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Unit IV - Develop A Business Plan

Starbucks is the largest coffee retailer in the world, known for its specialty coffee drinks and third place experience. It differentiates itself through premium pricing and customization. Starbucks faces challenges including maintaining quality as it focuses on profits, increased competition, economic factors like rising costs, sustainability criticisms, over-expansion, and technology issues from heavy mobile ordering volumes driving away some customers. Maintaining its unique brand experience while navigating these strategic problems will be key to its continued success.

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ARIANE DOLINO
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97 views4 pages

Unit IV - Develop A Business Plan

Starbucks is the largest coffee retailer in the world, known for its specialty coffee drinks and third place experience. It differentiates itself through premium pricing and customization. Starbucks faces challenges including maintaining quality as it focuses on profits, increased competition, economic factors like rising costs, sustainability criticisms, over-expansion, and technology issues from heavy mobile ordering volumes driving away some customers. Maintaining its unique brand experience while navigating these strategic problems will be key to its continued success.

Uploaded by

ARIANE DOLINO
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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1.

Write a description of the product or service and its unique features of


Starbucks.
Starbucks is a specialty coffee retailer. It is in fact the largest coffee retailer in
the world. It roasts, markets, and retails specialty coffee. The company, through its
stores, offers several blends of coffee, handcrafted beverages, merchandise, and food
items. Starbucks also offers whole bean and ground coffee, readymade drinks, snacks,
and other beverages. Its brands include Teavana, Evolution Fresh, Starbucks Reserve,
Princi, Seattle’s Best Coffee, and Ethos. The company, through its owned and licensed
stores, has a presence in Asia-Pacific, the Middle East, Africa, Europe, and the
Americas.
Starbucks has made its brand unique by de-commoditizing the mature coffee
space. It fashioned a unique brew and a unique image that appealed to luxury-craving
aficionados who relished the prestige, the ritual, and the uniqueness of coffee savoring.
It is so successful because it was able to provide an experience that changed how much
of the world thought about coffee shops and how many of us drink coffee outside of
our homes.
Starbucks has managed to differentiate itself from competitors by creating the
unique value proposition of becoming the “third place” for customers, after home and
the workplace. Purchasing a cup of coffee became an “affordable luxury” and an
experience in itself. Also, the company's commitment to the "Barista Promise" ensures
making coffee and drinks based on every customer's desire. Hence all its customers can
request to have their drinks customized.
Furthermore, Starbucks has a great reward program that keeps customers
addicted to its coffee. For every $1, you get 3 stars ($1 = 3 stars). When you collect
150 stars, you get a free drink (150 stars = 1 free drink). In addition, reward members
get the convenience of mobile payment, pre-order, free birthday drinks, etc.

2. Identify its mission, vision, and objectives.

Vision: To establish Starbucks as the premier purveyor of the finest coffee in the world
while maintaining our uncompromising principles while we grow.

Mission: To inspire and nurture the human spirit – one person, one cup, and one
neighborhood at a time.
3. Describe the market conditions and strategies related to how products and
services are priced, distributed, and promoted.

Starbucks has positioned its brand image by promoting high-quality coffee and
drinks. With this, the coffee chain has become the go-to place for those looking for
good cups of coffee. Besides coffee, it has various food items, including smoothies, tea,
cookies, pastries, muffins, donuts, blended beverages, and fresh fruit juice. Starbucks
uses the premium pricing strategy where it cultivates an impression that its products
are superior to others. The brand strategically sells its products higher than the market
price.

Starbucks uses the premium pricing strategy where it cultivates an impression


that its products are superior to others. The brand strategically sells its products higher
than the market price. The brand targets the premium class of society who are ready to
pay a higher cost for superior service. However, you seldom hear complaints of
overpriced products from Starbucks since the brand is not only justifying its higher price
with premium quality products, but Starbucks also ensures customers feel the
welcoming and warm environment upon entering their stores. The brand also makes
sure that every customer gets an excellent and magical coffee experience - from
ordering, and taking sips of the drink until leaving the place.

The company utilizes a promotional mix that deals with a unique blend of
advertising, public relations, sales promotions, e-commerce, and social media to
promote products. The promotion approach is part of the marketing mix, aiming to
persuade, inform, and remind target customers about the brand's products. Despite
Starbucks having a steady and robust position in the market, it continues to promote
the brand. Besides investing a significant amount of money in promotional activities, it
partnered with local companies to make its local presence more engaging.

Starbucks uses different channels to distribute its products outside the


company-operated stores. These include arrangements with food service companies,
licensed partners, grocery channels, warehouse club accounts, direct-to-customer
market channels, joint ventures, and other specialty operations.

4. What are the challenges ahead for Starbucks?


The company may face the problem of consistency and complacency. Through
the years, with the mind of executives focusing on profits, they might impose measures
that might compromise the coffee experience to gain profit. This might lead to
complacency as the people give their bare minimum in order to earn and raise the
revenues. Below are additional problems that Starbucks may face in the future:
● The pandemic and staffing shortages are cutting down store hours.
● Experts predict the pandemic will continue changing customer behavior and
tightening discretionary spending. In addition, the decline in the restaurant
industry and other macroeconomic factors can adversely affect Starbucks’
development plans and operations.
● Ingredients are missing across the board. The price of raw coffee beans –
Arabica, the world’s most-produced coffee (representing over 60% of the world’s
production), has increased drastically during the pandemic due to concerns over
its availability, hoarding, and supply chain disruption. Any additional dollar
channeled to purchase raw coffee beans at an increased price reduces Starbucks’
profitability.
● Mobile orders are causing chaos for employees and customers. Although they
benefit from technology, the demand in their mobile applications becomes very
overwhelming.
● The company's workers are unionizing but Starbucks is firm that the company is
against this.
● The chain is facing backlash for the new COVID-19 policy. The pandemic have a
significant impact on Starbuck's financial performance due to reduced customer
traffic and store hours.

5. What are the strategic issues and problems affecting Starbucks Company
nowadays? Explain fully.
In the video, the problem is that the company started focusing more on profit
than the experience which was not aligned with the vision of the company. This led to
losing the quality of making coffee baristas and the traditional coffee making and coffee
that Starbucks was infamous for. Profit should only be second to the people because
once the people are satisfied, they will perform their best.
One of the external challenges was increasing competition. For example, there
was a proliferation of specialty coffee retailers and other established companies dealing
with food and beverages that entered the market. Some sociocultural movements would
rather support small independent and local coffeehouse and oppose the expansion of
large multinational chains.
Moreover, economic factors have a direct effect on the operations of the
business. The world economy was significantly affected by the pandemic lockdown and
now the rising fuel prices due to UK-Russia War. This affected the cost of operations and
the ability of the company to sustain its employees. For example, there was an increase
in the price of gas and milk which are crucial in the operation of Starbucks. This
affected the revenue of the company. Many coffeehouses offer products at an
affordable rate. This can threaten the future stability of Starbucks which offers higher
prices. For many middle tiers and working consumers, Starbucks’ offerings are more
costly than McDonald’s and other coffee outlets. Its high prices reduce affordability for
the consumers.
Starbucks also faced a challenge related to falsehood attacks on its
environmental sustainability practices. Starbucks in 2018 was responsible for emitting
16 million metric tons of greenhouse gases, using 1 billion cubic meters of water and
dumping 868 metric kilotons—more than twice the weight of the Empire State
Building—of coffee cups and other waste. Moreover, many social and environmental
activists criticized the company for its unethical procurement practices. They claimed
that it procures coffee beans from impoverished third-world farmers. It has also been
accused of violating “Fair Coffee Trade” principles.
Starbucks has added stores at an aggressive rate in recent years. Since 2013,
according to Technomic data, the chain has grown its unit count by nearly 22%. The
company has spread itself too thin in too many markets and some of its locations are
spread inefficiently.
Furthermore, Starbucks has done as good a job as any company at applying
technology to its locations. And that has helped it generate sales growth in recent
years. But apparently, the company is finding there are limits. The chain has 15 million
loyalty club members and another 5 million “digital relationships,” numbers every other
chain would drool over. It has better mobile and pay capabilities than just about any
other restaurant company on the planet. However, the heavy use of the company’s
online and mobile ordering have generated problems by driving away some less loyal
customers.

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