In this Icon College marketing principles Assignment, Starbuck’s expansion strategy is discussed.
a. Examine a few definitions (at least two) of marketing and explain the marketing process with example drawn from your chosen organization.
There are various definitions of marketing given by different authors and two very important definitions are as follows:
According to Philip Kotler Marketing is defines as creating, communication and delivering value to the customer. This one line statement has explained the entire process involved in marketing. With the help of Starbucks we will try to find out how it is creating, communicating and delivering value to the customers (Kotler, 2006). Starbucks always focus on making best quality products by using best quality raw material i.e. coffee beans. It has high quality infrastructure and ambience in its stores. These things come under creating value for its customers. Then comes communicating this values to the customer and Starbucks is one if the pioneer companies to use social networking sites for promotional strategies. Starbucks has always been good in advertising and promotion of its brand. It has very high brand value and image. Starbucks is delivering the product in a very efficient way. Service provided in its store is one of its strengths. Employees and staff members are very knowledgeable and motivated and they also believe in building strong relationship with the customers.
Marketing is also defined as the activities which are associated with buying and selling of products. It includes advertising, promotions, selling and delivering products or services to the clients. Marketing is also defined as finding the need and then filling it with the valuable product or service.
Below are the five important steps involved in marketing process:
- Market and environment analysis
- Fixing market target
- Setting marketing strategy
- Marketing mix
- Marketing controlling
b. Explain the various marketing concepts and evaluate the cost and benefits of adopting marketing orientation in your organization.
Stakeholder’s analysis and Porter’s five force model are important concepts involved in marketing. We will study Starbuck’s stakeholders and porter’s five force model.
Those who get most affected by the actions or decisions taken in an organization are called its stakeholders (Marcooux, 1998). All these people or organizations are called stakeholders of the organization. If the Starbucks plan to expand to new country to develop its market share it will have impact on lots of people. Major stakeholders are customers, employees, suppliers, partners, owners, farmers, government and non-government regulatory bodies, advertising agencies etc. Starbucks always believes in making long term relationship with all the stakeholders and wants mutual growth.
Porter’s Five Force Model
Porter’s five force model is used by the organization to study the competitors and customers and suppliers of the organization.
Suppliers: Starbucks buys its best quality coffee beans from the farmers and they are the major supplier.
Buyers: Starbucks has strong brand value and name which has helped in creating strong customer base and loyalty.
Potential New Entrants: Entering into luxury coffee market requires lots of money, research, time and resources and there is not threat of new entrants.
Substitute products: Substitute products can be low cost coffee makers, restaurants and hotels.
Competitors: McDonald’s Mccafe, Dunkin Donuts and Café Coffee Day (Koehn, 2008)
Cost and benefit analysis
|· New infrastructure in new country. · Advertising and promotional activities need lots of money. · Cost will also be incurred on market research activities and to acquire new suppliers in the country. · Hiring and recruitment of new employees will also require money and time. · Raw material cost will also be included.||· Increased profit. · Increased revenue and market share. · Increased brand name, brand value and customer loyalty and satisfaction will lead to increase in number of customers. · Organization will be able to create strong relationship with the government and locality of new country.|
a. Analyse the macro and micro environmental factors that influence the marketing decisions in a business organization.
PESTLE analysis helps in studying the macro environmental factors which are as follows:
Political Factors : Starting business into a new country requires political support. Any political disturbance can impact the business very badly. For e.g. in 2003 Iraq war impacted the Starbucks business very badly.
Economic Factors : In 200 during economic slowdown we saw the reduction in the business done by the Starbucks in countries like Japan, Switzerland, and Germany etc. There are non-governmental organizations which also put some restrictions for example beans should be grown in some specific environment.
Social : Society consists of Suppliers, farmers, partners and the customers. Local citizens of the target country also matter. Starbucks has also contributing in Corporate Social Responsibility activities to keep the societal factors in its favour (Middlemis, 2003).
Technical : New technologies are very important to be competitive in the market and to reduce the expenditure. For e.g. Starbucks started a machine in its stores to grind and press coffee beans. It reduces the time spend by employee on it manually.
Legal : All the organizations have to follow all the legal rules and policies of the country it is entering. Employment law which includes minimum wage, working time etc. should be followed.
Starbucks has to stay green and business should not have any negative impact on the environment. Starbucks has plans to have water saving technique and it will reduce water consumption by around 25% in the year of 2015.
Micro Environmental factors
Suppliers: Farmers who grow beans for the organization are the major supplier of Starbucks. They are one of the most important partners and it is not possible to run business without strong relationship or support from them.
Buyers: Buying behaviour needs to be studied in the locality of the store which will help Starbucks in developing its marketing strategies in the area.
Competition: Competitors are very important micro-environmental factors which need to be researched before entering into new region. Starbucks need to know the pricing strategy, product quality etc. of the competition and try to provide improved quality products and services.
b. Examine the concept of segmentation and recommend segmentation criteria and targeting methods to be used for two products in your chosen organization.
Market segmentation is defined as the process of dividing a big market into smaller parts on the basis of some common criteria. For example customers of same age can be considered as one target market and customers living in one area can be considered as one target market (Wedel, 2000). Below are the methods which are used to do the segmentation:
- Geographic segmentation
- Demographic segmentation
- Behavioural segmentation
- Psychographic segmentation
- Segmentation by benefits
- Multi-variable account segmentation
Two selected Starbuck’s products are:
- Iced tall sugar-free caramel, Non-fat, Light Ice, Starbucks double shot on ice
- Oreo Frappuccino
Targeting method used by Starbucks will be demographic i.e. on the basis of age of customers. The first product which we have selected is positioned as healthy and energetic product so the target market for this product will be people above 20 years of age because young and old people are very health conscious. Second product is positioned as tasty and chocolaty product so it will have target market including the school children and also students who go to college and between 20-25 years of age.
c. Identify factors that influence buyer behaviour and propose a new posting strategy for a product or service of your organization
Buyer behaviour can be defined as the different approaches of customers to buy a product. All the customers have different choices and preferences from each other. Marketing and promotion activities depend a lot on the buyer behaviour. Starbucks need to hire an experienced market research agency and should do a complete research on the preferences of the customers. Market research should try to find out the average disposable income of the potential customers. Promotional activities and discounts always attract more and more customers. So initially Starbucks should give discounts or combo offers to increase the awareness and brand name.
Below are some of the factors which impact the consumer buying behaviour (Park, 2003):
- Cultural factors
- Social factors
- Marketing factors
- Psychological factors
- Situational influences
Positioning is defined as the way we want customer to perceive the product we are selling. In case of Starbucks the above-selected products can be positioned in two different ways. The first product will be positioned by communicating some health benefits. For e.g. it is cholesterol free and it helps in keeping good body shape. Low fat can also be used as a positioning strategy for this product. New positioning strategy which can be used by Starbucks is to connect with the tongue of the customers for example other product i.e. Oreo Frappuccino can be positioned as a finger licking or very tasty product. If you have one you will not be able to resist yourself from having other one. These types of taglines can be used while advertising these products. Positioning strategy also says that the consumer should be able to connect himself with the product.
a. Using your chosen company, explain how products are developed to achieve sustainable competitive advantage.
Competitive advantage is defined as the internal capabilities and competencies of the organization which helps in beating the competition. Internal capabilities can be quality and cost of the raw material used to make the product. The process involved in making the product can also become competitive advantage. Starbucks is famous for the quality, taste and services offered to the customers. Starbucks should maintain the quality in the longer run and this is possible by giving proper training to the newly employees in the new location. New employees need to be taught by experienced employees and the process should be standardized in all the stores. Quality of the product can be maintained by having control on the suppliers or farmers. Coffee beans which come from farmers should be fresh. Infrastructure and environment in the stores and service provided by Starbucks will also help in getting competitive advantage.
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b. Evaluate a range of distribution methods to provide convenience to a target group of customers in your chosen organization.
Product or the service needs to be easily accessible by the target customers and distribution channel helps in making the organization operations successful and in providing the product to the customer at his convenience. Starbucks has huge customer base and product base it has been successful in maintaining strong distribution channels in all the major regions. Expansion strategy needs competency in distribution channels. Starbucks has many ways of distributing its products to the customers. It sells its coffee products to the retailers and to the wholesalers also. The important distribution channel is its own stores and it has large number of retail stores in around 65 countries. It is targeting colleges, schools and campuses and opening its stores near to these areas. Private company’s employees are also major target market of the organization and they have also started their stores inside the companies and near the companies as well to make the products easily available to the customers. Other ways of distribution used by Starbucks include supermarkets, shopping complexes and cinema halls. It has also made partnerships with the hotels and airlines to sell its coffee.
c. Discuss the various pricing methods used by businesses and critically evaluate the pricing strategy of your organization.
Pricing strategy is defined as setting the price of the product to maintain suitable profit and to cover all the cost. Pricing strategy needs lots of research and analysis. Starbucks needs to know the cost incurred on employees, raw material, infrastructure, advertising etc. and then on the basis of profit percentage it has to set the price of product or service. Starbucks has to follow the same pricing business strategy i.e. premium pricing which they are following in countries like USA and UK. They have to look for customers which have higher disposable income and with better lifestyle. Starbucks coffee has become a status symbol and people with good income or salary are always ready to spend more to maintain their lifestyle. Strong brand value and name will also help in maintaining the prices higher but Starbucks has competitors pricing as well. When customers pay for better infrastructure and ambience then this type of pricing strategy is known as skimming the market. The other pricing strategy which can be used by the organization is value based pricing. Customers should be able to see value in the product. Friends can sit in very Starbucks ambience and can chit chat and have fun for longer time.
d. Explain the concept of integrated marketing communication and discuss the elements of promotional mix as relevant to your organization.
Starbucks is using both push and pull strategies. The very simple concept which is used to ensure that all types of communications and messages are linked to each other carefully is called integrated marketing communications. Organization uses various promotional tools and integrating these tools comes under integrated marketing communication. One of the very important marketing mixes is promotion and there is various communication tools used in promotion. IMC helps in achieving competitive advantage, increases revenues and profits. IMC tries to position a product with the help of advertising. It helps in transferring message to the potential customers of the organization. Important ways of communicating value to the customers are:
- Print Marketing
- Email campaigns
- Media Marketing
There are various important elements of promotional mix and some of the important elements are as follows:
- Personal Selling
- Direct marketing
- Public relations
- Sales promotion
a. Examine the nature of extended marketing mix and discuss their relevance to service marketing.
There are some extended elements of marketing mix which are as follows:
Physical presence: The way by which organization can make contact to its customers or customers can reach out to the organization is called physical presence. Starbucks should make a website especially for the new country users. For e.g. if it is entering a developing country like India, it should have a website named StarbucksIndia.com where customers can know about the products sold by Starbucks. Other way to have its physical presence is through its own stores in all the major regions in India.
People: Employees, customers and the suppliers come under this marketing mix element. Mutual growth has always been one of the important agendas of Starbucks’ CEO.
Process: Way of preparing and delivering the product to the customers is part of process. It also includes the way employees prepare the coffee.
b. Evaluate the marketing mix variables for two segments of the consumer market and discuss how different it would be for business-to-business services
The first segment is the customers between the age group of 18 to 30. Below is the marketing mix for this segment.
Products: Oreo Frappuccino and Apple Pie Frappuccino
Pricing: Pricing will be premium i.e. between 3 to 4 euros to cover all the products and service costs.
Promotion: Social networking sites and its own stores.
Place: USA and UK
New segment will be developing country like India and the marketing mix for India is:
Products: Start with the best-selling products of Starbucks.
Pricing: Starbucks has to follow premium pricing and it will be around £1 per cup.
Promotions: Television, Hoardings, Facebook, Twitter etc. will be used for promotion.
Place: For metro cities i.e. Delhi, Chennai, Mumbai, Kolkata will be the first target locations.
c. Assuming that your selected organization is to enter the international market, examine and discuss the differences between domestic marketing and international marketing.
Domestic and international marketing are different from each other in many ways. Expanding globally i.e. entering into a new marketing requires lots of effort, research, money and analysis. A complete PESTLE analysis should be done on the country we are entering. Society and culture of the culture should also be researched. Human resource management should be able to handle any conflicts between the new and already existing employees. Conflicts between the employees of both the countries can cause lots of disturbance in the organization. Starbucks usually follows two expansion strategies. First is mergers and acquisitions. It is the strategy used by Starbucks to expand internationally. A company called Seattle was acquired by Starbucks in 1998 to expand in UK. Other international strategy used by Starbucks for international marketing is licensing and franchising.
Marketing is one of the very important departments of any organization. It helps in communicating the features and specifications of the product to the customers. Customer can know about the product without going to the organization himself. We studied various important marketing principles considering the expansion strategy of Starbucks. PESTLE and SWOT Analysis helps in knowing the micro and macro environmental factors impacting the business of the organization. We also studied the concept of segmentation, Targeting and positioning. Advertising and promotions are also very important to stay competitive in the market. Starbucks has been using all the marketing elements in a very efficient way.
ReferencesConstantinides, E. 2006. The marketing mix revisited: towards the 21st century marketing. Journal of marketing management, 22(3-4), 407-438. Koehn, N. F., Besharov, M., & Miller, K. 2008. Starbucks Coffee Company in the 21st Century. Harvard Business School, Case Study, 9-808. Kotler, P., Kotler, P., Bowen, J. T., & Makens, J. C. 2006. Marketing for hospitality and tourism. Pearson Education India. Marcoux, A. M. 1998. Who are the Stakeholders? Business and Professional Ethics Journal, 17(3), 79-108. Middlemiss, N. 2003. Authentic not cosmetic: CSR as brand enhancement. The Journal of Brand Management, 10(4), 353-361.
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