INTERNATIONAL MARKETING

International Marketing



International Marketing

Introduction

Starbucks Coffee is the world's number one specialty coffee retailer, currently with more 12,000 coffee shops in more than 35 countries. The outlets offer hot and cold coffee drinks and few food items, as well as beans, some coffee accessories, and teas. The company owns about 7,100 of its shops, which are located in about 10 countries—though mostly in the U.S.—while licenses and franchises operate more than 5,300 units worldwide. In addition, Starbucks markets it coffee through grocery stores and licenses its brand for other food and beverage products.

Problem Highlighted in the Case and Competitive Approaches

The coffee industry is highly dependent on sales to grocery wholesalers because they form the crucial link to supermarkets. As the economy recovers and disposable incomes return, coffee drinkers will reduce spending on coffee at supermarkets and return to higher-priced coffee drinks and products at coffeehouses. Industry revenue is estimated to decline 0.5% as a result of increased prices of coffee beans. Slowed consumption levels because of higher prices, especially at the retail level, will support the decrease in revenue. 

Another issue that has plagued the industry is concern over sustainable and fair-trade production and the rise of ethical consumerism. Considering that small, family growers in developing countries grow more than 50.0% of the world's coffee, there is increased scrutiny and allegations about corporate exploitation. The Coffee Production industry is in its mature life cycle stage, characterized by a saturated domestic market and a range of well-established brands. Although barriers to entry remain relatively low, a few large producers that compete for market share typify the industry that requires Starbucks to focus on brand image development.

Other costs that can significantly affect the industry include overhead expenses such as logistics and distribution, depreciation, interest, research and development, rent and utility costs. The price sensitivity of consumers in the coffee market varies between product segments. Although the market is dominated by well-established brand names, consumers are still price sensitive and can easily switch their preferences to a lower-priced substitute. The perceived quality of a particular product or brand will determine the price consumers are willing to pay for it, and forms one of the most important bases of competition in the industry (McDaniel, 2008). Brand loyal customers are not very sensitive to changes to price because of the associated perceptions of quality, and will continue to purchase a brand despite price increases (Gray, 2005).

Players within the industry also compete on their ability to be innovative and differentiate a product/brand from its competition (McDaniel, 2008). Considering the limited opportunities for growth within the industry, it is important for manufacturers to distinguish themselves in order to maintain market share. Changing consumer tastes and dietary trends have further compelled producers to be innovative with packaging, marketing and labelling initiatives. The emergence of organic, fair-trade, and decaffeinated coffee products signifies a step in that direction.

Target Market

Starbucks is primarily adult-focused and aims to connect with their customers, communities, and children through various advertising ...