Strategic Marketing: Introduction to Starbucks

| March 14, 2016

The chosen company selected for the assignment is Starbucks Limited. Starbucks Limited was established in 1971 as a roaster and retailer of whole bean and ground coffee, tea and spices in a single store in the city of Seattle at Pike place market. The mission statement of the company is “to inspire and nurture the human spirit-one person, one cup and one neighborhood at a time.” In relation to its main product which is coffee, the company has always had a firm believed in serving the best coffee that it can. Its goal for the coffee is that it be grown under the highest standards of quality through the use of ethic sourcing approaches.

In order to ensure the best quality, the company’s coffee buyers normally pay visits to the coffee farms so as to identify the best quality coffee beans. The signature Starbucks roast ensures emergence of balanced as well as rich flavored coffee beans (Fellner, 2008, p.78). The core values of the company include creation of a culture of warmth and belonging for every individual, being present while at the same time connecting with dignity and respect, delivery of the best results in terms of products and services and being able to act with courage so as to challenge the status quo by finding new approaches aimed at growing the company.

Situation analysis of Starbucks

The current macroeconomic environment where Starbucks is operating is defined by volatile economic conditions due to the global recession experienced in the world. The latest trend in the economy has greatly reduced the purchasing power of consumers of Starbuck’s products. As a result, most of the consumers have registered a shift from consumption of expensive coffee brands to the least expensive ones instead of cutting down their coffee consumption (Simon, 2009, p.114). Therefore the company has had to adjust by shifting to the production of low priced coffee so as to avoid loosing its customers to its main competitors who have cheap coffee products.

The company has further shifted into the mobile computing technology through collaboration with Apple so as to bring to its customers discounted coupons in the Apps that are available in the iPhones (Bussing-Burks, 2009, p.63). The situation analysis of Starbucks is best explained through PEST analysis which is a strategic analytical tool as well as an acronym for political, economic, social, technological factors. The PEST analysis of the company includes an analysis of the impacts that the factors have in relation to the short and long-term growth initiatives.

Political factors

Starbucks is faced by regulatory pressures in its home ground of the United States due to increased level of scrutiny that the multinational companies in the United States are facing in regard to business processes.

A political factor that affects Starbucks is based on the over sourcing of its main raw materials that has gained the attention of key politicians in the Western countries and the countries where the materials are actually obtained.

The attitude of various governments towards business operations is another factor affecting Starbucks. For example, in United Kingdom, the company was faced by a tax scandal that tended to damage its reputation. However, according to the management of the company, it had not broken any rule regarding tax policies in the country.

The company is faced by increased need to stick to the laws and the regulations of the countries in which they are obtaining their raw materials. The trend has been intensified by the increased awareness and activism in the developing countries where it draws it raw materials.

Economic factors

The inflationary macroeconomic environment where the company is operating, presents huge and increasing operational and labor costs presents a challenge that the company must contend with. The trend has resulted into decline in the profitability of the company.

The global recession that has been witnessed in the recent past has resulted into the customers of the company shifting to low priced coffee products of the company and some are shifting to its competitors (Strutzmann, 2013, p.25). The company has had to change to production of low priced coffee so as to adjust to the changing trend which is likely to lower the profitability.

The exchange rate of various currencies has emerged as another factor that the company faces. The increasing strength of the US dollar in relation to that of other countries has resulted in decline in the profitability of the company in its branches outside the United States.

Social factors

Starbucks has had to be cognizant with the emerging trend of new customers who are keen on the social and environmental costs of the brands that they consume.

The changing trends in generations mean that the company must devise strategies of attracting the younger generation. The company has heavily relied on the baby boomers generation as the main source of its customers but that generation is slowly fading away and the company must now focus its attention to the younger generation Y and Z.

Despite the increasing pressure to shift to the low priced coffee, the company needs not to sacrifice its high quality brands of coffee. The changing trend has emerged as a major socio cultural challenge for the company even as it plans to pursue its growth strategy and expanding its consumer base………………………………………………………….

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