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I. EXECUTIVE SUMMARY
This study will focus on the success-marketing segment of Starbucks. The study is to determine if a milk tea brand extension for Starbucks is feasible. The researchers made use of a survey to determine the target market and its current situation. By looking at the industry and company situational analysis, the researchers will determine whether milk tea will be a successful brand extension for Starbucks. The researchers will then discuss why Starbucks is a successful international business and the implications of being an international business and effect of the milk tea in the beverage market under the Starbucks Company. This cold drink “samalamig” addiction started with sago’t-gulaman made with little tapioca “bubbles”, panutsa or palm sugar and often a hint of vanilla in stalls to pearl shakes made be with fruits just like Zagu. This milk tea craze with the courtesy of Taiwan’s was brought to the Philippines by a entrepreneur couple founders Juliet D. Herrera-Chen and Peter L. Chen the people behind to blame for this milk tea addiction who thought of bringing the concept of “milk tea” or also knowing as bubble tea here in the Philippines. The milk tea craze started in Taiwan back in the 1980’s experimented with cold milk tea by adding fruit, syrup, candied yams, and tapioca bubbles and was brought here to the Philippines in 2008 with its stall Serenitea. Cha Time brought by French Baker Johnlu Koa and his family brought members observed a line was very long line for their very hot and cold drink that catered a wide selection of consumers old to young that has a market with untouched potential that brought Cha Time here in the Philippines and believed that that the Filipino market has similarities.
II: THE CHALLENGE
Starbucks Corporation is an American coffee company and coffeehouse chain. Starbucks sell products like coffee, tea, frappuccinos, pastries and merchandise. As of september, 2018, the company has made a huge following with 15, 341 stores worldwide according to the fiscal annual report of 2018. Products are being sold in cafes and retailers offer products at the Starbucks online store and a mobile application called the Starbucks App. The website and mobile app gave the company an opportunity to adapt to its surroundings by being able to reach out to their customers through social media and the internet international. This also is convenient for the customer so customers do not need need to go to the actual Starbucks cafe to line up and buy a cup of coffee since they can have one without lining up with just a single click away. According to Roberta Greenspan, Starbucks makes use of a premium pricing strategy where they try to take advantage of the behavioral tendencies of people to purchase products that are more expensive and base on the perception of higher price correlates to higher value. Compared to its competitors, it is higher which in turn makes the customer feel like they’re paying a premium price for high quality. For promotion, they make use of advertisements, sales promotions and public relations where they make use of social media to reach out and communicate to customers. Being heard is an important for a business so customers will increase. Starbucks was able to promote themselves by adapting to trends like social media and made use of the internet as another platform to promote their brand or products. Market Share According to an article in The FORT City(2016), “The Philippines is the most concentrated market with 96% market share”. The Philippines particularly city areas like Manila, Makati and Fort Bonifacio have not only a lot of Starbucks cafes, but also Starbucks customers. One close competitor of Starbucks is Coffee Bean & Tea Leaf but Starbucks still dominates the area.
- Acting with courage, challenging the status quo and finding new ways to grow our company and each other.
- Being present, connecting with transparency, dignity and respect.
- Delivering our very best in all we do, holding ourselves accountable for results.
- We are performance driven, through the lens of humanity. (Starbucks.ph) B. Competitor Analysis Starbucks Corporation has a net income of $4.518 billion in 2018 with 182, employees across 19,767 company operated & licensed stores in 62 countries. Starbucks with its known as top quality of coffee, great customer services, excellent coffee, fresh taste coffee made from its espresso machine, Starbucks has its coffee franchises competitors in America. In the year 2018 of September, Costa Coffee, Mcdonalds Mccafe, Dunkin Doughnuts, Café Coffee Day, Independent Fast food chains, Bakeries, McDonalds, Tazo, Twinings, Dilmah, etc. are Starbucks’ top 11 competitors not only with coffee, but other beverages and food too. (marketing 91) As of 2016, Starbucks has 59.2% of the market share in the coffee industry according to a Forbes article. It is projected to grow at 12.14% on 2020 and will grow at 18% on 2021(Nasdaq). In 2018, Starbucks has reported better than expected in earnings during the fiscal fourth quarter according to Sarah Whitten in a CNBC article.
‘Market Share of Leading Players in the Coffee Industry
coffee industry. Competitors will have difficulties keeping up with the number of stores that Starbucks have. Therefore, threat of new entrants is low.
- Moderate cost of doing business
- High cost of brand development
- Moderate supply chain cost
- New brands lower prices Bargaining Power of Suppliers According to Eric Goldschein in his Business Insider article, “90% of the world’s coffee production in developing countries”. It is also said in the article that the top three producers of coffee are Brazil, Vietnam and Columbia. There are a few countries that produce coffee along with the high demand of coffee, it will be difficult to shift from one supplier to another. Therefore, Bargaining Power of Suppliers is high. Aside from that demand coffee is a global level and coffee beans can be produced in certain geographical areas.
- Can provide coffee beans.
- Rising price of the product due to high demand.
- High Capital Investment
Bargaining Power of Buyers (Customers) Success and failure of a business depends on the purchasing power of its customers. Competitors that offer the same products at a lower price can affect the company but to counter this, Starbucks has a large variety of drinks. Thus, Bargaining Power of Buyers is moderate.
- More options of the product due to many competitors that offers same product with Starbucks.
- Has a large variety of drinks. Threat of Substitute Products Starbucks has a large of variety of drinks to offer to its customers but at a premium price. But these customers are also given the option to choose a cheaper and affordable alternative. Thus, Threat of Substitute Products is moderate
- Consumers can buy same product in other coffee retail brands at lower price.
- Retailing stores already offers 3-in-1 coffee or instant coffee so consumer can prepare their own coffee at their house with minimal expense.
SWOT ANALYSIS
STARBUCKS SWOT ANALYSIS
STRENGTH WEAKNESS
· Strong brand image · Customer Centric - Consistent quality over all their stores. · Strong financial performance · High Quality products · Variety of products - Food, beverages, cups, mugs,and planners. · Wide Global chain supply · Highly dependent on its main and key input - Coffee Beans · High Price for products · US Dependent Market · Slow Expansion in Europe OPPORTUNITIES THREATS
· Global Expansion · Alliances with firms · Co Branding · Expand product production · Technological Advancement · Product range diversity · Cheaper Alternative · Rise of Coffee Bean Prices due to demand · Competition for Local Coffee Businesses · Economic Development of a Country · Biotechnological developments · Breaking of machines PESTEL ANALYSIS Political Factor Economic Factor Social Factor Technological Factor Legal Factor Environmenta l Factor
- The level of political stability within the
- Local currency exchange rates that
- Consumer preference s in terms of location,
Biotechnologica l developments
- Strict customs
- Trade
- Global warming and other environmental
ethically sourced coffee beans good for the people and the environment. Operations Starbucks invests in loan programs for coffee-growing communities and work onsite with farmers to help improve coffee quality. Employees who work for starbucks must undergo training and interviews before getting the job. Drinks are made to order while for the food they are to go and good for reheating. Outbound Logistics Starbucks is very well known for their beverages, they store them in plastic cups for cold drinks and papers cups for hot beverages with size of Tall (12 ounces), Grande (16 ounces), Venti (20 ounces) (Eater,2011). When you are a registered Starbucks card owner or you have the mobile app, Starbucks will allow you for refills for brewed coffee and tea when at the same visit. (Starbucks Customer Service). The delivery of the product can also be signified once the customer receives their drink and pays for the said drink. That then results to a successful transaction.
Marketing and Sales A Strong brand image and quality of products was the first way starbucks had to market their products. At first Starbucks was not into investing in marketing because they believed in their strategy of “strong brand imagine and quality of products would do the work” until the marketing strategy of their environment has changed to a visible view ads like televisions. In 2015 starbucks invested more than $351 million in marketing and advertising. (Starbucks corporation fiscal report 2016 annual report) An example would be the starbucks planner every year were you need to purchase at least purchase (18) eighteen a tall, venti or grande stickers as you buy the drink. Being a company that cares for the environment if you bring your own cup you get a P5 (five pesos) discount. Service In the Philippines Starbucks has value cards reward program in which the balance does not expire but the stars does this can be redeemed at the company and licensed stores.(Starbucks corporation fiscal report 2018 annual report) As soon as you enter staffs will greet you with as smile and say “ Hi! Or hello! Welcome to starbucks, may I take your order?” or personnel would mention their name then take your order. After as for your name so they would call your name as your order is done. That is the aim of starbucks to create an environment friendly area where you enjoy leisure. SUPPORT ACTIVITIES Procurement What keeps Starbucks going is they buy coffee from local farmers The Procurement team involves purchasing items needed for the final products or services offerings. Starbucks would be coffee bean,
Infrastructure Starbucks infrastructure as a wide range of general support just like the accounting department, Human Resources department, a finance department, retail operations team, Marketing and Creative team, Public Affairs and Communications, Research and Development, Sales and Account Management, Store Development and Design, Strategy team, Supply Chain, Technology, Administrative Support and legal support the work of the entire value-chain. IV. Market Segmentation and Target Market A. Segmentation The were 53 people that participated in the survey. 24 out 53 were male while 27 out of 53 were female. 2 people chose not to disclose their sex. There are only 4 people that are employed. The participants were mostly students. There were 48 students and one graduating student. 41 out of 53 participants are around the age of 15-20. 10 participants are at the age range of 21-29 while 2 people are around the age of 30-39. 34 out of 53 participants have a budget of P1,000- P5,000. 12 people have a budget at the range of P10,001 and above while 7 people have a budget around P5,001-P10,000. The top 5 milk tea shops that participants usually buy from are: Chatime, Gong Cha, COCO, Infinitea, Dakasi and Serenitea respectively (Dakasi and Serenitea are both tied at 5). The three
factors that will most likely influence the customer's decision the most would be: Quality of drink, Size of serving and How fast they make it. This is according to the highest number of "most likely" answers. 45 out of 53 participants order milk tea 1-2 times a week. 40 out of 53 participants are most likely to order milk tea during the afternoon. Pearls and Jelly are the most preferred toppings for milk tea while there are 8 people who do not like toppings in their drinks. 32 out of 53 participants are willing to purchase milk tea around the maximum price range of P100-P150. Lastly, the three most preferred media for updates on offerings were: Facebook ads, text messages and mobile apps.
