At the time of its creation, Starbucks became the sole competitor in the mobile coffee market. Although it began by simply selling coffee beans for home use, the rapid implementation of coffee preparation and sales launched the company into an unimaginable realm of success. The company expanded exponentially, spreading across the United States, then infiltrating the international market. During the first fifteen years of operation, the business achieved remarkable success, with very little need to innovate or adapt. Starbucks has been successful, despite relatively high prices, due to the lack of alternative suppliers. However, competition is increasing in the mobile coffee industry, challenging the company with the need to meet both convenience, quality, and price standards presented by other companies.
STRATEGIC PROBLEM STATEMENT:
Starbucks was designed and enacted in a relatively competitor-free environment, introducing the lack of necessary business planning and preparation. The recent increase in market competition has challenged Starbucks’ ability to adapt.
TACTICAL PROBLEM STATEMENT:
The Starbucks business plan was implemented without consideration for the effect that competition would have on its sales. Now, as both the coffee-shop industry and the fast-food industry have expanded into the Starbucks market, they must reevaluate their strategies in order to maintain sales and customer satisfaction. Improvements in quality, price, and convenience, along with increased audience targeting through advertisement must be explored to continue business expansion.
IDENTIFICATION OF ISSUES:
Starbucks is now facing decreasing sales due to competition from previously non-existent brands. The pure volume of alternative coffee suppliers results in a spread in the market distribution, as Starbucks franchises are less common in smaller population areas than new competitors. Availability of Starbucks products is slim in many areas, allowing for customer loyalty to transfer to other suppliers.
While there was initially a significant customer loyalty to Starbucks, the lack of availability threatens the dedication of customers. While the brand in itself used to convey a message of status, the effect on perceptions of Starbucks customers has suffered from negative attention due to elements such as “Starbucks stereotypes.” The brand was formerly associated with higher socioeconomic classes and white-collar jobs.
Starbucks has historically offered high prices, which were previously unchallenged. With the expanding market, they must now compete with the extremely low prices that fast-food companies are able to offer. Additionally, with the optimization of convenience in fast food chains, Starbucks must continually improve its efficiency.
The company has relied on its higher quality levels during the most recent years in order to avoid price and convenience competition. However, as competitors continue to improve quality, while continuing highly competitive features in other realms, Starbuck is being faced with the need to compete or accept losses of profit.
Competitors have become highly efficient in marketing and appealing to a large variety of individuals. Starbucks, in comparison, relies heavily on repeat customers rather than advertisements to attract new individuals. Public marketing need to increase proportionally in order to increase overall exposure.
Short-term:
1. Increasing competition threatens Starbucks sales; company must become more competitive in current market.
2. High prices limit product marketability and relevance.
3. Reliance on presentation rather than convenience challenges success.
Long-term
1. Acting on changing needs of the customer by increasing improvement in quality while remaining competitive with price and convenience.
2. Implement higher rates of public advertisements while appealing to people of many socioeconomic states.
3. Expand offerings while offering large varieties of products in more significant price ranges.
4. Simplify descriptions of products in order to decrease stigma held by less coffeeshop-experienced individuals.
Setting the Goals or Objectives
Goals include increasing customer loyalty while maintaining consistent increases in product quality. The company must maintain competitive pricing in the face of increases in coffee suppliers. Also, expansion must continue in the international arena.
Recommendations
Starbucks must increase their marketability be either increasing quality, increasing convenience, or decreasing price. Without the implementation of at least one of these changes, customer loyalty will decrease in the face of competition.
Increase the number of Starbucks locations by decreasing the cost of franchising, or by acting on the in-store market by partnering with other large businesses, such as retailors like Target, Kroger, Walmart, or a variety of bookstores.
Implementation PLAN:
Create advertisements that appeal to lower socioeconomic individuals by focusing on the high quality of products offered. Also, strategically place television advertisements in a larger variety of programming. Place printed advertisements in shopping centers where a Starbucks location is within close proximity. Appeal to new audiences, such as the elderly, blue-collar workers, or families with young children.
Implement menu changes that focus on lower priced options while still maintaining the variety of the original menu, in order to compete with the “dollar-menus” of fast food establishments. Decrease pricing of basic items, such as child-friendly choices, providing free water, along with lower priced milks and teas when purchased individually.
Increase the total number of Starbucks locations, playing on partnerships with other retailers. Additionally, it is important to maintain convenience by increasing availability of drive-through or pick-up options, especially in retail partnership situations.
Continue to expand variety of products available while maintaining the high quality that customers can rely on. Improving working conditions for employees would result in increased consistency as compared to similar competitors. Increased consistency allows for more reasonable efficiency expectations that should be placed on employees of the company.
