Marketing Principles Starbucks

Starbucks suppliers have high bargaining power due to the fact that the demand for coffee is high in global level and coffee beans can be produced only in certain geographical areas.

The determinants of Starbucks profitability over time are variable costs and fixed costs. “A variable cost is a cost that change in direct proportion to a change in the level of activity (dict). Variable costs for Starbucks would include labor, coffee beans, dairy, and plastic products. A fixed cost is indirect costs of business expenses that remain unchanged (dict). Fixed costs for Starbucks include rent, taxes, and insurance as well as advertising. In the figure below (fig 1) we have Starbucks financial data in millions for the year of 2015. This includes their operating expenses, net revenues, such as company-operated stores, licensed stores, CPG, food service. It also includes their total net revenues and their balance sheet. As we can see “Operating costs dropped in the fiscal year

The determinants of Starbucks profitability over time are variable costs and fixed costs. “A variable cost is a cost that change in direct proportion to a change in the level of activity” (Pearson, 2016) . Variable costs for Starbucks would include labor, coffee beans, dairy, and plastic products. A fixed cost is indirect costs of business expenses that remain unchanged (Pearson, 2016). Fixed costs for Starbucks include rent, taxes, and insurance as well as advertising. In the figure below (fig 1) we have Starbucks financial data in millions for the year of 2015. This figure includes their operating expenses, net revenues, such as company-operated stores, licensed stores, CPG, food service. It also includes their total net revenues and their balance sheet. As we can see “Operating costs dropped in the

Starbucks kicked off the new year with the launch of it’s first-ever line of VIA lattes. Starbucks introduced a new Caramel Flan latte and a fresh line of Starbucks VIA Ready Brew lattes that are now available in Starbucks stores throughout the United States and Canada. Simply add water to Starbucks' new VIA Vanilla Latte and Caffe Mocha Latte packs and voila -- instant gratification. Perhaps more important, these new products underscore the wild success Starbucks has achieved with it’s VIA format. With it’s VIA, K-Cups, and Verismo platforms, Starbucks has a stronghold on the $8 billion-and-growing single-serve coffee category these days. Moreover, the company should gain even more market share in this space as it rolls out new products to complement its recent line of VIA lattes. As it stands, Starbucks is nearing $300 million in sales from it’s VIA format. That's a 200% rise in sales from four years ago (Walsh, 2014).

Starbucks’ lead in the specialty coffee industry exemplifies the result of deftly executing a well-planned business strategy. Moreover, Starbucks is well positioned for what is expected to be a continuing rise in the popularity of specialty coffee products. The question before Starbucks’ leadership, however, is what avenues will lead to Starbucks’ goal of remaining true to its core, the highest quality coffee products while providing a “total coffee experience” for its customers?

Starbucks ' pricing strategy also depends on how it positions itself as an authority on coffee, which is allowing the company to charge premium prices. Thus, when Starbucks introduces new products at higher prices, consumers are willing to pay extra without even having tried the products because they associate the Starbucks name with high quality (O 'Farrell, n.d.).

The price has been rising, not simply due to the price of coffee itself, but because of the supply chain and the current economic situation around the world. Last year Starbucks had to raise prices globally, but especially in the United States and China, due to rising prices for coffee and other ingredients, but this year they are taking the hit from the rising coffee prices for the consumers (Baertlein, 2011). Although the prices of coffee had to be raised globally due to the high demand of the product and the cost of producing it, there is still a strong outlook for the coffee industry because of the large consumer base of the industry. The coffee industry is expected to continue growing through at least the year 2015 and even longer in other emerging markets around the world (Lingle, 2007). Even if the market in the United States begins to decline, there are other emerging markets for the specialty coffee industry. Due to Brazil’s rising economy, it is set to be the biggest coffee drinking country in the world with recent coffee consumer growth of 39% from 2000 to 2009 (Murphy, 2011). With Brazil’s upper and middle classes expanding, it has more money to spend on specialty coffee and other superfluous items. Brazil could be

Starbucks primarily operates and competes in the retail coffee and snacks store industry. The industry itself hit financial drawbacks in 2009 due to the economic crisis and changing consumer ideals. The industry, since then, has continued to grow, and in 2015 the industry was reported as having a revenue of ”$19.163 billion, which was a 16.5% increase from 2014 at $2.068 billion” (Starbucks SWOT Analysis 2016) . This growth would be due to an improving economy, and an increase in consumer confidence. Starbucks currently dominates the industry with a market share of 36.7%, Dunkin Brands with 24.6%, and other competitors taking up the rest.

Starbucks is one of the most profitable companies of United Kingdom. Due to its high market share and increasing growth rate, internal and external factors impacts Starbucks both positively as well as negatively. Some of the impacts of internal and external factors are as follows;

Howard Schultz had the perfect plan to create a successful coffee company. He got people to pay more for a premium coffee then to just go to a local coffee shop and pay a lot less for a cheaper coffee. He did this by creating an experience around purchasing your coffee. Starbucks focused on creating relationships with its customers while providing one of the best premium coffees out there. Also being able to customize your own drink was a big success in getting people to purchase the product. A high quality coffee was one key component to Starbucks value proposition. Another was service and

Starbucks gave the customers what they wanted. They ensured that there were ample locations and endless amounts of stores (Ferrell & Hartline, 2014). Furthermore, they provided drive-through services at several locations to further cater to parents with children or those with other needs. Likewise, Starbucks implemented order confirmation screens to help manage accuracy of orders. In addition, Starbucks found it essential to find ways in which to connect with its customers through its products by providing an atmosphere infused with music, books, and movies. Moreover, Starbucks wants to continue to foster entertainment that further supports the foundation of the coffee experience that the many customers have come to expect and enjoy.

Starbucks originated in Seattle, USA in 1971, by three partners, who met while they were studying together at the university. In 1984, when the sales started to decrease, while the specialty coffee sales increased. In 1987, the original owners opted to sell the coffee shop to one of their former employees by the name of Howard Schultz, who rebranded his II Giomate Coffee by the name of Starbucks and started to expand very quickly. It opened its first store in Vancouver, BC at the Waterfront Station, and another one in Chicago, Illinois, US. By the year, 1989 Starbucks had increased its stores to 46 locations. By the time Starbucks appeared on the Stock Market in 1992, it had expanded to 140 outlets with revenue of US$73.5

Starbucks is a global brand. High quality products and a consistently-positive consumer experience have helped the company build a strong brand image. Starbucks, for instance, was ranked 91st in the 100 Top Brands 2006 ranking of BusinessWeek and Interbrand, an international branding consulting firm. The BusinessWeek-Interbrand combine valued the Starbucks brand at $3,099 million in 2006, up from $2,576 million in 2005.

most coffee drinkers because it is where most of the educated professionals are located as

can order and pay for their drinks in a flash while stacking up rewards for each purchase made. This Strategy has significantly drawn people to Starbucks due to its highly anticipated services, products, and marketing strategies that differ from most fast food restaurants. The next service is the Starbucks webpage where the customers can go onto the site and view product and also make purchases. This service is quite excellent for those that want to checkout items online through the site, because it incorporates a similar process as the application on your smartphone. Starbucks also incorporates equipment and drinkware to their massive line of products. First their Drinkware consists of cups and mugs that are affordable to the customers. These cups come in many colors and aesthetic values, which make people interested in purchasing. Starbucks had the right idea when they decided to manufacture these cups out to their customers because not only were they a huge success for the business, but it also made Starbucks distribute more merchandise. Cold cups, which were from stainless steel containers. These containers made a rise once the popularity rose for other merchandise. These containers were sold very often to customers and once again made a surprise since it was from the same line of cups and mugs category. As more popularity grew in their products so did the equipment used to make customers coffee. First Starbucks decided to manufacture coffee makers, presses, and expresso