Our plan is straightforward, to keep 250 Starbucks locations in
Southern California open until 1am, 7 days a week beginning January
1, 2013. Our plan includes a specific promotion and is attainable with
the available resources. We intelligibly offer a way to increase daily
profit by shifting the behavior of our consumers, which in turn will
grow the organization. Our suggested marketing budget is $822,576
and will contribute an additional 13% to the company’s sales
revenue. Through situation analysis, marketing objectives, strategy
and programs and financial analysis, we discuss why this objective is
specific, measureable, achievable and realistic in the time allotted.
Funding our plan will not only increase profitability, but it will also
create customers for life.
•
Starbuck’s team continues to grow every year, last year we ended
our fiscal year with more than 17,000 stores in 55 countries. What
our Starbuck’s team is going to focus on more domestically is the
stores that are currently in place all over the United States.
Approximately, 1,700 stores in the United States are going to be
remodeled this year. Our new flagship store in Times Square is an
example of what our stores will look like.
Focusing on the southern part of California, Starbuck’s locations will be
experiencing growth by selling beer and wine in their stores after two p.m. They
introduced beer and wine into the Pacific Northwest stores and had great
success. Starbuck’s plans to introduce these products into four to six southern
locations and two of them will start to sell beer and wine in Orange County. They
stated, “The four beer and wine cafes will also undergo remodels to add flexible
seating to accommodate a variety of groups, especially large parties like book
clubs. Wine prices have not been set for the cafes. In Pacific North West locations,
prices range from $7 to $9 for a glass of wine and $5 for a bottle of beer. The food
menu will consist of savory snacks, cheese plates and hot flat breads to drive
sales at night”(Starbucks). This will help drive sales into the stores that we are
planning on keeping 250 locations open till one a.m.
Employee Value Low Turnover
System of
Distribution - Cutting
Down Time Between
Manufacturer and
Stores
Core
Competencies
Ambient
Environment that
Allows a Customer to
Stay, Relax and Work,
while Enjoying
Trendy Music with a
Beverage Catered to
their Customizable
Tastes
Commitment to
Coffee Quality and
its Sustainability
Cafe Practices,
Social Programs and
Farmers Support
Continually
Developing New
Technologies to
Speed Up
Production,
Manfuacturing and
Service to the
Customer
•
Starbucks distributes through two retail channels. The first is retail stores
where customers enjoy quality coffee service, an inviting atmosphere
and an exceptions cup of coffee (“Starbucks Company Profile”). The
second, is online at the “Starbucks’ Store” where customers may
purchase coffee beans, tea bags, brewing equipment, drink ware, gifts
and Starbucks cards (“Starbucks Store”).
•
Manufacturing capabilities include 1 company owned manufacturing facility
(Georgia, USA) (Hutson), 5 company owned coffee roasting plants (Nevada,
Pennsylvania, South Carolina, Washington, USA and the Netherlands), 24 comanufacturers (United States, Canada, Europe, Asia and Latin America), 1 tea
processing plant (Portland, Oregon, USA), 70,000 – 80,000 deliveries per week
and 2.7 million deliveries per year (Cooke).
•
Starbucks marketing structure is monopolistic competition due to many
competitors offering a differentiated product type with low barriers to enter
or exit the market. Starbucks offers a place to stay, work and listen to music.
This allows for some pricing strategy, since Starbucks demands a higher price
for is coffee (Jochem). Starbucks participates in two key customer markets:
consumer markets and global markets. Starbucks sells mass consumer goods
and services such as coffee, tea and baked goods, spending a great deal of
time establishing communications and reliable service.
•
Starbucks in the global marketplace carefully decide on which countries to
enter, how to enter each, how to adapt product and service features for each
country, how to price products in different countries and how to design
communications for different cultures. Starbucks faces different requirements
for buying and disposing of property; cultural, language, legal and political
differences; and current fluctuations (Kotler 9).
•Profitable Organization
•Well-Trained Staff
•One On Every Corner
•World-Wide Presence
•Strong Ethical and Core Values
•Brand Loyalty with Starbucks Card
•Atmosphere
•Price Point
•New Stores and Products
•E-Commerce
•Global Expansion
•Co-Branding
•Juices/Energy Drinks
•Bakeries
•One On Every Corner
•Dependent on the Retail of Coffee
•High Prices
•Too many Choices
•Confusing to New Coffee Drinkers
Strengths
Weaknesses
Opportunities
Threarts
•Prices
•Economy
•Rise of Dairy
•Competitors Offering Lower Prices
Market trends
Compared to the rest of the market, during the past year Starbucks’ stock has steadily
declined in value. Meanwhile, Peet’s Coffee, one of Starbucks’ major competitors, has had its
stocks perform about the same as the rest of the market, following the general trend of rises
and drops that the market experienced (Higbee).
Category marketing activity
As of late, Starbucks has clearly been declining compared to its main competitors and
compared to the market. One cause of this may be the current economic downturn. The
slowdown in the economy has changed people’s spending habits. According to the
Associated Press, “Research by WSL Strategic Retail found that ...premium brands or
food and specialty coffees...are [among] the top areas where people are trimming their
spending” (Higbee).
•
The proper management of our natural resources is key to promoting the
health and vitality of the Southern California region. As fossil fuels become
more costly, we will likely see an even greater proliferation of hybrid and
electric vehicles that emit less pollution. As the cost of solar panels comes
down, their use, too, will increase. While the quality of our drinking water is
generally good, future generations will be astonished by our profligate use of
drinking water for irrigation. Many parts of Southern California, particularly
Los Angeles, have substantial amounts of unused or underutilized land. These
vacant lots, many of which are owned by the city, often end up being the
repository of household debris and community nuisances. Action programs
seeking to turn vacant lots into pocket parks, community gardens, and other
community amenities are being put in place under funding from foundations
such as the California Endowment and under national initiatives, including
the Centers for Disease Control and Prevention's RENEW program (Jackson).
Substitutes (Products)
1. Other beverages apart from Starbucks coffee and tea – Examples
include soda, fruit juice, smoothies, water, beer and other alcoholic
drinks
• Other “quick‐grab” foods apart from pastries, muffins,
doughnuts, etc sold at Starbucks. Examples include burgers,
burritos, tacos, sushi, snack food
1.
Lower‐end or “less luxurious” coffee places
2.
Places that offer people a place to hang out, chat, relax or even work.
Examples include tea houses, fast food places, ice‐cream parlors, side‐walk
cafes, and bars and pubs
3.
The entry barrier for the coffee industry is relatively low, even for premium
coffee like Starbucks.
4.
There is more bargaining power for suppliers of technological innovations
such as automated coffee machines, latte and espresso machines, etc
because there are not as many suppliers for such equipment
5.
With newer entrants and competitors such as McDonalds who claim to offer
premium roast coffee of reasonable quality for lower price, buyers now have
slightly more bargaining power than they’ve had in the past (Higbee).
Company
Starbucks
McDonalds
iHop
Denny’s
Market Cap
40.09 B
99.47 B
1.02 B
472.5 M
Revenue
12.19 B
27.01 B
981.63 M
518.3 M
•
•
•
•
•
•
•
Total net revenues increased 13% to $3.3 billion
U.S. comparable store sales increased 7%; Global comparable store sales increased
6%
Channel Development revenues increased 45% to $316 million
Operating income increased 22% to $492 million; operating margin expanded 120
basis points to 14.9%
EPS increased 19% to $0.43 per share, compared to $0.36 per share in Q3 FY11
Starbucks opened 231 net new stores globally, including its 600th store in mainland
China, and its first stores in Finland and Costa Rica.
(“Starbucks Reports Record Third Quarter Results”)
Costs
•
•
Coffee prices are at $1.9 a pound, significantly lower than last year’s prices of $3 per
pound.
Since Starbucks “hedges its coffee costs by entering into long-term coffee
contracts”, the lower input costs will lead to margin improvements (“Trefis”).
Profit Trends
•
•
•
Starbucks plans to accelerate growth by opening approximately 1,200 net new
stores globally, representing 20% growth over fiscal 2012.
The company is targeting approximately 10% - 13% revenue growth, driven by midsingle-digit comparable store sales growth, approximately 1,200 net new store
openings, and continued strong growth in the Channel Development business.
(“Starbucks Reports Record Third Quarter Results”)
•
McDonald's has become the world's largest fast-food company with 22% market share and more than
33,500 restaurants serving burgers and fries in 119 countries. Approximately 500 restaurants are located
in Southern California and about 60% of them are open 24 hours, including the drive-through. It is well
known for its Big Macs, Quarter Pounders, and Chicken McNuggets. Most of the restaurants are
freestanding units providing dine-in and drive-through service, but McDonald's also has many eateries
located in airports, retail areas, and other high-traffic locations. McDonald's has established its brand
imagine as convenient and wholesome family dining. The company mainly targets families with children,
advertising its kid-friendly Kid’s Meals and budget-minded Value Menu. In order to attract more
consumers, McDonald's is also continuously creating new menu items (“McDonald's Corporation”).
Recently, the company has been promoting a new line of espresso coffee drinks such as Premium Roast
Coffee, McCafé Caramel Mocha, McCafé Caramel Mocha and more under the McCafé line (“McCafe”).
•
Denny's Corporation
With more than 1,650 of its signature eateries located across the country, Denny's is one of the top full-
service, family-style restaurant chains in the United States. It is open 24 hours a day and is best known for
its breakfast menu items, including eggs, pancakes, and combination plates such as the All-American
Slam, Lumberjack Slam and the Grand Slam Breakfast. Denny's also provides standard American meals
like burgers, sandwiches and steaks for lunch and dinner. The company owns and operates about 230 of
its restaurants, while the rest are franchised or operated under licensing agreements. 416 of the
restaurants are located in state of California (“Denny's Location”).
Denny’s has established itself as a family friendly dining environment and features good quality and
value food choices. In order to help the operation run smoothly, Denny’s offers discounted prices during
limited times on their menu for their consumers. In 2010, Denny’s came out with $2 and $8 value meals
and in 2011started serving "Baconalia" menu featuring different bacon-centered dishes 24 hours a day, 7
days a week.
•
International House of Pancakes (IHOP), LLC is owned by
DineEquity Inc., with a market share of 3% in the breakfast and
dining restaurant market (International House of Pancakes LLC).
IHOP restaurants provide moderately priced, good quality food
and beverages as well as table service in a comfortable and
family-friendly atmosphere. IHOP restaurants are best known for
their signature pancakes, omelets and other breakfast
specialties. In addition IHOP restaurants are open throughout the
day and evening hours and offer different choices of meals for
lunch, dinner and snacks. It has about 1,500 franchised
restaurants that are open 24 hours a day in selected locations and
over 200 locations in Southern California. IHOP also serves
discounted value pricing and limited-time offers (such as its Free
Pancake Giveaway) similar to Denny’s (“DineEquity, Inc.”).
A Place for Everyone
• Apart from coffee, Starbucks also carries a selection of food items and
coffee-free beverages, making it friendlier for children and snackseekers.
• Customers have the option to over-indulge via a trenta-sized (their
largest size to date, being 31oz.) macchiato and a pastry, or underindulge with options like a skinny latte (about 120cals. according to
their menu) and lighter snack options such as their veggie snack box.
Ambience
• The allure of Starbucks extends to more than just their coffee, with
prices that are not necessarily competitive (from about $2 for a small
cup of coffee to even $20 for an elaborate, customized drink).
• Because Starbucks’ interiors in Los Angeles will not be far from that of
a location in Tokyo, customers know what to expect when they walk
into those heavy glass doors. With a rich, warm color scheme,
alternative music, coffee aroma, casual couches, and organic=looking
art, every Starbucks’ location’s overall aesthetic and ambience evokes
the romance of coffee.
Consistency
• The key to Starbucks maintaining customer loyalty over the years is in
the reliability of the Starbucks experience. Even with complaints about
Starbucks’ high prices, it can be argued that one can pay a small fee of
$2.50 for a cup of coffee, free Wi-Fi, and a warm, public environment
where he/she can sit, work, and mingle. As numbers have shown over
the years, certainty is quite attractive.
•
•
•
•
•
Specific –Starbucks will keep a select number of stores in
Southern California open until 1am, 7 days a week. Southern
California includes Los Angeles County, Orange County,
Riverside, San Bernardino, San Diego Metropolitan Area,
Bakersfield Metropolitan Area, and Oxnard-Thousand OaksVentura Metropolitan Area.
Measurable – Out of the 1,700 Starbucks locations in Southern
California, 250 Starbucks locations will change their operating
hours to remain open until 1am.
Achievable – This objective is achievable. The select locations
were chosen based upon their positioning near college
campuses, nightclubs, bars and event centers.
Realistic – This objective is realistic with our current available
resources and involves no additional resources.
Time – The specific and realistic timeline for this achievement
will begin on January 1, 2013. The 250 Starbucks locations in
Southern California will remain open until 1am, 7 days a week.
1,700 Starbucks
Locations In Southern
California
(Google Maps)
Pricing – All pricing with remain the same. A $1 off discount will be given to any
purchase made between the hours of 11pm – 1am, 7 days a week.
Advertising
Our Market Areas of Interest:
Los Angeles:
Downtown - Staples Center and LA Live
Hollywood - Hollywood Walk of Fame, Chinese Theater,El Capitan Theater, Hollywood and
Vine
Sunset Strip
Beverly Hills - Rodeo Drive, Restaurant Row
Santa Monica’s Third Street Promenade and Pier
LA/OC Amusement Parks and Beaches
Orange County: Disneyland, Newport Beach, Laguna Beach,
South Coast Plaza, Irvine Spectrum, and Fashion Island
San Diego:
Downtown, Gaslamp District, Convention Center, Qualcomm Stadium, Petco Field, Old Town,
Hillcrest, La Jolla, Del Mar, Carlsbad, Oceanside, Balboa Park, Torrey Pines, Pacific Beach,
Military Bases, Casinos, and Amusement Parks.
Bulletin Billboards
Delivers high frequency and is positioned on highly visible, heavy traffic locations
such as highways expressways, primary arteries and major intersections.
Builds strong brand and image awareness.
Delivers high reach and frequency over an extended period of time.
Long term, permanent displays offer a dominant presence in the immediate trade
area.
•
•
•
•
•
•
•
Promotion – Our promotion of a $1 off discount is targeted directly our
customers.
Distribution – The distribution will employ the channels of the select 250
Southern California Starbucks locations.
Sales Force – Will include additional hires and store mangers see fit. Reorganization of store management to allocate a night-shift manager.
Product – We are not adding, changing or deleting any products.
Service and Support Needed – Service and support needed to keep locations
operating during new hours.
Use of Market Research – Starbucks’ marketing team conducted market
research to determine the best Starbucks locations that would increase
profitability most by staying open until 1am, 7 days a week. This research
evaluated the geographical area and foot traffic of the 1,700 Starbucks
locations in Southern California. Additional research was done to determine
what advertising methods would have the best reach and frequency of
viewing based on location.
Affordability of Proposed Programs – We are requesting $822,576 to be
allocated for our marketing budget. A specific breakdown of our total
marketing cost includes:
Financial Analysis Continued
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