What is Marketing Strategy?
Marketing strategies are comprehensive plans framed especially for accomplishing the marketing purposes of the company. It provides an outline for achieving those objectives and is the designed after in-depth marketing research. The right marketing strategy and tactics help an organization to centralize its scarce and common resources on the finest possible opportunities to increase its sales and thus analyze its growth.
In this article, we’ll be discussing an exceptional example of outstanding marketing strategies that will further help you clarify how a company touches its predetermined objectives through the desired marketing tactics. We have taken a case study of Starbucks and have analyzed the company’s business growth, its marketing model and plans:
One of the renowned fast food business which is found by most of the people as a fascinating source of various types of delicious foods is Starbucks. There are two important aims of Starbucks business i.e. one is to provide great coffee to its customers and other is to contribute in making world a better place to live in. Back in 1971, Coffee icon, Starbucks was first opened as a shop in the market of Seattle’s Pike Place. This company was founded by three former students of University of San Francisco. They had planned to make sale of high quality coffee beans to the customers along with the roasting equipment. This company was formed by getting inspiration from the early traders of the coffee i.e. Moby Dick. In 1982, this coffee café started to expand its business operations by providing coffee to most of the expresso bars and restaurants. First café latte of the Starbucks was served in 1984 in a downtown Seattle. This company expanded its business operations to new locations and attained a competitive position in the market due to which huge investors were also attracted for investment appraisal. (Marshall, 2015)
There are various types of additive drinks which are which are brewed up by the company. customer satisfaction is priority of the business objectives of Starbucks. Mission of the company is to nurture and inspire human spirit through variety of coffee flavors. It has a traditionally rich business environment and also provides a feeling of connection to its customers. Logo of the Starbucks also sought unique fame. It is a picture of a green mermaid which is based on nautical mythology. Its logo design also helped it to gain immense success around the globe. Nowadays, Starbucks is considered among the greatest businesses of the world due to its refined coffee culture.
Starbucks Growth and Performance
Starbucks was considered as one of the largest coffeehouse of the world in 2013. There are approximately 20,891 operating stores of the company in more than 62 countries of the world. There are 13000 stores of the company in different states of America. There are more than 149000 employees of the company serving worldwide. This company has attained success in a short span of time and extended its business locations all over the world. Growth and performance of the company gradually increased that helped it to gain more shares in the market. In 2013, market capitalization of the company was $ 40.58B and its outstanding shares were $ 743.6M. increasing revenue and market share of the company shows that its policies and procedures are based on dedicated customer’s basis and its ability to penetrate in the massive market of coffee.
Economic crisis of 2008 and 2009 has a major impact on the growth and performance of the company. it is found that these crises contributed to cause a decline in the performance of business operations of Starbucks. There was 6.6% decline in the revenue of the company in relevant industry. Starbucks has experienced a consistent and remarkable growth pattern before these financial crises. Such a type of economic slump led to a decrease in the spending power of the consumers and it ultimately declined growth rate of the company about 0.9% from 2008 to 2013. After 2013 an increase in the growth rate of the company is found and it also increased revenue of the business. Improvement in economic structure helped it to expand its business operations and to compete in the market by considering growth patterns of some its competitors like Costa Coffee, McDonalds, and Tim Horton. (Doraisamy, 2016)
Business of the Starbucks is at a maturity stage and its market power helps it to concentrate its market share. Two important demand determinants of the company are its snacks products and premium coffee. And increase in demand of these two is dependent on per capita coffee consumption, world pricing of coffee, disposable income, attitudes towards health, and demographics. When there is an increase in disposable income of the consumers then an increase in their consumption pattern is also reflected. So such a type of increase in income of people also affected revenue of the Starbucks. Coffee beans which are used as a primary component of the coffee products has a volatile market and its profitability margins and market costs can fluctuate easily. So price of the coffee products can be also increase and decrease likewise. It is found that demand of the coffee of Starbucks is increasing day by day and prices of the coffee are also increasing which has contributed in an increase in the revenue of the company. (Bashore, 2013)
Financial results of the Starbucks reported for the year 2016 show that non-GAAP EPS up 17% to a record $0.49 per share and GAAP EPS up 24% to a Q3 record $0.51 per share. There is also an increase in sales of the company found in 2016 as sales increased by 4% in US, 7% in china, and 4% at global level. There was 9% increase in the operating income of the company. and its channel development revenues rose by 9%. Active memberships of the Starbucks also increased and there are about 12 million members of the company in Canada and US. Consolidated net revenue of the company increased by 7% and which was about $5.2 billion in third quarter of the fiscal year 2016. And consolidated operating income of the company was recorded $1.0 billion for the same quarter. It is also found that about 474 new stores of the Starbucks are opened in third quarter of the fiscal year 2016. And these new stores totaled its stores to 24,395 in 74 different countries of the world. Pay usage and mobile orders of the company are also increased in fiscal year 2016. And this increase was 5% as compared to last year. Another important membership program was also introduced by the company which is Starbucks Rewards loyalty program and it caused an increase in its members by 18% as compared to the last year. (Anon., 2016)
Growth rate of the company rose by 7% in 2016 due to delivery of effective products to its consumers and commitment to its goals and objectives. Earnings per share of the company for the revenue of $5.71 was $0.56. and trading of the company also increased up to 11.7% as it was $51.80 in November 2016 and increased to $57.85 in January 2017. 2016 is also considered as a tough year for the business operations of the Starbucks as it led to a decline in its stock by 4.7%. it is analyzed that revenue earned from the Americas operations of the company constitute 69.5% of the total revenue of the company for the year 2016. It channels development operations constituted 9.1%, EMEA operations contributed 4.7%, and CAP operations constituted 14.7% of the total revenue of the company for the year 2016. (Nathan, 2017)
Business growth and performance of the Starbucks has revealed an increase in its revenue over the last years and it is also expected that company will maintain its financial positions and performance in coming years by increasing its revenue based activities and operations. Company is also in a position to face global challenges to the business and it can also attain a competitive edge in the market.
SWOT Analysis of the Starbucks
Business growth of the Starbucks is dependent on the strengths possessed by its business activities and also from the competitive edge it attains in the market. SWOT analysis of the business activities of the company is carried out which shows business trends of the company and increase and decrease in its revenue. There are different strengths, threats, weakness possessed by the business of Starbucks are also provided in the SWOT analysis. This analysis also helps in evaluation of external and internal factors which are significant for the performance of business operations. Although Starbucks is a global brand of the world but still there are some threats to its business performance and financial health. It is evaluated form the SWOT analysis that its weaknesses. strengths of the Starbucks outweigh more as compared to Results of the SWOT analysis of the company are elaborated below.
Strengths of Starbucks Coffee (Internal Strategic Factors)
This component of the SWOT analysis will be helpful in the analysis of organizational strengths and internal factors of the business. Some of the major strengths of the company include its strong brand image around the globe, possession of an extensive global supply chain projects, and expansion of the diversified business through subsidiaries. It is considered as one of the most popular and strongest brand of the world. Population of the loyal customers of the Starbucks is increasing day by day due to enhancement of effective quality. Network of the suppliers of the company is also spreading at global level and some of the famous subsidiaries of the company are Teavana, Ethos Water, and Seattle’s Best Coffee. Global supply chain and diversification in its business environment and products helped it to attain a competitive edge all over the world. Reinvestment strategy of the business and its expansion efficiency helped it to adopt effective growth strategies. Employment treatment of the Starbucks and its ethicality helped it to become recognized at global level. (LOMBARDO, 2017)
Weaknesses of Starbucks Coffee (Internal Strategic Factors)
This component of the SWOT analysis helps in the identifications of various inadequacies which create number of challenges for the business growth and development. Some of the weaknesses existing in the business of Starbucks include higher prices, imitable products and use of generalized standards for the production of various products. Higher prices of the products of Starbucks products make those less accessible to lower income class of the consumers. There is also decline in the alignment of the products with the cultural demands and there is also an increasing demand of innovation in its business environment. There is lack of existence of a unique market of the Starbucks and big spending on the investment. It is also found that uneven profitability at international level is also occurring. So company is in a need to innovate its products and to make its products accessible to different classes of consumers. (BUSH, 2016)
Opportunities for Starbucks Business (External Strategic Factors)
This part of the SWOT analysis will be useful in the identification of external factors that may exist in the market and will be helpful in the growth and development of the business. There are lot of opportunities existing in the market which are favorable for the business growth of Starbucks. These opportunities include expansion of the business in different regions like Africa, Asia, and Middle East. Product mix of the company can be also made in a diversified way that will improve competitive position of the company. there are also large opportunities for the formation of strategic alliances and partnerships with other business entities and these will increase global presence and growth of the company. (Jurevicius, 2017)
Threats Facing Starbucks Business (External Strategic Factors)
There can be some factors that can play a role to decline business efficiency and its performance, and these can also decline financial health of the company. there are also some of the factors which can act as a threat to the business of Starbucks like competing from the low cost sellers of the coffee, imitation of the products, and movements of the coffeehouses in an independent way. There are various brands in the market which are offering same products at low prices as compared the high pricing products of the Starbucks. There is also imitation of the coffee business which is decreasing its global network. Trend for the growth of independent coffee houses is also increasing day by day which acts as an opposition for the large chain businesses like Starbucks. Commodity pressures is also a threat which is faced by Starbucks, and it can also affect demand and supply of its products in the market. (Hellman, 2014)
Impact of Competitive Advantage over Starbucks Business
Starbucks attained a competitive edge in the market in a short span of time and it has also sustained its competitive position for a long time. This company has shown an aggressive growth pattern and it is also one the largest coffee house of the world. It is analyzed from the financial results of the company that it has generated $16.8 billion revenue in the year 2016 as compared to its one of the competitor i.e. Dunkin’ Brands which has earned $828.9 million revenue in 2016. When supply chain network of the company was analyzed, it was found that there are 22519 stores of the Starbucks and distribution network of the Dunkin’ Donuts’ is composed of 11,500 stores. Presence of the business of Starbucks is extended to more than 70 countries of the world whereas Dunkin’ Donuts’ don’t show that much extended presence at international level. Revenue generation by the Starbucks in US comprises 80% of the total revenue of the market and 20% of the revenue is generated in the international markets. (WHITE, 2016)
Most of the Starbucks locations are company based operations whereas Dunkin’ Donuts’ is operating through franchises in different locations. There are most of the licensed locations of the business operations of the Starbucks. Capital expense, cost of goods sold and operating expenses of the Starbucks are much larger than the Dunkin’ Donuts’ and these also have a great impact on the profits of the company. Starbucks has also gained a competitive edge in the market by providing freshest coffee in the market. There are various factors which has played a vital role for the achievement of cutting edge in the global market by this company. these factors include use of strategic approach for the growth and development of the business, ability to retain high quality employees by providing employee care plans, creation of a sustainable supply chain management process to deliver high quality products to the consumers of coffee, enhancement of community environment which helps to create good social relations, and adaptation of the changes on the basis of consumer’s demographics. These factors are effectively managed by the company and these also helped it to gain a forefront position in the coffee industry. (Hawley, 2015)
Starbucks management has also reflected concerns about the environmental and corporate sustainability. It is also organizing various programs to improve its environmental leadership position. Some of the market shares of the Starbucks are also stolen by its rivals i.e. Dunkin Donuts and McDonalds but it is not possible for those rivals to attain a position of market leadership. There are distinctive competence skills possessed by the business environment of the company. Marketing approach of the company is also capable of increasing financial health and competitive position of the Starbucks. (Downie, 2017)
Ethics and Corporate Social Responsibility of the Starbucks
Starbucks has strongly considered impact of its business operations on the communities served by it. It has also reflected a high level of commitment to the global social issues and its vision statement also includes creation of positive change for all the stakeholders of the business. Provision of a healthy environment and a healthy society in an innovative way are some of the prime focuses of the company. corporate social responsibility is an increasing phenomenon all over the globe and it is achieved by the fulfillment of environmental and society protection purposes. There are comprehensive social corporate responsibility strategies which are devised by the management of the company in an effective way. There are three primary pillars of the Starbucks CSR strategy and these include environment, community and ethical sourcing. There are large number of community stores established by the company to attain CSR aims and these stores provide various services to the communities for the fulfillment of their basic needs. Company has also included diversified working environment for the employees and it also provide opportunities to excel in the relevant field. Starbucks Foundation is also developed whose basic purpose is to serve communities. (Vandeveld, 2015)
There is a strong ethical business environment prevailing in all of the outlets of Starbucks. This type of environment is helpful in dictating various type of the purchases made by the company for raw material to be used in coffee. Company is committed to the purchase of cocoa, coffee, tea, and other relevant commodities from the farmers who are using a standard ethical treatment for all of those. Starbucks also considers planet as one of the important partner of their business. Water and energy recycling and conserving are also commuted by the LEED certified stores of the company. Company is aimed at enhancement of environment friendly business operations.
Starbucks is also publishing its Global Responsibility Report in nine different languages. And it also tries to comply with all the standards of ethical and social responsibility. It is also leading in green retailing and using ethical and sustainable sources for its products. It is also providing opportunities to create a better and bright future for the farmers. Community service and Youth are some of the important platforms of the company serving community. Environmental issues related to the recycling, water, green building and climate change are also dealt by its environmental protection policies. (Dudovskiy, 2017)
Starbucks as one of the largest coffeehouse of the world is providing high quality coffee products to its customers in more than 75 countries of the world. It has attained a high level of the customer’s loyalty and a cutting edge in the global coffee industry. Company financial performance and growth is increasing due to an expansion of its business locations and increase in its products. Internal and external business environment of the company can be improved in a remarkable way by exploiting various opportunities exiting in the global market. Company is also recommended to introduce low cost coffee products by considering per capita income of different classes of the consumers and it shall also introduce uniqueness in its products. Threat of intimation to the business of Starbucks can be also decreased by increasing intellectual property and trademark protection efforts.
To sum it up, the right marketing tactics not only give a company an edgy over other competitors but also develops its services and goods with Grade A profit-making potential. Hope this guide was useful and helped you in analyzing an organization’s business growth with respect to its marketing tactics.