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In this report, I will identify the current marketing strategies of Starbucks in the UK market and how to improve this performance by introducing new strategic approaches. I will start by analyzing the coffee industry with its consumers and competitors in the UK. After that, I will assess the internal strategic capability of the coffee company. This will lead me to the recommendation of opportunities from which Starbucks can potentially benefit to improve its current marketing strategy.
The Industry: “The UK is the most developed market [in Europe] and remains the model for the branded coffee shop industry” according to Allegra Strategies (Sousa, 2017). In fact, the United Kingdom has the biggest annual growth in coffeehouse chains in Europe since 2015. 643 stores have seen the lights in 2017 to attain the total of 7421 outlets in the kingdom.
The average annual growth of the industry from 2013 to 2018 is 5.7% with total revenues of £6.2 billion in 2017 (Clients1.ibisworld.co.uk, 2017). The chart below represents the four phases of the industry’s life cycle which are introduction, growth, maturity, and decline. The introduction stage is when the sales are still slowly growing. The growth phase, where the UK coffee industry currently is, is when the sales are rapidly growing. After the maturity phase, the number of sales starts to fall down, but there is currently no sign of stagnation.
The Consumers: We determined the different categories of Starbucks’ customers by their behavior and by in what situation do you frequently go to the coffee house. The most common answers are “on the go” and for “socializing” with respectively 37% and 32%. While fewer people buy coffee when it is “part of work routine”, for “meetings”, to “pass time” or to have “me time” (Bacon, 2013).
The Competitors: The coffee UK market is very competitive and the barriers to entry for new competitors are very low. It has already been 20 years since Starbucks has opened its first store in the UK now (News.bbc.co.uk, 1998) The main competitors of Starbucks in the UK market are Costa Coffee, Pret A Manger, Caffè Nero, AMT Coffee and Harris + Hoole with 17.3%, 10.3%, 4.8%, 0.3% and 0.3% respectively. Starbucks is the third largest coffee chain in the UK with 5.8% of the market shares. However, the other part of the market shares which is the biggest one (61.2%) belongs to independent coffee shops and other smaller coffee chains (Clients1.ibisworld.co.uk, 2017). The main coffee chains are perceived as following based on the two dimensions of the price and the quality experience. It is clear that Starbucks is seen as the best in quality for the higher price.
On the other hand, Pret A Manger is perceived as a coffee shop that has the same high price for the lower quality experience. Also, the leader of the UK market is in the middle with a faintly lower price and a quality experience slighter higher than Pret A Manger and lower than Starbucks.
Key Success Factors Value of brand names: A strong brand name gives more value to the company and to the brand perception in the mind of the customers. Supply contracts in place for key inputs: Companies need to have good relationships and contracts with distributors that must respect the deadlines otherwise the whole activities of the company can be jeopardized. Attractive presentation: Attractive products and stores are most likely to be seen, remembered and wanted by customers. It helps the subconscious of the customers to put a positive label on the product or service before even trying it. Consequently, logos, lights, colors, sounds and even smells are important to attract prospects.
Accessibility: Coffee shops should be close to an active area where there usually are people around in order to be easily accessed easily. Also, the stores should be visible to the public in order to be seen. Appropriate price: The price should not be too high for the product or services the company is offering. The brand must strike a balance.
Political: Starbucks, like other international companies, make use of the services of low-skilled European migrant people because those companies save costs and increase profit by paying them to the minimum wage. Pret A Manger declared also that only one out of fifty applicants is British (Carroll, 2017).
Economical: The price of coffee is very volatile, that means that its price always fluctuates depending on international economies (Sera, 2016).
Social: Every location is different and will have a different impact on every stores’ revenues.
Technological: We live in a fast-growing world when the digital world in part of our everyday lives. The companies need to invest in the future of interactive tools like social media or virtual reality. Primary Activities SWOT Analysis In order to identify new strategies to implement, we need to identify the strengths and take advantage of the opportunities to overcome the weaknesses and avoid the threats.
For that, it is essential to conduct a SWOT analysis of Starbucks:
In order to come up with a set of potential strategies, I need to conduct a SWOT Matrix to evaluate all the possible combinations. I generated 4 types of options which can be used to maximize opportunities by using the strengths of the company or to overcome the weaknesses by benefiting from the same opportunities or to use the strengths to avoid the threats, or to minimize the weaknesses and the threats. Implementing the strategies to minimize the threats and weaknesses is mostly for defensive strategies.
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