The following report evaluates the marketing environment for the coffeehouse business, specifically Starbucks. The report will cover a brief background of the company and reasons to why Starbucks has been selected as a center group to display a marketing report. A macro environmental study will demonstrate important possible threats and opportunities for Starbucks. It will also look into further segmentation research, characteristics, views and behaviors within the consumer groups.
Background to Starbuck and Selection Criteria Starbucks was established in 1971. The global brand is well known throughout the world and now sits in 50 countries, with more than 17,000 stores (Starbucks,2011). In 2010 the international coffee house had revenues of $10. 7 billion (business insider,2011), with outstanding revenue Starbucks is recognised as the worlds top coffee retailer. The company has been selected as the author has personal experience of working within the establishment, in the role of a qualified barista.
During that time the business remained busy throughout the day, peaking in both the morning and evening, when customers were leaving for work or travelling home. The role came with pressure of continually making a high standard of coffee, whilst attempting to make each product consistent in taste, across the entire company. The Starbucks Macro Environment The macro environment is when all external environmental forces can affect how a company operates but which are beyond its control.
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This can be structured as Political/legal, ecological, socio-cultural, technological and economical. These are also known in short hand as PESTEL. To really understand their market field in which their business is positioned marketers must assess their gap in the market for competition or business opportunities within the macro environment. Many different trends have an impact on an organisation and each is individually considered. Although Starbucks is currently the worlds leading coffee house, it still needs to stay competitive.
Coffee contains a high amount of caffeine that has been proven to lead to health issues, such as; high blood pressure, insomnia, muscle termers and heart disease (mayoclinic,2011). This socio-cultural pressure presents a potential threat to Starbucks, as people may start to reduce their caffeine intake. Leading to a decline in volume sales. Starbucks do offer a decaffeinated version of each product, however many coffee drinkers consume it for ‘kick’ of the caffeine. If health scares continue within the coffee trade Starbucks might find it hard to continue to make large profit margins annually.
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Currently Starbucks makes most of its trade on coffee, with only a few other products, such as; desserts and quick food like sandwiches and Panini’s. A socio-cultural threat is that coffee may not stay in favor with customers, it could simply be a phase. At the present going to a coffeehouse to catch up with your friends is seen as cool, but how long will this last. Could it be replaced in the future by a different leisure idea or even a different beverage. Is drinking coffee just a latest fashion? Another socio-cultural effect is simple and uncontrollable.
The weather can quite easily affect the sales of coffee. Many people drink hot beverages to keep warm on cold days, however if global warming persists to heat the world up, will the demand in coffee lower. Hypothetically people would want a cold drink or ice cream to cool them down rather than a warm drink on a blistering hot day. The economical threats of pricing could also have a negative effect on Starbuck’s income, while most people consider Starbucks coffee a luxury good and would pay whatever price is set for it, there is an increasing opinion that Starbucks charges too much.
They are also very inflexible in terms of location. For example, Starbucks charges the same price for their products whether you’re in UK or Beijing (ft,2011). In addition to fixing its prices for international customers, Starbucks also has lacked some tact in the way of international relations. Starbucks boasts that it has stores worldwide in over 50 countries, however less economically developed countries where Starbucks trade, such as; Vietnam, will struggle to meet targets as less people will be prepared to spend money on an expensively priced cup of offee. Currently with the economical crisis, this could have a large effect in sales. Coffee to many people is seen as a luxury, it isn’t needed to survive, so if prices continue to soar, people may simply eliminate it from their lifestyles. This will give other competitors a gap in the market to compete against its prices, Starbucks already has competition from many fast food chains, such as; Burger King and MacDonald’s as their prices are low and its convenient.
Other coffee roasters have also closed the gap on Starbucks, competing with lower prices and more to offer than coffee and a minimal food selection (money,2011) The majority of Starbucks beverages contain milk, and recently diary products prices have increased due a rise in raw materials and diesel prices, again this could lead to an increase in price at Starbucks coffee, which could eventually end in losing customers, who simply don’t have the money to spend on coffee (Telegraph,2011).
Starbuck’s are very modernised when it comes to the technical side of the macro environment, they have Wi-Fi in the majority of stores, and have their own loyalty cards to help maintain their regular customers (florence20,2011). Recently they have brought out an app for the I-phone and other smart phone users, where you can quite simply scan your phone to pay for your drinks, the app also finds your closest Starbucks (Starbucks,2011). All of these ideas have helped to keep Starbucks popular as it gives customers the sense of importance, and are being helped to make their visit quicker.
However recently fellow competitor Costa has designed a self-service machine (marketingweek,2011). Andy Harrison, chief executive of Whitbread (Costa), says: “Customers increasingly want great tasting coffee on the go, which makes the self-serve coffee market very attractive” this could steal some of Starbucks customers who just want a drink on the go rather than sitting. Research into Customer Segments Market research “The collection, analysis and communication of information undertaken to assist decision-making in marketing” (Wilson,2006).
Market research helps any organistation and if the facilities were available, it would be a very good place to start when a company wants to make a change or introduce something new within the company. Companies need to research their markets so they can discover who their main customer target groups are. According to Kotler (1998), segmentation is the act of dividing the market into specific groups of consumers/buyers who share common needs and who might require separate products and communications.
Understanding the needs of the segment allows marketers to make better decisions about when and where to advertise a product, how to price it and where to sell it. Currently Starbuck’s largest segment in the market is young business people and graduate students. To increase revenue Starbucks could research when products are more likely to sell, and explore if it would be beneifitiacal to stay open longer. The overall aim; to increase revenue, could be explored by a number of objectives such as: To find out if sales of cold drinks increase during the summer months across Europe, by December 2012.
To explore if customers in the UK who work within the travel industry or travel during off-peak times, would use a Starbucks store during uncooperative times by June 2012. The first objective would be met by collecting internal information from each shop, the study would be based over a year, enabling the study to research if the sales do increase over the summer months. Depending on Starbuck’s database’s secondary research could be conducted, by looking over previous sales, looking over stock sheets, and asking staff if there is any noticeable change throughout the seasons.
The timescale of one year, is necessary to compare results to previous research. The method would be simple and very cost effective as the information goes directly on to the till each day, which prints off as a z-read, showing sales of both hot and cold drinks. When the data has been collected, it would be presented on a line graph to clearly show when cold drinks peak throughout the year. If the research proves that cold drinks do consistently peak during the summer season, then Starbucks may be inclined to introduce a larger variety of cold drinks, or focus on promoting the cold products during warm seasons.
The second objective would be met by collecting primary data, which is information collected for the first time and for a specific purpose. The objective identifies that it will be focusing on people who work within the travel industry or use public transport during off-peak hours. To complete this objective quantitative research methods would need to be used. Questionnaires could be distributed around busy 24hour airports or train stations, possibly offering the customer a free drink at Starbucks on completion.
When distributing the questionnaires ethics wills need to be considered, making sure all data stays anonymous and persons under 18 have consent from a carer. The questionnaire would have to be specific to recogonise how much money they would be prepared spend, and how often they travel in off-peak times. Once the information is collected Starbucks could present their research in a pie chart showing the percentage of who would and wouldn’t use the store, following with how much an average customers would pay. This would give Starbucks an idea if opening a store around the clock in a busy airport/train station would be beneficial.
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