Research Objective
Analysis of Starbucks marketing strategy, identifying its current marketing position as a Managing Director of the company and improving, implementing new changes in the strategy based on the current scenario and competition.
Core Competencies of Starbucks
The center skill of Starbucks has been its capacity to adequately use their foundation item separation procedures by offering a top-notch item blend of great drinks and snacks. Starbuck’s image value is based on offering the finest quality espresso and related items, by giving every client a novel “Starbucks Experience”, which is received from supreme client service, all around kept up stores that mirror the way of life of the groups in which they work, in this manner fabricating a high level of client faithfulness.
SWOT analysis of Starbucks
The SWOT analysis of Starbucks coffee is shown by the combination of both external and internal factors in association with the firm. Although, it is a world recognised brand, it still has few weakness attached to it.
Strengths
• Starbucks is the biggest coffeehouse business in the world. (Appendix: Figure 1)
• Produces highest quality coffee with a premium touch.
• A powerful base of loyal customers.
• Strong goodwill and versatile business through subsidiaries.
Weakness
• Expensive offerings as compared to its competitors.
• Continuous changes required to withstand with the dynamic market condition.
• Local competitors of different countries.
• Brand image tarnished due to various company’s issue.
Opportunities
• New diverse opportunities for the company.
• Increasing demand in Asian markets.
• Focus on the mobile application.
• Restructuring pricing strategies.
Threats
• Increasing direct and indirect competitors.
• Raising health issue concern leading to decline in coffee consumption.
• Failure in the top-level management of the company.
• Increase in the coffee-bean costs.
Situation Analysis
Starbucks in Dublin
Starbucks has approximately 50 outlets in Dublin and has been expanding continuously. The first outlet was open in Dundrum Town Center in South Dublin in 2005. The U.S. based coffee company license out its business in Ireland after the giant sustained losses in 2010, 2009, 2008 and 2007. The operation of Starbucks in Ireland is licensed under Entertainment Enterprises Group which is Dublin based. The company runs under Colum and Ciaran Butler.
The coffee culture developed in Ireland since the 21st century. The people increasing demand recognised the needs for coffee culture in Ireland. Earlier in the 20th century, the two-main coffee outlets were Robert Roberts and Bewley’s which were both part of Quaker Family. There main outlets were on George Street and Grafton Street of Dublin. The people were getting inclined towards specialty coffee beverage such as cappuccinos, lattes, macchiatos, espressos and frappuccinos. This new era led to the unexpected growth of coffee in the market, during which Ireland became known as the “Celtic Tiger”.
The main predicted reason behind this was the latest trend of apartment living in Dublin. This was due to the famous American sitcom “Friends” and its fictional coffee house “Central Perk” may have also played a pivotal role in increasing popularity of coffee shop. Also, the “dotcom-boom” era played a huge role in the expansion of the coffee market. There were many budding young entrepreneurs, stock market investors and various analyst from different fields. The factors which can potentially explain the new café culture at that time was the new regulations passed such as anti-smoking legislation, Dublin pubs and the new budding coffee meetings. Another, significant factor which played a major role in prospering the coffee culture was free wireless internet connections at coffee shops such as Starbucks.
Competitors analysis
Dublin is like a Europe’s Silicon Valley, consisting the European headquarter for companies such as Facebook, Google, Ebay, Paypal. This has not only led to expansion in business but have also attracted people from different nations towards itself. This has increased more demands which has dwelled in more competition. Coffee outlets such as Café Nero, Costa, O’Brien, Pret-a-manger, Mc Cafe are among the top competitors of Starbucks.
The total coffee Irish market is approximately 502 outlets and is continuously growing at an increasing rate with a growth of 14% which will lead to around €284m. There was also a Project Cafe 2015 Ireland defining the highly dynamic Irish branded coffee market in which primary research was conducted to analyse the success factors of the coffee operators and its market dynamics.
Cafe Nero is the top competitor with 39% and Costa with 38% both giving strong competition to Starbucks. The structure of the competitive analysis has also been based on several factors such as speed of service, food quality, value, friendliness of staff and ambience. The respective elements have shown results of all the 3 positioned almost at the same level. They almost provide the same level of services and they all maintained a respectable image in their consumer’s eye and have their loyal customer base. (Appendix: Figure 2&3)
Segmentation Targeting Positioning
Segmentation
Starbucks customer base can be segmented based on following characteristics which include:
1. Geographic: People residing in urban areas. Both males and Females.
2. Demographic: 18-40 millennials and self-income earners.
3. Behavioral: People who enjoy high quality products and comes with their friends to relax, work.
4. Psychographic: People who are aspirer, explorer or a mainstreamer.
Positioning
First age group is 18-29 year which are the millennials which are the “future of tomorrow” and the second target group is 30 -40 year which includes of people who belong to “higher income group” mainly consist of self-income earners. In the research, it has been measured that these are the two group from which Starbucks has made its core profit by Fromm (2014).
Moreover, the target of Starbucks should constantly be on these group as they are the ones who will lend under the 3 categories:
1. Adaptive Positioning
As per the new and increasing health trends Starbucks has developed new coffee beverages with less calorie intake such as Chai Tea Latte (103 calories), Iced Americano (11 calories).
2. Mono Segment Positioning
In this type of positioning Starbucks targets only its premium clients only. These are individuals who are willing to pay extra bucks for a high-quality product.
Targeting
In Dublin main city, there are as many outlets on a single street. The U.S coffee giant has introduced its Five-year growth plan in which company has revealed how it wants to expand more worldwide and open 12,000 outlets worldwide till 2021.
The company should target well educated modern people who are technology addictive as the world is becoming digital and company is also prioritising on the Starbucks take away app which is getting recognition in the U.S markets also adding new features such as voice and message ordering on its app which is making Starbucks distinct from its competitors and providing it an edge over others.
Current Marketing Mix
There are 7 core parts in marketing mix which comprise of place, price, promotion, product, process, people and promotion. The marketing mix is quite broad and each company choose 3- 4 elements to mainly focus upon so that the company could pay attention to detail to its target based on their business strategy. Starbucks marketing mix optimises on product, place, price, promotion. Starbucks has a premium price range for its products and focuses on supreme quality product and best customer service. Its main objective is to give its customers an unforgettable experience. Starbucks offers wide range of products and introduces new innovative beverages according to seasons. (Appendix: Figure 9)
Primary Research
The research was conducted with the one on one talk with the manager of Starbucks, Blackrock and observations at different outlets of Starbucks across Dublin. The main idea behind the interview and the observation was to get an in-depth knowledge about the current marketing strategies, customer service, competitors and market position of the company.
During the research, the manager highlighted major key points which are the part of Starbucks marketing strategies. There are various unique programmes conducted at Starbucks called “Be Amazing Today” such as “kids club”, ” Coffee at Home” and more to interact with its customer on daily basis and give them a platform to socialise which helps in developing a positive and a happy environment. These events have fixed days and are posted on the blackboard present in the store on which days it is carried out. For instance, “kids club” is especially for children in which they participate in various engaging activities conducted by the staff and get innovative drinks from Starbucks which helps them to increase their loyal customer base and target 2 different age group with one event which include children and their parents who come along with them at the event. (Appendix: Figure 8)
The other essential information provided at the interview was Starbucks biggest competitor is Costa as it offers the same product line with a premium quality to its customers. Moreover, locations of the stores (Place) for Starbucks are decided very strategically and after a lot of research based on the maximum traffic of the consumers as for example, Starbucks at Stillorgan is located just next to the supermarkets and the premium shopping clothing brand stores where it has the maximum footfall and has an excellent connectivity through Public transport.
Lastly, while conducting the interview when asked about the drawbacks or which areas Starbucks can improve so the manager said this is quite confidential and they are not allowed to speak about the negative aspect of the company.
Recommendations
- Continuous change and innovation are required at the coffee outlets in terms of interiors as to attract more customers old and new which can be beneficial to the company to increase sales. This can be done by conducting open mics which take place at Starbucks outlets in Mumbai, India. (a free program which gives a platform to people to recognise their hidden talents, showcase it and helps in networking and get to meet with a lot of new people (Figure 4).
- Starbucks can improve its social media platform customer interaction as with the change in era customers love the brand which involves them in their activities because today’s consumers are quite keen in knowing what they are eating, drinking etc. The research also indicates that “Humanisation element” is the current trend in the market.
- Starbucks can increase its food options in more gluten free, vegan options which according to Board Bia reports current need of the Irish consumers as people are moving towards more healthier options.
- Starbucks can also start the on-the-go home delivery which would be a new concept and can potentially target the old customers as well.
- Starbucks is taking lot of initiatives for the society such as “reusable cups” and green initiatives which are empowering them over their competitors which they should continue (Figure 7).
Conclusion
Coffee Culture has been a developing phenomenon among the Irish audience with almost 75% Irish residents consuming coffee. There has been a rapid increase in sales for fresh coffee and a decline on instant ones. Slowly, Coffee is becoming the first preference of the Irish consumers in place of tea in Ireland but still tea is the first choice due to which Starbucks has launched Chai Latte (Tea Beverage) to capture the tea drinkers as well. One of the major reason of development of coffee market is Irish consumers are becoming very health conscious and are limiting their alcohol intake. Therefore, people are choosing coffee shops as compared to pub or restaurant to socialise.
Irish consumers as per the latest Mintel report are becoming more specific about their preference of coffee and even the type of milk. The coffee market in Ireland is taking a transition like the current Irish craft beer market which is most popular in Ireland.
The future is bright for Irish coffee with off trade value sales of €176 million predicted for 2020. Recently, Dublin hosted the “World of Coffee” in the RDS, an event attended by baristas and coffee enthusiasts from over 100 nations. The competition focused on promoting excellence in coffee and advancing the barista professional.