Starbucks Coffee is the top mega giant coffee shop brand in the world. It was first found In America in 1971. At first it was a coffee-bean roaster and retailer . Back in the 1971 the company had a single store in Seattle`s historic Pike Place Market. The name ‘‘Starbucks‘‘ was inspired by Moby Dick, which in his thinking it evoked the romance of the high seas.
In 1981, Howard Schultz tried his first cup of Sumatra coffee, a year later Howard joined Starbucks. Howard traveled in 1983 to Italy to learn more the romance and the coffee experience. He had a vision to bring the Italian traditions to the United States of America. He had a vision for a place that people could come meet their friends for a conversation and sense of community. He wanted for the locals to have a place they can go between home and work . Howard took a short break from starbucks to start his own coffeehouse but he has returned in 1987 .
Howard Schultz with the help of the local investors he purchased Starbucks from his former employer. Il Giornale coffee outlets were re branded as Starbucks.
By 1989, Starbucks were established across the US with 46 stores and a small part of Western Canada. In 1991 they became the first privately owned U.S. company to offer a stock option program that includes part-time employees.
By 1994, there were 425 stores in North America. In 1996, the company went international & opened a coffeehouse in Singapore and Japan. 1998 – Acquired Tazo Tea and launched Starbucks.com
By the year 2000, Starbucks had 3,501 stores located around the world. In 2009 they became the world`s largest buyer of Fair Trade Certified Coffee. Currently there are 21,000 coffeehouses in 62 countries and it is known to be the largest coffeehouse company in the world.
In my project I will be discussing the ICEDRIPS model for Starbucks.
Starbucks continues to break ground in retail and tech while expanding offerings for its workers. From training and development to improved digital payments.
Research shows that more than 70m people worldwide enter Starbucks cafe . To make it all happen and to keep their customers satisfied workers blend,steam, and brew the brand`s coffee in all the 21,000 stores around the glob.
CEO Howard Schultz say that its fifth year in a row of revenue gains ,its estimated that $16 billion by the end of this year should be the coffee shop`s sales.
Starbucks took technology into an additional competitive advantage by using mobile payments and also coffee deliveries . The company has been recently on a innovation tear by putting its resources and money toward cloud-based coffee brewers and fine tea bars. Howard is planning to branch out more with the tea chains and opened a second Teavana Fine Teas in Seattle`s University Village in November 2014. Meanwhile Howard overhauled its food options by offering sandwiches from La Boulnge , a San Francisco bakery chain .
Starbucks Coffee`s main competitors would be Costa Coffee, Dunkin Donuts and McCafe . Costa would be the bigger competitor .
Starbucks is a famous brand which is associated with high quality products and service. People like the atmosphere that is created in Starbucks for its customers . Not only they have many outlets around the world ,its often that they are situated in a high class location.
You can also say that Starbucks products are sold at a high price. The coffee quality is not as good as the reputation its built over the years. Customers have a higher expectation on the service and product.
While on the other hand Costa Coffee has products that boast of a very powerful retail. Where as a reputation for value of money was formed , convenience and wide variety of products .
As Starbucks is known for its luxurious locations and quality products , Costa has grown significantly over the years , and has experienced global expansion while not having the same prices as Starbucks.
The product differentiation between Costa and Starbucks.
Starbucks has a enlarged product line and a variety from special coffees , teas, juice/smoothies to hot chocolate . Healthy organic sandwiches , salads and pastry for vegetarians . Every little things matter while selling their product . The idea of writing the customers name on the coffee cups which are fitted to coffee choice is a great idea . As many young adults enjoy having a nice place to relax, chat and spend more time with their friends/colleagues while having a delicious coffee.
Sratbucks will have a high quality place and well designed furniture , free WiFi to everybody , children corner. Develop outlets in non-high street areas and developing cities for future growth .
Costa Brand name is also known around the world as much as Starbucks is . Their brand name is their signature.The name of Costa signifies luxury , excellence and perfection all over the world same as Starbucks , the competition is at a similar level. Costa`s reputation for excellence applies not only for exceptional coffee but also the instance on perfect service.
Both Coffee shops are doing firmly well in the Coffee industry .
The prime external economic driver for Starbucksis the ongoing global economic recession. The recession has convinced buyers to shift to cheaper options. Consumers did not quit buying coffee , this means that Starbucks should seek an opportunity during the recession period.
Starbucks had to deal with operational cost and labor rising, while the inflationary environment and the falling of profitability is causing a lot of stress to the owner.
Few more economic factors that can affect Starbucks , the local currency exchange rate, taxation levels and also local economic environment in different types of markets.
Currency exchange rate : In 2014-2015 Strengthening US Dollars in comparison to other currencies around the world diminishes the profits of Starbucks . As the dollar increased in value , revenues generated in the foreign markets . profits would changed depending on the local currencies.
The interest rates will increase same as inflation rates are on the up.
Level of disposable income greatly influence demand on consumers , if disposable incomes falls, consumers will continue to buy but will reduce in spending on luxuries necessity . the increase in the raw materials price actually brings a change to the sales, with the decrease in the rates of income comes to a result in lesser buying power. People will think twice when buying coffee to not overspend in Starbucks coffee due to a hike in other goods out there.
Demographic studies are based on factors such as race, sex, age, economic status, income level,level of education,and employment, among others. Demographics are used by corporations , non- governments and government organizations to learn more about policy development and economic market research.
Demographic trends are also important to the size of different demographic groups will change over time as a result of cultural, economic and political circumstances.
For Demographic factors I will be talking about what age group do Starbucks target.
Adults : The primary target is women and men aged 25 to 40 which they account as almost half of its total business as most of them are business men and women . Starbucks appeals to this consumer age group with their contemporary design that is consistent in their decor and advertising. Starbucks works to keep its products at a certain level of status to accommodate all the factors above. Customers tend to be from the urban areas with relatively high income with professional careers and a social welfare . This target audience grows at a rate of 3% each year.
Young Adults : aged 18 -24 have a 40% of Starbucks sales. Starbucks positions itself as a place where college students can come to study , hang out ,meet people and write term papers. It appeals to the young consumers directly through the new technology as soon as it becomes available , focusing more on social networking and cultivating a ‘‘Cool image‘‘. This target audience grows at a rate of 4.6 % each year.
Kids and Teens : are a large part of Starbucks also . Consumers of age 13-17 account for just 2% of Starbucks sales . Most of the items are bought by their parents , whether the focus is on the steamed milk or the sugary, caffeinated drinks that are so popular with teenagers. Kids come to Starbucks with their parents while teenagers use Starbucks as a place to hang out with their friends or to study. Starbucks make their products kid-friendly and offers special child size drinks.
Starbucks has the following statement when it comes to internal and external regulatory and policy “We think it's important to take a sand on issues to support our business and because it's who we are and how we operate. That's why we believe we have a responsibility to advocate both internal and public policies that support the health of our business, our partners (employees) and the communities we serve” Starbucks. (2015).
Starbucks have a long rage of policies in place from global ethical standards to their internal guidelines of how they operate their business. The policies that Starbucks uses it's not just for their company but also applies to all of their producers of coffee & other products they sell in their shop. Starbucks regulatory policies touches on every aspect such as:
• Workplace Environment – How the company treats the customers and their employees, diversity, wages, workplace health & safety, consumer protection.
• Conduct or Practices of Business – How the company do international business, sales and advertising, compliance with laws & regulation, interact with local governments.
• Information of Property & Proprietary – How they keep confidential information on employees & customers, keeping records, audits and financial audits.
• Ethical Decision Making.
Starbucks also has a strict regulatory policy when it comes to their producers making sure that, animal welfare, human rights, equal employment opportunity, deforestation, cocoa practices, coffee and farmer equity is kept under strict supervision and abides to all regulations. Thus making the company Sociably Responsible for Manufacturing and selling of their product.
Stabucks plans to open stores across low-to-medium income urban community areas across the United States and Europe. Each of those locations are planned to have an onsite training space .Starbucks usually will partner with the local youth service organizations which helps to connect youth with internships. Come up with apprenticeships and jobs in the community.
In order to determine which community will make a good fit for the new store concepts, Starbucks examines all the available data to understand which communities have the biggest opportunity gap. Which lead to bigger business investment and leaderships to build a better future for the company.
They seek out and engage partners who are as diverse as the communities they serve. they focus on partner development by educating and engaging their partners.
Starbucks main partner is Espresso but at the same time they consider that the position and dedication of their extensively trained baristas that determines whether the customers coffee is good or if it is perfect. It is a sentiment that is instilled from the very beginning of their training . This means that no matter how good the beans are or how dark the roast, or how great the tools are its up to the baristas to make it the way you like it.
Social - Culture
Globalization is a lifestyle fueled by the media and internet resulting in the spread of the western cultures in the developing countries .The social factors that may contribute to Starbucks Coffee may have a long-term growth prospective. Starbucks is known to be a spending time with your friends and enjoying a fresh cup of hot or cold coffee, as it associates with the American and European lifestyle in consumers perception as such.
Individuals from developing countries are attached to the American and European values that may represent the future in a new community.
There are certain social factors at the same time that may have a bad impact on Starbucks`s long-term growth prospects. Due to caffeine and sugar consumption increasing health concern among the population.
Most local coffee shops are unfamiliar with the quality of coffee and service Starbucks provides. Some might be surprised to find a land known for its coffee beans offering watered down and low quality coffee to its customers. More often than not the barista and bus boy are one in the same. The locals prefer darker and stronger coffees and Starbucks can prepare a blend made from locally sourced beans. Starbucks' highly infused milk and cream drinks fit in well with the taste of the locals.
Some differences between domestic and the foreign market lie in the language. English is our primary language in the US and the Brazil's primary language is Portuguese. Although, Spanish is spoken in both countries, it is not the dominant language in either country. Other differences could include space. In America, if a person were to get too close, they would see it as an infringement of their personal space and possibly rude. However, in Brazil it's not unusual to give two kisses on the cheeks as a greeting and the space between people in conversation is much closer.
The US is also an individualistic culture whereas Brazil is more cohesive. In the US, people mostly look after themselves and their families and are mostly self-reliant and display initiative. In the work-place, Americans are also encouraged to show evidence of what they have done or can do to gain a promotion. Because Brazil is a more cohesive society, they tend to rely more on loyalty. In the work-place it would be expected that an older relative find a job for a younger relative within their company. Another big difference would be the level of long-term orientation. The US has a low level of long-term orientation meaning we are a short-term oriented culture. Our profit and loss statements are measured quarterly and individuals often strive for quick results in the work place. In contrast, Brazil is high in long-term orientation. They easily accept change as a part of life and accept more than one truth.
Starbucks is a well established part of the coffee house culture in the UK, well regarded for its ethical approach to sourcing and buying coffee beans. There are global opportunities for the firm as well as niche markets within the UK to exploit. Although not the number one firm in the coffee house market (a position held by Costa Coffee) Starbucks has developed a strong following among st the youth and student segments; whilst continuing to provide the requisite products for the working population in their busy working day.
Having weathered the temporary storm of bad publicity over the income tax evasion scandal, Starbucks has worked hard to improve its position in the eye of the consumer by emphasizing the ethical and sustainable principles the firm has always maintained. Such communication and relationship marketing is key to long term brand loyalty. Despite fears that coffee may be bad for health there is also evidence to support drinking coffee in moderation to have preventive value against certain diseases.
Starbucks is well placed to continue to trade competitively in the UK market, particularly as it continues to find and exploit new and innovative ways to get their product out to the consumer in the form of drive-thru's and kiosks in high footfall areas. There seems little sign of the trend and fashion for coffee houses to diminish any time soon and it continues to be part of the UK culture just as it was over 300 years ago.
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