MKT501 Marketing Management

This report describes marketing segmentation and decision making of an organization in the operating market. For discussion, the famous company Starbucks has taken. Starbucks is the largest coffee producing company in the world. Starbuck started operating in the UK market. The customers of the company enjoy high quality services with the smoothing atmosphere of the Starbucks. The company believes in the high quality of coffees along with pastries and other form of confectionaries. By this way, company is expanding its business and sales in the super markets by providing high quality products in the shops. This report focuses on the market segmentation and target market of Starbucks. Further, report focuses on the industry trend of Starbucks in the market. Positioning gap for Starbucks is also given in the report (Boychenko, 2012).

Industry trends

Starbucks has introduced new strategies for its development progress and future plans for Asian markets. For this, Starbucks has done plans such as introduction of loyalty programs and digital and mobile payments platforms, expansion program in the Asia Pacific region, and launching of reserve stores in the high growth market etc. in the recent investor conference, the company has shown the strategies for potential expansion. The growth factor of Starbucks in the food industry is based on some strategies (Dominous, 2006).

The company is focusing on the expansion of the stores in the market. Instead of opening more dine-in-restaurants, the company is focusing on simple coffee stores in urban and sub-urban areas. Along with this, Starbucks is opening up express stores in various stores. The aim of this strategy is to increase the store penetration of the company.

Further, coffee market is booming in current time and will grow in future. So, Starbucks wants to be considered as the most preferred coffee shops among the customers. The glimpse of expanded stores portfolio, elevated experiences and highly customized products by the Starbucks are shown in the figure (Forbes, 2016).  

Along with this, to grow in the coffee market, Starbucks is creating new customers occasions. Improved food, more fresh food items with bistro boxes and sandwiches and its tea platform are the key strengths of Starbucks. The aim of the company is to target greater number of customers to its stores by providing innovative and new food and beverage products (Seaford, Culp & Brooks, 2012).

Profitability 

For the profit maximization, Starbucks uses pricing strategy in the business. Basically, it can be seen that Starbucks is the master of implementing value based pricing in the business to capitalize on the profit. Starbucks uses customer analysis and research before implementing pricing strategy which is helpful in capturing the greatest amount of consumers who are willing to pay for the coffee. Profit maximization is the concept by which any company analyzes the product and price output level to generate the profit (Dibb et al, 2012). In the pricing strategy, Starbucks increases the prices and attract the loyal and higher-income based customers who perceived the coffee as an reasonable luxury. Starbucks raises its prices to gain profitability from the price insensitive customers who love to drink coffee (Dawson, 2013). To differentiate its products in the market and to compete with the competitors, Starbucks uses price hikes in the market. Along with this, to gain profitability in the market, the company has maintained fairly inelastic demand curve which have the positive impact on the margins without decreasing demands on the products and beverages. By these strategies, Starbucks has positioned itself as the most preferred coffee company in the world (Gupta, Sahi & Chahal, 2013).

Macro environment (PESTEL)

It is important to analyze the factors in the market which affect the business of Starbucks in the global market. The factors can be analyzed by the PESTEL analysis of Starbucks. PESTEL analysis of Starbucks is as follows:

Political factors 

Major political feature for Starbucks is about sourcing the raw material. This has grasped lots of notice from politicians in the various countries. For this reason, company wants to hold environmental and social norms. Along with this, Starbucks is willing to follow the various sourcing strategies. Further, company gives the value to the fair trade practices in the various countries. Other factors are laws and regulations of the countries which are needed to follow by the Starbucks. The laws and regulations of those countries impact the business of Starbucks from where the company buys the raw material. Increased political awareness and activism in the developing countries have made this essential for the Starbucks. Along with this, the regulatory factors affect the business operations of the company. The company Starbucks must monitor the political stability in the company in which it is operating. There are some factors such as tax policy and employments laws which must be consider by the company in the various countries (Lynn et al, 2011).

Economic factors 

Sometimes, global economic recession can be the prime external economic factor for the Starbucks. Economic factors affect the profitability of Starbucks in the operating market. Economic recession has convinced the buyer to move towards the cheaper options. The consumers did not give up of buying coffee so, Starbucks can look for the opportunity to attract more customers. Further, Starbucks has to deal daily with the rising operational cost and labor cost. The inflationary environment and decreasing profitability can be the cause of stress for the company. There are some other factors such as taxation level, local economic environment in various market and local currency exchange rates of the various countries. There are many socio-cultural factors which should be considered by the Starbucks. Those factors are consumer preferences, changing work patterns, changing family patterns in countries, change in lifestyles of population, changing principles of customers, and the point of education of the consumers in the market etc (Latif et al, 2014).  

Social-cultural factors 

Starbucks is famous for high quality products having high prices. If the Starbucks offer cheaper products, it might have to compromise with its quality. This can be main socio-cultural challenge which can be faced by Starbucks in the operating market. The consumers in present time are concerned for ‘green’ and ‘ethnical chic’. They are more concerned about social and environmental costs of the brands (Cadogan, 2012).

Technological factors 

Starbucks has very good position in the food industry which enjoys the advantage of emerging mobile waves. The company has done partnership with Apple to provide comfort to its customers. The company has brought app based discount coupons for the customers which help the company to ride mobile wave easily. In the outlets, the company has launched Wi-Fi capabilities for the consumers. It is well known that internet is very significant for the customers. Through the Wi-Fi facilities, customers can use the web and can do their job while having Starbucks’ coffee. This is an additional value to the Starbucks. Along with this, Starbucks is also providing the facility of mobile payments to the customers. There are some other technological factors such as biotechnological developments, development in agriculture and emergence of innovative technology which must be focused by the Starbucks (Fitzgerald, 2013).

Environmental factors 

Three are many business practices in Starbucks which are concerned for the environment. But still, The Company has to face many issues while holding the trust of consumers. There are many environmental factors which affect the business of Starbucks. Those factors are environmental rule and policies, different ecological tragedy in the various countries which produce coffee beans, issues of global warming and other environmental concerns in the international market which can affect the business of Starbucks.

Legal factors 

The company Starbucks makes sure that any laws and regulations must not be affected by the company in the market from where the company buys the raw material. The introduction of caffeine production and policies and regulations related to consumption are focused by Starbucks in the various countries. There are many other factors i.e. stricter customs and trade regulations and licensing regulations in the various countries which impact the business of Starbucks.

Overall market segments and target market

Market segmentation can be described as dividing the whole market of Starbucks in to various factors or criteria’s. By segmenting the overall market, Starbucks is able to define its target market effectively. Along with this, company is also able to select proper and suitable marketing strategies for the various segments (Baines, Fill & Page, 2011). By dividing the market in to segments, the staff of Starbucks is able to fulfill customers’ demands and wants in the market. Starbucks basically divides the market in four segments i.e. geographic, Demographics, psychographics and behavioral segments.

The segmentation of Starbucks focuses on four variables i.e. geographic issues, demographic issues, psychographic issues and behavioral issues. It is well known that Starbucks operates its business in all over the world. To operate the selling effectively and competently, Starbucks has segmented the whole market on the basis of all countries such as Asian countries, south Asian, Western Europe, south East Asian, east Europe and sub-Sahara etc. along with this, Starbucks also divides the market on the basis of gender, age and income level (O'Farreell, 2015). The major market segmentation of Starbucks is child age and middle age groups. Further, Starbucks is dividing its marketplace based on psychographic problems such as lifestyle, social class,  and personality of the customers. Behavioral segmentation is also the part of Starbucks which include customer loyalty, product usage rate and attitude of consumers (Bose, 2012).

In terms of target market, there are many targeting strategies which are adopted by Starbucks. The targeting strategies are helpful for the company to target the customers present in the market. For diverse products and services, the company follows various targeting strategy as various products are made for various customers (Cravens & Piercy, 2013). The target market profile of Starbucks can be divided into two markets i.e. primary target market and secondary target market. Primary target market of Starbucks are both male and female having age of 24 to 40 years. These target customers are basically graduates or it can be said that they are job holders. They have social class i.e. upper middle, middle and lower middle class. Further, secondary target market of Starbucks is young people having age of 18 to 23 years. They are basically college going students. They also are social class i.e. upper middle, middle and lower middle class (Geereddy, 2015).  

Primary segment and decision making 

Primary segment of Starbucks are young generation who are fond of coffee. The decision of buying the products or service of any particular company depends upon the brand image of the company in the market. In case of Starbucks, the involvement of customers depends upon various factors. Starbucks is one brand which focuses on the engagement of the customers by various factors. There are varieties of ways by which consumers are involved with the brand.

• The sight of various kinds of coffee, labeled and improved with the information i.e. country of origin, strengths and characteristics which make the customers empowered to choose the Starbucks.
• The atmosphere of people who tells the other customers about the varieties of attractive choices for the kind of coffee they desire.
• The facilities of coffee i.e. preparation of coffee and services for the customers in Starbucks.
• Chairs, tables, fireplaces, wall hangings, point of purchase and various offerings help the customers to create an experience and satisfy them. All these things empowered the customers for higher level of involvement which makes the customers look forward to coming back and repeating experience of coffee in Starbucks.
• Continuous innovations such as adding new flavors, new sales items, and new supporting elements for the experience are the ways to create higher level of involvement of the customers for Starbucks.

Competition 

The coffee industry has come a long way in terms of competitive rivalry and product variety. Starbucks had to compete against many companies and local coffee retailer. The food industry has now grown globally and Starbucks has to compete now with the companies having different size and exposures. All of these competitors have their own strong points with serving high quality coffee to compete in the market. It is well known that the Starbucks is the famous coffee provider company in the food industry. The company has many other high quality food products along with the good taste of coffee (Hooley, Piercy & Nicoulaud, 2012). There are many other companies also who are providing same food products in the market. These companies give strong competition to the Starbucks. The top competitors of Starbucks are Dunkin Donuts, Tim Horton and Nestle. Dunkin Donuts and McDonalds are quite old in the fast food industry but they have recently entered in the market of coffee sector. McDonalds is the major business competitor of Starbucks having worlds’ largest restaurant chain with 200,000 restaurants in all over the world. The key factor of success of McDonald is the consistent quality standard with the quick service and low prices (Forbes, 2013).

Apart from this, Dunkin Donuts has claimed to be the major coffee and baked goods chain operator in the world. Now, Dunkin Donuts is putting lots of efforts on coffee beverage. Main key values of Dunkin Donuts are various types, styles and tastes in the product line-up. In the product line-up, Dunkin Donuts offers cappuccino, espresso, and latte in the different flavors including hazelnut, cinnamon French vanilla and many other exciting flavors. The success factor of Dunkin Donuts is the ability to understand and quickly grasp the business opportunities in the market.

Positioning map

Positioning is the concept which shows the desired position of the product by the management of the company. Company desires the position of product or brand in the mind of the targeted customers. Positioning mapping allows the company to provide values required by the target customers in the market. The company Starbucks has positioned itself as the high price or premier coffee company in the market. Starbucks wants to sell high quality confectionary products to mainly young people who have good income and have potential to earn more money. Along with this, Starbucks wants to be perceived as the ‘high quality’ brand among the customers in the market. Main competitors of Starbucks are Costa, Dunkin Donuts who already have positioned themselves same as Starbucks. On the other hand, Subway and McDonalds are the companies who have positioned themselves as the low priced and provider of high quality products (Kotler, et al, 2012).

Conclusion 

The report focuses on the marketing and industry trends of Starbucks. Report provides brief analysis of marketing strategies of Starbucks to gain profitability and growth in the operating market. The sales of Starbucks have grown up due the differentiation strategy adopted by the company to compete in the market. To sustain the competitive advantage in the market, Starbucks has adopted some innovative strategies for future operations. There is the need to analyze the environmental impact on the business process of Starbucks before implementing any kind of strategy.  There can be some threats for the Starbucks such as stricter customs and trade regulations in various countries, consumer preferences, changing work patterns, and changing family patterns in countries. Starbucks must keep in mind to be customer-focused to create effective values for target market. If the company applies the strategies effectively then it will be a successful company in the food industry.

References 

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Bose, T. (2012). Market Segmentation and Customer Focus Strategies and Their Contribution towards Effective Value Chain Management: International Journal of Marketing Studies. 4(3). 113-121

Boychenko, M. (2012). It's Not Just Coffee, It's Starbucks. Retrieved on 2^nd April 2017 from http://thecoffeeteam.blogspot.co.uk/2012/02/3-more-ps.html

Cadogan, J. W. (2012). International marketing, strategic orientations and business success: International Marketing Review, 29(4), 340-348

Cravens, D., & Piercy, N. (2013). Strategic Marketing. (10^th). Singapore: McGraw-Hill

Dawson, T. (2013). How Starbucks Uses Pricing Strategy for Profit Maximization. Retrieved on 2^nd April 2017 from http://www.priceintelligently.com/blog/bid/184451/How-Starbucks-Uses-Pricing-Strategy-for-Profit-Maximization

Dibb, S., Simkin, L., Pride, W. & Ferrell, O. (2012). Marketing Concepts & Strategies. (6^th). Hampshire: Cenage Learning EMEA

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Fitzgerald, M. (2013). How Starbucks has gone digital: MIT Sloan Management Review, 54(4), 1-8.

Forbes. (2013). Starbucks And McDonald's Winning Strategy. Forbes.  Retrieved on 2^nd April 2017 from http://www.forbes.com/sites/panosmourdoukoutas/2013/04/25/starbucks-and-mcdonalds-winning-strategy/

Forbes. (2016). Let's Look At Starbucks' Growth Strategy. Retrieved on 2^nd April 2017 from https://www.forbes.com/sites/greatspeculations/2016/09/19/lets-look-at-starbucks-growth-strategy/#7c1724f33d71

Geereddy, N. (2015). Strategic Analysis Of Starbucks Corporation. Harvard. Retrieved from http://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf

Gupta, M., Sahi, G., & Chahal, H. (2013). Improving market orientation: the theory of constraints-based framework: Journal of Strategic Marketing. 21(4). 305-322.

Hooley, G., Piercy, N., & Nicoulaud, B. (2012). Marketing Strategy and Competitive Positioning. (5^th). Essex: Pearson Education

Kotler, P., Keller, K., Brady, M., Goodman, M., & Hansen, T. (2012). Marketing Management. (2^nd). Essex: Pearson Education Ltd

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O'Farreell, R. (2015). Who Is Starbucks' Target Audience? Demand Media. Retrieved on 2^nd April 2017 from http://smallbusiness.chron.com/starbucks-target-audience-10553.html

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