Starbucks Corporation’s Marketing Audit

Executive Summary

Marketing audit entails evaluation of the promotion processes in a business organization. It provides an overview of the current situation of the company. A comprehensive audit covers the analysis of macro and task environments, marketing functions, and strategies. The current paper presents the findings of a marketing audit of Starbucks Corporation. The company is an American international corporation dealing with the marketing and retailing of specialty coffee. The information used in this report was generated from interviews I conducted with three top-notch employees in the company’s marketing department. I have made recommendations to enhance the effectiveness of Starbucks’ marketing strategies.

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Company Background

Starbucks Corporation is a first-class coffee company. It roasts, distributes, and markets specialty coffee. The company operates in more than 62 countries. It has operations in North America, Europe, Africa, Asia Pacific, and Latin America. As of September 2009, Starbucks had approximately 182,000 employees globally. It has its headquarters in Seattle (MarketLine, 2014).

The company survives in the highly competitive foodservice retail market through a combination of marketing endeavors and effective management techniques. The organization’s competitive advantage is sustained by bringing together a range of value-added services. As such, Starbucks not only sells coffee but also generates a coffee-drinking experience for in-store customers.

In this report, I present the results of a marketing audit on this firm. I interviewed a number of high-ranking personnel to gather data for this report. They included Andrea Santos (marketing and trade manager), Army Wang (loyalty innovation and expansion marketing manager), and Julie Westerman (senior marketing manager).

Starbucks’ Macro-Environment Audit

Macro-Environment and Marketing

According to Julie Westerman, a number of external factors, which are beyond the control of the company, influence decision-making at Starbucks Corporation. Consequently, the factors determine the strategies of the business organization, affecting its performance in the long run. They make up the company’s macro-environment.

Kotler and Keller (2012) postulate that the marketing environment of a company consists of internal and external forces. Westerman is of the opinion that the macro-environment of Starbucks includes demographic and economic factors, technological changes, social and natural conditions, as well as legal and political issues.

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Demographics

Demographic factors constitute a major force affecting the management of marketing strategies in the organization (Arnold, 2002). The operations of the company bring it into contact with various cultures and different kinds of people. The individuals constitute its customer base. The age composition, sex, and other factors related to this population influence the nature of the marketing strategies.

Economic Environment

Westerman informed me that Starbucks Corporation has had its fair share of the negative impacts of the economic environment. For instance, following the 2008 financial meltdown, consumers were encouraged to cut down on their expenditure. According to Army Wang, reducing expenditure on gourmet coffee topped this list. As a result, Starbucks had to close down approximately 300 stores.

According to Allison (2009), in spite of these occurrences, 2009 was one of the most profitable years for the company. Westerman attributes the success to prudent management of the brand. Communication of quality and variety of options helps the company to cope with varying economic conditions. The organization makes consumers feel that there is always something available for them regardless of the economic conditions.

Environmental Analysis

Wang cites the availability and management of natural resources as one of the major challenges influencing Starbucks’ operations. The corporation sources top-quality coffee from different parts of the world. Westerman postulates that Starbucks has shifted to partnerships with other key global stakeholders to effectively manage the limited natural resources. For instance, the company entered into a strategic partnership with Tata Global Beverages Limited of India. The aim was to facilitate its smooth entry into the growing Indian market. In this agreement, the latter supplies Starbucks with roast coffee. Such partnerships facilitate access to resources that the company requires.

The green revolution has become an opportunity for some businesses. According to Schultz and Yang (1999), the company offers incentives for the recycling of reusable mugs. Wang points out that the organization hosts local clean-up projects. In spite of the conservation initiatives and awareness campaigns, approximately 3 million paper cups with the Starbucks logo end up in landfills every year (Allison, 2009). The conservation efforts are challenged by the massive growth of the company. However, to some extent, the efforts have succeeded. For example, an environment-friendly mug was introduced in 2006 (Allison, 2009).

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Technological Environment

Technological innovations translate to improved living standards. Wang admits that technological innovations are shaping global trade today. Technology is a marketing trend in itself. Starbucks has introduced a number of digital distribution channels. They include online marketing platforms and mobile applications aimed at reaching out to clients. In a bid to fulfill the technical requirements of various demographics, Starbucks offers Wi-Fi services in its stores. The corporation provides consumers with working coffee breaks and study sessions in its shops. The feature has turned the shops into gathering places for people from different walks of life.

According to Westerman, the company uses technology to expand its consumer base. It achieves this by offering the clients convenient means of carrying out transactions. The strategy enables Starbucks to break away from the traditional distribution channels. It also increases the revenue generation avenues available to the firm.

Political Environment

Santos feels that the company’s political and legal environment presents one of its major weaknesses. The foodservice industry is highly regulated (Ellis, 2004). Regulatory agencies include the US Department of Agriculture and Food Safety and Inspection Services. It monitors the quality of food products in the country.

Starbucks has suffered a number of setbacks with regard to the regulation of food products. In 2011, the aforementioned agency reported that it found Listeria bacteria in samples taken from chicken used in one of Starbucks’ bistro box lines of ready-to-eat meals (Levy, 2012). The announcement led to a massive recall of products.

On the legal front, Starbucks faces several lawsuits in relation to tax evasion and other issues (MarketLine, 2014). For instance, in 2012, Starbucks was alleged to have diverted profits earned in the UK into other nations, effectively evading taxes for three years (MarketLine, 2014). Westerman feels that such lawsuits have the potential of severely tarnishing the brand image of the corporation. In the long term, the impacts may be disastrous to the sales volume.

Cultural Environment

Westerman is of the opinion that the diverse nature of the company’s products and consumers is brought about by its global presence. Culture arises from a combination of various factors passed down from past generations. As such, cultural values are influenced by, among others, family, language, and educational institutions.

The reception of Starbucks’ products in the world varies depending on the culture of the particular community. Currently, the company is interested in accessing the Indian market. The reason is the high potential for coffee consumption in the retail market. The Indian segment consists of tea drinkers. Changing demographic patterns and expansion of the middle class significantly affect coffee consumption.

According to MarketLine (2014), an industry survey conducted in 2012 indicated that 50% of adults in the US acknowledge the need to change their diet for the sake of health. In addition, 33% are interested in functional foods. An additional 25% reveal that they have already started using functional foods at least once every day (MarketLine, 2014). Westerman feels that Starbucks must try to meet these changing demands to remain relevant in the market.

Task Environment Audit

Markets

The food and beverage industry is experiencing very high growth. Santos attributes the growth to changing lifestyles in the contemporary world. Marketing reports indicate that the market for Starbucks’ products is growing, especially in the emerging Asian economies. For instance, Asia constitutes the fastest-growing retail market for products outside the US. The company expects China to be its second-largest market by 2013.

Santos postulates that Starbucks is aggressively seeking to penetrate other Asian markets. They include India, Malaysia, Singapore, and the Philippines. In the US, the company is expanding its business in the fast-growing single-serve coffee market (Rippin, 2007). Industry reports for 2012 indicated that the estimated growth of the country’s coffee market was approximately $2 billion. The growth was an increase of 80% from the previous year.

Customers

Westerman holds that the company’s customers cannot be broken down into clear-cut segments. According to Ellis (2004), Starbucks commands a strong and premium brand in relation to its competitors. For instance, within the US, a cup of coffee costs an average of 50 cents. However, the company charges approximately $1.75 for the same. Consumers pay a high price not only for the beverage but also to make a social statement. The clients are always searching for an experience, an attitude, and a lifestyle. To this end, Starbucks stands out from the rest. It relies on consumers’ perceptions of the brand and its superior experience.

Competitors

Santos acknowledges the intense competition in the specialty coffee market. Starbucks faces stiff competition in its various markets and channels. Direct rivalry emanates from competitors in the quick-service restaurant sector. It also comes from operators in the ready-to-drink coffee beverage market (Ellis, 2004).

The company has faced competition from various organizations. They include Dunkin Brands (US), which has a strong presence in the northeastern US. McDonald’s also poses a threat to Starbucks operations through its established international presence. The competitor sells its specialty coffee through McCafe, a company that has a strong brand and global presence (MarketLine, 2014). Other companies include Peet’s Coffee and Tea, Nestle, Jamba, Caribou Coffee Company, D.E Master Blenders 1753, The J.M. Smucker Company, Panera Bread Company, and Krispy Kreme Doughnut Corporation.

Distribution and Dealers

The main marketing channel used by Starbucks includes coffee shops. The company has embarked on plans to offer free and unlimited instant Wi-Fi connectivity in all the stores across Canada and the US. In addition, the company operates retail stores, food service outlets, and licensed shops as part of its distribution network.

Westerman highlights the wealth of experience that this company has in the market. The organization is using technology to enhance its distribution channel. It is achieving this through the adoption of e-commerce and office deliveries (Levy, 2012). However, the main channel of distributing Starbucks’ products is the coffee shops.

Suppliers

The major inputs used by the company include coffee beans from different parts of the world. High-quality coffee is imported from Kenya, Ethiopia, and other major producers in the world. However, the future of this raw material is bleak. The trends of these suppliers are changing. Many farmers in these countries are abandoning coffee farming for other lucrative ventures (Levy, 2012). Wang informed me that the company is aware of this reality. The company has made efforts to support local farmers to encourage their continued distribution (Allison, 2009).

Facilitators and Marketing Firms

Wang holds that Starbucks focuses on partnerships with various stakeholders in its supply chain stakeholders. The company aims is to enhance quality, availability of products, and efficiency in acquisition and dispersion supplies. For instance, the strategic joint venture with Tata Global Beverages of Limited of India has proved to be very beneficial (Mikunda & Blomen, 2006).

Through such alliances, Tata Global owns and operates Starbucks cafes in different cities across India. The shops are branded as Starbucks Coffee ‘A Tata Alliance’. The company does not rely solely on traditional marketing strategies. According to Westerman, the soft marketing approach adopted by Starbucks seems to be paying dividends. The company relies on word of mouth and its strong brand to enhance its reputation (Gaudio, 2003).

Marketing Function Audit

Products and Prices

The objective of the company’s product line includes entering into long-term global strategic partnerships with other players in the industry. Other goals include marketing, manufacturing, distributing, and selling products. Under the various new agreements, Starbucks intends to expand its brand portfolio.

Distribution

The objectives of the company’s distribution strategies include the retention of its leadership position in the industry. One strategy used includes the promotion of products and services through social media. According to Wong, the market coverage and service adopted by the company is adequate. The scenario is indicated by the sales volumes reported in the company.

Integrated Marketing Communications

The organization relies on word of mouth and its strong brand to market its products in the world. Today, the company has adopted internet and mobile marketing strategies (Ellis, 2004). The marketing strategy adopted by the company has effectively promoted its brand in the international market (Gaudio, 2003). Adoption of technology in marketing indicates that the company has identified the potential of this strategy in the industry.

Strategy Audit

Business Mission and Marketing Objectives

The mission of this organization reflects its marketing strategies. Its major objective is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (MarketLine, 2014, par. 4). In the opinion of Westerman, the company’s mission statement clearly reflects the ‘market-oriented objective’ of the corporation. The global penetration strategy is structured to meet the objectives of the company.

Starbucks is reaching out to neighborhoods in areas where it has operations. It achieves this by using technology marketing and enhancing in-store walk-in experiences. The company sustains its competitive advantage through a combination of in-store experiences, customized coffee blends, and unique selling propositions. The aim is to pursue marketing objectives indicated in the mission statement.

Strategy Audit

The organization operates within a very competitive foodservice retail market. Consistency in the delivery of high-quality services is very important in attracting and retaining new customers (Levy, 2012). The company’s strategy of achieving its marketing objectives focuses on delivering high-quality products through a superior coffee-drinking experience. Starbucks meets unstated demands through the development of new products. Understanding marketing decision-making as both a science and art is part of Starbucks’ marketing strategies (Kotler & Keller, 2012).

Conclusion

Starbucks can adopt several short-term policies to improve the effectiveness of its overall marketing strategy. The plans include the development of detailed marketing strategies focused on specific customer demographics. The company should also respond to individual requirements among the customers. Starbucks can also adopt several long-term plans to enhance its operations. The activities include evaluating the company’s global expansion program and reviewing its policies to mitigate legal suits and breaches of local and international regulations. Starbucks should also review the overall marketing strategy to include mainstream media promotions.

A marketing audit provides a general picture of the current situation of a business organization. Through such surveys, it is possible for marketers to generate, gather, and screen new ideas in relation to marketing management. Marketing audit facilitates the identification of key issues through evaluation of the effectiveness and efficiency of the various promotional campaigns.

References

Allison, M. (2009). Starbucks will cut 6,700 jobs, close 300 more stores. Web.

Arnold, S. (2002). Lessons learned from the world’s best retailers. International Journal of Retail & Distribution Management, 30(11), 562-570.

Ellis, M. (2004). The coffee house: A cultural history (1st ed.). London: Orion Publishing.

Gaudio, R. (2003). Coffee talk: Starbucks and the commercialization of casual conversation. Language in Society, 32(5), 659–691.

Levy, S. (2012). Marketing management and marketing research. Journal of Marketing Management, 28(1-2), 8-13.

MarketLine. (2014). Company profile: Starbucks Corporation. Web.

Mikunda, C., & Blomen, A. (2006). Brand lands, hot spots & cool spaces: Welcome to the third place and the total marketing experience. London: Kogan Page.

Rippin, A. (2007). Space, place, and the colonies: Re-reading the Starbucks’ story. Critical Perspectives on International Business, 3(2), 136-149.

Schultz, H., & Yang, D. (1999). Pour your heart into it: How Starbucks Built a company one cup at a time. New York, NY: Hyperion.

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