Strategic Alliance With Pepsi Company

Within the coffee industry Starbucks Corporations has grown from a small shop to a leading coffee distributor, proving to have financial strength and determination to continue growth. With the weakening economy the continued success of Starbucks

While there are various brands such as: Folgers, Maxwell House, and Chock Full O’ Nuts you can typically find everyone carrying a Starbucks or Dunkin’ Donuts cup. Starbucks and Dunkin’ Donuts are the top two competitors when it comes to coffee. I personally am caught between the two. On one hand, you have Starbucks, they have great tasting coffee but is very overpriced. Dunkin’ Donuts while doesn’t have all the flavors Starbucks has, is less than half the price of Starbucks. The amount of money you pay for a small ice coffee in Starbucks you can get a large one at Dunkin’ Donuts.

The “Coffee Wars – The Big Three: Starbucks, McDonald’s and Dunkin’ Donuts” article focuses on the company analysis of the Starbucks brand and how its main competitors, McDonald’s and Dunkin Donuts, has affected their brand and driven competition higher. Even though there are many companies trying to enter the specialty coffee market, these three companies own the majority of the market share. With Starbucks’ top quality and above average prices they hold a different market than the fast coffee/food market of Dunkin’ Donuts and Starbucks; yet the competitive moves Dunkin’ Donuts has made over the years in order to compete with Starbucks and surpass McDonald’s has driven competition up between all three companies. The competition has stiffened ever more in the past ten years due to the changing economy. This led to “the big three” to come up with different techniques to gain competitive advantage over the other. Although the competition between these companies is to gain most of the market share, consumers are still loyal to a certain brand; this makes it difficult to gain each other’s clientele. McDonald’s continues to appeal to customers who want value and speed, Dunkin’ Donuts focuses on the middle-class, while Starbucks a customer who desires a higher quality product along with being recognized for using the brand.

Starbucks is dominant coffee brand in North America, which also is well-known worldwide. Established in 1971 as coffee shop oriented to a niche of coffee purists, in late 1980’s it turned to be a constantly growing chain of stores that sold whole-beans and premium-priced coffee to mostly affluent, well-educated customers. In years 1992-2002 company was showing at least 5% annual growth. And by 2002 Starbucks was serving already 20M customers in 5886 stores (both operated and licensed) around the globe, had $3.3 billion net revenues and was opening 3 new stores a day in average.

It’s a known fact that Starbucks is one of the leading brand in the market.When we analyse the market we find that Mcdonald 's and Dunkin are the competitors in the same product segment. So comparing Starbucks with these competitors will throw light on its grey areas, process and competitive edge in the market.

2) Garthwiate, Craig; Busse, Meghan; Brown, Jennifer; Merkley, Greg “Starbucks: A Story of Growth” Harvard Business Publishing, July 2012.

Coffee has been around the market and homes for a very long time now. The first coffee shop in the United States opened in 1697 in New York. Today, nearly two-thirds of americans drink coffee. Coffee is usually associated with 'waking up ' or 'staying awake ' due to your high caffeine level, and it 's invevitable to these two coffee chains be overcrowded during the rush hours in the morning. Coffee shops are always trying to innovate with different coffee flavor or mixtures to make them standout more than the other competitors. Starbucks and Dunkin '

This Module 1 SLP will be the first part of an in-depth market analysis. The company I have chosen is Starbucks Coffee Company. The first Starbucks opened in 1971 at Pike Place market in Seattle, WA. Eleven years later, Howard Schultz was hired by the company to be the director of retail operations and marketing. The first Starbucks with the current coffee house look and feel was opened in 1984 in downtown Seattle. The Starbucks headquarters is still located in Seattle, WA. Currently, Starbucks is relying on retail expansion, product innovation, and service innovation to achieve this long-term goal once set by current chairman Howard Schultz: “The idea was to create a chain of coffeehouses

Moreover, most of the people know the brand Starbucks as the leader of the coffee industry. It is enormously successful and it comes out with no surprise that this will be used as benchmarking against the study of Dunkin’ Donuts.

When Howard Schultz launched Starbucks, its main targets were the competitors and the customers. Schultz’s brand aimed at gaining dominance in the coffee industry in addition creating a Italian coffee shop feel in the United States (Buchanan & Simmons, 2009). The strategy of Starbucks was based on new products, listening to customers wants and ensure future expansion (Buchanan & Simmons, 2009). In creating convenience for customers, Starbucks created stores almost on top of eachother. They hinged on the idea that, they did not want to lose out on a sale if a line was too long. This action, of placing stores in heavy populated areas, basing need on projected growth of an area caused some decline in sales during economic trouble with the economy. The 2007 recession, failure of subprime mortgages, increased competition from McDonald 's McCafe brand, and Dunkin Doughnuts all led to a decline in sales for Starbucks in the fourth quarter of 2007 (Buchanan & Simmons, 2009). To attempt to regain market share and recover after the

Notable business partnerships have emerged over the years, as such, that between Thomas J. limp ton company and PepsiCo, to sell various ready-to-drink tea brands throughout the United States. Another partnership was that with Starbucks, a reading fast-food chain in the USA, to sell ready to drink coffee by the brand name of Frappuccino. Various Mergers and acquisitions have also been recorded with PepsiCo e.g. the acquisition of Tropicana and dole juice business in late 1998, and a merger with Quick Oats Company, in 2001.

In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.

Since its foundation in 1971, Starbucks has been working uncompromisingly to achieve the company objective of becoming the world's leading coffee brand. Having gone through various stages of growing pain, today the Company is operating with over 10,000 stores in 37 countries. Starbucks' success was mostly a direct result of its aggressive expansion plan, that consequently turned the Starbucks coffee beverages into a most familiar and popular world-leading brand. Although Starbucks has been successful over the past 34 years, there are some potential drawbacks as identified on this Marketing Audit that might warrant some careful

Starbucks does not use direct advertising such as commercials, ads or other promotion. They do however; have one of the largest social media networks with one of the highest customer contact percentages on a daily basis. This is one way they continue to promote their brand with customers who have been with the company for a long time. At the same time Starbucks has made quality choices in generating “alliances” with companies who have a similar market segment or customer base. Some of these alliances have been with “Barnes and Noble, I-tunes, Green Mountain, Tata Coffee”. These have allowed Starbucks to differentiate their product in India, Canada, USA and China. They can provide their quality product in hotels, bookstores and specific markets that relate to their direct customer base.

Starbucks have shown in the past that they are very good at taking advantage of opportunities. In an strategy alliance with Hewlett Packard, customers could create their own music CD within a Starbucks coffee shop. Thus the company could look for these kind of opportunities to seize. In addition, new markets for coffee are emerging such as India and the Pacific Rim nations, also Europe which is getting more and more accustomed with the brand name “Starbucks”. Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.