Table of Contents Starbucks and its description3 Requirement 01 1.1) Elements of the marketing process..3 1.

2) Evaluation of benefits and costs of marketing orientation for

Starbucks..........8 Requirement 02 2.1) Macro and micro environmental factors..9 2.2) Segmentation criteria to be used for the product or service in different markets.................9 2.3) Development of products to sustatin competitive

advantage....10 2.4) Buyer behavior affecting marketing activities...............................10 2.5) New positioning for a selected product/service............................11 Requirement 03 3.1) Product Development to sustain competitive advantage11 3.2) Distribution to meet customer convenience requirements.12 3.3) Price setting to reflect Starbucks objectives and market conditions ..12 3.4) Integration of promotional activity to achieve marketing objectives 13 3.5) Additional elements of the marketing mix.13 Requirement 04 4.1) Marketing mix for two different segments...14 4.2) Difference in marketing products and services to businesses rather than consumers...15 4.3) Difference between international marketing and domestic marketing

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BIBLIOGRAPHY.21

COMPANY NAME: STARBUCKS. COMPANY DESCRIPTION: Starbucks was first opened in 1971 in Seattles Pike Place Market by three coffee fans, Gordon Bowker, Jerry Baldwin, and Zev Siegl. In 1982, Howard Schultz (now CEO of Starbucks) joined Starbucks and was fascinated by the coffee culture in Italy. He introduced the coffee shop concept and the company started selling coffee by cup in 1984. After coming from Italy, Schultz insisted the management to open espresso bars in addition to their coffee bean sales. In 1984, first espresso bar was opened in the corner of Seattles Starbucks store. After two years, Schultz bought the Seattle Starbucks Company and united all the stores under the name of Starbucks Corporation. Wanting to build a company with a soul Schultz bought the Seattle Starbucks company for $3.8 million. Since then Starbucks mission: to inspire and nurture the human spirit one person, one cup and one neighbourhood at a time started, ensuring that it would never stop pursuing the perfect cup of coffee. 1.1

1.2 Businesses can develop new products based on a marketing orientated approach. A marketing-orientated approach means a business reacts to what customers want. The decisions taken are based around information about customers needs and wants, rather than what the business thinks is right for the customer. Most successful businesses take a market-orientated approach. Most markets are moving towards a more market-orientated approach because customers have become more knowledgeable and require more variety and better quality. To compete, businesses need to be more sensitive to their customers needs otherwise they will lose sales to their rivals. Starbucks, the company, in terms of marketing leans more towards the marketorientation side. The company would have to constantly change or add new products or to satisfy customers changing tastes if we have to survive in the market. We need to adapt to the different local tastes and constantly add a bit of their own flavour to welcome customers. We have to focus on market research first and then adjust their drinks to local tastes. For example, in Asian countries where the company is active, we have in recent years added the green tea flavour into the drinks to satisfy the customers tastes. Another example would be that in Christmas, the cups are adjusted to the season spirit and atmosphere and have red and Christmas decorations on them to appeal to the audiences and customers.

2.1 Two macro environmental factors are: Economic and Technological: The buying power of the consumers has helped the company to grow. Also, local currency exchange rates have played a major role and local economic environment within each market the company operates with the taxation level. The emergence of technology has helped the company to establish in the competitive market with biotechnological developments and developments in agriculture. Two micro environmental factors are: Company often introduce additional brands in the same category which is known as multi-branding but a company has to be aware that multi-branding will spread its resources over many brands instead of building a few brands to a highly profitable level (Kotler and Armstrong, 2008). Starbucks also invented new drinks to add on to their coffee menu for customers to choose according to their specification. This resolution was acknowledged by customers as Starbucks had revitalized an ordinary commodity such as coffee into Frappuccino, Latt, Chai tea Latt; also giving the customers opportunity to buy fresh-roasted coffee beans to take home. 2.2 Starbucks has come long way from the time of its realization and has seen the different type of customer either exuding loyalty or revenue or both. Time has come when Starbucks has to deliver satisfaction to different customer segments while keeping its brand image intact. For this Starbucks have to find a way to strike a balance between the financial(tangible) values that different segment of customers bring with them and the brand perception they carry about the company. Considering the situation we can say that the face of Starbucks ideal customer is changing. The ideal customer can be bit of both the segments. Customer who visits Starbucks for a quick coffee during the rush hour of weekdays may come back on weekend to pamper himself and to enjoy the third place feeling of Starbucks. From the Starbucks perspective, an ideal customer is the one who is loyal to Starbucks and visit the store more frequently. He can be a student, professional with a white collar job or may be a housekeeper, i.e. these are the new faces of Starbuckss customer. Well this customer might not have experienced Starbucks services earlier as Starbucks is opening three stores daily. The state has come when Starbucks has to devise strategy to accomplish its aim of higher level of customer satisfaction in different customer segments. The challenge in front of Starbucks is to improve satisfaction among its diverse customer base with different needs and expectations from the company. For this Starbucks has to look after customers who value efficiency. The definition for efficiency for them is good service with improved amount of serving speed. While doing this the company has to keep in mind not to alienate those customers who comes to Starbucks for self-indulgence. This can be accomplished by reducing bottlenecks in order to make the store look less crowded especially during heavy hours and by decreasing hard skills pressure on the baristas. For this the company has already introduced labor
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saving vending machines. On the face it will look as with an introduction of new beverages the pressure on baristas increase however the contrary is also valid .for example drinks like frappucino is bought mainly during off peak hours. The addition of SVC card has proved conducive for the repeat visits and it help in reducing transaction time as well. 2.3 Coffee consumption in the U.S. Coffee consumption in the U.S. has been trending down since 1960s. Therefore, the company was extremely cautious in selecting its target markets. A target market, according to Kotler and Armstrong (2008), consists of a set of buyers who share common needs or characteristics that the company decides to serve. The decision of selecting target segments can be assessed by looking at the market factors, competitive factors, and political, social and environmental factors (Jobber, 1995). Price, bargaining power of customers and suppliers and barriers to entry all comes under the market factors and in the case of the company their coffee was expensive and they were trying to recreate a new coffee culture in America. Hence, they have low barriers for entry. Since they were extremely careful in each step of coffee making, they tried to maintain a longstanding relationship with their suppliers (Stanley, 2002) and similarly they did not have any real competition threats. The company targeted office workers, with middle to high incomes, who had a desire to purchase premium products. The CEO of the company wanted the company to become the Third Place, the place between home and work where people could gather, relax, and interact with one another. So, the company was cautious about their quality control to meet the high expectations. Target marketing can be done in three different ways undifferentiated (mass), differentiated (segmented), and concentrated (niche) (Dibb et. al, 1994). When the company was launched, they used this undifferentiated (mass) marketing strategy and they created and maintained the marketing mix considering the market as a single segment. 2.4 Further in terms of product development for the buyers, Starbucks adapted segmentation strategies by analysing the customers tastes and suitability and introduced different versions of their blended beverages which can also be considered as one-to-one marketing, in which each customer is treated as different segment (Hooley et al., 2004). Also introduction of Chai Tea Latte, Frappuccino and many more different versions of coffee gave more options for customers to try and enjoy the new inventions. Through their new ideas and knowledge they kept on offering buyers vitally new and finer value in traditional business. This approach of introducing new products can also be related to concentrated or differentiated strategy which was been adapted by the company, as some customers may have similar needs for few products, for most products their needs are quite different (Dibb et al., 2006). Also the recent addition of hot breakfast sandwiches to its menu and increase in offering the mid-day meals and food during dinner hours made Starbucks more competitive and got some business of its competitors such as McDonalds and Burger King. As the chairman refused to use franchising as a business model, owned and operated most of the stores, then expanded its operations by selling its coffee through supermarkets also in some office complexes and providing a special services such as drive-through, which gave an easy option to buyers to grab a coffee
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while they remain in their vehicles. Introduction of this concept, in a way increased their sales. These strategies used by the management can be related to market penetration, as they made more sales to existing customers without changing its product.

2.5 Brands positioning must be continuously communicated to the customers so the brand is managed adequately (Kotler and Armstrong, 2008). Brand positioning however does not mean making it visible in the display units but ensuring that a brand can fight through the noise in the market and occupy a distinct, meaningful and valued price in the target customers mind (Chernatony, 2001). A brand positioning helps in developing brand equity, making customers loyal towards a particular brand. Starbucks are known for serving Italian style espresso coffee but became unstable when they diversified introducing various products in their coffee stores such as breakfast and sandwiches. Customers were disappointed with this transformation therefore losing the brand value and equity losing its positioning. Starbucks heavily relied on word of mouth and did not believe in advertisement. They positioned their brand by opening stores in high traffic and visible areas seeing each store as a brand ambassador. Brands are clusters of functional and emotional value (Chernatony, 2001). However, with consumers being more brand conscious more balanced perspective is needed for brand management. To create a clear position in the minds of a target consumer it requires a considerable thought and effort regarding advertising, selling and other promotional activities which builds awareness about the product (Jobber, 2007). 3.1 Growth can be considered as a crucial aspect of marketing to achieve economies of scale in production, distribution and promotion that contributes to the companys sustainable competitive advantage (Palmer, 2004). To evaluate the growth strategy adopted by Starbucks, market-product matrix developed by Igor Ansoff (1975) and Michael Porters generic strategies can be associated. In defining the Ansoffs matrix one can acknowledge it being a very helpful tool that facilitates decision making with the organisations strategic objectives linking products and markets (Dibb et al, 2006) (See Appendix 1). On the other hand, Porter identifies cost leadership, differentiation and focus being the three generic strategies (Dibb et al., 2006) (See Appendix 2). In the course of development the company diversified its objective from a coffee pioneer towards their entertainment venture by launching music CDs and a movie. When Starbucks ventured in music and movie, it was unsuccessful as the revenue of these subsidiaries were nominal (1% in 2005) as compared to the coffee (96% in 2005). Schultz lost his focus of creating the coffee culture in due course. This form of growth strategy carries the highest level of risk and it was overlooked by Starbucks. As recognised by Porter, Starbucks target market was ignored when they opened stores in Southern California ignoring their demography, as opposed to their target
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customers of 40 years old with average income of $92000 a year. Thus, Starbucks was unable to achieve all these strategies resulted in company being stuck in the middle (Dibb et al, 2006) as it can be seen from the report th at their stock price dropped nearly 31% (September 2007). Marketers need to position their brands clearly in target customers mind (Kotler and Armstrong, 2008). In the aim of becoming the pioneers in coffee business when the stores were expanded across USA, Starbucks growth strategy ignored their end customer. 3.2 It is important for a corporation like Starbucks to take advantage of their existing customers and markets by its distribution process, so the first espresso bar was opened in Seattle where the customers were already familiar with their coffee beans. When Schultzs (CEO of the company) proposal of expanding coffee bars was denied, he opened his own coffee bar with the Starbucks beans be aring the lowest level of risk in market penetration. In the aim of market development he then expanded his coffee bar by increasing the number of stores in and outside Seattle and later internationally (11 in 1987 to 161 in 1992; few could be spotted in the same street). This expansion by Starbucks can be determined by Porters cost leadership that involves developing a low cost base through economies of scale. However from the given report it can be evaluated that in expanding their growth Starbucks did not consider the risk factors associated with the development of products and markets. The market development attained by Starbucks can be criticised on the grounds that they were not well planned and too rapid as it can be seen from the report that opening stores in same street did not boost its revenue. It had negative impact on their revenue as the commercial rent and distribution expenses rose bringing their profits down while the customer still visited the old store. Despite aiming for economies of scale it was analysed that more stores opening resulted in slower growth of the business. 3.3 A brand distinguishes the products of one company from those of its competitors (Palmer, 2004); Starbucks established coffee as a brand in USA in late 1980s. On the other hand consumers regard branding as an important part of the product which adds value telling something about the product itself giving benefits such as price premium, higher volumes, low cost and better utilisation of assets (Doole & Lowe, 2005); likewise Starbucks coffee had a premium price of $4 for a latt. In making Starbucks a well-known brand among the coffee lovers, Schultz described his coffee stores as third place after home and work as a gathering place regarded as important in the lives of many people (Chernatony, 2001). Later when they popularized with sale of additional non coffee items in their stores (breath mints to CDs to notebooks) it created disorientation thus hampering the brand image. As opposed to Starbucks, some of their competitor were offering free refill while Starbucks maintained its premium price thus decreasing its customer base.

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3.4 Dear Sir, The standard marketing mix is vital and is comprised of 4 Ps; product, promotion, price and place. Like products, services also have their own distinct features such as intangibility, inseparability, variability (heterogeneity) and perishability. The company should take great pride in the quality of coffee it provides, which is sourced from the different parts of the world. The company should maintain strict quality standards as it works directly with the producers and controls the supply chain management on its own. The company should see service as an opportunity to develop relation with the customer, an act which will make a customer feel valued and sought after so that he should feel comfortable and enjoys his presence at Starbucks. Its because of service factor the loyal customer visit the company as often as 18 times in a month. Emphasis should be laid upon not only on hard skills which means making best coffee but also in soft skills in order to develop customer intimacy. Personalized service like knowing the customers name and his drink should be stressed upon. Service variability reflects the amount of diversity allowed in each step of service provision. The example for this is baristas who were trained on being courteous and making the right coffee on customer specifications thus enhancing the heterogeneity of the service providing customers with different versions of coffee according to their tastes. To add variability on the service, the company should introduce vending machines for customers to buy coffees and introduce espresso machines in our coffee stores to handle the customer waiting time, but in doing these, the company should not forget that it should not lose the personal touch on the service which every company is proud of. This will form as an integral role in managing service quality because customers expectations are formed by their past experience. 3.5 Process, physical evidence and people are the added elements of service sector in marketing mix. People are vital elements of the marketing mix (Palmer, 2000) because without them no services will be created. Here, staffs who serve coffee everyday are people of Starbucks. Schultz has also admitted their staff being the cornerstone of their success. To embrace the people on their service sector they were offered with Coffee Master program and once graduated employees earned a special black apron and an insignia on their business cards. The company offered health care coverage for all eligible employees. In terms of motivating and retaining employees wages were above the industry standards and they were covered by Bean Stock, an employee stock option plan. It can be seen from the report that Starbucks definitely emphasised on their people with realization that planning people in its widest sense has impacts on a firms service offer (Palmer, 2000). Process is the system adopted by the organisation that helps them in delivering the services therefore Starbucks ensured special trainings were given to their employees
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(especially baristas). In order to complement the process baristas were trained to adhere with basic rules such as on precise milk temperature, pulling espresso shots and compensating dissatisfied customers. Marketing is not only about selling products, service is mutually important. Starbucks not only sold coffee as a product but equal consideration was also made on how the products were served. Thus the training strengthened the consistency of the product as well as service. Service on the other hand is produced and consumed simultaneously therefore inseparable (Armstrong & Kotler, 2006). Layout, dcor, upkeep, noise and aroma are the part of service product that gives the physical evidence of a service (Dibb et al., 2006). Starbucks identified these as the important features of their service aspect. Their coffee bars were furnished using same materials which boost their physical appearance that conveyed right image and character. When Starbucks ventured in the movie Akeelah and the Bee, they had no posters hanging in their stores as it would have affected the physical evidence of their service which was justified by a Starbucks spokesperson. Similarly the employees were also asked to avoid smoking and using perfumes; the food sold in the coffee bars were also covered so that the distinctive smell of coffee was not interrupted. When they introduced food in their coffee stores, staffs were asked to clean the oven regularly so that the smell of cheese did not over power the coffee aroma. 4.1 The two different segments are: 1. Product Development: In this strategy, the company has developed new products in the recent times to target its existing market segments. We have to introduce Frappuccino, creamy iced coffee drink to its menu and later in different versions according to the customers tastes. In addition to this, we have to add Chai Tea Latte with a selection of fresh pastries, sandwiches, and other food items, sodas, juices, and coffee-related hardware and equipment. Later, when everything is introduced and we are well-established in Greater London, the plan is to introduce Starbucks Barista home espresso machine to grind the coffee. Then, we can introduce Starbucks super premium ice-cream and bottled Frappuccino with the help of its partnerships. To add in the portfolio, the company should add Starbucks Shade Grown coffee. Later on, Starbucks Barista Aroma solo thermal coffeemaker can be added for its customer to enjoy the brew at home or at work. The company can also introduce Iced Shaken Refreshments, a new beverage containing coffee and tea shaken over ice. Then, warm breakfast sandwiches can be added to avoid the customers buying them from the neighbourhood store. I think this would have an impact on the store as its odour overpowered the aroma of the coffee. Then, we can introduce Cinnamon Dolce Latte as a new promotional beverage offering. According to me, if this strategy is adopted by the company, we can target the customers in the market with great success. 2. Diversification: We have to develop new products and offer them to new markets. It is the strategy of highest risk as it represents a withdrawal from a companys
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existing product and market involvement. The company can diversify into other fields such as launching movies, music, and books. On the request of the customers, we can start selling CDs, Capitol Records Library, and this can result in a significant addition to its product line. We can do a partnership with a few web portals to sell its products without any positive results. We can also acquire a music chain retailer. I think the company with the strategy of diversification will prove to be useful.

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4.3 The company is planning to open 100 new stores in Southeast Asia, Indonesia, over the next three years and another 100 stores in the Philippines over the next four years. The chairman, president and CEO, are committed to continuing to invest in the region. The company entered Southeast Asia in 1996 with its first store in Singapore. The company currently operates more than 700 stores across six countries, including Indonesia, Malaysia, the Philippines, Singapore, Thailand and, most recently, Vietnam. The company, as compared to the national markets, can grow in Southeast Asia as there is a population of more than 600 million people, an emerging middle class that is driving strong consumption and a robust and resilient economy, Southeast Asia presents a compelling growth opportunity for the company. The company sources a significant amount of the best Arabica coffee beans from Indonesia (Sumatra), the Philippines, Thailand and Vietnam. The companys Sumatra Dark Roast Coffee is the best-selling single origin coffee for Starbucks around the world. The company is gaining popularity with consumers across Asia as the company continuously expands its store base outside the U.S. The company is increasingly investing in the Asian markets, which have significant growth potential due to their relatively low per-capita consumption and burgeoning middle class population with rising income levels. This in turn is increasing the demand for convenience food and beverages.

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BIBLIOGRAPHY Armstrong, G. and Kotler, P. (2006) Principles of Marketing. 11th ed. New Jersey: Pearson Education, Inc. Chernatony, L. (2002). Would a Brand Smell any Sweeter by a Corporate Name ? Corporate Reputation Review, Vol. 5, Nos. 2/3, 2002, pp. 114132. Dibb, S., Simkin, L, Pride, M. W. and Ferrell, C. O. (2006) Marketing: Concepts and Strategies. 5th ed. USA: Charles Hartford Jobber, D. (2007) Principles and practice of marketing. 5th ed. New York: McGrawHill. Keller, K. L., (2008) Strategic Brand Management. 3rd ed. New Jersey: Pearson Education, Inc. Kotler, P., Armstrong G., Wong V., & Saunders J. (2008) Principles of Marketing. 5th European ed. Essex: Pearson Education, Inc. Kotler, P., & Armstrong G., (2008) Principles of Marketing. 12th ed. New Jersey: Pearson Education, Inc. McDonald, M. (2007) Marketing Plans: How to prepare them, How to use them. USA: Elsevier Palmer, A. (2004) Introduction to marketing: Theory and Practice. USA: Oxford University Press Palmer, A. (2009) Introduction to marketing: Theory and Practice. 2nd ed. USA: Oxford University Press <http://www.starbucks.com/> [Accessed on 15 July 2011] Other Source: http://www.starbucks.co.uk/ ICFAI Business School Brand Starbucks (A), Can the Brand be Revitalised?

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