analyze the Starbucks marketing strategy 2012/2/8 Executive Summary External environment impacts the enterprise's business to a large

ge extent. While a company can not change the external environment, internal business strategy can be studied. Market segmentation, targeting and positioning should be paid attention to. After target customer, marketing strategies are important for the business success. The purpose of this report is to analyze the Starbucks marketing strategy. The report will first analyze the environmental factors. Following that, the report will make a profile of the Target Customer. Finally, the report will make an analysis of marketing strategies.

Table of Contents
1.0 Introduction

2.0 Environmental analysis 2.1 Economic environment 2.2 Political environment 2.3 Technological environment 2.4 Social-cultural environment 3.0 Target customer profile 4.0 Analysis of marketing strategies 4.1 Product 4.2 Price strategy 4.3 Place strategy 4.4 Promotion strategy 5.0 Conclusion 6.0 References

1.0 Introduction Starbucks is a well-known coffee shop. The company has achieved its long-term development since the establishment. This is inseparable from its business strategy (Aaker, 1991). The purpose of this report is to analyze the Starbucks marketing

strategy. The report will first analyze the environmental factors. Following that, the report will make a profile of the Target Customer. Finally, the report will make an analysis of marketing strategies.

2.0 Environmental analysis External environment impacts the enterprise's business to a large extent. External environment include Economic, Political, Technological, Social-cultural environment and so on (Baker & Sinkula, 1999). PEST model can be use for the environmental analysis. 2.1 Economic environment With the recovery of global economic, the world economy began getting better. This provides the economic foundation for the development of the coffee bar industry. Income level of people also began to gradually get better, which increases people's spending power to coffee bar. However, the economic growth is slow because of the impact of subprime mortgage crisis as well as the rising prices of grain and oil. The slow increasing of consumer price index is bound to affect the coffee bar industry because coffee is not a necessity of life. Prices of raw materials such as coffee been and creamer also has been raised. In addition, the prices of packing material are rising all the time. The coffee bar industry also is faced with a substantial increase in labor costs and transportation costs due to the rise in oil prices (Bohlander & Snell, 2010).

2.2 Political environment In January 1, 2008, the new "Enterprise Income Tax Law was entered into force. This new tax law changed the provisions of the tax rate and cancel differential treatment to foreign enterprises. That means that "super-national treatment" would be no longer offered to foreign-funded enterprises (Fraj & Martinez, 2008). This will help create a fair business environment. Obviously, the new tax law is beneficial to domestic-owned

coffee bar but not conducive to funded coffee bar. However, enforcement of the new "Labor Contract Law" on January 1, 2008 has a significant impact on enterprise existing methods of management and human resources (Fraj & Martinez, 2008).

2.3 Technological environment The coffee industry is a traditional industry, but the advances in technology continue to bring a lot of positive impact on the coffee industry. The coffee industry has made considerable progress in technological innovation. Benefit from the first industrial revolution, the production of coffee developed from manual work into the industrialization stage (Grant, 2005). Benefit from the second industrial revolution represented by automation and microelectronics technology in 20th century, the industry achieved the rapid expansion of production scale. Nowadays, coffee bar industry also benefits from the rapid development of information technology. 2.4 Social-cultural environment Coffee is a daily drink. Coffee culture has already formed. Coffee has been used as a popular drink in all sectors of society since long before (Grnroos, 2000). Therefore, there is great demand for coffee bars. Coffee bars also are suitable for the consumers with different moods. Coffee bar has become a leisure place. This is beneficial to the coffee bar industry because the industry is altered and needed by the socially, which is the basis of market demand.

3.0 Target customer profile While Starbucks can not change the external environment, internal business strategy can be studied. Market segmentation, targeting and positioning should be paid attention to. Target customer profile can be conducted by the market segmentation. Geographic segmentation: Survey shows that urban-rural wealth gap is growing

(Grnroos, 2000). Urban residents are more willing to pursue fashion and enjoy leisure. Moreover, urban residents have more buying power. Urban residents have more time to enjoy leisure, so the opportunities for them to buy coffee will be greater. Demographic segmentation: Survey shows that coffee consumers are mostly young people (Hafferty & Hult, 2001). With the improved quality of life and accelerate the aging society, more and more middle-aged people in particular housewives, and retired elderly people have become an important part of the coffee consumers. From a gender perspective, in the coffee consumers, women are more than men. Psychographic segmentation: With the improvement of living standards and cultural quality, the coffee has been no longer just a casual drink. Many consumers are seeking different tastes from the coffee (Klein, 2008). Many consumers are seeking different types of coffee. Meanwhile, as there is growing concern about health, many consumers wants to get nutrition from the coffee. Behavioral segmentation: Some consumers tend to be loyal to a brand they prefer to. Some consumers tend to be loyal to some brands. Some consumers tend to be disloyal to any one brand. Overall, the consumers of coffee bar are middle and upper classes. They have high income levels. They are happy to enjoy life and have enough spending power. They follow the fashion and consumer trends. They always like trying new things and new tastes. They suffer greater pressure of work. They have a great demand for relaxation and leisure. They have strong brand awareness and seek social status and respect. They care about quality and not about the price.

4.0 Analysis of marketing strategies After target customer, marketing strategies are important for the business success. This paper will make an analysis of 4Ps Marketing Mix.

4.1 Product Starbucks does not to produce products which they can produce, but produces products that customers really need. Products are not only the most important factor in the marketing mix, but also the fundamentals of marketing strategy (Lee & Cassell, 2009). Starbucks are expecting to emphasize that the Starbucks is a combination of tasty and healthy. Starbucks is a product full of aroma of slow roasted coffee beans. The product uses a new formula which makes the taste mellower. The product emphasizes the health value of coffee. The product shows that coffee contains many antioxidants which are beneficial to human health, such as anti-aging, anticancer function. It can see from the list of ingredients that there are 360 mg Natural Coffee Polyphenol contained by per Serve and 210 mg Melanoidin Antioxidants contained by per 100mL Serve (Rippin, 2007). Coffee beans as the main material are imported. In addition, the product also reduces the unhealthy ingredients such as carbohydrates and fats which are the biggest concern of coffee for consumers. Moreover, at the same time, the product also increases the amount of healthy ingredients such as fiber charity which can help digestion and detoxification. Compared with other brand, these features can attract more consumers. The nutritional comparison of three products is shown in the following table. In addition to coffee, Starbucks also offer food along with the drinks at breakfast, lunch and snack times. Ansoff Matrix can be used for analyzing the product strategy used by the company. The following figure shows the Ansoff Matrix. Market Penetration: It can be seen that Starbucks would like to show core interests of the coffees namely tasty and healthy. That is what consumers really want to buy. For a consumer, the purchase of a product is not to own the product, but to enjoy the benefits of a product (Rafiq & Ahmed, 2009). Starbucks strive to increase its market share. On the one hand, the company convinces consumers to switch to products of Starbucks or persuades consumers to change their habits to increase purchases by product upgrades.

Market Development: Coffee is one kind of fast moving consumer goods. Of course, consumers want to enjoy the delicious coffee from the drink. However, at the same time, consumers are more concerned about health. Traditionally, coffee is a high-calorie drink. This makes many consumers who worry about weight have to refuse to coffee. The most prominent feature of Starbucks is the emphasis on that the product is a combination of tasty and healthy, because other products pay more attention to the taste but ignore the healthy factors (Steinfield, 2003).This company can attract more consumers even who are worried about weight. As a result, the company can develop new markets through this product strategy. Product Development: it can be seen that Starbucks also offer food alongside drinks. The company introduces new products to existing customers and makes full use of the existing customer relationships to expand market share. So, the company offers food with a limited range of healthy eating options at breakfast, lunch and snack times. Diversification: Starbucks has also introduced its low-calorie version of its Frappuccino iced drinks. The company intends to target new market by introduction of its lowcalorie version of its Frappuccino iced drinks (Ritter, 2009). As the organization's existing expertise and capabilities can not be used in the introduction of new products, the enterprise is risky.

4.2 Price strategy To make outlets more attractive during the recession, a new instant coffee brand, Via, was launched which Starbucks claims tastes as good as ground coffee but at a much cheaper price (Swanson & Holton, 2009). The company has also introduced a loyalty card, which allows for free extras such as a shot of whipped cream, syrup or soy in the coffee. Starbucks fluctuate in line with market conditions to set prices. Starbucks also use psychological pricing strategy. Under the conditions of perfect competition in the market structure, Starbucks can not guarantee to obtain the absolute advantage in the market. In order to avoid the losses that may be caused by price competition, Starbuck

sets prices in line with market conditions in the pricing. Therefore, this product prices are set on an average level in this industry. This pricing is compatible with rest of the mix. On the one hand, the company needs to maintain a high degree of brand products through high prices. On the other hand, the company needs to broaden the scope of the market through low-priced products. In addition, this sensitivity of the pricing strategy will help meet the changing business environment. This is one reason that Starbucks has maintained a good development in the economic crisis (Wilkinson, Young & Freytag, 2009).

4.3 Place strategy Because of the brand personality, Starbucks does not seem to worry about competitors can produce delicious coffee but worry about the concept of quality service can not be understood by the brand followers. Thus, Starbucks insists owned chain strategy. Starbucks holds that behind the brand are people who are operating the brand. So, Starbucks proposes strict requirements for their operators approving the company's philosophy and brand positioning. Starbucks emphasize consistency of actions, discipline, and quality. Although this direct mode hinders the speed and scope of the company's expansion, it benefits the company's long-term development. On the one hand, enhancing of brand value needs the consistency of actions, discipline, and quality (Wiersema & Bowen, 2008). Brand is the intangible assets. Direct mode can well ensure the quality of products and services. This can develop brand loyalty of consumers. On the other hand, consumers can enjoy the same products and services no matter in which branch. Large extent, this stabilizes the brand's core values. This can develop the brand identity of customers to penetrate the market.

4.4 Promotion strategy Starbucks does not want to spend too much money in advertising and promotion. Staff promotion is used as a principal way. Starbucks ensures that every employee has the most professional knowledge and enthusiasm for service. Starbucks employees like fans

of coffee being able to explain in detail the characteristics of each coffee product to customers. In this way, Starbucks has wins trust and reputation. Such promotional approach is economical and affordable. Expenditures that would have to be used in advertising are used for staff welfare and training. This leads to very small staff mobility. This plays an important role in the Starbucks he brand management of "word of mouth". In addition, Starbucks also appeal to consumers with a free tasting and free gifts when launching new products. Consumers often have a natural resistance to new products in the market, because the purchase of new products will increase their purchase cost. Starbucks is offering a free test to eliminate the consumer's concerns. Starbucks offers coffee cups, spoons, coffee pad to customers as gifts. On the one hand, these gifts are bundled in the package. On the other hand, Consumers will feel the company's care to customers.

5.0 Conclusion In conclusion, this paper make an analysis of Starbucks marketing strategy by analyzing the environmental factors, profile of the Target Customer and analysis of 4Ps marketing strategies. Starbucks is faced with both opportunities and threats in the macro environment. Overall, the consumers of coffee bar are middle and upper classes. Starbucks does not to produce products which they can produce, but produces products that customers really need. As the organization's existing expertise and capabilities can not be used in the introduction of new products, the enterprise is risky. The sensitivity of the pricing strategy will help meet the changing business environment. Starbucks insists owned chain strategy. Starbucks emphasize consistency of actions, discipline, and quality. Starbucks do not want to spend huge sums of money advertising and promotion. Staff promotion is used as a principal way. Such promotional approach is economical and affordable.

6.0 References: Aaker, D. A. (1991). Managing Brand Equity: Capitalizing on the Value of a Brand Name. Detroit: Free Press Baker W.E & Sinkula JM (1999). The Synergistic Effect Of Market Orientation And Learning Orientation On Organizational Performance. Journal of the Academy Of Marketing Science, 27 (4), 411-427 Bohlander G.W., Snell S (2010). Managing Human Resources. UK: Thomson Learning

Fraj E & Martinez E.(2007). Ecological Consumer Behavior: An Empirical Analysis. International Journal of Consumer Studies, 31(1), 2633 Grant R (2005). Contemporary Strategy Analysis. Cambridge. MA: Blackwell Grnroos C. (2000). Service Management and Marketing. A Customer Relationship Management Approach (Second edition). England Chichester: Wiley & Sons Hafferty B.A. & Hult T.M. (2001). A Synthesis of Contemporary Market Orientation Perspectives. Europe