Marketing_Brand

STARBUCKS COFFEE COMPANY EXECUTIVE SUMMARY Starbucks Coffee Company is North America's leading roaster and retailer of specialty coffees. Headquartered in Seattle, WA, Starbucks has 931 retail stores and 75 major airport locations. The Company's objective is to establish Starbucks as the most recognized and respected brand of coffee in the world. To achieve this goal, the Company will continue to rapidly expand its retail operations, grow its mail order and specialty sales operations, and selectively pursue other opportunities to leverage and grow the Starbucks brand through the introduction of new products and the development of new distribution channels. Starbucks sells not only its coffee; it sells the "Starbucks' experience". The company is successful to convey its vision to the customers. It can convince customers paying more for high-quality products and a new life style. Starbucks reached its goal to establish and leverage its powerhouse premium brand through rapid expansion of retail operations, introduction of new products and store concepts, as well as development of new distribution channels. Employees are one of the most important resources to Starbucks. If the company is to prosper, the employees must be treated well. All employees are eligible for Starbucks' health care and benefits package, as well as a starting wage above the minimum. Starbucks' strong commitment to the environment is guided by an environment committee. The Company endeavors to offer an environmentally safe product, as it believes that the welfare of people, plant and product are linked. Starbucks prides itself on being a "good citizen" locally and in the various coffee producing countries. They make significant contributions to local charities that focus on children, the environment, the homeless, and AIDS research/support. The main segmentation criteria used by Starbucks is psychographic segmentation, targeting customers based on their lifestyle and attitudes. Starbucks aims to create loyal customers and reduce brand switching by offering a wide variety of products and special coffees regularly. Using a combined push-pull strategy, the company mostly relies on advertising, promotions, personal selling, Internal marketing, and public relations, all making good use of AIDCA formula. An important part of this strategy is the (basically) exclusive distribution channel used in the UK and the premium pricing strategy supported by augmented products such as after-sales service. Overall, think these adverts serve the company well by communicating why Starbucks is unique. Financially, Starbucks has had solid earnings and returns. While still in the fast-growth stage, the Company has managed to continue healthy operations while generating enough public funds to finance store expansion. The company is expanding its empire overseas. Japan was Starbucks' first expansion outside of North America. Starbucks also plans to open coffee bars in Singapore. Although Starbucks expects same-store sales, which showed 20% increases in the past five years, to fall, overseas expansion and joint ventures promise to be major growth areas for Starbucks. Despite this potential problem, Starbucks remains excited about future growth and continues to be hopeful about the future. 2.1 Market Summary The target market for crystal mix drink is for people who want to be able to select healthy choices but something with good taste. The crystal mix drink is the perfect drink for them because of the crystals. The crystals make it so that consumers can easily pour it into their water bottles and take it anywhere. The crystals are better for you then drinking sugary sodas or artificial juice drinks. The target market would include health conscious people, busy people, and moms on the run, and consumers who travel a lot. The target market for mix drink is for people who want to be able to select healthy choices but something with good taste. The crystal drink is the perfect drink for them because of the crystals. The crystals make it so that consumers can easily pour it into their water bottles and take it anywhere. The crystals are better for you then drinking sugary sodas or artificial juice drinks. It is the perfect drink mix for busy, fast paced consumers. In the early stages of development for Starbucks, Schultz identified their target market as “affluent, well-educated, white-collar patrons (skewed female) between the ages of 25 and 44,” (Moon). Targeting adults and young adults is a good mechanism for Starbucks because this age level has the same interests as the foundation that promotes arts, culture, education, and the environment (starbucks.com). The company satisfies their customers through their advertising, support programs and, of course, their coffee. This large portion of the consuming market is attractive because Starbucks has the money, resources, and time to cater to young adults. 2.1.1 Market Demographics Demographics The crystal mix drink product will be used by both males and females. However, with recent trends of increasing Wi-Fi use on cell phones and laptops there will be a slight demographic edge to young females and males. The demographic users will mostly be young, affluent, tech-savvy customers25 - 45. There are no racial, ethnical or educational influences for this drink. A 1999 estimate showed that 70% of customers were internet users, and today the estimate has exceeded 90% (Hoovers). People have started to combine work and a coffee break. Geographic The total potential market will be based on just over 4 million per year in the US. The early release of crystal mix drink product will be focused in the US but overall it will have no particular geographic target. Starbucks is a worldwide known brand name and will be available through all major supermarkets and convenient locations. The crystal mix drink product will be available to both domestic and international customers. Behavioral Factors (Psychographics and Lifestyle considerations) Since its beginning over forty years ago, the three main goals of sports drinks remain unchanged: (1) to prevent dehydration, (2) to replace electrolytes lost in sweat, and (3) to provide carbohydrate for use during exercise (Coombs and Hamilton, 2000). As the name implies, energy drinks have arisen to deliver a proposed “jolt” of energy to a person’s daily life. Individuals are very health conscious so the introduction of a healthy drink at Starbucks can prove beneficial. 2.1.2 Market Needs Since being introduced in the United States in 1997, the energy drink market is the fastest growing segment in the beverage industry, and it has grown into a multibillion-dollar business. In the United States, energy drinks hold 62 percent of the functional beverages market, and their market share continues to grow. New developments geared toward increasing the health functionality of energy drinks will gain market acceptance due to an increasingly health-driven society. Energy drinks are a new alternative to coffee and sodas. These drinks boost mental alertness, enhance your metabolism, and increase endurance. 2.1.3 Market Trends Starbucks premium crystal mix drink product is a luxury good. The company relies on consumer discretionary spending to drive sales. Consequently, a major economic change can have a large impact on revenues. Throughout the global economic recession of 2009-2001 potential customers have less money and are more likely to forgo a $4 specialty drink in favor of a cheaper alternative. Revenues in Q1 2009 were down 7% to $2.6 billion from Q1 2008 as consumers pinched their pockets. Until the economy recovers, Starbucks' bottom line may continue to be negatively affected. Authenticity This trend has been socio-cultural driver for the past five years and shows no sign of abating. Starbucks brands are hailed by all generations of consumers as authentic because they have stood the test of time. Leveraging this historical pedigree in a modern, relevant context will be a key in the next year. Legacy: Making Your Mark Making your mark through support of important causes, whether it's supporting the discovery of new products; because marketing has been primarily female focused, but will evolve to include men, kids, and teens. 2.1.4 Market Growth Industry analysts in 1998 saw Starbucks as being well on its way to becoming the Nike or Coca-Cola of the specialty coffee segment. It was the only company with anything close to national market coverage. The company's most immediate objective was to have 2,000 stores in operation by the year 2000. Its longer range objective was to become the most recognized and respected brand of coffee in the world. In order to sustain the company's growth and make Starbucks a strong global brand, Schultz believed that the company had to challenge the status quo, be innovative, take risks, and alter its vision of who it was, what it did, and where it was headed. Building cafes in fast-growing overseas markets like China will certainly have a role in the Seattle-based company’s future growth. In 2010, Starbucks’ global consumer packaged goods business brought in $707.4 million, or about 16 percent of total revenue. So currently the market is growing and it will continue to grow with the introduction of the new energy crystal mix drink. 2.2 SWOT Analysis  2.2.1 Strengths Strong global brand Starbuck’s innovative initiatives High quality and diversified products Strong, loyal customer base Offers the value proposition that its biggest competitors are not able to deliver to Starbucks’ customer base 2.2.2 Weaknesses Overextended premium coffee market – self cannibalization Competition (i.e. McDonald’s) Current economy Ethical approaches in building relationship with its employees and suppliers are often costly and could hurt the bottom line of the company in a short-run 2.2.3 Opportunities Co-branding with other manufacturers of food and drinks and brand franchising to manufacturers of other goods and services New products and services that can be retailed in Starbuck cafes include names such as Fair Trade products. The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge. Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential. 2.2.4 Threats Who knows if the market for coffee will grow and stay in favor with customers, or whether another type of beverage or leisure activity will replace coffee in the future' Starbucks are exposed to rises in the cost of coffee and dairy products. Since its conception in Pike Place Market, Seattle in 1971, Starbucks' success has led to the market entry of many competitors and copycat brands that pose potential threats 2.3 Competition Starbucks competitors in the coffee beverage sales include 7-Eleven, Dunkin Donuts, BIGGBY Coffee, Caribou Coffee, McDonald's, Panera Bread, and Einstein Bagels. Competitors such as McDonald's and Dunkin Donuts not only have extensive menus, but also the financial resources and position to leverage their strengths to threaten Starbucks profitability. Starbucks is a company that embraces diversity, not limiting themselves to one specific demographic, behavioral, or geographic segment. Individuals appreciate how, regardless of any little difference, at Starbucks they are always treated as equals. Health-aware consumers tend to shop more frequently and spend slightly more than consumers who are less concerned about health. More mainstream in their health pursuits, this group strives for moderation in their lifestyle and prefers food that is inherently healthy, as opposed to organics or supplements. Customers will love this project as it is healthy and can also give them the boost that they need. The drink will become popular because it has a recreational sense within it and it is in line with the health sentiment to have at least five portions of fruits. On the other hand crystal drink mix are made out of concentrated fruit juice, which is closer to the `crushed fruit ' definition and sets the differences between ordinary juice and smoothies .2.4 Product Offering Product/features/benefits Enjoy a delicious, refreshing drink in seconds. Just add one stick to a 16.9 fl. oz. bottle of water and shake it well. These single drink mixes are perfect at home or on the go! With 90% fewer calories than leading beverages, crystal drink mix is a good deal for calorie conscious consumers who need to flavor their water. Crystal mix energy drinks does not only give that physical boost but, most importantly, provides mental boost. . Building a successful brand requires using creative marketing and branding strategies to create strong brand equity. In today’s competitive market, a brand can only achieve success if it can connect with consumers and effectively communicate its unique qualities in a way in which they create a positive impression in the minds of consumers. However, products or service cannot generate brand equity on their own – this requires marketers to develop creative efforts that result in consumers bestowing on the product/service the desired brand image Differentiation: It is important to reinforce your brand by providing a consistent positive experience in the minds of consumers. The mix drinks should be one that is offered by another competitor. Energy: strong brand has the ability to adapt to changes in the marketplace in order to stay relevant. To achieve this, marketers must monitor industry trends and market conditions. Relevance: Since the real power of a brand exists in the mind of consumers, it is necessary for marketers to always capture and analyze customer feedback. 2.5 Keys to Success One of the key reasons for the company's success has been the successful projection of its stores as venues for socialization between office and work. This strategy provided Starbucks with a large customer base that could use Starbucks stores as a place to meet up or socialize on a recurring basis while not at office or work. This, along with the premise of being a premier specialty coffee brand that is perceived as an affordable luxury allowed Starbucks to charge a premium for its products. Offer consumers what they love = Starbucks has shown that consumers love sugary drinks. Thus, you have flavors such as Strawberry crystal mix served Consistency = Consumers want to know that they are getting their favorite cup of coffee whether they are in Seattle, New York or Tokyo. Focus on capturing consumer's attention = While demand for Starbucks was initially attributed to the yearning for a "pure European coffee experience", the company's ability to offer "beverage entertainment" has allowed them to capture customer's hearts and pockets. 2.6 Critical Issues Rapidly expand retail operations Growth in its specialty sales and other operations Selectively pursue opportunities to leverage the Starbucks brand through the introduction of new products 3.0 MARKETING STRATEGY 3.1 Mission                    Starbucks mission is to provide a friendly, comfortable atmosphere where the customer can receive quality food, service and entertainment at a reasonable price. Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. To inspire and nurture the human spirit which is — one person, one cup, and one neighborhood at a time. The mission of Starbucks is to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. None of this success would have been possible without a set of goals that the company aimed to achieve and a set of principles, which governed the decision making process. Starbucks Coffee Company is the largest coffee company in the world with 16,635 stores in 49 countries, 11,068 of them in the United States. They maintain a presence in more than 55 countries worldwide, with a variety of types of stores operating from small outlets to large scale premises in prestige locations. Starbucks Corporation is the leading roaster, retailer, and marketer of specialty coffee in North America. Its operations include upwards of 2,400 coffee shops and kiosks in the United States and Canada, more than 100 in the United Kingdom, and more than 200 in other countries, including China, Japan, and Kuwait. In addition to a variety of coffees and coffee drinks, Starbucks shops also feature Tazo teas; pastries and other food items. The fundamental goal of this company is to provide consumers with delicious, healthy, high-quality fresh food, coffee and drinks for a reasonable price. Starbucks value proposition: - To create an ambience based on human spirit, sense of community and the need for people to come together. - To create an uplifting experience in customer intimacy - To create an experience around the consumption of coffee, an experience that people would weave into their lives. 3.2 Objectives Starbucks main objectives are as follows: a. Grow the business by constantly adding more stores around the world: The Company has had tremendous success in opening stores around the world. It has applied its global strategy effectively and has enjoyed increase in sales from global operations. b. Provide a great work environment and treat each other with respect and dignity. c. Embrace diversity as an essential component in the way we do business. d. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. e. Develop enthusiastically satisfied customers all of the time. f. Contribute positively to our communities and our environment. g. Recognize that profitability is essential to our future success. We all know Starbucks spends very little on advertising. But this chart showing market share and media spend numbers for the Top 10 Restaurant Chains is startling. It’s just one more reminder that Starbucks spends its advertising dollars on making better products and better customer experiences and not on making funnier television commercials. Starbucks' strategy for expanding its retail business is to increase its market share in existing markets and to open stores in new markets where the opportunity exists to become the leading specialty coffee retailer. In support of this strategy, the Company opened 647 new stores during the fiscal year ended September 30, 2001 (fiscal 2001). At fiscal year-end, Starbucks had 2,971 Company-operated stores in 38 states, the District of Columbia and five Canadian provinces (which comprise the Company-operated North American retail operations), as well as 252 stores in the United Kingdom, 25 stores in Thailand and 18 stores in Australia (which comprise the Company-operated international retail operations). 3.4 Target Markets According to Kotler, “Market segmentation means dividing a market into distinct groups of buyers with different needs, characteristics or behaviors, who might require separate products or marketing mixes” (p.391). By this, Starbucks convert a heterogeneous large market in smaller segments (Kotler, 1996). According to McDonald and Dunbar, the main benefit of using segmentation strategies is that “it can lead to the concentration of resources in markets where competitive advantage is greatest and returns are high” (2004, p.55). Considering the high prices of its products, Starbucks should look for consumers with high disposable incomes and for the most developed zones. For this reason, using a Geographic segmentation model (Kotler, 1996) is the approach more advisable in this case. Targeting involves “making the decision about which market segments a firm decides to prioritize for its sales and marketing efforts” (Dibb, 2001 cited by Willan). The target market is formed of people with ages comprised between 20 and 40 years old, a reasonable high income, sociable lifestyle, and well educated. One dimension of segmentation will be demographics (age and household status). According to our data in figure 5, we found that these households spend more than other households on non-alcoholic beverages away from home. We also like this segment because the children can consume the coffee-free healthy drinks as well. We expect such events as parents buying the child a healthy frozen treat for a soccer game victory, or on a family trip to the beach. We anticipate the exciting summertime experience, will remain in the child’s mind and will influence their purchase decisions as they mature. The most suitable targeting strategy to follow in this case is the “undifferentiated targeting”, offering the same range of products to all the customers (Kotler, P. Et al, 2005). Some population groups that might be interesting are: - Students whose families have high disposable income - Individuals who like traveling and appreciate foreign products - Young people with a well-paid job and stylish. Positioning Positioning is defined by Kotler as “the place that a product or brand occupies in consumer’s mind compared to competing products” (2005, p.432). Starbucks will be positioned as a premium brand, providing high quality products at a high price. According to the benefits Starbucks offers, it is important to make clear that compared to other traditional cafeterias Starbucks provides a relaxing environment compared to the noisy Spanish style. Another key part of the positioning is to show Starbucks brand as something trendy, proper of successful trendy people, whereas they can show traditional cafeterias as something for old people. Promotion tools must be used to this goal. By extending a nationwide marketing campaign in order to promote brand equity, Starbucks will experience economies of scale within its marketing and advertising activities. The attraction of differentiation over low cost as a basis for competitive advantage is its potential for sustainability. Starbucks seeks a price premium from differentiation in that at Starbucks it is not just about the coffee, it is about a place, an experience. In analyzing differentiation, Starbucks should look at both the demand-side and the supply-side. 3.5 Positioning One of the key reasons for the company's success has been the successful projection of its stores as venues for socialization between office and work. This strategy provided Starbucks with a large customer base that could use Starbucks stores as a place to meet up or socialize on a recurring basis while not at office or work. This, along with the premise of being a premier specialty coffee brand that is perceived as an affordable luxury allowed Starbucks to charge a premium for its products. After deciding its target markets, the company must decide what position it wants to occupy in their target market. A product’s position is the way the product is defined by consumers on important attributes such as price, quality, competitor, product class, application and so on(Kotler & Armstrong, 2004). Companies tried to position their products in such a way as to distinguish themselves from the competitors and give them the greatest strategic advantage in the target market. By the time Schultz acquired Starbucks in 1987; transactional marketing was being replaced by relationship marketing. Profit from retained long term customer relationship became the key of marketing and business. Relationship marketing aims at delight rather than satisfaction of customers. And Starbucks realized public opinion, even though it takes longer to cultivate, when energized can help pull the company into the market (Kotler, 1986). Starbucks strategy has been to position itself as an upscale brand and differentiate its offerings as being not just coffee products, but rather a rich "experience". This Starbucks "experience" has been the company's selling point. The company initially targeted young college students, social classes, and neighborhoods that would be most receptive to the idea of buying $3 a cup of coffee and spending time with friends at their stores. With rapid growth and expansion, Starbucks target market expanded rapidly to include every individual of every age. The company targeted small towns, rural communities, ethnic neighborhoods, highway rest stops, and even markets already saturated with various coffee shops ("Starbucks Corp: Long-Term Growth Goal Raised To 30,000 Stores World-Wide"). What began as a niche target market eventually came to include consumers from all facets of life. 3.7 Marketing Mix Product Starbucks tried to position themselves as a premium product in the coffee industry by creating a high standard, introducing innovative products and providing excellent service. Schultz knew how perishable coffee was and they were so fanatical about quality control, and hence they carefully monitored each and every step of coffee production. They bought dark-roast, whole bean coffee from places like Sumatra, Kenya, Ethiopia and Costa Rica; roasted them in their own plants; and sold only through company-owned stores (refer case study). They used total quality management (TQM) in which all company’s people are constantly involved in improving the quality of products (Kanji, 1996). Usage of nonfat milk and introduction of Frappuccino made a significant presence in the balance sheet of Starbucks. Moreover, they provided seasonal offerings, such as strawberry and cream Frappuccino in the summer and gingerbread latte in Christmas, were introduced. Gradually food items such as cookies, pastries, sandwiches and salads made their way into the stores (ibid.). Later they went on to develop new products with other companies. This shows how cautious Starbucks was to keep their standard high and maintain their premium quality image. Starbucks product-mix expanded from 30 varieties of whole bean coffees to eco-friendly cappuccino, coffee makers, and other Starbuck paraphernalia. Its product offerings have also expanded beyond pastries and coffee to oatmeal, smoothies, and wraps to keep up with the competition and satisfy more customer needs. The company has also been constantly introducing new products, such as "Instant via Ready" and "Full Leaf Tazo Tea Lattes" and "Tazo Tea Infusions". The Instant via Ready is an instant coffee that the company claims is indistinguishable from its regular brewed coffee (Jargon). Full Leaf Tazo Tea Lattes and Tazo Tea Infusions are the company's new tea offerings through which it hopes to attract tea drinkers (Edwards). The company also offers Starbucks coffee and cappuccino makers for consumers who wish to replace their existing home coffee makers. Price The amount of money a buyer must give to the seller for a specific quantity of the product is the price of that product and usually consumers use this as an indicator of quality (Dalrymple & Parsons, 1986). Price and quality determines the value of the product. When launched, Starbucks was expensive and was positioned in accordance with that. They always tried to deliver the high value promised to the consumers. They bought the quality beans, gave effective and efficient training to staffs, and moreover, made an atmosphere to enjoy coffee, meet fellow people and ‘take a break’ from the busy life. These all justify their pricing and show how price supported their positioning. Starbucks products are priced higher due to perceived upscale image attached to its brand. The company also began to offer $1 bottomless 8 oz. cup of coffee, with unlimited refills that cost approximately 50 cents less than any other Starbucks products. The company is also implementing "value strategies" that would emphasize more on inexpensive coffee products rather being perceived as unaffordable to price-skittish consumers. For example, the company introduced $3.95 "breakfast pairings," including popular breakfast items paired with a coffee, and highlights $2 energy fruit drinks instead of the more expensive specialty drinks (Jennings). Place As stated earlier, Starbucks can be found in any neighborhood where there is a perceived high traffic for its stores. Starbucks outlets can also be found in-store of various large chains including Barnes & Noble and Target. Their locations are extremely conducive for individuals that are on the go and for those who enjoy reading or listening to music. Starbucks has also been recently testing "stealth outlets", where the store is named after the street it is located on. The new stores attempt to "localize" Starbucks stores with no Starbucks logo on any of the products being offered there, and instead have the specific street address as the brand name (Allison). Promotion All marketing activities that attempt to stimulate buyer action or sales of a product can be considered as promotion (Shimp, 1997). Starbucks used to organize a big community event prior to the opening of its stores (refer case study). Artworks were designed to boast each city’s personality, and it was used on commuter mugs and T-shirts. They also recruited local ‘ambassadors’ from new partners and from customers to promote their brand (ibid.). They didn’t use advertising but they used those funds for acquiring key locations. Starbucks tried to establish a national dominance before other specialty coffee bars comes into the picture. Starbucks has implemented numerous promotions to reach its target markets. Promotions are listed as follows: One of the promotions that Starbucks has used is the Starbucks Card. Starbucks Card is an initiative that offers customers the opportunity to promote company's products through a referral system. When a customer purchases a gift card, it not only shows brand loyalty, but it also provides the company with free advertising, and brings in new customers. Starbucks also provides a card for corporate sales, which are used for extrinsic rewards to show employee appreciation for a job well done, or a gift to client or a vendor. Energy fruit drinks services delivered to offices without size restrictions. Appealing to a diverse customer base we offer international juice, teas and coffees to accommodate those customers that want a taste from home; or for locals that enjoy tea. Using philanthropy as a means for promotion - Starbucks contributes to several non-profit organizations as a way to improve brand image and awareness in local communities. 3.8 Marketing Research Simplified Wi-Fi is what customers ask for most, says Starbucks chairman, president and CEO, Howard Schultz. He goes on to say that Starbucks providing of the free service is what customers have requested more than any other thing on MyStarbucksIdea.com. Mr. Schultz continues and says the company’s excited to provide this enhanced experience for customers in stores. Starbucks as of July 1, 2010, turned on the free and simpler service at over 7,000 stores within the U.S. and Canada for any laptop owner to use all day. Prior to this, users had to provide user name and password and had only two hours per day of the free Wi-Fi. Schultz does not plan to stop there but is making plans to provide even more for customers by introducing the Starbucks Digital Network, in partnership with Yahoo. This plan offers to customers in U.S. company-owned stores, free unrestricted access to a collection of paid sites and services, exclusive content and previews, free downloads and local community news. Studies have shown that up to 85% of customers want to share ideas and insights for improvements, but half of them don't feel encouraged to speak up and share. It gets even worse than that though. 99% of ideas shared in a community are never looked at or implemented. So the sheer fact that Starbucks has implemented change based on customer feedback is important. Starbucks knows that engaged customer stick around, buy more (often) and refer friends. 4.0 FINANCIALS Starbucks has been a company that has served the people in America close to forty years now. Starbucks Company over the last few years has seen some very hard times according to Starbucks newsroom, the company has made some major changes in the way that they do business now, and Starbucks says they have seen sales rise from those changes in this first quarter of 2010 according to Starbucks newsroom. With the global market for coffee being in such high competition Starbucks had to create an idea for innovation and they did in early 2009. In 2009 Starbucks listen to their customers and found a way to bring Starbucks high quality coffee to the instant coffee market. Starbucks reviled a line called Starbucks Ready Brew and has been successful in the American. The "Starbucks Corporation - Financial and Strategic Analysis Review" is an in-depth business, strategic and financial analysis of Starbucks Corporation The report provides a comprehensive insight into the company, including business structure and operations. The hallmark of the report is the detailed strategic analysis of the company. General Assumptions Plan Month Year 1 Year 2 Year 3 1 2 3 Current Interest Rate 10.00% 10.00% 10.00% Long-term Interest Rate 9.00% 9.00% 9.00% Tax Rate 0.00% 0.00% 0.00% Other 0 0 0 In order to fully recognize the impact of the tremendous growth of the Starbucks business, a brief re-look at the history and growth of the business is necessary. The Company was started in 1971 with the opening of its first store in Seattle's Pike Place Market, selling roasted coffee by the pound. Early growth of the company was slow, and by 1987, the company had less than 100 employees and only 11 stores. In 1984, Howard Schultz convinced the owners of Starbucks to open their first coffee bar in downtown Seattle and it became overwhelmingly successful, and in 1987 Schultz purchased Starbucks, which he renamed the Starbucks Corporation. Since that time, the Starbucks Corporation has grown by leaps and bounds, growing over 50% in most categories in each year since 1987. The table below illustrates their phenomenal achievements. Financial Objectives 1. A double-digit growth rate for each future year. 2. Reduce the overhead per store through disciplined growth. 3. Continue to decrease the variable costs associated with food production. Break-even Analysis The Break-even Analysis indicates that $40,000 will be needed in monthly revenue to reach the break-even point. With the marketing the company has in place from promotions and product, the company hopes to steadily improve revenue stream by 10% percent in 2011, 15% in 2012, and 30% in 2013.  The following chart shows changes in key financial indicators: sales, gross margin, operating expenses, collection days, and inventory turnover. The growth in sales exceeds 250% each year. Starbucks expects to keep gross margin above the 38% projected for the first year, but it doesn't anticipate anything higher than 46%, since our payroll expenses will increase substantially as it grows into new areas and faces new competition. The projections for inventory turnover show that TDP will maintain a relatively stable amount of inventory in its headquarters warehouse so that it has no less than two weeks of inventory on hand, no more than three weeks, in order to keep products fresh. The only time it would consider holding larger stores of inventory is if there was some catastrophic event that could cause a dramatic rise in the price of its coffees, teas or energy drink. Break-even Analysis To arrive at the average monthly fixed costs, Starbucks calculated the fixed costs for the Drive-thru. Using the average price per unit, less the average cost per unit, divided into the fixed costs of operation, Starbucks concludes that we will need to sell at least the number of units shown in the following table and chart to reach break-even each month. The last source of market research is competitive analysis/appreciation. Starbucks will continually patronize local restaurants for two reasons. The first is for competitive analysis, providing Sigmund's with timely information regarding other restaurant's service offering. The second reason is that local business owners, particularly restaurant owners, are often part of an informal fraternal organization where they support each other's business. Break-even Analysis The Break-even Analysis indicates that $40,000 will be needed in monthly revenue to reach the break-even point. ($30,000) ($20,000) ($10,000) $0 $10,000 $20,000 $30,000 $0 $8,000 $16,000 $24,000 $32,000 $40,000 Monthly break-even point  $0 $8,000 $16,000 $24,000 $32,000 $40,000 Break even analysis Break even analysis Monthly Revenue Break even $23, 037 Assumptions Average Percent Variable Cost 45% Estimated monthly fix cost $22, 000 The first two months will be used to get the restaurant up and running. By month three things will get busier. Sales will gradually increase with profitability being reached by the beginning of year two. Starbucks sees increase in sales shopping season which is November and December. Then  you get into the months after Christmas and you see some new customers come in from the gift cards they have received and they usually spend more because they are with someone other than themselves. Starbucks also has great summer and fall drinks that are seasonal only, which ushers in more people who don’t regularly go to Starbucks daily. Sales forecast 2001 2002 2003 Sales Individuals $103, 710 $262, 527 $327, 424 Families $150, 304 $380, 374 $474, 528 Total Sales $254, 014 $643, 001 $801, 952 Direct cost of Sales 2001 2002 2003 Individuals $46, 669 $118, 137 $147, 341 Families $67, 637 $171, 213 $213, 538 Total Sales $114, 306 $289, 350 $360, 879 For its fiscal first quarter, which ended Dec. 27, Starbucks said it earned $241.5 million, or 32 cents a share, compared with net income of $64.3 million, or 9 cents a share, in the year-earlier period that included hefty charges to close stores and lay off baristas. Sales rose to $2.72 billion, compared with $2.62 billion. Analysts had forecast earnings of 27 cents a share on sales of $2.62 billion, according to a FactSet Research survey. Same-store sales -- an important barometer of customer demand at stores open at least a year -- rose 4%. On average, eight analysts had forecast growth of 1.5%. In last year's period, same-store sales fell 9% Starbucks has taken a number of steps to combat the slowdown in customer traffic at its stores. It has shut 1,000 sites, overhauled its food menu, unveiled smoothies and other new drinks. In an unusual move, the company best known for turning Americans onto expensive lattes and espresso, launched an instant coffee called via in late September. As the instant coffee moves beyond its trial phase and into grocery stores, how much via can sustain same-store stores at Starbucks is a wildcard. During the past three months, Starbucks heavily promoted via and handed out free packets. The company had posted negative same-store sales since December 2007. During the latest quarter, Starbucks said company-wide growth was lifted by a 1% increase in traffic and a 4% increase in average ticket prices. PROFIT ANALYSIS Starbucks has to sell at least 824.51 million cups of coffee per year to break even with costs. Each cup sold after the 824.51 millionth is profit for Starbucks. So in order to meet the profit standpoint that Starbucks wants and be able to pay out dividends to the shareholders Starbucks has to sell an additional 845 million cups to get to a profit forecast of 1800 million. Starbucks will succeed if they keep cutting costs and closing store that are not profitable. Starbucks has already saved close to 580 million dollars with the restructuring plan in place in 2009. Starbucks has forecasted that they will keep cutting costs and improve customer service while keeping a high quality coffee affordable. Controls The following section outlines the methods in which Starbucks will recognize and achieve the goals of this marketing plan for the years 2011 to 2013. We have also defined how and when we are to obtain these goals. Some obstacles we are to face include: · Sustaining repeat business · Increase product use by existing, loyal customers · Gaining new buyers and reaching a new market · Reaction to competitors · Customer satisfaction · Keeping up with social media and latest technology trends MARKETING ORGANIZATION Starbucks Corporation made the decision in September 2009 to hire Annie Young-Scrivner as their global chief marketing officer. Michelle Gass is also the head of marketing, and leads Starbucks’ secondary, Seattle’s Best Coffee. Among the various people working underneath these two, Starbucks will hire locally in Grand Rapids in order to market specifically to the West Michigan Area. This will happen immediately after entering the area. Hiring will be geared towards marketing and advertising professionals and students with an innovative mindset. CONTINGENCY PLANNING Revenue exceeds projections: If revenue generated is higher than we expected, we can put the extra profit into use for the next fiscal year. We can put more effort into the marketing arena with the extra income. What we need to do is figure out what we are doing well and what has triggered this success so that we can build upon it in the upcoming years. We could also use this money to refurbish existing locations or build additional venues. All of the money should be reinvested into the company in hopes of continued success. Revenue misses projections: If revenue is considerably less than what we predicted for ourselves, we need to take a step back and see where we have failed. We may need to look into the effects of the economy on our profit margins. Other options may include redefining how we market and for whom. We may need to see how our products are positioned in comparison with our competitors. Ultimately, what is necessary at this stage is a revamping of our product and realizing adjustments to be made. Social Media plays a lesser role: While Starbucks is one of the leaders in this newer marketing tactic, we need to take action to prevent this department from lacking since financial performance does indeed correlate with engagement in social media. We will need to make sure that we are engaged in multiple social media channels. We will need to hire and dedicate teams specifically for this task. They will need to be young professionals that will have a good understanding of the way social media works and the way to market to those who use social media. A competitor gains the lead in the industry market: If this should happen, we should take some time to define where they are gaining their success. We will need to survey current consumers and lost consumers of our company to see where our faults lie. If we can define our weaknesses, we can clearly see where we need to improve. What we also need to do will survey not only the successes of the competitor, but their weaknesses as well. Their weakness shall become our strength. What they do wrong, we will do right. Consumer tastes change: This answer is simple. We cannot lose sight of who our consumers are and how to market to them. We may need to differentiate an existing product to look new and exciting. We will need to take time to examine trends in the industry and in the country as a whole.  Reference Marketing Plan. Retrieved April 3, 2011 from Chicago Tribune, “The Stew: Starbucks’ Frappuccino, however you want it”, 2010 Leisureblogs.chicagotribune.com/thestew/2010/04/starbucks-newfrapuccino. Html DailyFinance.com, “Starbucks Customers Feel Burned By Surprise Price Hikes”, 2010 Dailyfinance.com/story/company-news/starbucks-customers-feel-burned-bysurprise-price-hikes/19317030 Groom, Nichola. "US News." 27 March 2007. 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