Starbucks Corporation is an international coffeehouse chain based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world. Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, snacks, and items such as mugs and coffee beans. Many of the company’s products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores. Starbucks’ Italian style coffee, espresso beverages, teas, pastries and confections had made Starbucks one of the greatest retailing stories of recent history and world’s biggest specialty coffee chain.
Starbuck’s vision statement is to establish Starbucks as the most recognized and respected brand in the world and become a national company with values and guiding principles that employees could be proud of. The vision statement clearly describes the dream or the future of the company that is to be the world’s most well known coffeehouse and also to be the most appreciated and positively graded brand by all levels of people around the world.
The company also focuses its vision to employee satisfactions, so that the employees will be happy.
Marketing Strategy. When marketing their product, Starbucks Corporation has implemented product differentiation. They offer several drink options and different blends, and flavors of coffee and tea. Also, they have expanded into selling food, coffee machines, mugs, and other merchandise. Starbucks bases their marketing strategy around six guiding principles: Provide a great work environment and treat each other with respect and dignity. Embrace diversity as an essential component in the way we do business. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.
Develop enthusiastically satisfied customers all of the time. Contribute positively to our community and our environment. Recognize that profitability is essential to our future success. Environmental Analysis (Porter’s Five Forces) There is intense competition in the coffee market amongst established coffee shops that are fighting to get customers. There are local coffee shops offering specials to lure potential customers in. Restaurants are opening earlier and closing later to accommodate customers on the go. With the 85% North American customers taking their coffee to go, convenience is a major factor.
There is a great deal of risk of entry by potential competitors due to the low start up costs. McDonalds is able to add specialty coffee to their existing services to tap into the specialty coffee market. There is potential of $125,000 per year in revenue to be made by each store if they are able to successfully enter the specialty coffee market. Water is a substitute which is healthy for us and it is free. The option to buy bottled water is also inexpensive compared to coffee. With the focus on healthier living, water is the ultimate choice.
There is more bargaining power for suppliers of technological innovations such as automated coffee machines, latte and espresso machines, etc. There are not as many suppliers for such equipment as there are for coffee beans. Customers do not really have bargaining power when it comes to premium coffee such as Starbucks. Starbucks’ business reduces the bargaining power of any single group of buyers. Key Problem Starbucks has become the corporation most envied, pushing competitors to compete in hopes of achieving some of their similar success.
The growing development of coffeehouses combined with the increased emphasis on coffee sales promoted by fast food restaurants resulted in an aggressive competition. Starbucks has become a victim of over-saturation. The abundance of stores available is partially to blame for altering the consumer’s view of Starbucks as a quality of coffee shop. A brand seen as a luxury item in the coffee industry has now become rather accessible to consumers. This increase in availability of Starbucks brand and products provided is responsible for the decrease in appreciation consumers had for the corporation.
Consumers are also taking into consideration their trips to Starbucks are no longer special experiences due to the rise in their availability. There is also a growing enthusiasm from health consciousness consumers in the United States and more people are cutting down on caffeine. Course of Action Starbucks Corporation could continue their expansion into international markets. Currently operating in 44 countries, they should continue to focus on these markets and while opening into new markets. Domestically, Starbucks has become over-saturated, causing their product to lose value.
The corporation should narrow their focus on the US market and shift their primary focus internationally. This alternative could increase the product value in America, increase international sales, introduce new markets, and gain new consumers. The success of this alternative also has potential to raise the stock prices for Starbucks Corporation. Considering Americans are over familiarized with their brand, less focus on domestic expansion and more focus internationally would be the best option for helping the company. The only possible weaknesses in this alternative would be the cost.
Another alternative would be to continue differentiating their product by introducing new, healthy product lines and making health conscious consumers aware of these new products. This alternative could generate an increase in sales and attract new consumers. Starbucks Corporation already offers a wide assortment of products including food and drinks. By adding more products, they are faced again with more competition. Consumers may also begin to think Starbucks is losing the original coffeehouse image it once maintained.
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