Chapter 7: Business Marketing

This chapter, the final chapter of the semester, is on business marketing.  This specific type of marketing is of goods and services to individuals and organizations for purposes other than personal consumption.  An example of business marketing are the market for the Starbucks coffee machines which are used to make the coffee for their customers.  Since these machines are not being used by the Starbucks customer themselves but instead it creates the product which their customers consume, it is a business product and is marketed to the Starbucks business.  They are also business products since it is used to manufacture other products, being the coffee which is then sold to the consumer.

After the launch of the new Verismo machine, which is a multi-purpose, single serve, coffee machine by Starbucks, and the larger model carries more water to make multiple cups, it may become easier for small offices and people of small businesses to create their own coffee.  This makes it convenient for them and overall may be more cost efficient then purchasing a specialty coffee everyday.

Now business products generally fall into one of 7 categories, depending on their use.  These 7 categories are: major equipment, accessory equipment, raw materials, component parts, processed materials, supplies, and business services.  For Starbucks, an example of a business product are the coffee machines mentioned earlier.  These are part of the major equipment category, since it's a capital good.  Another business product of Starbucks are the coffee beans used to make the coffee, which is a type of raw material.  Raw materials are unprocessed extractive or agricultural products.    These are also business products because it becomes a part of another product, in which the organization sells.  Other examples of raw materials for other businesses are items such as corn, wheat, fruits, and vegetables.

The use of strategic business alliances, which is a cooperative agreement between business firms and may take form of: licensing or distribution agreements, joint ventures, research and development consortia, and partnerships, is an area of marketing strategy that Starbucks frequently uses.  According to chron.com, which is the Houston premier local news provider, the list of business alliances Starbucks has includes Barnes and Nobles, PepsiCo, United Airlines, Kraft, and NAACP.  "According to Rebecca Larson, assistant Professor of Business at Liberty University, Starbucks partnered with Barnes and Nobles bookstores in 1993 to provide in-house coffee shops, benefiting both retailers.  In 1996, Starbucks partnered with PepsiCo to bottle, distribute, and sell the popular coffee-based drink, Frappacino.  A Starbucks-United Airlines alliance has resulted in their coffee being offered on flights with the Starbucks logo on the cups and a partnership with Kraft foods has resulted in Starbucks coffee being marketed in grocery stores.  In 2006, Starbucks formed an alliance with the NAACP, the sole purpose of which was to advance the company's and the NAACP's goals of social and economic justice," stated within the Houston Chronicle piece.

Chapter 8: Segmenting and Targeting Markets

Within a market which is defined in our marketing textbook as people or organizations with needs or wants and the ability and willingness to buy, are market segments, which is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. 

Market segmentation is a very resourceful strategy for organizations to fulfill their mission and gain profits.  This is the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups.  Starbucks uses demographic segmentation (markets by age, gender, income, ethnic background, and family life cycle) as well as geographic segmentation (markets by region of a country or the world, market size, market density, or climate) and psychographic segmentation, which can link with demographics.

According to an article on chron.com (the Houston Chronicle), Starbucks holds around 33% of the market share for coffee in the U.S.  Starbucks has been able to accomplish this by catering to a specific target market.  Stated in the article, Starbucks' main target market is men and women between the ages of 25-40, which accounts for almost half (49%) of its total business.  Customers within this range tend to have high income and professional careers.  This group grows at a rate of about 3% annually.  Young adults, aged 18-24, are the next large group that Starbucks targets.  They bring in about 40% of Starbucks' sales and Starbucks "positions itself as a place college students can hang out, study, write papers, and meet people."  They appeal to this group through the growth of technology and innovative ideas.  The young adult group grows at about 4.6% each year.  The last group which are apart of Starbucks' target market are kids and teens, ages 13-17.  This group accounts for about 2% of Starbucks' sales but lots of items are bought from the parents of the kids.  Starbucks targets this group by offering certain drinks that appeal to them.

As stated earlier, Starbucks also uses geographic segmentation.  Starbucks is located all around, specifically in upscale locations, near offices, and near many college campuses.

After a company decides what is their target market and market segments, it should choose what positions they should occupy within those segments.  Positioning within a market is developing a specific marketing mix to influence potential customer's overall perception of a brand, product line, or organization in general.  Starbucks has positioned themselves as a highly respected brand.  The Starbucks company has become positioned in a way that it can distinguish their products from competition, which gives them an advantage once again.  Going back to their mission, they want "to inspire and nurture the human spirit - one person, one cup, and one neighborhood at a time."  Their positioning strategy is customer based, which allows them to give the best customer service.  As they continue to do this, they hold onto their sustainable competitive advantage in terms of their customer satisfaction as well as their employee satisfaction.

Chapter 11: Developing and Managing Products

Over the last four decades, Starbucks has developed new products and continues to do so.  A new product is new to the world, the market, the producer, the seller, or some combination of these.  This can include new-to-the-world products, new product lines, additions to existing product lines, improvements or revisions of existing products, repositioned products, or lower-priced products.  Starbucks is very innovative when it comes to their products, whether it's their seasonal coffees, their iced beverages, or their coffee/espresso makers.

An innovative, new Starbucks product are the Starbucks Refreshers, which is a product that uses green coffee extract (a natural source of energy), resulting in thirst-quenching, low-calorie, refreshment with a boost of natural energy from caffeine and fruit juices.  This makes Starbucks the first to bring green coffee extract innovations to customers, on a global scale nonetheless.  According to Starbucks' newsroom, this gives the company an opportunity to introduce a new offering globally and continue to expand through innovation.  This also extends their product line of coffees, making more variety for customers to purchase.

Another example of an innovative product, which recently was released, is the Starbucks Verismo System.  This is a machine that makes both coffee and espresso.   The machine features three different pod types -- espresso pods, coffee pods and milk pods that can be combined in a number of ways to make custom drinks.  If a consumer invests in this system, price range is from $199-$399, then they may save on buying coffee everyday from Starbucks in the long run.

Because these items have just recently been introduced into the Starbucks product mix, they are just in the introductory stage of the product life cycle.  As reactions start to increase amongst the Starbucks customer and people start to buy or reject the products, then the product will be in the growth stage.  If they last the growth stage, then they may just complete the cycle into the maturity stage and all the way to the decline.  For the Starbucks Refreshers, people seem to have mainly positive reviews on the taste.  According to a blog called YumSugar, their tasters thought the drink had a "crisp, fresh taste" adding it was "ideal for pop lovers who want a healthier alternative."  While some praised the "nice fizziness level," others still pulled down the voting average, claiming the beverage was "too reminiscent of Red Bull" and the "pungent, syrupy sweet smell" was overwhelming.  It is still rather early to tell seeing it just came out this year. 

 

As for the Verismo System, someone from the Huffington Post stated, "Somehow Starbucks has learned the art of coffee making through this machine. It made a latte better than I've ever had in a Starbucks coffee shop" and for espresso making, someone said from the same news source "I tried the espresso and the house blend.  I'm not someone who's that familiar with Starbucks espresso, but I would say the espresso from the machine tasted as genuine and close to the real thing as I could ask for.  At no point did I feel the slightest inkling of being duped into drinking fake or knock-off espresso. It was tasty, and I already feel slightly more productive at work."  From these reviews, it seems Starbucks is using innovation as a key strategy to continue to gain profit and make their customers happy with the products they offer.  Huffington Post couldn't have said it better, "The verdict: We were a little surprised at how much we liked this machine. If you like Starbucks coffee and you want to drink it at home, this is the ticket."  This view would be ideal if all of their innovative products had the same reaction.

2011 Annual Report

Chapter 16: Intergrated Marketing Communication

When Starbucks redesigned their logo, they reached out to several of the Starbucks rewards members regarding the change.  The email provided a link and was available for mobile viewing.  The timing was an important element because in order for the message to be unique, it had to be received before the official announcement.  They also used a video with Howard Schultz explaining the reason for the redesign (video found in previous blog post).  Lastly, there are sharing icons so the reward members can spread the word to other prospective members and there can be a flow of communication about this news.  These are some elements of integrated marketing communication.  The rewards members were viewed as special customers worthy of a pre-announcement.   As one observer pointed out, "the timing also helps deflect attention from a price increase announcement."

Starbucks does a good job with integrated marketing communication because not only do they reach out to their customers through email, they also use many of the social networking sites as a form of advertising and letting people know what is going on within the company.  Although they have a large Twitter and Facebook audience,  they have found their voice in these channels and it's appropriate and consistent with who they are as a brand.  Lastly, direct mail is the delivery mechanism for rewards.   Despite all their online communication, the old fashioned postcard is still the "gift basket" for delivering reward benefits.  Customers look forward to the solid black postcard because they know it's treat time.

 As previously discussed in the first week of September, Starbucks has a sustainable competitive advantage because even though they sell a product, which many companies offer as well as street carts, they are very consistent with how the coffee is made and the service they give their customers.  Many people continue to purchase their products at higher prices which proves their advantage is sustainable to keep loyal customers, gain prospective customers and keep them all happy.

Starbucks is using a QR program which allows consumers to learn more about various coffee products.  QR codes are newer to the marketing world and haven't quite taking off as some other marketing endeavors have.   Unfortunately these codes have an unappealing look to them, but it can be quite effective if used properly.  With the new program, Starbucks uses QR codes in their ads and stores to promote information in an interactive way.  Since the consumer has to physically scan the QR code with their device, the motivation to actually read and take in the information about the coffee they are learning about is there.

The promotional mix -- the combination of promotional tools including advertising, public relations, personal selling, and sales promotion to reach the target market and fulfill the organization's overall goals -- is used rather effectively within Starbucks.  Again, Starbucks doesn't overload their consumers with advertisements but when used, they try to have quite an impact on their customers.  









They also use a bit of sales promotion through online sources and as reward loyalty members.  As for personal selling, whenever I walk into a Starbucks location, they make sure to get your name when ordering and that builds a sense of personal selling.  Their vibe is emitted to the customer and makes each individual feel special in some way.

ENJOY SOME STARBUCKS ADVERTISEMENTS, since they're not heavily saturated through our everyday lives.

Chapter 10: Product Concepts

A product is everything, whether it is favored or not by the consumer, that a person recieves in an exchange.  Even though Starbucks coffee is not quite as inexpensive as let's say the corner cart, since Starbucks merits little shopping effort and it has wide distribution areas in order to sell large quantities of it to achieve profit goals, I would say it fits the mold of a convenience product.  Also, Starbucks coffee, among other products sold at Starbucks, are specialty products because many loyal Starbucks customers are very reluctant to accept alternatives.

Starbucks has a vast product mix (all the products a company sells) such as coffee, tea, breakfast and lunch products, as well as espresso and coffee machines.  As time progresses, more innovative ideas come about.  Some of the product mix is shown in the image below:

Source - Janice Ho's Blog: http://sites.cdnis.edu.hk/students/001771/2012/02/21/classifying-starbucks-products/

As a brand, Starbucks has built their company to differentiate from the competitors.  According to the Starbucks website, I've provided a bit of history on their brand mark (logo), which is the elements of the brand that cannot be spoken.  "Back to 1971, when Starbucks was first coming to be, in a search for a way to capture the seafaring history of coffee and Seattle’s strong seaport roots, there was a lot of poring over old marine books going on.  Suddenly, there she was: a 16th century Norse woodcut of a twin-tailed mermaid, or Siren.  There was something about her – a seductive mystery mixed with a nautical theme that was exactly what the founders were looking for.  A logo was designed around her and their long relationship with the Siren began." Their logo, which has been renovated to commemorate their 40th anniversary (video to the left; picture at beginning of post shows evolution of the logo), maintains their heritage and now Starbucks has dropped the "Starbucks Coffee" from the logo and has let the woman come out of the circle.
History and Information on the Starbucks brand mark

Also, Starbucks has made it a point to take its successful offline branding strategies and begin them online.  Their online image and messages have stayed consistent with their brand values, which are honesty, sincerity, and connecting with its consumers on a level unlike any other brand. The offline, more personal Starbucks culture has taken to the airwaves of the internet and social media.

Lastly, Starbucks is a global brand since it does obtain at least a third of its earnings from outside the U.S. and it is recognizable outside of the U.S. to other consumers.  It was number 88 in the top 100 best global brands of 2012, according to Interbrand.

Chapter 18: Sales Promotion and Personal Selling

Starbucks' first card was launched in November 2001.  The first rewards of any kind was launched in April 2008.  The first generation of Starbucks rewards had no “levels.”  You just registered a card and earned free soy milk, free breve milk, free syrups, a free tall beverage with a pound of beans, and free refills.  Then in November 2008, Starbucks launched a gold card where customers pay a $25 annual fee and got 10% off of their purchases.  This meant by the end of 2008 and through most of 2009, Starbucks offered two side by side programs - the free program and the new, paid program.  The 10% off program, which had a $25 annual fee, did not include the free milk changes, free syrups, and all the free perks.   The 10% off card was phased out, one year after its initial launch.  In October 2009, after realizing that having two overlapping programs which didn't relate to one another didn't work, Starbucks announced the current MyStarbucksRewards program, which offers three levels: A “Welcome” level, a “Green” level, and a “Gold” level.  This program launched in January 2010 and the updates to the program occurred on October 16, 2012.

Explanation of MyStarbucksRewards program:

Welcome Level ~

Use your card once, earn your first reward. Sweet!
Something to Drink or Eat On Your Birthday
Get a little extra birthday love with a free drink or food reward on your big day
Green Level ~
Five Stars puts you at Green.  
Besides your free birthday drink or food reward, you also earn Free Refills in the Store.
Paying with your registered Starbucks Card gets you brewed and iced coffee and tea refills at no charge during your visit at a participating store.
Gold Level ~
Collect 30 Stars within 12 months and you’re Gold. 
Once you reach Gold, keep those benefits for another 12 months by earning another 30 Stars. With Gold, you get all the Welcome and Green benefits plus Free Drink or Food Reward Every 12 Stars
Use your Starbucks Card 12 times and the next one’s on us.
Also, you receive a personalized Gold card.  Your barista will know you're somebody special when you place an order.  Be sure to opt in to get special offer and coupons via mail, email, or text message.

Use your free reward to redeem any handcrafted beverage or any food item of your choice. All food items in participating stores are eligible for the free reward, with the exception of multipacks, trays, whole bakery loaves and food items specific to the Starbucks Evenings menu.

This is a form of sales promotion within Starbucks, where marketing communication activities, other than advertising, personal selling, and public relations, in which a short-term incentive motivates consumers or members of the distribution channel to purchase a good or service immediately, either by lowering the price or adding value.  This specific form is a loyalty marketing program, designed to build a long-term, mutually beneficial relationship between the company and its key customers.  It is also a frequent buyer program, a loyalty program in which loyal customers are rewarded for making multiple purchases of a particular good or service.  According to our marketing textbook, at one point, gold level members were notified that they could purchase rare coffee beans grown on one farm in the Galapagos.  The coffee, selling at $12.50 for half a pound, sold out in less that one day, showing that gold-level members are willing to use their benefits.

Lastly, Starbucks also uses sampling within their locations and outside as a form of sales promotion.  This allows the consumer the opportunity to try a product or service for free.  If the consumer likes the certain product, they will most likely purchase it then or at a later moment if the product is still available, since it tends to happen with a limited product or a trial product.

Sampling some Starbucks coffee in Times Square

Starbucks Unofficial Fan Site - Questions answered about the Reward Program

Starbucks Coupons

Chapter 17: Advertising and Public Relations

According to AdvertisingAge, "Starbucks has long been something of a curiosity in the marketing world because it has spent so much less on traditional advertising than other big chains.  And yet, it's been doing better than what almost anyone expected from it a few years ago."

As shown in this ad campaign video, Starbucks focuses on word-of-mouth promotion.  CEO Howard Schultz makes it important to relay the information and give the customer the experience they expect from Starbucks.  Here and there, consumers encounter advertisements in magazines, train stations, buses, newspapers, or a few commercial ads.  Starbucks also promotes within other companies (as shown in the video below).



Also stated in AdvertisingAge, certain marketing initiatives for Starbucks includes social-media efforts and advertising for certain new or seasonal products (Frappacino and Pumpkin Spice Latte are a  few examples).  Starbucks has had a digital scavenger hunt featuring Lady Gaga and promoted for its 40th anniversary, with one example having MyStarbucksSignature, a website which lets customer create customized drinks.

Starbucks uses product advertising, showing the benefits of a specific good or service, and some pioneering advertising, a form of advertising designed to stimulate primary demand for a new product of product category.  Most of Starbucks advertising is a form of competitive advertising, designed to influence demand for a specific brand or product.  Starbucks doesn't show competition in their ads however, as other companies may in using competitive advertising form.  Even though these ads are out there, the frequency of them are not as vast as other company ads, particularly coffee companies (Dunkin' Donuts, McDonald's McCafe, etc).  Starbucks wants to remind the customer the pleasent experience once walking into a Starbucks and enjoying their product.

     

Explained in an earlier blog post on Chapter 6, Starbucks has a lot of product placement within TV shows and movies, such as Sex and the City, I Am Sam, Devil Wears Prada, and many more (check out Few Starbucks Feature Films for some more).  Product placement is a public relations strategy that involves getting a product, service, or company name to appear in a movie, television show, radio program, magazine, newspaper, video game, etc.  This increases the advertising and promotion of that particular product, service or company.  This has been increasing over time since advertising is easily ignored. 

Now in the case of emergencies, a company always has to be prepared for any repercussions at hand.  Starbucks had an advertising mishap where they had been advertising for their TazoCitrus drinks and the advertising was struck as familiar to the 9/11 attacks (shown to the right), especially since it occurred shortly before the ad would've released.

In a press release shortly after the ad had been seen, it was stated: "We deeply regret if this ad was in any way misinterpreted to be insensitive or offensive, as this was never our intent.  The poster, promoting Tazo Citrus and Tazoberry beverages, was designed to create a magical place using bright colors and whimsical elements such as palm trees and dragonflies."  Starbucks Press Release 6/16/2002

The ad was pulled and replaced with this:

Chapter 15: Retailing

Retailing is the major part of the sales process of a good or service.  Everyone encounters a retail location at least a few times a week, whether it is a supermarket or department store.  Starbucks falls into the category of a specialty retailer, which is a retail establishment specializing in a given type of merchandise.  Coffee or other morning beverages are Starbucks' main merchandise.  Starbucks is also classified as a chain store, which is a store owned and operated as a group by a single organization.  In North America, most of the Starbucks locations are company operated.   However, the company sometimes has licensing arrangements with companies who provide the right to use particular locations that would otherwise not be accessible.  For example airports, grocery chains, colleges/universities, etc.  Some people see Starbucks as a franchise, which is incorrect.  Starbucks’ subsidiary (a company controlled by a holding company) Seattle’s Best Coffee, does franchise the operation of its cafes and kiosks.  As of the middle of 2008, the subsidiary had over 540 cafés in the U.S. as well as nearly 100 espresso bars.  But since Starbucks' stores are run by the company and not combined with independent ownership, it remains a chain coffee shop.

I have visited several Starbucks locations and now that I attend Borough of Manhattan Community College, I visit a smaller location on Chambers St. right outside of the 1, 2, and 3 trains.  At the beginning of the semester, I was a bit skeptical in going to that location since it is rather small but since it is Fall season, that means Pumpkin season!  I don't go to Starbucks all the time but when it's pumpkin season, I love to have their Pumpkin Spice Latté.  I visited the Starbucks during a high traffic part of the day, around 2:00pm when most people are on lunch break, and there was a huge line.  They had an associate come over to me, take my order, and speak it into a microphone for the baristas to make the order.  When I visited the cashier, I just had to tell them what it is I told the associate taking the order on the line, pay for my order, and since the associate on the line took my name, I just had to wait for my name to be called.  It was a rather quick process and I think it's pretty organized, even though I get worried if they get too many orders at once and mine may be forgotten.  Where I used to work in SoHo, there was a Starbucks on the corner and because of the high congestion and smallness of the location, they also did the same process and it always worked, at least for me.  The people who work at Starbucks care about their customers and makes sure they are assisted as quickly and nicely as possible.

As most people may notice, there are Starbucks locations all over the city, some within a block from each other.  Starbucks looks for densely populated urban communities for its stores.  There are even Starbucks coffeehouses located in Target locations as well.  This is a great marketing strategy and helps them build their company.

Chapter 6: Consumer Decision Making

When an individual buys a product, there is a process which occurs for making their decision.  This is the consumer decision-making process, which includes: recognition, information search, evaluation of alternatives, purchase, and post purchase behavior.  Now not all of the steps are exactly necessary or even taken.  For example, a person may not even purchase the item or some consumers may not need to do the information search. 

Starbucks' consumers rely mainly on the recognition step and even the information search if it is a new consumer.  When a person is thirsty and needs their daily fix of coffee, they are responding to their stimuli.  An individual can be walking by one of Starbucks' coffeehouses and their senses become aroused, which could be enough to indulge in a coffee, or morning beverage/treat in general.  If a consumer needs the information search, they can receive this information from word of mouth.  Many of Starbucks' loyal customers speak very highly of the brand and the quality of the coffee.  Even though the price points are about $2.00 or more than say a Dunkin' Donuts coffee, Starbucks' locations are more convenient to have access to then one of their competitors.

Now within the decision-making process, perception of a specific product is considered by marketing managers.  Perception is a process all people take part in as we move through the course of events in our daily lives.  When we meet people, make business decisions, evaluate performances, or pass judgments, our perception surrounding such events helps us persuade our next course of direction.  Starbucks focuses on their employees and the effects they give on the consumer, as mentioned in previous blog posts.  Starbucks has been successful in modeling guidelines to direct employee behavior and shape corporate perception to help in its success.  Consumers perception must start from the perception employees view about the company.  If the employees decide this is the place to be for them, then the energy will be given to the consumer and they will return.

The consumers' post purchase evaluation process is probably the most important out of the five steps taken because it requires the decision of whether or not to buy that particular item again.  This decision to purchase a product at Starbucks, because of all the research and the variation of products they offer, can be done in one store visit.  Starbucks gives a good motive for customers to return because if you are unsatisfied with your drink, then you will be offered another drink and even given a coupon for a free one.  Again, the customer service in Starbucks is what makes the experience.  The employees make sure that the customer receives what they ask for in a personal way which makes a customer feel like they are the only person Starbucks is attending to and caring for.  As Howard Schultz, CEO, stated to Fortune Magazine, “We aren’t in the coffee business, serving people.  We are in the people business, serving coffee."

An advantage marketing managers take into consideration when selling a product and making sure the consumer continues to buy the particular product is looking into specific primary or secondary membership groups.  Consumers are influenced by people around them, whether from their similar cultures, values, personalities, attitude, etc.  Starbucks focuses a lot in spreading their brand name by word of mouth.  They have some commercial ads but what mostly works for them is to be recommended by someone consumers know.  They also take opinion leaders, which by textbook definition is an individual(s) who influences the opinions of others.  Starbucks does this by being featured in many shows and movies.  This has helped them grow their credibility and gain return customers.

Chapter 5: Developing a Global Vision

In order for a company to be successful and fulfill their mission, a vision for the company must be made.  Specifically, a global vision is ideal because the company will recognize and react to international marketing opportunities, use effective global marketing strategies, and become aware of threats from foreign competitors in all markets.  Starbucks utilizes great global marketing strategies, which is why their global vision is successful.

Starbucks uses the same retailing formula worldwide but product offerings may differ depending on the "local tastes."  The advertising strategies within the company are more local and differentiate rather than are standard throughout the world.  Starbucks focuses on profitable growth.  When opening a new location/s, the company will generally open in important locations where it incorporates fastest growing economies.

Starbucks did begin in North America but needed to globalize.  According to www.slideshare.net, "with just 20% of the world's coffee consumed in North America, Starbucks had to aggressively sell its offerings in countries that already have dedicated coffee or tea drinkers."  Starbucks first foreign expansion occurred in 1996 and developed their first market with Japan, with the help of SAZABY Inc., a Japanese retailer and restaurateur.  Their initial strategies in expanding was buying out competitors' leases, operating at a loss, and opening several locations in a small geographical area.

After their expansion in Japan, Starbucks began globalizing into the U.K.  The company bought out Seattle Coffee Company and with that capital obtained, used it to take over prime locations.  Some did operate at a loss, but mistakes are to be learned from.

Of course with any vision certain risks need to be taken and issues have to be faced.  In Japan, Starbucks faced possible ridicule of their product seeing how the Japanese claimed they would never buy take-out coffee in paper cups.  This was proven wrong by Starbucks; about 30% of its customers drink take-out coffee in the throwaway cups.  In France, many older, traditional people looked down upon the American culture of this coffee franchise.  The French are used to their cafés.  Fortunately for Starbucks' benefit, younger French people joined many American tourists in the Starbucks locations and have added to the company's progress.  

In China, there is some difficulty in moving coffee since so many people prefer tea.  Starbucks' locations in China are coffee houses, which empower the Chinese middle class to openly display their new lifestyles and maintain Starbucks' beverages as affordable luxuries.  These are just a few issues this company must face when expanding globally (there's also Italy and England as a few more examples).

With Starbucks merging and acquiring new prospects came benefits.  The company expanded into different countries around the world and took over companies, which helped their success.  Even in September 2006, their rival Diedrich Coffee sold most of its company-owned retail stores to Starbucks.  This shows their strive and strength to overcome the competitors.  Starbucks realized that committed and motivated human resources were the key to leading a successful business.

In regards to the employees and job outsourcing, where a company sends U.S. jobs abroad, Starbucks and CEO Howard Schultz, believes even though it is more expensive to have the jobs in America, he'd rather that then have the tasks taken on from someone in another country.

A quote from Schultz shows a perfect example on the views of globalizing and what his people mean to him and the company: "We remain highly respectful of the culture and traditions of the countries in which we do business.  We recognize that our success is not an entitlement, and we must continue to earn the trust and respect of customers every day."  He also states, "The relationship we have with our people and the culture of our company is our most sustainable competitive advantage."

Slides on Starbucks Marketing Strategies (Source)

Chapter 4: The Marketing Environment

Starbucks' Target Market
Starbucks' target market is mainly adults, men and women, from the ages 25-40.  This consists of almost half of Starbucks' consumers and grows at a rate of 3% annually.  Even though this is the majority of Starbucks' business, the consumer also ranges from young adults 18-24 (40%), which grows at 4.6% annually, and even kids and teens 13-17 (2%), which most products are bought from the parents.

A main reason why Starbucks is so so successful today and continues to grow is because the people of the company takes many factors into account.  These include: social, demographic, economic, technological, political and legal, and competitive factors.

The people within the Starbucks company, management and staff, feel they have a responsibility to give back to the community.  Ever since they opened their first store in 1971, they dedicate themselves to show a balance between profitability and social conscience (social factors).  There is a whole area behind just the coffeehouse where they offer community service, create jobs for those in need, and youth action programs to prevent violence among young adults.  They are also very involved in keeping the Earth green and certain environmental factors, such as recycling and reducing waste, energy, water, and climate change.
Starbucks - Environmental Responsibility

Because Starbucks is a global company and is expanding the retail stores throughout the world, they focus on all demographics.  Although the prices of their products are more than say a street cart, they do provide some low-cost items for those who still want the quality of their coffee.  That said, if we take a look at the average income of an American household in 2011 (Per Capita Personal Income U.S.), it was calculated to be $41,663.  That suggests that Americans can buy specialty coffee drinks from an expensive, quality-oriented organization such as Starbucks.  This also covers certain economic factors Starbucks faces.

Starbucks has kept up to date with the technological factors.  For instance, they developed the Starbucks card, which is basically a pre-paid reward card.  This keeps repeat customers and as a person bumps up rank in the program, they receive greater benefits.  Everything is stored within the system and when a Starbucks employee sees a customer with the Starbucks card, special treatment is delivered.

Political/Legal factors, which affects Starbucks as a company, include the stability of the countries where Starbucks purchases its coffee and natural resources.  They receive their coffee beans from countries all around the world, even places that have many natural disasters: tsunamis, earthquakes, and wars.  If any of these events occur in a country where they are expecting their coffee from, Starbucks may not be able to produce coffee and profits will drop.  Also, Starbucks is environmentally friendly, as stated earlier.  They have to consider how to protect the brand aspect in everything they do, from providing a living wage that makes it to farmers and have production with low pollution rates.

I have mentioned in a previous post about certain competitive factors which Starbucks faces everyday.  The fact that Starbucks' products are generally more expensive then elsewhere (Dunkin' Donuts, street carts, etc.) a few reasons why Starbucks tends to strive is because it is a place for everyone, their ambiance is unique, and they're consistently convenient.  Starbucks is also very innovative and they're always finding a way to reach out to the community, which is very promising to the customers they serve.

Being a Responsible Company

Chapter 3: Ethics and Social Responsibility

In most companies, part-time employees are less valued as workers, or maybe more valued from the view of management of the company in the sense where they can be let go quicker without the usual repercussions of a general layoff to a full-timer.  Also, part-timers generally don't have the same benefits as full-time employees have.  Starbucks doesn't follow this standard, which is rare for a company (Costco is a noticeable exception as well).  Most companies increase the hiring of part-time employees, or contingent workers, since they are payed less and because of the previous reasons stated.  This can be viewed as an ethical problem or issue within a company because then the workers may feel it's immoral and they feel under appreciated compared to a full-timer.

As Howard Schultz (CEO) grew Starbucks, he vowed to build "the kind of company my father never got a chance to work for."  When Schultz was just a child, his father had broken his ankle and was out of the job without any health insurance.  This was a fear his family had to face.  His basis on how he now leads the company is from this story and makes Starbucks a more ethical place to work for.  He cares for his employees.  Schultz is a leader in offering comprehensive benefits for part-time workers and this has been central to Starbucks' success.  There is a downside to this aspect of Schultz's moral view though.  The Starbucks Corporation has been seeing double-digit increases in health costs.  Schultz feels that the trouble goes beyond spending.  "We can't be the kind of society we aspire to be when we have 50 million people uninsured.  It is a blemish on what it means to be an American," Schultz says.  He then reached out to Jim Sinegal, CEO of Costco who also gives benefits to part-time employees, to seek advice for what to do if numbers keep increasing in health benefits but not in correlation to profits.  Schultz feels taking away the benefits is not an option and he will do what he can to keep his commitment to his employees. 

In contrast to the USA, 36 other countries where Starbucks operates, health care is basically funded by the government rather than the company itself.  Schultz has gone to Washington but came back discouraged and his next idea was to bring together a meeting for the CNBC to raise awareness of the issue, but it was put off.  With this information and the difference the US has compared to other countries, we lie with the question: should the US follow in the footsteps of many countries where they offer health care from the government rather than the company themselves?

The story of CEO Howard Schultz is an example of an ethical and moral workplace.  All companies should follow a code of ethics, which is a guideline to help marketing managers and other employees make better decisions.  There are law enforcement agencies, such as EEOC (Equal Employment Opportunity Commission), which guarantees employment for all races, genders, backgrounds, etc.  If a company was to not state they are a EEO company, there would be big ethical problems and it would cause investigations into that particular company.  Starbucks makes their employees happy to work for them, part-time as well as full-time.

Starbucks Business Ethics and Compliance

Starbucks - Environmental Responsibility