Starbucks Case for Consumer Behavior Essay

Starbucks Case for Consumer Behavior Essay.

The grid above is the 10 factors that affect the Spread of Innovations. Starbucks’ target market is young people, highly educated, and trend group. The life-style in China also evolves after the economic reformed and new policies regarding having child. This causes young Chinese people to not have the same strong mentality as the old generations. They are easily manipulated by western culture. They believe that Chinese culture has been outdated and not fashionable anymore. As a result, it is easy for Starbucks to influence them from many western movies to drink coffee and be fashionable.

Starbucks also continues on encouraging Chinese people for greater coffee consumption with its communication and precise target on Chinese market. This is because Chinese people give a lot of importance to self-image and expect social recognition. This causes Starbucks to associate its image to famous young and trendy Chinese actor/actress. Therefore, by drinking Starbucks coffee, it will increase your social status while you are also being fashionable and modern in cohesion with one’s epoch.

Starbucks also starts on educating them regarding the good effect of coffee benefits and how to enjoy its delicacies for each of its products. This causes Starbucks to broaden its market to young-old generations who have more money than the youngsters. Starbucks also put their shop in typical clustered high traffic and high visibility locations. Varying store size and chairs’ comfort also allows Starbucks to be situated in various settings, such as airport, grocery store, mall, office building, school, and street corners.

It also encourages Starbucks to buy some smaller coffee companies so that it reduces its competitors and the risk of cannibalizations. It also gains local power and knowledge to enhance its expansion while reducing its responsibility due to ownership that Starbucks provides to former owner with maintaining its favorite products from the former one. Therefore, with strategic location, broader market, and wider knowledge of coffee and its variations, Starbucks has become more and more successful international company.

However the coffee’s price in Starbucks is still very high for normal Chinese people. Therefore, only the rich people are able to drink Starbucks coffee and that makes people feel it is prestigious. The inferiority in price competency of Starbucks can be one of a barrier for its expansion in China. That will make majority of people to choose drinking cheap coffee like Nescafe inside their houses or offices rather than drinking outside in an expensive shop since most of the people do not appreciate coffee for its delicate difference of taste.

According to the analysis above we can deliver an advertisement in order to successfully encourage greater coffee consumption. Starbucks should improve its communication and define precisely its target on Chinese market. Chinese people give a lot of importance to self-image and expect such a brand to fulfill their need of recognition. Starbucks should also associate his image to famous youngest and trendy Chinese people as singers/actors (like with George Clooney for Nespresso), for example: to emphasize on the good effects of his coffee and other beverages.

Starbucks should also communicate on the delicious and particular taste of its products. Some ideas for advertising campaign can be like in the following: * Video Chinese young and trendy people are at a concert of well known Chinese singer and dream to have an autograph but there are too many people and finally leave the place with empty hands, very disappointed. Then they go in the Starbucks across the street and settled at a table, look annoyed. They order a drink when suddenly the famous singer appears in the cafe and orders coffee. Chinese youngsters are amazed and hen appears the slogan: “Starbucks give taste to your life” : This ad plays on words showing that drinks from Starbucks taste better but also that, beyond the taste, they make you happy. Advertising emphasis on the need for recognition that can serve Starbucks. * Visual We could create a poster with the famous singer surrounded by the two young people who are now with sunglasses (they are now trendy and successful) and seem very happy with a big smile. * Health Make a TV program or CM about the research on the coffee’s effect on human health.

Emphasize that coffee is good for health so that people would be able to appreciate coffee as much as tea. * Affordability Since Starbucks coffee is expensive to most of the Chinese people, the company can make discount on the price like student discount in occasion. That may make people appreciate coffee’s taste more and in the same time, may improve company’s image of being a youth friendly company. If the company keeps doing that, the people who had its coffee, when they grow up, will appreciate the taste of coffee and think it is more reasonable to buy Starbucks coffee despite paying a little bit more money on it.

Despite the difference between culture backgrounds, Starbucks has to make some changes in delivery their brand image into the Chinese market, especially for internal and external marketing. From the internal marketing perspective, Starbucks has to put more concern for their employment policy, where they should create a win-win solution, by doing so Starbucks could save the cost of efficiency while making employees happy. Create a simultaneous communication to the market and society in China is one of paradigm that Starbucks should emphasize, just what they had been through today.

Utilizing and cooperating with local farmer in the south-west province of Yunnan, had create jobs and helps local society into better economy. Their products are adaptive and communicative to the Chinese culture, by redesign packaging according to the local national events. Starbuck is considering cultivating their marketing effort to meet local behavior and taste. Figure [ 1 ]: Starbucks Mooncake for Mooncake Festival They also customize some of their offerings, as some Western brand tends to do when they enter on the Chinese Market.

Like many other countries, Chinese market is largely influenced by its culture, which is an ancestral. In response to that, Starbucks could expand their range of coffee to match up the taste of the tea or finding varieties of coffee that have healing properties. They also should pay more attention to the flavors and the colors of their products because Chinese people associate them with yin and yang, traditional culture that has been embedded to each person in China. Nevertheless, extreme customization could also be risky because it can cloud Starbucks face within China.

This causes Starbucks to lose its identity and its brand image. Therefore, Starbucks need to customize some of their offerings to local taste while maintaining its global face – coffee – such as coffee bland green tea moon cakes for moon cake festival; this following Chinese tradition while keeping Starbucks’ identity as a coffee seller not as a tea seller. Furthermore, coffee is still prohibitively expensive and not familiar to majority of the populations, the indication are that despise potential being massive, the growth of coffee will continue to be slow.

Although some Chinese people have already evolved and start buying and enjoying the taste of coffee, majority of Chinese people do not have the power to buy yet they want to. This is because there is no authentic Chinese coffee from Chinese producer that has international standard like in India due to its background as tea-drinking country, its massive variation of teas, and theirs value. Some of the solutions that Starbucks come up with is that teaching southwest at Yunnan province (smaller Chinese cities) to produce coffee and encouraging them to enjoy their own produce.

This creates jobs and help local society to have better economy while learning the essence of coffee and its delicacy. This will increase Starbucks’s profit while may reduce Starbucks’s price so that broader Chinese people can enjoy due to its local products. This is because all Starbucks coffees that are being sold within China are imported from other part of the world that has been charged with heavy taxes. Therefore, by gaining little-by-little and influence people from smaller area, they can be successful; the only problem is time and patient which most western companies do not have.

Because many other coffee companies have surfaced in China, it reduces a bit of Starbucks profit. This is because many other concepts that they provide such as Mcafe, Blenz Coffee, and Pacific Coffee is more accessible and convenient. For instance, why we would need to go to other store if we want to buy coffee when we are with family or friends or business partner in McDonalds, they have McCafe. Besides, they often offer a lower price with not much different taste (for amateur coffee drinkers and novice coffee lovers) and provide a better service; free refill within certain time limit.

The complexity taste of coffee is the same as the complexity taste of tea in China as well as the taste of Wine in French or beer in German. This is one of major complexity of taste preference problem within China that is very hard to change. Currently according to marketing professor, Chinese people value Nescafe, an company that provide instant coffee, more than fresh made coffee from coffee shops due to similarity taste (which is not true, Nescafe has high acidity flavor and low complexity).

In Comparison, India as one of the most populated country in the world do not tell the whole story. Potential of 1. 2 billion population base is largely rural and lower income. The economy is growing and the middle class is increasing in size. Some middle and upper class Indians tend to be located in the major cities such as Mumbai and Delhi where incomes have risen substantially. While the other middle class Indians tend to spread around because other cities have similar number of population with similar GDP.

The coastal market between Mumbai and Delhi represents roughly 180 million people and is therefore highly attractive. It also has more stable growing rate compare with China’s that is decreasing right now due to its new policy for having only child within a family unless both parents do not have any siblings then they can have two children. The Indians who have reputation for drinking spicy tea have changed their habits these last 10 years. Since 1998, coffee consumption has increased by 90% in the country and buying nespresso –a type of espresso – is not rare anymore.

Especially in big cities, there is an increasing number of coffee bars setup, like Coffee Day, Barista, Coffee Bean, or Costa Coffee. However, only middle and high class people go to western style coffee due to its cost which happens also in China. The cleanness of the place, air-conditioned (or heater on winter), comfort and cozy seats are one of the key success factors in India and China. Even if this phenomenon touches only a fifth of Indian people, it is already widely enough to guarantee the success of coffee bars, and convince Starbucks to enter the market war.

With widely knowledge of coffee, Starbucks is ready to not neglect its new implantations in India to guarantee their product among the locals by adapting their product and taste. With extensive research, Indian coffee has a good reputation in other part of the world especially Europe for its flavors, less acidic and sweet. Thus, it is widely used in espresso coffee. However, American prefers African and South American coffee due to its acidity and brighter variety. Currently in India, a new coffee product, coffee bars, has gained widely popularity with chains such as Barista.

Cafe Coffee Day is the country’s largest coffee bar chain. In the Indian home at South India, coffee consumption is greater than elsewhere. This craves Starbucks to participate so that Starbucks can increase its profitability, enhance its knowledge regarding coffee consumption around the globe, and innovate new coffee products to satisfy the hunger of customers for variation. Media is also part of Starbucks marketing strategy to be success in India. The conglomerate TATA is Starbucks’ partner. They launch their product in Taj Hotel which is a huge opportunity due to many tourists and high-class Indian.

After reaching the high-class consumers, Starbucks also need to find other partnerships to expend their concept in other places than luxury hotels to reach out middle-class customers. One of the solutions is Bollywood industry. This is because it is hugely broadcasted in India and western way of living is conveyed. The coffee is part of its life style. Therefore, it will increase the Starbucks’ satisfaction from usage of media to be popular among Indian due to its potential coffee producers and consumers. In the China of the 21th century, drinking tea is a real way of life inherited from the glory past of the “Middle Kingdom”.

Indeed, trough globalization and the progressive installation of Western culture in China, many Chinese people consider drinking tea as a means to preserve the country’s identity as it is the national drink. It can appear as a way to refuse the Western’s submission. Moreover, tea is a real symbol of luxury in China, but an accessible luxury (even if some teas can reach sky-high prices during auctions! ). Last but not least, tea can also be regarded as a self oriented-luxury, a kind of delight pleasure in a serenity mood of a degustation.

Starbucks Case for Consumer Behavior Essay

Starbucks coffee a case study Essay

Starbucks coffee a case study Essay.

1. INTRODUCTION OF STARBUCKS COFFEE

The company, Starbucks Coffee was initially incorporated in the year 1971 by 3 entrepreneurs in Seattle where the business of the company is mainly selling whole bean coffee. Throughout the years of 1990s, Starbucks Coffee under the leadership of Howard Schultz, the company had expanded and growth rapidly with several efforts done. Starbucks coffee started its global expansion from year 1996 opening its first store outside of North America in Japan. Opening globally made Starbucks Coffee Company to record total net revenues of USD 9.

8 billion for its business sales and operation. One of the Starbucks Coffee Company globally expansion market is Malaysia Food and Beverages Industry.

Starbucks Coffee Company expanded to Malaysia in year 1998. The mode of entry of Starbucks Coffee Company to Malaysia expanding and operating its business through the mode of licensing. Berjaya Corporation Berhad is the company that obtained the license to operate Starbucks Coffee Company locally. Berjaya Starbucks Company Sdn. Bhd. Is formed and jointly owned by Starbucks Coffee International and Berjaya Corporation Berhad.

Starbucks Coffee Malaysia opened its first store on 17th December, 1998 at KL Plaza Bintang, Kuala Lumpur.

The business of Starbucks Coffee Malaysia basically are selling of espresso and coffee beverages, non-espresso and coffee beverages, coffee-related accessories and equipment, gift and merchandise, souvenirs, pastries and confessions. To date, in Malaysia itself, Starbucks had more than 141 stores operating the coffee business, and more than 700 stores across six Southeast Asian markets, including Indonesia, Malaysia, the Philippines, Singapore, Thailand and, most recently, Vietnam.

2. WHAT IS MARKET SEGMENTATION

Market segmentation is a process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior that might require separate products or marketing programs (Kotler and Armstrong, 2006). Initially Starbucks was based as a Socio-Economic segmentation base in consumer markets as it has concentrated on social class particularly the business class people, those who are working at the office and wanted to have a cup of coffee with good atmosphere and facilities. Starbucks also had segmented his market by geographic and demographically by selecting the store location where they can find the educated and coffee lovers (Dibb and Simkin, 1996).

2.1 SEGMENTATION OF CONSUMER MARKET OF STARBUCKS COFFEE

2.1.1 GEOGRAPHICAL SEGMENTATION

Starbucks in Malaysia is operated by Berjaya Starbucks Coffee Company Sdn Bhd., a joint-venture between Starbucks Coffee Company and Berjaya Group Berhad. From its first store opening in Kuala Lumpur on 17 December 1998, It has expanded to Sabah and Sarawak and surpassed the 140 stores milestone in January 2012. Now into our 14th year operation, Starbucks has grown not only to become the favorite coffee place for Malaysians but also a productive member of communities across the country. In its efforts to adapt as the world rapidly evolves, Starbucks Malaysia introduced the new drive-thru concept stores with consistency in mind. This new platform gives customers the option to enjoy their favorite coffee on the go, or at the store should they prefer to stretch their legs and relax. In Malaysia, Starbucks drive-thru concept stores are located in Johor Bahru, Shah Alam, Cyberjaya, and Petronas Kajang along the highway as well as Penang, the northern region of peninsular Malaysia.

2.1.2 DEMOGRAPHIC SEGMENTATION

This divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Demographic factors are the most popular bases for segmenting customer groups. Starbucks targets both males and females, mainly 18-44 year olds, but really does cater for everybody’s needs. And because young children don’t usually drink coffee, Starbucks offers a range of non-coffee beverages to cater for the whole family. Starbucks history has shown that they place a huge emphasis on product quality. Their coffee, even if priced slightly more expensive than expected is notorious for satisfying customers with its rich, delicious taste and aroma. Local sensitivity must be taken into account, as there difference in Ethnicity in Malaysia, the Chinese, Indian-Malays, and Malays. It is essential for Starbucks to understand the cultures and norms of Malaysia in their promotional campaign.

2.1.3 PSYCHOGRAPHIC SEGMENTATION

Basically, it is the process of dividing the market based on the way people think. Psychographic segmentation includes variables of personality, motives, lifestyles, and social class. Psychographics are based on the customer’s activities, interests and opinions, so it’s basically how they spend their time, what their preferences and priorities are and how they feel about events and issues. In Malaysia, Starbucks has gone a great length in providing daily inspiration for all their customers one day, one moment, and one cup at a time.

Starbucks organize exciting events such as Halloween and Holiday parties as well as hold regular new product launches to further strengthen the Starbucks experience. Starbuck partners know their regular customers by name, send them birthday greetings, and remember their favorite beverage. During major festive such as the Chinese New Year and Hari Raya Aidilfitri, Starbucks celebrate with their customers by offering beverages that appeal to local market. Starbucks incorporate elements of these festivals in the way they greet their customers and decorate their stores to lift up the festive spirit.

2.1.4 BEHAVIORAL SEGMENTATION

Consumer decides on which brand they want to choose based on the functional benefits, the emotional benefits, or both (Jobber and Fahy, 2006). The function or performance benefits of the brand are important to consumers, but they also choose particular brands because it can be used to express their personality, social status, or affiliation (symbolic purposes) or to fulfill their internal psychological needs, such as the need for change or newness (emotional purposes) (Solomon et al., 2002). Some researchers present purchasing as a problem and are often presented as the buyer decision-making model: problem recognition, information search, evaluation of alternatives, purchase, post-purchase evaluation (Jobber and Fahy, 2006). For high involvement products, such as high priced products/services (economic risk) and products/services visible to others (psychological and social risk), the consumer often goes through an extended decision-making process that includes all these steps.

However, with the prices ranging from RM12 for a basic espresso to over RM22 for hot lattes, Starbucks’ prices are among the highest in the Malaysia, but in the general scheme of things coffee is a low-involvement product. This means that consumer are often engaged in a limited decision making process, or they may see coffee buying as an impulse purchase or a routine purchase. Additionally, if consumers are loyal to a specific brand, they would tend to buy coffee without much information search or evaluation of alternatives (Jobber and Fahy, 2006). Starbucks is trying to get consumers to get more involved in the product in several ways. First, Starbucks is marketed as a status item and so it is more high involvement (has more economic, psychological, and social risk) than unbranded coffee or cheaper coffee from Subway or McDonalds.

Second, the company is using various campaigns, such as ‘Bold Coffee’ campaign and the ‘Via’ taste challenge recently conducted in the UK to get consumers to come into the store continually and try its products. This is a good use of buyer behavior theory, which predicts that customers may switch brands just to try something new (Jobber and Fahy, 2006). By providing customers with a new flavor to try each week, Starbucks actively manages customers’ natural inclination to try new things. And by emphasizing its socially responsible behavior, Starbucks is also providing consumers with more benefits on which to evaluate its products. Starbucks is also making good use of consumer buyer behavior theory by building a really loves coffee strong brand to which customers are loyal, meaning that these customers do not even consider other brands when they are going for coffee, they will immediately choose Starbucks because it is the coffee for anyone who really loves coffee.

2.2 POSITIONING STRATEGY FOR STARBUCKS COFFEE COMPANY.

According to Mullins and Walker (2010), brand positioning can be defined as the image that the marker intends to put into the consumer mindset comparing with other brands and the ways the brand is placed in the consumer mindset. It can be said as the way a company would like the consumer to see of its company product or service. In the case of Starbucks Coffee, the company had positioned the brand into the mindset of its consumer as “Third Place” environment. The “Third Place” environment refers as the place other than workplace and home that an individual can visit to relax, gather or socialize with friends and family.

Therefore, Starbucks store is often decorated and filled with warm and comfortable climate such as nice sofa, Wi-Fi services, music and books offered to consumer. Additionally, Starbucks also positioned its brand of a quality-oriented product and services. Quality product refers to its finest coffee beverages and service refers to its environment, professionalism of its barista in brewing the finest coffee and the way its treat the customer. Starbucks Coffee understand the important of brand positioning in the consumer mind as the customer will not revisit if the product or service offered would not satisfy their taste and preference on coffee.

2.2.1 MICHEAL PORTER GENERIC COMPETITIVE STRATEGIES

Starbucks Malaysia is operating its business in the local food and beverage industry by adopting the Michael Porter Generic Competitive Strategies which intends to specify the company game plan to compete in the industry while maintaining its competitive advantage over its rivalry. The company in Malaysia is practicing the differentiation strategy. Commonly, Starbucks is well known for its quality of coffee. It has its high quality sources of coffee bean and plantation. These made the company different from the local company that does not serve quality but price as they main advantage. The company is differentiating the nature of the business from local coffee company such as Old Town White Coffee.

Starbucks developed the concept of Third Place to sustain its consumer by inserting the perception of Starbucks Coffee store as their third place other than working environment and home. It intends to generate the sense of belonging of its stakeholders and thus enhancing the relationship with them, retaining them and attracting new potential non-coffee market. In brief, Starbucks Malaysia is operating the business in Malaysia using the differentiation strategy in term of quality of the coffee provided and the comfort environment offered to its consumers to enjoy the life other than working and home environment.

2.2.2 CORPORATE SOCIAL RESPONSIBILITIES STRATEGY

Today, operating in the dynamic business environment, company has to response shortly to consumer taste and preference. Environmental issues have now becoming a concern for consumer before making purchase decision. They are now more aware and alert than before seeking environmental information about a company’s product contributing their efforts to preserve the environment. Starbucks, as one of the world leading coffee company, is facing controversy of coffee towards the health of human being. For this reason, Starbucks Malaysia, has adopted the corporate social responsibilities strategies as one of their marketing management practices before the issue is highlighted widely. Starbucks Malaysia has its decaf coffee powder to reduce the impact if caffeine towards the health of its consumer. Consumer can order coffee brew from caffeine or decaf coffee powder. Additionally, Starbucks Malaysia is also offering its consumer choice of milk to brew the coffee.

Consumer can either order their coffee using low fat milk or low fat soymilk. In term of stakeholder interest, Starbucks Malaysia treats their employees as partner by offering them comfort working environment. The employees can take a short break after a working hour of 5 hour, free beverages to reward its employees daily up to 5 cups of beverages. Starbucks Malaysia also is committed to the origin of the coffee product, the environment and the communities. Lots of efforts done to realize the corporate social responsibilities strategy to ensure the confidence of consumer towards the company such as Coffee Sourcing Guidelines, Conservation Coffee, Fair Trade Certified Coffee, Organic Coffee, Starbucks and CARE as well as their global corporate social responsibilities reporting which further address the stakeholder’s interest of environment and community in details.

It is clear that Starbucks widest use of marketing tool is through word of mouth marketing as customer will help the company to share and spread the quality product offered. However, for the reason of coffee health and environmental and communities concern nowadays as a result of globalization, consumer nowadays demand more on the product that they purchase. They demand more on intrinsic value that they could enjoy buying a company’s product while extrinsically enjoying the product of the company.

In the case of Starbucks, to provide finest quality of coffee signify that the premium price placed for its coffee and this will slowly weaken down its competitive position in the market especially during global financial meltdown. To overcome or slower the process, the company switch the focus of the consumer on price but to raise their awareness on Starbucks efforts done to the environment and community in reflect on their premium coffee price compare to the competitors. As a result, corporate social responsibilities strategy is nowadays a good marketing management practices that a company can adopted to sustain its market position and share in the industry.

3. THE ROLE OF MARKETING MIXES OF STARBUCKS COFFEE TO ACHIEVE THE RIGHT COMPETITIVE ADVANTAGE.

The marketing concept of 4Ps was formulated by McCarthy in 1975. The 4Ps is an element used to represent products, prices, promotion and place in the marketing mix. For over decades, these elements have been adopted as the root from which marketing plans are developed. In any case, with recent attention offered to service marketing in recent years, theorists have developed extra Ps to the basic concept. Fifield and Gilligan (1996) are the authors who recognized the need to include over variables – process, physical, and people to form the 7Ps of service marketing –, but only the initial 4Ps will be used to illustrate how marketing mix stimuli in Starbucks influence cognitive process, affective and behavioral response of customers as the company deals more on products rather than services. These 7Ps are:

1. Product – features, quality and quantity
2. Place – the location where the products are sold, number of outlets. 3. Price – strategy, determinants, levels.
4. Promotion – advertisement, sales promotion, public relations 5. People – quantity, quality, training, promotion.
6. Process – principles, automation, control measures. 7. Physical- cleanliness, décor, ambience of the service

3.1 PRODUCT

Florence (2013) stated that one of the main corporate objectives of Starbucks is to create standard taste, irrespective of the country or location where they operate in. The company is of the view that while standardization is essential for reducing operation cost, adapting to the local environment they operate in is important for business success. As such, there concept of “Its mission is to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” has been the founding principle of business management in Starbucks. Although Starbucks offers the same blend of coffee in terms of ingredients and taste standards across the world, their products are designed to feature the culture, cuisine and customs of Malaysia. Thus, this is why the coffee shop is still the most preferred across country.

These examples are how the company has designed its business strategy to focus on the local needs of its market, instead of adopting an international menu. By focusing on the local needs, the company is communicative a cognitive mind of value which the customers no matter where they might be across the globe will use in processing their purchase decision. As the company offers beverages and foods that are locally made, the customer value is increased in the sense that customer can be sure of having meals that meet their local taste.

In that case, the affective behavior is increased and this led to increase in customer loyalty and repurchase decision. When customers travel abroad as well, there might be a sense of cognition that Starbucks is the place to be – for tasking quality coffee internationally – as this is the value the company constantly communicates to its customer. For instance, the sells locally made white coffee in Malaysia, while they sell the pure black coffee in Brazil. The snacks are also different and tailored to the market’s taste with local Malaysian ingredients used in Malaysian restaurants and the local ingredients of other countries used in their respective outlets in those countries.

3.2 PLACE

Currently, Starbucks has 18,000 restaurant outlets in 60 countries across the globe (Florence 2013). The company still continues its focus on management of capital, which is an illustration of its effective, prudent and strategic expansion. The increase potential for growth in the international market has been learned from its operation in the USA. This strategy has created a benchmarking gap between the company and its competitors. However, there is a need to understand the importance of looking back and using the past experience to build on even more lucrative restaurants. Such local and global presence of the company is used in communicating the message of availability.

While the company is focused on business expansion as a means of increasing profitability, the expansion process is communicating to the market that Starbucks is easily available and accessible. As such, the customers can be assured that no matter where they might be, there is always a chance of having Starbucks around. This form of marketing communication enhances the cognitive processing in the sense that customers can easily visualize Starbucks whenever they fell like going out to have some meals as the company is communicating that they can easily be found around their homes.

In that case, it increases the affective behavior with a strong mental image of accessibility and availability. In some of their outlets around the states such as Kuala Lumpur, Sabah, Sarawak, Melaka, and Penang, Starbucks function 24/7 and this further enhances convenience on the customer’s side. As such, it can be seen that the company has been successful in enhancing positive behavior and attitude towards its brand. Starbucks is readily available in most of the major shopping malls and airports in Malaysia, as well as side corners across certain residential areas in the country and this makes them highly accessible.

3.3 PRICE

Florence(2013) also stated that the company has realized that notwithstanding its cost saving approach that is inbuilt its standardization process, success can only be obtainable by being able to adapt to economic conditions in the different markets they maintain business operations in. This is actually what is happening with the company’s implementation of its pricing strategy which is focused on localization instead of globalization. This is also in line with the company’s business model of think global and act locally. For each country, there are rigorous pricing concepts that can be used to determine the right price for such market. These processes have been described as:

1. Selecting price objectives;
2. Determining demand;
3. Estimating cost;
4. Analyzing competitor’s cost, prices and offer;
5. Selecting appropriate pricing method; and
6. Selecting the definitive price.

The above processes are the framework which the company uses in designing prices for its products across countries. The overall pricing objectives of Starbucks is to increase market share in each of the countries it operate in and this is the barometer used in setting prices for each of these market (Florence 2013). Such an approach whereby the company sets price according to market value is the best option. This is because, there are variations in earnings across the globe, and standardizing the pricing process wills an ineffective measure. For instance in the USA, the pay for 1 hours could be $5, and the same amount could be the pay for 3 hours in Malaysia or 6 hours in the Philippines, and even higher in some of the developing world.

Therefore, while the US employ can afford to spend $5 on a meal, this might be possible in the countries where the pay is actually lower. In view of that, Starbucks is communicating value per price by adopting a localized pricing option in Malaysia. This is because, the international customers will perceive high value for the products offered in relation to the American market, but will be paying a lot cheaper for the same quality. Overall, this will increase their affective behavior towards the brand and offer them numerous reasons to choose Starbucks over its competitors like Oldtown White coffee and Coffee bean companies. As such, it can be stated that it is significant to note that the company has been adopting numerous localized strategies in relation to the marketing mix discusses, and the reason behind such is to increase brand loyalty and subsequently increase their global market share. The company also adopts pricing to communicate value in the sense that its high price is a representation of higher quality over other brands.

3.4 PROMOTION

The final context that will be discussed is the issue of how promotion influences cognitive, affective and behavioral attitudes of customers towards Starbuck. Promotion is also known as the marketing communications mix, and it was developed, who also stated that it comprises of five major tools as:

1. Advertising;
2. Direct marketing;
3. Sales promotion;
4. Public relation; and
5. Personal selling (Kotler 1994).

By adopting these tools, Starbucks also localizes its marketing communications strategy, as the company seeks to meet the enormous demands of cultural and environmental differences that exist across Malaysia. It was Florence (2013) who stated that it would naïve of the company or any other company to ignore the fact that differences exists amongst markets in relation to culture and customers, as the ignorance or acknowledgement will have high influence of the performance of brands. Although the company focuses on promoting its corporate image global, it advertises its products by adopting the Maxim of “branding globally, advertising locally” (Sandler & Shani 1991) as it’s promotionally strategy. For instance, in Starbucks UK advertisement, English footballer such as Alan Shearer are used as the company’s figurehead in promotion of its products, while the company also uses Fabien Barthez (the international goalkeeper of France) for its advertisement in France.

In terms of setting, the environment of Starbucks in China features mostly big round tables which is a representation of communism in china – allowing customers to dine with their families, while the American setting is more of single and settings, which represents the American view of individualism. Overall, the promotional strategy adopted in Starbucks is yielding the same effect as other marketing mix discussed above. The fact from this analysis can be stated that, the company has been able to develop the right approach towards strategically managing its operations across the globe by thinking globally and acting locally at the same time.

The effects of such is that it provides customers with quality and positive information in which they can use for their cognitive processing and this will positively influence their affective behavior. The reason for that is that customers will view Starbucks as respecting their values in terms of culture, customers and cuisines, as well as being caring by pricing their products to suite their economic condition in their country. In that case, the customers will be positively affective towards the brand and this is the main reason behind its global success.

4. HAS THE MALAYSIAN KOPITIAM RESTAURANTS ACHIEVED SUSTAINABLE COMPETITIVE ADVANTAGE IN THE BREWING INDUSTRY?

Malaysian Kopitiam restaurants has achieved sustainable competitive advantage in the brewing industry especially Starbucks Coffee as it has successfully franchised in many states in Malaysia as well as globally. Malaysian Kopitiam restaurants (Starbucks Coffee) has achieved sustainable competitive advantage by so many ways. Firstly, Here at Starbucks, they have groom talented partners (employees) with their outstanding training and development programs. Most of their store partners are food service professionals and college students, and what they all have in common is their passion for great coffee and quality customer service, which ultimately helps them bond as a family and build satisfying careers at Starbucks. The commitment of Starbucks’ partners is a major reason why they are recognized as the leading specialty coffeecompany and the industry benchmark across Malaysia.

Secondly, in Malaysia, Starbucks has gone to great lengths toprovide daily inspiration for all their customers one day, one moment, and one cup at a time. Starbucks organize exciting events such as Halloween and Holliday parties as well as hold regular new product launches to further strengthen the Starbucks experience. Their partners know their regular customers by name, send them birthday greetings, and remember their favorite beverage. For customers who prefer their beverage with a personal touch, Starbucks also provide wireless internet access at all their stores nationwide to make visits to Starbucks a truly relaxing and enjoyable experience.

Thirdly, Starbucks is also very proud to have a collaborated with Persatuan Kebajikan Hope worldwide Kuala Lumpur, for the opening of a free pediatric clinic in May 2005. The clinic, on the Island of Penang, aims to provide specialist pediatric care to children from urban poor families who not be able to afford specialized medical consultation and treatment for these children. Consultations are provide pediatricians and child specialists on a voluntary basis,while our partners volunteer their time in the administration and upkeep of the clinic.

Starbucks organizes the Charity Movie screening and Charity Gold Championship annually to help sustain the costs of running this clinic. Lastly, in its efforts to adapt as the world rapidly evolves, Starbucks Malaysia introduced the new drive-thru concept stores with consistency in mind. This new platform gives customers the option to enjoy their favorite coffee on the go, or at the store should they prefer stretch their legs and relax. In Malaysia, Starbucks drive-thru concept stores are located in Johor Bharu, Shah Alam, Cyber Jaya, Petronas Kajang along the highway as well as Penang, the northern region of Peninsular Malaysia.

5. CONCLUSION

Starbucks claim their leadership in Malaysia Kopitiam restaurants by focusing on a strategy of new products, a stronger connection with customers as the third place and expanding store locations in Malaysia. They never compromised on their quality and service standards and maintain their customer relationships with utmost care. Starbucks is commited to offering the world’s finest coffee while enriching Malaysian’s lives one cup at a time. Today, Starbucks Coffee is cities all over Malaysiaand in 48 countries. The level of success achieved by Starbucks holds some much needed inspiration to the business world.

6. REFRENCES

1) Dibb, S., Simkin, L. (1996), “The Market Segmentation”, New York: Routledge Ltd. 2) Filfield, P. & Gilligan, C. (1996), Strategic Marketing Management, Butterworth-Heinemann Oxford. 3) Florence (2013), “Starbucks: International products branding analysis”. 4) Jobber, D. and Fahy, J. (2006), Foundations of Marketing. Berkshire: McGraw-Hill. 5) Kotler, P. & Armstrong, G. (2006), ‘Principles of Marketing’, (11 ed.). New Jersey: Prentice Hall International, Inc. 6) Sandler, D.M and Shani, D. (1991), “Brand globally but advertise locally? An emperical investigation”, International Marketing Review, vol. 9 No. 4, pp. 18-29. 7) Solomon, M., Bamossy, G., and Askegaard, S. (2002). Consumer Behavior: A European Perspective. Harlow Essex: Pearson Education Ltd.

7. BIBLIOGRAPHY

www.starbucks.com.my/Starbucks Coffee company
www.ukessays.com/company analysis of Starbucks coffee Malaysia www.ukessays.com/marketing portfolio for Starbucks
www.ukessays.com/the coffee and the Malaysian consumers marketing essay www.Shimworld.wordpress.com/Starbucks Malaysia

Starbucks coffee a case study Essay

Competitor Of Starbucks Essay

Competitor Of Starbucks Essay.

There are the known international company that become the competitor for the Starbucks.

There are: Coffee Bean & Tea Leaf
The endurance and popularity of The Bean, as it is affectionately referred to by devotees, can be attributed to the high standards that were established from the beginning. From trend-setting drinks like the World Famous Ice Blended, to the employees who become a part of the communities they work in, The Coffee Bean & Tea Leaf ® has discovered the formula for a successful coffee and tea company.

San Francisco Coffee
The company that serve fresh coffee sourced from the best coffee farms on this green earth and the roast master, uses company to concoct blends and roasts that have the people wringing their hands, anxious for their next hit.

Secret recipe
Secret Recipe Cakes & Café offers a friendly and personalised full-service dining experience for customers and incorporates a modern contemporary and vibrant interior concept with comfort ambience, and great food.

It provides a great respite for customers to enjoy good food and quality time with friends, family or associates, after a long day at work.

Old town white coffee
To be Asia Pacific’s leading white coffee brand, providing high quality products to customers globally

All the competitors try to win the demand of the customer who loves to drink coffee. Each company have their own strategy and uniqueness of their product.

THE MACRO AND MICRO ENVIRONMENT THAT AFFECT THE STARBUCKS COMPANY MACRO ENVIRONMENT
For the Starbucks micro and macro environment factor, we can use PESTEL element to evaluate and observed about the Starbucks. The (PEST) element included:

Political factors

The first factor which shall be kept in mind while studying the macro environment of Starbucks is the political aspect. It has been seen that, Starbucks has significant levels of presence in the coffee market. Starbucks consists of various types of products for government offices, corporate offices. The growth of Starbucks has increased and it means there are lots of demands about the Starbucks Coffee.

However, in certain country, the political try to avoid the Starbuck because some of the countries try to boycott the Israel product. The cases of the boycott make the Starbucks have problem for their expansion of the business. Indirectly, the political of the country will affect the performance and growth of the Starbucks.

Economic factors

Economic factors such as recession which hard a big impact to the different organizations also to the consumer ability to purchase their product due to been unemployed and having debts. The way income is distributed among the individuals impact the marketing activities such as higher income earners, middle and low earners. These economic factors influence marketing segmentation and decisions.

The exchange rate also will affect the Starbucks Company. When the currency decreases their value, it affects the monetary policies. Most of the supplier of the coffee comes from outsider. When the monetary decrease, it will affect the higher cost and the raw material become expensive. Finally, this situation makes the price of the Starbucks become expensive. It’s also become risk for Starbuck in making its coffee with the higher cost.

Social factors

Social factors that influence marketing decisions are such as demographic factors which is relating to the population where when the population increases creates good opportunity for the marketing activities but if it decreases results to great impact in the market. Age, marketers tend to target their market according to the number of age available in an area.

Behaviour also may influence the marketing decision where by some ethnics may not be able to purchase certain products due religion aspects also due to consumer’s different in taste, style and fashion some may like the products others may find them not attractive.

Another than that, the social also included the changing in culture, taste and health consciousness. The culture of Malaysia who loves the coffee made the demand of Starbucks increase. However, Starbucks also need to learn about the culture among the country. Starbucks is International product and well known. Some of the country most prefers tea compare than coffee. That means , that is one of the challenges for Starbucks to come out with variety of product.

Health consciousness of people also influences company to come out with healthy product for its customers. They need to plan new product that concern about the good healthy. It will provide opportunity to Starbucks to expand its business.

Technological factors

The fourth factor which shall be kept in mind while evaluating the macro environment for Starbucks refers to the technological aspect. Starbucks being one of the reputed coffee houses had a robust distribution strategy which helped them to stay ahead of the competition.

Starbucks try to variety their distribution strategy within use the internet and mobile application. Starbucks launched a mobile payment system. This technological advancement helped the customers to pay while sitting at the store with the help of their smart phones.

Starbucks also launched an I-phone mobile payment application. With this application, the customers would be able to have an access of their favourite Starbucks card application. The use of technology will help the enterprise to break through the various distribution channels & be a step ahead of its immediate competitors.

MICRO ENVIRONMENT

The micro environment factors are about internal aspect of Starbucks. The micro environment are evaluate using Porter’s 5 forces model). There are about bargaining power of buyer, bargaining power of supplier, threat of substitute product, threat of new entrant and rivalry among competitors.

Rivalry among existing competitors is high within the industry Starbucks operates in with major competitors like San Francisco coffee, Old Town White Coffee, Coffee Bean & Tea Leaf, Dunkin Donuts and thousands of small local coffee shops and cafes.

Starbucks customers possess large amount of bargaining power because there is no and minimal switching cost for customers, and there is an abundance of offers available for them.

The threat of substitute products and services for Starbucks is substantial. Specifically, substitutes for Starbucks Coffee include tea, juices, soft drinks, water and energy drinks, whereas pubs and bars can be highlighted as substitute places for customers to meet someone and spend their times outside of home and work environments.

Starbucks suppliers have high bargaining power due to the fact that the demand for coffee is high in global level and coffee beans can be produced only in certain geographical areas. Moreover, the issues associated with African coffee producers being treated unfairly by multinational companies are being resolved with the efforts of various non-government organizations, and this is contributing to the increasing bargaining power of suppliers.

However, the threat of new entrants to the industry to compete with Starbucks is low, because the market is highly saturated and substantial amount of financial resources associated with buildings and properties are required in order to enter into the industry.

Competitor Of Starbucks Essay

Dr. Pepper Snapple Group Case Study Essay

Dr. Pepper Snapple Group Case Study Essay.

1. HOW WOULD YOU CHARACTERIZE THE ENERGY BEVERAGE CATEGORY, COMPETITORS, CHANNELS, AND DPSG’S CATEGORY PARTICIPATION IN LATE 2007?_

In late 2007 the energy beverage category was reaching market maturity and projected to have a slower annual growth rate from 2007 to 2011 (10.5%) than it had between 2001 and 2006 (42.5%). Rising prices, packaging competition, and the introduction of hybrid energy beverages also added to the slower projected growth rate. However in 2007 the market still saw growth of 32%.

The category is dominated by 5 major brands (94% of dollar sales), with Red Bull far above the pack with a 43% dollar sales market share.

The other 4 are in close competitions with dollar sales market shares from 10-16%. Though Red Bull continues to grow, so does the competition. New, aggressive competition into the market and brands offering lower prices has brought Red Bull’s market share down from 82% in 2000 to 43% in 2007. This 43% of dollar sales is maintained with only a 30% share of unit case volume. Because of loyalty to Red Bull, consumers pay a premium price for its products.

Red Bull’s 8.5 oz. cans sell for the same price (approx. $2.00) as many competitors’ 16 oz. cans and their 16 oz. can sells for around $3.50.

This loyalty puts Red Bull far above other brands and leaves them to compete with each other on price and packaging. Pepsi and Rockstar are not projected to have any significant media expenditures in 2007, but Red Bull and Hansen Natural Corporation are projected to increase their media expenditures to $60.9 Million (from $39.6M) and $153,800 (from $61,100) respectively. Once again, it is clear to see the major difference between Red Bull and the rest of the group. Coca-Cola (Full-Throttle, Tab) is projected to decrease its media expenditure from $7.3 million to $492K, which is still more than Hansen, but far from the expenditure that Red Bull maintains.

Off-premise retailers represent 71% of total retail dollar sales compared to 29% for on-premise retailers. Off-premise retail sales are dominated by convenience stores (74%), but the off-premise retailers are slowly evolving. Convenience stores are slowly decreasing in percentage of sales, while sales in supermarkets and Wal-Mart are growing. Brands with broad product lines, multi-packs, and widespread distribution networks are succeeding in supermarkets and stores like Wal-Mart. In convenience stores, brands with smaller product lines and high inventory turnover, are gaining success. Restaurants, night clubs, and other on-premise retailers remain constant and are not projected to have any significant changes.

In 2007 DPSG began setting up distribution channels, which were projected to reach 80% of its target market by early 2008. It also began distributing Monster energy drinks on behalf of Hansen. DPSG also participated in the U.S. Sports Drink market in late 2007 with its launch of Accelerade RTD. Using its distribution network, DPSG introduced Accelerade to convenience stores, supermarkets, and mass merchandisers. It targeted the $35 million Americans who were competitive and exercise regularly. It supported the launch with a large marketing budget which consisted of a web site, podcasts, search-engine marketing, and a chat room. It emphasized the protein content to differentiate itself from the competition.

_2. DOES YOUR CHARACTERIZATION BODE WELL FOR A NEW ENERGY BEVERAGE BRAND INTRODUCTION GENERALLY AND FOR DPSG, INC. IN PARTICULAR?_

Generally it does not bode well for the introduction of a new energy beverage brand but in Dr. Pepper Snapple Group’s case, they may have the brand loyalty, budget, and awareness to pull it off. With a large market share and huge media budget, Red Bull makes it difficult for new brands to compete. Unless a brand is willing to spend a large amount of cash on R&D, media expenditures and competitively price its product to give incentive for consumers to switch from Monster or one of the other brands, it would not gain enough of the market share to compete. Red Bull is in a league of its own so new entries would mostly be competing with Monster, Full-Throttle, Tab, Rockstar, and numerous other less popular brands. DPSG on the other hand has the brand loyalty, equity, image, and budget to support such a venture.

It also has some unique qualities such as the addition of protein, a larger, re-sealable bottle, and an emphasis on performance over simply something to perk the consumer up. Since DPSG already has a target market, distribution network, and manufacturing set up, it could feasibly enter the market on the shoulders of its good name. The fact that DPSG has differentiated itself from the other brands also gives them a leg up. If it could successfully attract more consumers from the 35-54 year old range by riding its healthy image and promoting a healthier, more fulfilling energy beverage, it could that target market and become a great competitor.

_3. WHAT TARGET CONSUMER MARKET SHOULD BE CHOSEN FOR A NEW ENERGY BEVERAGE BRAND?_

An opportunity lies in the 35-54 year old range. It is a market that does not receive much attention and is not specifically targeted. Since this target market consumes only slightly less than the 24 and under market, there is a great opportunity to promote a product that suits their needs and advertisements that speak to them. By capturing that market, DPSG will stay consistent with its brand image and give it the awareness and experience to begin transitioning into the 12-34 year old market in the future. After 35, many men and women begin to exercise harder, and more often to maintain their youth as much as they can. If DPSG can provide a happy medium between a sugary energy drink and a full-fledged protein shake, they could help the 35+ consumers feel younger, while still giving them beneficial ingredients that their bodies need.

_4. WHAT PRODUCT SHOULD BE INTRODUCED AND HOW SHOULD IT BE POSITIONED/DIFFERENTIATED?_

Considering DPSG’s brand image, I think its best bet would be to introduce a low carb, low sugar, protein infused energy tea. Since the earliest civilizations, teas have been used for their various health benefits and today is no different. If they target the 35-54 market, a tea would be much more attractive than a sugary, carbonated beverage. Since Snapple has such a good name in today’s marketplace, especially with adults, I believe the drink should be branded under the Snapple name. As of right now, Snapple’s most popular flavors out of all its products are Lemon Tea and Peach Tea. DPSG could parlay that popularity into an energy tea by adding a few ingredients.

In order to position itself in a more grown up market, differentiate itself from the competition, and stay true to its loyal customers, DPSG should introduce the energy tea an aluminum bottle with the same dimensions as its 16 oz. glass bottles. This allows it to be resealed and gives it a different look than the energy drink competition on the shelf. 4-packs could also be considered for supermarket shelves. The tea should keep with the healthy image by using vitamins, minerals, herbs, and other natural ingredients to provide sustainable energy and health benefits that other energy drinks just do not provide. Instead of focusing on providing a large energy burst, DPSG should focus on providing a youthful, energetic feeling, and restoring the body to full potential.

_5. THROUGH WHICH CHANNEL(S) SHOULD A NEW ENERGY BRAND BE DISTRIBUTED?_

The new energy brand should be distributed mostly through off-premise retailers, but health conscious on-premise retailers such as subway would also be a good fit. Convenience stores are a great place to start because of the amount of exposure they provide and their track record in the energy drink market. Supermarkets are also a must because the majority of supermarket shoppers are within the target market. Whole foods would be a great place to showcase a new product to health conscious 35-54 year old adults. Also, vending machines in fitness centers and even placing fridges in sporting goods stores could attract attention from the target market. Other possible vending machine spots include golf-courses, college gymnasiums, police departments, firehouses, and airports.

Dr. Pepper Snapple Group Case Study Essay

Recommendation for Starbucks Coffee Company Essay

Recommendation for Starbucks Coffee Company Essay.

INTRODUCTION

The purpose of this report is to conduct market analysis and recommend appropriate marketing strategies for Starbucks Coffee.

In the report, we will first look into Starbucks’s goal, its product and markets. Then we will look into the key actions and decisions that lead to the success of the company. After that, we will discuss the issues that Starbucks is facing in this competitive global market. For each strategic issue, appropriate marketing recommendations for the company are made respectively.

BACKGROUND AND SITUATION ANALYSIS

Starbucks Coffee starts in 1971 with a single store in Seattle’s Pike Place Market. Today, they are privileged to welcome nearly 35 million customers on a weekly basis, in more than 12,000 stores around the world. (www.starbucks.com)

Starbucks’s goal is to become the leading retailer and brand of coffee in each of its target markets by selling the finest quality coffee and related products and by providing each customer a unique “Starbucks Experience”. “Starbucks Experience” is a third place after home and work with superior customer service, clean and well maintained retail stores which reflect the personalities of the communities in which they operate.

Starbucks strategy for expanding its retail business is to increase its market share mainly by opening additional stores in existing markets and to open stores in new markets. In support of this strategy, Starbucks opened 1,040 new company operated stores in fiscal 2006. (www.starbucks.com)

During fiscal 2006, Starbucks Coffee Company operated retail stores accounted for 85% of total net revenues. (Starbucks Annual Report 2006) In addition to company operated stores, Starbucks works with certain carefully chosen business to operate licensed stores in various places. Its strategy is to reach customers where they work, travel, shop and dine by establishing relationship with people that share the Company’s values and commitment to quality. These relationships take various forms, including licensing arrangements, foodservice accounts and other initiatives related to the Company’s business. Licensed and Foodservice stores can be found on college campuses. Customers can enjoy their Starbucks in select supermarkets, hotels and military bases throughout foodservice venues around the world. During fiscal 2006, specialty revenues accounted for 15% of total net revenues. (Starbucks Annual Report 2006)

Starbucks also recently has strategically sold coffee and tea products through other channels such as supermarkets, or non-traditional retail channels such as United Airlines, Marriott International, Holland-American Cruise Line, and Department Stores.

MARKET ANALYSIS

To achieving growth and making profits, Starbucks started to go international since 1996. International connections can build a strong foreign presence which helps to increase brand recognition and also increase the domestic business. The more stores Starbucks has around the world, the more loyalty and familiarity can be built among its existing and potential customers.

The following are the macro environmental variables which are likely to impact Starbucks when going international:-

_GEOGRAPHICAL FACTORS_

Starbucks has carefully analyzed various strategies for the placement of its stores. They have developed cost-saving options for these stores to meet the need to adapt to each geographic region. They also need to consider the tastes and preferences of each area. For example, customers in New Orleans prefer their bagels toasted and those in Atlanta require more seating for a “social” coffee break.

_DEMOGRAPHICAL FACTORS_

Starbucks begin in US, which is the sector we are examining for demographics. As of July 2005, the population of the U.S. was estimated at 295,734,134 (CIA World Factbook). Population facts are important to Starbucks because they can give Starbucks valuable statistics, such as US population base per Starbucks store. People ages 15-64 make up the largest percentage of the population (67%), and therefore will have greater control of the market than any other sector (CIA World Factbook). This implies that the most important target market for Starbucks are people within this age group. The two largest ethnic groups in the U.S. are white 81.7%, black 12.9% and Asian 4.2%. (CIA World Factbook) The ethnic background is important to a company because it influences tastes, trends, perceptions, values and beliefs of an individual.

_ECONOMICAL FACTORS_

Estimated GDP in 2004 was $11.75 trillion. GDP real growth rate was 4.4% (CIA World Factbook). The growth rate of GDP suggests that the economy is growing, and therefore there is opportunity for Starbucks to expand business. A very large per capita purchasing power parity of $40,100 suggests that Americans have the opportunity to buy specialty coffee drinks from an expensive, quality-intensive organization such as Starbucks (CIA World Factbook).

_3.4 TECHNOLOGICAL FACTORS_

Strategic issues that will challenge Starbucks in the future are related to their tight control and lack of flexibility, organizational structure, and diversification. First, Starbucks is vertically integrated as they buy and roast the beans, ship them to the stores, produce, and sell the coffee. They may face difficulties or have to raise the price of their coffee if the cost of raw beans increases, or there is a decrease in available labor.

The second issue is that they are centralized around controlling all steps of the distribution process, entering into joint ventures which may lead to quality control issues in locations.

Another issue is the ability for growth. Starbucks will continue to grow in their core business, but the more they spread into international and joint ventures they will face increased quality control problems.

_3.5 POLITICAL AND LEGAL FACTORS_

The Los Angeles city council was considering an ordinance that would require licensing of coffeehouses open past midnight. This demonstrates how government exertion can prove unprofitable for the business. Furthermore, anti-trust laws might prevent Starbucks from future expansions, since the company is not owned locally as with other franchisers. Other human-rights activists or organizations can potentially voice their concerns about the business’s process, such as how the leaflets concerning under-paid Guatemalan eventually forces Starbucks to establish several codes for treatments of its foreign subcontractors.

_SOCIAL CULTURAL FACTORS_

Nationalism and cultural differences may result in recurrent problems on resource availability, product quality consistency and costs, which effect adversely to foreign operations. For instance, due to its population and potential of growth, China represents a grate opportunity of market. In the past, coffee was considered as a Western bourgeois commodity in China and people are used to have tea instead. Coffee doesn’t go well with Chinese food and culture as well. Until recently, the market research shows the country’s coffee drinking has doubled in the past four years. (www.marketwatch.com/news) Nevertheless, it still only amounts to about one cup per person per annum and the brand typically is instant Nescafe.

Starbucks strives to create a unique culture with a passionate interest in changing a simple commodity into an addictive gourmet delicacy and meet individual market wants and needs without compromising Starbucks’s brand image and culture of the company.

STRATEGY RECOMMENDATIONS

Starbucks’s competence in the style of stores and creative coffee drinks has propelled it to the front among coffee retailers. Starbucks is not just stands for a cup of fresh and nice coffee. Starbucks is about the passion for the soul of people, quality product, excellent customer service and the experience and understanding of the culture of coffee. In the following paragraphs, we are going to analysis the 4Ps (i.e. Product, Price, Place and Promotion) of Starbucks, followed by appropriate marketing strategic recommendations.

_PRODUCT_

Premium Product Strategy

Starbucks has been committed to sourcing the highest quality coffees around the world. It only purchases coffees that have been grown and processed by suppliers who meet strict environmental, social, economic, and quality standards. Starbucks is well-known for its exceptionally high quality coffees, care in selection, and expertise in roast (www.starbucks.com).

Broad Product Differentiation

Depending upon competence and innovation, Starbucks establishes its long lasting and profitable competitive advantages by broadly differentiating its coffee and coffee related products.

Brand Image

Starbucks combines its merchandizing strategy with its marketing programs to create and reinforce a distinctive brand image for its coffees. The company’s brand image strategy is reflected in its product mix, producing, and sales and educational materials. What Starbucks stands for is a good cup of fresh coffee and the recognized brand worldwide.

Recommendations:

It is undeniable that Starbucks has a competitive advantage when it comes to quality, especially when compared to other generic coffee commodity. However, in terms of convenience, despite arduous efforts to establish Starbucks at every corner, there are still more supermarkets than there are Starbucks bars. Realizing the potential for this convenience sector of the coffee market, Starbucks should actively pursuing substitutes that compete in these areas, for example a pre-packaged drinks or offer tea in its shops as a preemptive measure to fight off any teahouse looking to steal away the coffee drinkers.

Sometime Asia can be mistakenly seen as one culture by outsiders. It can be true somehow, yet to be successful in the region. The countries in Asia are totally different when it comes to culture, value, religion, tastes etc. Many Asians prefer for tea especially in China, a county of devoted tea drinkers who do not take readily to the taste of coffee. Starbucks should set different strategies and approaches for each market to make Starbucks’s experience to be part of the culture.

To meet local tastes or preferences, Starbucks can act local, for example, by introducing alcoholic beverage fro special happy hour set in some countries or region. Traditionally Korea and China are huge alcohol consuming culture as well as coffee. High margin of beer, wine or cocktail may help Strarbucks match local tastes and preferences, most importantly, can boost its revenue.

_PLACE_

Site Selection

Starbucks stores are normally gathered in high-traffic, high visibility locations. It takes more than just location to be successful. Attracting customers to Starbucks happens by providing high quality coffee and creating inviting, comfortable places that are conveniently located. These places should be those that add to the spirit of each community.

Store Expansion

Starbucks expands its stores by entering new markets wherever the opportunity exists to become the leading specialty coffee retailer. By the year 2006, its current location totals 12,440 worldwide (www.starbucks.com)

Recommendation

From past experiences, customer loyalties cannot be stretched or transferred to a new product or channel in a short time. Starbucks should expect a gradually change on its customers’ purchasing power and habits. Eventually, the Internet may reconfigure how customers think of mass-market brands. But that shift will take years to unfold and company leaders need to manager the transition with great skills. Therefore, Starbucks needs to make some change on its current e-commerce strategy.

First, it may add more value to its value chain by expending its website function as a communication tool to link its stakeholders such as customers, suppliers, management and employees. Second, consolidate the public relation function. Starbucks.com is not only a window for online business, but also a window for building the company’s image and reputation. Third, keep online business on core products but maintain the products diversification as a long-term strategy, and implement it by gradually introducing new products one at a time. Last, to strategic ally with .com companies to expend its selling channels.

Starbucks can setup online chat room to facilitate communication among its stakeholders. It may also create free email accounts to further spread its fame and consolidate customers’ loyalty. In addition, it can gradually add indirect coffee related products into its online sales collection, such as coffee machine. It may also want to introduce some online coffee tour package to provide cheap travel tours or hotel accommodation. In order to increase sales, Starbucks may also ally with .com companies to promote its products. For example, to sign a sell contract with yahoo.com to carry Starbucks’ products.

_PROMOTION_

Starbucks doesn’t have much conventional advertising because it found that there is too much competition for consumers’ attention in TV, radio and print media. Starbucks usually picks one or two charities or events that reach the community it serves. This will inspire people inside and outside the company and reinforce the company’s value and image.

Starbucks integrates its corporate culture with its surroundings. At all levels of the Company, Starbucks partners strive to be good neighbors and active contributors in the communities where they live and work. It’s part of the Starbucks culture. It is the goal of Starbucks to involve partners as decision-makers, volunteers, and leaders in the initiatives they support.

Recommendation

To be a real global company, Starbucks can participate in or support local events, helping education in developing countries or community activities so that it can enhance its public relationship with those international markets. In most Asian markets, once it is perceived as a true partner or caretaker, its growth strategy might work just as in US market.

_PRICE_

Best value offering

By pricing its coffee competitively with the prevailing high-end coffee prices, Starbucks represents an attractive combination of price, features, high quality, good service and other attributes customers find attractive.

Recommendation

The fact that Starbucks prides itself in customer service, providing the “Starbucks experience” for the customer, means that the business is mainly customer-oriented, and thus translates to a strong customer’s power. Nonetheless, the greater the importance of the product’s quality or services to the customers, as is the case with coffees, there is little extent to the buyers’ price sensitivity. This indicates that as long as Starbucks maintains quality products and superb customer-service, individual consumers are unlikely to be able to exert their buying powers. Therefore, it’s good for Starbucks to maintain its prevailing high-end coffee prices.

CONCLUSION

It is no doubt that Starbucks is one of the most successful company in the world. They used a simply strategy, “connecting links between treating employees with dignity and respect and producing a good product and services.” That was the major factors that differentiate Starbucks from others and bring the successful to Starbucks.

The future of Starbucks, which is in a fast-growth phase, is apparently to be successful and promising. However, those keys of success may not be applicable to tomorrow’s environment and in global market. Defending and growing a competitive position requires firmly built strategies based on its unique, valuable and leading capabilities and resources, rather than the products and services themselves, proactively responding to ever changing internal and eternal environment to keep fending off its competitors. Although currently there are no formidable competitors for Starbucks leadership in both international and domestic markets, it should not take it for granted for good. Tomorrow’s destiny of Starbucks should depend on its strategic capability to preserve and sustain its strengths, offset weaknesses, avoid threats and capitalize on opportunities. If Starbucks would correctly identify and deal with the issues under current and near future circumstances, it could remain excited about further growth and continues to be prosperous.

List of References

http://www.starbucks.com/aboutus/investor.asp

http://geography.about.com/library/cia/blcusa.htm (CIA World Factbook)

http://www.marketwatch.com/news

Sandhusen, Richard, 1994, Global Marketing, Hauppauge, New York.

Cateora, Philip R., 1996, International Marketing, Irwin, Chicago.

Peter J. Buckley, Fred Burton and Hafiz Mirza, 1998, The Strategy and organization of international business, Macmillan Press, New York.

Masaaki Kotabe, Kristiaan Helsen, 1998, Global marketing management, John Wiley, New York.

Bryan Lowes, Christopher Pass and Stuart Sanderson, 1994, Companies and markets, Oxford, UK.

Starbucks Annual Report 2006 (2006). Starbucks Annual Report. Seattle,WA., Starbucks Coffee Company.

Recommendation for Starbucks Coffee Company Essay

Consumers’ Preferences for Coca Cola and Pepsi Essay

Consumers’ Preferences for Coca Cola and Pepsi Essay.

Recommendation provided by Yayra Consulting firm for the Coca Cola Corporation and Pepsi Corporation is as follows:Based on the survey I found that a majority preferred Coca Cola over Pepsi. The consumers that preferred Coca Cola were influenced by the products taste. Both Coca Cola consumers as well as Pepsi consumers were loyal to their product of preference. In both cases I found consumers who have consumed Coca Cola and Pepsi for over 20 years. I recommend that Coca Cola continue to invest in advertisements due to the fact that from those who preferred Coca Cola were influenced by their advertisements and their use of celebrities.

Consumers did say that if they did not have a choice and Pepsi was their only choice they would sometimes drink Pepsi. This leads me to recommend Coca Cola to increase their presence in areas where they currently are not. This will give the consumer an option and loyal consumers will stay with their preference.

I would recommend that Coca Cola ensures that their product is available at the convenience of their consumers.

My recommendation for Pepsi would be to target the younger community by incorporating cartoon characters on their products. This recommendation is due to the fact that from those surveyed I found that the younger generation liked the Pepsi sweeter taste more than what those surveyed described as crisp flavor for Coca Cola.

Pepsi:Two out of the 5 people surveyed preferred Pepsi over Coca Cola. Out of the two surveyed for Pepsi both preferred Pepsi’s taste. Price did not influence choice. Out of the two Pepsi preferred consumers stated that they drank < 1 cup – 4 cups per day. Of the two surveyed both stated that they would sometimes chose Coca Cola if they had no other choice. Of the two surveyed the years consuming the product ranged from 9 – 20 + years. Only one of the two surveyed exclusively consumed Pepsi in their family. Both Pepsi consumers surveyed were attracted to Pepsi’s advertisements.

APPENDIX BProduct Profitability analysis between Coca Cola and Pepsi:The product I have chosen is Coca Cola versus Pepsi for analysis. From research I found that Coca Cola net sales/revenues were $24,088,000. Cost of goods sold were $8,154,000 the difference between both sales/revenues and cost of goods sold resulted in a gross profit of $15,924,000 in 2006. The net income in 2006 was $5,080,000.

For Pepsi I found that net revenue for 2006 were $35,137,000. Cost of goods sold was $15,762,000. The difference between the revenue and cost of goods sold in 2006 for Pepsi showed a net profit of $6,439,000. The net income in 2006 was $6,439,000.

The importance of the financial data is to show areas in which the corporation is excelling and may want to continue to invest in. The financial data analysis in detail also reveals areas in which the corporation is losing money and from the findings the corporation can decide to change its approach in the particular area in order to prevent further financial losses. Also, the data helps management to identify these areas where there is loss and take action that leads to increased profits.

Based on the net income of 2006 for Pepsi I would say one of the factors that contribute to the edge they have over Coca Cola is that Pepsi is more diversified in the products that they produce. Pepsi not only distributes the nonalcoholic beverages they also distribute a variety of sweet and salty snack products.

APPENDIX CSWOT ANALYSIS – Strengths, Weaknesses, Opportunities and Threats:Strengths:Coca Cola:Coca Cola is a well established international nonalcoholic beverage corporation. They are well established in the market and are one of the largest nonalcoholic beverage companies in the world. Coca cola has over 400 brands from water to sports drinks. Coca Cola continues to invest in advertisements for their products, which contributes to their strong presence in the beverage market. They are addressing innovative ways to provide healthy drinks for consumers.

Pepsi:Pepsi is also a well established international nonalcoholic beverage corporation. In addition to beverages Pepsi sells snacks such as the Frito Lay chips. They operate globally and have penetrated the market through advertisements, which influences increased sales. Pepsi using a distribution network to sell their products. They sell to distributors based on customer needs. Their established presence in the market contributes to their continued success and sets the stage for new successes with new products distributed by Pepsi.

Weaknesses:Coca Cola:Coca Cola in 2006 some external factors caused a reduction in income due to foreign exchange negatively impacted operation income in a decrease of 1% in European Union, Bottling investments, Brazil, and Latin America. Higher interest rates also affected Coca Colas profits. In 2006 they had a decrease of $42M compared to the prior year. Their main competitor which is Pepsi has a strong presence in not only the nonalcoholic beverages but also in salty snacks such as the Frito Lay chips corporation. Coca Cola products are strictly beverage drinks and I believe that this is a weakness for them.

Pepsi:Similar to Coca Cola Pepsi operates on customer demand. If they were to market a new product that consumers don’t like Pepsi is at risk of losing sales and revenue. Other factors that can have a negative impact to Pepsi’s continued success are external factors like inflation, interest rates, and political issues. This corporation is heavily dependant on technology to run the day-to-day business. If anything were to go wrong with the technology they can be negatively impacted. Another issue that is of concern to the Pepsi organization is the fact that in recent years consumers have become more aware of health concerns. People are beginning to hold those responsible for distributing foods that are disease causing such as illnesses associated with obesity. To continue on the topic of health, Pepsi continues to distribute diet drinks containing aspartame which has been linked to cancer.

APPENDIX C (Continued)Opportunities:Coca Cola:Coca Cola continues to invest on innovative products. This leads to having the ability to stay ahead of their competitors such as Pepsi. With Coca Cola being an international business the ability to be innovative provides further success in an ever changing world. In regards to being innovative, through innovation Coca Cola has the opportunity to put out healthy products into the market and address how their product affects the health of their consumers. Coca Cola to date has increased their diet products by through their partnership with Splenda, a diet substitute, by providing a variety of diet Coca Cola drinks. I also believe that Coca Cola should branch out like Pepsi into the snack industry. By doing so,they can have more of a competitive edge over Pepsi by providing snacks that are healthy in combination with innovative health drinks.

Pepsi:Pepsi already participates in the distribution of snacks as well as their Pepsi drinks however, the snacks distributed are considered to be unhealthy. They should put more focus on providing healthier products for the consumer. This would provide more profitable opportunities for Pepsi. They would be reaching consumers who in today’s changing world are more health conscience than ever before.

APPENDIX C (Continued)Threats:Coca Cola:The threats for Coca Cola are the constant increase new competitors entering the market. They have to constantly be aware of who their competitors are and what they are offering the market so that they can stay ahead of their competitors. Coca Cola dependence on technology is also a threat because in today’s advanced technological world there is always some kind of external threat including hackers, viruses that can corrupt critical financial information as well as product information. Another factor that can be a threat to Coca Cola is the interest rates increase. This can directly affect Coca Cola’s profits which can result in a loss.

Pepsi:The threats for Pepsi are their contribution to the unhealthy snacks that they distribute to the consumer. I think that corporations have a social responsibility to provide healthy food products and not products that can cause ill health. Pepsi not only distributes nonalcoholic beverages but it also distributes snacks such as Lays chips, Doritos, Fritos to name a few. These snacks are considered unhealthy and I think that they should invest in innovative ways to come up with healthy snacks to the health conscience consumer. In recent years consumers have sued corporations for distributing food products that have lead to poor health. Therefore, with the threat of potential lawsuits Pepsi needs to address this issue and provide a product that consumers would consider to be healthy.

CONCLUSION

The fact remains that Coca Cola and Pepsi are each others main competitors. My recommendations for Coca Cola to invest in increasing their presence where they currently are not and continued investments in advertisements I believe will put them ahead of Pepsi. Also, Coca Cola should branch out into distributing snacks but not just any snack but a healthy alternative snack for the increased awareness consumers have in today’s market. Pepsi consumers favored their sweet taste that was especially appealing to young consumers. My recommendation that they advertise with cartoon characters by targeting the youth I believe would lead to increased sales and increased profits for Pepsi. I also believe that Pepsi should invest in providing healthier drinks and snacks for their consumers. They already are in the market for the snacks if they began selling healthy versions of the existing snacks I believe that would also give them an edge over Coca Cola being that Coca Cola has yet to invest in the distribution of snacks.

In conclusion, Coca Cola and Pepsi are successful companies that are well established in the market. This gives them an edge in the market that new competitors joining the market don’t have. That being said they still face the constant threat of new competitors and existing ones and must continue to invest in innovative ways that will keep them ahead of the competition. Also, companies have a social responsibility to provide healthy products for consumers especially in today’s world with consumers being more health conscience and demanding quality products from the food industry.

Citation

New York Stock Exchange:PEPSI http://www.nyse.com/about/listed/pep.htmlhttp://www.pepsico.com/PEP_Investors/AnnualReports/06/PepsiCo2006Annual.pdfCOKE http://www.nyse.com/about/listed/ko.htmlhttp://www.thecoca-colacompany.com/investors/pdfs/form_10K_2006.pdf

Consumers’ Preferences for Coca Cola and Pepsi Essay

Coffee retail Essay

Coffee retail Essay.

1. Introduction The report revolves around the Retail Industry. As it is a very generic industry we have taken the Coffee Retail Market as the highlight of scrutiny. Our scope of study is focused taking in consideration only India as the geographic segment. We broadly look at the Porter’s Five Forces of the industry specifically. Also the complementors are observed and how they affect the retail business of coffee houses. The major players identified in the industry are Starbucks, Cafe Coffee Day, Barista, Costa Coffee, and Nescafe.

Grilling down further the report includes SWOT analysis, External Factor analysis matrix ,Internal Factor analysis matrix and PESTEL analysis. 2. Porter’s Five Forces The porter’s five forces model framework is very helpful in understanding the industry and market closely. It further helps in determining the profitability of the industry as a whole. Also helps the management in taking strategic decisions accordingly. 2. 1 Threat of New Entrants In the present world coffee has become a really popular beverage among Indians.

This makes it an attractive market for the potential companies who are looking up for opening their retail coffee houses in India. Entering the industry is not that cumbersome in case a business house admires to open up a small coffee shop. Problem arises in respect to entering the industry when they aspire to set up retail coffee chains or speciality coffee shops. Due to many established names in the industry like Cafe Coffee Day and Costa Coffee, establishing brand name also becomes an issue.

Companies already with established brand names like Coca Cola, Starbucks can enter the industry easily without much caution as they already have marketing strategies designed in their favour. As a conclusion, we can state that barriers to entry are Low especially for global brands and they can easily enter the coffee retail industry with established marketing strategy, name, and huge capital and financial stability. Otherwise, hard for new and unknown firms admiring to be in the business. 2. 2 Bargaining Power of Suppliers The suppliers for the coffee retail industry in India generally come from southern India i.

e. Kerala, Karnataka and Tamil Nadu. Though these days different types of coffee are becoming popular among the Indians like, Gourmet, Organic, Eco-friendly coffee, and they are being sold for better prices in comparison to the traditional brewed coffee. Still the situation is not really in favour of these suppliers. These coffee growers are poor, competitive and rely on the buyers to a great extent. Therefore, power remains to be limited. This proves to be good for the retail outlets in the business. 2. 3 Bargaining power of Customers.

The whole retailing coffee industry depends upon the customers. So it is of vital importance to satisfy the customers in order to give them a reason to visit again. In this case word-of mouth plays an important role. So, if people appreciate about a particular coffee shop or chain, others are likely to try it. Thus, retailers must find new strategies and techniques of luring away the customers. But it is very important for the localities coffee retail shops to understand that they cannot charge prices as high as the industry players like Starbucks, Barista or Cafe Coffee Day.

They need to maintain a low price profile in order to attract customers. So in case of these small locality retail shops the bargaining power of customers is very high. Otherwise the other coffee retail chains (industry players) do hold some control over the prices charged but it becomes important to consider the customers purchasing power. Otherwise they would switch over to other brand as there is no switching cost for them. This establishes that the bargaining power of customers is high and really important measure for the conduct of efficient business.

Also these coffee retail chains should understand that the customers can also make the coffee at home which justifies their higher bargaining power. 2. 4 Threat of Substitute products There are a lot of substitutes for the coffee retail industry in general. Specially, the soft drinks industry has always given fierce competition. Also, other products like ice cream, candy, and beer are also a part of substitute products. It becomes important for these retail houses to make coffee more popular and drinkable amongst the masses. People should never consider switching from their coffee shops.

But with changing preferences of Indian masses in favour of coffee the players within the industry are making maximum efforts in favour of differentiating its products from the substitute products. Also strategic decisions and marketing activities are initiated to shift the customer base from the substitutes resulting in high demand of coffee from the retail sector. So the threat of substitutes is also moderate. 2. 5 Competitive Rivalry within the Industry Considering the entire coffee retail industry as the scope of study, there are number of retail chains serving the industry effectively.

To top the list is Starbucks, and than many more such as Cafe Coffee Day, Barista, Costa Coffee, Gloria Jeans, Nescafe, Bru Cafe, Dunkin Donuts, Mc Donalds, and small Kiosks and coffee points are also emerging in localities. They all are different in size and serve different segments of the society but are competing with each other in some or the other way. Each retailer follows different marketing strategy to lure away their target segments. Also with moving times the industry is occupying a stable position in the retail sector and is saturated .

Therefore, we can say that the competitive rivalry though on the higher side does not affects the profit margins for the industry. 3. Complementors There is a sixth force to the porter’s five forces model, the power and competence that the complementors provide to the business. The complementors are those that help in selling and adding value to the existing products of the industry. When these products are used together they help in satisfying customer demands more effectively. It is also to be believed that these complementors play an important role in drawing in the demand for the industry.

This in turn helps in scaling up the profits. Conversely, the poor products being manufactured or supplied by the complementors may harm the profits and demand. So it becomes important on part of managers to analyse all the six forces and then think systematically how their strategic choices would affect the industrial competition. Majorly the complementors can be associated with high-tech industries wherein they literally help in hiking the sales and profits for the industry. In our case, coffee retailing is not an industry that has any such complementors that would help in boosting sales or profits.

But certain products are identified by us that in a slight way might affect the coffee retailing business. Like, merchandising, snacks offered for sale in coffee retail chains. Merchandising includes apparels and coffee mugs and other products such as soft toys and key chains available for sale by many coffee retail houses Cafe Coffee Day, Barista, Starbucks etc. Snacks are offered mainly by all the coffee houses in the form of cookies, patties, croissants, sandwiches, pasta, oats etc. So these complementors directly help in pushing up the sales of the business. 4. SWOT Analysis 5. External factor Analysis External strategic forces.

Weight Rating Weighted score Comments Opportunities 1. India Large market .18 4 .72 Second most populated nation of the world 2. Increase in spending power .15 3 .45 The GDP or the purchasing power is rising adequately 3. Youth population .13 4 .52 Youth are the ones who are more prone and exposed to cafes 4. Favourable labour cost .07 2 .14 Easily available manpower at lower costs 5. Favourable infrastructure cost .07 2 .14 Low and easy access to infrastructure 6. Opportunity to serve the tea drinking segment .05 1 .05 A major portion of population is attracted towards tea drinking. Threats 1. Low per capita income.

.07 3 .21 Huge requirement to extend products at competitive prices 2. Increasing health consciousness .04 1 .04 3. Competiton from fast food joints .04 3 .12 Mc Donalds, Pizza Hut, Subway 4. Hiking coffee prices .06 3 .18 5. Tea drinking segment .10 4 .4 This segment consumes tea at least twice a day 6. Rare habit of travelling to cafes .04 1 .04 Total score 1. 00 3. 01 The EFE matrix is made by comparing the coffee industry with the other beverage industry in India and weights and ratings are assumed according to personal knowledge. Considering the external factors effecting the industry EFE matrix is created.

A score of more then 2. 5 reflects that the industry has more than average capability in response to external forces particularly the beverage industry in India. 6. Internal Factor Analysis Internal strategic forces Weight Rating Weighted Score Comments Strengths 1. Increasing Coffee demand .18 4 .72 Changing lifestyle leading to coffee adaptation 2. Favourable labour relations .15 3 .45 3. Non-perishable commodity .12 4 .48 Coffee is a non-perishable commodity which has no threat of being spoiled easily. Weakness 1. Low dominance over price .15 2 .3 Due to competitors in the industry.

2. Heavy export of coffee .05 1 .05 Low domestic consumption 3. High operating cost .2.5 1 .25 Total 1 2. 25 In the above tables, Column 1 depicts the strategic factors Column 2 depicts weight assigned to each strategic factor from 0 to 1 i. e. not important to most important Column 3 depicts the rating assigned to each factor wherein a scale of 1-4 is used. It signifies industry’s present response to each factor. In EFE matrix 1-4 is responses from poor to superior and In IFE 1-2 is major and minor weakness and 3-4 is major and minor strength. Column 4 gives in the weighted score.

Column 5 represents the comments for the strategic factors Since internal factor analysis is used to judge wether the company is performing inline with the expected strengths and weaknesses or not. Generally an average score of 2. 5 on 10 is expected. After the analysis, we conclude that the internal weigted score of coffee industry in India is almost in line with 2. 5,reflected that the respected industry is running as astrong business internally as well. 7. Value Chain It is a series of activities aimed at delivering maximum value to a customer, through a product or service, at the minimum cost.

This model analyses how a firm procures raw materials, adds value to these material through various processes and sells the finished product to the ultimate consumer. All these functions are performed with the objective of maximizing customer value at minimum cost. The value chain of the retail coffee industry consists of the following processes and activities: 7. 1 Primary activities 7. 1. 1 Inbound Logistics: This is primarily concerned with the procurement of raw materials in the form of coffee beans and various types of dairy products, required by all the coffee retail outlets.

The aim is to procure high quality materials so that best of the flavours is served to the customers. Cafe Coffee Day does in-house sourcing through coffee estates owned by the company. Starbucks Coffee and Barista Lavazza chains have sourcing agreement with Tata Coffee. Cafe Nescafe, owned by Nestle works through community farming, where it provides high yielding quality, disease resistant seeds to the farmers for improved productivity. The company provides regular and fair remuneration to the farmers. Dairy products are also sourced through community farming. 7. 1.

2 Operations: There are various operations involved in the business of retail coffee outlets. The most important operation to be performed is roasting of the coffee beans, which gives the taste, flavor and smell to the coffee. Tata coffee provides roasting services to Starbucks and Barista through its own roasting facility. The outlets undertake all the operations to run an outlet like preparation of items, serving them to the customers and billing, etc. Starbucks and Cafe Coffee Day work on the model wherein order is taken and served to the customers on the table, whereas Barista works as self-service outlet.

7. 1. 3 Outbound Logistics: The customers are serviced through company owned or licensed retail outlets, which may be in the form of lounge, highway cafes or store-in-store. The stores are set up in centralized locations, which are easily accessible to the customers, in order to achieve maximum footfall. According to a business standard report, top 40 cities in India have around 1700 coffee outlets. CCD is the largest coffee chain in India with 1200 outlets, followed by Barista having 154 outlets and Starbucks having 21 outlets. Starbucks also sells some of its products through retail stores and super markets.

7. 1. 4 Marketing and Sales: Companies undertake various promotional activities to attract a large number of customers, which may be in the form of sponsorships and co-marketing initiatives. Customers are also benefited through loyalty card programs, carrying various offers and advantages. Value meal combos attract students who have low purchasing power. Marketing is also done through TV and media sources. All this is done to maximize sales. 7. 1. 5 Services: Coffee retail industry relies on the quality of service to the customers. These chains don’t sell coffee, they sell experience.

For this, highly trained staff is recruited to provide high quality customer service. Other services offered are newspapers, magazines and free Wi-Fi to the customers. 7. 2 Support services 7. 2. 1 Firm Infrastructure: In order to have a smooth flow of operations, the companies need to have sound infrastructure for accounting, planning, finance, management, etc. The retail outlets have inviting interiors and comfortable seating space. 7. 2. 2 Human Resource Management: Human Resources are the most valuable assets of any organization, and same also goes with these retail coffee chains.

Highly trained people are recruited to provide high quality customer service. Various training and motivation programs are conducted to further enhance the skills of these people, which will add to the customer value. 7. 2. 3 Technology: Companies have started using latest technology to perform their operations. Computerized roasting machines are being used to maintain the consistency in the flavour of coffee beans. Barista has installed control systems like Total Quality Management to ensure the quality of materials distributed. Latest software is being used to achieve maximum operational efficiency.

7. 2. 4 Procurement: In order to achieve maximum customer satisfaction, companies need to procure raw materials that are of best quality available in the market. Companies also need to source furniture, kitchen equipment, utensils, etc. , which act as complements in the operations of coffee retail outlets. All the above-mentioned activities aim to maximize the customer value at the minimum cost. 8. PESTEL Analysis A strategic framework of macro economic , political, economical, socio-cultural, technological, environmental, and legal factors include :- 8. 1 Political factors.

Indian coffee board has proved a helping hand to the coffee industry of the same after 1996 de-regulation of coffee marketing. after it it has grown up as a free market leading to a four times growth in its trade. around 70-80% of the country’s production is exported . A coffee produced with set standards named fair trade coffee is one of the major constituents to coffee retailing. the one managing this in the country is fair trade alliance , kerela. Starbucks in India is certified to fair trade coffee provider ,whereas barista lavazza has fair trade coffee compliance abroad buit not in India and same is the case with dunkin donuts. 8.

2 Economical factors Development in lifestyle of people and coffee turning as a delighting factor in the economy ,the consumption of coffee is taking a pace. Increase in consumption by urban young generation is expected to take the industry at a whopping business of around 2250 crores by the year 2017. Though it currently stands at Rs. 1100 with its major players trading like barista, CCd etc. The infrastructure developements, the enhancing demand and smoothing trade procedure leads to incremental trade for the industry. A coffeeproduced with set standards named fair trade coffee is one of the major condstituents to coffee retailing.

The one managing this in the country is fair trade alliance,kerela. Starbucks inIindia is certified to fair trade coffee provider , whereas barista lavazza has fair trade coffee compliance abroad but not in India and same is the case with dunkin donuts 8. 3 Socio- Cultural factors Catering to the ever increasing population of the country, it is the responsibility of the businesses to look for to the socio economic factors in place . For instance, the development in lifestyle of people is leading to increase in the coffee consumption in the country.

Keeping these factors into mind businesses like cafe coffee day claims of training 400-500mpeople every month to enhance employment and as a part of responsibility to the society, MC Donalds along with CCD keep staff to clean right under your feet. Similar to those dunkin donuts provides 21 day training program to the staff to help customers better. As a part of social responsibility 50% Costa coffee employees in Delhi and NCR are deaf people.

8. 4 Technological factors With the changing lifestyle and gezmo addicted generation, one cannot afford to have a internet free cafe . The presence of bluetooths and wifi within the outlets of coffee companies is the basic requirement to get on the customer to the shop. The comfort of checking the emails, organising commercial meetings in the coffee shops an sitting there for hours requires the business to have a wifi enabled cafe. For eg -starbucks (India) uses help AT&T(India) to provide a click, no password facility for easy internet accessSalong with there mobile apps and various online facilties. Moreover whotspot also helps in proving in these facilities.

Barista lavazza uses strategy ‘ internet with mugs’ named strategy to lure customers in contract with spectranet. Along with this value addition it also provide facilities like hot deals with customers downloading deal on their tablets or smartphones and avail the services on the spot. 8. 5 Environmental factors The weather conditions play a major role in production of coffee. Environmental factors in case of coffee is the seasonal dependecy of the amount of coffee produced across different seasons.

For instance:- with on time monsoon this year in the country,the coffee production in southern area of country raised upto 8-10%. in india other factors on which the coffee production depends are the pest infestation and limitation of mechanisation. conserving water, recycling,energy and plastic management etc are also few termenologies which companies takecare off.

8. 6 Legal factors Legal establishments popping up prooved as aiding cushions to the domestic market of the industry as well along with the outside trade. with liberalisation of industries in 1991 this particular industry was also benefited. One of the drastic help was with the FDI in retail industry i. e around 51% which turned trade more smoother then before.

Tarrif charges in india are 40-605 on raw material and 60-100% on semi finished goods. Mc Donalds bring its coffee reatailing from its brand mccafe originated in melbourne,australlia. Starbucks got the way to enter in Indian markets after FDI was allowed by government but still restriction to get 30% of sourcing from SME’s of India. Indian institute of plantation management, Banglore (IIPM)usually takes up the responsibility of coffee retailing in the country along with its entrepreneurship and development. 9. Conclusion The coffee retail industry in India is on the expansion path and has doubled over the last decade.

The present size of the market is estimated at Rs. 1520 crore, which is expected to reach Rs. 3775 core by the year 2018, a CAGR of around 20%. Earlier there was no such demand for moving out of the houses for coffee consumption but the emerging coffee retail chains have changed the scenario triggering consumption need amongst the young adults. Serving the evolutionary phase exceptionally well, these coffee retail chains are overwhelmed with the response in the Indian market are planning further expansion of their networks in the country.

The above analysis of porter’s five forces highlights that the profitability of the industry is expanding with westernised culture being adapted by Indians. (Porters 5 force analysis). The snack and merchandise industry are complementing the coffee retail industry very effectively thereby leading to inflated sales and profits for these retail houses. (complementors).

Reflected by the study of strategy of coffee industry hereby conclude that the Indian coffee industry is a strong respondent to the external factors (EFA matrix) as well as internally also industry is doing well(IFA matrix).

To increase the figures of sales and profitability, a number of varieties of coffee and eatables are offered, targeted at different price-points of the market. The companies are using innovative strategies and marketing tactics. A large young population, rapid urbanization and changing lifestyle, coupled with not-so-difficult entry into the market have attracted a large number of domestic and foreign players in the country. Global brands like Starbucks are keen in investing in the Indian market due to the huge potential it displays.

This is evident from the sizeable revenues that these brands have generated over the years. (PESTEL and Value chain). Only home grown coffee is served in the Indian market as coffee import attracts a duty of 120%. Coffee beans are sourced from company owned estates or through the means of community farming. Companies with established brand names are able to run their business successfully, whereas small business houses are in a way struggling to compete in the market.

10. Bibliography Unknown. 2013. [online] Available at: http://pure. au. dk/portal-asb-student/files/3785/khrystyna_diaz_final_theses.

pdf [Accessed: 12 Oct 2013]. Unknown. 2013. [online] Available at: http://coe. brown. edu/documents/StarbucksaStrategicAnalysis_R. Larson_honors_2008. pdf [Accessed: 12 Oct 2013]. Unknown. 2013. [online] Available at: http://www. google. co. in/url? sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0CEYQFjAD&url=http%3A%2F%2Fojs. cnr. ncsu. edu%2Findex. php%2FJTATM%2Farticle%2Fdownload%2F1917%2F1205&ei=tqhRUsevEIrprQeNjoHQCg&usg=AFQjCNHBlG5wSoXga_TfbHIkiBKAffxb2g [Accessed: 12 Oct 2013]. Sites. google. com. 2013. Porter’s Five Forces – Starbucks and Dunkin Donuts. [online]

Available at: https://sites.google. com/site/starbucksanddunkindonuts/porter-s-five-forces [Accessed: 12 Oct 2013]. Slideshare. net. 2013. Tata Starbucks Ltd A Strategic Analysis. [online] Available at: http://www. slideshare. net/ranganathpandit/tata-starbucks-ltd-a-strategic-analysis-15117792 [Accessed: 12 Oct 2013]. Dudovskiy, J. 2012. Starbucks Value-Chain Analysis – Research Methodology. [online] Available at: http://research-methodology. net/starbucks-value-chain-analysis/ [Accessed: 12 Oct 2013]. Emergingstars. com. 2013. ‘A lot can happen over coffee’ | Success Story | Emerging Stars.

[online] Available at: http://www. emergingstars. com/success-stories/lot-can-happen-over-coffee [Accessed: 12 Oct 2013]. Unknown. 2013. [online] Available at: http://www. iipmthinktank. com/functions/marketing/compartive. pdf [Accessed: 12 Oct 2013].

Diplom-Kauffrau (FH), M. 2013. GRIN – Coffee Shop Industry – A Strategic Analysis. [online] Available at: http://www. grin. com/en/e-book/111348/coffee-shop-industry-a-strategic-analysis [Accessed: 12 Oct 2013] Kulkarni, M. 2013. India slips to 7th rank in global coffee production. [online] Available at: http://www. business-standard.com/article/markets/india-slips-to-7th-rank-in-global-coffee-production-113090400124_1. html [Accessed: 13 Oct 2013].

The Economic Times. 2009. Indian coffee industry: A paradigm of sustainable development. [online] Available at: http://articles. economictimes. indiatimes. com/2012-01-17/news/30635685_1_domestic-coffee-consumption-indian-coffee-coffee-beans [Accessed: 13 Oct 2013]. Unknown. 2013. [online] Available at: http://www. indiacoffee. org/userfiles/PCP%20in%20Coffee%20Entrepreneurship-IIPM. pdf [Accessed: 13 Oct 2013]. Profit. ndtv. com. 2013. FDI in single-brand.

Coffee retail Essay

Yuban coffee Essay

Yuban coffee Essay.

I. Introduction/Executive Summary and Product Description Yuban coffee is a brand of coffee you can find in your local grocery store that you probably did not know existed. It was founded by John Arbuckle, a famous coffee roaster, who has invented the original Yuban coffee in 1986. Yuban coffee only uses the best Arabica beans. In addition, Yuban is certificated by the Rainforest Alliance, which declares that at least 30% of Yuban coffee is organic.

Chemical fertilizers and pesticides are not used on the organically grown beans and the rainforest alliance also works to sustain agriculture, forestry and tourism in the regions of the forest that the coffee beans are grown.

More recently, Yuban coffee has been slowly grown, if grown at all, and has not been reaching its full potential. The main problem of Yuban is the lack of brand awareness and an unsuccessful marketing strategy. When the marketing strategy changes to solve these problems, it will make the Yuban brand more competitive and successful in the coffee market.

Our marketing plan will be discussed in detail in the pages to come, but our general objective is to build brand awareness by defining and marketing towards a more specific target market. Also, with the implementation in of our recommendations, Yuban coffee will be able to reach this objective.

Ultimately our marketing plan will consist of the following: 1. Increase Yuban’s brand image by: a. increasing brand awareness from business-to customers / Business-to-Business markets by penetrating the online and social media sectors b. creation and implementation of the vending machine/coffee brewing machine c.using recent acquisitions to push the Yuban name d. redesigning product packaging to reflect environmentally conscious brand II.

Target Customer Analysis People in the United State love coffee, just like how people in China love tea. Research suggests that 50% of the population of United States drinks coffee and those coffee drinkers in the United State drinking more than 3 cups of coffee each day! Aside from the United States there are so many other people in the world who love coffee (E-imports, 2012). This makes coffee become the second valuable trading product after oil.

For the people who love coffee, most of them have a favorite brand, even a specific taste. So for Yuban, they have a big market and great opportunity to develop. Yuban coffee is certified by the Rainforest Alliance Certification, which means Yuban coffee is healthier and environment friendly. “Made from 100% premium Arabica beans, YUBAN mountain-grown coffees offer uncompromising, robust flavor and seductive aroma” (Kraft. com). Also, because of this reason, Yuban coffee is more expensive than some other instant coffee, especially its caffeine-free organic coffee.

Therefore, the target customer of Yuban coffee should be those people who are environmentally and health conscious, and willing to pay more money on coffee. In figure 2. 1 of the Appendix, the two charts show the difference purchasing power on different generations. We can see in the first chart that people in age 25-34, 35-44, and 45-54 have the strongest purchasing power. And people now in those ages fall into 3 generations different generations, the Baby boomer (1946-1965), Generation X (1966-1976) and the Millennial Generation (1977-1992).

We feel the older generation being the baby boomers may not care too much about being health conscious, but if we had the time and money we would want to research this to find out if they are a part of our target market. The younger generation, being the millennial generation is anyone currently age 21-34. Then you finally have the last generation, which is Generation X, who includes anyone currently 37-47 years old. So, out of these 3 generations it will be in our best interest to go with the millennial generation. They have good economic condition, and they have good education background.

It means they can afford higher price of coffee, and the Millennial generation will be the most environmentally conscious, which we will discuss in another part of the paper. III. Competitor Analysis Yuban competes in the premium coffee bean and ground coffee market. While there are numerous coffee brands competing in the North American marketplace, most of these compete on a cost leadership strategy.

Only a few competitors such as Green Mountain Coffee, J. M. Smucker’s Folgers are brands which have small premium distributors such as Fair Winds Coffee and Organic Coffee Co., and all compete in the premium coffee category within the environmentally friendly and fair trade category (Agas, 2006; Statistics, 2013).

These brands specifically differentiate on quality rather than cost. Market Share of Main Competitors: The coffee bean and grind industry is highly fractured in terms of market share. While Yuban only has some 1. 93% of the marketplace, companies such as Folgers and Maxwell House have 21. 6% and 14. 62% respectively but with down market products (Statistics, 2013). Thus, it is quite clear that there is extensive room for further growth of the Yuban brand.

Market Structure: The coffee industry is an extremely competitive one. However, the market structure of the coffee industry and specifically the coffee bean industry that provides the raw materials for Yuban could be described as an oligopoly. The specific characteristics of this oligopoly are, however, more reminiscent of a cartel because a relatively small number of suppliers control the supply and distribution of coffee beans globally (Igami, 2011). Consequently, Yuban, which is a brand within the Kraft Foods umbrella, has limited choice in selecting its supplies.

The coffee bean industry was controlled officially through a cartel structure until 1989 under the International Coffee Agreement or ICA but thereafter market competition with new entrants such as Vietnam eroded the control of this official cartel organization (Igami, 2011). Yet, because coffee bean production is largely limited to certain geographic regions, these countries’ governments express a great deal of control over which entities control production and distribution. Competitive Barriers: There are a number of significant competitive barriers within the coffee bean and coffee grind industry.

While virtually any firm can purchase the raw materials or even the finished product in the form of ground coffee, the packaging and distribution of the product is a much more sophisticated endeavor. The most significant competitive barrier is the establishment of a retail distribution channel which requires negotiated shelf space in retail outlets, distribution channels including warehousing and transportation services and product packaging and design facilities (Amato & Amato, 2009). All of these factors require both material resources as well as managerial competencies that must be established prior to actually entering into the industry.

Sources of Competitive Advantage: Yuban’s coffee retail coffee industry has several sources of competitive advantage. The primary source of competitive advantage for Yuban is its parent corporation’s size, scale and revenues. Kraft as a corporation that earned more than $18. 3 million during 2012 and its coffee products which include Yuban contributed an estimated 8% of these revenues to Kraft’s earnings for that period (Annual, 2012). Consequently, Yuban has access to Kraft’s considerable financial resources as well as its developed competencies in the selling and marketing competencies of major food product brands.

IV. External environment analysis Economic environment: The main emerging markets in coffee consumption especially in Asia and South America market under the background of rising, global demand for coffee during fiscal year 2011 to 2012 rose 2%. During the fiscal year 2012 to 2013, global coffee production stabilized at about 146 million bales (60 kg per bag). Coffee is one of the most widely consumed beverages worldwide and in the United States. There are 183 million coffee drinkers in US and a 7% increase over 2011 in coffee consumption.

Technological environment: Modern technology can improve the production process and achieve economies of scale. Ultimately sophisticated technology can help coffee production in many factors, the product brand, and the coffee beans. Ultimetly, the process of producing good quality coffee beans is relatively the same with some secrets of the drying process that differ. In our recommendations, we suggest the introduction of coffee vending machines, which will be an area that Yuban will differentiate itself from the rest of the coffee market.

Political and legal environment: Low production of coffee beans, causing unstable climate could lead to a protectionist producers. So higher import prices to offset the damage caused by the low production. Yuban coffee is already rainforest certified, and thus the political environment is in its favor and will only cause it to grow more to become a more active leader in this political and legal area. Cultural and social environment: More than 50% of Americans drink coffee every day.

This represents more than 150 million daily drinkers. 30 million U. S.adults have professional coffee drinks daily, which includes drinks such as mocha lattes, coffee, mocha coffees, cappuccino, and etc. 65% of coffee consumption in the breakfast time, between meals, with the remaining 5% and other foods. At the same time, 35% of coffee drinkers prefer black coffee.

V. Company Analysis Yuban is an inexpensive brand of South American coffee. Comparing the same kind of coffee, Yuban provides lower price coffee than other brand in the market. Though Yuban coffee offers a lower price, it also emphasizes the quality of the product. Strength: Yuban provides 100% Arabica beans which are the finest coffee beans.

To support the high quality coffee beans, the company gets the Arabica beans from some of the best coffee growing regions in the world, and the highest quality coffee beans are sourced from some of the finest beans grown in Central and South America. Thus, Yuban will continue to be made with 100 percent Arabica beans but not 100 percent from Colombia, and some of them from Brazil, Peru and Nicaragua and so on. In addition, to avoid ruining the coffee’s flavor, Yuban used a sugar and egg glaze on the beans in a roasting process, ensuring to keep the flavor of the beans a rich taste.

Currently, Yuban is owned by Kraft Foods which is the world’s biggest buyer of Rainforest Alliance-certified coffee. And Yuban has been granted certification with the Rainforest Alliance in 2006. It means that there are at least 30% of its beans are organic. According to the certification, Yuban not only uses environmentally friendly farming methods, it is also required to provide a fair system to worker and efficient farm management. It is to keep the product quality in a high level while still supporting the team who is responsible for growing and protecting Yuban coffee beans. Weakness:

Yuban does not have its own official website. If people want to buy Yuban coffee, they can only purchase it off of websites like Amazon and of course super markets. In a shopping website like Amazon, there are many different kinds of coffee brand, not just Yuban coffee. In fact, if people buy an instant coffee or coffee beans, most of them have a particular brand they buy and will not search another brand’s product. Consumers just focus on what they need and in this situation Yuban is not targeting its target customer because it is sharing the arena with many other coffee options available too.

Yuban also does not have a renowned brand of coffee name or customer loyalty. An official website is useful to let customers focus on your brand’s product, and support more detail information about your company. It is an image that you are selling the customers. Thus, this is a weakness for Yuban coffee. Opportunity: People lifestyles are changing because more and more people enjoy drinking coffee, especially when humans reach a certain age in their life that is acceptable to drink coffee. Yuban can use the change of lifestyle trend to promote its coffee.

After all, Yuban coffee is historic brand in coffee market, and it will give consumer confidence to taste its coffee. Thus, it is a good chance to increase the market share. Moreover, Yuban is owned by Kraft Foods which is one of the top 500 companies in the world. It can use Kraft Foods’ awareness and resources to attract more customers, because people may know what Kraft Foods is, but they may not know what Yuban is. Thus, Kraft Foods can support the confidence for the consumer, when the consumer consider whether to buy Yuban coffee or no. Yuban coffee also does not own different kind of coffee products.

It keeps the style of traditional instant coffee, and launches several different types of coffee to suit customer preferences. So far, there are no other products other than instant coffee or whole coffee beans. Regardless of the season Yuban coffee products do not change where as some other coffee brands may offer different roasts or blends. There is an opportunity here because it can develop some new products which are based on 4 seasons a year. This can help attract more potential customers if we offer something different from time to time but still maintain our original product.

Yuban coffee is also not packaged with much innovation to differentiate itself and sell. Yuban can increase market share through diversifying the products and also focusing on the packaging to offer a design that matches the purpose of it. Threat: Yuban coffee is certified through the Rainforest Alliance, but that only guarantees 30 percent of the beans in any package of Yuban coffee are organically grown. It means that there are 70 percent of Yuban coffee product that do not probably come from ecologically-sensitive farms.

Customer may focus on the 70 percent of Yuban coffee product and worry about the quality of them. Yuban strives to support lower price and high quality product, but the organically grown coffee beans are more expensive than coffee beans that are not organically grown. If more and more customers pay more attention to this, Yuban coffee will lose some customers. Thus, this is one of the threats for Yuban coffee. What’s more, in the external environment, the economic recession will reduce customers’ demand of coffee, and there are many competitors in the coffee market, such as Folgers, Maxwell House, and Nescafe.

However, Yuban coffee does not focus on the promotions or advertisements. It will affect the company’s business. It probably reduces its sales and profits, even market share. Thus, Yuban must confront these problems, and how to solve them. VI. Marketing Information Requirements In our research, we learned that Kraft Foods has a wide portfolio of recognized roast and ground coffee brands that is unique to every type of coffee customer. Their portfolio includes Maxwell House, Gevalia Kaffe, Yuban, and Cafe Collection.

Yuban coffee is made from 100% premium Arabica beans, is mountain grown coffee which offers uncompromising, robust flavor and seductive aroma. According to the Kraft food website, Yuban coffee is made to appeal to those consumers who demand environmentally conscious products. Thus, Yuban coffee is perfect choice for customers who want to make a difference in the world. This strategy of marketing Yuban coffee to the environmentally conscious is part of our objective, however, Kraft foods has not differentiated who the environmentally conscious really are.

We discussed earlier who our target market included, but let us take a closer look and understand them and their habits better. In a study conducted by Generate Insight (2009) “69% of millennial’s surveyed expressed genuine interest in the environment, but they also admitted to a lack of personal involvement in green-related activities. In short, this group understands the why but is unsure of the how” (Gaudelli, 1). Thus it will be our job to tap into how they can be a part of the green movement.

If we had the time and money, which Kraft does have, we would recommend doing marketing research on the three generations which include gen x, baby boomers and the millenials to understand their buying habits especially when it comes to choosing an environmental conscious product over one that is not. VII. Marketing Mix Product: The package of Yuban coffee suggests that its drinkers can have great tasting cup of java and feel that they are participating in doing something great for coffee farmers as well as the environment. Yuban is grown according to Rain forest Alliance Certified standards and also applies organic coffee beans.

Therefore, the product has two benefits, being better for the rain forest and world, and is also organic, which means you can feel really good when you drink Yuban. The package description also comprises information of there being a minimum of 30% Rain Forest Alliance Certified Coffee in each bag which is supposed to help in conservation of the environment as well as support coffee farmers (Cliath, 2007). Yuban coffee has a very distinctive smell than any other coffee. It has a fresh and pleasant smell, loaded with a fresh ground coffee bean fragrance.

It is mild and has no bitter after taste (Cliath, 2007). The introduction stage is the first stage in the life cycle where the coffee was introduced to the market. At this stage there were low sales with high retail prices. Then there is the growth stage that is characterized by rapid increase in sales. This happened when the Yuban coffee was just introduced to the market. It is believed by some industries that Yuban coffee is still in the growth stage, signs indicate that it is in the maturity stage. In the maturity stage, there is high brand awareness, high distribution, and lower prices.

Yuban coffee is believed to be in this stage (Cliath, 2007) however, we feel differently about this. We feel that Yuban can be reintroduced into the market with our recommendation and back track to the introduction and growth stage once more. The coffee is packaged in what seems to be a 12 ounce bags. Today it is packaged in the traditional preserved coffee containers, or in coffee cases. Coffee cases are individually sealed cups of premeasured grounds, designed for use in one cup coffee makers. They are packaged in reasonable pouches for convenience and freshness and the label also contains a K for Kosher on the outside.

There is no indication through whether the bag is made of recyclable material or is (Cliath, 2007). Thus Yuban is not differentiating its packaging in relation to its purpose either. Customer service is required for the coffee brand so as to get the feedback from the customers on what they need improved. The product also does come with a warranty from the company. Customers are assured of the quality in the product. Place: Some products need much less market exposure than others. An ideal market exposure degree makes the coffee available widely enough to reach the target customer’s needs.

This however, should not be exceeded. The ideal exposure degree involves intensive distribution, selective distribution, as well as exclusive distribution (Cliath, 2007). Yuban coffee is distributed both at the wholesale and the retail level. It distributed all across nations of the world. One is likely to get Yuban coffee at the supermarkets, retail shops, and coffee shops. It is also distributed directly by the company to the wholesalers. The product is aimed at individuals who feel that they are participating in the preservation of the environment and minimize or stop further destruction to the rain forest (Cliath, 2007).

With our recommendation of introducing the Yuban vending machine, placing these machines in call centers across the nation, colleges and universities will be another way to introduce our environmentally conscious product to our target market. Promotion: The promotion objectives are to get customers to remain committed to buying environmentally conscious products and our customers will feel like they are doing their part in sustaining the world and environment through their purchase of Yuban coffee. Promotion Blend:

The advertising plan will focus mainly launching a website for Yuban as well as its own Facebook, YouTube and other media site promotions. Though print advertising can be very beneficial we will try not to dive too deep in this area as we are promoting an environmentally conscious product and want to track our carbon footprint. Our copy thrust will be more psychological to ensure that customers are aware that they are doing the right thing by choosing to buy Yuban coffee. Personal selling can be used especially if we show customers who and where the original Yuban coffee beans are grown and cared for.

This can be demonstrated through videos on YouTube and also shared on our Facebook page and website, similar to what Kashi does with their cereal products. Yuban can initiate a reward system that if their coffee packaging is recycled to certain grocery stores they can get a discount on the next Yuban coffee product they buy. Again here, customers can feel good about this buying process. Publicity will be used when we introduce Yuban coffee in the coffee shop recommendation through Tom n Toms and Urth Cafe. It will become recognized as the coffee used in these shops and slowly grow to the coffee used in customer homes and so on and so forth.

Price: The demand for an entirely organic coffee is price sensitive because the cultivation of organic coffee is difficult. Thus, if we can figure out what the minimum requirements are to be certified as organic in FDA standards and such, then maybe 30% is good enough and we do not have to promote that our product is only 30% organic, and we can call it entirely organic if the requirements are not demanding. The pricing strategy for Yuban would be price slightly higher than competitors such as Folgers but only because of the environmental work that goes into sustaining what Yuban believes in.

Also, by pricing our coffee slightly higher we can including something in our promotion that a part of the revenue from sales is pumped back into the environment to fix what matters most in the world environmentally. Yuban can offer discounts if their packaging is recyclable or reusable. We may be able to start an imitation to return Yuban coffee cans or jars to grocery stores to get a discount on their next Yuban purchase. This goes in line with what Yuban is all about and is also a discount to the customer which will get them to continually buy our brand of coffee. VIII.

Recommendations and Implementation Brand recognition is very important and closely connected to the implementation of our recommendations. We recommend that Kraft first redesign and assign Yuban its own website so customers are aware of the different product offering and what this brand of coffee is all about. In the Internet age, people have always enjoyed looking on the different websites for the information they can find on each individual product, however, there is no independent or well put together website for Yuban coffee, which will make it difficult for investors to learn more.

For example, Folgers which is another brand of coffee that everyone knows quite well due to the Folgers jingle actually has its own website despite the fact that it is a part of the Smuckers Company. Kraft food also has a portfolio of coffee that is targeted to different customers, however, Yuban has not been given that independence or leadership to stand alone or gain reputation. Maxwell House Coffee, the second of the 4 coffee brands/products of Kraft Foods has its own website, Facebook, and YouTube. Though Yuban is a product of Kraft Foods, Yuban has a poorly designed website with little information on it at all.

Also, the Yuban page in Kraft Company official site is very simple. Yuban is a coffee made under the Kraft Food line, and it appears they are unwilling to pour in the proper funds needed to fund a separate Yuban Coffee Website. Customers are considered as the backbone of any businesses. Hence, Yuban need to be well aware of their customers’ satisfaction for their products or services, especially in their efforts to track the ‘environmentally conscious’ customer base. Also, Yuban should conclude problems reported by customers and try to fix the problems, which benefit the company’s further development.

In addition, another recommendation for Yuban is that the brand can also develop vending machines that will provide hot coffee and specialty drinks with the touch of a button or two. Yuban is well known as a ground coffee product. However, making a coffee run to the nearest Starbucks or local coffee shop is not an option during the day. Hence, our recommendation of vending machines is also a very convenient to those customers. Especially if the machines are placed in locations such as college hallways and buildings where students are only allowed enough time to grab a quick beverage or snack during their short break.

Placing the vending machines in call centers where hours of operations usually start early in the morning and are located in large multi-level buildings that grind and brew a cup of fresh coffee is would be a strategy which would allow Kraft foods to tap into the coffee machine business because not only would Kraft supply the coffee, which is Yuban in our case, but it would also sell the machine that brews the coffee to these business, or collect some sort of rent or lease for having it.

Our third and final recommendation would be to become the coffee supplier of coffee shops such as Tom n Tom’s and Urth Cafe. Tom n Tom’s has an interesting location base in Los Angeles, Australia, Singapore and Thailand. They do not however carry or brew good quality coffee. Thus, by becoming the sole coffee provider for Tom n Tom’s will be a win-win situation. Urth Cafe is a cafe which offers exclusively organic coffee and tea, Yuban would fall into this category and could provide lower prices than other organically grown coffee.

Though Urth Cafe currently only has location here in Los Angeles, it is only an example of the position that Yuban coffee can take in the market. Appendix Figure 2. 1 Figure 8. 1 Research and make improvement Time Event Cost Note One month Redesign a new website $30,000 Two months Shot video on You Tube $50,000 Three months Research and make improvement Included in customer service Long time Customer service department 200,000 per year Work Cited Agas, G. (2006).

Conscious choice: Yuban coffee. Natural Health, 36(10), pp. 20-24. Amato, L.

H. , & Amato, C. H. (2009). Changing retail power and performance in distribution channels. International Journal of Retail & Distribution Management, 37(12), pp. 1057-1076. Annual form 10-K. (2012). Kraft Foods, Investor Relations (online).

Retrieved from: http://ir. kraftfoodsgroup. com /sec. cfm Igami, M. (2011). Oligopoly in International Commodity Markets: The Case of Coffee Beans. Available at SSRN 1531401. Statistics and facts on the coffee market in the U. S. (2013). Statista Research Publications, 01(05), pp. 1-72. E-imports.

Coffee Statistics.

Retrieved from http://www. e-importz. com/Support/specialty_coffee. htm Kraft. (n. d. ). Your customers care. about the planet. about people.. Retrieved from Oches, S. (2012, November). Meet your customer. Retrieved from http://www. qsrmagazine. com/consumer-trends/meet-your-consumer Cliath, A. (January 01, 2007). Seeing Shades. Organization & Environment, 20, 4, 413-439. Gaudelli, Janis. The Greenest Generation (April 29, 2009).

Yuban coffee Essay

Coffee Industry Essay

Coffee Industry Essay.

From the discovery of small, brightly colored red berries on trees in Ethiopia came the largest imported commodity in the world, second only to oil. The coffee bean provides a livelihood for over 20 million people worldwide with an estimated worldwide retail sales expected to grow by a compounded rate of 6. 9% from 2005-2010, reaching $48. 2 billion by 2010, according to The U. S. Market for Coffee and Ready-to-Drink Coffee. [1] The two main species of coffee beans are Arabica and Robusta.

Arabica is a high-quality coffee typically grown at higher elevations where the optimal climatic conditions necessary to grow this specialty grade of coffee are found.

Arabica coffee is traded in two ways: ? On the highly volatile New York “C” market where the “C” price is affected by the global supply as it rises and falls. The average “C” price for a pound of coffee during fiscal 2005 was $1. 04. ? Higher-quality Arabica beans are used in specialty coffee. Specialty coffee represents 10 percent of the total worldwide coffee market.

Prices for specialty coffee are higher than the “C” offers in order to provide better rates payable to producing farmers for quality. [2] According to the National Coffee Association in Volume 2005. 4 of Coffee Trax, as of December 2005, forecasts for the world coffee production for 2005-2006 will be 113. 1 million bags. Production is down 5. 5% over the actual 2004-2005 yields of 119. 8 million bags. Domestic consumption in producing countries in 2005-2006 is forecast to increase to 31. 2 million bags, indicating domestic use should be 9. 9% higher in 2005/06 than in 2004/05.

Using the most current data, world coffee consumption for 2003/04 was 96. 5 million bags, up by 1. 8% over 2002/03’s production. “In 1999 there were 108,000,000 coffee consumers in the United States spending an approximated 9. 2 billion dollars in the retail sector and 8. 7 billion dollars in the foodservice sector every year (SCAA 1999 Market Report). It can be inferred, therefore, that coffee drinkers spend on average $164. 71 per year on coffee. The National Coffee Association found in 2000 that 54% of the adult population of the United States drinks coffee daily (NCA Coffee Drinking Trends Survey, 2000).

They also reported that 18. 12% of the coffee drinkers in the United States drink gourmet coffee beverages daily (NCA). In addition to the 54% who drink coffee everyday, 25% of Americans drink coffee occasionally (NCA). The average consumption per capita in the United States is around 4. 4 Kg. Among coffee drinkers (i. e. not per capita) the average consumption in the United States is 3. 1 cups of coffee per day (NCA). Per capita men drink approximately 1. 9 cups per day, whereas women drink an average of 1. 4 cups of coffee a day (NCA).

The USDA’s 2005/2006 December estimate for world exportable production is 82.0 million bags which is 10. 2% lower than 2004/05. Total U. S. imports were down 15% for the second to third quarter of 2005. Estimated roastings for the third quarter of 2005 were up to 4. 7 million bags compared to the second quarter but down by 5. 8% for the year-ago quarter. [3] Retail prices were up from $3. 33 to $3. 40 for the average quarterly retail price of a pound of roast-and-ground coffee or 2. 1% after comparing the third-quarter 2005 to the second quarter. Compared to the year-ago quarter, average retail prices were up by 18. 1%, moving to $3. 40 from $2. 88.

The average monthly retail price continues to be 20. 8% below its seven-year high of $4. 67 in August 1997. [1] Fair Trade coffee is beginning to affect the economics of the coffee industry. Coffee retailers to help maintain a sustainable supply of coffee are increasingly adopting the Fair Trade movement. Over the years a coffee crisis has developed as supply has greatly exceeded demand. This paradox of continued growth of retail pricing at the expense of the small coffee farmers has driven retailers like Starbucks to create their own methods of providing higher profits to producing farms so that supply can be maintained.

Under a Fair Trade agreement producers are guaranteed a fair price consisting of a floor price of $1. 26 per pound and $1. 41 for certified organic coffee. [2] From 2002 to 2004, USAID invested over $57 million on coffee projects in over 18 countries in Latin America, East Africa and Asia in an effort to create sustainable supplies of coffee. Other movements such as Organic and Shade Tree coffee have had similar goals to help with environmental and quality concerns on the producing farms. [4] Coffee consumers are continuing to show a preference for premium coffees.

While most brands have declined in sales during the past year, premium coffees have managed growth, according to data from Information Resources Inc. , which measures sales through supermarkets; drug stores and mass merchandise outlets. Ground coffees lost 1. 8 percent of sales for a category total of $1. 6 billion, but whole bean coffees were up 2. 2 percent. Starbucks grew in both segments, with a 13. 2 percent increase in ground coffee sales and 6. 4 percent in whole bean sales. [5] Retailers such as Starbucks in the specialty coffees use the highest-quality Arabica.

Specialty coffee is a broad category of coffee positioned as the highest quality and/or roasted with the ideal techniques or even coffee from particular plantations. “Even though the overall U. S. coffee market has been sluggish lately, the specialty component has seen significant growth, with retail dollar sales approaching $9 billion in 2003. The segment’s sales in 2003 represented growth of 6. 7 percent over 2002’s $8. 4 billion. In 2003, coffee cafes – the approximately 11,240 retail locations including seating, such as most Starbuck’s outlets – generated $6. 1 billion in retail sales, or 68. 3 percent of the segment’s total.

Coffee bean roasters and retailers – the 1,350 sites with on-premise roasting – accounted for 14 percent of sales with $1. 3 billion. Coffee retailers without seating, also known as kiosks, had sales of $810 million, which represented 9. 0 percent of the total. There were approximately 2,700 coffee kiosks operating in 2003. Mobile retailers (i. e. , carts) accounted for an additional 3. 2 percent of sales, with all other channels responsible for the rest. ” [6] Driving Forces in the Coffee Industry Competitive and industry conditions experience change due to the forces that are pressuring industry participants to alter their actions.

Competitors, customers, or suppliers are enticed to change their ways. Those with the biggest influence on industry structure and the competitive industry environment are driving forces. The coffee industry has four driving forces that originate in the industrial and competitive environment. A change in who buys the product and how they use it is one of the four driving forces in the coffee industry. Shifts in buyer demographics and the way consumers use the product have altered the competition for this industry.

The variation has prompted producers to broaden the product line and try different sales and promotion approaches. Changing societal concerns, attitudes, and lifestyles is the other driving force that ties in with the customer base and usage. Society is changing, with the new generations being a huge influence. Parents, a huge factor in the lifestyle, attitudes, and opinions of their children, drink coffee and are, thus, promoting coffee to the offspring. These young persons are looking for caffeine to keep them going through their increasingly busy days.

At age 13, who knew that coffee was needed to add to their ever-so hyper lives? Coffee is established as a drink older people consume. Young people are always aspiring to be older than they are, so coffee is marketed in a different way to the younger generations as specialty coffee and gourmet beverages. Marketing these drinks as “cool” and “hip” is also a successful method of attraction. Establishing loyalty early while coffee drinkers are young will ensure a prospective future for this industry. In addition, the use of coffee has changed over the years.

Coffee was first marketed as a breakfast drink for the working parent to get a boost of energy for the day. As more women started joining the workforce, the coffee consumption increased. Throughout the years, an increasing amount of people started drinking coffee more frequently throughout the day. Today, it is not uncommon to see a person drinking a gourmet coffee drink at 10:00 p. m. , as well as anytime throughout the day. Whenever you need that caffeine-boosted beverage or just want that coffee bean taste most love, consumers now can look for multiple types of coffee drinks to satisfy the craving.

Growing buyer preferences for differentiated products instead of standardized is the driving force that allows the product innovation to take lead in this industry. Due to consumers demand for something different, companies in this industry needed to expand current products to fit customer needs and wants. The success of product innovation of introducing coffee drinks and coffee flavors, made the choices for consumers grow. Consumers wanted more flavor and excitement, instead of the regular or decaffeinated options.

During the hot summer months, many coffee lovers wanted the taste of coffee but were not fond of drinking a hot drink. Iced coffee drinks helped to solve that problem. Now, people can drink coffee anytime of the year. Many consumers do not just drink coffee in the morning, like the generations before; meetings, study sessions, hanging out, talking amongst old friends and other events are all done through coffee drinking. Due to the buyer influences, the coffee industry has grown in all directions and continues to see a future with innovation and other driving forces helping it along the way.

Lastly, product innovation is a driving force that has allowed the coffee industry to grow. The competitive environment is fierce and product innovation is one of the key driving forces to stay on top of the industry’s market share. Coffee drinks were developed as an anytime coffee drink. Such drinks are Espressos, Cappuccinos, Frappaccinos, Lattes, and Mochas. Whether a consumer likes it hot or cold is no difference now; iced coffee is for those that do not feel like a hot cup. Black, White, Irish, Turkish and Americano are also other types of coffee to choose from.

Flavored coffee is a pillar innovation to this product category allowing different consumers’ taste buds to run wild. Chocolate covered coffee beans are another innovation that expands the use of coffee in a nontraditional way, a snack. This industry growth has also allowed companies the opportunity to promote to different consumer markets. Young and old purchasers, people that like hot or cold coffee, and those that like a coffee drink in the morning or evening are all targeted now that the product lines have broadened the scope of the industry.

Product innovation has helped consumers’ differentiation issues, along with allowing them to drink it anytime of day they need an extra tasty boost of energy. In order to stay on top of the competitive environment in this industry, a company has to accept the driving forces and make each one positive for the company in the long run. The following driving forces are influencing the coffee industry: change in who buys the product and how they use it; changing societal concerns, attitudes, and lifestyles; growing buyer preferences for differentiated products instead of standardized ones; and product innovation.

Each of these driving forces increases the competition in the industry. The increased demand for products, especially the new innovated ones, is an opportunity for profitability as well. Because of the innovation, many people are expecting choices for the long run; the companies that offer the products consumers want will prosper. Competitive Analysis of the Coffee Industry Although there are many substitutes for coffee when it is regarded as nothing more than a liquid to drink, most people would agree that there are relatively few that would be considered viable substitutes to dedicated coffee drinkers.

Historically, teas have been the greatest rival substitute for coffee, and just as there are specialty coffees, there are specialty teas as well. The key to coffee substitutes being successful in luring coffee drinkers over to their products is differentiation. While tea alone may be substantially differentiated from coffee, a dedicated coffee drinker will need some sort of hook, or angle, to get them to try something different. Often this angle comes in the form of a doctor telling them to cut back on caffeine or to stay away from coffee altogether.

According to About. com the top five coffee substitutes are: 1. )Roastaroma ? a tea “blend of roasted barley, roasted chicory root, and roasted carob, with spices cinnamon, allspice, and star anise. ” 2. )Genmaicha ? a “green tea with roasted brown rice. ” 3. )Teechino ? “made from roasted carob, roasted barley, and roasted chicory” containing “figs, almonds, and dates. ” 4. )Cafix ? “a freeze-dried grain drink made from barley and chicory. ” This drink is non-acidic and does not contain caffeine. 5. )Pero ? “made from malted barley, chicory, and rye. ”

Although coffee substitutes are readily available and reasonably priced, traditional coffee drinkers are usually dedicated to coffee in general, if not one particular brand. Therefore, buyers tend to view substitutes as not adequately comparable alternatives. One of the coffee industry’s greatest attributes is the loyalty of their customers. Buyers of coffee can be broken down into two groups; individuals and businesses. An individual coffee drinker will have little or no real power to influence the industry or a particular seller beyond switching brands.

The switching costs of individuals are virtually nothing; therefore they can move between brands whenever they are dissatisfied with quality or price. Business buyers such as restaurant chains, hotel chains, convenience stores, and supermarket chains have considerably more power than an individual buyer. This is simply due to economies of scale where a restaurant chain purchasing several thousand pounds a week will have more influence on a supplier than an individual buying one or two pounds per month. Supermarket chains are in a strong position as well, as they can offer as much or as little shelf space as they want.

They can also switch brands on shelf space, virtually without cost, to replace poor selling brands with other brands, which may have a higher sales rate. Therefore buyer power depends upon the quantity bought, as with many industries. The power of buyers may range from weak to strong or even fierce. The threat of new entrants into the coffee industry is somewhat strong. While entrants into large markets may not be many, the entry of small shops in local markets offering specialty coffees has grown rapidly in the last several years.

Entrants into the specialty coffee arena have been lured in by rising demand of such coffee and attractive profit margins. While these local shops will not be able to compete with large corporations such as Kraft, Proctor & Gamble, or Starbuck’s on an international basis, they can account for some competition in local, concentrated markets by offering a niche; an alternative to corporate retailers with a less personable and hospitable atmosphere. Retailers such as these tend to do well in more rural areas where major corporations may not wish to enter, or in areas where collegiate or more naturalistic atmospheres prevail.

These areas may be less inclined to cater to large corporations. New entrants into the coffee industry are also faced with the obstacle of overcoming name brand loyalties. Although in some small specialty coffee markets a new brand with a unique name or style may do well, in most arenas coffee drinkers are extremely loyal to their brands when they are purchasing for home consumption. These buyers are not likely to switch brands for superficial reasons. The competitive pressure from suppliers is relatively weak in the coffee industry.

The individual coffee bean farmers have little control over the price of the coffee they sell. The worldwide market has little fluctuations and any that may occur have little effect on any one particular farm. Recently world coffee supply has been exceeding demand, which has taken even more power away from the suppliers who must compete with growers from around the world. The futures market provides security to firms purchasing beans from governments. By buying these futures contracts the company is promising to buy a certain amount of coffee at a stated price no matter what the overall market price may be at the time.

The government selling the contracts is promising to provide the amount of coffee stated to the buyer at the stated price regardless of the current market price. Governments also have a role in determining supply as they can set regulations governing the number of trees that are planted, provide price subsidizing for farmers, and impose tariffs. Furthermore, the price of coffee beans has not been increasing at the same rate as the price of your average cup at a specialty shop, or as fast as inflation. In January of 1996 the price of coffee beans was $1. 02 per pound [7].

Ten years later in January of 2006 the price has only increased to $1. 17 per pound, an increase of 14. 12% [7]. In the same period inflation had risen approximately 25. 3% [8]. Rivalry in the coffee industry among competing sellers is vigorous. Although the overall market for coffee grew fast in the late 1990’s, especially regarding the specialty coffee markets, it has leveled off some in the last few years and the overall demand is growing slowly. Another reason for the high level of competitiveness within the industry is due to the relatively low differentiation ability of coffee.

While specialty coffees derive some level of differentiation from region of growth or roasting methods, the overall product is fairly standardized. This leads to increase jockeying for position among existing firms, as they cannot lure customers in with a variety of unique products. Some firms however are attempting to lure customers in with new products such as Folgers’ Home Cafe system, which is a one-cup pressure-brewing system. These devices use “pods,” or individually packaged coffee for single serve applications. Other companies have also been marketing individually packaged coffee so that consumers can make a “perfect cup” every time.

The switching costs of buyers are also very low, if not non-existent. Buyers only have to purchase a different brand in order to switch. While some businesses may have to replace equipment if they switch brands, a business of large purchasing capacity will likely have equipment provided for them by their coffee bean supplier. The recent surge in specialty coffee brands has increased rivalry among existing firms. As companies such as Starbuck’s have grown and acquired market share, companies such as Kraft, Proctor & Gamble, and Nestle have had to increase advertising and create new specialty coffees of their own in order to compete.

“Sales of specialty coffee were $10 Billion in October of 2005 and expected to rise at a rate of 7% annually, while sales of traditional brands have been falling. ” [9] Over the past two years Maxwell House has seen a decline of $75 Million in supermarket sales alone. ” [9] Furthermore, companies like Starbuck’s have been acquiring smaller companies and thereby growing in market share and sales. This has been done to such an extent to make them comparable to big firms such as Kraft and Proctor & Gamble who compete in various markets with multiple products.

This has increased rivalry among these firms as they struggle to maintain their market share. Key Success Factors in the Coffee Industry Coffee drinkers are becoming interested in the type of coffee they drink, people who want specialty chocolates and wines want specialty coffee. Specialty coffee is label “gourmet” or “premium” coffee. The specialty coffee bean comes form rare locations and is 100% from that origin; that means no mixing with another bean. People want to know the beans country of origin and if the bean is a blend or a single-origin.

Coffee originates from a variety of places like South America, Africa, Middle and Far East, and Jamaica. The Specialty Coffee Association of America (SCAA) said people want specialty coffee because of its superior coffee, “People want things to taste good and clean and no longer want cheap coffee. ” The SCAA reported that 15% of American adults drink specialty coffee an increase from 6% points over 2000. According to Mintel International Group, saw producers who specialize in coffee rise, Procter and Gamble’s Millstone premium brand increased 37.

5% and Starbucks rose 23% between 2001 and 2003 (Chater, 2005). Along with specialty coffee is flavored coffee, which is increasing popular. Flavored coffee ranges from Cherry Vanilla with Pecans and Cashews, Orange Cappuccino, or even Hazelnut. The SCAA claims flavor coffee will continue to grow in the total market share. The Motley Fool Stock exchange reported that the 7-Eleven saw 5% of sales come from coffee products like the Slurpee with flavors Cherry Creme and Vanilla Nut. The Black Mountain Gold Coffee (BMG) offers its flavor coffee through Amazon.

com and it is their number one flavor; Cinnamon Crumb Cake-flavor coffee became so popular that Albertsons in Texas included the brand inside the store (Friedman, 2004). The United States is the largest base of coffee drinkers and the second largest importer of coffee (Packed Facts, 2003). Therefore, it is evident that coffee is popular drink. Coffee is sold in airplanes, office buildings, hotel rooms, train terminals, schools, and grocery stores. Some grocery stores even offer coffee to drink while shopping. It is good having these locations offer coffee because it stimulates more coffee being drunk and later more purchases.

It is also a good way to get non-coffee drinkers to try coffee and turn them into coffee drinkers. Coffee is sold in most stores, and even on the Internet. Having coffee sold in a variety of places ensures the consumers have easy access to purchase the product. Locations benefit by selling coffee because usually when coffee is being bought customers have a tendency to buy other products such as, milk, cream, sugar, or a mug. Numerous studies are indicting coffee can offer health benefits. It would be beneficial for the coffee industry to further these studies and use as a selling tool.

The coffee bean is a plant base food, therefore offers rich antioxidants more so than broccoli and blueberries. These antioxidants can help prevent cancers, Parkinson disease, gallstones, and used for an antidepressant. Other nutrients inside coffee like potassium, niacin, magnesium, and chlorogenic acids can possibility help reduce diabetes (McAuliffe, 2005). Cautious coffee drinkers are concerned with how coffee effects the environment and farmers. Sun-grown coffee, uses fertilizers and pesticides, and contributes to deforestation; shade-grown is grown beneath a canopy of trees while preserving the forest.

Organic coffee has increased 54% in 2005 through Nov 6, while non-organic coffee increased 8. 5%. Coffee drinkers want to be reassured that producers of coffee are treated fairly. Are farmers compensated fairly, no abuse, or child labor? Companies should be very weary of this issue because, if the source of coffee is not on good terms, if the farms are not healthy or unhappy employees than it could affect the industry in a negative way. Starbucks is a perfect example showing support to farmers by offering decent wages, and ways to help protect their asset (farms).

Starbucks as teamed with the Fair Trade Certified Coffee by offering “Coffee of the Week” to bring awareness for the Fair Trade Certified Coffee. Other companies should take notice of the Fair Trade Certified Coffee, the Fair Trade Certified Coffee ensures farmers are properly compensated, health care, and economic stability of farms (Gimbl, 2005 & Chater, 2005). Overall Industry Attractiveness In order to decide if the coffee industry presents an attractive opportunity for earning good profits, it is important to base a conclusion on several factors.

By drawing upon previous analysis of the intensity of competition, whether the impacts of the driving forces are positive or negative, the market positions of industry members as shown on the strategic group map, and also close examination of the industry’s key success factors an educated answer can be deduced. First, by examining the market size and growth potential the coffee industry presents a livelihood for over 20 million people worldwide with an estimated worldwide retail sales expected to grow by a compounded rate of 6.

9% from 2005-2010, reaching $48. 2 billion by 2010, according to The U. S. Market for Coffee and Ready-to-Drink Coffee [1]. Competitive forces in the industry point to growth through the development of product innovation and specializing in gourmet coffee and specialty drinks. “Sales of specialty coffee were $10 Billion in October of 2005 and expected to rise at a rate of 7% annually, while sales of traditional brands have been falling. ” [9] This has increased rivalry among these firms as they struggle to maintain their market share.

Competitive forces are conducive to rising industry profitability as long as companies continue to offer product innovation and stay ahead of the curve when it comes to the driving forces in the industry Degree of risk and uncertainty in industry’s future encompasses many issues. Coffee drinkers are many and are seemingly very loyal to their drink. Proof being that recently the coffee supply has been exceeding its demand, which has taken even more power away from the suppliers who must compete with growers from around the world. In addition several tentative studies show positive health benefits to coffee drinkers.

With a trend in the United States to be more health conscious, the coffee industry has opportunity to capitalize on these finds. In contrast when examining the severity of problems facing the industry it is evident that although demand is growing the trend is that it is steadying off. Due to little differentiation and small increase in the price of coffee since 1996, companies have been forced to focus on increased product differentiation in areas such as specialty coffees; however, that too is steadying off in growth over the past couple of years.

Possible strategic issues include customers increasingly loyal to certain brands, which possibly make it more difficult for smaller coffee companies to edge into large consumer base. Also coffee companies need to consider the growing demand of consumers in the ethical treatment of coffee workers and focus their attention to a coffee drinker who looks to drink it for its benefits and special offering in taste. Ultimately when drawing conclusions about the attractiveness of an industry, the perspective is important. It depends on the scope and breadth of a particular company.

The attractiveness of the opportunities an industry presents depends heavily on whether a company has the resources and the competitive capabilities to secure them. A standard judgment of if an industry is profitable is if the industry’s overall profit prospects are above average, the industry environment is basically attractive; if industry profit prospects are below average, conditions are unattractive (Strickland III et al, 2004). However this analysis of the industry shows that the coffee industry has a strong future and to the right players offers an attractive business opportunity.

Works Cited

[1] 6 Mar. 2006 . [2] “Starbucks. ” Starbucks, Inc.. 3 Mar. 2006 . [3] 1 Mar. 2006 . [4] 2 Mar. 2006 . [5] http://www. stagnito. com/fbr_beverage. asp [6] “Slow Roast”, John G. Rodwan Jr. NPN, National Petroleum News. Chicago: Mar 2005. Vol 97, Iss. 3; pg. 14, 1 pgs. [7] http://www. econstats. com/fut/xnyb_ew2. htm [8] Bureau of Labor Statistics. http://www. bls. gov/cpi/cpi_dr. htm; Table Containing History of CPI-U U. S. All Items Indexes and Annual Percent Changes From 1913 to Present. [9] Coffee Drinkers and Their Habit, Business Week Online October 10, 2005 Marketing/Online Extra http://www.businessweek. com/magazine/content/05_41/b3954201. htm 12 Mar.

2006 Packaged Facts. “The U. S. Market for Coffee and Ready-to-Drink Coffee, 4th Edition. ” (Nov 1, 2003). Packaged facts. 8 Feb 2006. < http://www. packagedfacts. com/pub/895867. html> Chater, Amanda. “SPECIALPERKS; THE BUZZ ABOUT SPECIALTY COFFEE IS ENLIVENING SALES IN AN OTHERWISE DECLINING CATEGORY. ” (coffee markets). ” Supermarket News (Dec 19, 2005): 41. InfoTrac OneFile. Thomson Gale.

Middle Tennessee State University. 2 Feb 2006 http://find. galegroup. com/itx/infomark. do?&contentSet=IAC-Documents&type=retrieve&tabID=T002&prodId=ITOF&docId=A140760166&source=gale&srcprod=ITOF&userGroupName=tel_middleten&version=1. 0. McAuliffe, Kathleen. “Enjoy!. ” U. S. News &World Report 139. 23 (Dec 19, 2005):67-68. InfoTrac Online. Thomson Gale.

Middle Tennessee State University. 2 Feb 2006 http://find. galegroup. com/itx/infomark. do? &contentSet=IAC-Documents&type=retrieve&tabID=T002&prodid=ITOF&docId=A139695515&source=gale&srcprod=ITOF&userGroupName=tel_middleten&version=1. 0 Friedman, Susan. “Beyond cream & sugar: savvy Retailers recognize the value of flavored coffee. ” Tea & Coffee Trade Journal 176.

3 (March 2004): 30(3). InfoTrac One File. Thomson Gale. Middle Tennessee State University. 2 Feb 2006 http://find. galegroup. com/itx/infomark. do? &contentSet=IAC-Documents&type=retrieve&tabID+T002&prodId=ITOF&docId=A114819506&source=gale&srcprod=ITOF&userGroupName=tel_middleten&verson=1. 0 Introducing Starbucks Cafe Estima Blend(TM).

Fair Trade Certified(TM) Coffe. Business Wire. LOAD DATE: Oct 10, 2005. 23 Feb 20006. /cnn/sbux. shtml Strickland III, A. J. , Arthur A. Thompson Jr. , and John E. Gamble . Strategy Core Concepts, Analytical Tools, Readings. 2nd ed. Boston: Mc-Graw-Hill Irwin, 2004.

Coffee Industry Essay

Wake Up and Smell the Coffee! Black Gold Essay

Wake Up and Smell the Coffee! Black Gold Essay.

The following paper is a movie review of “Wake Up and Smell the Coffee! Black Gold” which is directed by Marc Francis and Nick Francis. In the movie, the director tries to make the customers realize that what they actually are drinking on the name of coffee. Customers can convey a revolution if consciousness is specified to patrons. It is not simply on coffee, all goods are receiving an extremely little value – and the manufacturers are exceedingly having an influence. Nowhere is this contradiction in terms further obvious than in Ethiopia, the place of birth of coffee.

Tadesse Meskela is one male on an assignment to accumulate his 74,000 under pressure coffee cultivators from economic failure. As his farmers make every effort to produce a number of the uppermost eminence coffee beans on the intercontinental market, Tadesse moves around the world in an effort to come across purchaser agreeable to compensate a reasonable value. Review: The movie is about the journey of a man called Tadesse, who has his long journey against the surroundings of London to Seattle.

In this journey, a number of huge international players who deal in trading the coffee around the world become noticeable.

New York product traders, the intercontinental coffee connections, and the twice over transactions of trade preachers at the World Trade Organization make public the numerous and countless confronts Tadesse copes with in his expedition for an extensive tenure clarification for his farmers. The movie is more like a documentary. The main objective of the documentary are the unreasonable proceeds that coffee growers in Ethiopia acquire in relation to the enormous profits international business similar to Nestle, Proctor and Gamble, and Starbucks put together each and every year.

This analysis was conducted using the method in the book “A Short Guide to Writing about Film” (Timothy Corrigan, 150). A large quantity of the documentary goes behind Tadesse Meskela, a spokesperson of the Oromio Coffee Farmers Cooperative Union which is located in the Southern Ethiopia. Meskela and the Union’s great efforts are to accumulate 74,000 under pressure coffee farmers commencing economic failure.

The motion picture furthermore give you an idea about the fight back of emergent country in demanding to acquire their right to be heard and to take notice of at the World Trade Organization’s (WTO) Fifth Ministerial Conference in Cancun, Mexico in the year of 2003. The WTO lays down the regulations for the comprehensive dealing organizations and the film demonstrates how those regulations are over and over again indomitable in good turn of the more affluent Western associates (Rob Cawston, pp. 1) Spectators require not be efficiently versed in the ins and outs of the coffee manufacturing organizations to tag on this motion picture.

The filmmakers have taken coffee, the most important sale to other countries for Ethiopia, which is the prevalent exporter of coffee in Africa, and publicized how the unreasonable and unjust worldwide and international market values place Africa at an inconvenience. According to the makers of the film the international businesses who contract in coffee formulate a predictable USD$80+ billion a year, manufacturing coffee the mainly most precious buying and selling product in the world subsequent to lubricate.

The quantity that dribbles along to the African coffee growers who’s administrations cannot come up with the money for financially supporting them relentlessly undercuts the significance of in cooperation with their goods and their manual labor. Conclusion: The overall film was just an average one. But the positive aspect of the film was that it bought a number of unknown facts to reality. The screening of the movie is in the form of a documentary which also brings life into the screen play of the movie.

This prized documentary is a convincing, informative and unremorseful depiction of the multi-billion dough coffee business, sourcing a universal mix ever since its pictures release in 2006.

References:

Cawston, Rob. Black Gold: wake up and smell the coffee. Retrieved on 1st March 2009 from Corrigan, Timothy. 2003. A Short Guide to Writing about Film. Publisher: Longman; 5th edition

Wake Up and Smell the Coffee! Black Gold Essay