TROUBLE BRWES AT STARBUCKS

Introduction

This assignment is based on a Starbucks case study. The questions that are answered in this assignment are aimed at providing a clear understanding of the Starbucks, which was a Wall Street darling. The issues highlighted include; the targets that was behind the launching of the Starbucks by Howard Schultz, the positioning of the Starbucks in terms of price, promotion, product and distribution. The assignment will also give an overview of the definition of the target market by Starbucks, its positioning after its decline in 2007 and the course of action that resulted in reinvigoration of Starbucks.

The target of the launching of the Starbucks

            When Howard Schultz launched Starbucks, its main targets were the competitors and the customers. The Starbucks aimed at gaining dominance of the business in addition to squeezing the small businesses that could not stand the competition. To Starbucks, growth was its mantra. Starbucks was strongly in a race to ensure that national dominance was established in front of the specialty coffee bars that were emerging. In order to ensure that its growth ensured claiming of this category leadership, the strategy focus of Starbucks was based on new products, a connection that was stronger and expansion of the stores locations in not only the United States but also abroad. To support the positioning, there was targeting of the new products for distribution to grocery stores, which included ice-cream novelties and coffee drinks. For the strategy of retail distribution, additional challenges were addressed. New stores were designed by Starbucks for local culture reflection in the effort to react to the fear in which communities cared for their uniqueness. In addition to the importance of the changes in the distribution and products, Starbucks invested on a promotion strategy that was well designed to build an image that was consistent worldwide. An approach that was undifferentiated was taken by Starbucks. The identification with the product by the customers was aimed at being personal. On the advertisement dimension, the ads that were used were somehow unpolished, although they had been done by an art student.

            In the effort to ensure its expansion, Starbucks had maintained a market positioning that was dominant. This included the buying out of the leases of the competitors, operating internationally at a loss as its several locations were clustered into small geographical areas. This positioning strategy should not have been used by Starbucks since it was not competitive, based on the arguments of many critics. The initial expansion was fueled by Starbucks in the market into the UK as it bought out the Seatle coffee company. However, its capital and influence was then used in the effort which was aimed at obtaining major locations; and in most of these locations, Starbucks operations was characterized by losses. This attempt was aimed at driving out the competitors that were small and independent and was based on the understanding that it was hard for these companies to pay the real estate premiums which were inflated. As it is indicated in the case study, the Starbucks later increased the store system of licensing. This system permission to the Starbucks license was only through contribution of a certain percentage of the gross income of the license, in addition to being inside the other stores so that the brand image of Starbucks is not diluted. The license stores menus were either similar, trimmed or in modification of the cafes version, or through positioning as cafes that were independent selling the products of Starbucks.

 

 

  How Starbucks should define its target market and positioning after decline

            After the decline in 2007, the biggest question for Starbucks is based on its ability to continue being profitable even in the future. The starting point should be evaluation of the coffee current market after which Starbucks can gather information on the performance of the market which will result in the determination of the extent in which the current consumers becomes appealed by the designer coffee. Starbuck should in addition take advantage of its numerous location numbers which should help it to position itself in such a way that it explores the wider market. The positioning will allow the fast implementation of new products across a wide demographic area thereby ensuring new entrants are prevented from gaining their share of the market. In addition, Starbucks should take advantage of the establishments that are already existing such as Noble and Barnes to open smaller cafes in other businesses. This will allow their expansion of the market while ensuring that the costs are at the same time maintained at a low level. Through this strategy, Starbucks will be able to expand the potential of the marketing to various demographics. Taking advantage of the already existing branches it the key. By taking advantage of this, Starbucks will be able to extend its target beyond a small scope to developing its international marketing domination that it had before; especially now that Howard Schultz is back as the CEO.

Actions taken to reinvigorate Starbucks

            One of the actions taken by CEO Jim Donald after the decline was to have a lower offering on the product price. The testing for $1 coffee was started by Starbucks in addition to free refills on the coffee that was traditionally brewed. This was aimed at attracting the customers that were price conscious regardless of the fact that the economy was at its weak state. The competitor’s price (such as Dunkin’ Donuts and McDonald) would be undercut by Starbucks through this sale offered at $1.

Another action taken by Starbucks was that of running a national campaign in the television during the holiday season of 2007. However, these actions were insufficient to revive Starbucks because by the end of 2007, Starbucks had lost so much in the stock market. The decline in the value of the shares in the market could not go unnoticed since the price had dropped from $35 down to $18, thereby scaring off most of the investors. The major step that was taken after these events was to bring back the former CEO Howard Schultz at the same position. This action was seen to redefine the future of Starbucks since it is through the effort of Howard Schultz that Starbucks had raised to the top. The effect was felt since the investors regained their confidence in Starbucks. Generally, the future of Starbucks lies in the course of action taken by the management through the influence of the reinstated CEO Howard Schultz. The future of this company still remains unclearly defined. Following its report to slow the growth of stores in the USA in 2007, Starbucks could be headed to a new direction since this is a full deviation from its philosophy that it has always held to which has been to continue with new retail stores opening as the company pursues its objective of becoming a company with the brands that are most respected and recognized all over the world.

 

 

 

 

Reference

INVEY 9B09A002. (2009). Trouble Brews at Starbucks. Richard Ivey School of Business: University of Western Ontario

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