The Starbucks Company: Strategic Marketing

The Starbucks Company was established in 1971 in Seattle, and by now, it has more than 32,943 cafes and stores in 76 countries. The US and China constitute its major 62% market share with over 15,288 and over 4,973 cafes, respectively (“Starbucks reports Q2 fiscal 2021 results,” 2021). Starbucks has a compelling business and marketing strategy and puts stakes on further market growth, introducing product diversification and customer target segmentation practices. This paper aims to present the Starbucks company’s strategic marketing analysis.

Applying SWOT, PESTLE, Porter’s Five Forces, and Marketing Mix

SWOT strategy is usually allied to evaluate the company’s strategic position using the indicators of its main strengths, weaknesses, opportunities, and threats (Elavarasan et al., 2020). This marketing strategic analysis model is often used together with the PESTLE model to present the cross-analysis. PESTLE utilized the indicators of political, economic, social, technology, legal, and environmental factors on the company’s business (Dalirazar & Sabzi, 2020). As for Starbucks, its main strengths include a well-established market position and brand recognition, a loyal customer base, successful use of technology, including the music apps and Wi-Fi incentives, and a successful online marketing strategy (Subramaniam, 2020). Wide implementation of environmental-friendly practices and incorporation of the CSR approaches add to the value of Starbucks ’products.

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The company’s main weaknesses are high cost and narrow customer segmentation since the Starbucks products are targeted mainly at the customers of the upper-middle-class (Khan et al., 2018). Other weaknesses include the over-reliance on the US market, with 15,288 of total 32,943 cafes being open in the US (“Starbucks reports Q2 fiscal 2021 results,” 2021). There are also speculations about the lack of implementing CSR practices, and some public image problems with the race issues, with both these aspects, met through the new community-friendly social development programs and new equality policies regarding the employees’ salaries, promotions, and chief positions (“Global social impact report,” 2020).

The opportunities for Starbucks include the further increase of the market share through the expansion of the new markets in developing countries and Europe. Other options are introducing new ways for buying products online, for example, implementing a diversified marketing incentive program for customers who use the Starbuck coffee and food delivery services. There could also be a growing demand for the Starbucks product presented in the retail to diversify its retail products.

There is also an opportunity to expand the customer base since, by now, Starbucks only focuses on high-income groups (Khan et al., 2018). The company also can improve its media image by doing more for sustainable development and implementing more massive social responsibility programs. Further advances in technology, including customer-friendly apps and support for a social media presence, are also very important. The main threats for Starbucks are the threat from the competitors ‘rivalry, less predictable demand on home and global markets due to Covid-19, problems with the customers’ purchasing power, and market saturation (“Starbucks reports Q2 fiscal 2021 results,” 2021).

Political factors that influence the company’s business include the new lockdown policies, economic and social factors related to Covid-19 peaks and immunization campaigns’ global success, and customers’ purchasing power. Narrow higher-class-only marketing segmentation is another potential adverse economic and social factor. Social factors also feature Starbucks’ public image, including the success of its CSR practices. Technological factors are related to the company’s effective or non-effective partnership with tech companies and brands and the success of its apps and social media marketing efforts. Legal issues may feature new taxation policies due to Covid-19 or other issues, and environmental factors are mainly related to sustainable consumption, including sustainable water use and the use of the biodegradable materials, and sustainable distribution featuring ethical farming practices with fairly paid human labor and ethical use of various nations’ natural resources like land and water.

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Porter’s Five Forces analysis is usually applied in strategic marketing to evaluate the threats from the competition. It includes the indicators of rivalry among existing competitors, the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitute products and services (Isabelle et al., 2020). There is a moderate to high threat of the competitors ’rivalry due to monopolistic competition, the industry maturity, Starbucks having a competitive advantage in many areas, and no cost for customers’ switching to other brands. The threat of new entrants is moderate since the entry barriers are not high enough. The bargaining power of suppliers presents a low to moderate pressure due to the established base of retail and distribution. The bargaining power of buyers is low since there is a vast demand for a product, and the threat of substitute products is high since there are many beverages that customers may choose instead of drinking coffee.

Target Audience

Starbucks’ target audience is the high-income audience of adults from 25 to 40, and 18 to 24 years teens who belong to rich families (Khan et al., 018). Experts say that the company’s marketing strategies are between mass marketing and segment marketing, but the company needs to attract a wider public (Subramaniam, 2020). Starbucks also utilized demographic and geographical segmentation when choosing the locations for the new stores (Subramaniam, 2020). The threat from the competitors ‘rivalry is moderate to high due to the extensive number of local monopolists on the US and global markets. The main Starbucks competitors are Dunkin ‘Donuts and McDonald’s, Maxwell House, and Folgers. The following perception map will illustrate the details of customers’ perceptions of Starbuck vs. its competitors.

Target Audience

McDonald’s and Dunkin’ Donuts are the main competitors of Starbucks; these are the fast-food restaurants that utilize the All-American positioning rather than choosing the chic and upscale approach. Maxwell House and Folgers are online coffee beans and ground coffee sellers who are not in direct competition with Starbucks but also present a particular threat.

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The 4Cs of positioning include customer, cost, communication, and convenience indicators of positioning success (Lin et al., 2020). The company meets the customers’ needs through a diverse and targeted product range. The cost of the product is rather high but acceptable to the target customers, which demonstrate satisfaction with the service and perceive it as valuable. Starbucks effectively communicates with clients through SMM, and the company traditionally studies the demands and tastes of its clients through surveys. Convenience is ensured by eliminating barriers upon purchase, including new targeted delivery and prepaid offers developed in response to the pandemic (“Global social impact report,” 2020).

Recommendations for the Future

Given the information presented above, there are two main recommendations of how Starbuck can improve its marketing strategy. The first recommendation is that Starbucks should expand the market share and use more diverse approaches globally to face the competition from local substitute beverages and monopolists. For now, the company uses the same marketing techniques as on the US market, ignoring the cultural diversity. The second recommendation is to ensure the expansion of the convenient delivery and prepay options for customers globally.

The first recommendation can be justified using the BCG Matrix and the Ansoff Matrix. The BCG Matrix strategic model was created to simplify choosing the development and expansion strategy; it divides businesses into four groups – Stars, Cash Cows, Dogs, and Question Marks (Hossain & Kader, 2020). The Stars have high market growth and market share and are recommended the increased investment due to constant growth; Starbucks can be put into this category, which justifies the first recommendation to proceed to expand. The Ansoff Matrix presents approaches, depending on the business situation: market penetration, product development, market development, and product/market diversification (Zanjani et al., 2020). This Matrix justifies the first recommendation of the product/market diversification, which is usually advised for the well-established expanding businesses.

References

Dalirazar, S., & Sabzi, Z. (2020). Strategic analysis of barriers and solutions to the development of sustainable buildings using PESTLE technique. International Journal of Construction Management, 1-30.

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Global social impact report. (2020). Web.

Hossain, H., & Kader, M. A. (2020). An analysis on BCG Growth Sharing Matrix. International Journal of Contemporary Research and Review, 11(10), 1-11.

Isabelle, D., Horak, K., McKinnon, S., & Palumbo, C. (2020). Is Porter’s Five Forces framework still relevant? A study of the capital/labor intensity continuum via mining and IT industries. Technology Innovation Management Review, 10(6), 1-13.

Elavarasan, R. M., Afridhis, S., Vijayaraghavan, R. R., Subramaniam, U., & Nurunnabi, M. (2020). SWOT analysis: A framework for comprehensive evaluation of drivers and barriers for renewable energy development in significant countries. Energy Reports, 6, 1838-1864.

Khan, S. K. B. N. Z., Yusop, Y. B. M., & Baharudin, F. B. W. (2018). Starbucks market segmentation and targeting. International Journal of Business and Management Invention, 5(1), 1-7.

Lin, H. C. K., Wang, T. H., Lin, G. C., Cheng, S. C., Chen, H. R., & Huang, Y. M. (2020). Applying sentiment analysis to automatically classify consumer comments concerning marketing 4Cs aspects. Applied Soft Computing, 97, 1-5.

Starbucks reports Q2 fiscal 2021 results. (2021). Web.

Subramaniam, T. V. (2020). Impact of social media on digital marketing: Starbucks marketing strategy on Twitter. Case Study, 2, 1-7.

Zanjani, S., Iranzadeh, S., Khadivi, A., & Feghhi Farahmand, N. (2020). Designing a Corporate Growth Strategy based on Ansoff Matrix using fuzzy inference system. Innovation Management in Defense Organizations, 3(2), 151-178.

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