Marketing Analysis 3

Situation Analysis

Situation Analysis

Situation Analysis

Trouble Brews at Starbucks

Rodney A. Lee Sr.

Grantham University

Trouble Brews at Starbucks

The Starbucks Company has experienced various challenges since 2007 which has caused the price of its stock to drop by over 50% within a period of one year. Some of the challenges the company has undergone involved changing of the perception of customers on the familiarity of Starbucks and the value of the impact of a shift in the customer’s profile of the standard Starbucks client. The fast growth of Starbucks in many places, the ease in which the company was available and the utilization of permits in the promotion of the goods of the company shifted the focus of the customers from the initial standard high end customers who purchased coffee. This customer base decreased thus changing the profile client to groups with low income. Despite Starbucks expanding and setting up many stores as a tool for advertisement in the location, the price of growth was more than anticipated on the bottom line (Ferrell & Hartline, 2013).

An increase in drive by windows and products in the store took the company close to a fast food product store shifting from the initial idea of designing a third place. This reduced the value that existed on the products. The company also had a challenge of commoditizing its brand. This led to introduction of many products selling under the name of Starbuck brand from coffee, books, CDs and the other merchandise to the food items such as the sandwiches. This reduced the value of Starbuck brand from being seen as the high end quality ground coffee.

In the process, to increase efficiency in the company operations and lower the waiting times Starbucks introduced machines that were automated which made coffee much faster. By increasing the efficiency, it presented a problem for customers who enjoyed watching the making of the products. Starbucks bought bags that were sealed with pre-ground coffee which removed the unique brand and the aroma of freshly ground coffee they had initially (Bussing-Burks, 2009).

The company brewed coffee in leagues that were different with their rivals for a long time but by the mid of 2000 the high end coffee of the company clashed with their rivals for example Dunkin Donuts and McDonalds. This was worsened by the move to drive through window stores for coffee that made the company to appear more like McDonalds. The value of the coffee from Starbucks was eroded and made it simple for the rivals to get in the market of high-end coffee through developing the high end drinks which were flavored and then sell them at costs that were reduced thus undercutting the prices of Starbucks. A number of the high end customers of Starbucks shifted to the coffee from the competitors which was cheaper and of high quality.

In order to address this, the company could have tried the development and introduction of different brand names for the new products that had the capacity for reducing the value of initial brand name of Starbucks. The idea may have included the introduction of brand names for the books and CDs, as it maintains the value of Starbucks brand. This would enable the company to get customers quickly from groups with low income and also maintain the high end customers who are the initial customer base. This customer base did not mind paying the higher cost for coffee as long as Starbucks stuck with its original concept.

Starbucks should have also focused on what it does best such as making good coffee. This can be done by the rebranding of the company, developing and keeping focused on the products it provides and what clients are purchasing. Product segmentation and the development of different perceptions of the brand for each product that is marketed to target specific customers will be beneficial to the company. This will assist the company in adopting strategies that are focused on enabling the recapturing of the market base that has been lost. The company will also be capable of competing effectively with its rivals in various markets and product segments (Buchanan & Simmons, 2009).

References

Ferrell. O & Michael Hartline. (2013). Marketing Strategy, Text and Cases. Cengage Learning

Bussing-Burks, M. (2009). Starbucks. Santa Barbara, Calif: Greenwood Press.

Buchanan, L. & Simmons, C.J. (2009). Trouble Brews at Starbucks. Richard Ivey School of Business, The University of Western Ontario.