Overview of The Current Marketing Strategies of Starbucks in The UK Market

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.

Market and Competitor analysis

“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.

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 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.

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.

Macro Environment

PEST Analysis:

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:

Strengths:

• Brand name & visibility: Starbucks is the biggest coffeehouse chain in with a presence in more than 75 countries with more than 24,000 stores (Starbucks, 2018). It is the one of the world’s most famous and valuable brand in 2017 (Forbes, 2018). Value for money: It is reputed for an excellent quality price of the products offered in-store. Strong financial performance: In 2017, Starbucks generated revenues equal to around 9 billion British pounds (Statista, 2018). Broad outlet range: Starbucks has 807 stores across the United Kingdom which (Hooker, 2017). Large portfolio of products: The coffee house offers a big variety of products in its menus like hot beverages and cold beverages, but also food and snacks.

Weaknesses:

• UK market position: While Starbucks is the worldwide leader, the British companies Costa Coffee and Pret A Manager are respectively first and second in the UK market ahead of Starbucks. Overdependence in the North American market: Most of Starbucks revenues comes from the US and Canada. There are more Starbucks outlets in the United States than the entire world combined (Statista, 2018). Lack of unique products: Starbucks products are not exclusive and can be replicated. Scott Maw, the Chief Financial Officer of Starbucks, said “coffee shops out there, they are doing a lot of what Starbucks has been so good at for so long” (Taylor, 2017).

Opportunities:

• Worldwide expansion: Since there are more than 50% of the stores situated in the US, the company can still expand itself in many markets, especially in emerging countries. More demand for coffee: The demand for coffee is strictly increasing in the kingdom. In fact, the industry is seeing an annual growth of 5.7% and 70 million cups of coffee drunk per day in the UK. UK inhabitants are drinking more and more coffee than before.

Threats:

• Intense competition: There is huge competition with the several coffee chains, independent coffee shops and food restaurant chains entering the market with similar beverages like McDonald’s. The threat of substitute: The threat of coffee is very high, especially in a country like the UK where tea is the main beverage drunk. Volatile price of coffee: The revenues of Starbucks depend a lot on how much the imported coffee costs in the market.

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.