Starbucks at a Glance
One of the largest beverage companies in the world, Starbucks, is founded in Seattle in the year 1971. The company enjoys being the second biggest brand value with nearly $50 billion, operating in 78 countries all over the world. In total, it has more than 30,000 joints internationally. The company, with its business strategies, has been at the top of the list for the coffee lovers, as per City (2021).
According to Lombardi, Chidiac and Record (2021), Starbucks, at this point, is aiming towards becoming one of the major giant of beverage companies among the international market flooded with other such firms as the market situation in the global level favours the business of the Starbucks. To use the current situations in its advantage to grow in the market, Starbucks focuses in setting its goal towards attracting people more to its outlets. The ultimate present statistics prove that the beverage giant is nearly beating all the targets and threats imposed by other rival firms in its domain estimated by the performance by all its ventures across the globe. Presently, the beverage giant Starbucks has been operating in countries like Australia, Bahrain, Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Malaysia, New Zealand, Oman, Peoples Republic of China, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Switzerland, Taiwan, Thailand, United Arab Emirates, Egypt, United Kingdom and the United States (Azriuddin et al. 2020).
The Starbucks has been attracting the notice by major firms in the world by its extremely wonderful performance in the past years, as the conditions have also been favourable for the company in order to achieve its goal towards becoming a major firm in front of the global world, as claimed by Duncza (2021). Currently, a lot of big companies have shown interest in working along with the company jointly which is a very strong marketing strategy for the company in strengthening its business roots quite strongly into the market. It also helped in spreading its branches to various levels which ultimately helps it to become one of the leading coffee joints in the global market. The net revenue of Starbucks has increased by 3 per cent accounting up to nearly 2.5 billion dollar towards the last phase of 2010. From that time, Starbuck had started increasing its business from all over the world. The company has been expanding its branches exponentially from the last ten years. In the 13-week phase in 2011which got ended in the month of September, the company earned a revenue of a whooping amount of nearly 6 million dollar as per Tien et al. (2020). The net income of Starbucks was around 160 million dollar around 2015. During that time, the company had been introducing and updating itself with new menu and food options along with various kind of coffee. In the year of 2021, the company has opened around 33 thousands of outlets across the world, indicating its huge revenue collection in the world market and its strength and domination over the other brands. According to the statistics of Basak et al. (2020), in 2020 and 2021, the company has earned over 24 billion dollar, with almost 11 per cent increase in growth from the last years. Furthermore, Starbucks has reportedly earned nearly 2 billion in cash flows from all the activities around the year from sponsorships to new outlets and events (Alwaleed et al. 2019).
Business Strategies to Attract More People to Outlets
PEST Analysis
PEST (Political, Economic, Social, and Technological) analysis is considered as one of the most effective mechanism to examine the influences of external affairs. Starbucks has also revolutionized into mobile computing to make ease of their business. But, Starbucks did struggle in establishing their business because they took it for granted that every coffee lover would be fond of them (Clements 2019).
One of the most important political influences of Starbucks is outsourcing of raw material of coffee which had garnered attention from the West and other countries. To earn greater profit margins in the outsourcing business, the company wishes to stick to environmental norms which would felicitate the growth of more raw materials. On the other hand, there is also requirement to follow the rules and guidelines in the countries from where the company gets its huge number of raw materials (Shtal et al. 2018).
Economic Analysis
One of the most crucial economic impacts of Starbucks in the world is the currently ongoing economic fall down. And this issue, in the world, has been proving to be a denting factor in this business of Starbucks. As Starbucks coffee is on a bit pricier side, it proved to be of great pothole of the business standard. Due to its high price, a good percentage of the consumer shifted towards cheaper coffee shop (Dumon, McDonald and Schmitz 2019).
According to the statistics of Azriuddin et al. (2020), the price of the Starbucks coffee is an issue for the coffee lovers across the globe, but it is also a factor that if the company compromises with the price, it has to also compromise with the quality of the coffee. This is because it has to cut short with the work force as well in order to compensate with the price reduction. But lowering the price is needed to fit in the new generation inside the cafeteria because that section of the total population is the target audience of the coffee and beverage shop (Bruijl 2018).
The business tie-up of Starbucks with that of Apple established to be fruitful in this wave of technological era. The partnership allows some discounts vouchers to the consumers availing the mobile application to buy the company’s product and services as per Duke (2018). The company has also inaugurated the installation of WIFI in all its outlets which has helped the consumers to surf through the internet and do some work sitting inside cafeteria while sipping a mug of hot brewed coffee. Moreover, the emergence of online payment is also a strong point that works in the favour of the company in which enabled cashless payment (Musonera 2021).
In order to survive in other countries, Starbucks needed to follow a list of guidelines and compromise a bit in terms of their price so that every other individual who love to have coffee with their friends can avail the taste of Starbucks across the globe.
Michael E. Porter provided with Five Forces Analysis that describes the external factors of a business sector. Moreover, it helps to find out unique schemes so as to procure more profit in the competitive market (Khushman 2019).
PEST Analysis and Its Impacts on Starbucks
Starbucks has been competing with small-scale coffee retailers as well as with big companies serving specialty coffee and beverages. Cafeteria like Coffee Bean gives Starbucks a tough competition. They differentiate themselves by serving with a totally different ambience. Unlike Starbucks which seeks for a European coffee culture, Coffee Bean strives to execute a more homely American style at their joints. They offer magazines and newspapers to their consumers and also ensure fast service. Additionally, they also offer rooms for rent on the purposes of meetings, wedding and parties (Chowdhury 2020).
Primarily, the products that have been posing a challenge to the coffee industry on a substitute basis are the caffeinated soft drinks like Pepsi, Coca-Cola, Thumb Up, and Sprite. Studies, in the last five years, claim that the amount of preferences percentage of meals or snacks along with a soft drink over coffee have been proved to be a reversal with consumers (Sakal 2018).
Farmers who sell coffee beans to Starbucks have united under an initiative called fair trade certified coffee, organized by TransFair USA. According to this, companies like Starbucks are to showcase their coffee as being fair trade certified if they buy from such coffee suppliers owned by cooperatives. It posed as a threat to Starbucks as per Sztompka (2020).
Buyers are in the position to decide if they want to pay for a pricy coffee mug and see if they receive the fair quantity of the product. The bargaining power that the buyers possess has increased more as they are aware of their rights, put forward more rational logic coming out of information regarding market scenario. This has changed the dynamics of a consumer’s power with overall perspective (Novak and Richmond 2019).
From the above external analysis, it can be observed that, Starbucks has been facing umpteen challenges from various competitive giants since a very long time in Australia. This is making it a bit difficult for the company to operate if they do not come up with solutions regarding high prices.
One of the leading beverage companies in the world, Starbucks has been ruling all over the world for more than decades as claimed by Phillips and Moutinho (2018). The consistency of the company definitely relies on its strength regarding its operation, management, marketing and public relations.
Some strength of Starbucks is listed below:
- Large-scale manufacturing chain- The availability of Starbucks outlets is scattered in almost all public places in Australia, such as shopping malls (Westfeild Penrith, Chadstone Shopping Centre, Melbourne Central, and Brisbane Centre). There are more than 80 Starbucks outlets in Australia which makes it easier for coffee lover to avail them as per Gozdan and Sudolska (2019).
- Strong brand value- Starbucks has been constantly maintain a strong brand positioning among the public with its popular products. It endorses and sponsors various public events in Australia. It is considered among one of the top five biggest corporations on a global basis.
- Diversity in menu card- Beverages like Blueberry cheesecake, strawberry frappucino, cold coffee, vanilla latte, pumpkin spice latte, choco chip hot coffee, hot chocolate coffee, and chai latte. These are all exclusively curetted for Starbucks menu card and are significantly famous among the consumers (Islami et al. 2020).
In spite of possessing a great number of strengths in the marketing aspects, Starbucks has some weaknesses to deal with. Some of the weaknesses are listed below:
- Costly products- Consumers, in Australia, who consider coffee and tea a requirement in daily life, find the coffee at Starbucks too pricy. It is also claimed that beverages are cheaper at rival joints with better quality. Working class consumers do not consider it affordable sipping coffee at Starbucks.
- Recall of products- This point can cause damage to any food chain company if the items are not delivered to the consumers properly and timely. Unfortunately, Starbucks has had its share of product recall many a times as the delivered items contained pollutants (Widuri and Sutanto 2019).
- Unhealthy products- Beverages in Starbucks consist of high sugar, calories and sweetened items making it unhealthy for the consumers. A chocolate coffee contains more than 500 calories.
From the above internal and external analysis of Starbucks by applying Porters Five Forces Model, it has been found out that in spite of being among the top five big corporations, it deals with both negative and positive aspects. The positive points about the company are its huge scale manufacturing units, strong brand and public image. Whereas, on the other hand, the negative aspects of the company are its high prices, dealing with product recall and unhealthy food items with excessive sugar and calories contents.
The Business Tie-up of Starbucks with Apple and Installation of WiFi
The strategy of differentiation has been built over a strong credence that a commercial company requires clear, concise, and strong as well as a unique positioning in the market in order to withstand a very competitive environment outside. The strategy based on the differentiation category is basically responsible in order to provide the factors which increase the values and differentiating qualities for its potential consumers. It is essential for a competitive company to do investment constantly as well as develop and upgrade itself with the quality of the products and other related services for building a strategic base upon differentiation as per Hossain and Azmi (2020). The up gradation and development of the company regarding the brand positioning can be related to the check of loyalty towards the customers, perks, benefits, various features, as well as reliability and durability. The brand promotion of the companies must include the brand image, recognition, public relations, and desirability among the potential consumers. For strengthening the differentiating strategies, a company, for its growth, development and recognition, can also opt of various sponsorships and advertising as well as the public relations strategies. These create enormous brand value of a particular company. There are further divisions into the strategy of differentiation like purification, hybrid as well as the sophistication. All of these are related to the marketing strategies of the company into the competitive market in order to increase in its profit margin around the year. The purification of the strategy is responsible for the involvement of lowering the price of the product or the services which, again, is responsible for the decrease in the perceived value of the same. On the other hand, the strategy of hybrid is referred to the decrease in the price value which results in the increase of the perceived value of the product or the service provided. Lastly, the strategy of sophistication deals with the increase of the price of the product or the service and also leads to the increase of the perceived value regarding the same. The experts have explained the term of differentiation strategies as the one helps strategies for a product as well as for its related services so as to the company is able to offer some of the unique attributes and qualities which can in turn help in adding value by the potential and future customers. This is done so that customers choose this company over and over again and places the company as superior to the other rival companies. A standard unique price of a product or service may be accountable for it being purchased by the potential consumer at the premium price. And, setting the prices at the level of a premium price do help the company to cover up the extra costs associated with the manufacture of the unique products and the services. It is helpful in cost reduction because this process help in passing down the extra costs over to the customers who have become so fond of the products that they find it hard to find an alternative product in order to substitute it with the other one. There are few of the internal strong points related to the company which have proved to be of optimum benefits for a company following the strategy of differentiation as per Chang (2020). Those internal strengths help in developing the market and manufacturing of the unique products for the company. Such internal categories are the conduction of a scientifically research on the development and popularity of the rival companies, a highly creative as well as dynamically skilled production development bunch of people, a very enthusiast and strong team of sales who are hugely able in order to communicate the uniqueness and the strengths of the products and the services, as well as be responsible in maintaining a reputation of quality, uniqueness and the innovation from time to time. In this report concerning with Starbucks, it follows the strategy of differentiation. This is because the beverage company offers many unique products that are not available to any other rival beverage companies. Not only Starbucks produces the unique products, those are also available at the very premium prices which the potential customers, the coffee lovers do purchase from the company. As the products of Starbucks are already of premium quality and its potential consumers are aware of it being on the pricier side, so the company, rather than opting for the strategy of cost leadership of maintaining the price of the products at a much lower level to aim at savings, it should be focussing on to look for more development and up gradation of the beverage products. If gone by the statistics of products and their prices, the company seems to entertain no interests in reducing the prices any time soon as they are coming up with newer products and services every second day with premium price charts. From the past, they have been maintaining a premium standard in terms of uniqueness of the products, and services which makes them a valuable brand which does not compromise with the quality of the products.
Competing with Small and Big Coffee Companies Following Five Forces Analysis
The justification for the Starbucks to be obtaining the strategy of differentiation because every time the beverage giant sought to differentiate their customised products as well as services as they offer as compared to that of the rival company. The products and services offered by the Starbucks are of premium quality, and no matter what the situation remains, the company does not really opted the option for cost reduction strategies. The key characteristics of the market strategy of differentiation are that the consumers of the companies have diversified needs, requirements and preferences to be followed. Such consumers cannot be kept satisfied with only a form of offerings of the products without it being diversified and consisting of various options, as per Kim and Park (2021). And to hold on to the consumer’s loyalty and their attachment with the company, the beverage giant is required to come up with different options of beverage and coffee according to the preferences of the consumers over the table. Thus, this is the reason for Starbucks to come up with the variety of options in their menu card regarding the coffee, lattes, and iced drinks, skinny lattes, cold drinks, blended drinks, cookies, crunchy, juices, fruit juices, mock tails, cakes, tarts and many more options for the consumers. When the strategy for differentiation is implemented in the successful way, the beverage company, Starbucks, is required to set a premium price for the product and services, promotions for the coffee lovers to be aware of the new menu, opening of new joints at premium places, increase in the sales unit to retain the consumer loyalty with the brand of coffee as per Wang (2021). Starbucks, the coffee and beverage giant, is known to have some of the coffee and other products of the premium highest prices. However, the potential consumers of the Starbucks have been showing extremely loyalty to the beverage company since its inception even after there are ample amount of coffee joints or cafeteria scattered all over which have the similar variety of the coffee and beverage items and other related services at a much cheaper and reasonable price. This is because Starbucks have been maintaining the quality and uniqueness for all of its products and services and also have been successfully holding up on the trust of its esteemed consumer at large (Dawson 2019).
Conclusion
To conclude with, in order to understand the marketing strategy for the giant beverage company, the Starbucks, Porter’s Five Forces model has been proven to be of much usefulness. It helped in understanding the strategies applied for dealing with the potential consumers and suppliers at large. It also discussed about the current market positions of the company which proved that the company has been growing its businesses by setting up a number of outlets across the globe. The Porter’s Five Forces model also helped in the understanding of all challenges, risks as well as threats faced by Starbucks from the other rival companies and the new entrants who have been offering similar kinds of products at much cheaper ranges of prices. Though, Starbucks has been maintaining its loyalty with premium quality of products and services for many years, which helped it to retain its place in the consumer market.
Starbucks has been following the differentiation strategy which enabled it to constantly upgrade and develop its products and services in order to come up with high quality unique options which are superior to the other available options in the consumer market.
References
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