2. Executive Summary The aim of this report is to investigate
the challenges facing Starbucks. The objective of this report is to
analyse the businesses current situation, identify emerging issues,
offer solutions for the problems identified and lastly to propose
recommendations using relevant marketing theory which is in line
with Starbucks overall mission.
4. Starbucks is an iconic global company which originated in
Seattle, the company was founded by Howard Schults who seized an
open market opportunity and forever changed the coffee industry.
The company has experienced unprecedented growth by converting a
pedestrian commodity into a fashion accessory. Starbucks sells
coffee and snacks in well positioned cafes for premium prices. The
company began as a tiny chain of Seattle coffee shops and has grown
into a multinational conglomerate. Starbucks has endured a hostile
reception for future consumers, criticism for moving too slowly to
improve the situation for poverty stricken farmers as well as
discontent staff and low employee morale. This report will focus on
and analyse these issues facing Starbucks. Alternatives are
generated as strategic options and analysed in regards to the
extent which the alternatives address the issue of negative public
opinion, disgruntled employees and inability to penetrate the
emerging younger market. SWOT Analysis A SWOT analysis investigates
the current situation. Strengths of Starbucks are that it has
substantial financial backing and an experienced management team.
This ultimately provides Starbucks with capital base and buying
power, with 3.1 billion worth of sales in 2004. It can afford to
expand into new markets and acquire tacticalcommercialacquisitions.
It also has unwavering support of investors and a well-established
growth capacity, operating as one of Business Weeks top 100 global
brands in 2005. Starbucks has also become proficient at predatory
real estate strategy, which enables the company to keep competitors
at bay. The company-owned stores also enable Starbucks to maintain
control over the image of the company. This will also enable
Starbucks to implement any strategies across the stores rapidly
without losing control. Starbucks also has the competitive
advantage of having no nationwide competitor, which would
contribute to its growth potential. The company is also renowned
for being a highly innovative business with record service and
creative new product development. In terms of weaknesses, Starbucks
has encountered negative feedback from its futurecustomers, current
employees have been dissatisfied and the company has also been
criticized for debauched CSR practices. Generation X negatively
received Starbucks, saying that the brand doesnt welcome their age
group and they find it difficult to identify with the Starbucks
image. Furthermore, the 20-30 year olds complained about issues
surrounding the affordability of the products. Starbucks also
encountered large volume dissatisfaction amongst employees over odd
hours and low pay, which ultimately affected the coffee itself.
Controversy has arisen presiding over the companies CSR
practices;critics have claimed that Starbucks is more concerned
about public image than attempting to resolve widening inequalities
with suppliers.
5. Regarding opportunities, the presence of the generation Y
market as emerging consumers is growing and this technologically
savvy cohort responds well to wireless access and pre-ordering. In
order to gain a foothold on the younger generations, Starbucks must
adapt itself to the current expectations. The younger generations
are highly responsive to corporate social responsibility
initiatives. Starbucks has experienced high demand for new stores
internationally, which means the company has the opportunity for
further international expansion. An improved human resources
management inniative will help to improve employee relations and
motivation. In terms of threats, Starbucks is facing increasing
competition, an increasing fight for market share and decreasing
store sales in foreign markets.Starbucks is struggling for customer
retention in the youth market. Problem/Decision Statement The SWOT
analysis identified key problem areas in the Starbucks case: Lack
of corporate social responsibility Disgruntled employees and
inefficient employee relations Ineffectiveapproach to penetrate the
emerging youth market Decision Statement: Should STARBUCKS pursue
strategies to influence public opinion? This decision statement
questions the public opinion of the current business strategy and
the ability for Starbucks to persuade a generation of consumers and
employees that Starbucks is a company that enhances society and
accountable for its actions. Identification of alternatives:
Alternative A: Pursue a corporate social responsibility strategy
Corporate social responsibility will address several issues in this
case. The use of this strategy will balance corporate power with
responsibility, promote long-term profitability, improve business
value and reputation and correct social problems caused by the
business(Lawrence & Weber, 2008). The use of a mission
statement that incorporates a social mission will improve staff
morale and motivation level, providing intrinsic rewards for
employees and ultimately improving work and service quality. This
is catering to employees higher order needs (Bergman, Coulter,
Robins & Stagg, 2009).
6. Alternative B: Segmenting Consumer Markets Isolate
individual characteristics and cater to these segments using
different strategies. The newer generation that Starbucks needs to
attract has relatively homogeneous needs. Starbucks must focus on
closely aligning their image with the consumersideals. They must
consider how the age gap relates to customers needs, attitudes,
lifestyle and preferences(Hodgetts & Kuratko, 2008). The
younger generation is more price sensitive and values different
product benefits. Their personality, motives and lifestyles are
different to that of Starbucks initial customers. Promotional
discounting new products and odd-even pricing will help Starbucks
tackle the price sensitivity of the new younger customers.
Persuading the younger generation of Starbucks social
responsibility and non-pretentious attitude will help to encourage
penetration of this up-and coming market segment (Farell &
Hartline, 2011). Alternative C:Customise products and Starbucks
image to relate to new geographic locations to prove cultural
empathy and a sense of humility. Starbucks should customise
products to suit each countries wants and needs of the target
market. This will help deal with the problem of rising competition
and Starbucks overly powerful image. This will also help hamper the
socio-cultural issues faced by Starbucks in the Middle East. For
example, to enter the Chinese market in order to raise awareness
Starbucks will need to establish itself as a socially responsible
company and prove that it will make a strong commitment to the new
county. The daunting economic situation will increase this pressure
and in order to succeed and compete on a global scale with the
constant threat of imitators, Starbucks will need to be highly
innovative with product development and cater to the countries
tastes and preferences(Farell & Hartline, 2011). P.174
Alternative D: Development of a company-wide planning culture The
relationship between headquarters and local subsidiary staff is a
likely cause of dis-satisfied employees. It is common for
Subsidiary staff to claim that, being more involved with the local
customers gives them a better idea of opportunities and therefore
they should play a larger part in the planning process, especially
in the department of developing objectives and strategies. In order
for this situation to change, all corresponding persons should have
a clear idea of their own roles and involvement of the process and
how their contributions are integrated. A greater emphasis on staff
at all levels will provide an increased level of customer service
performance and a sense of self actualisation amongst staff
members. This should be a continuous process and enhance strategic
thinking across the board though a standardised planning process
P.223 (Doole & Lowe, 2008).
7. Criteria Criteria A In order to justify any expenditure or
use of organisational resources, the use of these strategies must
enhance the value proposition of Starbucks in the minds of the
consumers. Criteria BExpenditure must enablepenetration of the
younger market, increased staff morale and service capabilities,
and improved public opinion of Starbucks. Criteria CThe benefits
must outweigh the costs of this operation. It must enable the
Starbucks brand to move into new segments and markets to increase
profit margins. Ultimately it will enable Starbucks to increase
global market share. Criteria D The strategy must support the
long-term growth and sustainability of the company and enhance its
competitive advantage. Criteria EThisapproach will improve customer
relations and responsiveness to customer demands. Analysis This
section will discuss advantages and limitations of the alternatives
Alternative A In an assessment of the advantages of this
alternative, it does cover the majority of criteria. The creation
of a corporate social responsibilitystrategy will sway public
opinion, enhance staff morale and therefore service to customers as
well as increase global market share and responsiveness to customer
demands. The most poignant feature of this alternative is that it
will enhance the value proportion of Starbucks in the minds of the
consumers. It will also enhance the sustainability of the company
through increased an increased customer base and customer centric
ideals. The strategy also has the added benefit of having a
sustainable, long-term orientation and will enhance its competitive
position. Alternative BSegmentation of the market will enable
Starbucks to penetrate a new market and utilise Starbucks financial
backing to manage this expansion. This alternative is in line with
enhancing the value proposition of Starbucks and the accessibility
of it to the new market segment. However, it does not enhance staff
morale. Alternative CThis strategy presents many advantages. It
involves an interchange between development and knowledge of the
foreign market and an increasing commitment of resources. An apt
knowledge of the new market and marketing of socially responsible
efforts will increase the value proposition of Starbucks in the
minds of the consumers. It is also likely to affect the motivation
of employees and therefore enhance quality of service. These
actions will increase the likelihood of
8. success in foreign markets and therefore abide to criteria
C, having the cost outweigh the benefits. It will also help the
issue of psychic distance such as overcoming barriers like
difference in language, culture and political systems (Lawrence
& Weber, 2008). This will enhance the long-term growth and
enhance Starbucks competitive advantage. Alternative D Developing a
company-wide planning culture will help the responsiveness to
customer demands and will also boost staff morale and satisfaction
(Stasch, 2010). As the majority of staff is within the generation
Starbucks is hoping to target, it would also help to penetrate this
new market segment. However, it does not cover the issue or public
opinion. Recommendations Based on the analysis, alternative A is
the best course of action; however elements of alternative D do
warrant consideration. To implement alternative A, the following
actions are recommended: In order to change and influence public
opinion, the use of media messages must be crafted to enlighten or
educate the public regarding the changes in the businesses
viewpoint and how this will affect the public. This can be done
through public service announcements. In order to attract customers
that are politically and socially informed Starbucks can offer an
editorial informing the public about philanthropy and activism.
This can be offered inside the store and discuss issues that
resonate with the public. It is an informative way of showing its
customers that it is paying attention to global issues (Lawrence
& Weber, 2008). Starbucks can create a global public relations
management team to deal with issues surrounding corporate social
responsibility. This team can also deal with responsiveness to
environmental and recycling issues. The global management team can
analyse scientific studies and track government actions across the
world, it can also work within the company on different levels to
ensure that the staff are speaking with one voice regarding social
issues. This team can iron our any cultural disparities, design
press releases and interact with the media. The impact of the
public relations program will most likely vary between different
nations given the different systems and diversity. A public
relations manager needs to be capable of speaking the native
language to avoid embarrassing or misleading communication issues.
This will also help to alleviate some of the anit-American
sentiment felt globally (Lawrence & Weber, 2008). In order to
ensure that business strategies are implemented appropriately, the
global public relations program will need to be decentralized due
to the vast differences between nations. This team will also
integrate some of alternative D, so that company resources are
quickly utilised to maximise customer understanding and employee
satisfaction. A transparent communication system
9. between front of house staff and managers will impact
Starbucks competitive advantage and consumer appeal (Lawrence &
Weber, 2008). In order to announce changes in the business
organisation, image advertisements will promote the new image of a
socially responsible company. These advertisements target the
publics emotions and seek to inspire the customers and employees.
This will target the younger generation and develop an image of a
company that cares about its suppliers and the little guy. This
will be communicated to the employees and customers. It is
imperative that it is etched deep into the corporate culture to
ensure pride by the employees and loyalty from customers (Lawrence
& Weber, 2008). Reference List Bergman, N., Coulter, P.,
Robbins, P., & Stagg, A. (2009). Management (5th ed.)
Australia: Pearson Hartline, M. D, & Ferrel, O.C. (2011).
Marketing Strategy (5th ed.) USA: South-Western Hodgetts, R., M,
& Kuratko, D. (2008). Small Business Management: Essential
tools and skills for entrepreneurial success. USA: Wiley and Sons
Lawrence, A., & Weber, J. (2011). Business and Society (13th
ed.) New York, America: Mc-Graw-Hill Stasch, S. (2010). Creating s
successful marketing strategy. USA: Praeger