Business Plan

Executive Summary

Starbucks is the leading retailer and roaster for brand specialty coffee in the world. It has over 7,500 stores located worldwide. As Starbucks continues to expand, it will encounter all sorts of new product markets, with new and demanding customers for unique and appealing products. Starbucks has begun by introducing an extension of the Frappuccino line targeted to the non-coffee drinker. Entering this new market, Starbucks faces many challenges from having to compete to retain brand recognition of its primary products, yet increase awareness of its new product line. Our analysis and research of the market have resulted in keys findings as follows:

Ð'* The new Frappuccino blended beverages, also known as the Summer Drink flavors will help Starbucks reposition itself in the developing non-coffee iced-beverage market; Starbucks will also need to enhance the product perception to maintain the perceived high quality. Customers of this segment are sensitive to taste and quality of food product and nutritional data.

Ð'* With this new line extension, Starbucks will be facing many new competitors such as Jamba Juice, Orange Julius and other local non-coffee iced-beverage providers. Special care must be implemented to maintain Brand equity for it's primary product, and not become to diversified the current customers seek alternatives.

Ð'* Based on our research, we found that the married couples age 25-54 with children to be the primary potential target market.

Ð'* Additionally, we have concluded generating awareness about the product via a Web Campaign would be highly advisable. A Secondary approach would be Network TV or Print Media such as magazines, journals, and newspapers.

Managerial Problem

Starbucks strategic goal is to increase market share of the non-coffee drinker; they have begun by introducing an extension of a product line targeted to this segment. To ensure market growth, Starbucks has repositioned one of its current products, the Frappuccino line, this product has been extended to include 3 new flavors; Double Chocolate Chip CrÐ"Ёme, Vanilla Bean CrÐ"Ёme, and Strawberries & CrÐ"Ёme, introduced throughout the summer months. Faced with the challenge of entering a new competitive market Starbucks must compete to retain brand recognition of its primary products, yet increase awareness of its new product line.

Situation Analysis

Company

Starbucks is the leading retailer for roaster and brand specialty coffee in the world (See Figure 1). It has over 7,500 stores, which are located in the United States, Canada, Europe, Asia and the Middle East . Besides high quality coffee drinks, Starbucks sells bottled coffee drinks, such as FrappuccinoÐ'® and Starbucks DoubleShotÐ'™.

Starbucks revenue is growing by 20% a year and is opening approximately three stores every day. Starbucks is capable of managing its successful operations by having steady market growth. It achieved this by financing through their cash flow instead of franchising, selling stock or increasing their financial leverage . Its strategy to success is "blanket an area completely." This approach is to "cuts down on delivery and management costs, shortens customer lines at individual stores, and increases foot traffic for all the stores in an area," that gives Starbucks a competitive advantage.3

Customer

At first only yuppies went to Starbucks, but now it attracts a much wider demographic of customers including people of different ethnic backgrounds and ages. Today, Starbucks has the striking number of 25 million people visitors in its stores each week . This success is due to the combination of high quality drinks and friendly environment with good music, comfortable chairs, and good services. This creates the "Starbucks experience" which customers can relate to that lead to brand loyalty. In addition, Starbucks needs to deal with customers' cultural preferences in all its worldwide locations to maintain customers' loyalty. (See Figure 2) Also see Figure 3 for influences on the consumer purchase decision process.

Competitor

To ensure further market growth and be competitive, Starbucks is developing new products for non-coffee drinkers. Starbucks provides its current customers and attracts new customers not only with quality products but also with varieties flavors that customers' desire (See Figure 3).

Starbucks' two largest competitors are Dunkin' Donuts and Krispy Kreme, both are national chains. These companies use aggressive price-cutting, up to 20%, for their drinks.5 Other competitors are small local coffeehouses, and other coffee brands like Tully's and Pete's Coffee. Their direct competitors for the new product line are Orange Julius, Jamba Juice, fast food chains such as McDonald's and Burger King, and other small coffee alternative providers.

Complementors

Starbucks recently teamed up with Bank One to offer the Starbucks Card Duetto Visa.7 This is a stored-value card and traditional credit card. Starbucks has also introduced a T-Mobile Hotspot service which allows the Starbucks customer to have access to wireless internet for a fee.8 Offering more services like the Visa card, wireless internet and customized CD will add more value to the Starbucks experience and help draw more customers to Starbucks which will lead to higher revenues.

Strategy (STP)

Segmentation

One dimension of segmentation will be demographics (age and household status). We have selected married couples age 25 Ð'- 54 with children to be our primary target market. According to our data in figure 5, we found that these households spend more than other households on non-alcoholic beverages away from home. We also like this segment because the children can consume the coffee-free Frappuccino as well. We expect such events as parents buying the child a Frappuccino as a treat for a soccer game victory, or on a family trip to the beach. We anticipate the exciting summertime experience, will remain in the child's mind and will influence their purchase decisions as they mature. (See Figure 10)

Target

Points of Difference:

Starbucks cannot expect to grow by offering the same products as its competitors. Starbucks must offer "points of difference"