Executive Summary
In this report we analyzed business strategy of the world’s largest coffee and coffeehouse Chain Company; however the report concentrates of the company’s operations in Saudi Arabia. Although the company was originally incorporated in the United States, it has diversified its operations in Saudi Arabia and forms one of the most competitive coffee houses in the country. This marketing plan focuses on Starbuck- Saudi Arabian branch marketing objectives, goals, and tactical programs that the company can adopt to enhance competitiveness.
Introduction and organization history
Starbucks is a leading coffee and coffeehouse company trading in both ASDAQ Stock Market and. It has outlets in more than 55 countries. Jerry Baldwin, Zev Siegl and Gordon Bowker on March 30, 1971 opened the first Starbucks outlet in the United States of America; the idea to have a coffee chain was inspired by Alfred Peet who was them selling coffee and equipments; for the next five years after incorporation, the company remained at Western Avenue where they purchased coffee beans form peet.
The first strategy change in the company occurred in 1982 with the admission of entrepreneur Howard Schultz who suggested that the company should start selling coffee and espresso drinks; Howard Schultz was admitted as Director of Retail Operations and Marketing.
With the idea of the Director of Retail Operations and Marketing the company saw its first expansion and opened its first locations outside Seattle at Waterfront Station in Vancouver; later in the year the management had accumulated enough funds to establish other outlets at Illinois, Chicago, and British Columbia.
The first outlet outside North America has to wait until 1996 when an outlet was opened in Tokyo, Japan; in 1998 the company entered the U.K. market in 1998 after an $83 Million acquisition of UK Based Seattle Coffee company 60 outlets that it later rebranded to Starbucks. The company entered Saudi Arabian market in 2000, where it is located in different strategic places like Makah and Mecca.
The company has an elaborative sales and marketing team that is backed by wide research and development done by the company’s development team. However to remain competitive in the changing business environment, the company ensures it makes products that are consumer focused and those that improve the satisfaction of customers.
In line with customer relation improvement, the company in early 2008 developed an official website termed as community website that targeted getting responses and feedbacks from customers on their performance and how they can probably improve the same (Starbucks Corporation Official Website).
Starbucks Vision, Mission, and Objectives
To be able to manage its operations strategically, Starbucks is guided by well stated and thought vision, mission and statements; they are:
Vision Statement
In a letter to shareholders written by Howard Schultz and Orin Smith in 1996, Starbucks vision statement can be summed as “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Starbucks Corporation Official Website).
The vision statement offers the company the playing field and shapes the direction of its operation. When interpolating the statement, the company aims at improving its services and products for the benefit of its customers. Strengthening its brand name and ensuring that customer’s satisfaction has been attained is the main driving force that the company has.
Mission statement
Starbucks mission statement is aimed at inspiring good results among its stakeholders, the statement is: “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow” (Starbucks Corporation Official Website). The above mission and vision statement are attained by adopting a five stake approach where it focuses on its products (coffee and services), business partners, customers, supply chain stores, neighborhood and shareholders.
Objectives
As outline in the company’s corporate philosophy documents, the following are the objectives and operational goals that the company adheres to:
- To be the leader in coffee industry in the world by increasing its presence in different countries and offering high quality coffee to customers (the objective is attained through continuous process and products improvements).
- To innovate, invent, develop, and acquire new measures to catch the attention of potential customers and diversification of business through strategic alliances (this is attained through research and development mechanisms that the company adopts)
- To develop a platform for more innovations in the future and develop global logistics and marketing strategies
- To respect its employees and offer a pleasant environment for innovation as the company grows the wealth of its stakeholders (Joby 78-124)
Products and Brands
Starbucks provides different hospitality industry products with coffee being the main products; it has a variety of coffee brands to fit the demand of its customers, the following are the main brands and products of the company under different classifications:
Drinks: the company has a variety of drinks to its end users which include Frappuccino, Tazo tea, smoothies, Espresso beverages (this is the main drink), chocolate beverages, brewed coffee, bottled drinks and Kids drinks and others. Customers have the option of taking away the drinks or using them at the premises of the company.
Food: there are different categories of food served by the company although they fall under the category of fast food; they include bakery, Bistro Boxes, salads, sandwiches, Panini & Wraps, Ice cream, Yogurt parfaits, Starbucks Petites and hot breakfast. The foods can be eaten without and a drink or they can be taken with one or more of the company’s drinks.
Nutrition: these are foods and drinks that are made specifically for a particular category of people. They may be the sick or people who have keen interest on their health or the food they take. The nutrition foods include food nutrition, drink nutrition, delicious drinks under 200 Calories, favorite food under 350 calories among others.
Coffee: the company sells some blend beans brewing to customers of different tastes the following are the coffees that the company sells to its customers Whole bean Coffee, Multi-region coffee, Dark and specialty roast, Asia/pacific, Latin American, and Africa/Arabica.
Actual Customers
Starbucks roasts and blends coffee of different tastes and regions; the difference in roasting offers the company with the much needed difference in taste that make customers keen flocking in the outlets. The company target customers are families (adults and kids) when shopping together or when alone. For instance there are some products that are specifically made for children like Kids drinks while other are made for adults.
When looking at adolescence and teens, the company alongside coffee has ice creams and yogurts. On coffee lover, Starbuck is the place to be; the management outsources quality coffee beans from different sections of the world to offer present tastes to their customers.
According to the company’s website, the management is committed to offering high quality service and experience to customers in the efforts of remains competitive, customer management philosophy in the company is “We want you to enjoy your trip to Starbucks every time you visit the store” (Starbucks Corporation Official Website).
Market Segments
For an effective business operation, Starbucks segments its market in different approaches; a market segment is a homogenous subset of the main market, which share similar characteristics. Since a market segment is stimulated by similar innovations, selling and marking decision are made to affect the entire population of the market.
After segmenting a market, the next important move is to position the company’s products to get the best method of selling the products to the particular market. Different market segments calls for different approach to marketing thus with segmentation, then the company will know the right method to sells its products (Rakesh 12-123). The following are the main segmentation methods that Starbucks adopts:
Geographical location segmentation: according to the company’s financial statement of 2010, it has a total of 18,887 stores in 55 countries; the stores are situated in different parts of the world with 12,500 in the United States, over 1,200 in Canada and over 700 in the United Kingdom; there are other outlets in the Asian countries. When selecting the actual location for its outlets, the management ensures that it’s located in places that will be accessible by the target customers, they include in airports, in shopping malls, in town, and in populated places.
Demographic segmentation: Starbucks products cover’s deferent ages in the human life-cycle; there are products that target the youth, kids, and adults. The main reason for the wide variety of products is to ensure that it becomes a one stop shop where families can get their needs with ease.
Psychographic segmentation: with the differences in income and social classes, Starbucks has develops its products in a manner that can serve all spheres in the community; the main social classes that the company serves are lower lowers, upper lowers, working class, middle class, upper middles, lower uppers and upper uppers (Kotler and Kevin 56-89)
Starbucks Competitors
Competitors’ analysis is a strategic management tool that analyzes strengths and weaknesses of an organization in relation to those of its competitors. According to management gurus definition competitors are businesses in the same line of business (selling similar/same products) or businesses trading in substitute goods and/or services; they can offer similar products and have similar marketing, pricing, and comparable elements like the comparing company.
Starbucks Corporation has to contend with other coffee makers in Saudi Arabia as well as in other operational locations where it has an outlet; the following are the main competitors that the company has in Saudi Arabia: El Farouki Coffee Center (15% of retail volume sales in 2010), Al Najjar Co and Al Hamawi Coffee (13% and 11%, respectively in 2010).
El Farouki Coffee Center: El Farouki Coffee Center is the market leader in coffee sale in the republic of Saudi Arabia, the company in 2010 commanded a 15% retail market share to retain its dominance in the market. The company’s dominance in the market can be attributed to long stay in the market where it has established its brands to the consumers.
Najjar Co. In 2010, Najjar Co. was the second largest coffee seller in Saudi Arabia where it covered a market share of 13%; it was only second from El Farouki Coffee Center.
Al Hamawi Coffee: the company shares an 11% market share of the retail market of coffee in Saudi Arabia.
The above three companies are the main competitors of Starbucks and seems to have benefited from their long stay in the market. The main objective of undertaking a competitors’ analysis is to seek for sound information that can assist a company in effective strategy formulation, implementation, monitoring, and adjustment; this force determines market prices and profitability levels in the industry. Strong rivalry means that firms will try to outdo each other in price determination and eventually a price war will ensue.
Current position in the Market
Starbucks ensures that it has products that can meet the demand of its customers; the company is keen on increased awareness among customers and the rise of healthy eating habits among others thus it has nutritional sensitive products. When making products, the market segments must be carefully selected and products made to meet the demand of the segment.
Besides joint marketing and public relations, Starbucks draws on its chain operator’s allowing them a level of product flexibility t o suit the fast changing demographics and varied local tastes. The experienced management, tasters, blenders, and coffee beans outsourcers assist the company have quality products roasted at different heats, durations, and combinations. The following are the main classification of the company’s products:
Products
Espresso Beverages
Iced Caffè Mocha, Caffè Americano, Caramel Macchiato, Cinnamon Dolce Latte, Caffè Mocha, Caffè Latte, Espresso Macchiato, Caramel Macchiato, Espresso Con Panna, Cappuccino, Eggnog Latte, Espresso Shot, Flavored Latte, Iced Peppermint White Chocolate Mocha, Iced Salted Caramel Mocha, Iced Caffè Americano, Iced Cinnamon Dolce Latte, Iced Flavored Caffè Latte, Iced Peppermint Mocha, Iced Caffè Latte, Gingerbread Latte, Iced Caramel Macchiato, Iced Gingerbread Latte, Peppermint Mocha, Skinny Flavored Latte, Salted Caramel Mocha, Pumpkin Spice Crème, Pumpkin Spice Latte, Skinny Cinnamon Dolce Latte, Peppermint White Chocolate Mocha, and Skinny Caramel Macchiato
Drinks
Bottled Drinks, Chocolate Beverages, Frappuccino® Blended Beverages, Brewed Coffee, Starbucks Petites ,Tazo® Teas, Espresso Beverages Kids’ Drinks & Others, Smoothies, Hot Breakfast, Sandwiches, Panini & Wraps, Food, Yogurt Parfaits, Bakery, Favorite Foods Under 350 Calories, Bistro Boxes, Ice Cream, Salads Nutrition, Delicious Drinks Under 200 Calories, Drink Nutrition, and Food Nutrition.
Coffee beans
Latin America, Multi-Region Blends, Whole Bean Coffee, Dark & Specialty Roast, Africa/Arabia, and Asia/Pacific.
When coming up with the different products, the company engages the services and inputs of its market researchers. At product development stage the advises the company on the product that is needed in the market. Development aims at offering unique and innovative products to the markets. When product has finally been rolled out, the management ensures that the product is different from what the market is selling.
Product differentiation is another product strategy that the company adopts; with the product and the opportunity already established, the next step that a product should go under is development. When developing the product, what is important is to improve the quality of the product continually so as at any one point a company is ahead of its competitors in customer satisfaction.
Price
Price is a strong marketing tool that Starbuck has been keen on, the following are the pricing method that the company adopts:
Premium pricing
The method is used when targeting the upper-middle and upper-uppers class of the market segment; the pricing method adopted by premium pricing models is selling of products at relatively high prices than that offered by the competitor. The strategy is particularly effective with unique or new products in the market and those that offer higher satisfaction to customers.
Penetration Pricing and economy pricing
When using this method, Starbucks sets its prices at a low rate than that offered by the competitor; the aim of the approach is attack a large mass of people to the products.
On the other hand, economy class pricing model aims at keeping the bare price of commodities low; it uses organizational advantages to benefit the larger organization. The approach is mostly used by established organizations with good reputations; they also use the advantage they have to set prices, for example, they can use advantage brought about by economies of scale to set low prices.
Place
Starbucks determine its operational locations after considering where its target customers can be found. In Saudi Arabia the company has outlets in main towns and centers like Mecca, Khamis Mushait, Riyadh, Jeddah, Medina, Dammam, and Buraydah; these are highly populated cities where the company can get its target customers with ease. When in the cities, starbucks locates its outlets in shopping malls like Al Othaim Mall, Riyadh, Euromarche Shopping Centre, AlTahlia Shopping center, Andalus Mall, Jeddahbn, Khaldoun Plaza, Dammam, Marina Mall and Dammam, it also has outlets in main airports like Dammam, Jeddah, Buraidah and Medina (Madinah) airport. In order to ensure that products are available to consumers in perfect condition, the company has an effective supply chain management/logistic management strategy. The supply chain are molded to ensure that every outlet has adequate supply of coffee beans among other products to operate normally without defiict
Promotion
To ensure that customers are aware of the company’s products, whether an existing brand or a new development, the management embarks on various promotional campaigns.
SWOT Analysis
The following is a strength, weakness, opportunity, and threat analysis for Starbucks:
Strength
- Corporate ownership ownership
- Qualified, competent, and experienced leaders
- Effective customer management strategy and effective personnel management approach :Customers and employees feel honored
- high levels of ethics and integrity targeting offering quality services to consumers
- Diversified product portfolio: their simplicity and diversity in the delivery of food items in the menu
- Innovative new product development and packaging: consistency in service delivery
- state of the art restaurants that cater for both drive-in and sit-down customers
- strategic locations, strong brand name and chances of brand extensions
Weaknesses
- resistance to adapt new changes at times
- service delivery is slow sometimes due to high demand and customer base
- the slowing pace in adapting the usage of major debit and credit cards
- concentrating on the Christian culture can interfere with the targeted clientele from other religions
- Franchising form of ownership is likely to reduce the stability of the management.
Opportunities
- Nationwide expansion capabilities to other ethnic markets.
- Projected sales are expected to hit ten billion by the year 2015.
- The ability to compete with casual dining restaurants.
- Diversify operations into the growing ethnic markets such as the Hispanic and Asian-American market.
- Investing in high-tech facilities to facilitate efficiency in service delivery.
Threats
- substitutes from old players in the industry
- The changing cultures that is not conversant with the religious culture of the organization such as Muslims.
- demographic distribution of the targeted market is always changing
The external analysis of Starbucks
Competitive environment
The Saudi Arabian coffee market is dominated by three main companies as El Farouki Coffee Center (15% of retail volume sales in 2010), Al Najjar Co and Al Hamawi Coffee (13% and 11%). Despite the dominance Starbucks has been able to distinguish itself from other coffee houses by developing unique and identifiable characteristics. Innovation is the driving force behind the production and operation activities at Starbucks; the company has ensured that its operations are guided by state of the art technology to facilitate good business.
The advancement in technology include Smart network advantage, high broadband network to aid the usage of credit and debit cards in transactions and innovative restaurant scorecard The company is keen on customer satisfaction and human resources management which has enabled the company to cut down costs set aside for employee training and at the same time usability has been increased. Other key competitive policies/strategies by the company include efficiency, quality assurance, customer relation management, and continuous improvement paradigm.
Social cultural environment
The macroeconomic difficulties present a challenge to leisure, fast foods, restaurants, cafes in Saudi Arabia affect the business mode/strategy as adopted by Starbuck. The company is affected by economic meltdown of the world thus to remain afloat, the company has developed different approaches. In addition, low inflation reduces the possibility of firms passing on costs to consumers and thus minimizes price competition in the fast foods industry, effectively shifting the focus to product differentiation.
On a positive note Saudi Arabian demographic profile has also been changing; baby boomers are well into retirement, investing in holiday home. The main challenge that Starbuck has is that the culture of taking coffee in Saudi Arabia has not taken much of center stage, thus the company has to recruit some of its consumers.
Technological environment
The government of Saudi Arabia is very keen on technological improvement, the improvements are meant to offer good operating environment to organizations and other operators in the country. Taking this advantage, Starbucks has developed state of the art technology in its operations. Technology is used in areas like advertising, sales and marketing, product line automation, and other operational areas.
Economical environment
Despite the economic financial crisis of 2008, Saudi Arabian economical standing has been good with the country recording an increasing positive growth in GDP and purchasing power. The increased economic well being of the people is of much benefit to Starbuck as people can afford its products with ease.
Marketing Objectives & Marketing Strategies
Marketing goals
Undertaking an analysis of Starbucks mission, vision, and objectives, the company’s marketing goals or objectives can be summed as :
To develop quality products and services to our customers so as to reinforce good relationship with them
To be the leading coffee company in the world respected for its quality services, ethical business strategies, high innovation, technological invention and respect for customers and employees
To be a leader in environmental conservation policies and
To enrich the coffee lovers every day by providing quality and tastily coffees
Target markets
The company has wide range of customers in different parts of the globe; the determinant of where to place an outlet is determined by the potential of the place; however the company segments the market into many segments, the most selected segments are; geographic, demographic, and psychographic segment:
Geographical: It is operational in 25 countries and a pilot survey is ongoing to analyze the chances of expanding to Ukraine and Italy; the company has operating bases in Saudi Arabia Portugal, Austria, Belgium, GermanyPortugal, Russia, Sweden, Czech Republic, HungaryIreland, United KingdomDenmark, Netherlands, Poland, Bulgaria, Greece, Turkey, CyprusHungaryIrelandFrance , Jersey, Romania, Switzerland and Spain.
Demographic: Starbucks products cover’s deferent ages in the human life-cycle
Psychological: with the differences in income and social classes, Starbucks has develops its products in a manner that can serve all spheres in the community; the main social classes that the company serves are lower lowers, upper lowers, working class, middle class, upper middles, lower uppers and upper uppers.
Product strategies
Life cycle
Firms in the coffee industry are always identifying ways that will help them to increase their competitive edge in the market as well as maximization their revenue generating potential; Starbucks keeps innovating new products to benefit its sales base.
This means that a lot of resources are channeled into research and development, developing new products and other actions that are projected to increase the level of the work force. To ensure that the company stays in the front line the management has adopted effective research and development, business-line management, marketing and finance management policies.
Pricing strategies
Other than differentiating the classes on prices, the company is also keen on the packaging of the products as it can offer a difference in prices. When pricing, the company is keen to use psychographic pricing methodology; the approach aims at creating an impression in consumers mind that certain commodity is sold cheaply while it is not always the case it places prices like $99, $999 and $999.
Starbucks enjoys both new and domestic markets and managed through the organization’s growth opportunities as specified in their corporate strategy; marketing activities are undertaken throughout its many stores located throughout the operational base. The company has also distinguished itself by branding and multi branding of its products, the most recognizable coffee and coffee products.
Promotion strategies
Starbucks promotion takes place in local media, international media, road shows, and over the internet. Promotions are done in the effort to either introduce a new product or increase the market segment; to engage in a promotion, the company first invests in understanding the target customers then devises the best selling approach to them. Marketers should establish the kind of approach to use so that they can get the attention of the target market. There are two approaches to promotion used by the company as PUSH and PULL approaches (Kerin 23-98).
Distribution strategies
Starbucks management ensures that its products get to the customers in the best form possible; with the notion, the company has invested in an effective logistics and supply chain management. The integrated supply chain management scheme ensures that raw materials get to the company in a continuous manner to support production and the final products get to the customers when needed. The company has a just-in-time management policy.
Tactical Program
To remain competitive in the high volatile coffee industry in Saudi Arabia Starbuck has embarked on the following strategic management practices:
- Value creation and innovativeness
- State of the art technology
- Customer relation management
- Professionalism and Expertise
- Products and services differentiation
- Continuous improvement, total quality management, and six sigma (Joby 78-124)
Monitoring & Control
Other than having elaborative policies, Starbuck management ensures that it has an effective internal control strategy. Performance indicators and critical success factors are the main indicators of the level at which the company is operating to meet its corporate goals and objectives.
To enhance good business, the management has invented in effective human resources management strategy where subordinates are involved when making corporate decisions. The company’s effective monitoring and control system has enabled it offer quality services to its customers when needed (Joby 78-124)
Conclusion
Starbucks is an international coffee company that has been a leader in the industry; however, it has limited dominance in Saudi Arabia. To improve the company’s market share in Saudi Arabia, the management need to adopt an effective sales and marketing strategy; when developing a marketing strategy, the company’s marketing team should analyze the market and establishing market gaps to satisfy. To understand the market, the marketing team should make use of marketing tools like marketing mix , product development/differentiation, customer relation management tools, and continuous improvement paradigms.
Works Cited
Joby, John. Fundamentals of Customer-Focused Management: Competing Through Service. Westport: Praeger, 2003. Print.
Kerin, Andrew, and Peterson Richards. Strategic Marketing Problems: Cases and Comments. London: Pearson Education, 2009. Print.
Kotler, Porter, and Kevin Keller. Marketing Management. New Jersey: Prentice Hall, 2006. Print.
Rakesh, Mohan. International Marketing. New Delhi: Oxford University Press, 2005. Print
Starbucks Corporation Official Website. Starbucks Corporation, 2011. Web. 28th Dec. 2011