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Case study: Starbucks 1



Case study: Starbucks

Starbucks, formerly known as the Starbucks Corporation is the world’s largest coffee company based in America and operates in more than 20,000 locations across the world.

Question 1

Strengths and weaknesses

One of the major strengths is that the company has a strong growth and operating efficiency that creates a superior financial performance in the American market. For instance, sales climbed by 29 percent annually since 1995 to 3.1 billion in 2004. Also, the company is termed as one of the best employers as it treats its employees very well. Starbucks is an adamant brand that has created its reputation in the public. In 2005, it was voted the fastest growing brand in a Business Week Survey. Also, it has many subsidiaries, hence diversification of business. It has an unyielding relationship with its suppliers.


One of the major weaknesses is that since its inception, it has continued to face competition from companies such as Nestle and Procter and Gamble. Also, Starbucks once faced a lot of criticism from the market as a result of the way they treated its coffee farmers and this affected its reputation in one or another. Also, natural disasters still influence the supply of raw materials.

Challenges of marketing

Dealing with competitors is one of the main difficulties of marketing at Starbucks. There are numerous coffee shops across the world such as Dunkin Donuts and McDonald’s. For Starbucks, it is important for them to know what their competitors are offering at a given time. Also, Starbucks prefers brand advertising and tend to ignore other common forms of advertising.

Question 2

Starbucks has struggled to build its brand in the Australian market unlike in other markets such as Canada and China. Firstly, Australians love coffee, and this is a significant opportunity. This can be matched to the fact that Starbucks is a highly reputable brand across the world. Australia is also a big market that if cracked well, it can be highly profitable for Starbucks. Efficiency and innovation at the company can benefit it in the Australian market.

Question 3

Starbucks has a global marketing strategy mix that works to bring out an active growth globally. The marketing strategy does not follow a specific procedure; rather it is localized and differentiated to fit a particular market. For example, in Australia, and New Zealand, Starbucks believes that the company is a top brand, and this is seen as a form of self-marketing. However, this has been termed by many economists as the main reason why the corporation did not pick well in the Australian market. Ideally, Starbucks uses a marketing mix strategy comprising of the four P’s which are product, price, place and promotion. Apart from coffee, Starbucks offers other beverages such as oatmeal, salads, and juice for the non-coffee drinkers. Regarding price, Starbucks charges higher prices for its coffee so as to substitute for its quality differentiation from its competitors. The company commonly uses IT for its advertising. Regarding promotion, for example, Starbucks has been able to manage its crowds in its outlets through offering ample parking space as well as providing a clean and healthy environment with services such as WIFI.

Question 4

Starbucks is one of the most successful coffee chains across the world, and this can be attributed to its aggressive expansion strategies that have continued to push out much of its competition. Despite their inflated prices, Starbucks has continued to create a sense of brand loyalty among its loyal followers whereas the other main coffee shops continue to use other forms of marketing such as TV adverts, ads among others. Starbucks portrays a luxurious lifestyle for its customers, and that is the reason why it charges high prices for its coffee. Also, the company operates a monopolistic competitive market structure whereby they have been able to control their inflated prices and remain at the top despite stiff competition. Starbucks uses its logo, quality as well as various trademarks so as to differentiate its coffee from that of competitors. Major coffee shops that give competition to Starbucks include Dunkin’ Donuts, McDonald’s, and Panera Bread. The major difference between Starbucks and the competitors is that Starbucks charges relatively high prices for its coffee. Customers who believe that Starbucks has superior coffee regarding quality and taste tend to become loyal to them where there are other clients who believe that coffee is homogeneous and tend to prefer low prices and become faithful to the other coffee shops. Through this, the firms have been able to coexist with only a few being forced out of the market.