Starbucks
Executive Summary
Starbucks is a known market leader in the coffee industry and is performing well in the market experiencing a tremendous growth where today the firm has more than 30,000 retail stores that are in 78 markets that range from Andorra to Vietnam (Starbucks Corporation, 2020). Starbucks has embraced technology in collecting and exploiting information by adopting mobile apps for the promotion of the company products where the loyal customers are rewarded. The Starbucks app has special features that include providing the store location, facts about nutrition of the products and also the reward and loyalty points. In 1971 is when the franchising of Starbucks was implemented because at that point only a single store in Seattle’s Pike Place Market but later the business expanded to other states and countries. The Company had strategic planning processes from the start and in 1990 is when the company developed its mission statement that is “To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow.” In 1993, Starbucks proceeded to open its first roasting plant which would help cut production costs and pave the way for the first drive-thru location in 1994.
The emergence of Covid-19 pandemic has affected the sales of the Starbucks products and this contributed to a decline in the consolidated revenue by 11% to $23.5 billion in the fiscal year of 2020 (2021 Notice of Annual Meeting of Shareholders and Proxy Statement, 2021). At the same time Starbucks also lost its market share where it decreased from 40% in 2019 to 38.4% in 2020. The effect caused by the presence of the Covid-19 pandemic showed that Starbucks needed to consider expanding their digital touchpoints as the means to increase customer engagement with the brand.
Starbucks is facing competitive pressure that includes the threat of substitution where competitors producing similar products are present in the market satisfying the same need of the customer. The capital and investments needed to start a coffee business is low and this has made it possible to have increasing new entrants in the business that reduces the company market share. Starbucks needs to focus more in branding the firm to be more unique and creates loyalty and recognition. Branding ensures that the customers continue interacting with their usual brand and the emphasis prevents them from changing reference and loyalty (Team Pitchspot, 2020).
The forces that Starbucks encounter include political influence where the company operates in different countries globally that includes the United Kingdom, Japan, Korea and Indonesia among others forcing the company to adjust to their political situations for success. Starbucks products are much of specialty and premier and this makes the pricing high and this is likely to restrict the low-income customer segment and those affected by Covid-19 pandemic financially. Coffee drinking culture can be developed and this is what Starbucks has been doing and has yielded much in retaining customers through branding. A strong corporate responsibility is the best branding for a firm like Starbucks to attract and retain customers. Starbucks has worked towards implementing technology in its operation like the use of artificial intelligence in obtaining and gathering data for best decision making. Starbucks also introduced the mobile order and pay that allowed its customers to order for their products through the company app (SBUX, 2016).
Starbucks targets people of both genders that range between the middle and upper class and have the ability to afford higher specialty branded beverages on a regular basis. Starbucks should consider putting more effort on the product quality and also put it under more marketing mix and advertising. The Starbucks communication channel that is characterized by a large marketing communication helps the firm to reach more customers increasing its market share.