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Introduction

Starbucks Corporation is the leading roaster, retailer, and marketer of specialty coffee in the world.

Its operations include upwards of 7,300 coffee shops and kiosks in the United States, and nearly

3,000 in 34 other countries, with the largest numbers located in Japan, Canada, the United

Kingdom, China, Taiwan, South Korea, the Philippines, Thailand, Malaysia, Mexico, Australia,

Germany, and New Zealand. In addition to a variety of coffees and coffee drinks, Starbucks shops

also feature Tazo teas; pastries and other food items; espresso machines, coffee brewers, and other

coffee- and tea-related items; and music CDs. The company also sells many of these products via

mail-order and online at starbucks.com. It also wholesales its coffee to restaurants, businesses,

education and healthcare institutions, hotels, and airlines. Through a joint venture with Pepsi-Cola

Company, Starbucks bottles Frappuccino beverages and the Starbucks Double Shot espresso drink

and sells them through supermarkets and convenience and drugstores. Through a partnership with

Kraft Foods, Inc., the company sells Starbucks whole bean and ground coffee into grocery,

warehouse club, and mass merchandise stores. A third joint venture, with Dreyer's Grand Ice

Cream, Inc., develops super premium coffee ice creams and distributes them to U.S. supermarkets.

From a single small store that opened in 1971 to its status as a 21st-century gourmet coffee giant,

Starbucks has led a coffee revolution in the United States and beyond.

Starbucks was founded in Seattle, Washington, a haven for coffee aficionados. The city was noted

for its coffee before World War II, but the quality of its coffee had declined so much by the late

1960s that resident Gordon Bowker made pilgrimages to Vancouver, British Columbia, to buy his

beans there. His point of reference for the beverage was dark, delicious coffee he had discovered

in Italy. Soon Bowker, then a writer for Seattle magazine, was making runs for friends as well.

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When Seattle folded, two of Bowker's friends, Jerry Baldwin, an English teacher, and Zev Siegl,

a history teacher, also happened to be seeking new ventures; the three banded together and literally

built their first store, located in Seattle's Pike Place Market, by hand. They raised $1,350 apiece,

borrowed another $5,000, picked the name Starbucks, for the punchy "st" sound and its reference

to the coffee-loving first mate in Moby Dick, then designed a two-tailed siren for a logo and set

out to learn about coffee (Starbucks Corporation).

Marketing environment

Target market is mainly adults, men and women, from the ages 25-40. This consists of almost

half of Starbucks' consumers and grows at a rate of 3% annually. Even though this is the majority

of Starbucks' business, the consumer also ranges from young adults 18-24 (40%), which grows at

4.6% annually, and even kids and teens 13-17 (2%), which most products are bought from the

parents. A main reason why Starbucks is so successful today and continues to grow is because the

people of the company takes many factors into account. These include: social, demographic,

economic, technological, political and legal, and competitive factors. The people within

the Starbucks company, management and staff, feel they have a responsibility to give back to the

community. Ever since they opened their first store in 1971, they dedicate themselves to show a

balance between profitability and social conscience (social factors). There is a whole area behind

just the coffeehouse where they offer community service, create jobs for those in need, and youth

action programs to prevent violence among young adults. They are also very involved in keeping

the Earth green and certain environmental factors, such as recycling and reducing waste, energy,

water, and climate change Political/Legal factors, which affects Starbucks as a company, include

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the stability of the countries where Starbucks purchases its coffee and natural resources. They

receive their coffee beans from countries all around the world, even places that have many natural

disasters: tsunamis, earthquakes, and wars. If any of these events occur in a country where they

are expecting their coffee from, Starbucks may not be able to produce coffee and profits will

drop. Also, Starbucks is environmentally friendly, as stated earlier. They have to consider how

to protect the brand aspect in everything they do, from providing a living wage that makes it to

farmers and have production with low pollution rates (Chapter 4: The Marketing Environment

1970).

Mission and vision statements

Starbucks vision statement is;” To establish Starbucks as the most recognized and respected brand

inthe world and become a national company with values and guiding principles that employee

could be proud of “The vision statement clearly describes the dream or the future of the company

that is to be the world’s most well-known coffeehouse and also to be the most appreciated and

positively graded brand by all graded level in the company also focuses its vision to

employee’s, so that the employees will be happy.

Starbucks Mission Statement is; “Establish Starbucks as the premier purveyor of the finest coffee

in the world while maintaining our uncompromising principles while we grow. “The six principles

are: Provide a great work environment and treat each other with respect and dignity. Embrace

diversity as an essential component in the way we do business. Apply the highest standards of

excellence to the purchasing, roasting and fresh delivery of our coffee. Develop enthusiastically

satisfied customers all of the time Contribute positively to our communities and our environment.

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Recognize that profitability is essential to our future success Establish Starbucks as the premier

purveyor of the finest coffee in the world and also to be established as the most employee valued

company while maintaining our uncompromising principles as we grow together with

technological advances. The six principles are: Provide a great work environment and treat each

other with respect and dignity. Embrace diversity as an essential component in the way we do

business. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery

of our coffee. Develop enthusiastically satisfied customers all of the time Contribute positively to

our communities and our environment6.Recognize that profitability is essential to our future

success (Scribd, Scribd).

Starbucks Marketing Strategy Analysis

Starbucks has a distinct marketing strategy that starts right from its products. It has

differentiated itself from others based on the premium quality of its coffee. From its humble

origins in Seattle, the brand has spread throughout the world to become the number one coffee

retail brand. It’s an international brand and the newest chapter in its growth story is the Asian part.

Starbucks has used the formula of quality-based product differentiation which has resulted in high

level popularity and customer loyalty. However, its marketing strategy is not limited to only

products, but Starbucks is equally unique in other aspects of its marketing and promotions. Product

quality must be considered the central pillar of its marketing efforts. Great quality has several

benefits. First of all, it helps with brand image and reputation. Great taste equals higher recognition

and popularity. As a brand, Starbucks has built great reputation over time for the quality of its

products, their flavor and for unequalled customer service. At Starbucks, the demographic

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segmentation's main group is between 25 and 40 years of age with high incomes, the second target

group is 18 to 24 year of age and belongs to richer families. In general, the customers belong to

the Generation Y born between 1977 and 2000; this is where most profit is made as claimed by

Fromm (2014). Psychographic segmentation indicates that customers belong to the upper-middle

class and generally have college education (Rafii, 2013). When targeting, Starbucks is situated

between mass marketing and segment marketing; they are targeting a broader public; however,

there are some criteria that the customers should have, such as higher incomes or a younger age.

We can illustrate Starbuck's positioning thanks to the graph (Zapolski, 2010) below; it is how the

customers perceive the product and service sold. (Bulletin, 2015)

Starbucks in 1998 entered into a long-term licensing agreement with Kraft Foods, Inc. for the

marketing and distribution of Starbucks whole bean and ground coffee into grocery, warehouse

club, and mass merchandise stores. The company also began experimenting with a full-service

casual restaurant called Café Starbucks. In early 1999 through the purchase of Pasqual Coffee

Co., a chain of coffee and sandwich shops with 56 units in California and New York. Starbucks

had already developed its own in-house tea brand, Infusion, but it was replaced following the

early 1999 acquisition of Tazo Tea Company, a Portland, Oregon-based maker of premium teas

and related products with distribution through 5,000 retail outlets. In early 2000, the company

did an agreement with Kozmo.com Inc., an operator of an Internet home-delivery service

providing its customers with videos, snacks and other items (UK Essay).

SWOT Analysis: Strengths

Quality, profitability and ethicality: Starbucks have established themselves as a premium

coffeehouse chain, despite their huge worldwide presence comparable to that of most fast food

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chains. Their products are of excellent quality, seemingly environmentally friendly, and

relatively consistent between locations. As a result, they can afford to charge customers high

prices, which most people are willing to pay. Not only does this mean large profits, but also

has them globally recognized as one of the best coffee shop chains. Efficiency and

reinvestment strategy: Most of the profits that this company makes go straight back into

expanding the business. This is evident in the ever-increasing number of locations that

Starbucks boasts [4]. It’s clear that this corporation has a well-planned growth strategy, which

seems to be working well for them. Employee treatment: Starbucks is known for treating its

hundreds of thousands of employees very well and has previously been listed as one

of Fortune’s Top 100 Places to Work For. Weaknesses High price point: While their high

price point was a strength in the previous paragraph, it is also a weakness. The hefty price tags

on some of their products (starting even with their most basic coffee options) deter plenty of

customers who might otherwise make Starbucks a part of their daily lives. While their

premium quality and good ethical values might be attractive, some just don’t have that much

money to spend on a cup of coffee. A lack of overly unique products: While Starbucks might

be known for their Frappuccino’s, pumpkin spice lattes, and big chocolate chip cookies, they

don’t exactly have the most unique market. Plenty of other coffee shops, chains or otherwise,

provide similar products and only lose out to Starbucks’ big name. Opportunities Global

expansion: While Starbucks does have many coffeehouses across the globe, most of them are

located within the US [5]. There are plenty of regions where profitably branching out is a

possibility, including India, Central Europe, and some regions in Africa. Introducing new

products and co-branding: Starbucks products would be welcomed in supermarkets across the

world, something which has already begun. Selling their own branded products in stores other

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than their own would be a great way to maximize the value of their big reputation. They also

have the opportunity to team up with other companies and co-brand — imagine the

introduction of Starbucks products in McDonald’s Restaurants (something which will quite

possibly never happen)! Threats Fierce competition from cheaper alternatives: Dunkin’

Donuts and McDonald’s are two other huge multinational companies which directly compete

with some of the products that Starbucks sells. While these companies don’t pride themselves

entirely on their coffees and teas, they offer products of a similar quality for a fraction of

Starbucks’ prices. Who can tell what consumer forces will favor in the future? A specific

market: Starbucks’ success can be partially attributed to the popularity of coffees, teas and

convenient snacks in today’s society. If consumers were to shift away from these products

(perhaps one day relying on caffeine pills instead of caffeinated beverages), it would leave

Starbucks struggling to stay afloat. They are also very prone to feeling the effects of rises in

coffee, tea, and dairy product prices.

Main competitors

Starbucks has been fighting its competitors – Dunkin' Donuts and McDonald's – for the top

position as coffee king for several years. The company, which began close to 50 years ago with a

single location, has experienced phenomenal growth and success. In Q4 2018 alone, the

company opened 604 new locations, bringing the coffee behemoth's global store count to over

29,000. With a Starbucks on every corner, the company is often considered the go-to coffee

place to work and socialize, a concept that corresponds to the company's marketing approach.

from its humble beginnings as a Seattle-based coffee roaster, Starbucks has strived to create a

"second home" for consumers, where they can stop on their way to and from work. In recent

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years, the company has invested heavily in its brick-and-mortar locations by expanding its food

options, remodeling its restaurants, and revamping its rewards programs. If Q4 2018 earnings

were any indicator, the company's efforts seem to be working. Starbucks shares soared on

November 2, 2018 after the company delivered an upbeat earnings report that beat Wall Street

estimates. The company reported $6.3 billion in revenues that quarter, compared to $5.7 billion

over the same period in 2017. With no end in sight for Starbucks' growth, here's how the

company stacks up against its competitors (Hawley, 2019).

Starbucks value-chain analysis

Inbound Logistics

The inbound logistics for Starbucks refers to selecting the finest quality of coffee beans by the

company appointed coffee buyers from coffee producers in Latin America, Africa and Asia. In

the case of Starbucks, the green or unroasted beans are procured directly from the farms by the

Starbucks buyers. These are transported to the storage sites after which the beans are roasted and

packaged. These are now ready to be sent to the distribution centers few of which are company

owned and some are operated by other logistic companies. The company does not outsource its

procurement to ensure high quality standards right from the point of selection of coffee beans.

Operations Starbucks operates in 65 countries either in the form of direct stores operated by the

company or as licensed stores. Starbucks has more than 21,000 stores internationally which

includes Starbucks Coffee, Teavana, Seattle’s Best Coffee and Evolution Fresh retail locations.

According to its annual report, the company generated 79% of the total revenue during fiscal

year 2013 from its company operated stores while the licensed stores accounted for 9% of the

revenue.

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Outbound Logistics

There is very little or no presence of intermediaries in product selling. Majority of the products

are sold in their own or licensed stores only. As a new venture, the company has launched a new

range of single-origin coffees which will be sold through some leading retailers in the U.S.; these

are Guatemala Laguna de Ayarza, Rwanda Rift Valley and Timor Mount Ramelau.

Marketing and Sales

Starbucks invests in superior quality products and high level of customer services than

aggressive marketing. However, need based marketing activities are carried out by the company

during new products launches in the form of sampling in areas around the stores.

Service

Starbucks aims at building customer loyalty through high level of customer service at its stores.

The retail objective of Starbucks is, as it says in its annual report, “to be the leading retailer and

brand of coffee in each of our target markets by selling the finest quality coffee and related

products, and by providing each customer a unique Starbucks Experience.”

Infrastructure

This includes all departments like management, finance, legal, etc which are required to keep the

company’s stores operational. Starbucks well designed and pleasing stores are complemented

with good customer service provided by the dedicated team of employees in green aprons.

Human Resource Management

The company’s committed workforce is considered a key attribute in the company’s success and

growth over the years. Starbucks employees are motivated through generous benefits and

incentives. The company is known for taking care of its workforce and this is perhaps the reason

for a low turnover of employees, which indicates great human resource management. There are

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many training programs conducted for employees in a setting of a work culture which keeps its

staff motivated and efficient.

Technology Development

Starbucks is very well known for use of technology not only for coffee related processes (to

ensure consistency in taste and quality along with cost savings) but to connect to its customers.

Many customers use Starbucks stores as make a shift office or meeting place because of the free

and unlimited wifi availability. The company in the year 2008 also

launched mystarbucksidea.force.com as a platform where customers can ask questions, give

suggestions and openly express opinions and share experiences. The company has implemented

some of the suggestions given via this forum. Starbucks also uses Apple’s iBeacon

System wherein customers can order their drink through the Starbucks phone app and get a

notification when they walk in the store.

Procurement

This involves procuring the raw material for the final product. The company agents travel to

Asia, Latin America and Africa for the procurement of high-grade raw material to bring the

finest coffee to its customers. The agents establish strategic relationship and partnership with a

supplier which is built up after reconnaissance and communication about the company standards.

High quality standards are maintained with direct involvement of the company right from the

base level of selecting the finest raw material which is coffee beans in case of Starbucks.

Bottom Line

The concept of value chain helps to understand and segregate the useful (which help in gaining a

competitive edge) and wasteful activities (which hamper market lead) accompanying each step

during the product development process.

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It also explains that if value is added during each step, the overall value of the product gets

enhanced thus helping in achieving greater profit margins (Bajpai,)

Works Cited

“Starbucks Corporation.” Reference for Business,


www.referenceforbusiness.com/history2/54/Starbucks-Corporation.html.

“Chapter 4: The Marketing Environment.” Chapter 4: The Marketing Environment, 1 Jan. 1970,
cacholajennifermar100.blogspot.com/2012/09/chapter-4-marketing-environment.html.

“Starbucks Case Study.” Scribd, Scribd, www.scribd.com/doc/26095695/Starbucks-Case-Study.

Bulletin, Cris. Starbucks Marketing Analysis. 2015,


www.degruyter.com/downloadpdf/j/cris.2015.2015.issue-1/cris-2015-0002/cris-2015-
0002.pdf.

“Starbucks Market Analysis.” UKEssays.com, www.ukessays.com/essays/marketing/internal-and-


external-market-analysis-for-starbucks-marketing-essay.php.

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Hawley, Julia. “Who Are Starbucks' Main Competitors?” Investopedia, Investopedia, 3 Apr. 2019,
www.investopedia.com/articles/markets/101315/who-are-starbucks-main-
competitors.asp.

Bush, Thomas. “SWOT Analysis of Starbucks, the World's Leading Coffeehouse Chain.” PESTLE
Analysis, 16 June 2016, pestleanalysis.com/swot-analysis-of-starbucks/.

Bajpai, Prableen. “Starbucks as an Example of the Value Chain Model - Supply Chain 24/7.”
Supply Chain 24 7,
www.supplychain247.com/article/starbucks_as_an_example_of_the_value_chain_model.

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