Market Entry Strategy Marketing Plan to launch the product to the new market - Starbucks

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Market Entry Strategy Marketing Plan to launch the product to the new market.
1.0 Introduction
Formed in 1985 in Seattle, Starbucks opened as a coffee trader offering fresh-roasted coffee
beans, tea and spices to customers. Ten years later, New Yorker Howard Schultz joined the
company in 1982 and revolutionised Starbucks to another discovery inspired by warmth and
artistry in coffee. Starbucks soon expanded to several regions in the United States followed by
Japan in 1996, Europe in 1998 and China in 1999. Today, Starbucks is present in more than 80
countries with dedication towards their mission which is “to inspire and nurture the human spirit –
one person, one cup, and one neighbourhood at a time.” With their employees as their main
partners, Starbucks offers a selection of products beyond the traditional cup of coffee (Gorgoglione
et al., 2018), namely handcrafted coffee beverages, branded merchandise and fresh food.
1.1 Introducing Starbucks in Pakistan
Coffee originated from the Muslim community of Yemen and Ethiopia. Later, coffee houses began
to appear in Muslim cities such as Makkah, Cairo, Istanbul, Baghdad and Damascus before
making its way to Europe where it was transformed into a place of social gathering (Gulf News,
2017). Coupled with this coffee history, the plan is to launch Starbucks in the Pakistan to serve
different segments.
Pakistan, a traditional tea-loving country, is embracing the strong aroma, bold colour and rich taste
of coffee with the launch of Espresso in 2004 in Karachi and Gloria Jean’s in 2007 (Gulf News,
2017). This growing acceptance of coffee gained momentum among the youth whose
psychographics are more geared towards elegant coffee houses (Gulf News, 2017). Considering
the preference for latte coffee among Pakistanis, the launching strategy is emphasise on the
quality of service offering and the ambiance.
1.2 Market Entry Strategy
Competition in the retail sector is driven by the ability to open and run new outlets around the world
(Richey and Ponte, 2020). Starbucks has been successful in extending its geographic coverage by
opening its stores in China, Australia, UK, Japan, Latin America, and the Middle East. The table
below elaborates Starbucks market entry strategy and justifies the chosen launching strategy in
Pakistan. Overall, Starbucks reaped the benefits of international market entry by seeking
collaboration with powerful brands, such as Pepsi, United Airlines, and Nordstrom (Garthwaite et
al., 2017).
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Despite tea being the preferred beverage, Starbucks has been successful in introducing the coffee
culture in the UK and China. In this regard, the launching strategy in Pakistan is through a licensing
agreement with a reputable and capable local company with retailing know-how in the target host
Countries Market Entry
Strategy
Justi
fi
cation
China Licensing
agreement
Internationalisation
Starbucks adopted licensing agreements as its market entry
strategy with local companies in order to minimise entry risks
(Sholihah et al., 2016).
The Chinese partners bear all capital costs to bring the
Starbucks brand abroad (Sholihah et al., 2016).
Starbucks adopted the internationalisation strategy to adapt
itself to the local environment (Qian and Xing, 2016).
Driven by extensive research and design, product innovation
enabled Starbucks to compete with early entrants in China
(Azriuddin et al., 2020).
Australia Wholly-owned
Subsidiaries
Starbucks’s global chain was unable to replicate
internationalisation strategy in Australia since the Australian
culture was coffee without disguised flavours and syrup (Honack
and Waikar, 2017)
Starbucks faced competition and lack of acceptance from the
Australian Market due to their inability to adapt to the local
culture (Purkayastha and Basu, 2009).
United
Kingdom
Acquisition Starbucks used acquisition and 100% ownership to enter the
United Kingdom (Campbell and Helleloid, 2016).
Starbucks was accustomed with UK’s labour economics,
language, and culture (Campbell and Helleloid, 2016).
Japan Joint Venture Starbucks used joint venture as an entry strategy due to their
lack of local knowledge and their ability to attract local talented
employees (Chuang, 2019).
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country to develop and operate new Starbucks stores. The reason for this launching strategy in
Pakistan is justified as follows:
• Starbucks receives the right to sell its products and obtain a global coverage through the
licensee distribution network. For example, Nestle pays Starbucks for the exclusive right to sell
Starbucks’ products worldwide through its global distribution network (Swati, 2018).
• Starbucks receives royalty payment from the licensee (Swati, 2018).
• Starbucks is able to increase its brand recognition outside of its courtly of origin through the
licensing agreement.
• Starbucks will bear lower capital investment requirements as most cost will be borne by the local
licensee company in Pakistan (Maqsoom and Khan 2016).
• Starbucks will be able to acquire expertise and skills in the Pakistani Market (Maqsoom and
Khan 2016).
1.3 Segmentation, Targeting and Positioning
Based on various research, Starbucks STP strategy is described in the table below:
Segmentation Targeting Positioning
Market segmentation is a
crucial marketing strategy
which identifies and describes
market segments which would
become targets for the
company’s marketing plan
(Kotler 2016).
Targeting evaluates the
interests of different segments
and helps the company to
choose which segments to
enter (Kotler 2016).
Positioning a product in the
market involves marketing a
brand to build an image in the
customers’ minds within the
target market (Kotler 2016).
Demographic segmentation
Starbucks customers belong to
the Generation Y which was
born between 1977 and 2000
(MaYueyi, 2020).
The age of targeted customers
has increased to 20- 40 years
women and men (Khan, 2018).
Young adults between 18-24
years, makes 40% of
Starbucks’ coffeehouse sales
(Khan, 2018).
Starbucks targets a broader
public to cater a wider market
segment (MaYueyi, 2020).
Starbucks targets the college
students by providing a space
to meet and study (Khan,
2018).
Starbucks targets the 40+
years by providing the
coffeehouse ambiance (Khan,
2018).
Starbucks has a positioned
itself through its statement
“one person, one cup, and one
neighbourhood at a time”. This
positioning strategy aims to
give the best service to its
customers more than what
they expect (Starbucks, 2021).
Starbucks positions itself as a
coffeehouse drive by customer
service excellence, luxurious
store ambiance and a place for
social gatherings.
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1.4 Product strategy in Pakistan
Starbucks brand is renowned for its premium quality coffee, offering more than 1000 varieties of
food items including coffee, smoothies, tea, fresh fruit juice, blended beverages, cookie, pastries,
doughnuts and muffins (Musonera, 2021). To meet its high quality product offerings, Starbucks
emphasises on its supply chain. The strategy used by Starbucks affirms the strong belief that
success in the coffee business relies on the quality of the beans (Glowik, 2017). Most importantly,
Starbucks Unique Selling Proposition (USP) explains its commitment towards its Baristas’ promise
Psychographic
segmentation Starbucks
customers belong to the
upper-middle class and
educated customers (MaYueyi,
2020).
Starbucks customers belong to
the “on-the-go” suburban
category who spend a lot of
time in their cars and traffic
(Chuang, 2019).
Starbucks consumers are
socially conscious and
committed to protecting the
planet (Kang and Namkung,
2018).
Starbucks targets the upper-
middle class through their
premium coffee brand
(MaYueyi, 2020).
Starbucks targets the “on-the-
go” customers by offering them
curbside pickup, online
ordering and drive-thru
facilities (Chuang, 2019).
Starbucks targets the socially
conscious customers by
providing them with a
coffeehouse structure design
that is based on the
Leadership in Energy and
Environmental Design (LEED)
(Kang and Namkung, 2018).
Starbucks positions its
products with premium quality
which justifies the higher than
average price of its products
(MaYueyi, 2020).
Starbucks is shifting its “third
place” positioning strategy to a
contactless positioning
strategy (Chuang, 2019).
Starbucks positions its brand
by promoting its image with
sustainable coffee growing,
reducing carbon footprint and
improving surrounding
communities (Kang and
Namkung, 2018).
Segmentation, Targeting and Pricing Strategy in Pakistan
Being an internationally renowned brand, the plan for Starbucks segmentation, targeting and
positioning strategy in Pakistan is to ensure consistency of its product offerings, service quality
and in-store experience. That is, based on the above findings, the segmentation strategy is to
launch Starbucks to target a diverse audience in Pakistan so as to spread the risks. The
positioning strategy for Starbucks in Pakistan, is to empathise on its premium image, “third place”
image and its sustainability image so as to attract wider Pakistanis in the introduction stage of
Starbucks.
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“Love your beverage or let us know. We’ll always make it right” (MaYueyi, 2020). Moreover, their
coffee cup with handwritten customer name, is a unique product design strategy of Starbucks
(Garg, 2021) that enables customer service excellence and constant evolution of the product
portfolio towards other coffee beverages (Musonera, 2021).
Starbucks product strategy is further classified into two categories namely durable such as mugs
and souvenir objects and non-durable such as beverages and food (Musonera, 2021). Moreover,
Starbucks trademark offers the company a competitive advantage (Starbucks, 2014). Along with
the high quality coffee and food, the market entry strategy of Starbucks in Pakistan will emphasise
on enhancing customer experience and adapting the product offering to suit local tastes and
preferences.
1.5 Pricing Strategy
Starbucks adopts a premium pricing strategy which serves high-end products at high prices, as
such taking advantage of the behavioural tendency of consumers who purchase expensive
products to match their high status. Also, premium pricing is charged because Starbucks is
perceived as a fair-trade supplier of ethically-sourced and high-quality coffee. The retail chain has
gained an edge over its competitors as socially responsible consumers are aligning themselves
with the ethical cause of Starbucks (Marzec, 2014). In the same vein, the Nielson’s Global
Corporate Sustainability Report (2015) stated that 66% of consumers internationally are
demanding products with a sustainable brand. Similarly, Kasolowsky (2014) concluded that
customers want to be associated with ethical brands and are willing to pay more for extra service
even if the same quality at cheaper price is available at other competitors.
Another argument supporting Starbucks’s premium pricing strategy is their commitment towards
delivering excellent customer service and in-store ambiance to its target audience. Their premium
pricing strategy is supported by their brand strategy which is based on customer experience and
product quality (Guzman, 2012).
However, despite its differentiation strategy, Starbucks is losing its customers to rivals such as
McDonald or Costa coffee where they get similar service at a cheaper price (Shaughnessy, 2013).
Therefore, the launching strategy in Pakistan will adopt the same premium pricing strategy which is
in line with the segmentation, targeting and positioning of Starbucks among Pakistanis.
1.6 Distribution Strategy across Pakistan
Place is another component of the marketing mix which determines the venues where customers
can access Starbucks products. It was mainly at Starbucks’ coffeehouses. Eventually, Starbucks
shifted towards mobile ordering and curbside pickup locations, allowing customers to place their
orders online. Starbucks also distribute its products in supermarkets and has distribution
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agreements with office coffee suppliers, hotels, and airlines. Post pandemic, Starbucks has also
introduced home delivery. Through these multiple distribution channels, Starbucks reaches a wider
market and improves customers’ buying convenience (Azriuddin et al., 2020).
However, coffeehouses remains the widely used distribution channel for Starbucks with 30,000
stores across 80 countries. Starbucks hugely invest on the design, decor and environment of its
coffeehouses where customers enjoy a premium experience (Chuang, 2019). Coupled with this
argument, the launch strategy in Pakistan will focus on providing coffeehouse experience to
Pakistanis. The concept is to have a coffee house equipped with a reading corner, a meeting room
facility, free wifi and live performances of ghazal singers all under the same umbrella in order to
create the ambiance tailored for the young Pakistanis. The marketing idea is to build a social
lifestyle with a coffee culture in Pakistan.
1.7 Communication Strategy with the Pakistanis
The slogan introduced by Howard Shultz, “Build Starbucks one cup at a time” means that
Starbucks relies on customer experience for generating loyalty and word-of-mouth advertising for
growth of the business (Honack and Waikar, 2017). Similarly, Grissafe (2014) explains that
customers who create a relationship with a brand, engages in word-of-mouth to demonstrate the
trust they established with that brand. Furthermore, Winchester et al. (2008) explains that there is a
relationship between a brand and consumers’ belief that triggers the brand choice. Therefore it is
crucial for Starbucks to communicate a positive brand image so as to attract customers and create
value for them.
Apart from focussing on its brand image, Starbucks also promotes its image by emphasising in its
corporate social responsibility and sustainable practices (Campbell and Helleloid, 2016). Starbucks
has also made a shift from traditional word-of-mouth to more digital communication platforms such
as FaceBook, Twitter, Google +, Instagram and Pinterest (Garg, 2021).
Coupled with this argument, to launch Starbucks in Pakistan, the market entry strategy is to use a
mix of promotion strategies. Initially, the plan is to raise awareness among Pakistanis by giving
away free tee-shirts and mugs to the first 100 customers visiting the coffeehouse. This is adopted
to induce consumer purchase and to be remembered by the consumers even after their first visit.
Eventually, the plan is to promote Starbucks as a socially responsible company to attract socially-
conscious and educated customers such that customers who bring in their cups or tumblers are
rewarded with a discount (Musonera, 2021). This promotion strategy will motivate socially
responsible Pakistani consumers to develop a relationship with Starbucks since Shah et al. (2018)
found a positive relationship between moral values and purchase intention in Pakistan.
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The launching strategy will also introduce Starbucks loyalty program to develop customer
relationship where customers will be rewarded two stars for every Pakistani rupee spent. Upon
reaching 125 stars customers can take a free drink and food from Starbucks. This promotion
strategy is adopted so as to build camaraderie among Starbucks employees and Pakistani
customers which will increase store loyalty (Grissafe, 2014).
The promotion strategy will also involve nationwide tailored advertising campaign in line with the
culture and values of Pakistani customers so as to boost sales (Akhtar et al., 2011).
1.8 People
Employees at Starbucks are important in service delivery (Fedorko, 2018). At Starbucks, a people-
centered approach is used where employees are partners who share the same goals and success
of the company. Starbucks realise that happy customers begins with happy employees and so,
Starbucks invests significantly in training its partners. Those partners have a significant impact on
customer satisfaction and experience following their communication skills (Yeo and Grant, 2018).
As a result, Starbucks has high employee motivation which contribute to the coffee-house friendly
and relaxed atmosphere for the customers. The plan for Pakistan is to adopt the same strategy
and philosophy regarding the employees.
1.9 Process
Due to the inseparability, intangibility and inconsistency characteristics of process (Abbas et al.,
2018), Starbucks has a transparent and publicly accessible process to communicate with its
customers. Starbucks also has an efficient command line to deliver its products by using
technology to maintain its premium standard. This explains that along with the product, customers
assess the service delivery to rate their experience.
1.10 Physical evidence
Physical evidence is the atmosphere in which the service is communicated and offered by
Starbucks to the consumers that promote service efficiency (Ali and Raza, 2017). The setup in
which Starbucks provides its services is designed to fulfil customer demands in an ambient in-store
environment that encourages people to sit and stay longer. Starbucks coffeehouses observe an
appealing interior decor and lights, comfortable furniture, fresh-smelling coffee, soothing music,
and welcome smiles from employees which are all physical cues that act as measure of consumer
service (Othman et al., 2019).
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2.0 Ethical Marketing Practice in the Pakistani market
Corporate social responsibility is a marketing orientation that engages in value creation by meeting
stakeholder’s societal expectations rather than just profit maximisation to ensure long-term
business survival (Podnar and Golob, 2007). According to Brassington and Pettitt (2006),
Starbucks follows the societal-marketing philosophy where they try to add a societal benefit to their
brand by helping communities and respecting the environment. Similarly, Starbucks was rewarded
for their ethical coffee sourcing, local farmers support programme, and eco-friendly stores and
100% recycled materials used for their cups. (Starbucks, 2021).
However, tax avoidance by Starbucks UK, gave rise to public criticism, boycotts, lost of ethical
brand image which resulted in a drop of its sales by 3.4% within a year (Bergin, 2014). Based on
these findings, the plan is to emphasise on the ethical aspect of Starbucks in Pakistan given that
Pakistanis are have an emotional buying culture conservative culture (Sarki et al., 2012).
3.0 Conclusion
The table below summarises the market entry and launching strategy of Starbucks in Pakistan:
Launching Strategy - Licensing agreement with a reputable and capable local company
Product Price Place Promotion People Process Physical
Evidence
coffee
smoothies
tea
fresh fruit
juice
blended
beverage
cookies
pastries
doughnuts
muffins
High
quality
USP
Customer
name on
coffee cup
Premium
pricing to
support
ethically
sourced
high quality
In-store
coffeehouses
Supermarkets
Hotels
Mobile
ordering
Curbside
locations
Drive-thru
Word-of-
mouth
Digital
platforms
Free t-shirts
and mugs
Loyalty
program
Employees
are partners
Extensive
training
Employee
motivation
Transparent
Publicly
accessible
Consistent
across the
globe
Efficient
command
line
Technology
Ambient
store
environment
appealing
interior
decor
lights
comfortable
furniture
soothing
music
Reading
corner
Ghazal
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