Case The Coffee Shop Market Starbucks Marketing Essay

Case The burnt umber Shop mart Starbucks Marketing EssayStarbucks Corporation is an international hot chocolatehouse chain, founded in 1971 in Seattle, Washington. Starbucks serves a variety of beverages including brewed coffee, tea, hot chocolate, espresso and a picking of bottled boozings. Starbucks as well as sells firm bean coffee and a variety of ready-to-eat snacks. The low gear Starbucks location to move oer step forwardside of North America was in Tokyo in 1996 and from thusly on Starbucks became an international bell ringermark, expanding both nationally and world(prenominal)ly.This report depart exploit to examine the situation of Starbucks in japan. It provide bring come forth the food market place placeing outline to be adopted for a rise in profit cogency of Starbucks lacquer in the next two years. In addition, it will attempt to explain the use of marketing mix to aid the chosen strategy. machinate ANALYSIS1.1 STRENGTHS1.1.1 Strong inciter imag eStarbucks spot name, quality customer service and w behousing ambience ar its key strengths. It has maintained its international operations to ensure consumer recognition. Starbucks is famed for its high quality harvest-homes and has maintained a consistently positive consumer experience that has helped Starbucks physique a strong stigma image. Starbucks spends little than 1% of revenue on advertising and promotion individually year which indicates they rely on an established participation image (P. Ghauri, global marketing case study Starbucks-Going Global Fast). Starbucks key contender in Japan-Doutor coffee, had taken advantage of Starbucks trade name image and copied its logo, while replicating the experience rendered to customers in its retail outlets. (Ono, 2003). This shows that the Starbucks image is a strength worth mimicking. With a well-established brand image in America, it was sure to expect recognition in the Japanese market, because the consumers thit her hit a fondness for everything western. (http//azjatycka.wordpress.com/2009/11/05/international-marketing-strategy-of-starbucks-in-japan-success-or-a-failure/)1.1.2 Commitment to conjunctionStarbucks contributes a considerable amount of its resources to corporate social responsibility programs (Kotabe Helsen, 2004). gibe to only whenler (2006)-CSR programs influence 70% of all consumer buying decisions, with legion(predicate) investors and employees also being swayed in their choice of companies. As a result, Starbucks involvement in the CSR programs helps its competitiveness in the business world.1.1.3 Widespread Presence in multinational MarketsStarbucks has ventured into foreign markets with astonishing pace opening its outlets in 40 countries with 2068 throw ins worldwide. This oecumenical expansion has allowed its presence to be felt across the globe.1.1.4 Retail outlets redeem at well-off and accessible locationsStarbucks has undefended a figure of coffee shop s at convenient locations like shopping malls, libraries, university campuses, office scopes etc. They ar typically located in high traffic, high visibility locations.(Starbucks yearbook report, 2008)1.1.5 Presence of a variety of pabulum items Beverages in addition to CoffeeStarbucks stores offer a choice of regular and decaffeinated coffee beverages, a abundant selection of Italian-style espresso beverages, cold blended beverages, iced shaken refreshment beverages and a selection of premium teas. Starbucks stores also offer a variety of fresh viands items, including healthier choice selections focussing on high-quality ingredients, nutritionary measure out and prominent flavour.1.1.6 Well Developed Corporate Strategy and Good Marketing skills.Weaknesses1.2.1 omit of internal focusStarbucks focuses too much on over-expansion, at propagation tending to ignore the problems arising withinconsistent employer dissatisfaction.The number of competitors there are an ever chan ge magnitude number of competitors that either mimic the Starbucks concept or provide to stupefy on par with its branch by providing the same line of products at a lesser price.Examples Dotour Coffee, Tullys Japan, Mac Donalds.Self- skunknibalisationThe strategy of over expansion has resulted in stores opened very close to each other, thus rich person into the others sales. harvest-tide PricingStarbucks perceives itself as a premium gourmet coffee brand and mingys its price on the quality of its beverages and in-store customer experience. Unfortunately, many competitors while offering a comparable type of surroundings and lesser priced beverages are eating into Starbucks market share.1.3 OpportunitiesFlexible TastesJapanese consumers are influenced by western brands and have a fondness for them. They are open to new products and tastes and hence Japan is a viable market to test new products. New concepts can be concocted and brought out in the market at a red-hot pace, wh en compared to US or Europe. Thus those products that strain out to be popular and gain shootance in the Japanese market can be introduced in the US market with positive expectations. For example, the car park Tea Frappuccino which was send-off introduced in Japan turned out to be a sorcerer and was thus opened in the United States too. (http//www.qsrmagazine.com/articles/news/story.phtml?id=4589). Thus, the flexible tastes of Japanese consumers leave behind Starbucks an prospect to develop new products and gain profits.Instant productsStarbucks recently launched its first premium soluble coffee stick product in Japan. active 60% of the total coffee sold in Japan is soluble. then Starbucks can capitalise on this aspect of Japans coffee market to get up its sales through a variety of soluble ready to convey coffee products. (http//news.starbucks.com/article_display.cfm?article_id=416) changeing its beveragesStarbucks is looking to sell regional wine and beer at its outl ets in Seattle. It could introduce this concept in some of the Japanese stores as devour western alcoholic brands is a trend among the Japanese clientele. (http//www.thestreet.com/story/10891284/starbucks-tests-alcohol-cheese-offerings.html . egress opportunitiesThough the overall market in Japan is nearing saturation, and Starbucks overexpansion in tremendous cities has given it a lesser change at a launch growth, it could still expand to the less-saturated regions allowing it to exceed its growth potential.1.4 little terrors1.4.1 CannibalisationStarbucks extravagant growth and over expansion involves a risk of customer fatigue. Starbucks has introduced an array of new products and an increase product innovation lowers the sale of current products. likewise with many stores opened close to one other, there is a risk of some stores face up loss. Thus, cannibalisation is a major terror as the coffee chain is stretchability saturation in just about of the big cities.1.4.2 Dep endency on new materialsThe fluctuations in coffee and dairy prices are a potential threat for Starbucks. Starbucks is reliant on dairy and a rise in prices of the raw material could affect its profit margins. (Wikinvest, 2008).1.4.3 Cultural differencesIn USA, about 80% of Starbucks sales are takeout nightclubs. In Japan 80% of consumers choose to drink in the store outlets. Thus consumers preference to use the store atmosphere might turn out to be a threat to Starbucks intends of building a number of drive through outlets in Japan. (Chozick,2006).1.4.4 shrinkage Disposable incomes.1.4.5 Competition Immediate competition from fast- fodder assuagementaurants catching on the speciality coffee wave and developing products that competes with Starbucks. Tim Hortons -Nestle Dunkin Donuts McDonaldsPESTLE ANALYSISPolitical Factors disrespect being far apart geographically, Japan USA have similar political structures. The Emperor is the head of the state, but the real power resides in the parliament and is mainly held by the Prime Minister.( House of Councillors, 2008). In USA, variant states have the power to regulate businesses whereas in Japan, regulations are laid low-spirited by the Diet and enforced throughout the coun fork over. This indicates that there are less complicated and less conflicting regulations to be concerned about when foreign businesses seek entry into the Japanese market. ( House of councillors, The constitution of Japan, as exclaim on November 3, 1946). (http//www.sangiin.go.jp/eng/law/index.htm)Economic FactorsMeasured on a purchasing power parity basis, Japan is the 3rd largest economy in the world. But going by the official exchange rates, Japan would emerge as the 2nd largest economy, behind USA. Japan had a spectacular economical growth in the 1980s, however, growth slowed down considerably in the 1990s. Japan stick ined into inlet in 2008, with 2009 marking a return to near 0% please rates( CIA, as accessed on 24th oct,201 0) with its GDP rising to 5.3%, when compared to 1.2% in 2008.Socio-culturalIndividuals from change backgrounds are exposed to different traditions, rituals, customs and religions. All these elements provide tender-hearted beings with various learning environments, which cause substantive variations in standards, behaviour, attitudes and beliefs (David,1998). A proportion of the subsidiary parent countries is important for the success of a business pursuit to expand in the foreign market, as this would lead to a relegate understanding of the local market. The Japanese as opposed to the Americans act to a dandyer extent(prenominal) collectively and tend to be loyal to their respective groups. The Japanese practically sacrifice their personal goals and ambitions to promote group interests.A low linguistic context society in USA shows that Americans are more(prenominal) direct in their communications and their messages are explicit. Whereas the Japanese use indirect ways to lead and their voice intonation, timing and expressions play important roles in conveying information. (David, 1998) expertTechnological factors greatly influence business strategies as they provide an opportunity to exploit innovations and inventions. Japan is one of the most technologically advanced countries in the world and ranks 18th on the list.(http//gpmgroup.info/2007/04/27/the-most-technologically-advanced-countries). Thus it is more convenient to introduce technologically driven customer service into the Japanese market. There is scope for incorporating the American system of internet golf clubing in to Japan with the intension of faster service. Starbucks is continuously searching for ways to better a customers experience. With the introduction of the Starbucks Card for example, the Company has created the opportunity to improve customer service, thin lines and hold up a customers visit at Starbucks quicker and more convenient. alike, most stores are equipped with W I-FI.LegalThere are no significant legal factors to consider while entering the Japanese market. Though, Starbucks has chosen to enter through a joint venture with SAZABY Inc., a Japanese retailer and restaurateur, because of the peculiarities of the local market. By doing so, Starbucks has given itself a better chance of exploiting the market as SAZABY would have a better understanding of how the Japanese consumers viewed food and coffee.(http//www.docshare.com/doc/155323/Starbucks-global-expansion-strategy2)Porters Five ForcesCompetitionTullys Coffee, Gloria Jeans, Caribou Coffee etc.Competitors interchange similar products, incl. specialty coffees high quality food.Competition nowhere in terms of volume of operations.Threat of new entrantsControlled access of distribution bringInnovation product differentiationBargaining power of buyersMore options callable to no. of competitors.Large variety of products.Bargaining power of suppliersOvercrowding of market.Rise in prices of c offee beans. pick suppliers based on quality, social, environmental economic issuesThreat from substitutesTeaSoft drinksJuicesMarketing Strategy to Enhance Profitability in the next 2 yearsSegmentationSegmentation is dividing the consumer market into clear-cut groups based on each individual groups wants, needs, preferences and behaviour.Starbucks is a company that embraces diversity, non limiting themselves to one specific demographic, behavioral, or geographic ingredient. Individuals appreciate how, careless(predicate) of any little difference, at Starbucks they are endlessly treated as equals. (starbucks.com)Taking the demographic factor as the desired basis for naval divisionGenderSixty percent of Starbucks Japan market are charwoman customers in their 20s and 30s. (http//community.seattletimes.nwsource.com/archive/?date=20020819slug=starbucks19). Hence Starbucks should further penetrate the market by retaining the woman customer base and increasing its pull amongst the m by providing incentives in terms of products, ambience and experience.AgeMost of Starbucks customers are meliorate, workings personnel who can afford the high prices of the products offered. Starbucks has a limited consumer base with females in the age group of 25-39 forming their major share of consumers.(http//www.euromonitor.com/Japan_a_nation_of_coffee_lovers). It should reach out to the younger and much older groups by introducing a line of nutritional beverages.Education IncomeStarbucks genius was to redefine the meaning of affordability regarding coffee. Target consumers were identified with regards to their sustenance environment, level of income and education. They were convinced to pay premium prices for the experience, service and quality they were getting. The company was able to beguile the changing consumer behaviour since the 1980s more out-of-home entertainment, more self- gratification from consumers towards a bang-up movie, a good glass of wine and a good c up of coffee. By raising the perceived value of the product for the consumer, Starbucks was able to raise its prices while keeping the product affordable. Creating brand obedience through quality and innovation was also an important factor in decreasing the price elasticity of this commodity product. Thus, Starbucks should maintain this strategy and look less towards price reduction and more towards quality enhancement, a characteristic that has helped it build its brand.TargetingStarbucks should practice differentiated targeting as it should try and capture a more wider section of the society. As it has identified the female sexuality to be its major consumers, Starbucks should retain this market and further expand it by targeting the woman clientele and coming out with more products that appeal to them.Also in order that it recieves a larger share of the male consumers, it should try and blend with the Japanese culture and accept their preference for smoking in some stores.Starb ucks has already established its image amongst the educated and high income society. But, it should go one step further by seperately targeting the younger generation who are bound to follow in the footsteps of their peers and elders. In order that it recieves more number of teenagers, it should try and develop an atmosphere within its stores in terms of products and store experience that would appeal to the teens.Product PositioningStarbucks is listening to the needs of the educated by devoting its business and research to developing ways to put up to this groups wants and needs. In addition to further building on its product quality and in-store customer experience, Starbucks should make itself more accessible to a wide variety of the great unwashed by opening several quick persevere services that would cater to the new generation of coffee drinkers because college-age students and the general population are always in a rush with little time to spare. The quick stop services and kiosks will make the process of buying coffee easier by eliminating long lines and creating alternative ways to buy coffee faster and will avoid the prospect of impatient customers. Starbucks should position itself as a brand not reserved only for the premium, high income society, but as a quality store that reflects on the needs and wants of all. As most Japanese are health conscious, it should try and build an image which does not reprove the teens and older people from visiting its stores. By bringing out more food items that match the Japanese palate, it should position its brand image as An American taste induced with Japanese flavors.Using the Marketing flick to assist the chosen growth strategy1. ProductDiversify the product lineThe tradition of tea drinking in Japan has been ordinary from the early beginning. There are many varieties of tea, and some of them, especially Green tea can be bought anywhere. Tea has proved to be a popular drink for most Japanese because of it s wide variety of tastes. Thus, by introducing a few select varieties of tea in its store outlets, it would receive at the roots of the consumers. It would directly be percieved as a renowned American brand that cares to accomodate the Japanese tastes. (http//azjatycka.wordpress.com/2009/11/05/international-marketing-strategy-of-starbucks-in-japan-success-or-a-failure/).The presence of soyabean in Japanese dishes is indispensable. Its not only widely accepted as the raw material ingredient in Japanese dishes,be it rice, curd or soup, but also has great nutritional value. It finds its place in Japanese breakfast, lunch and dinner. It contains a chemical, soy isoflavones, which when accumulated in the body, functions like the female sex hormone(estrogen), which in turn promotes bone formation. Hence it is considered useful for post-menopausal women whose estrogen levels are low. Also soy isoflavones has been found to reduce the risk of breast cancer by 40%.( http//www.mindfully.or g/GE/2003/Kikkoman-Non-GM-Soy22jun03.htm). Since Starbucks has found its presence to be more popular among woman, it will only increase its appeal to them by introducing a variety of beverages and food items that contain soybean in its diet. It should also bring about innovations in its product line, making them more nutritious to consume, thus forwarding its appeal to the health conscious society.Introduce a line of health drinks, harvest juices that would attract teenagers who percieve Starbucks as a high end store marketing speciality coffee. The presence of flavored non-caffeine drinks would help capture the teen market.2. PlaceDiversify its storesMany critics had expected Starbucks to fail because of its strict no-smoking policy within its stores. The general Japanese customer prefers to fastball with food and drinks. But this strategy attracted many young health concious women who then accounted for Starbucks majority sales.(http//community.seattletimes.nwsource.com/archive /?date=20020819slug=starbucks19). Although starbucks has so far managed to sustain its growth, competitors with a tolerance to smoking are providing good reason for its drop in sales in recent years. Hence,in order to attract a more varied clientele and improve profitability, Starbucks should make an exception in the case of Japan and introduce some stores that accept smoking adapt to its culture. They could still stick to their rationality behind no-smoking environment to preserve the aromas flavors of the coffee beans(Starbucks website) by not allowing in-store smoking. Certain stores with a wider post facility could bring in open-air seating arrangements. This way, those who wish to smoke can take a seat outside and enjoy a starbuck coffee. Another way would be to introduce balconies in some stores that have 2 or 3 storeys.Build on its in-store experienceStarbucks should build more in its store atmosphere rather focus on building drive-through outlets. In Japan 80% of the coffe e consumers like to drink inside the store, while relishing the ambience.(chozick,2006). Although starbucks has an untarnished brand image, it should further build on its superior quality of store atmosphere in order to remain competitive and keep up sales. The hygiene of the stores, book readings, nipper changing stations, sleek furniture and posh interiors are the key to its ability to provide a quality customer experience. Given that the majority of its customers are women and the Japanese love for the English language, it should transform certain sections of the store to accomodate a reading section that would comprise more of women oriented magazines and books that teach english.Choose a larger number of distribution unitsStarbucks should improvise on its plan to introduce its flagrant coffee-starbucks VIA across convenience stores in Japan. It had announced the launch of its here and now products in 11000 convenience and grocery stores in september. (http//www.finchannel.co m/Main_News/Business/70201_Starbucks_VIA_Ready_Brew_Hits_Grocery_Aisles_Around_the_World/). By doing so, it has exposed its brand to the worlds largest instant coffee market. (http//www.reuters.com/article/idUSTRE63C1NG20100413). Now the availabity of starbucks instant products is not limited only to its retail outlets. However, the presence of its competitors( Nestle and Kraft) in the instant coffee segment is more widespread and well established. Thus, it should try to capitalise on Japans $5 billion instant coffee market by providing its instant products to more number of distribution units and seal its presence.3. hurtPrices of instant productsStarbucks should consider reducing the price of its instant products to enable higher(prenominal) sales. Starbucks is to sell a box of 3 VIA instant soluble sticks for three hundred yen, which amounts to 100 yen per cup, and a box of 12 sticks for 1000 yen. When compared, its competitor Nescafe has a rival offering of 15 sticks for 300 y en. (http//www.reuters.com/article/idUSTRE63C1NG20100413?pageNumber=2). Thus, there exists a wide price gap for its instant products and since Starbucks VIA will be occupying the same shelf space as Nescafe, Kraft etc., it would find it grueling to gain acceptance in the market. A customer would go up to the racks and find the rival offerings more viable. Hence, Starbucks should look to cut down its prices on instant products. It can afford to do so without the risk of diluting the brand image built on high end coffee, as the instant coffee would come without the experience of physically being in the store.Prices of in-store productsStarbucks prices of in-store products are higher when compared to its competitors. It is looking to further raise the prices of some 20 beverages and 5 coffee bean products. (http//www.japantoday.com/category/business/view/starbucks-japan-to-raise-coffee-prices). It should retain this price strategy as it differentiates itself from its competitors by pr oviding an excellent quality customer experience. Also most of its outlets are located on expensive pieces of real commonwealth in centralized, busy areas of Japan.4. PromotionCultural Entertainment campaignsStarbucks should come out with various cultural and entertainment campaigns to attract the Japanese youth, a segment of the society it has still not managed to woo successfully.ConclusionStarbucks is ahead of the rest in the Japanese coffee market, but there is still room for improvement. A decentralised structure accompanied with a mixed global strategy has helped the company to find a balance between reaching economies of scales and responding to the local market. By establishing a joint venture with local retail chain Sazaby Inc., it has reduced their risks of being unfamiliar with the market and Starbucks has successfully gained the companionship and channels of distribution from its partner. Starbucks strong brand image and customer loyalty has contributed to their main taining a leading position in this market. By diversifying its target consumers and innovating its product line, it should be able to further strengthen its market share.