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25th November 2011 Name

Business Plan

Executive Summary: This business plan focuses on evaluating one of the biggest international beverages food chain, Starbucks. In this assignment we will focus on analyzing the market and the products of the company and focusing on implementing different strategies which can be implemented by the company to gain competitive advantage in the market of its operations. In today's highly competitive environment, it is becoming increasingly difficult to differentiate one beverage organization with the other. The brand focuses on catering to the mass market of coffee lovers by offering premium coffee to its target consumers. The company plans to participate in the competitive market share by boosting up its business with taking competitive edge. Introduction: Starbucks is one of the most popular international chain of coffee, the corporate office of Starbucks is situated in Seattle. The company operates globally with 16635 stores in about 49 countries, Majorly all the retail outlets are owned by the company itself, out of 11068 stores in US 4304 stores are franchised. The company was incorporated in the year 1985 and since the inception of the company; the company has tried to build a global reach. Today, with the strong marketing strategy, excellent customer service and differentiated products it is one of the biggest coffee brands of the world. Starbucks being into coffee business focuses on high quality of coffee beans which the company purchases from different coffee producing nations. The company sells cold beverages which are available in different flavors. Starbucks sells fresh creamed beverages, rich brewed beverages, Irish and Italian style beverages, and Ice blended beverages along with variety of food items to company the beverages. Starbucks also sells a selection of premium tea, coffee beans accompanied by accessories which are related to beverages.

International Beverage Company: Starbucks |

Business Plan

Defining the market: The company will focus on mass marketing with a focus on vast target market with different age groups and geographic locations. Starbucks focuses on mass marketing with a strong focus on capturing different segments and groups of customers. The main target market of Starbucks are the coffee lovers, who are fond of different varieties of coffee. Quantifying the market: The company will cater to a vast market with different demographics, geographic and behavioral basis. Having the global existence the company will focus on attracting the coffee lovers attracting more and more consumers and will help in building up a strong customer base. Segment 1: The main segment to which the company will focus on is: Teenagers and young generation who are fond of coffee. This will be generation X and Y. this segment will be about 55% of the total market Segment 2: The other segment will be families which will account to about 40% of the total market. This will take into consideration parents along with their children. PESTLE ANALYSIS: Political Condition: The political changes as change in government, war, labor discord, terrorism political instability also affects the profitability of the company. Economic Condition: One of the major external condition that affects the sales of the company is the downfall in the economic condition of the country. If the economic condition of the company decreases than the company is impacted directly as the walk-ins of the customers decreases. The company faces low traffic which impacts the sales of the company which affects the profitability of the
International Beverage Company: Starbucks |

Business Plan

company. Recently, America and the other parts of the world has faced economic crisis. This affected the purchasing power of the people and people preferred low priced coffee rather than differentiated expensive product of Starbucks. The income of an individual directly affects the company. Social Condition: The changing preferences, demand of the people, greatly affect the business of the company. If there is a change in the labour market the business is tend to be effected. Lack of customer acceptance of new products or price increases necessary to cover costs of new products is also one of the condition that may affect the business of the company. Technological Conditions: Technological and innovation is driving the companies in todays time, the company have to keep up with the changes and move accordingly so as to survive in the competitive world. If we see in 2007, Starbucks faced major problems in respect of its profitability, there was an decrease in the customer traffic. The main reason was the lack of product technology and innovation. The company did not adopt the innovative machines for preparing coffee, which effected the flavor and aroma of coffee, and reduced the customer base. Legal conditions: Different legal taxes and duties imposed by the government of different nation while purchasing the coffee affects the business of Starbucks. The other legal taxes, import duties, increasing cost, interest rates affect the business. Existing Business: The company is considered as one of the most respected brand across the world, the company has to focus on achieving this goal with a continuous focus on global expansion and introducing new products so as to attract more and more consumers. The company should also focus on developing a channel of distribution which will help in increasing the profitability of the organization.
International Beverage Company: Starbucks |

Business Plan

The company has shown a remarkable growth since the company has been into existence. Starbucks Experience as stated by the CEO of Starbucks Howard Schultz. He describes Starbucks Experience as You get more than finest coffee when you visit at Starbucks you get great people, first rate music and comfortable and upbeat meeting place. We establish the value of buying a product at Starbucks by our uncompromising quality and by building a personal relationship with customers. Starbucks is rekindling Americas love affair with coffee, bringing romance and fresh flavor black brew) (Howard Schultz, 2007) Customer Analysis: Starbucks focuses on coffee lovers and distinguishes itself by delivering extra ordinary environment to spend in. The consumers of Starbucks have a feeling of association with the company. It offers a wide range of exotic coffee blended drinks to the customers. The environment of Starbucks is friendly and customers are highly influenced by the place. Market Analysis: Starbucks focus on expanding its reach particularly by following franchising. The concept of franchising is the key of success for Starbucks with this they are able to ensure consistency of quality and uniformity of product from location to location and country to country. The objective of Starbucks will be global standardization with an statement Expand our mindset by sharing best practices and leveraging our best people resources around the world. The companys strategy is based on knowledge of modern lifestyles, young people tastes, food production processes and service levels coupled with a strong brand image, its constant product innovation and effective marketing tools. Porters Generic Strategies: The company focuses on differentiation strategy, Porter Generic strategy call for four different strategies where one can compete for selling the product. The restaurant focuses on differentiation strategy with a strong focus on providing innovative and differentiated concept coffee that is delivered to the consumers. The company will have a strong focus on high quality and customer service so as to attract more and more consumers.
International Beverage Company: Starbucks |

Business Plan

Source: http://www.quickmba.com/site/search/results.php? q=General+Electric+Model+&x=0&y=0 Boston Changing Group Matrix (BCG) BCG model is used by the organization to analyze where the SBU of the company will fall under dogs, Question mark, Stars and cash cows.

International Beverage Company: Starbucks |

Business Plan

Source: http://www.quickmba.com/ Considering the Starbucks, we can say that the company falls in the Star section as it has high market growth rate as well as it occupies the largest share in the beverage market.

Marketing Mix of Starbucks:


The main elements of Marketing mix are 4 Ps which are Product, Price, Place, Promotion.

Product:
Starbucks is a coffee retail outlet which is operated all over the world. It delivers differentiated products to its customers. Starbucks stores offers different choices in coffee, ranging from a regular coffee to decaffeinated coffee beverages, The company has expanded its product range by delivering a wide selection in Italian, cold, iced beverages of coffee. The company specializes in Italian-style espresso beverages. The company also offers a selection of premium teas. The company has extended its product range by offering premium roasted coffee beans which are packed in attractive packets and are offered to the customers not only in retail chains of the company but also other grocery stores. The company has recently launched soluble coffee Starbucks VIATM Ready Brew (VIA). Apart from the beverages, the company has expanded its offering in variety of food items which includes sandwiches and other high nutrient product. The food offering that are offered to the consumers focus on high-quality ingredients, nutritional value and great flavor. The food items offered includes pastries, prepared breakfast and lunch sandwiches, oatmeal, and salads as well as sodas, juices and bottled water. Starbucks offers warm products in different retail outlets of the firm. The company offers different product range in its different stores, the variety of products or the product mix is dependent on the location and size of the store and the equipments used in the particular outlet. Company also focuses on innovative and attractive packaging of its premium packages of coffee beans and tea. The large store offers a wide range of product mix as compared to the small outlet of Starbucks.

International Beverage Company: Starbucks |

Business Plan

The main essence of the products of Starbucks is the flavor, aroma and the taste of the coffee as the company uses high premium product to its customer. Thus creating an experience to their customers.

Price:
The company offers premium coffee to its customers so the price of the coffee is at a higher range. The company follows differentiated pricing strategy focusing on a particular set of customers who have a taste for coffee.

Place:
The company is operated in different parts of the world. Starbucks focus on particular place for locating its store. The stores of Starbucks vary in size and format. The company focuses on locating its stores at a high traffic and visibility location so as to attract maximum customers. The other places where one can find a Starbucks outlet is in the market place, near office building and university campus. Some of the outlets of Starbucks are located off the highway so as to capture mass customers. The company focuses on high access and convenience in terms of place that is chosen by the company.

Promotion:
Starbucks offers several promotional programs. One of its promotional program is The Starbucks Card program, this program focuses on increasing the customer loyalty and the frequency of store visits by cardholders. This helps in increasing the customer visit. Starbucks has also expressed its Starbucks Experience as a cup of coffee everyday. The company follows strong advertising promotional methods. The other most effective promotion method that works for Starbucks is Mouth of word.

Supplier Analysis:
The Company purchases different coffee beans from the suppliers around the world. The main product purchased by Starbucks is green coffee beans, these beans are roasted on a particular standard to build fragrance and aroma of the beans. Coffee is a product that is treated as a
International Beverage Company: Starbucks |

Business Plan

commodity so it is subjected to high volatility. As the company focuses on acquiring high quality Arabia coffee, the company have to trade on a negotiated basis. The supply and demand of coffee is depended on several factors. The company heavily relies on its suppliers. Other suppliers of Starbucks include Dairy suppliers, There are six dairy suppliers of Starbucks from which Dairy supplies are taken. The different coffee beans are taken from distinct sources whereas the beverages ingredients are generally taken from specialty suppliers usually under long-term supply contracts. Different national and local suppliers supply different ready to eat products. The other important Supplier on which Starbucks rely on are the supplier of coffee making equipments which includes several espresso machines, coffeemakers, these are purchased directly from the manufacturers of the respective machines.

External analysis:
Competition:
With the increasing demand of coffee and coffee lovers. The competition faced by Starbucks has increased. The main competitors of Starbucks are the Specialty coffee shops and quick service restaurants. shops. With the changing consumer perception and tastes, consumers choose a coffee shop based on their product quality, taste of the coffee, flavor, service, convenience, environment of the coffee outlet and price. The coffee bean market of Starbucks also faces intense competition from the coffee makers such as Nescafe which are sold in the supermarkets. The Companys whole bean coffees, its coffee beverages, and its recently launched soluble coffee VIA, compete indirectly against all other coffees on the market. (Annual Report2009)

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SWOT Analysis:
Strengths:

Product Diversification Starbucks offers its customers wide range of coffee blended premium drinks with different flavours.

Developed brand Starbucks is one of the world recognised brand, having its operations in more than 58 countries.

Company operated retail outlets The company have a wide chain store of Starbucks which are operated across the world, these stores are wholly owned by the company, thus the company can have full control over its operations.

Globalization With the increasing globalization, The company has taken an opportunity to operate its store all across the world. Building its reach in different nations.

High brand awareness Starbucks is a strong brand name that is recognised all over the world. Customers and the people are aware of the brand. In 2005, a movie was also launched which told the experience of Starbucks, stating the Starbucks Experience.

Weaknesses:

Lack of internal focus In 2007, the company was loosing its market share as the company lacked the internal focus, the environment of Starbucks was loosing its shape.

Lack of Product innovation With the increasing development and technological innovation, the company was not able to adopt several innovative techniques, it did not incorporate the innovative technology because of this the company suffered major losses in the year 2007.

Self Cannibalization Improper use of resources The resources of the company are sometimes not utilized to its fullest.
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High price of the products Starbucks offers differentiated products with high price, so it is out of reach from common people.

Dissatisfaction with the taste and quality of coffee

Opportunities:

Growing market for coffee lovers Coffee is a product that is demanded by major people all over the world. In past few years, according to research there has been drastic increase in the demand of coffee. There are many coffee lovers who love to spend their time in coffee outlet.

Expansion into retail operations Starbucks has expanded itself into retail operations which has increased the profitability of the company.

New Products Starbucks is innovative with its product offering. It offers differentiated products to its customers.

Brand extension - Along with the coffee blended drinks, the company has also expanded in operations and sell premium coffee beans to its customers. It is increasing its brand width by increasing its range. In 2009, Starbucks VIA Ready Brew was launched. This is a product is marked as soluble roasted coffee beans. Starbucks VIA gives customers an easy and affordable single-serve option at home and on-the-go. The company look forward to extending the product internationallyboth in stores and in grocery channels (Annual Report2009)

Emerging international markets The company has extended its operations in international market, Kuala Lampur, China and other Asian nations are the few current destinations where the company has recently opened in company operated stores.

Threats:

Competition as the demand of coffee is increasing worldwide, many coffee outlets are being opened all over the world, which is giving tough competition to the company.
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Business Plan
US market saturations Changing consumer trends The consumer trends is changing, the company needs to cope up with the changing trend so as to survive in the market.

Variations in different quality coffee beans - There are different coffee beans which are available in the market. Ranging from a low coffee beans to the premium and roasted coffee beans each delivering different aroma, flavour and taste.

Economic Conditions as Starbucks is a premium coffee retail outlet. The company is highly affected by the economic conditions of the market. The downfall in economy affects the profitability and sales of the company.

Innovating for a Better Customer Experience


The company focuses in creating significant investment so as to increase the customer experience. Starbucks focuses on enhancing the visit of its customers, by providing them quality products, friendly environment, extra ordinary service, store ambiance. One of the customer defined the Starbucks Experience one cup at a time, every day. The company follows the policy of innovation. With the changing trends in the taste and preference of the consumers, the company responds to the change instantly so as to give customer the best experience that the company can. The company runs a loyalty card program for its loyal customers, the company gives compelling offer and value on the card so as to attract customers and try the new beverages introduced by the company. The company keeps into consideration of the quality of the products that are used by them especially focusing on the quality of coffee, the company adopts different approaches in enhancing the quality, flavor and aroma of coffee beans. The company has its commitment to espresso excellence, ensuring that we are providing the highest-quality handcrafted, customized beverages to suit every customers taste. (Annual Report2009)

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Business Plan

For gaining consumer experience the company extended its product line, it offered seasonal products such as Pumpkin Spice Latte and Caramel Brule Latte which were customer favorites this holiday season. The company have started offering healthier products to its customers with the changing demand and need of the customers.

Strategic Analysis and Plan:


The focus of strategy should be on eliminating the internal weaknesses of the company. The company should focus on pursuing different market opportunities considering the innovation and differentiation of its offerings which is the core competence of the company. According to Starbucks innovation helps drive growth and long-term success of the business. It should focus on innovation and delivering differentiated products to the market, Starbucks is the brand which needs to focus on Innovation, value, cost leadership, and commitment. These are the building blocks of the company or the pillars of the company which helps in establishing itself and building a competitive position in the market. Through these blocks the company is able to attract customers. The company follows artisctive advertisements by associating itself with different customers and their changing tastes so as to attract maximum customers. Through these advertisements and the building blocks the customers are attracted to try the products of Starbucks. As Starbucks focuses on cost leadership and associating customers with its products, the customers tend to build a loyalty towards the brand as the products give added value and advantage to its customers. Through this brand loyalty the company is able to retain its customers and build brand equity. Starbucks should focus on achieving competitive advantage by utilizing its resources optimally, by utilizing its resources and capabilities it will be able to focus on different functional strategies which will help in creating value thus, creating profitability. It should focus on its five core aspects i.e. people, products, place, price and promotion with associating with world class suppliers considering the quality of its products. By investing in innovation and research, the company will be able to attain competitive advantage. It should make a proper use of external opportunities with a focus on services,
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Business Plan

restaurant reimaging and menu innovation and extension. With the increasing technology the company should make a move to exploit the technology so as to improve upon its customer service and speed. The company should also focus on changing the environment of its restaurant by accelerating its interior and exterior reimaging so as to create excitement in the customers which will help in increasing the brand image of the company. It should make a move towards modernization and adopting E-commerce technology so as to have a strong competitive position and growth. Starbucks should focus on creating an appealing menu in terms of breakfast, beverages and should introduce new products and emphasize on value menus and encourage trial of new products. Starbucks should focus on expanding its product range so as to cater the increasing needs of consumers. Today, consumers are getting more inclined to innovative products and new product range in respect of fast food and beverages industry. Starbucks should follow innovative strategy to creative new menu so as to appeal the taste of the consumers. The expansion should be in terms of fast food as well as beverages section. Starbucks should continue to focus on aggressive strategy so as to maintain its position as the market leader in fast food industry. Innovation, technology, products, customer service and value to customers should be the main focus of Starbucks.

Marketing Plan:
The company will focus on implementing the marketing plan, once it has decided the venue of its operations, the company should focus on presenting itself to the consumer. The company will focus on adopting AIDA model of attracting more and more consumers. The milestone chart is accompanied by a table outlining key activities critical to our success Milestones: Milestone Business plan Start date End date 10th 25th September September Budget $1000 Manager Department

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15th 1st October September 15the 31st September December

Accounting plan Marketing and advertising

Conclusion:
Starbucks is one of the leading brands in offering coffee beverages to the customers. With strong marketing strategy and innovation the company has been successful in recovering the downfall that it faced in the year 2007. The focus of Starbucks should always remain on its core competency i.e. offering differentiated coffee with a different aroma, flavor and taste. It should continue with its expansion considering its core competence.

References:
Annual Report2009 of Starbucks, available at: http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-reportsAnnual, pg 114 Kotler, 2000, Marketing Management Millennium Edition, 10th Ed., pg 138-153 International Beverage Company: Starbucks |

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Behar, Goldstein, (2008), It's Not about the Coffee: Leadership Principles from a Life at Starbucks, pg 41-43
Pham-Gia, (2009), Marketing Strategy of 'Starbucks Coffe' pg 9-14

Kimmel, (2010), Connecting with Consumers, pg 204-207


Cravens, (2009) Strategic Marketing 8E, Planet Starbuck Case 4-1, pg 380-384

Barney, J. B (1991): Firm Resources and Sustained Competitive Advantage, Journal of Management, 17, p99-120. Bharadwaj, A. A resource-based viewpoint of information technology capability and firm performance: An empirical investigation. MIS Quarterly, 24, 1 (2000), p69-196 Meso, P.; Smith, R (2000): View of The Organizational Knowledge Management Systems, Journal of Knowledge Management, 4, 3 (2000), p224-234. M. A (1993): The Cornerstones of Competitive Advantage: A Resource based View, Strategic Management Journal, 14, 3 (1993), p179-192. Spender, J. C.; Grant, R. M (1996): Knowledge and the Firm: Overview, Strategic Management Journal, 17, Winter Special Issue, pp. 5-9.

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