Analyse of Starbuck
Establishment of an enterprise for the sale of coffee makers and coffee beans. Analysis of the main types of marketing used. Studying of legal and economic aspects of activity. Evaluation of possible problems, strengths and weaknesses of the company.
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The story of Starbucks started in 1971, when the first shop opened in Seattle, Washington. The shop at the beginning merchandised only coffee producing machines and coffee beans. 10 years later, Howard Schultz was employed as a managing director of `Retail Operations' and decided that they should retail drinks instead of equipments and beans. He did not persuade the proprietors, and he moved his personal path. Later, Schultz started his own enterprise the IL Giornale - chain of coffee bars in 1986. The following year owners of Starbucks sold the company to Schultz who changed the name of IL Giornale to Starbucks and rapidly began to enlarge. Starbucks is named after the first helper in Herman Melville's Moby Dick. Its logo as well encouraged by the sea-characteristic a twin-tailed siren from myth of Greek.
At the beginning of 21st century, Starbucks was operating to reach Schultz's high-flying target of 500 shops in both European and Japan by 2003, in addition to his final target of 20000 sections widespread in the world. With approximately moiety of provided to be possessed beyond the bounds North America, Schultz determined to expend a lot of time on the enterprise's transmarine businesses. Nowadays Starbucks Corporation is salient roaster, retail dealer, and bargainer of speciality coffee in the world-wide. Its occupations involve over 7300 coffee stores and stalls in the United States, and about 20000 in 66 different countries. Besides to multiformity of coffee and coffee drinks, Starbucks stores feature Tazo teas either; baking and different food components; espresso equipments, coffee makers, and different types of coffee and tea connected elements; and music CDs. An annual profit of Starbucks in 2013 was about 14 million dollars, while in 2014 it has made over 3 million dollars more than the previous year.
`Starbucks mission is to inspire and nurture the human spirit-one person, one cup and one neighborhood at a time'(Starbucks, 2015). This company always has faith in delivering the best coffee eventual. It's their aim for all of their coffee to be raised under the maximum criterions of class, utilizing moral sourcing experiences. Starbucks' coffee customers specifically trip to coffee holding in Latin America, Africa and Asia to choose the superior quality seeds. And the owner roasters produce the equilibrium and abundant fragrance of the seeds across the signature Starbucks Roast. The major issue in handling with consumers is to “Just Say Yes”, this is a Starbucks company motto takes to include it unconditionally (Harrington, 2011). Besides to the amicable, fast and effective purchaser servicing the Starbucks have to perform totally sure that they are supporting every client with a special, high performability drink to Starbucks requirements, and this have to be firm for all Starbucks clients.
Presented business report is divided into several sections. The first section is showing analyze with marketing types. The second section is include comparison economically and legally environments. There we have chosen two countries, where the Starbucks operates and we have indicated possible challenges, strong and weak sides of the company in those countries. Finally, the conclusion involves opportunities of the Starbucks' operations in Uzbekistan.
marketing beans economic coffee
To begin with the products, which Starbucks provide to customers, it is obvious that, it uses product mix structure. Starbucks is focused not only on coffee production, but also on ice cream, snacks, different types of tea etc.
Starbucks' product range
Caffe latte, Caffe Mocha, Caramel macchiato
Iced caffe Latte, Iced vanilla Latte.
Coffee base, cream base and tea base
Coffee and tea
Hot chocolate, soya milk, tea
Cookies, muffins, salads, sandwiches coffee bags
Equipment: mugs, coffee machines, mixers.
Product - Market Segmentation.
Mainly, Starbucks company uses three types of segmentation namely: geographic (markets by region of a country or the world, market size, market density, or climate), demographic (markets by age, gender, income, ethnic background and family life cycle) and psychographic segmentation, which can be linked with demographic. Starbucks specify on such target market as men and women at the age from 25-40, which makes approximately a half of whole business. These consumers tend to have high profit and are likely to buy any production of the company. The next large target group are youngsters and adults from 18-24. They and such factors as hanging out, writing papers and just meeting with people bring 40% of Starbucks sales. In addition, target group at the age of 13-17 should be considered. This group accounts for 2% of sales but lots of production are made by parents. As it was mentioned above, Starbucks uses different places with high visibility to distribute their products, for instance office buildings, downtown and suburban retail centers, airports, campuses at university and other shopping areas along the roads.
Price - Pricing Strategies.
Starbucks Corporation usually uses several types of pricing strategies. Firstly, it sets prices basing on certain principle: high value at a cautious cost. It is a kind of psychological influence; when people start thinking about their financial status, that they get a good deal with money, they can pay for a product a higher cost. In addition, Starbucks is focused on their authority on coffee while pricing their market. For example, when the company presents a new product at a premium price, customers are likely to pay extra money to try this new product and then associate the Starbucks with great quality. In 2010, Starbucks announced that it would be increasing prices due to the rising price of raw materials. Nevertheless, slight decrease in prices for its most popular beverages, including espresso coffee is expected Exact comparative values of Starbucks' caffe latte is provided below to clarify, what is the difference in prices between countries where the company acts.
Comparative values of Starbucks' caffe latte.
Towns & countries
Price of a tall caffe Latte (€ and won)
Price of lunch in the neighborhood
Seoul, South Korea
Promotion - Advertisement.
The promotional part of Starbucks plays a significant role in success of the company. To start with the brand logo, it is a commonly now fact that it is one of the most recognized logos in the world. The first version of the logo was introduced in 1971, based on a 15th century woodcut. It included a round ring encompassing the legendary two-tail mermaid figure in an espresso cocoa shading palette. The outline was proposed to symbolize the overpoweringly alluring and very nearly enticing nature of the coffee. Then, in 1987, the corporate logo was completely changed. Bare breasts were covered by flowing hair. Moreover, green color appeared as a symbol of freshness, growth and uniqueness of the product and developing company. Finally, the last and current version was introduced at company's 40th anniversary, where Siren's figure was enlarged, removing the other green circle with brand name. Talking about the advertisement part, It started from a community website and the main purpose was to collect suggestions or feedback from consumers and this program was called “My Starbucks Idea”. This program allows members - customers to earn a free drink after every 15 purchases at participating Starbucks stores. Furthermore, Starbucks uses technology to promote their brand, for instance, mobile applications, which helps consumers to make an order, or messaging system. Also, Starbucks does not use an advertisement boards, instead, social media marketing plays a significant role in advertising, making people aware of upcoming product or daily notices.
Place - Distribution strategies.
Starbucks utilizes various channels (half and half) of conveyance for its items. This implies the organization uses more than one conveyance plan. Firstly, Starbucks offers its items through a direct retail framework in organization claimed stores. They import and methodology espresso and afterward offer it under their own particular image name in their own particular stores. Then again, Starbucks additionally offers its items in grocery stores and malls. Furthermore, Starbucks has circulation concurrences with office espresso suppliers, lodgings, and aerial shuttles. Utilizing numerous appropriation channels permits the organization to achieve a more extensive business, on the other hand, at the same time Starbucks needs to watchful with this methodology because of the potential for channel clash.
As a method of strategic planning, SWOT analysis has identified strengths and weaknesses in internal environment of Starbucks. The advantages of internal environment are that the Starbucks has diversified their products, with the mentioned above goods and services that help to maintain the business and increase its profit.
Then, the company set a recognizable logo with twin-tailed mermaid (or Siren) that has a history from ancient Greek mythology. They also evolved their brand name, copyrights, trademarks and patents, created cognitive site about the whole company under their name.
Globalization is one of the strong points of Starbucks, when the branches in some countries cover loses of the other branches. The company manages many retail shops and is the top coffee seller all around the world.
Additionally, the company creates job positions that highlight a good reputation of Starbucks over its competitors. Human resource management works in a high level, results of which are motivated and valued employees creating a good working atmosphere.
Planned marketing strategy is also considered the strength, which created the whole system that attracts huge amount of customers, despite some disadvantages. Marketing increased the level of brand loyalty that is one of the competitive advantages among other coffee sellers.
Moreover, weak sides of Starbucks should also be taken into consideration.
It was researched that Starbucks Corporation is too much focused on expansion of company, instead of improving internal environment. This point is crucial in an area of product and profit getting activities that would decrease brand loyalty.
Starbucks' products are expensive for a majority of people. In comparison, Starbucks' Cappuccino costs $3.67, whereas Cappuccino of Dunkin' Donuts is sold for $2.47 in the United States.
The company always tries to promote a new product. This will lead to brand cannibalization, where the sales of earlier brand are replaced by the sales of new product.
Today, Starbucks offers its packed coffee items, iced drinks and merchandises through merchants. These retail operations provide broad prospects for expansion of Starbucks. Additionally, the delivery process has many opportunities to develop by increasing the number of distribution channels
Another opportunity is related to new product development and introduction to the market, not only in coffee, but also in other products. For instance, in 1997, Starbucks entered tea market with Teavana Corporation that sells brewed teas in various ways with unique tastes.
Starbucks has many opportunities in technological progression. They created a mobile application, by the help of which customers can easily order products. As is shown in a graph below, the application is still being developed.
There are several internal factors, which are characterized as potential threats for Starbucks Corporation. First of all, the company operates in a highly competitive market. Restaurants, other coffee shops and caffeine-based products can harm the profitability of their business.
The consumers may suddenly start thinking about their health, so the consumption of Starbucks Coffee will decrease. Similar threat would occur if the retailers of coffee crops increase their prices, Starbucks will have to increase the prices of their products and services too.
American coffee culture may not be accepted in some other countries. In 2013, Starbucks closed about 84 stores located in Australia, because of the wrong location and high pricing of its products and services (Lutz, 2014).
3. India is the second most populated country in the world and its economy has been growing fast since 1991. This growth in India's economy provided a positive environment for international investment. Starbucks is one of the companies that showed a substantial interest in launching its branch in the country. Starbucks opened its first store in Mumbai, India in October of 2012 by joint venture with Tata Global Beverages. Currently there are 59 stores in six cities and the company is planning to increase the number in 2015 (Company, 2014). According to Tata-Starbucks chief executive Avani Davada, India was the fastest growing market in Starbucks history (Suneera, 2014). Investment in India, like many other developing countries, has its own advantages and disadvantages in terms of legal and economic environments for international businesses. It is very crucial for companies to predict and analyze the possible challenges that they might face while operating their business. The second important step would be to find the best solution to overcome these challenges. India's economy, as it was mentioned before, has been growing significantly since 1991 due to government regulations. The taken actions by Indian government, facilitated business operations across the country, especially for international businesses. The gross domestic product (GDP) in India was worth 1876.80 billion in 2013 and the GDP value of India represents 3.03% of the world economy (Trading Economics, 2015). This is relatively high GDP and indicates a good business opportunity for the company. In recent years, there has been inflation about 11% but due to India's central bank interest level adjustments, this number reached a single digit figure (Trading Economics, 2015). Another favorable economic factor for Starbucks's entry are provided by big cities in the country. For example, Mumbai, Delhi and Bangalore are the major and the most populated cities in the country. Apart from the favorable economic factors, India's economy still needs to work on improving the unfavorable factors such as poverty, lack of education and technology, and inadequate infrastructure. These unfavorable economic factors can hurt the company in various ways. For many Indians with low or average income, buying a cup of coffee from Starbucks might be too expensive and the company should reduce its prices to avoid this problem. It is important to mention that there is a threat of substitute goods for Starbucks's coffee, such as tea. This is a major problem for Starbucks in India, because the majority of population prefers tea to coffee. According to statistics conducted by nation's own Tea Board, the average annual per capital consumption of tea in India was 800 grams while the consumption of coffee was only 85 grams (Palash, 2013). In order to solve this problem, Starbucks provided more of other beverages such as different flavored tea drinks and other fruit juices to avoid the threat of substitute goods. Legal environment in India might not be viewed very positively in the eyes of international businesses as those in U.S.A or Europe. Corruption in the country still exists and it is a high concern to business operators. Starbucks experienced some drawback from legal environment in India. The case “Starstruck” was an example of weak copy right in India. In the case of “Starstruck”, the U.S coffee shop chain told India's Controller-General of Patent, Designs and Trademark that the name of the new coffee shop was similar to Starbucks, but unfortunately the name “Starstruck” reminded unchanged (Reuters, 2007). Although India's legal environment might sound unfavorable, but the country is working hard to solve the problems and make it a better place for international investment. For instance, lower tariffs and lower barriers to enter have made Indian market a promising environment for business operations. Starbuck has generous reputation among other dominating coffee producing companies in the world. UK is another major source of economic growth for Starbucks. Starbucks has spoke to such a wide target market, it appears to be each item presented will be a moment achievement (soft drinks, teas, frozen yogurts, cakes). In the example of UK, the Starbucks came into British market in 1999, stimulating Creation of a coffee drinking culture. The British like the Starbucks atmosphere and currently the amount of shops that Starbucks is running or franchising leaded 738 (BBC, 2013). As foundation of brand in UK, the Starbucks contributed the economy of United Kingdom to a significant amount. Starbucks is estimated to support a total gross value added contribution to UK GDP of Ј338 million. It is assessed that the United Kingdom, taken together, posted a superior than- expected GDP development of 4.5% last year, marginally higher than the 4.1% development that they accomplished in 2002. Although UKґs population is much less than India, but the living standards is much higher. People have more income and they donґt find Starbucksґs products as expensive as those in India. Unemployment Rate in the United Kingdom decreased to 5.6 percent in the three months to February of 2015 from 5.70 percent in the previous period (Trading Economics, 2015). Compare to India where poverty is a big issue for the government, UK has a stronger work force. This is a big advantage for Starbucks. In terms of legal environment, UK is viewed positively. Legal environment of UK is more concerned with the health of people and environment. Starbucks produces 4 billion paper cups in one year. In order to save the environment form the extra waste, Starbucks is now serving their costumers who bring their own mugs and more important than that the company will give a discount of 10 cents. Except for the discount, UK government is very strict about recycling and Starbucks accomplished this by recycling the paper cups or any other waste in itґs own community. ЁWe are currently transforming the way we process our waste and aim to divert 95% of waste from landfill by October 2012, Ё reports the official profile of Starbucks. In an increasingly economically integrated world, a financial collapse like the one in 2008 could have a stream down impact from the created markets to the creating markets. The 2008 world crisis hurt the profitability of Starbucks, as many UK buyers moved from Starbucksґs products to cheap alternatives such as homemade coffee or simple drinks. While its quality is obvious, its cost has dependably been higher than those offered by the local cafйs in different countries. Because of this reason, Starbucks was compelled to close 600 shops that were not making benefits. By March 30, 2008, its benefit had fallen 28 every penny contrasted with the same period in 2007. In 2009, it shut another 300 stores and laid off 6,700 workers (Shezray Husain, 2014). Like many businesses in the world, Starbucks has its own weaknesses and strengths. In case of India, one of Starbucks's strength is its well-known brand name, which is known to the majority of people. Besides the brand name, the size and market power of Starbucks is bigger than the other competitors in the field. Moreover, Starbucks has a unique and innovating marketing strategy that no other coffee retailers have. Starbucks provide a quality service throughout the globe with strong joint ventures and strategic alliances to satisfy its costumers. Even thought the valuable brand name and the market power differentiate Starbucks from other coffee retailers, Starbucks has its weaknesses as well. Because of the high quality products that Starbucks offers to its customers, the prices are relatively high compare to its competitors. This is the biggest weakness of the Starbucks, but the company believes that this is part of their exclusive image.
Starbucks opportunities in Uzbekistan
As it was mentioned before, Starbucks is worldwide famous company, which is mainly focused on coffee production. It has a huge number of branches in 66 countries of the world and still keeps expanding its' business by opening divisions in new countries. Consequently, there is a probability that Uzbekistan also could be in that list. In order to give an adequate assessment to demand for Starbucks' products in Uzbekistan we looked through some facts related to the target audience and product assortment of Starbucks Corporation. In addition, by our research team was compiled a list of question according to it we estimated real demand in Uzbekistan market for Starbucks products. The purpose of this section is identifying the opportunities of Starbucks in Uzbekistan and giving an assessment of conditions in Uzbekistan.
A success of entrepreneur's business depends from the number of clients who is able and ready to purchase his products. According to previously mentioned information in the section of marketing analysis, 49 percent of Starbucks whole business form adults. The reason is that Starbucks “appeal to this consumer age group through hip, contemporary design that is consistent in its advertising and decor and working to keep its products current as status symbols” (O'Farrell, 2015). Annually amount of these target audience rises for 3 percent (O'Farrell, 2015). While according to the questionnaire results almost 84 percent of adults in Uzbekistan do not know about Starbucks trademark.
Young Adults forms the next group with 40 percent of total revenue of Starbucks Corporation. Typically, these people are students. In accordance with our data, 53 percent of young adults in Uzbekistan know about Starbucks and ready to go there with friends for hanging out. Moreover, 20 percent of young adults regardless of that they heard about this trademark the first time and ready to visit this place.
Finally, people who belong to all the other categories aged below 17 and over 40 forms remained 11 percent from total income of Starbucks. Accordingly, only 4 percent of people who we asked and belong to the mentioned age group know Starbucks trademark.
In addition, to the questions if they like coffee and how much they consume it, 87 percent of questioned people answered yes and one cup a day was an average consumption. Consequently, according to our questioner results it can be proved that demand for Starbucks products in Uzbekistan is measurably low. However, demand for coffee in Uzbekistan still exists. When our team visited some local coffee shops such as Kafe Kafe, Bon!, Book Cafй, Dolce Vita which could be potential competitors of Starbucks, we determined that these places are very popular among local people. Available prices and high quality products are really appreciated by visitors.
Another aspect of successful business is auspicious conditions and legal environment. Hence, if take a look to Uzbekistan, Uzbek government policy is mainly focused on developing local entrepreneurs' business, decrease the quantity of import products and services and enhance Uzbekistan GDP with the intention of developing the economy of the country (Bureau of Economic and Business Affairs, 2012). These are cause of high taxation of foreign firms.
To sum up, demand for Starbucks products in Uzbekistan is limited. In order to increase demand and make Starbucks trademark well known in Uzbekistan, company can use intensive advertising and fix unusually low prices for products. Even though, it will be difficult for Starbucks Company to compete with local entrepreneurs because of “government policy of domestic industries protection and limiting competition from abroad” (Bureau of Economic and Business Affairs. 2012). All these features can negatively effect on Starbucks operation in Uzbekistan. That is why it is not profitable for Starbucks Corporation to open new division in Uzbekistan, because their income cannot fully cover all expenditures of production, advertising and taxation.
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