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UNIVERSITI UTARA MALAYSIA

MASTER OF BUSINESS ADMINISTRATION IKIP CAMPUS, KUANTAN, PAHANG. BPMM6013 MARKETING MANAGEMENT GROUP CASE STUDY 3 PLANET STARBUCKS LECTURER : DR. SALNIZA BT MD.SALLEH PREPARED BY: ROSMILAH BINTI OTHMAN ALIAS BIN AWANG MAT SUPIAN BIN SALLEH ZAIDIN BIN MOHAMAD ABDUL MANAN BIN HAJI ABDUL GHANI 805654 805651 805653 808648 808646

1.0 This case study is to be presented as our group discussion assignment for subject

Marketing Management.

2.0

Case Abstract

Starbucks Corporation is a public listed company traded as NASDQ in New York Stock Exchange main board. Operating in 50 countries with 8 business products namely : Whole bean coffee, Boxed tea, Made-to-order beverages, Bottled beverages, Baked goods, Merchandises, Frappuccino beverages and Smoothies. Starbucks Ventures (domestic & foreign subsidiaries) across the world. In total more than 170009 outlets worldwide.

Starbucks performance in global marketplace is very significant with steady growth of revenues, operating incomes and assets over the years for all regions. 3 direct competitors exploiting the industsry, namely: YUM (KFC, Pizza Hut, A&W, Big apple, MCD, Dunkins Donuts, etc), Wendys and Burger King.

Starbucks operates in the fast food service industry through company owned cafes, franchises, and licenses worldwide, competing with international, national, regional and local retailer of food product including restaurants, quick service eating establishment, pizza parlors etc.

The main services is coffee and consider the largest coffeehouse company in the world with about 137000 employees and generate operating income Us 1.42 billion in (fy 2010).

External Factor Evaluation (EFE)

Opportunities:

1.

Increasing demand for low calories and less cholesterol foods. To produce varieties of bottled beverages and baked goods.

2.

Changes in customers growth behavior with more sales of food and other non-coffee items such as sandwiches and desserts towards healthy foods.

3.

Globalization encourages easy exploring to new markets such as China and Asian countries.

other

4.

Promising growth through technologically advanced instant coffee packet called VIA Ready Brew. To advertise to a happy family with their kids enter the premises for their meals.

5.

Acquisition of small company i.e. The Coffee Equipment Company, the manufacture of the Clover Brewing System (horizontal integration). To acquire or joint venture with local fast food company for rebranding or restructure for better operation.

6.

Highly potential market in focusing needs of people, products, place, and price and promotion. With a greater percentage of development country people working, there has been less time available for at home food preparation. Therefore these trends along with growth into income households will increase snack foods consumption.

Threats:

1.

Stiff competition from Direct International competitors i.e.: Yum! Brand (such as KFC, Pizza Hut and Taco Bell) and MCD They have to share the market percentage among themselves.

2.

Anti-American products by Muslim countries due to war crises in Middle East which favour to Israel. Majority of Muslim countries want to boycott all American products such as fast foods etc.

3.

Healthy conscious products of high calories/fat/sugar content foods. There is a new trends of next generation of customer towards providing healthy foods.

4.

Long undisputed following terrorist attack same store stayed positive while those stayed skidded.

External Factor Evaluation (EFE)


Weight Opportunities Increasing demand for low calories and less cholesterol foods Changes in customers behavior towards healthy foods Globalization encourage easy exploring to new markets Promising growth through technological advanced and media promotions nationwide Acquisition of small but unique branding competitor i.e. Wendys (horizontal integration) Highly potential market in focusing needs of people, products, place, price and promotion Threats Stiff competition from Direct International competitors i.e.: Yum! Brand (such as KFC, Pizza Hut and Taco Bell) and MCD. Anti-American products by Muslim countries Healthy conscious products of high calories/fat/sugar content foods Long undisputed of terrorist attack at location store. Total Remarks on EFE: 0.15 4 0.60 0.15 0.07 0.07 0.08 4 4 3 3 0.60 0.28 0.21 0.24 Rating Weighted Score

0.05

0.10

0.05

0.15

0.10 0.20 0.08 1.0

3 4 3 --------

0.30 0.8 0.24 3.52

Total weighted score of 3.52 is highly above average level of 2.50. Starbucks strategies are able to capitalize existing business opportunities, leverage potential new markets and mitigate business threats.

Internal Factor Evaluation (IFE)

Strengths:

1. 2. 3. 4. 5. 6. 7. 8. 9.

Worlds Brand leader in quick fast coffeehouse industries. Total Revenue Us 10.71 billion in Financial year 2010. Extensive chain of network with more than 17009 outlets. 137000 highly motivated employee capacity in 50 countries Excellent leadership team headed by Howard Schultz (Chairman, President and CEO) Comprehensive and effective advertisement below the line (BTL) and above the line (ABL) worldwide. Promising dividend distribution to shareholders with positive increase every year Total assets Us 6.38 billion in Fy 2010 Operating income Us 1.42 billion in Fy 2010

Weaknesses:

1. 2. 3. 4.

Opening without planning permission by local authorities of opening stores in United Kingdom. Negative perception towards food contents eg: fast food contents high cholesterol Trademark disputes legal battles .Starbucks often faces legal action from activists, consumer, labour unions, medical and religious groups around the world. Alleged relationship with the Israeli military, there have been calls for boycott of Starbucks stores and products from Muslim countries

Internal Factor Evaluation (IFE) Matrix


Critical Success Factors Strengths Worlds Brand leader in quick fast coffeehause industries Total asset Us 6.38 billion in 2010 Extensive chain of network with more than 17009 outlets 137,000 highly motivated employee capacity in 50 countries Excellent leadership team headed by Howard Schultz (Chairman, President and CEO) Comprehensive and effective advertisement below the line (BTL) and above the line (ABL) worldwide. Promising dividend distribution with positive increase every years to shareholders 0.15 0.10 0.15 0.07 0.05 0.07 0.05 0.05 0.06 4 3 4 4 3 4 3 3 3 0.6 0.3 0.6 0.28 0.15 0.28 0.15 0.15 0.18 Weight Rating Weighted Score

Revenue increased by Us 10.71 billion in 2010 Operating income increased Us 1.42 billion in 2010 Weaknesses Opening store without permission Negative perception towards food contents Trademark disputes legal battles Alleged relationship with the Israeli military Total

0.05 0.10 0.05 0.05 1.00

2 2 2 2 -----------

0.1 0.2 0.1 0.1 3.19

Remarks on IFE: Total weighted score of 3.19 is far above average level of 2.50. Starbucks therefore has a strong internal position to capitalize market situation and quick respond to customer needs.

5.0 SWOT Matrix and Suggested Strategies

Strengths

Weaknesses

1. Worlds Brand leader in quick fast coffeehause industries. 2. Total asset Us 6.38 billion in 2010. 3. Extensive chain of network with more than 17009 outlets 4. 137,000 highly motivated employee capacity in 50 countries. 5. Excellent leadership team headed by Howard Schultz (Chairman, President and CEO). 6. Comprehensive and effective advertisement below the line (BTL) and above the line (ABL) worldwide. 7. Promising dividend distribution to shareholders with positive increase every years. 8. Revenue increased by Us 10.71 billion in 2010. 9 Opportunities 1. Increasing demand for low calories and less cholesterol foods 2. Changes in customers behavior towards healthy foods Globalization encourage easy exploring to new markets Promising growth through technological and media Operating income increase Us 1.42 billion in 2010.

1. Opening store without permission. 2. Negative perception towards food contents 3. Trademark disputes legal battles 4. Alleged relationship with the Israeli military.

S-O Strategies 1. Marketing Penetration continue to promote the current strong brand name to attract younger consumers & children. Younger customers and children is the potential market that cannot be compromised. (S1, O5) 2. Product Development product innovation by developing new healthy products to cater growing demand & health conscious (S2, O1, O2); i.e.

W-O Strategies 1. Product Development localized existing product & develop product to cater local ethnics (W2, O3)

3.

4.

promotions nationwide

smoothies frappuccino beverages

5.

Acquisition of small but unique branding competitor i.e. Wendys (horizontal integration) Highly potential market in focusing needs of people, products, place, price and promotion

6.

3. Horizontal Integration acquire relatively smaller competitor to leverage their niche market or acquire local strong brand company, i.e. Roti Boy brand in Malaysia (S3, O5) 4. Related Diversification keep to introduce new concepts to cater new market needs i.e. 3 zone concepts at new restaurants namely Linger Zone, Grab&Go Zone and Flexible Zone (S3, O6) 5. Horizontal Diversification explore new business to promote healthy activities i.e.: Swimming Suit/Golf/Football/F1 (S3, O6)

Threats 1. Stiff competition from Direct International competitors i.e.: Yum! Brand (such as KFC, Pizza Hut and Taco Bell) and Burger King 2. Anti-American products by Muslim countries 3. Healthy conscious products of high calories/fat/sugar content foods 4. Long undisputed of terrorist attack at store location)

S-T Strategies 1. Marketing Development continuously identify new markets for business penetration (S1, T1,) 2. Product Development product innovation (S2, T3) - i.e.; Salad burger, steam burger

W-T Strategies 1. Product Development product innovation (W2, T3) i.e.; smoothies

6.0

PROPOSED STRATEGIES TO BOD

1.

Starbucks strategy should continuously concentrate in:


i.

Market penetration (TV advertisements, Corporate Social Responsibility etc)

ii.

Market development (explore new market in new developing countries)

iii.

Product development (introduce and promote healthy factors products, i.e. smoothies, frappuccino beverages)

2.

Related Diversification will generate opportunity for MCD to explore needs of existing and potential customers, capture new market and consistently improve customer loyalty

3.

Horizontal integration is needed to sustain and enhance sales growth as well as to leverage competitors market and also as part of positioning strategy To build awareness on local sensitivities for better market acceptance (i.e Muslim countries market)

4.

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