Starbucks Company Analysis: Market, Barriers and Plans

Product description

The Starbucks Company has penetrated the beverage market for the last twenty years due to its unique coffee brand and other related services. Among the main products, company stocks include coffee and tea.

The company’s products have no age limit on the users. Besides, the company has benefited from the research-oriented product creation to suit the demands of customers (Bodily & Allen 2009). The UK restaurant sector is steadily growing in terms of scope and production. The sector operates under the open market system. The sector has low barriers to entry due to the low cost of doing business and the existence of varieties.

The UK is one of the most economically stable countries in Europe. This has created a peaceful business environment for coffee shops such as Starbucks. The legal system in the UK is very stable and functions on the pillars of serving the interest of everybody equally. The Starbucks Company is a registered business entity that is licensed to operate in the UK (Finch 2009).

Market analysis

PESTLE

In the UK, government regulations, taxation strategies, directives, and norms of leadership are highly flexible for business. The UK is one of the most promising business places with a remarkable expansion in the corporate world. The stable economy of the UK has been a pull factor for the company’s products since the purchasing power of many of its potential customers is high, especially for its coffee brand (Dalkir 2005).

In the UK restaurant industry, laws on commerce and certificate of compliance to taxes are issued to a business that remits their returns accurately form which taxes are deducted.

This has created an easy environment for Starbucks’ business activities since it is tax compliant. The UK offers an economically sound environment that is good for business activity. Being one of the most strategically located businesses, the Starbucks Company is positioned to benefit from the economies of scale and improved revenues since it has several brands within the UK (Wallace 2007).

Many social issues affect any business sector or industry. However, the Starbucks Company has aligned its services with the target market needs by actively participating in a series of corporate social responsibility initiatives. The Starbuck Company has successfully incorporated online activities within its operations.

All aspects of the firm, such as sales, purchases, marketing, management, and operations have been aligned to appropriate and sustainable technology to ensure competitive advantage (Johnson, Whittington, & Scholes 2011).

Target market

The Starbucks Company targets customers of all ages who consume coffee and tea products. The market is segmented into take-away and sit-in customers within and without the city of London (Baltzan 2014).

Competitors

The main competitors of the Starbucks Company are the Nero, McDonald’s, Greggs, and Costa Coffee. These competitors have a well-established network besides being in a position to offer perfect substitute products. The market share of McDonald’s, Greggs, Nero, and Costa Coffee are 20%, 11%, 16%, and 9% respectively. These companies have diversified products. However, their prices are relatively high (Tynan & McKechnie, 2009).

Barriers to market entry

The main barrier to market entry includes the presence of competitors providing a similar or nearly similar product at low cost. Besides, most businesses in this sector have a strong financial position. As a result, a new entrant in the market will have to deal with these challenges (Kotler & Keller 2012).

The unique selling point of the Starbucks brand

In order to diversify market operations in the UK market, the Starbucks Company has created multiple brands from the same product with different coloration, scent, sizes, and packaging. This has created an environment of its competition and blocks other competitors from encroaching into the company’s market, especially for the newly launched tea brand.

These sub-products are differentiated by features, prices, and the difference in quality. This strategy has been successful towards dominance as it offers a variety of options to consumers, while at the same time maximizing benefits of economies of scale (Miller, Vandome, & McBrewster 2011).

Marketing plan

Marketing mix

Adopting a multi-brand strategy, the Starbucks Company will position its products as offering alternatives to customers. Through a defined delivery channel and strong media marketing, the company will revolve on quality maintenance to support the leading marketer status as a placement strategy. In the process, the focus will be directed to the most competitive price and what the customers are able and willing to pay (Witcher & Chau 2010).

Despite the crowded market, the products will be marketed as providing alternatives. In order to achieve this aim, demographic differentiation will be based on income supported by strategic packaging and a series of relevant marketing campaigns, as the best approach towards commanding a price premium. As a result, the fair pricing mechanism, among other factors, will positively skew competitive advantage in favour of the company (Cheverton 2004).

Distribution strategy

Also, the company will have to recruit distribution agencies across the market regions and well-trained marketers for this product. The distribution strategy will involve the use of a franchised distributor within the target market around the city of London. The company will adopt an automated product marketing management system to easily track the final distribution of the finished products (Wallace 2007).

Pricing strategy

Specifically, the company may use a mixture of the loss leader pricing and the ‘good, better, best’ pricing since the prices for its products are inelastic. The ‘good, better, best’ pricing will ensure that the company provides a variety for the low-end and high-end customers (Cheverton 2004).

Promotional strategies

The company will create flexible and proactive advertisements meant to appeal to each customer segment. The company may also use a series of after-sales services such as discounts, coupons, and rewards through the annual coffee sampling events. Besides, the company will use direct, online, and database marketing through its Business-to-Consumer (B2C) e-commerce model to promote its products (Witcher & Chau 2010).

Conclusion

The Starbucks Company has a competitive advantage position in the UK market since it will offer different alternatives that the competitors do not offer. Besides, the business targets both the low-end and high-end customers to ensure that the entire market is well served.

Through a fair pricing mechanism, a franchised distribution network, and multiple branding strategies, the company is well-positioned to penetrate the UK coffee market and make profits within the first year of operations. Besides, the current economic climate is favourable for the company since the targeted customers in the UK have high purchasing power.

Recommendations

The short-term action plan is to modify the market leader branding strategy to avoid instances of counterfeiting. This will allow clients to distinguish the products for their uniqueness. To move the Starbucks’ brand forward, it is critical to adopt the localization strategy that directly appeals to different target markets. The company should localise its means of production and marketing to capture different customer bases in the UK as a long-term action plan.

Reference List

Baltzan, P. 2014, Management information systems: Business driven MIS in Business Driven Information Systems. Web.

Bodily, E., & Allen, M. 2009, “A dialogue process for choosing value-creating strategies”, Interfaces, vol. 29 no. 6, pp. 16-28.

Cheverton, P. 2004, Key Marketing skills: Strategies, tools, and techniques for marketing success, Kogan Page, London.

Dalkir, K. 2005, Knowledge management in theory and practice, Elsevier Publishers, New York.

Finch, J. 2009, Managerial marketing, Wiley and Sons, New York.

Johnson, G., Whittington, R., & Scholes, K. 2011, Exploring strategy, 9th edn, Prentice Hall, Alabama.

Kotler, P., & Keller, K. 2012, Marketing management, Pearson Prentice Hall, New Jersey.

Miller, F., Vandome, A., & McBrewster, J. 2011, Pestle analysis, VDM Publishing, London.

Tynan, C., & McKechnie, S. 2009, “Experience marketing: a review and reassessment,” Journal of Marketing Management, vol. 25 no. 6, pp. 501-527.

Wallace, D. 2007, Knowledge management: Historical and cross-disciplinary themes, Greenwood publishing Group, New York.

Witcher, B., & Chau, V. 2010, Strategic Management: Principles and Practice, Cengage Learning, Alabama.