Market Research Starbucks 2 04-06 PDF

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Marketing research about StarBucks...

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Introduction Starbucks Corporation is an American based company founded by Howard Schultz in 1971 (BBC News 2016). Additionally, Starbucks is a premier retailer and marketer of splendid coffee around the globe. In 2016, Starbucks has a market share of 39.8% in USA and has a net revenue of $14.89 billion (Statista n.d.). Besides, BBC News (2016) claimed that Starbucks has almost 234000 employees across 65 operating countries. They promote premium quality and priced coffees, tea and other fresh food (Starbucks Corporation 2017). Starbucks Corporation (2017) mentioned that the mission statement of Starbucks is: “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” In the USA, more than half of their country population who are over 18 year old drinks coffee on a daily basis. Statista (n.d.) reported that Starbucks‟ total coffee drinking population spends nearly $40 billion on this coffee yearly. This makes the coffee industry one of the most potential profit-making industries in the world. Starbucks has grasped this opportunity and innovated within this potential market. Throughout this report, we will be looking at the macro environment affecting Starbucks, how Starbucks segment their market in the most profitable ways and also identify their consumer buying behaviors and communication tools that provides them the competitive advantage.

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Part A – Macro environment Macro environmental factors affect Starbucks‟ marketing in many ways. These factors include demographic, economic, natural, technological, political and cultural external factors. All these factors are uncontrollable and can influence a company‟s decision making process, performance and strategies. One way to analyze these factors is to use PESTLE analysis.

Political Factors Firstly, I would like to talk about political factors affecting Starbucks. A major issue affecting Starbucks politically is the tax avoidance issue. A good example would be the tax scandal in the UK in 2014 (Dudovskiy 2017). Starbucks was accused of avoiding paying corporation tax for 15 consecutive years and that has led to the Public Accounts Committee of the UK government to launch an investigation towards Starbucks. The investigation has greatly affected Starbucks‟ brand image (Dudovskiy 2017). According to the Starbucks management team, Starbucks was clean and claimed that they didn‟t break any rules (Dudovskiy 2017). However, Starbucks still had to pay an astonishing amount of GBP 20 million to the UK government (Dudovskiy 2017). Not only that, the second political factor affecting Starbuck‟s performance is the strength of the bond between the USA and two of their stakeholders (Dudovskiy 2017). These stakeholders are the countries that produce Starbucks‟ coffee beans and the countries where Starbucks operates in (Dudovskiy 2017). As we know, political factors are external factors; Starbucks cooperates with K&L Gates and Monument Policy Group to form a political environment that favors the business (Dudovskiy 2017). Furthermore, regional integration is very important to Starbucks (Smithson 2017). Regional integration has provided the opportunity to Starbucks to expand globally at a very fast pace (Smithson 2017). For example, Starbucks entered Singapore in 1996 and now operates 700 stores in multiple countries such as Malaysia, Indonesia, Thailand and Vietnam (Starbucks Corporation 2017). Also, governments in Southeast Asia are continuously improving the infrastructures in favor of Starbucks (Smithson 2017). This creates many opportunities for Starbucks to tackle different markets in different geographical areas (Smithson 2017). For instance, the railway stations in Malaysia have provided Starbucks the opportunity to operate in

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them (Smithson 2017). It is very convenient for working classes to get a cup of hot coffee before heading off to work.

Economic Factors Next, I will talk about the economic factors that affect Starbucks. Economic factors normally have a direct impact on Starbucks‟ revenues (Dudovskiy 2017). The purchasing power of consumers in an economy is one of the significant factors affecting Starbucks‟ revenues (Dudovskiy 2017). Consumer purchasing power reflects the overall economic position in the country (Dudovskiy 2017). Besides that, consumer buying patterns can affect Starbucks‟ performance as well. The increase in prices of coffee beans is also an external economic factor to Starbucks (Dudovskiy 2017). Starbucks had to increase their coffee prices around 30 cents in 2016 because of it (Dudovskiy 2017). Moreover, global economic recession can affect Starbucks as well. In fact, it is already affecting Starbucks (Haseeb 2017). The sales of Starbucks‟ items are badly affected by this recession (Haseeb 2017). Starbucks had to lower down their item prices to withstand the impact of global economic factors (Haseeb 2017). At this time of economic recession, Starbucks has to be aware that consumers are now more likely to buy lower price coffee (Haseeb 2017). Many competitors are able to offer coffee at a lower price compared to Starbucks (Haseeb 2017). Starbucks should adapt to these dynamic economic conditions as soon as possible in order to sustain the business (Haseeb 2017). This should not be taken lightly. In March 2008, Starbucks‟ revenue fell by 28% and the company had no choice but to shut down nearly 900 stores and retrench 6,700 staffs because of this crisis (Haseeb 2017). The third economic factor that Starbucks has to consider is the currency exchange rate (Dudovskiy 2017). As USD appreciates, it will somehow diminish the total profits of Starbucks (Dudovskiy 2017). For instance, in 2015, the appreciation of USD caused a reduction of 2% in total revenues (Dudovskiy 2017). Unfavorable exchange rates decreased Starbucks‟ revenues by $92 million in the first 3 months of 2015 (Dudovskiy 2017). The revenues of Starbucks is actually affected by a few other factors such as levels of inflation, interest rates and unemployment rate, it varies from country to country depending where Starbucks operates in (Dudovskiy 2017).

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