates

 Local economic environment in different markets
 Taxation level

 Impacts of Socio-Cultural Factors on Starbucks

As already stated, Starbucks can offer cheaper products but it might have to sacrifice the
quality. This is the main socio-cultural challenge that the start-up faces. It will expand
consumer base to include the buyers from the lower and the middle-income tiers.

The “green” and “ethical chic” consumers are also concerning. They fret about social and
environmental costs of the brands. Starbucks has to be aware of this trend.

The baby boomer generation is retiring. This means spending by older consumers will
decrease. Now, Starbucks will have to tap the Gen X and the Millennials as customers.

Other socio-cultural factors to focus on are:

 Changing family patterns in USA and Europe

 Consumer preferences
 Changing work patterns
 Changes in lifestyles of population
 The level of education of the population in local markets
 Changing values among population

 Impacts of Technological Factors on Starbucks

Starbucks is in a good position to enjoy benefits of the emerging mobile wave. It’s
partnership with Apple to bring app based discount coupons is helping it ride the mobile
wave easily.

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The company introduced Wi-Fi capabilities in its outlets already. Internet is important to the
consumers. They can now surf the web and do work while sipping Starbucks coffee. This is
an added value to the brand. It enhances the overall consumer experience.

Starbucks is also enabling mobile payments. They are testing this in pilot locations in the US.

Some other technological factors to keep in mind are:

 Emergence of innovative technology

 Biotechnological developments
 Developments in agriculture

 Impacts of Environmental Factors on Starbucks

Many Starbucks business practices concern activists and international advocacy groups.
Even the consumers have expressed issues. So, the company should take these into account
to continue holding consumers’ trust.

Some of the other environmental factors Starbucks should worry about are:

 Environmental rules and regulations

 Environmental disasters in countries which produce coffee beans
 Global warming and other environmental issues in a global level

 Impacts of Legal Factors on Starbucks

Starbucks must ensure that it does not violate any laws and regulations in the home market
and countries from where they buy raw materials.

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  BCG MATRIX

SUMMARY

The Boston Consulting Group (BCG) matrix is enhancing a multidivisional firm’s efforts to
formulate strategies. This division decides to strengthen on pursuing an intensive strategy.
Division quadrant II identifies best long-run opportunities for growth and profitability. Star
division is high relative market share and high industry growth rate. In convince of
substantial investment to maintain or strengthen their dominant positions. Next in quadrant
III. Cash Cows with high relative market share position but compete in a low growth
industry, while this division will be managed to maintain strong position for as long as
possible.

Finally, in quadrant IV Dogs have low relative market share position and compete in a slow
or no market growth industry. This divisional are weak into internal and external position
and often liquidated, divested or trimmed down the retrenchment. Retrenchment can be best
strategy to pursue because many dogs bounced back, after strenuous asset and cost
reduction, to become viable, profitable divisions. In contrast, the highest scored is 3.5, and it
determinant that relative share position is HIGH.

Starbucks Coffee uses the following types of positioning:

 Mono segment positioning. The coffee chain giant targets premium customer segment
only i.e. individuals who are willing to pay extra for the quality of products and services
 Adaptive positioning. Due to the tendency of increasing consumer health awareness,
Starbucks Coffee developed coffee beverages with less calories such as Chai Tea Latte (103
calories) Caffe Misto (63 calories) and Iced Americano (11 calories)
 Standby positioning. Certain Starbucks beverages such as Frappuchino had to await
changes in the market for certain period of time to find demand.

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  Competitor Analysis and Recognition:

Since the beginning, Starbucks has been a different kind of company. One that is dedicated to
inspiring and nurturing the human spirit. Committed to serving the finest coffee, creating an
exceptional customer experience, and being a great place to work.

Globally, Dunkin’ Donuts is the biggest threat for Starbucks. Dunkin’ Donuts currently have
9,700 stores in 31 countries, and 3000 of those stores are outside US. Dunkin’ Donuts is also
focusing significantly on coffee business and it offers a wider variety of food complements
with coffee. Therefore, it presents a significant threat for those who prefer eating while
drinking coffee.

Starbucks is different from other coffee services as it follows and perfects itself in:

Market Penetration
Market Development
Product Development

100% Rating on the Disability Equality Index

One of the “World’s Most Admired Companies”
Fortune – 2009-2017

One of the “World’s Most Ethical Companies”

Ethisphere – 2007-2017

100% Rating on the Corporate Equality Index

Human Rights Campaign Foundation – 2015-2017

One of the “Top 10 Millennial Brands”

Adweek – 2017

One of the “World’s Most Valuable Brands”

Forbes – 2013-2017

Named a “Top Growing Global Brand”

Interbrand – 2017

One of the “Top 10 Military Spouse-Friendly Employers”

Victory Media – 2017

Howard Schultz, Starbucks Executive Chairman

One of the “World’s Best CEOs”
Barron’s – 2012-2017

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  Recommendation
1. Corporate Level: Reduce their price by producing a new product of coffee
using cheaper beans or may come out with special discounts promotions to
increase the sales. Starbucks’ coffee is world preeminent global brand.
Starbucks’ should decrease price of the coffee to face competition from
nationwide coffee manufactures. They also can do promotion or promote
packages of coffee set to impress customers, such as McDonald promoting
their product. If the challenge was met successfully, in all likelihood company’s
best years lay on the strategic road ahead.
2. Business Level: Large companies like Starbucks can effectively pursue Focus-
Based Strategy in conjunction with differentiation or cost leadership based
strategy. Being a lower cost store will increase the difference between St and
other stores. At present, Starbucks competitors are attempting to specialize in
the coffee business, therefore Starbucks must pursue focus strategy to increase
its strength.
3. Functional Level: Advertisement can develop through internet that services
convinced for users to access, give the brochures, do road shows, so that public
come to know more about Starbucks details. Market penetration and market
development will help to increase the sales and reduce the weakness in
Starbucks. Distribute packaging of Starbucks instant coffee will definitely
increase the sales as it is a demand from customers.
Introducing accurate missing level of the coffee in a tea bag style will increase
the sales at supermarkets. Packing it together with the guidelines on mixing
coffee beans and sugars with milk to result same taste of coffee will never
reduce the quality of the coffee. Providing proper steps to customer will make
a better quality of coffee instead.

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  Conclusion

To be successful in its international growth and expansion strategy, Starbucks needs to

have a strong innovation mindset and the ability to locally customize its product offer
and positioning of its stores. The brand has taken rapid strides towards implementing an
organizational wide innovation strategy by investing in new technology, redesigning
store layouts and investing in new concept stores.

In addition to improving the customer experience, which has always been the primary
focus area of the company, the future innovation focus areas increasingly need to be
around the product offering.

The company, without doubt, is a successful global marketer with significant experience
in entering and establishing themselves in new markets. But as it expands and grows, it
needs to reassess constantly and keep its ears close to the ground to understand
consumer preferences. Innovation and operational efficiency would be the bedrock for
Starbucks to continue to gain success internationally and also in existing markets.

Last but not the least, it needs to evolve and elevate the customer experience of drinking
coffee in its stores continuously. This is important because customers get educated very
quickly in today’s inter-connected world and their levels of expectation around basic and
hygiene customer experience is constantly being elevated. So, a brand experience that is
superlative today may just become a regular one tomorrow. Starbucks has to stay on top
of this curve to be continuously competitive and differentiated in the eyes of the
customer.

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  Bibliography

 Emre Kiratli. Starbucks: Managing A high Growth Brand, Case Study.

 www.starbucks.in/
 Theory Reference:-Harold Koontz: Essentials of Management
 Parnell, J.A. (1997). New evidence in the generic strategy and business performance
debate: A research note. British Journal of Management,8(2), 172-181.

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