Porters Five Forces Starbucks - Solution is Just a Click Away - Free

Question: Discuss about theStarbucks for Marketer of Coffee. Answer: Introduction The company Starbucks is running as a marketer of coffee in 68 countries all over the world. The corporation sells coffee, tea and other food stuff via its various outlets. The sale of its tea and coffee is also through its various licensed stores. Apart from the Starbucks brand the sale is done through other brands also like Teavana, Tazo, Seattles Best Coffee, Evolution Fresh, La Boulange and Ethos. Starbucks operates via varied channels. It operates in America, which includes US, Canada and Latin America. The second segment is of China and Asia Pacific the third segment is of Europe and Middle East and the fourth is of Africa there is also a channel development segment. The channel development includes ground coffees and other ready to drink beverages. The stores of the company are located in populous locations. The company is regularly expanding its store formats by including Drive thru outlets for the ease of the customers. Apart from tea, coffee and beverages the company also p rovides food items of nutritional value. Starbucks also offers its equipment and accessories like coffee brewers and espresso for sale. In various locations like Teavana and Seattle and other places the company goes for traditional franchising. As far as the consumer packaged goods are concerned the company sells packaged coffee and tea in both its domestic and international markets. It also provides ready to drink beverages to grocery, clubs and retail outlets (Team, 2016). Pestel Analysis of Starbucks This tool is used to analyze the impact of external factors on the performance of the business. It includes 6 factors that have a direct impact on the business- Political, Economic, social, Technological, Legal and Environmental Impact of Economic Factor on the company: The overall economy has dented the purchasing power of the customers. According to the market survey, the customers have not cut down on their coffee consumption and rather they have moved to options with lesser prices. This would imply that the companies can still influence its customers by providing them the products at lower priced options. Starbucks has the challenge of rising costs, both operational and labor. Apart from this local currency exchange rate is also posing a threat (Makos, 2015). Impact of Legal Factor on the company: The customers of US are getting more alienated towards ethical business which means that the brand they opt should be in accordance with the social and environmental norms. The growing consumer awareness is posing a challenge to the company. The company has to make sure that it does not violate the rules and regulations of both the home country as well as the buyer countries. Starbucks has also to pay heed on caffeine production and other policies in accordance to the health authorities. Other legal factors that can have an impact on the company are: Strict trade regulation Licensing regulation Impact of Political factor on the company: The main concern is of sourcing of the raw materials. The politicians of the west and the source country are paying a lot of heed to this factor, because of which the company is going in accordance with the social and environmental issues. The activism and enhanced knowledge in the developing countries from where the company buys its raw material are putting pressure. The same pressure is also felt in home country (Ukessays Team, 2015). The MNCs of US are being checked strictly for their business processes. The company complies with all the fair trade practices. Impact of Social Factor on the company: As discussed above in order to counter the economic factor the company can lower down the prices of its products but then it will have to compromise on the quality. This is one of the big social cultural impacts that the company will have to face. The company will have to enlarge its consumer base to accommodate lower and middle income group people. The consumer base that is more concerned about ethics is also to be kept in mind. The older generation is on the decline; therefore Gen X and Millennial are now the customers that the company has to focus. Other factors which have to be focused on are: Change in family style in developed countries Changing preferences of the clients Change in working style Change in standard of living of people Education level of consumers Impact of technological factor on the company: Starbucks is exploring the benefits of Smartphone technology. It has partnered with Apple to make an app which provides discount coupons to its customers. The company has also incorporated Wi-Fi facility in its stores. The consumers can now work and have coffee at the same time. This has increased the brand value of the company as well as the consumer experience of the customer. Starbucks has also initiated for mobile payments. Other Technological Factors to be Focused on are: Evolving innovative technology Biotechnological advancement Agricultural development Impact of environmental factors on the company: There have been environmental disasters in many countries which are the producer of coffee beans. Global warming and other such environmental challenges at a global level have a huge impact on the company. Starbucks Porters Five Forces Analyses Michael Porters five forces analysis helps stakeholders a basic analysis angle based on effect of market forces and targets to provide analysis of the companys strength, weakness within its industry. It is helpful to analyze the market with respect to investors and stakeholders (Oakley, 2014). Starbucks is one of the leading companies in coffee and snack industry globally. It operates in 20,000 retail stores across 50 countries. One of its huge strength is its brand and success globally. The company sells coffee, Bakery items, snacks both in retail stores as well as grocery shops and online stores. Currently, the company has strong financial and profitable position. The company is slowly entering into emerging market of China and expanding its operations and products in beverage list (Maverick, 2015). Porters five forces model will analyze following points: Market Competition Threat of Substitute Products Bargaining power of buyers Threat of new Entrants Bargaining Power of Suppliers (Dudovskiy, 2015). Market Competition Market competition is the strongest force, although Starbucks holds a strong position in the market, it has to face severe competition from its competitors like Dunkin Group and McDonalds. Starbucks marketing strategy has focused on improving its brand image and loyalty of customers to induce people to pay more. Starbuck has a strong brand identity in coffee, whereas these Dunkin and McDonalds are identified for other food items, hence Starbucks in a market leader. Starbucks is also facing competition in grocery items from Caribou, Folgers and Maxwell House which are coffee brands. Starbuck strategy includes coffee with other products like Tazo, Teas and its own Verismo brewing machine (Bloomberg L.P., 2016). Threat of Substitute Products There is a threat that customer can go for substitute product and this is another significant market force. There is a huge list of alternate food and beverage items that customers can substitute with Starbucks products. The markets get strengthened when there is no switching over other food items and selecting alternative products. Bars and restaurants are easily available options for coffee house. However, there is no threat for Starbucks as its customers going for substitute is less and Starbuck has been established as a premium brand. Starbuck will encounter the substitute by selling its home-brewing coffee maker Verismo. Bargaining Power of Buyers Bargaining power of buyer is a moderately effected market forcing i.e. Starbucks customers have little bargaining power as individual purchases are very less in number that companys total sales. Also the customer varies from coffee buyers, snacks buyers to grocery items customers. Thus, no single customer can affect the market pricing of Starbucks (Larson, 2009). Threat of New Entrants to the Industry/Marketplace The threat to market entrants is moderate to weak market force. The market is open for new potential entrants since entry is open and there are fewer prohibitions. However, in order to become a serious potential competitor of Starbuck, the entrant needs to be really strong and has to face many obstacles. Starbuck is a strong brand and its coffee shop market is very mature, its stores are placed at secure and prime locations so it has no problems with new entrants in the market or any other market share threat (Geereddy, 2012). However, the threat of new entrants in the retail store market is high as it does not hold a strong position currently. Bargaining Power of Suppliers This is the weakest force of Porters five forces. Starbuck is free to select any supplier amongst the ample of suppliers available in the market. Starbuck is an important customer for most of its suppliers which decreases the bargaining power of supplier. While Starbuck being at strong position, it doesnt misuse its position and take advantage of its suppliers so it operates a set fair trade practices under CAF program. Recommendations After analyzing the economic factor, it is recommended that Starbuck needs to reduce the costs and increase the value, in order to retain its customers and gain their loyalty Brand Recognition: Starbucks should continue to increase its brand recognition and brand identity. Preserving brand recognition and identity will help Starbuck to face competition from Dunkin Group and McDonalds. Customer loyalty will also help Starbuck to excel in the retail sector and compete Maxwell House Folgers. Product Portfolio: Starbucks should continue to increase products in its product portfolio. Increase in variety of snacks and beverages will help them to reach a variety of customers with different preferences (Kuuta, 2012). Retail Sector: Starbucks is weak in its retail sector this is why it can get affected by the threat of new entrants, fierce competition and bargaining power of buyer. So the company should continue to focus its attention on this area. Conclusion The company Starbucks is running as a marketer of coffee in 68 countries all over the world. The corporation sells coffee, tea and other food stuff via its various outlets. The above analysis demonstrates that Starbucks enjoys stable external environment. The main reason of this is that the company is into Food and beverage industry because of which consumers can reduce partial consumption but will not put an end completely. Michael Porters five forces analysis helps stakeholders a basic analysis angle based on effect of market forces and targets to provide analysis of the companys strength, weakness within its industry. It is helpful to analyze the market with respect to investors and stakeholders. Market competition is the strongest force, although Starbucks holds a strong position in the market, it has to face severe competition from its competitors like Dunkin Group and McDonalds. Starbucks marketing strategy has focused on improving its brand image and loyalty of customers to in duce people to pay more. There is a threat that customer can go for substitute product and this is another significant market force. There is a huge list of alternate food and beverage items that customers can substitute with Starbucks products. The markets gets strengthens when there is no switching over other food items and selecting alternative products. Bars and restaurants are easily available options for coffee house. Bargaining power of buyer is a moderately effected market forcing. Starbucks customers have little bargaining power as individual purchases are very less in number that companys total sales. References Bloomberg L.P. (2016). starbucks corp . Retrieved from https://www.bloomberg.com/: https://www.bloomberg.com/research/stocks/snapshot/snapshot_article.asp?ticker=SBUX Dudovskiy, J. (2015, October 23). Starbucks Porters Five Forces Analysis. Starbucks Porters Five Forces Analysis. Retrieved from https://research-methodology.net/starbucks-porters-five-forces-analysis/ Geereddy, N. (2012). Strategic Analysis Of Starbucks Corporation. Retrieved from https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf Kuuta, H. (2012). Recommendations for starbucks. Recommendations for starbucks. Retrieved from https://thecoffeeteam.blogspot.in/2012/02/its-time-for-my-final-blog-post-sniff.html Marketing Strategy and Alliances Analysis of Starbucks Corporation. NorthCentral University. Retrieved from https://digitalcommons.liberty.edu/cgi/viewcontent.cgi?article=1005context=busi_fac_pubssei-redir=1referer=http%3A%2F%2Fwww.bing.com%2Fsearch%3Fq%3DRecommendations%2Bfor%2Bstarbucks%26src%3DIE-TopResult%26FORM%3DIETR02%26conversationid%3D#search=%22Reco Makos, J. (2015). PESTLE Analysis of Starbucks. PESTLE Analysis of Starbucks. Retrieved from https://pestleanalysis.com/pestle-analysis-of-starbucks/ Maverick, J. (2015, December 08). Analyzing Porter's 5 Forces on Starbucks (SBUX) . Analyzing Porter's 5 Forces on Starbucks (SBUX) . Retrieved from https://www.investopedia.com/articles/markets/120815/analyzing-porters-5-forces-starbucks.asp Oakley, T. (2014, June 02). Starbucks: Porters Five Forces. Starbucks: Porters Five Forces. Retrieved from https://themarketingagenda.com/2014/06/02/starbucks-power-of-the-brand/ Team, S. (2016). Starbucks official website. Retrieved from https://www.starbucks.com/: https://www.starbucks.com/ Ukessays Team. (2015, March 23). A SWOT and PESTEL analysis of Starbucks. A SWOT and PESTEL analysis of Starbucks. Retrieved from https://www.ukessays.com/essays/marketing/a-swot-and-pestel-analysis-of-starbucks-marketing-essay.php