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group 6: case x starbucks: going global fast

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group 6: case x starbucks: going global fast

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    1. Group 6: case X STARBUCKS: GOING GLOBAL FAST

    3. OUTLINE STARBUCKS INTRODUCTION STARBUCKS STRATEGY ANALYSIS HOLISTIC MARKETING OF STARBUCKS SERVICE QUALITY MANAGEMENT STARBUCKS SERVICE DIFFERENTIATION STARBUCKS CHALLENGE QUESTION AND DISCUSSION CONCLUSION RECOMMENDATION

    5. STARBUCKS AT A GLANCE 12,440 stores in 37 countries. 2,199 stores opened in 2006 (6 stores a day). 145,000 baristas (waiters). Net revenue $7.8 billion, making an annual profit of $564 million. Source: Starbucks 2006 Annual Report Green one is where has starbucksGreen one is where has starbucks

    8. Strategies for Managing Demand Side Pricing- Starbucks has been able to accomplish with its pricing strategy : focus on profit, not on sale and low pricing would erode the perception of quality Reservation - Starbucks launched Starbucks Express, customers can pre-order and prepay for beverages and pastries by phone or website. Just call or click Service Starbucks hear music, Starbucks card, wireless internet. Pricing : Starbucks a cup of coffee seemed reasonably priced at 25 cents, and it is now priced at a dollar fifty, then it is very likely that customers will find that a dollar is a perfectly good price for that c Hear Music is the brand name of Starbucks' retail music concept Pricing : Starbucks a cup of coffee seemed reasonably priced at 25 cents, and it is now priced at a dollar fifty, then it is very likely that customers will find that a dollar is a perfectly good price for that c Hear Music is the brand name of Starbucks' retail music concept

    11. Strategies for Managing Supply Side Part time employees- Starbucks had lowest employee income rate of any restaurant or fast-food company but Starbucks offering health insurance and modest stock options to part-timers. Increased consumer participation- Starbucks does a nice job of encouraging this through its integrated marketing communications efforts. For example has questionnaires in its stores urging customers to send in feedback about their experiences.

    12. Facilities for future expansion The company's efforts to greatly increase its sphere of strategic interest by its joint ventures with Pepsi and Dreyer's, its move to sell coffee in supermarkets, and the possibility of marketing fruit-juice drinks and candy under the Starbucks label represented In order to sustain the company's growth and make Starbucks a strong global brand, that the company had to challenge the status quo, be innovative, take risks, and alter its vision of who it was, what it did, and where it was headed.

    13. Holistic Marketing Internal marketing Every partner/barista hired for a retail job in a Starbucks store received at least 24 hours training in the first two to four weeks. Management trainees attended classes for 8 to 12 weeks. Their training went much deeper, covering not only the information imparted to baristas but also the details of store operations, practices and procedures as set forth in the company's operating manual, information systems, and the basics of managing people. One of their major objectives was to ingrain the company's values, principles, and culture and to impart their knowledge about coffee and their passion about Starbucks.

    14. External marketing Promotion- Starbucks usually picks one or two charities or event that reach the community it serves. For example - Free tall cup of brewed coffee to anyone who votes on election day. Price- Starbucks represents an attractive combination of price features, high quality, good service and other attributes customers find attractive.

    15. Service Quality Management STRATEGIC CONCEPT TOP MANAGEMENT COMMITMENT High dedicated to the company Health insurance and stock options for the workers HIGH STANDARD High service quality standard Better and faster delivery system Innovative

    16. INNOVATIVE PRODUCT Event Products : Coffee beverages Non-coffee beverages Cakes and pastry Sandwich Salad Etc.

    17. SERVICE QUALITY MANAGEMENT SELF SERVICE TECHNOLOGY Convenient and faster for customer MONITORING SERVICE Customer service : Voice of customer

    18. SERVICE DIFFERENTIATION INNOVATIVE FEATURE : STARBUCKS EXPRESS Customer can pre-ordder and prepay for beverages and pastries via phone or on website. STARBUCKS CARD Prepaid card, priced from $5 to $500, that offered to cuts transaction times. HIGH SPEED WIRELESS INTERNET SERVICE

    19. STARBUCKSS CHALLENGES Going Global focuses on the risks and rewards of expanding into new geographic and cultural markets

    20. STARBUCKSS CHALLENGES How to maintain growth and keep growing Cannibalizations: one challenge lies on its own dominance with Starbucks in every corner of a street there is likelihood of cannibalization of sales from existing locations. Starbucks closed 600 underperforming locations in 2008. This seems to be an admission that cannibalization seems to be a major challenge. Quality :premium coffee quality with local taste, theres some specific coffee drinking market that Starbucks still left open. green tea Frappuccino in Taiwan and Japan. It's the largest-selling Frappuccino in those countries. We don't offer it anywhere else.green tea Frappuccino in Taiwan and Japan. It's the largest-selling Frappuccino in those countries. We don't offer it anywhere else.

    21. STARBUCKSS CHALLENGES Prices: as a high-end coffee, Starbuck has a substantial price premium, should have a more reasonable price strategy to face with harsh competition of others like Mc coffee. Economic situation: The company relies on consumer discretionary spending to drive sales. Consequently, a major economic change can have a large impact on revenues. Eg: With the global economic recession of 2008-2009, potential customers have less money and are more likely to forgo a $4 specialty coffee in favor of a cheaper alternative. Target demographics-yuppie, teens: Starbucks targets a higher-income crowd of the young and college-educated, a group that tends toward higher luxury-consumption levels. Although this focus allows the company to maintain high profit margins, it also puts Starbucks at greater risk from a shift in consumer spending habit. habits. If Starbucks chooses to expand further into coffee for home consumption, it could find a new consumer base in baby boomers (the largest demographic, 26% of the population), who are more likely to drink their coffee at home but who are more price sensitive than "yuppies" (young urban professionals).k Teen coffeedrinkers are also important to Starbucks--many believe that this segment will be the main driver of domestic specialty coffee consumption in the next few habits. If Starbucks chooses to expand further into coffee for home consumption, it could find a new consumer base in baby boomers (the largest demographic, 26% of the population), who are more likely to drink their coffee at home but who are more price sensitive than "yuppies" (young urban professionals).k Teen coffeedrinkers are also important to Starbucks--many believe that this segment will be the main driver of domestic specialty coffee consumption in the next few

    22. STARBUCKSS CHALLENGES Being a Global responsibility corporation: Environment: In October 2008, Starbucks was report wasting 23.4 million litres of water a day by leaving a tap constantly running for rinsing utensils, 10% used cup in the US is not recycle, what about hundred million cups served over the world? Health Concerns: Consumers awareness of their health rise the concern of obesity with dairy, sugar and caffeine product, may caused some would-be Starbucks customers to turn to their health options. Labor relation: should improve working conditions and others benefits for employee

    23. Questions & Discussion

    24. Questions Identify the controllable and uncontrollable elements that Starbucks has encountered in entering Global Market. What are the majors sources of risk facing the company and discuss potential solutions. Critique Starbucks overall corporate strategy. How might Starbucks improve profitability in Japan.

    25. The controllable and uncontrollable elements that Starbucks has encountered in different markets

    26. What are the major sources of risk facing the company and discuss the potential solutions? Three major risks at domestic region Saturated market condition in USA. Loosing customers, customers that grow annoyed because fewer options are available. The young generation (Generation X) feels about Starbucks Starbucks Turned off because: a lot of activist on gen X, really turn off by well known brand image and Kenny G music are really turn off.Starbucks Turned off because: a lot of activist on gen X, really turn off by well known brand image and Kenny G music are really turn off.

    27. What are the major sources of risk facing the company and discuss the potential solutions? Base on the risks faced by Starbucks, the solutions we suggest are: One of the risks that they faced in USA-the risks of market saturation can be over come in focusing on international or global marketing. They may focus on to increase the quality of service and coffee for which they are well known. As they were facing ominously hostile reception from its future consumer (Generation X), they should reposition their product according to customers need, so that they find can the $3 they are paying for a cup of coffee is reasonable. They can also change their pricing strategy. As coffee is the core product of them to serve they should give more focus on improving the quality of coffee. They may make arrangement for some other items beside coffee as well. As Starbucks is going abroad to expand it business with local partners of that region there risk of Self Reference Criterion (SRC) and ethnocentrism. It can be over come through proper adjustment keeping SRC and ethnocentrism away in decision making. The primary obstacles to success in international marketing are a persons self reference criterion (SRC) and an associated ethnocentrism. SRC is an unconscious reference to ones own cultural values, experiences, and Knowledge as a basis for decisions. Closely connected is ethnocentrism, that is, the notion that ones own culture or company knows best how to do things. Ethnocentrism is particularly a problem for American managers at the beginning of the 21st century because of Americas dominance in the World economy during the late 1990s. Ethnocentrism is generally a problem when managers from affluent countries work with managers and markets in less affluent countries. Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true light. but in international marketing, relying on ones SRC could produce an inadequately adapted marketing program that ends in failure.The primary obstacles to success in international marketing are a persons self reference criterion (SRC) and an associated ethnocentrism. SRC is an unconscious reference to ones own cultural values, experiences, and Knowledge as a basis for decisions. Closely connected is ethnocentrism, that is, the notion that ones own culture or company knows best how to do things. Ethnocentrism is particularly a problem for American managers at the beginning of the 21st century because of Americas dominance in the World economy during the late 1990s. Ethnocentrism is generally a problem when managers from affluent countries work with managers and markets in less affluent countries. Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true light. but in international marketing, relying on ones SRC could produce an inadequately adapted marketing program that ends in failure.

    28. Critique Starbucks overall corporate strategy Starbucks are incurring losses for mismatch between their corporate strategies and the customers expectations. Those are described below: When Starbucks is blanketing some specific cities for dominance, still eight states in the United States are with no Starbucks stores. Starbucks free cities are - Butte, Mont., and N.D. They believe that the more the outlet the more the sale. Basing on this strategy they are increasing their outlets day by day in their domestic region as well as abroad. Without satisfying the customers need, by increasing the numbers they will not be able to succeed in their mission. Starbuckss target customers are the Baby boomers or older generation, it has no differential pricing for the Generation X or younger generation. Though Starbucks fully control its business in the USA, but it has franchisee outside the USA. Depending on the franchisees undermines the strength of Starbucks outside the USA.

    29. Critique Starbucks overall corporate strategy (Contd) Starbucks is about to become a global company. But its spending does not match with its status. Starbucks only spends 1% of its revenue as advertisement; whereas most companies its size spend at least 10% revenue. Low spending on advertisement obstruct Starbuckss brand building outside the USA. By aggressive marketing strategy they have created entry barrier for the competitors through predatory real-estate strategy. They have focused on the product concept which myopic attitude in making corporate strategy. Starbucks pay does not come close to match the work load of their employees that created dissatisfaction among them affecting sterling service and even the coffee itself. Schultz should be more cautious to various cultural and ethnic affairs. As a Chair of Starbucks and having market in Muslim dominated regions , he can not make any scathing comment against Palestinian. predatory real-estate strategy = paying more than market-rate rents to keep competitors out of a location. Still, the company's strategy could backfire. Not only will neighborhood activists and local businesses increasingly resent the tactics, but customers could also grow annoyed over having fewer choices.(http://www.vizettes.com/perspectives/tc/korporate/starfux/starvebucks.htm) Despite the current onslaught undertaken by Israel against the Palestinian people, Starbucks CEO Howard Schultz is fueling an already tense situation by using inciteful language to legitimize Israels actions.He has also called on every Jew in America to rise up and defend Israel at any cost. (http://www.muslimtents.com/aminahsworld/boycott_starbucks.htm)predatory real-estate strategy = paying more than market-rate rents to keep competitors out of a location. Still, the company's strategy could backfire. Not only will neighborhood activists and local businesses increasingly resent the tactics, but customers could also grow annoyed over having fewer choices.(http://www.vizettes.com/perspectives/tc/korporate/starfux/starvebucks.htm) Despite the current onslaught undertaken by Israel against the Palestinian people, Starbucks CEO Howard Schultz is fueling an already tense situation by using inciteful language to legitimize Israels actions.He has also called on every Jew in America to rise up and defend Israel at any cost. (http://www.muslimtents.com/aminahsworld/boycott_starbucks.htm)

    30. How might Starbucks improve profitability in Japan? To improve the profitability in Japan they should reposition their product and service. The Japanese are less conscious about the price. According to the present cultural trend in Japan, younger generation is inclined towards spending their time in a constructive manner. The source from internet says that the Japanese youth have very less time for their leisure. Besides sipping a cup of coffee in a coffee shop they love to learn English Language. Even they do not hesitate to spend 1,500 in an internet caf just for sleeping.

    31. How might Starbucks improve profitability in Japan? (Contd) Starbucks and its competitors in Japan are providing the same fare. As a result, competitors can easily eat up Starbuckss share. So, Starbuck should either reduce the price or increase benefits in Japan. Starbucks can introduce US style online system in Japan, so that busy Japanese can provide their order in the internet. Starbucks can introduce various cultural campaign or entertainment campaign in Japan, so that Japanese youth feel attraction to come Starbucks. In times of economic recession extra activities are necessary to boost up sales. So, for attracting the Japanese market in addition to coffee, arrangement of internet facility and other amenities should also be provided.

    32. CONCLUSION FACTORS CAN LEAD TO SUCCESS OF STRABUCKS IN THE FUTURE INNOVATION BUY, SELL AND USE ENVIRONMENTALLY FRIENDLY PRODUCTS MEET SATISFY OF CUSTOMER WITH FASTER AND CONVINIENT IMPROVE FACILITIES OF STALL

    33. CONCLUSION (Contd) Since the Company has been concentrating on developing more blends of coffee drinks, Starbucks may have over looked the potential market of different healthy tea drinks. Although Starbucks maintains a top-notch management team, the Company does not seem to have a well organized consumer relations department.

    34. Recommendations For Improvement Implement Employee Branding: Employees are motivated with more incentive to perform and innovate Lower employee turnover rates Positive reinforcement which leads to higher feelings of job satisfaction Let them feel they are not just employees but rather as professional baristas Prevent Self-Cannibalism: Stores must be strategically located

    35. Recommendations For Improvement Improve Corporate Social Responsibility Help farmers have a sustainable livelihood Improve the life and living conditions of the farmers who plants cocoa by help building rural infrastructures such as schools, irrigation systems, roads and houses for the farmers. Pricing Strategy Starbucks should consider the general demand and work a price reduction strategy into the Company's overall pricing strategies. Price reduction strategies may include a rebate or coupon promotion program as the increase in sales will offset the costs of these price reduction programs.

    36. Recommendations For Improvement 5. Neglected Customers Starbucks should also consider researching into the tea specialty drinks market. Tea drinks will increase popularity because their perceived value of healthy benefits. Starbucks may need to review its company policies to see if updates are needed to address different consumer relation situations.

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