Starbucks Marketing Analysis

UNIVERSITY OF REDLANDS

MARKETING MANAGEMENT

BUAD 680

INDIVIDUAL: CASE SUMMARY

14 OCTOBER 2006

STARBUCKS CORPORATION - ASSESSMENT AND EVALUATION OF MARKETING

STEPHEN ANSUINI

Introduction

Headquartered in Seattle Washington, Starbucks Corporation is a premium coffee retailer offering a wide selection of hot and cold beverages, pastries and light deli fare, coffee accessories and equipment. Starbucks opened its first location in 1971 at Seattle's Pike Place Market and within 20 years held its initial public offering and now has over 8500 retail locations in 32 countries. "Each store varies its product mix depending upon the size of the store and its location. Larger stores carry a broad selection...smaller stores...a more limited selection" (www.investor.reuters.com). Store locations follow the example set by the fast food industry and are typically located in high traffic and high visibility areas in a variety of urban and suburban settings.

Today, Starbucks has achieved their mission statement to; "Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow." (www.starbucks.com). This is accomplished through the purchase and sale of high quality beans and an aggressive expansion of retail operations, along with a strong social and environmental commitment. Starbucks has also realized substantial success through deliberate and intentional partnerships and affiliations with business partners that hold the same high social and environmental standards. Through aggressive marketing and branding, and at a higher price point then competitors, Starbucks has attained market nce.

SWOT Assessment

Strengths

* Starbucks has strong global brand recognition built on a solid reputation for premium products and is well known with consumers for making high quality beverages, food and associated goods.

* Starbucks has established six guiding principles, first of which is to "Provide a great work environment and treat each other with respect and dignity" (www.starbucks.com). This philosophy has led to their being a highly desired employer and contributed greatly to their repeated inclusion in Fortune magazines Best Places to Work list.

* Starbucks does not mass advertise and spends just one percent of sales on marketing. This is certainly a challenge to Anne Saunders, senior vice president brand strategy and communications. A significant portion of marketing effort has gone to support local events such as beach cleanups and school meetings. "These events communicate wonderfully about the brand and who we want to be, but they are very low-reach vehicles. Our challenge is: How do we change the wheels on the car as the car is racing around and around the track?" (www.adage.com). Saunders is successful by being accessible and approachable to all partners (employees) and by encouraging feedback from store level partners.

* Starbucks continually searches for ways to be innovative. Providing internet connectivity, collaborating on movies ("Akeelah and the Bee"), offering a convenient credit card service with a unique quick charge option, pursuing music downloads for MP3 players, exclusive interviews with musical artists such as Sheryl Crow.

Weaknesses

* Home Market Saturation. Starbucks has greater then seventy-five percent of stores located in the United States. This is a strong presence in the North American market, and is opening additional stores at a rate of five a day in 2006. Starbucks recently declared that the intention is to double this effort in 2007 by opening an unprecedented 1000 additional stores in the calendar year. Starbucks sees itself as in the early stages of growth and is "passionately committed to our ultimate goal to have approximately 25,000 Starbucks locations worldwide" (www.starbucks.com). Starbucks has seen a rapid increase in costs and overhead costs due to this aggressive growth strategy and subsequent high rate of store openings. This plan may prove to be too much for Starbucks management who may find it challenging to effectively manage the additional exponential debt and related product quality control issues.

* Single Product Line. Currently, Starbucks is heavily reliant on a single product line. With coffee and related products being its primary focus, Starbucks narrows the potential market to this market segment and leaves itself vulnerable to a possible global trend away from tea and coffee consumption.

* Pricing. With the recent price hike, an already above average priced cup of coffee may be out of reach for some consumers. Starbucks is missing out on the opportunity to reach the lower-to-middle income customer. This also leaves them vulnerable to competition on a strictly price point basis.

Opportunities

* Marketing. Starbucks spends a relatively small amount on marketing, does not offer coupons and rarely uses television as an advertising medium. Sponsoring television movies, such as Ford Motor Company did for "Schindler's List", would give exposure with the desired emotional feeling without the vast cost of partnering with a movie production. That may end up not playing well to consumers.

* Pepsico Partnership. The new partnership with Pepsico to test launch product vending machines could open a new path to consumers and puts products in office buildings, hospitals, shopping malls and other niche markets and locations where Starbucks currently does not have exposure while concurrently not requiring the traditional overhead of a store. The genius of this is that it can provide presence without the traditional overhead of a store.

* Starbucks has a great deal of potential by continuing to pursue overseas markets. A prime target of opportunity lies in China, where Starbucks currently operates barely 200 stores, and is already profitable at the store level and presents enormous