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

Chapter 2: Strategic Planning for Competitive Advantage

The community at a Starbucks coffee shop

In order for a company to grow and maintain a successful business, a standard has to be made to live out the mission of that company and keep their consumers satisfied. There must be a strategic plan made, which consists of the managers creating and sticking to a particular structure between the organization's objectives and resources as well as the changing market opportunities. This plan will be set for the company to sustain its business and it must include ways to have an advantage against its competitors.

As stated in part of their full mission statement, the people of Starbucks are more focused on the customer being able to go to a Starbucks whenever necessary and feel like it is a natural part of the daily routine, which for many it has become.  Starbucks is also concerned about the quality of their coffee, their partners, their customers (as stated previously), their stores, the neighborhood, and their shareholders.  This is the first step of establishing a strategic marketing plan: by creating a mission statement, which the rest of the plan should follow through and achieve the goals of the company.

Now, because no company is perfect and nothing is ever just in plain black or white, marketers must prepare the situation analysis, or what's referred to as the SWOT analysis, in order for the business to strive.  In doing this, the people in charge of this area of the company, must point out the Strengths, Weaknesses, Opportunities, and Threats.  Starbucks' has many strengths, and the major important ones are listed: 
~ product diversification
~ established logo, developed brand, copyrights, trademarks, website, and patents
~ company operated retail stores, international stores (no franchise)
~ valued and motivated employees, good work environment
~ good relationship with suppliers
~ industry market leader
~ customer base loyalty
~ widespread and consistent
~ knowledge based
~ strong board
~ strong financial foundation

With strengths comes weaknesses because again, no one and nothing is ever perfect.  Here are some of Starbucks' weaknesses:
~ size
~ lack of internal focus (too much focus on expansion)
~ ever increasing number of competitors in a growing market
~ self cannibalization (refers to a situation where a new product "eat" up the sales and demand of an existing product)
~ cross functional management
~ cleanliness
~ product pricing (expensive)

Following this pattern of the SWOT analysis, Starbucks has a list of opportunities and threats to consider as well.  A main opportunity Starbucks has is the expansion into retail operations such as department stores (Macy's, Bloomingdale's, etc.) and creation of new products.  A major threat against the Starbucks company are its competitors, such as Dunkin' Donuts, McDonald's McCafé, and even street carts.  One way Starbucks is different from its competitors though, and other major companies in general, is by not having a great deal of advertisements on billboards, in newspapers, or even posters in places where you would expect to see advertisements.  This is a part of their marketing strategy, or should I say an uncommon marketing strategy.  Most of Starbucks' advertising is by word of mouth, which has worked with the company seeing how rapidly the business has grown.  This is all included in the marketing mix (sub category of promotion) of the latter part of the marketing plan.

After the SWOT analysis, or situation, is defined, the objectives have to be listed.  This goes back to the the mission of the particular company and how to work through those objectives in establishing a target marketing strategy.  Within the marketing strategy is the marketing mix (product, place/distribution, promotion, and price).  After all of these areas are covered, the business can begin implementing the plan and get ready for evaluation and control.  Once a business begins working though the marketing plan, they can sense that even though there are steps to follow, areas will intertwine and link with one another.

With creating a thorough SWOT analysis, Starbucks is able to have a sustainable competitive advantage, which is an advantage that cannot be copied by the competitor.  Starbucks' ideals and sense of responsibility is a big part of the consumer value it delivers.  As they continue this and find new ways to add to this emotional value associated with their brand, it increases their sustainable competitive advantage.  Lastly, even though other coffee producers and retailers may be able to match the quality of Starbucks' roast, it will be difficult to match the brand in which Starbucks has created.  The intangible value is what creates their brand loyalty.

Source regarding SWOT Analysis

Definition of Market Cannibalization