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1. Executive Summary
This report investigates the opportunity for a brand extension for Starbucks UK and what
problems the brand may have to overcome for it to be a success. The brand extension is
a Film Festival which needs to keep in line with the brand image and taps into what their
target market is passionate about.
Problems that Starbucks UK may have to investigate are its controversial involvement in
political issues, for example the 'Race Together' campaign (Peterson, 2015) and
recovering from its known tax avoidance (Khan, 2015). Although these issues may have
knocked their image, they have a strong loyalty from customers who are environmentally
conscious, being on the list of top ethical companies for the past ten years (Forbes,
2016b). The brand is well connected with its target market as it supports its communities
and sources its coffee ethically (Starbucks, 2016b) and it has been reported that
millennials care greatly about the environment (Keller and Kotler, 2016). It is ahead of
trends for introducing 'Mobile Order and Pay', a mobile app that allows customers to order
a coffee before they enter the coffee shop (Le Duc, 2016), and hands out free music and
app downloads (Fromm, 2014). They also provide non-dairy alternatives to the emerging
health-conscious society (Forbes, 2016a), and this keeps them firmly in second position
of the UK's leading coffee chains (Bloomberg, 2016).
With the increasing popularity of independent film screenings (Anderson, 2014) and other
brands successfully hosting open-air cinemas (Hogan, 2016), a Film Festival could
connect with Starbucks UK existing customers if it keeps the brand's core messages in
being ethical, (tickets proceeds could go to their projects), providing a relaxing 'third place'
atmosphere, and selling high quality coffee in the same fashion as their authentic coffee
shops.
2. Introduction
This business report is an analysis of Starbucks UK, and is split into two parts. The first
part includes two sections, and the first section will cover identifying its market share, key
UK consumer segments, UK competitors, positioning and marketing communications
approach, financial performance, and key trends within the coffee shop market. The
second section is an analysis of Starbucks UK detailing its intangible brand values. The
second part of this business report will identify and justify a brand extension of Starbucks
UK.
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3. Analysis of the Parent Brand
3.1. UK Market Share
Starbucks is a Seattle-based company which started out as one store in Pike Place
Market (Starbucks, 2016a), before opening branches around the world, and now has 849
outlets in the UK (Bloomberg, 2016). It is the world's biggest coffee chain with a recorded
22,557 stores around the globe in 2015 (Statista, 2015) but actually is in second place in
the UK to market leader Costa Coffee (Bloomberg, 2016). Starbucks UK accounts for
27% of the market share, second to Costa Coffee which has a 46.5% market share, and
Caffe Nero is third with 13.8% market share (Thomas, 2014). The market size of UK
coffee shops was £2,968m by the end of 2015 but is forecast to grow to £3,747m by 2020
(Mintel, 2015a).
Fig. 1: UK Coffee Market Leaders Number of UK Outlets. (Bloomberg, 2016:online)
3.2. Key UK Consumer Segments
Starbucks UK is a successful company in targeting millennials, Generation Y or 'Echo
Boomers', (people born between the late '70s and '90s), who are highly concerned about
environmental issues (Keller and Kotler, 2016). Because they are a segment that has
grown up with technological innovation, 'they are more sensitive to topics of sustainability'
(Atzori et al, 2016:2). Starbucks UK is reputable for its Fairtrade coffee and efforts in
sustainability, from its financial incentives to its farmers who grow ethical and responsible
coffee, to reducing its carbon footprint and tackling climate change (Starbucks, 2016b).
The company has been listed in the 'World's Most Ethical Companies' Forbes list every
year for the past ten years (Forbes, 2016b) which proves how consistent the coffee chain
is in having a strong Corporate Social Responsibility, which enables its target market to
trust the company.
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The coffee chain also targets 'affluent young professionals' (The Drum, 2014) in the
millennials segment which counts for 40.8% of its total customers (Atzori et al, 2016). The
company's CEO, Howard Schultz points out that the cafes are a "third place", the place
between 'the stresses of the workplace and the insular privacy of the home' (Oldenburg,
1989, cited in Ruzich, 2008:9). Starbucks UK connects so well with its target market of
millennials because it speaks to them through affluent social media channels, hands out
rewards in the form of free app downloads, and encourages face-to-face contact which
younger people who have grown up with technology cherish (Fromm, 2014).
3.3. UK Competitors
The coffee chain's main UK competitors are Costa Coffee and Caffe Nero (Thomas,
2014), being second to Costa Coffee in its market share (Bloomberg, 2016). A report by
Mintel asked consumers which coffee shop they preferred to purchase coffee from and
42% reported that they would go to Costa compared with 25% who preferred to go to
Starbucks (Mintel, 2015a). On the Price-Quality Matrix below, Starbucks UK is a premium
offering as it produces high quality coffee at a high price, alongside its main competitors
Costa Coffee and Caffe Nero, and also Coffee Republic. Restaurant chains KFC and
Burger King are Cheap Goods as they are low quality coffee. McDonalds is Average as
it is in the middle of the price scale and has competed with coffee chains since launching
its good quality McCafe range, giving customers a variety of choice (McNew, 2016).
Fig. 2. Price-Quality Matrix of UK Market Leaders. (Kotler, 1980)
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3.4. Positioning and Marketing Communications Approach
The aim of positioning is 'to identify, and take possession of, a strong purchasing rationale
that gives a real or perceived advantage' (Kapferer, 2012). Aaker (1991) believed that
'positioning is closely related to the association and image concepts, except that it implies
a frame of reference, the reference point usually being competition" (Marconi, 1999:44),
which means that brands are positioned by the overall reference and association a
customer has with the brand. In terms of Starbucks, the brand is positioned as a 'third
place', authentic and original, in a market of corporate and similar coffee shops and fast
food restaurants.
An important element of how a brand positions itself in the market is how it is advertised.
Starbucks famously never advertised their product until 2014 (Morrison, 2014). CEO
Howard Shultz claimed 'our stores are our billboard' (Williams, 2015:online), relying on
the traditional method of word of mouth.
De Charnatony (2006) proposed the matrix below to evaluate the effectiveness of a
brand's positioning. The brand needs 'to consider what the key benefits are that are being
offered to the target market' (De Chernatony, 2006:39). Starbucks identifies with Market-
Oriented as it has a strong position, but if a brand identifies itself in 'Firm-Centred' it means
that it is not reaching customers and has a weak position.
Fig. 3. Evaluating effectiveness of brand positioning. (De Chernatony, 2006:39)
Another model that can be used is the matrix below that can 'identify the attributes of the
brand and their opposites' (De Chernatony and McDonald, 2007:250). This matrix
identifies the brand's competition and where they are positioned, and aims to distinguish
the difference between competitors. Starbucks UK is positioned as authentic and high
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quality, whereas competitors McDonalds is more corporate even though it has a high
quality McCafe range (McNew, 2016). This matrix also shows that premium coffee brands
have a higher price range as they offer an authentic experience whereas the cheaper
brands are more corporate.
Fig. 4. Identifying the attributes of the brand and their opposites. (De Chernatony and
McDonald, 2003)
3.5. Financial Performance
Starbucks UK made a profit of £34,217 at the end of 2015 (Fame, 2016), which shows
the growth of the company over the past few years as they made a profit of £1,056 in
2014 and a loss of £20,465 (Fame, 2016). The company may have made changes to
improve profits by reducing its payroll costs as the report shows a reduction in employees
over the last few years, with 6,848 employees recorded at the end of 2015 but 7,345
employees at the end of 2014 and 7,726 employees at the end of 2013 (Fame, 2016).
Reflecting on the company's financial performance, a model called the Boston Consulting
Group Matrix can be used to identify its position in relation to its market share and market
growth opportunities. This matrix looks at the amount of growth available to the company
and indicates its market share in relation to its competitors, providing 'a useful insight into
the likely opportunities and problems associated with a particular product' (Brassington
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and Pettitt, 2003:850). Starbucks UK is identified as a Star product as it is one of the
market leaders in coffee shops, and maintains its position. A Star 'needs a great deal of
cash to retain its position, to support further growth and to maintain its lead' and it does
'generate cash, because of its strength, and so is likely to be self-sufficient' (Brassington
and Pettitt, 2003:853).
Fig. 5. Boston Consulting Group Matrix. (Henderson, 1968, cited in Professional
Academy, 2016:online)
Although the BCG Matrix is concise and simple, problems have been identified with the
model. Abell and Hammond (1979) believe that the model doesn't 'adequately assess
alternative investment opportunities when there is competition for funds' (Brassington and
Pettitt, 2003:855). The General Electric Business Screen, or GE Matrix, was proposed in
1975 to overcome this problem, and categorises strategic business units (SBUs), which
are 'profit centers which focus on product offering and market segment' (Ahmad,
2016:0:21secs) to provide an 'in-depth analysis of both industry attractiveness and
company business strengths' (Berman and Evans, 1994:76). This matrix is split into two
parts, industry attractiveness which includes the market size and rate of growth, and
business strengths which includes price competition, product quality and brand image
(Brassington and Pettitt, 2013). The matrix indicates three different zones, in different
colours, which identify what marketing strategy the company should plan to take. Zone 1
(green) is a high attractiveness, 'the SBUs are in strong industries and are performing
well in them' (Berman and Evans, 1994:76) and would be the same as Stars in the BCG
Matrix. The strategy in this zone 'should be investment for further growth' (Brassington
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and Pettitt, 2003:855). Zone 2 (yellow) is a medium attractiveness, the SBU 'offers an
opportunity for the firm to identify and appeal to undeserved market segments' (Bermans
and Evans, 1994:77) and 'the strategy here should be one of selective investment'
(Brassington and Pettitt, 2003:855). Zone 3 (red) is the least attractive, similar to Dogs in
the BCG Matrix, and 'can concentrate on a few products rather than a product line, divest
or close down the SBU' (Berman and Evans, 1994:77), 'either make short-term gains or
proceed to pull out' (Brassington and Pettitt, 2003:855).
Fig. 6. The GE Matrix. (Professional Academy, 2016:online)
3.6. Key Trends Within UK Coffee Chains
Starbucks UK has kept up with technological advances such as providing free Wi-Fi in
stores (Houghton, 2014) and mobile payments being used to order drinks through the
"Mobile Pay & Order" app (The Drum, 2014) where customers can pay for their drink
before they walk into the shop (Witts, 2016). As 41% of millennials use their smartphone
to reach a brand's website (Mintel, 2015b) and consumers associating payments through
mobile apps fast and convenient (Mintel, 2015b), the company has caught on to an
important trend.
The rise in health-conscious consumers has led the company to launch Teavanna
specialty teas since an interest in 'health benefits of tea is driving a resurgence of the
drink' (Witts, 2016:online) and introduce non-dairy alternatives to milk such as almond
milk, coconut milk and soy milk (Forbes, 2016a).
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3.7. Intangible Brand Values
The company shares a romantic ideal of the Italian coffee shops (Conlon, 2015) where
customers feel the same sophistication as coffee aficionados and where the baristas
know them by name (Brooks et al, 2012). This gives the brand a 'personality' so that
consumers can emotionally link with it, and gain a sense of personal achievement called
'psychological brand pleasure' (Ellwood, 2001).
The brand personality model (Aaker, 1997) categorises a brand having a certain
personality that consumers can identify with, and when customers have experience with
a brand they develop views about it and 'to help them express this they personify brands'
(De Chernatony, 2006:40). The model shows how a brand leads consumers to build 'a
public identification of oneself with the brand that leads to strong brand loyalty' (Marconi,
1999:64).
Fig. 7. Brand Personality of Starbucks. (Aaker, 1997)
Starbucks UK has positioned itself as 'the consumer's "third place" to spend his/her time
between home and work' (Brooks et al, 2012) and to 'disconnect from the world and its
cares' (Conlon, 2015). A brand pyramid shows the brand's position with its customers:
the top is its purpose or vision, the next level is its marketing communications, the next
level is its image features, and the bottom level is its basic positioning and what it offers
(Kapferer, 2012).
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Fig. 8. Starbucks Brand Pyramid. (Kapferer, 2012:450)
4. Analysis of the Brand Extension
4.1. Brand Extension
A brand extension is 'the use of the name of a parent brand on a different product
category' (Aaker and Keller, 1990:27). A brand extension is a new product which may be
launched in an existing market or a new market. The risks are identified on the Ansoff
Matrix (Ansoff, 1965) below, and show that a new product in a new market is high risk.
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Fig. 9. Ansoff Matrix. (Ansoff, 1965, cited in Professional Academy:online)
To justify a brand extension, it's important to indicate the parent brand's strengths and
weaknesses in a SWOT analysis, after establishing the marketing environment. This
contains the macro-environment, external factors that cannot be controlled (Brassington
and Pettitt, 2013).
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Fig. 10. The Macro-Environment. (Professional Academy, 2016:online)
Political factors cover 'the EU, national governments and local authorities' (Brassington
and Pettitt, 2013:44), and Starbucks UK has involved itself in political conversations such
as the controversial 'Race Together' campaign in which employees were encouraged to
speak to customers about racial tension (Peterson, 2015). Economic factors 'affect the
structure of competition in the market' (Brassington and Pettitt, 2013:44) and Starbucks
UK was greatly affected by the financial crisis where its profits fell by 69% (BBC News,
2009). Socio-cultural factors 'looks at the way in which attitudes and opinions are being
formed and how they are evolving' (Brassington and Pettitt, 2013:43) and Starbucks UK
is very connected to its younger customer segment who care about the environment
(Timm, 2014). Technology factors involve technological advances; Starbucks app allows
customers to order their drink on their mobile phone for convenience and faster time (Le
Duc, 2016). Legal factors cover 'the constraints of imposed by other trade' bodies
(Brassington and Pettitt, 2013:44) and the company came under fire for illegally paying
reduced tax rates (Khan, 2015). Environmental factors includes the government's input
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of climate change, and Starbucks UK have made a commitment to 'go 100% renewable'
(Worland, 2015).
Reflecting on this to create the company's SWOT analysis, the coffee chain's strength is
in its sustainability efforts and how it connects to its environmentally-conscious target
market. Its weakness may be that due to its issues with tax avoidance, this could damage
the brand's image as an ethical company. The opportunities are that it is adapting the way
customers pay for orders through the mobile app and keeping up with technological
innovations. Threats could be that its involvement with politics hasn't been smooth in the
past and they will need to strategically plan how to create conversations without excluding
or exploiting races or cultures in the future.
The brand extension chosen for Starbucks UK is a Film Festival showcasing world cinema
and independent films, selected to match the company's authentic message, and ticket
sales will go towards the company's ethical and charitable efforts. Keller claims that
customer's likeability of a brand extension depends on 'the degree to which the attributes
and benefits of the brand serve to satisfy its target market' (Keller, 1994, as cited in
Martinez and Pina, 2003:433), so the company must continue to fund its ethical projects
through ticket sales as its target market cares about the environment and charity
initiatives (Timm, 2014).
The benefits of this extension is that it will increase the coffee chain's brand image by
helping to fund its ethical projects such as 'Starbucks Shared Planet' and 'Backing Youth'
(Starbucks, 2016b). It is important that the Film Festival serves Starbucks coffee in a
similar dining experience because customers need to be able to feel like they are still in
the brand and not let the film showings dominate the experience. This is because of
'associative network theory' (Anderson, 1983, as cited in Martinez and Pina, 2003:437),
a theory which states that consumers are influenced by associations they make in their
mind linked to the brand. For example, a customer associates Starbucks as being a
relaxed environment so they would associate the film festival as also being a relaxed
atmosphere. It is claimed that for established brands, the associative link with extensions
will 'enhance rather than inhibit parent brand retrieval' (Morrin, 1999:518), meaning that
the film festival will make consumers think of the parent brand because it is a
distinguished successful brand.
The brand has been very successful, which presents the challenge of it being 'an ever-
expanding multinational corporation and retain the image of a friendly small business'
(Ruzich, 2008:438), and so the films would be screened in an independent venue,
perhaps one that has closed down, to stengthen their brand image of being authentic and
independent.
The Film Festival was chosen because of increasing popularity with open-air and
independent film screenings, and people 'willing to pay more for film showings that offer
something extra over the standard cinema experience' (Anderson, 2014:online). A food
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company that has seen success in the same market is Ben and Jerry's open-air cinemas,
in which they provide free icecream on the beach (Hogan, 2016).
2496 words
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5. References
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change/
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6. Appendix
1. Brand Essence Wheel of Starbucks UK

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Starbucks Brand Extension: Open Air Cinema

  • 1. 1 1. Executive Summary This report investigates the opportunity for a brand extension for Starbucks UK and what problems the brand may have to overcome for it to be a success. The brand extension is a Film Festival which needs to keep in line with the brand image and taps into what their target market is passionate about. Problems that Starbucks UK may have to investigate are its controversial involvement in political issues, for example the 'Race Together' campaign (Peterson, 2015) and recovering from its known tax avoidance (Khan, 2015). Although these issues may have knocked their image, they have a strong loyalty from customers who are environmentally conscious, being on the list of top ethical companies for the past ten years (Forbes, 2016b). The brand is well connected with its target market as it supports its communities and sources its coffee ethically (Starbucks, 2016b) and it has been reported that millennials care greatly about the environment (Keller and Kotler, 2016). It is ahead of trends for introducing 'Mobile Order and Pay', a mobile app that allows customers to order a coffee before they enter the coffee shop (Le Duc, 2016), and hands out free music and app downloads (Fromm, 2014). They also provide non-dairy alternatives to the emerging health-conscious society (Forbes, 2016a), and this keeps them firmly in second position of the UK's leading coffee chains (Bloomberg, 2016). With the increasing popularity of independent film screenings (Anderson, 2014) and other brands successfully hosting open-air cinemas (Hogan, 2016), a Film Festival could connect with Starbucks UK existing customers if it keeps the brand's core messages in being ethical, (tickets proceeds could go to their projects), providing a relaxing 'third place' atmosphere, and selling high quality coffee in the same fashion as their authentic coffee shops. 2. Introduction This business report is an analysis of Starbucks UK, and is split into two parts. The first part includes two sections, and the first section will cover identifying its market share, key UK consumer segments, UK competitors, positioning and marketing communications approach, financial performance, and key trends within the coffee shop market. The second section is an analysis of Starbucks UK detailing its intangible brand values. The second part of this business report will identify and justify a brand extension of Starbucks UK.
  • 2. 2 3. Analysis of the Parent Brand 3.1. UK Market Share Starbucks is a Seattle-based company which started out as one store in Pike Place Market (Starbucks, 2016a), before opening branches around the world, and now has 849 outlets in the UK (Bloomberg, 2016). It is the world's biggest coffee chain with a recorded 22,557 stores around the globe in 2015 (Statista, 2015) but actually is in second place in the UK to market leader Costa Coffee (Bloomberg, 2016). Starbucks UK accounts for 27% of the market share, second to Costa Coffee which has a 46.5% market share, and Caffe Nero is third with 13.8% market share (Thomas, 2014). The market size of UK coffee shops was £2,968m by the end of 2015 but is forecast to grow to £3,747m by 2020 (Mintel, 2015a). Fig. 1: UK Coffee Market Leaders Number of UK Outlets. (Bloomberg, 2016:online) 3.2. Key UK Consumer Segments Starbucks UK is a successful company in targeting millennials, Generation Y or 'Echo Boomers', (people born between the late '70s and '90s), who are highly concerned about environmental issues (Keller and Kotler, 2016). Because they are a segment that has grown up with technological innovation, 'they are more sensitive to topics of sustainability' (Atzori et al, 2016:2). Starbucks UK is reputable for its Fairtrade coffee and efforts in sustainability, from its financial incentives to its farmers who grow ethical and responsible coffee, to reducing its carbon footprint and tackling climate change (Starbucks, 2016b). The company has been listed in the 'World's Most Ethical Companies' Forbes list every year for the past ten years (Forbes, 2016b) which proves how consistent the coffee chain is in having a strong Corporate Social Responsibility, which enables its target market to trust the company.
  • 3. 3 The coffee chain also targets 'affluent young professionals' (The Drum, 2014) in the millennials segment which counts for 40.8% of its total customers (Atzori et al, 2016). The company's CEO, Howard Schultz points out that the cafes are a "third place", the place between 'the stresses of the workplace and the insular privacy of the home' (Oldenburg, 1989, cited in Ruzich, 2008:9). Starbucks UK connects so well with its target market of millennials because it speaks to them through affluent social media channels, hands out rewards in the form of free app downloads, and encourages face-to-face contact which younger people who have grown up with technology cherish (Fromm, 2014). 3.3. UK Competitors The coffee chain's main UK competitors are Costa Coffee and Caffe Nero (Thomas, 2014), being second to Costa Coffee in its market share (Bloomberg, 2016). A report by Mintel asked consumers which coffee shop they preferred to purchase coffee from and 42% reported that they would go to Costa compared with 25% who preferred to go to Starbucks (Mintel, 2015a). On the Price-Quality Matrix below, Starbucks UK is a premium offering as it produces high quality coffee at a high price, alongside its main competitors Costa Coffee and Caffe Nero, and also Coffee Republic. Restaurant chains KFC and Burger King are Cheap Goods as they are low quality coffee. McDonalds is Average as it is in the middle of the price scale and has competed with coffee chains since launching its good quality McCafe range, giving customers a variety of choice (McNew, 2016). Fig. 2. Price-Quality Matrix of UK Market Leaders. (Kotler, 1980)
  • 4. 4 3.4. Positioning and Marketing Communications Approach The aim of positioning is 'to identify, and take possession of, a strong purchasing rationale that gives a real or perceived advantage' (Kapferer, 2012). Aaker (1991) believed that 'positioning is closely related to the association and image concepts, except that it implies a frame of reference, the reference point usually being competition" (Marconi, 1999:44), which means that brands are positioned by the overall reference and association a customer has with the brand. In terms of Starbucks, the brand is positioned as a 'third place', authentic and original, in a market of corporate and similar coffee shops and fast food restaurants. An important element of how a brand positions itself in the market is how it is advertised. Starbucks famously never advertised their product until 2014 (Morrison, 2014). CEO Howard Shultz claimed 'our stores are our billboard' (Williams, 2015:online), relying on the traditional method of word of mouth. De Charnatony (2006) proposed the matrix below to evaluate the effectiveness of a brand's positioning. The brand needs 'to consider what the key benefits are that are being offered to the target market' (De Chernatony, 2006:39). Starbucks identifies with Market- Oriented as it has a strong position, but if a brand identifies itself in 'Firm-Centred' it means that it is not reaching customers and has a weak position. Fig. 3. Evaluating effectiveness of brand positioning. (De Chernatony, 2006:39) Another model that can be used is the matrix below that can 'identify the attributes of the brand and their opposites' (De Chernatony and McDonald, 2007:250). This matrix identifies the brand's competition and where they are positioned, and aims to distinguish the difference between competitors. Starbucks UK is positioned as authentic and high
  • 5. 5 quality, whereas competitors McDonalds is more corporate even though it has a high quality McCafe range (McNew, 2016). This matrix also shows that premium coffee brands have a higher price range as they offer an authentic experience whereas the cheaper brands are more corporate. Fig. 4. Identifying the attributes of the brand and their opposites. (De Chernatony and McDonald, 2003) 3.5. Financial Performance Starbucks UK made a profit of £34,217 at the end of 2015 (Fame, 2016), which shows the growth of the company over the past few years as they made a profit of £1,056 in 2014 and a loss of £20,465 (Fame, 2016). The company may have made changes to improve profits by reducing its payroll costs as the report shows a reduction in employees over the last few years, with 6,848 employees recorded at the end of 2015 but 7,345 employees at the end of 2014 and 7,726 employees at the end of 2013 (Fame, 2016). Reflecting on the company's financial performance, a model called the Boston Consulting Group Matrix can be used to identify its position in relation to its market share and market growth opportunities. This matrix looks at the amount of growth available to the company and indicates its market share in relation to its competitors, providing 'a useful insight into the likely opportunities and problems associated with a particular product' (Brassington
  • 6. 6 and Pettitt, 2003:850). Starbucks UK is identified as a Star product as it is one of the market leaders in coffee shops, and maintains its position. A Star 'needs a great deal of cash to retain its position, to support further growth and to maintain its lead' and it does 'generate cash, because of its strength, and so is likely to be self-sufficient' (Brassington and Pettitt, 2003:853). Fig. 5. Boston Consulting Group Matrix. (Henderson, 1968, cited in Professional Academy, 2016:online) Although the BCG Matrix is concise and simple, problems have been identified with the model. Abell and Hammond (1979) believe that the model doesn't 'adequately assess alternative investment opportunities when there is competition for funds' (Brassington and Pettitt, 2003:855). The General Electric Business Screen, or GE Matrix, was proposed in 1975 to overcome this problem, and categorises strategic business units (SBUs), which are 'profit centers which focus on product offering and market segment' (Ahmad, 2016:0:21secs) to provide an 'in-depth analysis of both industry attractiveness and company business strengths' (Berman and Evans, 1994:76). This matrix is split into two parts, industry attractiveness which includes the market size and rate of growth, and business strengths which includes price competition, product quality and brand image (Brassington and Pettitt, 2013). The matrix indicates three different zones, in different colours, which identify what marketing strategy the company should plan to take. Zone 1 (green) is a high attractiveness, 'the SBUs are in strong industries and are performing well in them' (Berman and Evans, 1994:76) and would be the same as Stars in the BCG Matrix. The strategy in this zone 'should be investment for further growth' (Brassington
  • 7. 7 and Pettitt, 2003:855). Zone 2 (yellow) is a medium attractiveness, the SBU 'offers an opportunity for the firm to identify and appeal to undeserved market segments' (Bermans and Evans, 1994:77) and 'the strategy here should be one of selective investment' (Brassington and Pettitt, 2003:855). Zone 3 (red) is the least attractive, similar to Dogs in the BCG Matrix, and 'can concentrate on a few products rather than a product line, divest or close down the SBU' (Berman and Evans, 1994:77), 'either make short-term gains or proceed to pull out' (Brassington and Pettitt, 2003:855). Fig. 6. The GE Matrix. (Professional Academy, 2016:online) 3.6. Key Trends Within UK Coffee Chains Starbucks UK has kept up with technological advances such as providing free Wi-Fi in stores (Houghton, 2014) and mobile payments being used to order drinks through the "Mobile Pay & Order" app (The Drum, 2014) where customers can pay for their drink before they walk into the shop (Witts, 2016). As 41% of millennials use their smartphone to reach a brand's website (Mintel, 2015b) and consumers associating payments through mobile apps fast and convenient (Mintel, 2015b), the company has caught on to an important trend. The rise in health-conscious consumers has led the company to launch Teavanna specialty teas since an interest in 'health benefits of tea is driving a resurgence of the drink' (Witts, 2016:online) and introduce non-dairy alternatives to milk such as almond milk, coconut milk and soy milk (Forbes, 2016a).
  • 8. 8 3.7. Intangible Brand Values The company shares a romantic ideal of the Italian coffee shops (Conlon, 2015) where customers feel the same sophistication as coffee aficionados and where the baristas know them by name (Brooks et al, 2012). This gives the brand a 'personality' so that consumers can emotionally link with it, and gain a sense of personal achievement called 'psychological brand pleasure' (Ellwood, 2001). The brand personality model (Aaker, 1997) categorises a brand having a certain personality that consumers can identify with, and when customers have experience with a brand they develop views about it and 'to help them express this they personify brands' (De Chernatony, 2006:40). The model shows how a brand leads consumers to build 'a public identification of oneself with the brand that leads to strong brand loyalty' (Marconi, 1999:64). Fig. 7. Brand Personality of Starbucks. (Aaker, 1997) Starbucks UK has positioned itself as 'the consumer's "third place" to spend his/her time between home and work' (Brooks et al, 2012) and to 'disconnect from the world and its cares' (Conlon, 2015). A brand pyramid shows the brand's position with its customers: the top is its purpose or vision, the next level is its marketing communications, the next level is its image features, and the bottom level is its basic positioning and what it offers (Kapferer, 2012).
  • 9. 9 Fig. 8. Starbucks Brand Pyramid. (Kapferer, 2012:450) 4. Analysis of the Brand Extension 4.1. Brand Extension A brand extension is 'the use of the name of a parent brand on a different product category' (Aaker and Keller, 1990:27). A brand extension is a new product which may be launched in an existing market or a new market. The risks are identified on the Ansoff Matrix (Ansoff, 1965) below, and show that a new product in a new market is high risk.
  • 10. 10 Fig. 9. Ansoff Matrix. (Ansoff, 1965, cited in Professional Academy:online) To justify a brand extension, it's important to indicate the parent brand's strengths and weaknesses in a SWOT analysis, after establishing the marketing environment. This contains the macro-environment, external factors that cannot be controlled (Brassington and Pettitt, 2013).
  • 11. 11 Fig. 10. The Macro-Environment. (Professional Academy, 2016:online) Political factors cover 'the EU, national governments and local authorities' (Brassington and Pettitt, 2013:44), and Starbucks UK has involved itself in political conversations such as the controversial 'Race Together' campaign in which employees were encouraged to speak to customers about racial tension (Peterson, 2015). Economic factors 'affect the structure of competition in the market' (Brassington and Pettitt, 2013:44) and Starbucks UK was greatly affected by the financial crisis where its profits fell by 69% (BBC News, 2009). Socio-cultural factors 'looks at the way in which attitudes and opinions are being formed and how they are evolving' (Brassington and Pettitt, 2013:43) and Starbucks UK is very connected to its younger customer segment who care about the environment (Timm, 2014). Technology factors involve technological advances; Starbucks app allows customers to order their drink on their mobile phone for convenience and faster time (Le Duc, 2016). Legal factors cover 'the constraints of imposed by other trade' bodies (Brassington and Pettitt, 2013:44) and the company came under fire for illegally paying reduced tax rates (Khan, 2015). Environmental factors includes the government's input
  • 12. 12 of climate change, and Starbucks UK have made a commitment to 'go 100% renewable' (Worland, 2015). Reflecting on this to create the company's SWOT analysis, the coffee chain's strength is in its sustainability efforts and how it connects to its environmentally-conscious target market. Its weakness may be that due to its issues with tax avoidance, this could damage the brand's image as an ethical company. The opportunities are that it is adapting the way customers pay for orders through the mobile app and keeping up with technological innovations. Threats could be that its involvement with politics hasn't been smooth in the past and they will need to strategically plan how to create conversations without excluding or exploiting races or cultures in the future. The brand extension chosen for Starbucks UK is a Film Festival showcasing world cinema and independent films, selected to match the company's authentic message, and ticket sales will go towards the company's ethical and charitable efforts. Keller claims that customer's likeability of a brand extension depends on 'the degree to which the attributes and benefits of the brand serve to satisfy its target market' (Keller, 1994, as cited in Martinez and Pina, 2003:433), so the company must continue to fund its ethical projects through ticket sales as its target market cares about the environment and charity initiatives (Timm, 2014). The benefits of this extension is that it will increase the coffee chain's brand image by helping to fund its ethical projects such as 'Starbucks Shared Planet' and 'Backing Youth' (Starbucks, 2016b). It is important that the Film Festival serves Starbucks coffee in a similar dining experience because customers need to be able to feel like they are still in the brand and not let the film showings dominate the experience. This is because of 'associative network theory' (Anderson, 1983, as cited in Martinez and Pina, 2003:437), a theory which states that consumers are influenced by associations they make in their mind linked to the brand. For example, a customer associates Starbucks as being a relaxed environment so they would associate the film festival as also being a relaxed atmosphere. It is claimed that for established brands, the associative link with extensions will 'enhance rather than inhibit parent brand retrieval' (Morrin, 1999:518), meaning that the film festival will make consumers think of the parent brand because it is a distinguished successful brand. The brand has been very successful, which presents the challenge of it being 'an ever- expanding multinational corporation and retain the image of a friendly small business' (Ruzich, 2008:438), and so the films would be screened in an independent venue, perhaps one that has closed down, to stengthen their brand image of being authentic and independent. The Film Festival was chosen because of increasing popularity with open-air and independent film screenings, and people 'willing to pay more for film showings that offer something extra over the standard cinema experience' (Anderson, 2014:online). A food
  • 13. 13 company that has seen success in the same market is Ben and Jerry's open-air cinemas, in which they provide free icecream on the beach (Hogan, 2016). 2496 words
  • 14. 14 5. References Aaker, J. (1997) 'Dimensions of Brand Personality.' Journal of Marketing Research, Vol. 34(3) pp. 347-356 Aaker, D. and Keller, K. (1990) 'Consumer Evaluations of Brand Extensions.' Journal of Marketing, 54(1) pp. 27-41 Ahmad, S. (2016) Strategic Business Unit. [Online video][Accessed on 4th November 2016] https://www.youtube.com/watch?v=yo15wxMLC9Y Anderson, E. (2016) Greggs moves a step closer to coffee connoisseur as it launches flat white. [Online][Accessed on 3rd November 2016] http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/12093388/Greggs- moves-a-step-closer-to-coffee-connoisseur-as-it-launches-flat-white.html Anderson, E. (2014) Taking Cinema to the Next Level: Pop Up Cinemas a Hit for Film Lovers Looking for Cult Classics. Telegraph. [Online][Accessed on 6th November 2016] http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11251196/Taking- cinema-to-the-next-level-pop-up-cinemas-a-hit-for-film-lovers-looking-for-cult- classics.html Atzori, R., Shapoval, V., Murphy, K. (2016) 'Measuring Generation Y Consumers' Perceptions of Green Practices at Starbucks: An IPA Analysis'. Journal of Foodservice Business Research, 10(1080) pp. 1-22. BBC News. (2009) Starbucks slashes jobs and stores. [Online][Accessed on 4th November 2016] http://news.bbc.co.uk/1/hi/business/7857316.stm Berman, B and Evans, J. (1994) Marketing. 6th ed., New York: Macmillan Publishing Company Bloomberg. (2016) Starbucks Trails Costa in Booming UK Coffee Shop Market: Chart. [Online][Accessed on 30th October 2016] http://www.bloomberg.com/news/articles/2016- 02-04/starbucks-trails-costa-in-booming-u-k-coffee-shop-market-chart Brassington, F and Pettitt, S. (2013) Essentials of Marketing. 3rd ed., Harlow: Pearson Education Limited Brassington, F. and Pettitt, S. (2003) Principles of Marketing. 3rd ed., Harlow: Pearson Education Limited Brooks, B., Culp, R., Seaford, B. (2012) 'Starbucks: Maintaining a Clear Position.' Journal of the International Academy for Case Studies. 18(3) pp. 39-57 Conlon, J. (2015) Five Lessons from Starbucks on Brand Positioning. Linkedin. [Online][Accessed on 4th November 2016] https://www.linkedin.com/pulse/five-lessons- from-starbucks-brand-positioning-jerome-conlon
  • 15. 15 De Chernatony, L. (2006) From Brand Visionto Brand Evaluation. 2nd ed., Oxford:Elsevier De Chernatony, L. and McDonald, M. (2003) Creating Powerful Brands. 3rd ed., Oxford:Elsevier Ellwood, I. (2001) The Essential Brand Book. 1st ed., London: Kogan Page Fame. (2016) Starbucks Coffee Company (UK) Financial Report. [Online][Accessed on 3rd November 2016] https://fame-bvdinfo-com.ezproxy.mmu.ac.uk/version- 20161011/Search.QuickSearch.serv?_CID=339&context=1AUV8YEQ82KU58H Forbes. (2016a) Starbucks is Maintainingits CompetitiveEdge. [Online][Accessed on 30th October 2016] http://www.forbes.com/sites/greatspeculations/2016/10/13/how-is- starbucks-maintaining-its-competitive-edge/#46d09d4c5a7f Forbes. (2016b) The World's Most Ethical Companies 2016. [Online][Accessed on 3rd November 2016] http://www.forbes.com/sites/karstenstrauss/2016/03/09/the-worlds- most-ethical-companies-2016/#2d08aeb373dc Fromm, J. (2014) Why Starbucks is Still Number One With Millenials. [Online][Accessed on 3rd November 2016] http://www.millennialmarketing.com/2014/02/why-starbucks-is- still-number-one-with-millennials/ Hogan, J. (2016) Open Air Cinemas Back in Camberra with Movies, Music and Free Icecream. Canberra Times. [Online][Accessed on 6th November 2016] http://www.canberratimes.com.au/act-news/canberra-life/openair-cinemas-back-in- canberra-with-movies-music-and-free-ice-cream-20160108-gm27dv.html Houghton, L. (2014) Coffee Shops Boosting our High Streets. Big Hospitality. [Online][Accessed on 4th November 2016] http://www.bighospitality.co.uk/Trends- Reports/Coffee-shops-boosting-our-high-streets Kapferer, J. (2012) The New Strategic Brand Management, Advanced Insights & Strategic Thinking. 5th ed., London: Kogan Page Keller, K., and Kotler, P. (2016) Marketing Management. 15th ed., Harlow: Pearson Education Limited Khan, M. (2015) EU rules Starbucks 'sweetheart' tax deals are illegal state subsidies. Telegraph. [Online][Accessed on 4th November 2016] http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11945013/Europea n-Union-orders-Starbucks-and-Fiat-Juncker-Luxembourg-pay-30m-in-unpaid-taxes.html Kotler, P. (1980) Marketing Management: Analysis, Planning and Control. 4th ed., New Jersey: Prentice-Hall Le Duc, S. (2016) Mobile Pay is Changing the Food Game. Green Bay Press Gazette. [Online][Accessed on 4th November 2016]
  • 16. 16 http://www.greenbaypressgazette.com/story/life/food/2016/11/01/mobile-pay-changing- food-game/93114744/ Marconi, J. (1999) The Brand Marketing Book. Chicago:NTC Business Books Martinez, E. and Pina, J. (2003) 'The Negative Impact of Brand Extensions on Parent Brand Image.' Journal of Product & Brand Management, 12(7) pp. 432-448 McNew, S. (2016) McDonalds is Competing Directly With Starbucks. [Online][Accessed on 3rd November 2016] http://www.fool.com/investing/2016/10/05/mcdonalds-is- competing-directly-with-starbucks.aspx Mintel. (2015a) Coffee Shops. [Online][Accessed on 30th October 2016] http://academic.mintel.com.ezproxy.mmu.ac.uk/display/716205/ Mintel. (2015b) The Connected Consumer. [Online][Accessed on 30th October 2016] http://academic.mintel.com.ezproxy.mmu.ac.uk/display/715832/ Morrin, M. (1999) 'The Impact of Brand Extensions on Parent Brand Memory Structures and Retrieval.' Journal of Marketing Research, 36(4) pp. 517-525 Morrison, M. (2014) Starbucks Launches First Brand Campaign, 'Meet Me At Starbucks'. Advertising Age. [Online][Accessed on 10th November 2016] http://adage.com/article/cmo-strategy/starbucks-launches-brand-campaign/295175/ Peterson, H. (2015) Here's the Starbucks internal memo showing the 'Race Together' campaign was always doomed. Business Insider. [Online][Accessed on 4th November 2016] http://uk.businessinsider.com/heres-the-starbucks-internal-memo-showing-the- race-together-campaign-was-always-doomed-2015-3 Professional Academy. (2016) Marketing Theories: Boston Consulting Group Matrix. [Online][Accessed on 4th November 2016] http://www.professionalacademy.com/blogs- and-advice/marketing-theories---boston-consulting-group-matrix Ruzich, C. (2008) 'For the Love of Joe: The Language of Starbucks'. The Journal of Popular Culture, 41(3) pp. 428-442 Starbucks. a(2016) Our Heritage. [Online][Accessed on 3rd November 2016] http://www.starbucks.co.uk/about-us/our-heritage Starbucks. b(2016) Responsibility. [Online][Accessed on 3rd November] http://www.starbucks.co.uk/responsibility Statista. (2015) Coffee House Chains by Number of Stores Worldwide 2015. [Online][Accessed on 30th October 2016] https://www.statista.com/statistics/272900/coffee-house-chains-ranked-by-number-of- stores-worldwide/ The Drum. (2014) Starbucks Plots Five-Year Marketing Charge to Exploit "Seismic Shift" in Consumer Behaviour. [Online][Accessed on 30th October 2016]
  • 17. 17 http://www.thedrum.com/news/2014/12/05/starbucks-plots-five-year-marketing-charge- exploit-seismic-shift-consumer-behaviour Thomas, N. (2014) Why Coffee Shops are Replacing Pubs in Britain. [Online][Accessed on 3rd November 2016] http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/11084328/ Why-coffee-shops-are-replacing-pubs-in-Britain.html Timm, J. (2014) Millenials: We Care More About the Environment. MSNBC. [Online][Accessed on 4th November 2016] http://www.msnbc.com/morning- joe/millennials-environment-climate-change Williams, P. (2015) Why Starbucks Chose to Forego Traditional Advertising for So Long. Observer. [Online][Accessed on 10th November 2016] http://observer.com/2015/10/why- starbucks-chose-to-forego-traditional-advertising-for-so-long/ Witts, S. a(2016) How 'Brand Fatigue' is Shaping the Coffee Shops of the Future. Big Hospitality. [Online][Accessed on 30th October 2016] http://www.bighospitality.co.uk/Trends-Reports/How-brand-fatigue-is-shaping-the- coffee-shops-of-the-future Witts, S. b(2016) Trends: Starbucks to Launch Teavanna Brand in the UK. Big Hospitality. [Online][Accessed on 30th October 2016] http://www.bighospitality.co.uk/Business/Starbucks-to-launch-Teavana-brand-in-the-UK Worland, J. (2015) Why Big Business is Taking Climate Change Seriously. Time. [Online][Accessed on 4th November 2016] http://time.com/4045572/big-business-climate- change/
  • 18. 18 6. Appendix 1. Brand Essence Wheel of Starbucks UK