Starbucks

1. Starbucks, according to the information provided in the case, has an array of products generally associated with coffee products. Starbucks started in 1971 selling gourmet coffee. Then Starbucks expanded its product mix into different types of products lines, most likely, to better meet the needs and wants of a wider target market and thus hopefully increase sales. Starbucks new product lines included more than 30 blends and single-origin coffees, handcrafted espresso and blended beverages, Tazo teas, a line of bottled Frappauccio coffee drinks, and Starbucks DoubleShot. All things considered, by Starbucks expanding the product mix it is, most likely, trying to segment the market further in hopes of creating a long term customer relationships, which should result in sustainable increase in sales.

Further expanding its market Starbucks broadened its product offerings into exclusive lines of Starbucks products. Some of the new products included, Barista home espresso machines, coffee brewers and grinders, freshly baked pastries, a line of ice cream, chocolate, sandwiches, salad, coffee mugs, and compact discs. All things considered, Starbucks has created different products that should capture different segments of the market and increase sales.

Further adding to the product mix is Starbucks new licensing agreements for its products with a number of other companies. Generally, the main purpose of creating the licensing agreements is to improve distribution and production methods of Starbucks products. The agreement with Pepsi-Cola Company to produce and distribute bottled Starbucks products in grocery and warehouse club stores is an excellent example of this type of licensing agreement. This new product mix should open up new markets for Starbucks by partnering with well know companies to hopefully increase the overall profitability of Starbucks.

2. The changes within society, from the information given in the case, that have helped Starbucks be successful are vast. First, internationally, societies in Asia and The Middle East have been progressively becoming more Western. Starbucks, selling Western coffee products, took note and, among other things, using a first mover advantage, significantly increased its customer base. Second, domestically, the societal trend of out-of-home-coffee-drinkers age 25-29 has dramatically increased from 42 to 66 percent and 30-59 year olds increased from 33 to 46 percent. Age 60 and over increased the out-of-home-coffee-drinking from 14 to 20 percent. Starbucks also had a hand in the social change out-side-of-home-coffee-drinking, by creating a third place atmosphere within the coffee stores allowing consumers to go and sit at the store to enjoy a cup of coffee. All things considered, the societal changes, some created by Starbucks, have been capitalized on by Starbucks to increase and sustain its place as an industry leader.

3. Starbucks has many strategic factors that account for the success in brand equity. The first is product quality, where products do what they are supposed to do very well. This is evident as Starbucks coffee is seen by most of its consumers as a high quality dark roasted coffee. Starbucks has managed to position themselves in the eyes of consumers as a purveyor of premium quality dark roasted coffee beans. Starbucks has the ability to produce a standard roast, thus customers in theory should know they are getting a quality cup of coffee when purchasing Starbucks coffee.

The second factor adding to Starbucks brand equity is the consistency of advertising and other marketing communications which allows Starbucks brand to tell its story well. Although, Starbucks does not spend much money on advertising, its product message is clear through a highly recognizable logo and brand name. Another method of advertising for Starbucks is through word of mouth marketing. People who generally enjoy out-of-the-home-coffee-drinking are more likely to tell friends and family about the highly enjoyable experience they had at Starbucks, therefore increasing the customer base. All things considered, Starbucks compared to its competitors is able to gain brand equity with relatively low advertising and marketing expenses.

The third factor adding to Starbucks brand equity is its distribution intensity. The distribution intensity might be the largest contributing factor to Starbucks brand equity. This is because customers see Starbucks coffee most everywhere they shop. Important for Starbucks brand equity, this distribution intensity is not restricted to North America, but spans 35 different countries. The brand equity intensity is so strong that it is not uncommon, even in North East Thailand, to see Starbucks coffee cups in a good portion of mall patrons hands. Also, by Starbucks having the Starbucks Card it increases its distribution intensity, by having customers possibly see the card when opening their wallet this could result in the customer getting the warm and fuzzy feeling and wanting to buy Starbucks coffee.

The forth factor adding to Starbucks brand equity is its brand personality. Starbucks brand, among other things, stands for a relaxing cup of quality coffee that can be enjoyed while having good conversation with friends. Also, the brand stands for corporate environmental, social, and economical responsibility. All things considered, Starbucks through many different aspects has created a lot of brand equity contributing to the success of Starbucks as a whole.

4. Starbucks is faced with a few opportunities and threats. However, Starbucks is generally pretty good at taking advantage of opportunities to help increase its overall market share. First, Starbucks is good at taking new products and services that can be retailed in its cafes, such as taking advantage of the trend towards more environmentally sound products. Second, Starbucks has the opportunity of expanding its global operations to new global markets because of changing consumer tastes. For Starbucks to capitalize on this opportunity it must make sure not to offend local customs and cultures as it has done in the forbidden city of China. The third opportunity is for Starbucks to co-brand with and/or franchise to other food and drink manufacturers. All things considered, there are many opportunities that Starbucks can take advantage of to possibly increase its customer base and product sales.

There are a few threats that Starbucks needs to be aware of and adjust accordingly to protect its overall market share. First, it is possible that the market tastes may shift away, in the long run, from coffee to other types of drinks, thus reducing the customer base ultimately decreasing Starbucks’ sales. Second, since coffee beans are a commodity, Starbucks is exposed to the risk of rising commodity prices. Third, there is an ever increasing