How does star bucks create brand equity?

Question 1

How does Starbucks create brand equity?

According to Kotler 2009, brand equity is reflected in how customers, think, feel and act with respect to the brand, prices, market share, and profitability that the brand commands for the firm. The green and white Starbuck logo is widely recognized. Starbuck create brand equity by turning an everyday beverage into a premium product. Starbuck coffee defined not only a product, but also attitude and personality together. In addition, Starbuck also launched various flavours that reflect the different moods and taste. Starbuck create brand equity by provides a superior level of customer service collecting the suggestion or the ideas from consumer. Therefore, Starbuck build a high degree of customer loyalty successfully. Apart from this, Starbuck also sell best quality of the coffee and related products like beverage mug. Starbuck become fastest growing brands. (Business Week’s, 2002) This is because it is about the experience, the atmosphere and the place that let most people gets away from everyday stresses. Starbuck also created an affinity with customers. Beside this, Starbuck also do commitment to the community to increase the brand equity.

Question 2

Why enter the Asian market? Why enter Singapore?

Starbucks enter Asian market because its company felt that Asian offered more potential market than Europe. According to one executive of Starbuck, Asian is a region which full of emerging markets since the consumer disposable income increase as country economics growth. Apart from this, people in Asia are open to Western lifestyle. Starbuck enter Asian because of the highly “Westernized” ideas and lifestyle. Finally, coffee consumption growth rates in Southeast Asia are estimated to increase 20 % to 30 % yearly.

Economic for Singapore has an annual growth rate of 11% (1998 in real terms).  Apart from this, Singapore country’s per capital income is the third highest in Asia after Japan and Brunei. Singapore has one of the best living conditions in Asia. Singaporeans are able to indulge luxury goods and they also like to indulge themselves with food. Singaporeans feel quality and price that eating has become a national obsession. Starbuck coffee is a premium beverage product and this brand product can defined as attitude of a person. Starbuck is not just a drink but personality together. Beside this, Starbuck choose to invest in Singapore because Singapore entertainment is influenced by Western culture. Singaporean highly “Westernized” ideas adopted. Starbuck identify as American icon except McDonald’s. Starbuck create an American coffee culture. Starbuck should focus on Singapore because of the market has tremendous growth potential. According to Bruce Rolph, he thinks that people should increasingly focus on Singapore not as a mature market with low earnings and growth potential. Finally, the Singaporean market still has no clear leader in the specialty coffee industry. Starbuck may get high demand of product in Singapore.

Question 3

Who is the target market?

Starbuck target people who are open to Western culture and lifestyle. In addition, Starbuck also target people who are with high disposable income. Those people are able and willing to spend money for purchasing costly gourmet coffee.  Target market for Starbuck is mainly adult-focused. The aims are for connecting with their client, communities. (Starbuck Campaign Market Analysis) Starbuck target consumer are from urban-areas because individuals who are willing to purchase costly gourmet coffee. Apart from this, college student who are undergraduate or post-graduate living in urban areas are target market for Starbuck too. (Starbuck Campaign Market Analysis) In addition, Starbuck also target consumer who are stressful. Starbuck provide a relax environment which is about the experience, the atmosphere and the place that let most people gets away from everyday stresses. Starbuck also created an affinity with customers.

Question 4

Is Starbucks facing cannibalization?

Yes, Starbuck is facing cannibalization. Even through, sales of Starbucks and growing rapidly but the rate of growth is slow. Rate of growth is slowing at existing stores and the annual sales growth at stores from 19% in 1993 to 7% in 1996 because of store cannibalization. Stores cannibalization has been known as open stores within one block of each other led to market saturation. Stores cannibalization cause competition among close Starbucks stores and damage the company culture within the workforce. Store cannibalization also cause decrease in employees’ performance. <http://www.calarosbay.com/files/StarbucksCaseStudy.pdf>

Question 5

Who are some of Starbucks joint venture partners?

Starbuck joint venture partners are Capitol Records, Sazaby Inc. in Japan, Dreyer’s Grand Ice Cream, Pepsi-Cola, Intel Corporation and Mack Johnson’s Johnson Development Corporation.

In 1995, Starbuck released Blue Note Blend Coffee and CD with Capitol Records.

An agreement signed at October 1995 with Sazaby Inc. to develop Starbuck retail stores in Japan.

Starbuck form joint-venture with Dreyer’s Grand Ice Cream to form premium line of coffee ice cream market. North American Coffee Partnership formed between Pepsi-Cola and Starbucks at 1996. The partnership announced its plan to market a bottled version of Starbucks’ Frappuccino beverage.

Apart from this, Starbucks also push it market toward cybercafes by formed joint venture with Intel Corporation.

In addition, Starbucks formed joint-venture with Mack Johnson’s Johnson Development Corporation to develop Starbucks locations in underserved, inner-city urban neighbourhoods.

Question 6

Is Starbucks a socially responsible company?

Starbucks is a socially responsible company. Starbucks sell only finest whole- bean coffee and coffee beverages. Roast coffee bean that do not meet the company requirement or the coffee bean is remaining in the bins for more than one week will be donated to charity. In addition, Starbuck also contributed in CARE which is a non-profit charity organization since 1991 for the needy in coffee-growing countries. Starbucks has helped establish health and literacy programs in Guatemala, Indonesia, Kenya, and Ethiopia as North America’s leading corporate sponsor. This long-term charity program has helped improve living conditions in the coffee-producing countries. Starbucks established a Code of Conduct policy, which is the first step in a long-term commitment to improving social conditions in the world’s coffee-growing nations in 1996. Starbucks joined an organization, TransFair, which is works for the rights of farmers. The efforts of the organization are driven towards ensuring that coffee farmers get a significant part of the amount ($1.26 a pound) paid by coffee roasters for coffee beans. Also, in 2002, the company purchased 150,000 pounds of coffee beans from a fair-trade Consortium of Coffee Cooperatives of Guanacaste and Montes de Oro in Costa Rica (COOCAFE). Starbucks also formed an alliance with eight companies to enable the gift of over 320,000 new books for children. Starbucks also doing recycle with controls waste removal (2,344 out of 3,192 stores), recycled at least one or more items, including cardboard, plastic, paper and organic wastes.

<http://www.starbucks.com/assets/starbucks-csr-fy2007.pdf>

Question 7

How does Starbucks market themselves?

Starbucks market themselves as selling premium beverage to the consumer. Starbuck try to positioning their product as the attitude and personality of an individual but not only a product. Starbucks serves the product as a beverage that can relax consumer with the store environment and create experience and place that is refuge for individual to get away from everyday stress. Therefore, Starbuck come out with various flavours that can reflect the different moods as well as taste. Starbuck also market themselves as the American icon. This is because Starbucks target individual that are highly “Westernized” ideas and lifestyle it had adopted. Apart from this, Starbucks market themselves as a luxury beverage. This is because Starbucks stores are provide air-conditional facilities. Besides, Starbucks also use high quality coffee bean to provide the premium beverage. Starbucks coffee is a coffee that let individuals taste the greatest taste of the coffee and enjoy themselves.

Question 8

What are some substitutes?

Starbucks competitors are Spinelli, Suntec Dome Holdings, Coffee Club, Coffee Connection, and Burke’s Coffee.

Spinelli Coffee Company is a company licensed by Equinox. Equinox is a joint-venture between Golden Harvest, Singapore Technologies Industrial Corp. and Singapore Conglomerate. In addition, Spinelli also involve in setting up roasting factories to supply Asian market. Spinelli brings to Asia years of experience in sourcing, producing and selling premium coffee drinks and whole bean coffee.

Dome Café is on European lines. It was discovered by a Singaporean. Dome Café is well-known for its distinctive sidewalk and atrium cafes. Dome Café also serve light snack and full meals served all day. Suntec Dome Holding was formed in 1996. Ronald Lee and Sebastian Ong, the founders of Dome imported European-style Dome concept from Australia. There are roasting factories in Singapore and Australia. The strategy is to expand in several Asian countries in Malaysia, Indonesia, Thailand, Hong Kong and China.

Coffee Club established coffee trading company Hiang Kie. The bestselling product in Coffee Club is Iced Mocha Vanilla. In addition, Coffee Club serves light meals of cakes, salad, sandwiches and home-made ice cream.

Coffee Connection started in the 1980s by Sarika Coffee. It is the mother ship of coffee bars, with sixty-nine different drinks ranging from cool coffee jelly to Blue Mountain Chaser. The bestselling product is Cappuccino Italia no. They also serve ice cream, pasta, pizza and focaccia sandwiches.

The origin of Burke’s Coffee are started from four Singaporean students who are studies in Seattle. Burke’s Coffee is a Seattle-styled café. Burke has made a name as a friendly and inviting place in Singapore. The store has established a loyal customer base of young professionals who visit the store frequently. Burke’s serve sandwiches, soups, and desserts. There are seven basic coffee drinks, plus twelve Italian syrups that can add on request. The best attraction of the coffeehouses is the Mocha Freeze and Hazelnut Latte.

Question 9

How did they come up with the name Starbucks?

Starbucks began in 1971 with three academics white collar. There are English teacher Jerry Baldwin, history teacher Zev Siegel and a writer Gordon Bowker. There three partners shared a love of fine coffees and exotics teas. The name comes from Herman Melville’s Moby Dick, a classic American novel about the 19th century whaling industry. The seafaring name seems appropriate for a store that imports the world’s finest coffees to the cold, thirsty people of Seattle. <http://starbucks.com.my/en-US/_About+Starbucks/History+of+Starbucks.htm>Baldwin, Siegel, and Bowker chose the name Starbucks in honour of Starbuck, the coffee-loving first mate in Herman Melville’sMoby Dick, and because they thought the name evoked the romance of the high seas and the seafaring tradition of the early coffee traders. The new company’s logo, designed by an artist friend, was a two-tailed mermaid encircled by the store’s name.

Question 10

Why did Starbucks choose to enter a predominantly tea consuming market like China?

Starbucks choose to enter a predominantly tea consuming market like China because it is probably easier to accelerate the sale of one’s products in a market where demand already exists if compare with a market that has a large number of potential consumers and an emerging economy but low demand for the product. As China that fits the above description down to it being predominantly tea-consuming and one of the smallest coffee markets in the world. Apart from this, China has large geographic area with large population.

Starbucks enter China because its company felt that China offered most potential market in Asia. According to one executive of Starbuck, Asian is a region which full of emerging markets since the consumer disposable income increase as country economics growth. China has the most population in Asia and China economic growth rapidly. Apart from this, people in China are open to Western lifestyle. Finally, coffee consumption growth rates in Southeast Asia are estimated to increase 20 % to 30 % yearly.

Question 11

Why did Starbucks places its outlets in China in mainly commercial areas?

Starbucks places its outlets in China in mainly commercial areas because individual living in urban areas are Western lifestyle adapted. Starbucks as American icon coffeehouses are highly recognize by individual living in commercial areas. Starbucks are identifying themselves a premium beverage seller with best quality of coffee bean. Thus, Starbucks couldn’t sell their product with low price. The individual with higher disposable income are living in mainly in commercial areas. Individual in commercial area have higher purchase ability to do expense. Furthermore, Starbucks depend less domestic advertising but more promotion through discount coupon and visits, which draw first-time consumers.