starbucks company: Psycho-Graphics of Target Market-Lifestyle, Values, Hobbies, Participation Report

Starbucks Company

The problem

Dynamite Advertising Agency is executing “Marketing and Branding of Products Project” on behalf of Starbuck Company. This project is being executed to address an expected growth in sales of Starbucks Company among the traditional market and also in the prospective and younger market. In terms of branding and marketing, the Dynamite Advertising Agency will be Starbucks products to be appealing.

The Starbucks coffee stores and restaurants will be supplied with well designed disposable coffee cups that are appealing to their clients. The company will also ensure the branded coffee cups supplied are aesthetic, unique in designs, light, disposable and are environmentally friendly to avoid pollution. These are areas the company will capitalize on to build strong relationship and to make Starbucks company attract many customers to their stores

Starbucks is a multinational company is a marketer, roaster and retailer of coffee that operates in over 60 countries. Furthermore, Starbucks Company sells variety of tea and coffee products. The company also licenses its trademarks through channels like the licensed stores, national accounts for food service and groceries (Bussing-Burks, 2009).

Research on industry

The national market of hot drinks is large. However, the industry has been badly performing for a number of years with the rate of negative growth consistently and hence the steady shrinking of the market.

According to Weinstein (1994), the hot drinks national market reached a value of $10.2 billion in 2012, having reduced with a Compound Annual Growth Rate (CAGR) of -2.2 in the 2005-2012 periods. This decline was against the global trend of the hot drinks market. This decline led to the decrease of the country’s global share by 3% between 2005 and 2012. The leading source of revenue for the national hot drinks in 2005 was the sector of coffee, which accounted for 83% of the market value (Oldenburg, 1999). In terms of value, the hot drink industry sector was worth $10.2 billion in 2005, a decrease of 5% since 2005. The 5% decline in 2005 made this industry the worst performing in the market. The best performing was tea, but it also showed 0.5% decline between 2005 and 2012 (McDonald et al, 1991).

Forecasting ahead, Overton (2003) observed that the industry is predicted to experience a decreasing rate of growth that is consistent. By 2014, the forecast of the market is to reach $10.7 billion, which is equal to a compound annual growth rate (CAGR) of -0.6 in the 2007-2011 periods, below the global market. The analysis results indicated that the country’s share of the market in the globe will have reduced dramatically from 20.1% in 2002 to 18.3% in 2014

Industry trends

In 2012, the country’s market accounted for 17.1% of the global sales of hot drinks. Europe still remains the largest market worldwide, and accounts for 41.9% of the global sales of hot drinks. The Asia- pacific has 31.5% of the market of hot drinks (Parker, 2006).

Most of the decline is responsible for the shift of the consumer away from coffee towards the soft drinks. However, evidence shows that manufacturers are trying to broaden their products range they sell, may be from the success Starbucks Coffee Stores enjoyed and their variety of flavored coffee items.

 Target market

According to Bussing-Burks (2009), Starbucks Company chooses to focus primarily on the psychographics, their customer’s lifestyles and demographics. It is with the gathered information about these segments that Starbucks Company can serve better its customers.

Demographics

According to Weinstein (1994), demographics include things like sex, age, education, marital status, occupation, education and income. The Starbucks Company will target females and males, mainly aged 18-30 years. However, Starbucks Company caters for the needs of everybody. Because the young children usually do not drink coffee, Starbucks Company will offer a wide range of non coffee beverages to take every need for the whole family. Moreover, Starbucks Company will focus to target high school final years, university students and the newly employed people. This is because if they have jobs, it is certain that they will bring a big income for the company.

Psychographics

Psychographics according to Weinstein (1994) are based on the activities, opinions and interests of the customers. Therefore, basically it is how the customers spend their time, their priorities and preferences and their feelings about issues and events. This form of applied research on consumers will prove to be valuable tool for marketing that will help in consumer segments identification that will likely to be responsive to the specific marketing messages.

Bussing-Burks (2009) observed that Starbucks Company will continue to be involved heavily on arts and charity, and in making great efforts to be environmentally and socially responsible. Starbucks Company will participate actively in AIDs benefit in every store in all stores. Starbucks will set up shelters for the children’s that are underprivileged as well as donate money. By Starbuck participating in different positive events and causes, the company will gain favorable exposure.

Competitive products

Starbucks Company faces major competitors in the industry who produce coffee but of different quality. The major competitors of Starbucks Company include Wendy and Burger king, Caribou coffee, MacDonald’s and Dunkins donuts.

  1. Wendy and Burger king

According to Overton (2003), Starbucks Company surpassed the major competitor, Wendy and Burger king to become number three restaurant by posting $9.07 billion in sales last year. The company is also projected to gain in as one of the day parts of restaurant that is fast growing for breakfast. The estimated media budget of the company is a fraction of the total expenditure of other top chains in the industry. Bussing-Burks (2009) indicated that Starbucks company spend $94.4 million on media compared to the media expenditure of MacDonald of about $887.8million in 2010 in united States only.

  1. Dunkins donuts

When comparing Dunkin donuts verses Starbucks, Americans who are hard working prefer Dunkin donuts taste over Starbucks. Dunkin donuts launched in 2009 a $100 million advertisement campaign that ran through the radios, outdoor and print advertising, in store purchase points, sports marketing, online advertisements and special events (Michelli, 2007).

  1. MacDonald

In comparing MacDonald verses the Starbucks, MacDonald has heavily marketed its MaCafé coffee drinks for breakfast for the past two years. Additionally, they have continually introduced new drinks for non coffee and coffee products such as the frappes and smoothies. Overton (2003) pointed out that MacDonald antagonized Starbucks in their TV adverts just like the Dunkin donuts. Moreover, MacDonald uses also signage and billboards, sponsor sports events at large scales.

  1. Caribou coffee

In comparing Caribou coffee verses Starbucks; Bussing-Burks (2009) observed that in 2008, Caribou coffee spent about $2 million in advertising. Moreover, the visitor demographics analysis shows that Caribou coffee could be having a more online success if they applied the same tactics as Starbucks. Additionally, analysis shows Caribou coffee is preferred by young adults between 18-34 years. This represents 32% compared to 42 % that is attracted by Starbucks.

References

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

McDonald, M., & Leppard, J. (1991). The marketing audit. Butterworth-Heinemann

Oldenburg, R. (1999). The great good place: Cafés, coffee shops, community centers, beauty parlors, general stores, bars, hangouts, and how they get you through the day. New York: Paragon House.

Overton, R. (2003). A marketing audit. Sydney: Martin Books.

Parker, P. M. (2006). 2007-2012 world outlook for specialty coffee stores, the. ICON Group.

Weinstein, A. (1994). Market segmentation: Using demographics, psychographics, and other niche marketing techniques to predict and model customer behavior. Chicago, Ill: Probus Pub. Co.

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Situation Analysis for Starbucks Company

Situation Analysis for Starbucks Company

Company and Product Overview

Starbucks Company is a multinational company is a marketer, roaster and retailer of coffee that operates in over 60 countries. There are four segments of the company which it operates: Middle East, Europe, Africa, Asia pacific and the channel development. The company purchases coffees and roasts before selling them, along with the handcrafted tea, coffee and other beverages in addition to different fresh food items. These are done in their stores that are operated by the company. Furthermore, Starbucks Company sells a variety of tea and coffee products. The company also licenses its trademarks through channels like the licensed stores, national accounts for food service and groceries (Bussing-Burks, 2009).

Starbucks Company has been the most successful company in the industry of coffee in the few decades that has passed. The company uses aggressive strategies for expansion to push out most of its competitors. It has focused on forming a dense stores network around United States, while opening up other new locations around the globe. Michelli (2007) pointed out that currently Starbucks is the leading coffee market retail selling coffee at a premium price to maximize their profitability.

Read also: Starbucks Corporation marketing mix

According to Sica (n.d), Starbucks Company surpassed the major competitor, Wendy and Burger king to become number three restaurant by posting $9.07 billion in sales last year. The company is also projected to gain in as one of the day parts of restaurant that is fast growing for breakfast. The estimated media budget of the company is a fraction of the total expenditure of other top chains in the industry. Bussing-Burks (2009) indicated that Starbucks company spend $94.4 million on media compared to the media expenditure of MacDonald of about $887.8million in 2010 in united States only.

The major competitors of Starbucks Company include Caribou coffee, MacDonald’s and Dunkins donuts. When comparing Dunkin donuts verses Starbucks, Americans who are hard working prefer Dunkin donuts taste over Starbucks. Dunkin donuts launched in 2009 a $100 million advertisement campaign that ran through the radios, outdoor and print advertising, in store purchase points, sports marketing, online advertisements and special events (Michelli, 2007).

In comparing MacDonald verses the Starbucks, MacDonald has heavily marketed its MaCafé coffee drinks for breakfast for the past two years. Additionally, they have continually introduced new drinks for non coffee and coffee products such as the frappes and smoothies. Sica (n.d) pointed out that MacDonald antagonized Starbucks in their TV adverts just like the Dunkin donuts. Moreover, MacDonald uses also signage and billboards, sponsor sports events at large scales.

In comparing Caribou coffee verses Starbucks, Bussing-Burks (2009) observed that in 2008, Caribou coffee spent about $2 million in advertising. Moreover, the visitor demographics analysis shows that Caribou coffee could be having a more online success if they applied the same tactics as Starbucks. Additionally, analysis shows Caribou coffee is preferred by young adults between 18-34 years. This represents 32% compared to 42 % that is attracted by Starbucks.

Situation Analysis

The second most traded commodity globally is coffee. United States of America is the largest coffee importer in the world. Coffee demand is price inelastic; this implies that when the prices of coffee rise, coffee consumption is not reduced.

Starbucks according to Michelli (2007) is the worlds most recognizable and powerful high quality brands that are unique. The market share of Starbucks is 32.6% with over 11,500 coffee stores in United States. The SWOT analysis of Starbucks is according Sica (n.d) to include:

Strength:

  1. Is the best and the biggest coffee shop in the industry
  2. Has a natural edge over other competitors who are less known in that customers associate it with popular experience and high quality
  3. With its widespread locations, it reaches larger market
  4. Drive through store
  5. Large demographic spread of its new products prevents new entrants and ensure large exposure

Weakness

  1. The whole business is in coffee industry only while its competitors like the Dunkin donuts have invested in other industries
  2. Strong presence in home market, United States, hence oversaturation of their market
  3. High price
  4. Competition from other brands that are low priced

Opportunities

  1. New opportunities for international markets
  2. New products
  3. Organic drinks
  4. Health drinks
  5. Energy drinks
  6. More bottled drinks
  7. Kid focused drinks
  8. Forming of partnerships with other companies of coffee

Threats

  1. New entry into market
  2. Stiff competition from McDonalds when they upgraded in 2006
  3. Smaller coffee houses that are privately owned
  4. Anti- Starbucks groups
  5. Image threat

 

References

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

Michelli, J. A. (2007). The Starbucks experience: 5 principles for turning ordinary into extraordinary. New York: McGraw-Hill.

Sica, Danielle. (n.d.). Starbucks Corporation: a strategy capstone. (Starbucks Corporation: a strategy capstone.

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