Contents
Executive Summary .......................................................................................................................... 2
Introduction and Background of the Company ............................................................................. 2
Marketing Strategies and Business Plan ......................................................................................... 3
A Brief Explanation about Operation Processes ............................................................................ 5
A Brief Explanation of the Financial Aspects ................................................................................ 7
Organizational Competitive Strategies Porters Five Forces Model ......................................... 8
Conclusion ....................................................................................................................................... 12
References ........................................................................................................................................ 12
APPENDIX A .................................................................................................................................. 14
TABLE OF FIGURES
Figure 1: The Starbucks Logo in 1992 ................................................................................... 2
Figure 2: Marketing Mix 4P's ................................................................................................. 4
Figure 3: Operation Processes ................................................................................................ 6
Figure 4: Porters Five Forces Model .................................................................................... 9
Figure 5: Radar chart of Porters Five Forces Model ........................................................ 12
Executive Summary
This report focuses on the analysis of the Marketing Mix also known as the 4Ps and the
organizational competitive strategies by using Porters Five Forces Model of Starbucks
Corporation, mostly known as Starbucks, which is an American Company created in 1971 in
Seattle. Starbucks Corporation specializes in roasting, marketing and selling of premium coffee
around the planet.
An elaborated explanation is given about the operation processes and financial aspect of
Starbucks Corporation in this report also Appendix A contains all the extra information needed
to comprehend the information discusses and analysed. The Marketing Mix analysis provide
the marketing manager with parameters that can be controlled but are subject to both the
internal and external characteristics of the marketing environment while Porters Five force
model helps to understand how rival organization functions.
The report concludes on which technique used on the organisation would be more efficient and
relevant to Starbucks Corporation and justifies this with appropriate explanations, charts and
numbers.
Introduction and Background of the Company
Starbucks is a vast corporation that gives privilege by connecting millions of customer
everyday through their irresistible products. Approximately 18,000 stores found in at least 55
countries once they began back in the year 1971 when they were roaster and retailer of bean
and ground coffee, tea and spices in a single little store which was found in Pike Market Place
in Seattle, Washington.
Figure 1: The Starbucks Logo in 1992
The name of the company comes from the first mate in the Herman Melvilles Moby dick. It
went public on the 26th of June 1992 with a price of 17.00 $ for one share and closing trade on
that day at 21.50 $ per share. Furthermore, it was incorporated under the law of the State of
Washington, in Olympia, Washington on the 4th of November 1985.
The mission of Starbucks is simple yet very inspiring. It is to inspire the human spirit, one
person one cup and a neighbourhood at a time. This is why Starbucks has become a gold
standard in the world of coffee lovers around the world. This is because Starbucks provides
sincere services that charm many neighbourhood customers to an outstanding cup of expertly
roasted and luxuriantly brewed coffee every time and anywhere. (Starbucks COFFEE
COMPANY, 2011)
Starbucks produce exceptional products that always satisfy their customers, some of their
products are:
Coffee, more than thirty blends and single-original premium coffees.
Handcrafted Beverages, fresh-brewed coffee, hot and ice espresso beverages,
Frappuccino coffee and non-coffee blended beverages.
Merchandise, coffee and tea brewing equipment, mug and accessories, package
goods, music, books and gifts.
Fresh foods, backed pastries, sandwiches, salads, oatmeal, yogurt parfaits and fruit
cups.
Marketing Strategies and Business Plan
The marketing and sales methods typically portray how the business will actualize the
promoting plan to attain the expected sales performance. To be successful, Starbucks uses a
very unique strategy since its inception. The process is that of product differentiation which
offers differentiators for example premium product mix, locations, coffee beverages reputation
and supreme customer service. Therefore, that meant building a premium esteemed brand
which is immoderate to copy for contenders.
Marketing Mix
Marketing mix consists of 4 elements which is the 4 Ps (Product, Price, Place, and Promotion),
it is a combination of these four elements which plays a great role in promoting the product
and services.
Marketing Mix consists of analysing the following various questions:
Product Strategies- how the product should be designed, how the package should be
and how can value be added to the product?
Price Strategies- what is the most appropriate pricing strategies to be used?
Place Strategies- Find the best location for the firm
Promotion Strategies- how the product should be promoted?
In a world of harsh competition like today, the Market Strategies can definitely help a firm to
compete with its rivals. The market strategy that Starbucks is currently using is very well
structured so that Starbucks does not even have a serious competitor which will cause
disturbance in the market. (Duermyer, 2014)
Figure 2: Marketing Mix 4P's
Product
To be able to top the market, Starbucks has used the marketing mix cleverly so that the firm
product is not aim for a specific age group either it is aimed for people of all ages. One example
to illustrate that is that the Starbucks provides for children juices and cocoa for the elders and
adolescents several types of brewed coffee which are provided.
Furthermore the firm also provide food which fit best with their coffee such as for example,
muffins, puffs and a variety of baked biscuits.
Price
Pricing may considered as one of the most important factor during marketing strategy, this is
because to be able to display a product nowadays on the market cost a lot of money.
Therefore, the firm must setup a good price strategy for them to be able to make the product as
profitable as possible.
Promotion
In the market today we can clearly see that Starbucks is a very successful firm. This is primarily
because promotion has played a great role in the success of the firm. To promote a product,
there are different forms of advertising and Starbucks has used every one of them through radio,
television, newspapers, magazines, posters, theatres and also through the web. Their main
objective is to advertise their product by creating awareness among the population.
The different types of promotion that has been used are:
When Starbucks introduces a new product in the market, the customers get to try a free
sample for taste.
When a customer buys a large size coffee, a small hot tea is given for free.
Placement
Last but not least of the marketing mix is placement. This is another very important factor to
consider. The location of the stores should be strategically located to able the firm to attract the
largest number of customers. Starbucks utilizes this technique well by placing their stores in
the best locations around the world for example, in shopping malls and in busy dense populated
areas.
A Brief Explanation about Operation Processes
The operation process of a firm like Starbucks is defined as is an accumulation of related,
organized exercises or errands that deliver a particular administration or item for a specific
client or clients. It can regularly be envisioned with a flowchart as a succession of exercises
with interleaving choice focuses or with a Process Matrix as a grouping of exercises with
pertinence tenets focused around information the whole time.
Figure 3: Operation Processes
In the case of Starbucks which has become a giant global company. The firm has obtained a
stunning inventory network that compasses crosswise over just about nineteen nations. Coco
beans can originate from one nation while milk could originate from a completely distinctive
nation many miles away.
This worldwide asset compass is an extraordinary route for Starbucks to grow the organization
and reach more nations than at any time in the past. That, as well as Starbucks Coffee has the
capacity supply the best fixings to their clients at a lower cost. All raw materials are then sent
to a cooking, assembling, and bundling plant.
Starbucks has six simmering focuses where the beans are readied. This number may appear to
be little for such an unbelievably huge organization like Starbucks, however this concentrated
framework is extremely powerful. These cooking focuses verify each and every one of the
beans is arranged, made, and bundled in literally the same way and rapidly through an
arrangement of generally planned assembling procedures. When the beans are readied,
Starbucks has a dull, well thoroughly considered conveyance process.
The measure of coffee being convey every day is astounding (countless pounds), yet with in
excess of seventy thousand conveyances day by day, Starbucks has the capacity supply each
one store with sufficient measures of coffee. (Roby, 2011)
A Brief Explanation of the Financial Aspects
Finance is a business work that uses numbers and systematic apparatuses to help directors settle
on better choices. Each entrepreneur must learn at any rate fundamental financial standards to
viably run his organization. Finance helps administration pick up an acceptable understanding
of the organization's present financial related position, especially whether the business is
profitable or not. Organizations of all sizes advantage from careful financial related planning
to guide the business relentlessly down the way to future development.
Taking a gander at a six year period proportion & development investigation of Starbucks'
financials from 2008 to 2013, we can see that the income development of the organization has
experience a drop of -5.9% amid the 2008/09 subsidence yet from that point on, Starbucks
posted a sound income development of from Fy2010 to Fy2013 with posting an incredible
development of 13.7% in Fy2012 and at present posted incomes $14.9 billion for Fy2013.
The working wage edges have increment significantly from 4.9% in Fy2008 to a high of 15%
in Fy2012. Starbucks posted a working misfortune in Fy2013 and this brought about a working
edge of -2.2% for that year and the fundamental purpose behind that is because of a suit charge
of $2.8 billion to Kraft Foods for ending a concurrence with them. This charges is dealt with
as uncommon occasion and accordingly ought to be marked down from the general sound
operational execution of Starbucks. Starbucks ROE and ROA have been noteworthy with
29.2% and 17.8% separately for Fy2012.
Taking a look at Starbucks productivity ratios, Starbucks has picked up noteworthy operational
effectiveness with amazing resource and stock turnover proportions with a low of 1.51 and 5.4
separately for Fy2013.
Anyhow its fascinating to note that the organization's money transformation cycle has
increment to high 54.7 in Fy2013, which is the place Starbucks ought to focus on to diminish
to achieve higher proficiency. Starbucks gloats great monetary wellbeing with low
obligation/power with an obligation/value proportion of 0.29 for Fy2013 and keeps up fair
present and snappy ratios.
*It should be noted that all the financials used have been taken from Starbucks10-K Form for
Fiscal Years ended 2008, 2009, 2010, 2011, 2012, and 2013.
The detailed financial ratio and growth calculations can be found in APPENDIX A.
Organizational Competitive Strategies Porters Five Forces Model
Porters Five Forces analysis is a schema to break down level of rivalry inside an industry and
business methodology improvement. It draws upon industrial organization (IO) mass trading
to infer five constrains that focus the aggressive power and subsequently appeal of a business
sector. Engaging quality in this setting alludes to the general business benefit. An "unattractive"
industry is one in which the blend of these five forces demonstrations to drive down general
gainfulness. An extremely unattractive industry would be one approaching "immaculate
rivalry", in which accessible benefits for all organizations are determined to typical benefit.
Here the level of strength of each threat is measured with the scale of 1 to 10, 1 being the
weakest, and 10 the strongest also they were given a characteristic (Low to High).
Figure 4: Porters Five Forces Model
Porters Five Forces Analysis of the retail Coffee and Snacks Industry :
Bargaining Power of Suppliers: Low to Moderate Pressure (4)
The fundamental inputs into the worth chain of Starbucks is coffee beans and premium
Arabica coffee become in select areas which are standard inputs, which makes the expense
of exchanging between substitute suppliers, decently low. Starbucks, with its size and scale,
has the ability to exploit its suppliers yet it keeps up a Fair exchange confirmed coffee
under its coffee and rancher value (C.A.F.E) program, which provides for its suppliers a
reasonable organization status, which yields them some respectably, low power. The
suppliers in the business likewise represent a low risk of contending with Starbucks by
forward vertical integration, which brings down their power. Starbucks additionally
structures a profoundly critical piece of the suppliers business, due its size and extension,
which make the force of the suppliers lower. Given these elements, suppliers represent a
decently low dealing power.
Bargaining Power of Customers: Moderate to Low Pressure(4)
There are numerous distinctive purchasers in this industry and no single purchaser can
request value concession. It offers vertically separated items with an assorted buyer base,
which make generally low volume buys, which dissolves the purchaser's power. Despite
the fact that there are no exchanging expenses with high accessibility of substitute items,
industry pioneers like Starbucks costs its item blend in connection to opponents stores with
predominating business sector value flexibility and focused premium estimating.
Customers have a moderate affectability in premium coffee retailing as they pay a premium
for higher quality items however are watchful of intemperate premium in connection item
quality.
Threat of New Entrants: Moderate (6)
There is a moderate danger of new contestants into the business as the boundaries to section
are not sufficiently high to debilitate new contenders to enter the business sector. The
business' immersion is decently high with a monopolistic rivalry structure. For new
entrants, the introductory venture is not huge as they can rent stores, gear and so on at a
moderate level of speculation. At a localized level, little coffee houses can rival any
semblance of Starbucks and Dunkin Brands in light of the fact that there are no exchanging
expenses for the customers. Indeed thought its an aggressive industry, the likelihood of
new participants to be fruitful in the business is moderate. Yet this moderately simple
entrance into the business is normally countered by expansive occupant brands characters
like Starbucks who have accomplished economies of scale by bringing down expense,
enhanced proficiency with an immense piece of the pie. There is a modestly high boundary
for the new contestants as they separate themselves from Starbuck's item quality, its prime
land areas, and its store environment 'experience. The occupant firms like Starbucks have
a bigger scale and extension, yielding them a learning bend point of interest and great access
to raw material with the relationship they assemble with their suppliers. The normal striking
back from settled organizations for brand value, assets, prime land areas and value rivalry
are respectably high, which makes a moderate barrier to entry.
Threat of Substitute Products: High (8)
There are numerous sensible substitute refreshments to coffee, which are essentially tea,
foods grown from the ground juices, water, sodas, and caffeinated beverages and so on.
Bars and Pubs with non/alcoholic refreshments could likewise substitute for the social
experience of Starbucks. Buyers could likewise make their own particular home delivered
coffee with family unit premium coffee producers at a small amount of the expense for
purchasing from premium coffee retailers like Starbucks. There are no exchanging
expenses for the shoppers for changing to substitutes, which makes the threat high.
However its vital to note that industry pioneers like Starbucks are at present attempting to
counter this risk by offering coffee producers, premium coffee packs in supermarkets yet
this threat still puts pressure on their margins.
Competitive Rivalry within an Industry: High to Moderate (7)
The business has a monopolistic rivalry, with Starbucks having the biggest markets offer
and its closest rivals additionally having a huge piece of the pie, making critical pressure
on Starbucks. Customers do have any expense of changing to different contenders, which
crates high intensity in rivalry. Anyway its vital to note that Starbucks keep up some
playing point as it separates its items with premium items and administrations, which cause
a moderate level of intensity in rivalry. The business is experienced and development rate
has been respectably low which cause the intensity of rivalry among the organizations to
be decently high because of every one of them trying to build market shaper from built
firms like Starbucks. This industry does not have over limit as of now and all these
components help the force among adversaries to be modestly high.
Therefore, taking a gander at the Porters five powers investigation, we can get a total
industry examination that the quality of strengths and the benefit in the retail coffee and
snacks industry are Moderate.
The Radar chart below represents the analysis done.
Porters Five Forces Analysis
Intensity
Bargaining Power of
Suppliers
8
6
Bargaining Power of
Customers:
Competitive Rivalry within
an Industry
2
0
Threat of New Entrants
Threat of Substitute
Products
Figure 5: Radar chart of Porters Five Forces Model
Conclusion
The Marketing Mix Method is better for this organization as Starbucks does not have any real
competitors in the market today and has a strong foothold in the coffee and tea market however
this is contradicted by when Porters Five Forces Model was used to analyse the Organizational
Competitive Strategies Starbucks Corporation illustrated in the Radar chart. The threat of
Substitute products is not relevant to Starbucks Corporation as they are producing high quality
products and are still making continuous growth in almost all countries and reflected in the
financial aspects explanation above. The marking managers of Starbucks will not be greatly
concerned by the output of the Porters Five Forces Model.
References
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9 Nov. 2014].
2. Starbucks COFFEE COMPANY, S.C.C. (2011). Starbucks Company Profile. [Pdf] Brazil:
Starbucks Corporation pp.1-2. Available through:
http://www.starbucks.com.brassets5739ef83a25444af98bd14ba1034eb50pdf [Accessed:
7th Nov 2014].
3. Roby, L. (2011). STARBUCKS AS AN INTERNATIONAL BUSINESS. 1st ed. [ebook] Unknown:
Liberty University., pp.1-30. Available at:
http://digitalcommons.liberty.edu/cgi/viewcontent.cgi?article=1237&context=honors
[Accessed 8 Nov. 2014].
4. Staff, I. (2014). Industry Handbook: Porter's 5 Forces Analysis | Investopedia. [online]
Investopedia. Available at:
http://www.investopedia.com/features/industryhandbook/porter.asp [Accessed 9 Nov.
2014].
5. CORPORATION, S. (2014). STARBUCKS CORPORATION Fiscal 2013 Annual Report. 1st ed.
[ebook] Seattle: STARBUCKS CORPORATION, pp.1-55. Available at:
http://news.starbucks.com/uploads/documents/Starbucks_Fiscal_2013_Annual_Report__FINAL.PDF [Accessed 6 Nov. 2014].
APPENDIX A
[Source: All Financials used here are derived from Starbucks10-K Form for Fiscal Years ended
2008, 2009, 2010, 2011, 2012, and 2013]
