HOW STARBUCKS DEVELOP THEIR BRAND IN UK AND ITS IMPACT ON CUSTOMERS’ BUYING BEHAVIOR
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Table of Contents
Chapter 1 – Introduction 4
1.1 Background of the Research 4
1.2 Statement of the Problem 5
1.3 Rationale of the Research 6
1.4 Research Questions 6
1.4 Research Aims and Objectives 7
1.5 Research Methodology (Snapshot) 8
Chapter 2 – literature Review 9
2.1 Research Question (RQ) 9
RQ 1 9
RQ 2 11
RQ 3 12
RQ4 13
RQ 5 14
RQ6 15
Analysis and Conclusion 16
Chapter 3 –Methodology 18
3.1 Introduction 18
3.2 Research Philosophies 19
3.3 Justification for Compatibility Research Philosophy 20
3.4 Research Design and Justification for Choice 21
3.4 Qualitative and Quantitative Data Collection 22
3.4 Research Methods and their Justification 22
3.7 Validity and Reliability of Data 23
3.8 Ethical Considerations 23
3.9 Limitation of the Research 24
3.10 Conclusion 24
Chapter 4 – Data Analysis & Findings 25
4.1 Introduction 25
4.2 Discuss the Sample Characteristics 25
4.3 Research Question 1 26
4.4 Research Question 2 28
4.5 research Question 3 28
4.6 Research Question 4 30
4.7 Research Question 5 31
4.8 Research Question 6. 31
5.1 Introduction – Objective of Chapter 33
5.2 Review of the Research Objectives 33
5.3 Findings and Answers to the Research Questions 33
Reference List 35
Chapter 1 – Introduction
1.1 Background of the Research
Starbucks Coffee is a US-based chain of coffee stores owned by Starbucks Corporation. Starbucks opened its first coffee shop in Seattle, Washington in 1971. The coffee house is now the largest in the world and has edged rivals such as Costa Coffee among others by its presence in over 65 countries (Weissman 2008). Domestically, the company operates close to 13,000 coffee stores. Additionally, it has 1870, 1400, 1120 and 760 coffee stores in China, Canada, Japan and the United Kingdom respectively (Michelli 2006).
Many of the Starbucks coffee stores are uniform with regards to branding and theme colors and offer similar items (Simmons 2005). Additionally, the variation in prices of similar items sold in different stores is kept to a minimum. Starbucks outlets sell hot and cold beverages, coffee beans, specially prepared instant coffee, tea leaves, snacks and pastries. This chain of stores also has a range of items that their customers can take home. These include prepackaged foods, sandwiches and gifts such as highball glass and mugs. Starbucks Corporation also operates evening venues where alcoholic beverages and appetizers are sold. Its entertainment division hosts music sessions under the Hear Music brand and markets entertainment and information materials such as books, music and films (Michelli 2006).
Starbuck opened its first store in London in 1998 under the leadership of then-chairman, Howard Schultz (Adler 2007). Over the last 17 years, it has grown to 760 outlets (Brooks 2013). In 2014, the company made a pre-tax profit of £1.05 (Brooks 2013). Additionally, the company had reached cumulative sales of £3 billion in UK in 2012 (Brooks 2013). This demonstrates a company whose sales have grown due to various factors. This project seeks to examine the strategies used by Starbucks Company to achieve their current position as well as enhance their future growth. This paper will look into the concepts of the strategies especially relating to a distinguishable brand sold by Starbucks. Additionally, it will also examine the impact of the strategies utilized by Starbucks on the customers purchasing behaviors as well as the effects of branding on customers’ purchasing decisions. Finally, in order to clearly understand the strength of Starbucks in the UK market, the company’s performance will be put in the context of the UK domestic market and compare it with the average. This will also involve comparing its financial performance with that of its close rival.
1.2 Statement of the Problem
Understanding how Starbucks Company has managed to popularized its brands in the UK market over the last 17 years since its inception is very important for any current or aspiring business managers, strategists and entrepreneurs. However, a step-by-step breakdown of the strategies that have been utilized by Starbucks has not been adequately researched. Important knowledge still remains not well analyzed in addition to the analysis concerning the comparison of this company to others in the premium coffee market in the UK. In the backdrop of thousands of entrants who fail in the UK market every year, the story of one entrant that manages to survive for 17 years is remarkable. Still, there are companies in other industries and in the premium coffee industry that fail or have not been as successful as Starbucks. But others have persisted in this market, and examples include Costa, Caffe’ Nero and SSP. The experience of how Starbucks Company has managed to succeed in the face of stiff competition is important and it has many lessons for aspiring business managers, strategists and entrepreneurs.
1.3 Rationale of the Research
This research is important for a number of reasons, especially for popularizing a brand in a competitive market. This would be important in identifying the strengths of the strategies utilized by this company over others used by competitors and vice versa. The overall effects of the strategies adopted by such companies would be analyzed better by means of comparison of financial performances of these companies. The financial analysis of various coffee bars in the UK market has been done by various organizations and for various purposes. This paper offers an in-depth overview of the strategies utilized by the Starbucks Corporation, leading to its growth in the UK and compares such strategies with those adopted by other competitors in the market. The analysis and comparison of various competitors in this industry is important especially in showing which strategies are superior for enhancing brands’ success. The whole analysis is very crucial for availing such information.
1.4 Research Questions
This research will attempt to answer a number of key questions related to the growth of Starbucks and how it has popularized its brands in the UK market leading to substantial success growth seen by the number of outlets opened as well as relative financial performance in terms of sales. The comparison of performance between this firm and others will be achieved by analyzing competitors in terms of their brand as well as their financial performance. The success of a firm is measured by various parameters and can be used to indicate the health as well as the soundness of strategies utilized by such a firm. The research questions for this paper are as follows.
• What are the strategies employed by Starbucks Company in marketing and brand popularization that attain its current status and enhance the firm’s future growth?
• What are the specific distinguishable brand(s) that have been used to enhance the company’s growths to the levels seen today?
• What is the impact of strategies utilized by Starbucks on consumer purchasing behavior?
• What are the effects of branding on customer purchasing decisions?
• How does Starbucks’ performance compare to those of competitors in the UK market, and what is considered average performance?
• What is the comparison between the financial performance of Starbucks Corporation in the UK and that of a close rival?
1.4 Research Aims and Objectives
The objective of this paper is to identify and describe the various strategies that have been developed and utilized by the Starbucks management for the UK chain to grow its sales through the popularization of its products. Since its inception in 1998, Starbucks coffee chain in the UK has enjoyed remarkable growth and is now the leading coffeehouse company in the country. In order to achieve this, various parameters such as sales will be examined to establish the degree to which firm has grown relative to its competitors. After this, various strategies that the firm has developed to popularize its products as well as its outlet in the UK market will be described. In order for the firm to have grown and succeeded over the 17 years it has been operational in the UK market, it must have caused some significant changes in consumers’ behavior such that they persistently prefer its products over their substitutes. This paper aims to describe how the firm’s strategies for the UK market have led to changes in the con purchasing behavior such that many of them opt for its products, which have led to its growth. There are coffee chains that have survived in the UK for a long time. They have persisted with moderated success to warrant slow but steady growth. Examples include Costa Coffee and Caffe’ Nero, which are considered the chief competitors of Starbucks in the coffee chain industry in the UK market. To find out how a firm has been performing in this industry, a comparison of the firm in question with these firms is very important. For this reason, this paper also aims to compare the performance of Starbucks to that of Costa Coffee. The comparison will be multifaceted and will include the sales of distinguishable brands from the two firms as well as the financial performances over time.
1.5 Research Methodology (Snapshot)
The methodology section in this paper will describe how data will be collected to effectively respond to the aims and objectives of this paper. All the research questions set in this paper will be answered through data acquisition and analysis so that the objectives of this research are attained. This research will rely primarily on secondary sources of data. Secondary data refers to information that has already been published and may include sources such as books, web resources, documentaries and articles. It contrasts sharply with primary sources of information, which requires the researcher to acquire the data first hand. Primary sources include interviews, personal observations, and surveys. This paper will rely on books, web resources and articles to get information about Starbucks, its brands and their popularization strategies as well as its competitors in the UK market and use this information to respond to the research questions.
Chapter 2 – Literature Review
This section of the paper looks at the various literature that has been compiled and that contains information concerning Starbucks coffee houses in the UK, their market brands, marketing strategies, its competitors and any other information that is useful in responding with the entire research question. The main aim of this section is to look into the views of other researchers and authors that have complied materials about the Starbucks operations in the UK. This is important in identifying areas that have not been effectively researched about as well as obtaining information that is important for responding to this research’s objectives. A large amount of material contains information that directly relates to the subject and the objectives of this paper. Others have information that is unrelated to Starbucks coffee shops in the UK or their markets but nonetheless provide valuable information such as the performance of the competitors, and the general overview of the market. This section will review the two types of materials described earlier in order to analyze the perspectives of various authors concerning various issues relating to the subject of this research.
2.1 Research Question (RQ)
RQ 1
According to Michelli (2014), there are a number of strategies that Starbucks in the UK has developed and utilized in order to grow and remain the leader in the market. One of the most significant strategies that has been used by Starbucks involves the marketing of its brand. The firm has developed a very active campaign involving the provision of personalized services to its customers which has been crucial for developing customer loyalty. When customers place an order, the staff at Starbucks outlets ask for their names and invite their opinions. In 2012, the firm took this a step further when they began writing the names of customers on their cups (Schultz & Gordon 2011). Although the move was seen as a novelty, customers are appreciative that staff did this as a way of recognizing their regular customers. Customer are also happy to identify with the firm and others have even shared images of Starbucks cups containing their names on the social media. Personalized services are very crucial as they attract new customers and develops high levels of loyalty among the existing ones, which ultimately boosts sales. The exquisite services offered to each customer is very important. It creates a platform on which the excited and satisfied customers recommend the firm to their friends and relatives. As a result, the firm does not really need to spend a lot to publicize its outlets. It is estimated that the firm spends only about 1% of its operations budget on advertising its new outlets while other firms may use up to 10% (Michelli 2014). Another market marketing strategy that Starbucks has gained a lot of growth from is value addition. The firm has a culture of adding value to its products, as the company was built around brewing specialty coffee drinks rather than standard, conventional coffee. Today, it specializes in adding value such that their customers feel like they are getting more. The value is either added in the actual products or in the venue. For instance, the free Wi-Fi in its shops attracts working clients who may opt to continue working as they enjoy coffee drinks or other products. The third marketing strategy utilized by Starbucks in the UK market relates to ensuring that it has many outlets making it accessible to as many consumers as possible. In the UK, the Starbucks has 760 outlets from where customers can be served (Brooks 2013). The company creates an illusion of being everywhere by opening many outlets -often in close proximity to each other- in its target locations (Michelli 2014). Being close to customers and potential buyers creates convenience for the buyers and increase consumption. In addition, by having outlets close to one another, potential customers have the ability to find an outlet wherever they go which encourages them to become loyal, long-term customers. All the marketing strategies discussed above have been very important in enabling the firm to grow to levels seen today. Additionally they are still potent and capable of enabling the firm’s products to continue thriving in the market in the future, which is very important for the firm’s growth.
RQ 2
The Starbucks chain of coffee shops in the UK has hundreds of items on its menu (Tekulsky & Moritz-Magnesio 2013). These range from sandwiches and baked goods, soft drinks, and cold and hot coffees and teas. Many of these items have been very important in popularizing the firm. Each Starbucks product has received a different reaction from buyers, with some of them have been widely accepted while others have been decidedly less popular. The most distinguishable item sold by the Starbucks is Coffee Frappuccino and accounts for a significant percentage of the firm’s sales (Schultz & Gordon 2011). Frappuccino is a registered trademark for a wide product line of drinks sold by Starbucks chain of coffee houses. These beverages contain coffee blended with ice and other components and topped off with whipped cream. In other instances, whipped cream, strawberries and other base ingredients are either added to the mix or used to replace coffee. Frappuccinos are most commonly served to customers in Starbucks outlets but are also packaged in bottles and sold in stores or through vending machines. The entrepreneur George Howell originally developed the coffee drink by blending thick milkshake ‘frap’ and cappuccino. The resulting drink was sold in a Massachusetts’ coffee chain The Coffee Connection, which was acquired by Starbucks in 1994 (Bell & Nicholls 2011). In doing so, Starbucks gained the right to make and market the drink as well as use the trademarked name. According to Godsmark, Arduser and Brown (2014), since 1995, the brand has been introduced into various markets where Starbucks operates, which has led to a monumental success with sales surpassing $2 billion. The sales and consumption of this brand has been on the rise since the firm continues to introduce even more varieties of its signature drinks.
RQ 3
Starbucks strategies have been very important to the continued success of this firm in the UK. It is important to note that when the firm opened its first store in the UK in 1998, and it found itself in competition with a number of already established premium coffee chains (Ryding 2011). The chief competitor of the Starbucks in the UK market is Costa Coffee, which had opened its first coffee shop in 1971 (Luttinger & Dicum 2006). Starbucks strategies have been very important in promoting the firm as a reliable coffee store in the UK. Additionally, the firm has been seen to be very innovative while maintaining the classic coffee traditions found in European culture. Additionally, the firm has invested a lot in customer relations that has led to customers developing remarkable loyalty to the firm, which made it a top competitor to the largest coffee chain in the UK. This has been achieved mainly by reducing the costs of product promotion as the satisfied customers will always bring in their friends and relatives, which is important in boosting sales. Still, Starbucks culture of value addition has been very crucial in attracting some classes of clients. One of the best examples of this is the free Wi-Fi, which has converted the firm’s stores into working or meeting places. Some customers, including young professionals, choose to have their coffee at Starbucks while they work. Others may meet in such outlets to discuss job-related matters as they are able to check and confirm various details over the Internet while enjoying their coffee and snacks. The firm has a marketing strategy through which it ensures that its presence is effectively felt in the market. This strategy involves opening up multiple branches in strategic locations where the inflow of potential customers is assured. Many branches opened in close proximity means Starbucks’ presence can be felt everywhere. As a result, Starbucks and its brands are widely known by the UK public despite the firm only having half the number of branches and being in operation in the market for less than half of the time that Coffee Costa has been present. Generally, Starbucks marketing strategies have greatly affected consumer behavior in a way that favors this firm. It has helped customers recognize and appreciate the American-level of customer service in which coffee shop’s staff try to develop familiarity with customers and try to offer personalized services. Additionally, customers have learned to use coffee houses as places where someone can take some break during working hours or even continue working while taking coffee.
RQ4
Branding is very important especially in influencing consumer purchasing decisions (Sinnott 2010). A strong brand makes a product something that consumers want to identify with. It gives the products desirable features meant to appeal to certain groups or clientele of buyers and attract potential new buyers. The distinguishable features in a product in terms of taste, color, texture, consumer’s perception and cultural beliefs of the target group are very important. Starbucks has taken care of this with its most distinguishable product. The Frappuccino has color range flavors and ingredients that appeal to a significant group of the UK population. The refreshing and stimulation value attached to coffee and the European tradition of using cream as a base ingredient makes Frappuccino a very popular brand whenever it is sold. Since the introduction of Frappuccino in 1995, its sales have been on the rise (Michelli 2006). Since its introduction in the UK, it has witnessed a significant upwards sales trend and the customers welcome the new varieties of flavors when they are introduced. The Frappuccino has attracted many customers to Starbucks, making it able to compete effectively with Costa Coffee. The branding efforts of the Starbucks have provided the firm with many loyal clients in the UK hence boosting its sales.
RQ 5
A Starbucks chain of coffee stores in the UK has registered a mixed performance since its inception in this market in 1998. The firm was the market leader in the UK market with regards to both the market share, sales and the number of outlets for a few years before 2010 (Rindova 2001). This was a remarkable success given that it was introduced in the UK at around 27 years after its archrival. Towards 2007, the Starbucks and Costa Coffee’s chain embarked in a serious competition as the two had a similar number of outlets (Tabío & Beamer 2009). Starbucks still maintained its lead but was overtaken by Costa Coffee in 2010 (Schultz & Gordon 2011). According to Brooks (2013), 2010 saw the Costa Coffee chain become the leading coffee firm in the UK and has since grown to double the number of outlets that Starbucks has. On the other hand, Starbucks continues to command a significant market influence in the UK market. It is the second most recognizable brand in the UK and is hailed for proper training of staff, improved working conditions as well as better remuneration for employees. Additionally, it works towards personalized services for its customers which have been very important in creating customer loyalty. Despite its loss of market share, the firm has also begun a new trend in which it finally generated profits for the first time in the UK market in 2014 (Godsmark, Arduser & Brown 2014). This shows that the firm has broken even and is able to handle the stiff competition from Costa Coffee. The real issue over which of the two firms has been more profitable over the others have been contentious, especially in the recent past. In 2012, Starbucks had generated more sales in UK compared to Costa Coffee over the same period of time (Hartley & Claycomb 2014). However, Starbucks consistently reported a pretax loss. It was hard to understand how this could have happened, which led some to think that Starbucks was evading corporation taxes (Hartley & Claycomb 2014). In the aftermath, the company suffered from a mass customer boycott. Costa coffee generated a 14% increase in profits in 2012/2013. This was also followed by an increase in consumer preference for Costa Coffee in 2014 (Miller & Oats 2014). On the other hand, Starbucks registered profits for the first time and finally agreed to pay corporation taxes. Despite the challenges in the recent past, Starbucks has competed effectively with its rival Costa Coffee for a significant period of time and the competition is gearing up to reach a higher level.
RQ6
Despite the general growth experienced by Starbucks in other markets, the coffee chain has been unable to generate consistent profits in the UK market (Richardson & Gilmartin 2009). Due to various reasons such as rapid expansion as well as payment of taxes in other countries where the company operates, the UK branch of this store has not made any significant profits since its inception in the UK market (Jaffee 2007). However, the company announced that it had achieved modest profits in 2014, which puts it in a better position to compete effectively with its profitable rivals in the UK market. On the other hand, Costa Coffee has been highly profitable in the UK market and has been for the larger part of its lifetime. This gives it considerable leverage to compete with Starbucks. Despite the strength of superior marketing strategies that have been employed by Starbucks to attract and retain its customers, the firm needs to reevaluate its financial management strategies in order to boost its profits further. The last financial year was characterized by the firm making a small profit, which the management linked to the closure of loss-making branches. Over the same period of time, the company has begun reporting corporation taxes to prevent boycotts and legal political issues that may arise. The firm needs to concentrate on such moves in its financial management and be more proactive in order to prevent instances in which the gains made by the firm’s sound marketing strategies are eroded or reversed due to taxation and financial issues (Pride & Ferrell 2013).
Analysis and Conclusion
The literature reviewed indicates that many authors recognize the effort that the Starbucks chain of coffee shops in UK has made in order to popularize its products in the UK market. The efficacy of its method of popularizing its brands in the UK is seen by the fact that by 2007, it had equal number of sales outlets in the UK with its rival Costa Coffee, which at that point had been in the market for 36 years (Michelli 2014). It is important to note that Starbucks had entered the UK market only 9 years before. Despite the financial muscle of the parent Starbucks Company, Starbucks sales in 2012 were higher than Costa Coffees (Michelli 2014). Starbucks cumulative sales were also comparable to those made by Costa coffee for the same period which shows that the firm’s rapid expansion had been driven by improved market demand that was created through aggressive and innovative means of popularizing its brand. The company’s efforts were effective and led to significant changes in consumer behavior in favor of its products. The firm’s move had curved a niche for its brands, some of which could previously be seen as being very American. Additionally, the firm also segregated the market, creating a segment that would choose its products if given a chance. On the other hand, the literature above indicates that the firm did not make any pretax profit for quite some time. Some politicians and tax experts thought that this was a form of tax evasion as the company had generated significant sales. However, if indeed the firm had not made any profit, this shows that the marketing and brand popularization strategies alone are not adequate for enhancing profitability. Towards the end the fiscal year 2012/2013, the company embarked on a bid to close some of its outlets that were not profitable and as a result it was able to report a pre-tax profit the following year (Michelli 2014). Such move was important to ensure that the firm could be able to compete effectively with Costa Coffee. Despite the high demand for the firm’s products in the UK, some locations of their outlets lacked the necessary number of customer to buy the significant amount of products in order to make a profit. For this reason and others, the firm should ensure that it opens its outlets in areas where all factors are favorable to ensure its profitability in the long run. The literature however shows that the Starbucks chain of coffee stores in the UK has had unique and functional strategies with which it has attracted various classes of clients, which has also created a significant degree of customer loyalty, aiding the firm in boosting its sales and competing effectively in the market (Pride & Ferrell 2013).
Chapter 3 –Methodology
3.1 Introduction
This section is dedicated to expounding how the information and the data required to achieve the objectives of this research will be sought. Out of the many books, Internet resources, articles and documentaries, there are certain ones that have information concerning the Starbucks coffee chain in the UK or the whole articulated coffee industry in the UK. This means that there are specific sources of information that will be required to effectively attain the objectives of this research. This section deals with the selection of such materials and explains how the required information will be sought and utilized. As previously noted, this paper will rely primarily of secondary sources. This means that sources such as personal observation, questionnaires and surveys will not be utilized. Additionally various models that guide data acquisition and analysis will be discussed. Among them, include research philosophies that are applied in data collection and the whole process of carrying out research. Several of the philosophies as well as the one that will be chosen for this research will be discussed. Additionally, the justification for the use of the selected philosophy will be discussed. In addition, the research design for this project will also be discussed as well as qualitative and quantitative modes of collecting data. Due to the nature of this research, qualitative data collection will be used; the research is descriptive in nature and the selected mode of data collection is most favorable. This chapter will also look into various research methods, including the one selected for this research in addition to justifying why it is suitable for this research. This chapter will also discuss the validity and the reliability of data collected for various academic studies including this research. Ethical consideration while collecting data for any research is very crucial. There is an accepted way through which it is achieved to ensure that all legal issues are considered. Additionally, various organizations may set ethical standards that must be observed by those conducting research on a given area. Finally, this chapter will look into the limitation of this research in terms of the size and scope of data collected.
3.2 Research Philosophies
Research philosophies are very important in understanding the whole process of developing a research project. The term ‘research philosophy’ refers to the process in which a research context, information and nature is established (Beckmann & Elliott 2002). In other instances, the term is defined with the help of the ‘research paradigm.’ The term paradigm can be used synonymously with perspective or standpoint among others, and refers to a new way of thinking or perceiving things (Beckmann & Elliott 2002). From this, ‘research paradigm’ may have several meanings among them is a structure of beliefs, discernment of the principles in addition to practices employed while carrying out research. It is also described as a short procedure involving a number of stages utilized by researchers to draw a connection between research goals and hypothesis (Beckmann & Elliott 2002).
Research philosophies/paradigms are modes of conceptualization when it comes to conducting research and for this reason, a philosophy/paradigm cannot be viewed as a research method. They simply summarize the conceptual model of the researcher, his/her perception, as well as principles towards the reality as far as the research in question is concerned. The researcher’s conceptual model is very crucial and may influence his/her beliefs as well as the significance of the inquiry. In all forms of research work, it is desirable that the researcher has the right conceptual model so as to generate valid points of views and expressions which form basis for attainment of reliable results. Depending on the view of the researcher towards the world and research and the nature of research which may influence the method of data collection applied, there are four research philosophies/paradigms: positivist, post positivist, social constructivism (interpretivism) and compatibility philosophies. Compatibility research philosophy will be utilized for this research.
3.3 Justification for Compatibility Research Philosophy
In pioneer research work and especially before the 19th century, the only research philosophy available and widely applied was positivism. This philosophy was based on utmost objectivity. This was achieved through gathering broad-spectrum facts and information from a huge social sample and did not focus on the details. Additionally, the researcher’s views and believes were valueless and were detached from the study. The researcher was only supposed to observe and report. Post positivist philosophies faulted the positivist quest for outright truths. They proposed that outright truths are impossible to obtain in a study arguing that evidence for research conclusions is never free of faults. For this reason, researchers can only focus on describing and establishing the links between various outcomes and their courses. The whole process becomes cyclic, in which the result of one research study can be used to build on another one. The beliefs and the views of the researchers are considered and when the research does not establish the expected links, several amendments and supplementary trials may be done. Positivism and post positivism philosophies are anchored on quantitative research methods where figures are mostly preferred over descriptive analysis.
Social constructivists argue that the above two philosophies are wrong and irreconcilable and may fail to be applied successfully in all research studies. Still, positivist philosophies do not provide for a research inquiry but for plain observation of situation. On the other hand, post positivism only foresees a situation where the expected outcomes are in line with the researchers’ prior propositions. Social constructivist theories on the other hand introduce another perspective of research paradigms. They introduce the view that humans try to derive sense of the world as they live. They develop a biased sense of their daily experiences and these biases can be derived from societal, political, historical, cultural and religious concepts. As a result, there can never be one truth but multiple points of view, often depending on the observers. Social constructivism philosophies try to comprehend how people experience their world leading to how they come up with what they consider to be truths, or how they make sense of their experiences.
Compatibility theories constituting the compatibility paradigm is important and recognizes the complexity of many research studies that require all the above approaches. For instance, many natural science research studies may require the positivists philosophies. On the other hand, social sciences researchers may find post positivists and social constructivists philosophies useful. However, today’s business and management research projects require a combination of all the above views. To find out the strategies that Starbucks has been using in the UK market to promote its products, and which has made it successful, general observation of the market is required. Additionally, various strategies and Assessment of whether the firm’s brand has been successful and the various effects that such strategies have had on customer’s behaviors is complex and will require all the above philosophies.
3.4 Research Design and Justification for Choice
Research design refers to the scheme or the layout of the research especially as far as data collection is concerned. It details how data will be will be analyzed by breaking it down into a plan. Examples of research designs may include experimental, correlational, meta-analytic, and descriptive and review. Each of the research design is selected according to its ability to respond to research questions and evaluate the nature of the data available. In some cases, research designs cannot be categorized into quantitative (fixed) and qualitative (variable) research designs. Quantitative research design is decided on before the data collection phase. It is usually theory-driven which determines the variable measured quantitatively. The research at hand is confirmatory in nature in that it is assumed that the Starbucks coffee chain in the UK has established its products in the UK and has various strategies that will be described in this research as well as their effects on consumer purchasing behavior in response to these strategies. For this reason, a descriptive research design is more suitable for this research.
3.4 Qualitative and Quantitative Data Collection
A fixed research design which requires pre-set hypothesis often to prove a theory through quantitative measurements is not applicable in this research. The research questions for this paper only require a review of various sources of data described and a conclusion that is in line with the objectives of this research. For this reason, qualitative methods of data collection will be utilized for this research, as it is adequate for obtaining the information needed to respond to research questions.
3.4 Research Methods and their Justification
Research methods refer to the means through which a researcher gets information needed to accomplish their research objectives. It involves transforming the data/information obtained by the researcher into meaningful statistics. In quantitative research, research methods may constitute what is referred to as experimental design. Qualitative research on the other hand may involve such methods such as email, Internet, telephone and email surveys, focus groups and literature searches. This paper will utilize literature searches in which the researcher looks for information from printed sources such as books, documentaries, internet resources and articles to answer the research questions. This paper will adopt this method as it is cheap, convenient and is in line with the sales resources. Additionally, this method allows for Assessment of many views from many authors, researchers and scholars; this is important in making a more objective conclusion.
3.7 Validity and Reliability of Data
Validity is a degree to which an assessment measures whatever it purports to assess. On the other hand, reliability refers to the consistency of the results obtained when a tool is used several times. Research requires that the tools used are consistent and reliable. In qualitative research, high degree of consistency may fail to be achieved even if several researchers obtain their information from the same company files, trade publications, annual reports, magazines, web resources or newspapers. This is because the discussion of the results may depend on the individual researcher. However, if there are similar research objectives and research questions while providing similar materials for literature searches; consistency and reliability of the research can be greatly enhanced.
3.8 Ethical Considerations
Ethics denotes the expected code of behavior amongst a group such as engineers and health practitioners. Researchers are also expected to behave in a certain way while conducting a research study and presenting and documenting their findings. Ethical consideration is very important in research work. First and foremost, it upholds the purposes of the research inquiries through upholding truth and prevention of error. When proper ethics are upheld, issues such as creation, falsification, and distortion of data are avoided. Ethics also spell out how the researcher should relate to the research population and require the researchers to ensure the respondents make an informed consent, participate voluntarily in the research, are not harmed in the process, the respondent’s anonymity is assured, the confidentiality of information is maintained and that the researcher only has access to the relevant components. In business as well as in other fields, the researcher should operate within the law and should avoid malpractices such as exposing a firm’s proprietary information to the public. However, being involved in secondary research may not necessarily involve all of these considerations. It is assumed that all the above considerations were made in the preparation of the secondary materials being used for literature search (Robbins & Coulter 2005).
3.9 Limitation of the Research
Every research conducted has limitations. Secondary research is limited by its dependence on its already-published information. For this reason, it takes a considerable amount of time to get the published source with the desired information and the one that covers the period of research. However, these challenges are not significant enough to affect the credibility of the research. Some of the limitations and the challenges experienced in secondary research can be resolved through setting clear objectives and proper training of researchers.
3.10 Conclusion
Generally, the chapter details the process in which the data is collected and analyzed to produce meaningful statistics that can be used to draw a conclusion and hence answer the objective of the research. The section also details all the consideration that the researcher has to make including various choices in terms of research method, research design among others. Although qualitative and quantitative researches are also described in the methodology stage, the decision to choose any of them is best made at the beginning of the research work. Methodology section also details ethical considerations to be made as well as the validity and the reliability of the research study including the limitations that the research inquiry may have.
Chapter 4 – Data Analysis & Findings
4.1 Introduction
This section of the research is used to record the research finding and their analysis. Literature searches for various materials that have information that respond to the research questions and the objectives of this research were availed and the required information will be listed below and discussed. This section is dedicated to recording the results found during literature searches and analyzing the information in order to convert it into meaningful statistics to be used to draw a conclusion and fulfill the aims of the research study. Sample characteristics that were sought in literature searchers will also be listed and discussed. These are the variables that will be used to describe the performance of the Starbucks in the UK, the effects of the firms branding strategies and the firm’s competition in the industry. Afterwards, the description of all these responses in relation to each research question will be done. Analysis of the performance of all the variables observed under the research questions will lead to a conclusion on how the firm has been performing.
4.2 Discuss the Sample Characteristics
The variables chosen for this research include the trends in prices of the firm’s flagship item, the trends in performance of its competitor’s brand. The chosen item is a non-statistical sample since it is not randomly selected or effectively stratified. The characteristic of this sample and other trends to be observed is that they are very varied and may sometime show a mixed performance. For instance, Starbucks sales both for its flagship Frappuccino and other items have varied over time. Due to the oscillation of the variables chosen, the major trend is assumed while the exceptions are also discussed.
4.3 Research Question 1
Starbucks has greatly increased its activities in the UK over the last 17 years (Riggs 2007). The coffee specialty chain has grown from its initial store in 1998 to over 700 in 2015. Among other reasons, the growth is attributable to innovative brand development strategies that it utilizes. In the UK market, the firm grew to a point where it had a similar number of outlets as Costa Coffee. At this point, it was the market leader before being overtaken in 2010 (Ottman 2011). The firm had not yet broken even and was unable to do so until 2014. Initially, the firm’s strategies were mainly aimed at popularizing its products but have lately adopted strategies to enhance customer engagement after various items had become adequately popular. In the financial year ending in September 2014, the company made a pretax profit of £1.05 million compared to £20.5 million in losses during the previous year (Moldvaer 2014). According to Moldvaer (2014), in 2014 the company made a gross profit of £98.8 million, which represented a 24% increase from the previous financial year.
The company’s perennial growth is linked to robust product-led strategies (Riggs 2007). In the neither the UK market nor other markets does the company engage in conventional marketing or product promotion; it is almost impossible to see its ads on billboards, newspapers or other ad spaces. However, the company has built a very strong brand based on the quality. Its products, such as the iconic Frappuccino is designed to be very attractive in its taste and aroma. This flagship item has recorded high sales in all the markets where it has been introduced despite being sold at a relatively high price. The firm has invested to make its drinks appear perfect in the mind of the buyers by placing a large importance on quality and taste (Moran 2006).
The other most important strategy that the firm has employed that has been very important in making it popular is offering personalized services to its customers. While serving the customers, the staff asks the customers’ first name, which is written on their cup. Additionally, the staff themselves try to understand their customers personally as the firm even sells mugs with customers’ names. This is a very important show of Starbuck’s commitment to the customers. Over time, this strategy has resulted in a Starbucks customer’s community with the firm creating a website where fans of Starbucks products can meet and share their experiences while the firm also joins the conversation and receives feedback on various areas that need improvement.
The firm has invested in its stores to ensure that they are relaxing and offer services in an attempt to make them the third most preferred space away from their homes and workplaces. Value addition in Starbucks coffee house included spacious rooms with cozy sofas and other furniture and services such as Wi-Fi. In future, the firm is even planning to introduce wireless charging spots for smartphones so that customers can relax without worrying about their devices’ batteries. The whole idea has been to transform the stores into places to unwind, meet with friends and even get work done which in turn increases the time spent by customers in these outlets and hence sales.
When Starbucks identifies an ideal location, the firm opens several outlets in close proximity, which has several effects including showing dominance over competing coffee houses that may have only one shop in the area, increasing the chances of a new customer trying out their products as well creating an illusion that the firm has outlets virtually everywhere. As a result, a potential buyer can become a customer with the understanding that whenever he/she craves Starbucks, there is always one conveniently located right around the corner. Starbucks can also increase their customer base through word of mouth. The company’s emphasis on high quality products and specially designed sales outlet constitute effective brand marketing where quality products lead to a satisfied customer who can refer friends and relatives to the same outlet (Thurston, Morris & Steiman 2013). The firm also offers many gifts especially while promoting a new product in order to lure new customers, some of whom may choose to purchase it on a regular basis.
4.4 Research Question 2
Since the introduction of the Frappuccino beverage in the American market in 1995, the drink became a hit and became Starbucks’ most popular drink replacing the standard roasted coffee (Lappé 2007). Similarly, Frappuccino became Starbuck’s flagship beverage in the UK. On the top of list of quality drinks with distinctive taste that has contributed greatly in developing the customer loyalty, Frappuccino has remained on top. Additionally, it has become the basis on which several others new products has been introduced into the specialty coffee market, most of which have achieved remarkable success (Jodidio 2012).
4.5 research Question 3
There are several changes that have occurred in the consumption of specialty coffee in the UK market. The consumption behavior shown by coffee consumers has varied over time for various reasons one of which is the marketing and promotional efforts that have been carried out by Starbucks overtime.
After traveling to Italy in early 70s, the founders of the Starbucks and the Coffee Costa were impressed with the coffee bars that they had visited (Honack & Waikar 2009). These entrepreneurs would introduce these cultures in their countries which became an instant hit. Starbucks’ entry into the UK market was very important and revamped the coffee bar culture in the UK. However, the company also curved itself a niche where it introduced the American coffee culture. All factors have made the UK coffee market very dynamic boosting its growth. In 2012, coffee industry in the UK grew by 7.5% and generated revenue of £5.8 billion (Hartley & Claycomb 2014). Coffee chain stores, individual stores and non-specialist stores outlets combined totaled to 15,723 sales outlets (Hartley & Claycomb 2014). This number has grown with the three major operators opening an average of 100 coffee stores by 2014.
Starbucks’ marketing strategies have had marked changes in the UK market where the firm has been seen to curve its niche in the market through differentiation. The first most important impact of Starbucks’ strategy is its offering of personalized services to its clients. Although the move was initially viewed as very American, customers in the UK warmed up to the idea with the regular ones enrolling in membership in the Starbucks Coffee Club. This has reduced this firm’s competition due to the creation of high levels of loyalty developed by the firm.
The other main effect of Starbucks marketing strategy has resulted from popularization of products that were not previously known among the UK population hence creating itself a category of consumers. Research shows that among the different types of coffee beverages, the UK population prefers lattes (Duhigg 2013). However, Starbucks introduced and popularized its Frappuccino and effectively differentiated itself from the rest and reduced its competition.
The Starbucks culture of value addition has had a very profound effect on customers purchasing behavior. In Europe, coffee houses were seen as bars where they were only used for relaxation. Customers would purchase and sip coffee in these bars. Starbucks has differentiated its coffee stores and has hence redefined the purpose of coffee stores. Starbucks outlets in the UK have free Wi-Fi, widely spaced and more upright seats increasing their functions. This makes them suitable for functions such as working, meeting, relaxing and holding group discussions. Many working people may meet at these outlets while others go there to work. Starbucks also introduced beverages to-go, a concept which was initially seen as American. All Starbucks strategies have worked to increase customers’ engagement with the firm and have also developed a cordial relationship between the firm and its buyers. The overall effect of this is that customers have felt valued as they receive more for their money, which has served to increase Starbucks sales.
4.6 Research Question 4
As stated previously, Starbucks marketing strategies has involved establishing a cordial relationship between the firm and its UK customers, increasing the value received by the customers for their money through value addition and reassuring customers that the chain has stores everywhere. Additionally, the firm also invests in enhancing the quality of its products, which satisfies its customers and acts as a form of marketing through customers’ word of mouth. The firm has also awarded promotional gifts when introducing new products. Finally, the firm’s strategies have been seen to value the customer’s convenience by offering options for to-go options for drinks and other products. The overall effect of all these strategies has been steady growth of sales where many customers decide to buy the firm’s products while others decide to be regular buyers. This is a major reason for why the coffee store is always expanding even in light of the high competition in this industry. For instance, the company announced the establishment of more drive through stores to serve its ever increasing customers. It is also in a bid to increase its employees from 12,000 in 2015 to 17,000 in 2016 (Brooks 2013).
4.7 Research Question 5
Since the introduction of the Starbucks chain of coffee store in the UK, the firm has experienced exponential growth. Starbucks grew from 1 branch in 1998 to 550 by 2007, the same number as its main competitor Costa Coffee (Fellner 2008). Afterwards, the firm expanded further to become the market leader until 2010 when it was overtaken by Costa Coffee (Cockrum 2011). Since 2010, Costa Coffee has been the dominant coffee chain in the UK. Additionally, Costa Coffee has been profitable in this market while Starbucks had operated at a loss in the UK until the first marginal pretax profit of £1.05 million (Cockrum 2011).
In 2014, sales at all the coffee stores combined amounted to 6.4% while the revenues were approximately £6.2 billion (Brooks 2013). In addition to the high profit made by Costa Coffee in the UK market, the firm was also the most dominant in the number of sales outlet and had 1670 (after adding 188 from the previous year) outlets while Starbucks had 790 (Brooks 2013). Café Nero was ranked third with 560 (Brooks 2013). The three chains command approximately 54% of the UK coffee market. While Starbucks has been performing better than many coffee store chains in the UK, the company continues to lag behind Costa Coffee.
4.8 Research Question 6
Since the introduction of Starbucks coffee chain in the UK, the company’s marketing strategy has helped it to maintain consistent growth trend in its sales (Shafer 2013). The company’s sales grew every year until the 16th year of its operations in the UK. The reduction in sales was occasioned by closure of non-profitable branches waiting reopening in more profitable locations or in premises that charged lower rent (Pride & Ferrell 2013).
The company’s financial performance in the UK shows a different story all together as the firm has generated losses in the 16 of the 17 years it has been in the UK according to the accounts presented to the Company House UK (Lyon & Moberg 2010). For instance, Starbucks in the UK reported a net loss of £46m, £52m £34.2m, £32.8m in fiscal years 2007/08, 2008/09, 2009/10 and 2010/11 respectively (Hartley & Claycomb 2014). The fiscal year 2011/12 initially appeared better as the firm had recorded gross profits of nearly £70 million. However, after managerial losses such as royalty/license fees, the company reported a loss amounting to £30.4 million (Hartley & Claycomb 2014). The fiscal year 2012/13 saw the company generate losses of £20.5 million pounds. However, this came at the midst of radical changes the company was engaging in that saw its gross profit grow by 24% by the end the following fiscal year (Hartley & Claycomb 2014). After all the deductions, the company reported its first ever pre-tax profit in the UK market of £1.05 million. On the other hand, Coffee Costa in the UK has made large amounts of pretax profits for many years. The company has had 12 years of uninterrupted increases in sales as well as profits in the UK market. For instance, in the fiscal write my paper year ending in February 2014, the company’s UK profits increased by about 22% to £110 million (Hartley & Claycomb 2014). The company increased its pretax profit at a rate of 20% to make £132 million for the fiscal year ending in February 2015.
Chapter 5 – Conclusions & Recommendations
5.1 Introduction – Objective of Chapter
This chapter concludes with a discussion on how the Starbucks coffee chains in the UK has developed its brand in the UK, and how consumers have responded to massive brand popularization, strategies that have been developed and applied by this firm. This will be achieved by using the information obtained and analyzed while responding to research questions in the previous chapter. Also in this section, research aims and objectives will be reviewed especially with an aim of finding out if they have been achieved through data collection, analysis and conclusions. This chapter is very important and shows a conclusion of this research inquiry by providing answers to the questions posed by the objectives of this paper.
5.2 Review of the Research Objectives
The objectives of this research was to identify and describe the strategies that have been developed and utilized by the Starbucks coffee chains management in the UK to achieve the sales growth the firm has. As discussed earlier, Starbucks has made cumulative sales of over £3 billion in the UK market over the last 17 years. The firm caught up and even overtook the local coffee chains to become the market leader in the UK before being overtaken by Costa Coffee in 2007. The growth of Starbucks branch in the UK is seen in the increase in the number of sales outlets, the sales in pounds, its resilience and becoming profitable even in the midst of stiff competition among others.
5.3 Findings and Answers to the Research Questions
The key strategies that this firm has developed and adopted to popularize its brand and growth in the UK include offering personalized services to every customers and offering quality services to keep the customers satisfied. This has been very effective and ensures that customers who try their services stand a high chance of becoming their regular customers. This is also important in that satisfied customers popularize the firm through word of mouth. The firm also increases its interactions with its customers especially through the internet which boost customer loyalty. The other strategy that the firm utilizes to attract and maintain customers includes value addition in which its sales stores contain the amenities such as Wi-Fi that customers can use for relaxation, meeting with friends as well as for working. The overall effect of this is that it increases the time spent by customers in their stores and hence the amount of products consumed. The coffee chain has also introduced and popularized items such as Frappuccino which has served to differentiate the firm and hence remain competitive. This has been very important in maintaining its customers’ loyalty such that the firm can have stable trends in sales. Starbucks has also established a culture of giving free gifts to buyers especially while introducing new products which make the firm appear generous and appealing to buyers. The general effects of Starbucks strategies have served to attract more and more potential buyers to the firm. As a result, Starbucks chain in the UK has continuously increased its sale for 16 out of its 17 years in the market despite the high competition and growth of other firms in this industry. The general effect of the Starbucks strategies has been to make more and more coffee consumers to prefer Starbucks products, giving the firm and opportunity to make it profitable if the firm works out other challenges.
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