Starbucks entry into emerging and developed markets is informed by market research. It is essential to understand the intellectual property rights laws and licensing issues when planning market entry in an emerging market. Updated October 15, 2016 Starbucks articulated an entry strategy that would address the dominant Chinese markets and that was designed to be as inoffensive with respect to the Chinese culture as possible. Instead of taking the conventional approach with advertising and promotions -- which could have been seen by potential Chinese consumers as attacking their culture of drinking tea -- they positioned stores in high-traffic and high visibility locations. Moreover, Starbucks very deliberately began to bridge the gap between the tea drinking culture and the coffee drinking culture by introducing beverages in the Chinese stores that included local tea-based ingredients. The bargaining power of buyers lowers the profitability of an industry by bargaining for more services and perhaps higher quality. Tastes— As preferences for a particular good or service changes, so will the demand for the item. If people enjoy drinking and develop a preference for the stronger tasting Starbucks coffee, they will want more of it. If consumer do not like the stronger tasting Starbucks coffee, the will want less of it. Income changes and lower priced substitutions could affect their tastes and a cheaper priced alternative could become a new preference. In 1971, the original Starbucks opened in Pike Place Market in Seattle, Washington by three partners named Jerry Baldwin, Zev Siegal how to write persuasive speech, and Gordon Bowker. Their focus was to sell coffee beans and equipment. They purchased green coffee beans from Peet’s, a specialty coffee roaster and retailer, during their first year of operation. Later introductions for persuasive essays, they began buying coffee beans directly from the growers. In 1983, an entrepreneur by the name of Howard Schultz joined the company; Schultz felt that the company should sell coffee and espresso drinks as well as coffee beans. The partners felt that selling coffee and espresso drinks would take away from their primary focus of selling coffee beans. Since the idea did not work, Schultz started his own company called II Giornale coffee bar chain in 1985. In 1987, the original owners of Starbucks sold their chain to Schultz’s II Giornale. Schultz changed II Giornale outlets to Starbucks chains and quickly began to expand. Bargaining power is the capability to control the setting of prices. The more concentrated and controlled the supply, the more power it leverages against the market. Despite all the barriers or obstacles associated with entry, the most significant barrier to entry is catching a niche market. Name brand franchises have ultimately captured most of the market share because of their own personal niche. Starbucks positions itself as a specialty premium coffee retailer and has a strong and well known brand image. As Starbucks is a premium coffee brand, its target market has always been middle and upper class with the disposable income needed to frequent the coffeehouse. One of the main reasons Starbucks has been so successful is because they focus on quality and experience rather than price. The Starbucks’ image and experience has been one of the key elements to their success. Starbucks has succeeded in giving coffee a new cachet and established themselves as a price setter through product differentiation. Consumers have been willing to pay for what they consider an elite lifestyle and many believe that the higher the price, the better the quality. Although premium brand coffee makers have some market power to set prices above the generic value brands, Starbucks operates under monopolistic completion where there are many small firms that sell similar products, therefore they do not exert complete market power in the industry. In today’s economy, many people have been losing their jobs or have had their income reduced. As a result, consumers have had to cut back on non-essential items such as higher end coffees like Starbucks. Many people will no longer be able to afford the $4-5.00 specialty beverage. When income increases, people have more disposable income therefore are able to treat them to a specialty beverage. Starbucks retail stores can generally be found in extremely busy, accessible locations including being located directly off exit ramps to serve a wider range of customers and promote brand awareness. The stores can also be found in downtown and suburban retail settings, shopping malls, within office buildings and can even be found on university campuses. Drive Thru stores continue to develop to reach non-pedestrian customers. Starbucks relies a great deal on information technology systems in the operations of its supply chain, point-of-sale processing writing services for essays, and many other business transactions. The management of these transactions greatly affects the production, distribution, and sale of its products. Any technical failure within these systems can cause delays in sales and decrease efficiency. There are various forecasting models that can be used for forecasting sales for coffee. Two methods are qualitative and quantitative. The qualitative method uses subjective judgment based on non-quantifiable information, such as management expertise, industry cycles, research, development, and labor relations. The qualitative method does not require a demand history for the product or service. The quantitative method is a research method that relies on interviews, observations, and a small number of questionnaires, focus groups, subjective reports and case studies. Much of the focus is on collection and analysis of numerical data and statistics. Looking for atmosphere, for a place to hang out, for velvet sofas. “We’ve known for a long time now that Starbucks is more than just a wonderful cup of coffee. It’s the experience,” says Howard Schultz. His genius understanding is that: modern brand-building is at least as much about the customer experience as it is about the actual product. (Shultz) More than 77 percent of all adults over 18 — or 161 million people — drink coffee on a daily or occasional basis, the study reported. According to the 2007 National Coffee Drinking Trends Report, 18- to-24-year olds have contributed to the increases in coffee consumption in the past year (daily, weekly, and annual consumption). They are also the only age group that showed an increase in daily gourmet coffee beverage consumption. People aged 40 and up showed the largest growth in consumption of gourmet coffee beverages over the past year. Sales forecasting is the process of estimating what the business’s sales are going to be in the future. Sales forecasting is an important part of business management. Starbucks cannot manage inventory, cash flow, or plan for growth without an idea of what future sales are going to be. A business’s sales revenue from the same month in a previous year, combined with knowledge of general economic and industry trends, work well for predicting a business’s sales in a particular future month. Substitutes– As the price of the substitute rises, the demand for the product rises. As the price of the substitutions goes down, the demand for them will increase. The more consumers, the more demand. The higher the demand for a good the higher the prices will rise. With the recent news of Starbucks closing six hundred store, it is evident that they have been running in a marginally inefficient business model. Most monopolistically competitive firms are marginally inefficient because production average total cost is not at the lowest point. In this event, in the long run, the marginal cost is simply less than the price of the good. This translates to the price of the Starbucks beverage to me marked up over the cost of production. The cost of producing for Starbucks may not be the most cost-effective writing a pros and cons essay, but it is less than the price charged for their gourmet brews. This could also explain why the price of Starbucks coffee is so high; their production costs are high and must that cost onto the customers to increase their revenue and decrease expenses. When Starbucks became a major competitor sample essays written by students, it was because the company’s environment was like none other and focuses on the benefit of the customer. People considered Starbucks as a “third place” after home and work. Howard Schultz’s vision was not to build a coffee shop, but instead build a company that treats people with dignity and respect. He wanted to establish a place where you can go relax and have a delicious coffee and smother yourself in a comfortable seat that makes you feel like you’re sitting on your living room couch. Ear pleasuring music will be consuming your background and make a customer feel as if they are at their home away from home. Or a place where you can bring your laptop and get some work done if there were any distractions at home or work. Starbucks is also the type of place where you can meet a friend, stay and talk for hours, and feel like you’re the only two people in the place. Consumers are thinking more about necessity versus luxury. Necessity tends to have inelastic demand and it is unresponsive price change. Where as luxuries have more elastic demands quantity demand is more responsive to price change and Starbucks coffee is elastic. Since Dunkin Donuts is a privately held company, no financial information is available to determine its share of the market. But based on the amount of stores that Dunkin Donuts has, it would be safe to assume that they have captured much of the market. And because McDonalds serves many more products than the other key competitors, it may be extremely difficult to report accurate market share information. Number of consumers– If there are more buyers than there must be more of a market demand. Starbucks has, up until now, been able to take advantage of premium pricing but according to an article in Business week, “Starbucks is looking to rebound from dismal US sales as more consumers cut back on spending. In its first-quarter report last week, same-store sales – a key indicator of a retailer’s performance – dropped 10 percent. That’s worse than the 8 percent decline in the fiscal fourth quarter.” Determents of Demand In comparison “vastly increase competition in coffee market. McDonalds entered into the Premium coffee selling for $1.39 for a small compare to Starbucks $1.75.” McDonalds has been aggressively markets its coffee winning breakfast time from the consumers and includes promotional items to allure them in. To which Consumer Reports indicate that they are head-to-head comparisons with the coffee from Starbucks. Starbucks product line has grown to include fresh brewed coffee, hot and iced espresso beverages, coffee and non coffee blended beverages, Tazo tea, baked pastries, sandwiches, and salads. Starbucks paraphernalia includes coffee grinders, espresso machines, coffee brewers essay on christmas, music CD’s, books, movies and gift cards. The global consumer products include bottled Frappuccino, iced coffee, and espresso drinks, whole bean coffee, tea, coffee liqueurs and premium ice cream. Pricing decisions also serve as a marketing tool and is one of the most compelling attributes of product positioning. It makes a very clear statement about how a consumer should perceive a product. Starbucks cannot become the low price leader; it takes away from the brand image and ambience that they are known for. Because there are a lot of options for the more cost conscious consumer looking to save money on coffee purchases, Starbucks felt the need to make a price change. After all McDonald’s Corp is offering new, lower-priced specialty coffee drinks and Dunkin’ Donuts is advertising value-minded deals. So when Starbucks founder ,Howard Schultz are exams necessary opinion essay, decided to offer a $1 cup of coffee in certain stores to compete with McDonald’s and to increase existing store sales, some critics thought it may have done more harm than good. Their thoughts were that the decrease in price may have implied that there is nothing more to Starbucks than coffee. By offering a cheap cup of coffee, Schultz may be reducing the company to commodity status, and the natural result being a price war. No longer is buying a cup of Starbucks coffee an experience. But because coffee is an elastic product in which price controls demand, Starbucks may want to consider a small decrease in their price to increase demand which will increase revenue and allow them to be more competitive. Many outside factors also contribute to Starbucks losing its brand appeal. People have begun to realize that they have alternatives to purchasing Starbucks coffee and still sample the luxurious blend by brewing it at home themselves. Customers no longer follow the hype supported by the Starbucks name and are becoming more price/value oriented. To remain a major player in the coffee shop market, Starbucks must reinvent themselves with the changing lifestyles, tastes and react to the alternatives within the market. Analysis of Exhibits from the case: Preliminary
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