The Starbucks Proposal

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Introduction

Starbucks is an international corporation that sells coffee products through its coffee house chain present in 50 countries in North America, Asia, Europe, South America, Africa, and Oceania. It is the largest coffee house company that was first opened on March 30, 1971 in Seattle Washington in the United States of America and is currently owning 17,009 distribution stores worldwide with its product variety ranging from drip brewed coffee, coffee beans, snacks, hot and cold sandwiches, espresso-based hot drinks, salads, Panini, other hot and cold drinks, pastries and other items like mugs and tumblers. 

Starbucks is currently facing stiff competition from other coffee house companies and the cultural resistance around the world. To remain competitive in the market, Starbucks needs to consider reviewing their strategic plan as far as management policies, marketing, expansion and financial plan are concerned. This review should be done based on the economic assessment analysis, the market strength, weaknesses, available opportunities and threats that the company faces in the market with full knowledge of the viability of the strategic management plan (Blanca, 2006).

Executive Summary

This term paper is a three year strategic management proposal for Starbucks coffee company based on the strength, weaknesses, opportunities and the threats of the company. The proposal covers the economic assessment and competitiveness of the company based on the strengths, weaknesses, threats and opportunities available for the coffee industry. The plan assesses strategic marketing techniques and achievable financial plan, workable organization structures that Starbucks need to adopt for the next three years so that the company can remain relevant in the products and services it offers to its consumers. This plan is guided by the Starbucks’ Global Quest of 2006 that gave hope to consumers that the best service and quality products is yet to be offered by outlining  industry and company overview, site analysis, impact analysis and recommendations to the action plan.

Economic Assessment

In the last few years, there has been global economic meltdown, a condition that has had adverse effects on the operation of a number of businesses some of which have closed down completely. Countries also face serious economic low points with an example of current Greece, where Starbucks have their distribution stores. Without strategic  bailout, then this distribution store among many others will be not be economically viable, changing from a Cash cow to a Question mark venture that only consumes capital but no generation of income. This is a big threat to Starbucks that necessitates the management and board of directors to make a decision to close down question mark distribution stores in the next three years and only remain with productive stores that are manageable and grow in their revenue collection. This therefore needs further market analysis and financial implications of non-researched expansions.

Cost minimization is another economic strategy that Starbucks management needs to adopt for the next three years to be able to remain afloat during this tough global economic period. One method is to consider reducing cost of staff and supplies by purchasing coffee seeds directly from the producers at relatively cheaper costs.

PEST Analysis

This examines the political, environmental, social and technological environments around Starbucks (Hill & Jones, 2010; 2009). Political environment involves people and government policies that either allows foreign investments or restricts based on the cultural alienations. China for example restricts the number of foreign companies entering their market like the McDonalds, Google and Starbucks. However, China still remains the target destinations for most fast food companies and restaurants due to their big population that provides ready market. Starbucks at the same time should embrace relevant technology in preparation that is competitive in the market. Economic environment involve economic policies of the government, capital investment that is required to put up distribution store in a particular location. Starbucks must analyze their economic power whether enough to maintain the growth strategy before the expansion plan is started.

The mission statement of Starbucks focuses on the sociological forces that are essential in improving current society environmental issues. To live by this mission, Starbucks regularly participate in clean up and walk-a-thons activities which have tremendously contributed to building and strengthening its image in the society as caring and giving back to the society. This is a factor that has gone down well with many consumers and help build customer loyalty. This is a great strength for the company and in the next three years, management should be employed in all countries to build more customer loyalty. It is a fact that long term financial implications on such sociological activities favor the company as it wins many customers and in turn have positive economic advantages on the sales turn over. This strategy should be inculcated on employees as part of their expectation in discharging their duties.

Marketing Assessment Plan

Marketing strategy used by Starbucks will be a major determinant on the success and relevance of the company in the competitive field. This involves the 4Ps which entail quality product and service timely delivered to the customers at their right places, charging competitive prices and well promoted and advertised to an extent of positioning the product into the minds of the consumers. Delivery stores in this case are core to customer loyalty since many prefer taking coffee in cool atmosphere where they can read, enjoy music and socialize as they drink coffee. This assessment therefore means strength to the company and should always be considered when choosing the store locations to bring about the uniqueness in the service. Based on the assessment, that marketing strategies to be employed in the next three years should include:

People marketing

This is where companies use their employees to market their products.  Starbucks should pay their employees higher salary and wages than the rates paid by their competitors. The effect of this is to have good labor relations with their workers, and eventually will prove future stability and reliability of service. At the same time, Starbucks can use its loyal customers to promote the quality of the services and products to other potential customers.

Place marketing

This refers to the means actual place the product is purchased like distribution stores and the cafeterias. Place marketing also entails the channels of distribution which must be well outlined to deliver the products at the customer’s request.

Event marketing

This is the organizing and participating in events like conferences and trade unions to display the quality of service and uniqueness of products as well as selling the benefits of these products to potential customers. This can be done throughout side catering services of offering coffee drinks to particular institutions during conferences or din house training. The management should consider winning such outside catering contracts for coffee luncheons.

Technological advertisements that entail use of internet, World Wide Web, iPhone should as well be seriously considered. Currently, the trends of communication adopted by the target market are fast changing to technology based. This means that any company that wants to remain relevant must embrace the same technique to be able to reach more customers. Starbucks need to maximize web advertisements to woe more customers (Hill & Jones, 2010; 2009).

Product Differentiation

Starbucks has employed product differentiation strategy in reaching all kinds of customer within its industry. More quality products that appeal to the children, youths and the aged should continue like the  drip brewed coffee, coffee beans, snacks, hot and cold sandwiches, espresso-based hot drinks, salads, Panini, other hot and cold drinks, pastries and other items like mugs and tumblers (Blanca, 2006).This will ensure that the needs of the customers are met at any time of demand making Starbucks stores a one stop shop for all the coffee related products and snacks that can fully match the home requirement.

Product differentiation also builds customer confidence on the company services and products.  The service should also include take away services where customers are allowed to carry their well packaged products to their offices, homes or any other destinations.  This makes the customers have an option of purchasing and eating at their own convenient times and places, as majorly experienced by the travellers. Payment methods should also be diversified further for the consistent and reliable clientele, other than the prepaid debit card method, credit card, cash, electronic Funds Transfer and standing orders can be considered not to lock any customers out to lock out the competitors and make Starbucks the industry leader.

Market segmentation

Demographic factors are opportunities that are significant to Starbucks management and board of directors for decision making regarding population sizes, ethnic groups to serve and viability of expansion plans.  According to CIA World Factbook, the largest composition of population comprised people aged between 15-64 years (Lorenza, 2006). This is the group the influence the performance of Starbucks. The management should therefore segment this market to capitalize on the best served, group and make it their core target market. The targeted group should be supplied with the products they prefer.  For example the youths like fast moving foods like snacks, hot and cold sandwiches, salads, Panini, pastries while the aged tend to like drip-brewed coffee and other hot drinks. The market segmentation also helps the company satisfy the perceptions, tastes and preferences of the entire customer base (Hill & Jones, 2010; 2009).

Customer Service

Starbucks Corporation operates in a dynamic service industry with customer taste and preferences changing with time. It is imperative that the management put more emphasis on quality customer service to be able to source more customers and maintain the current. Customer service policy should be developed to guide the employees on value added service. Customer expectations revolve around quality product and service, timely service, value for money charged, availability and sustainability of service and organized favorable atmosphere. The management should consider developing instant feedback mechanisms to get the views of the customers. This helps the company know the new trends and expectations of the customer needs and the areas that require improvements to fully satisfy these emerging needs.

Company Growth and Expansion

The company should tap the Emerging markets; these are markets in Latin America, Asia and Africa. In this case Africa remains to be the emerging market that has not been tapped by the Starbucks Company with its presence being in only two countries. It is worth noting that Africa has rich direct production of coffee from several countries like Kenya, which will provide cheap quality supplies required by Starbucks.  Most corporations are expanding to international unsaturated markets in the bid to increase their presence globally and to reach as many customers as possible as before.  This can be facilitated by employing advanced technology transmission media like the internet’s, World Wide Web and You Tube that reaches more potential customers around the world instantly and even social charting engines like the Face Book. This is because there is an invasion in the number of companies that provide same products and services and targeting the same customers.

Financial Plan

In May 2011, Starbucks total revenue grew by 10% to 2.8 billion USD in quarter one which is 12% increase in 2010 same time collected total revenue of 2.5 billion USD. Going by this projection, for the next three years if all the plans and policies are implemented, Starbucks will be certain of consistent increase in growth of not less than 12% in the first quarter which is always the lowest (Blanca 2006). The cost of marketing should maintain at minimum even with the expansion. Based on the 2006 marketing cost of 87 million USD, this figure should be increased by a maximum 15% as well as reducing the current supplies costs by 20% through direct purchases of coffee from the producers. This will ensure sales increase by 33% per annum for the next three years (Lorenza, 2006).

Management structure

Starbucks employs hierarchical management structure with the board of director at the top followed by the Chief Executive Officer and further to departmental heads (Lorenza, 2006). This structure can be retained but with a recommendation that the country directors be empowered to be able to make high level strategic decisions that are relevant in their area of operation having in mind that different countries Starbucks branches operate in different political, economic, social and technological environments with different cultural environment. This means that centrally made decisions may be irrelevant and inapplicable in different areas and cannot be fully implemented to achieve desired results (Hill & Jones 2010).

Conclusion

Starbucks is an international company present in 50 countries worldwide and has built a name over the years. For the company to remain the number one coffee service provider against the stiff competition, Starbucks will have to perform a number of strategic reviews that include economic assessment and analysis. Based on PEST analysis, the company will need to explore emerging markets with favorable political environment like good government policies supporting foreign investment while minimizing costs as much as possible.

Marketing strategies are also key sales improvement. The company should employ a multiple of marketing techniques that include use of internets, World Wide Web and YouTube, to reach more potential customers within a short time world over. They should also use people, place and event marketing alongside market segmentation into specific target groups that can be full satisfied. Products needs to be well differentiated to be able to offer a variety of products and services that matches the needs of each target group within the demography. Organization structure with clear differentiated roles is fundamental to good management and daily operation of the coffee company. This term outlines a three year strategic management proposal for Starbucks coffee company based on the strength, weaknesses, opportunities and the threats of the company.

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