In order for a company to stay successful in a ompetitive environment, they must create new products to help build customer loyalty. In the late 1990’s, a single serving coffee machine called a Keurig was introduced in the market This machine was originally designed for businesses so that associates could make their own cups of coffee. The idea behind the coffee machine was created so that consumers can switch out different flavors of coffee after every cup. The single serving of coffee also allows for consumers to drink a warm cup of coffee.
When large pots of coffee are made, the coffee eventually starts to get cold after consumers are finished with the first cup. Keurig coffee machines have become increasingly popular in households across the nation. The creation of Starbucks flavor K- cups allows for Starbucks to gain a competitive edge in a new market. This new market can help Starbucks increase the number of consumers that drink Starbucks coffee. Starbucks locations are only found in larger cities throughout the United States as well as in many other countries.
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For consumers who have Keurig machines, they can purchase Starbucks coffee in their local grocery stores. This convenience allows consumers to enjoy a fresh cup of Starbucks coffee within their home. Starbucks can increase consumer demand for K-cups products by creating different flavors. Different flavors will satisfy many of the consumer demands within the market. Starbucks will target many Of those consumers that are not close to a Starbucks location. Situational Analysis Cooperative Environment The cooperative environment for Starbucks K-cups could be quite large.
The cooperative environment is essentially all firms and individuals that have a vested interest in a firm accomplishing its objectives (Peter & Donnelly, 2015). Resellers are a primary example of someone who would have primary nterest in a firm achieving its objectives. Currently, Starbucks uses the likes of Wal-Mart, Kroger, Giant Eagle, Costco, Kohl’s, Office Depot, Target, and many other stores as resellers of their K-cups. It is important that Starbucks K-cups are being resold by very large businesses that have stores all over the world.
Starbucks K-cups can be sold not just in the united States, but all across the world because of the large, international reselling companies. This allows Starbucks to maximize its revenues as they are earning money from many different markets all across the world. It is important that Starbucks takes dvantage of the countries around the world that are big coffee drinkers. The united States is ranked as only the 16th highest coffee consumption per capita nation (Ferdman, 2014). It is behind the likes of the Netherlands, Finland, Sweden, Norway, Germany, and Canada.
These are all places with colder environments, so it will be significant for Starbucks to make sure the K- cups are being sold by Starbucks’ resellers in these locations. Suppliers would be another example of someone who would have a primary interest in a firm accomplishing its objectives. Starbucks currently uses a upplier diversity program by actively seeking diverse owned businesses to buy from CSupplier Diversity,” 2014). All businesses in the United States or Canada, who are certified as “‘diverse” by a third-party company are eligible to apply for this program (“Supplier Diversity,” 2014).
This method gives Starbucks an excellent opportunity to have suppliers come to them rather than having to go search for suppliers themselves. They can then look at the options from the applicants and choose a supplier with the best price and quality while also giving back to minority-owned businesses. Overall, this is an xcellent program that Starbucks should continue to use their K-cup suppliers. Competitive Environment There are many competitors in the coffee industry today that also offer products for Keurig coffee machines in local grocery stores.
Starbucks states, “Our primary competitors for coffee beverage sales are quick-service restaurants and specialty coffee shops” (Starbucks, 2014). Dunkin’ Donuts is one of the biggest coffee chain competitors that also use K-cups to branch out to more consumers. According to Dunkin’ Donuts’ annual financial statements for 201 3, Dunkin’ Donuts has added over 790 stores worldwide, nd their annual revenue has increased by 8. 5 percent (Dunkin Brands, 2014). Some of their highlights for 2013 include, “increased sales of Dunkin’ Donuts K-Cup portion packs driven by a $7. 9 National Coffee Day offer and a two- packs-for-$1 9. 99 offer” (Dunkin’ Brands, 2014). Price is a huge factor when it comes to competition. Starbucks K-cups can range anywhere from $19. 95- $109. 95 depending on the type of coffee and quantity (Starbucks, 2014). By having higher prices than competitors, this could turn consumers away from purchasing Starbuck brand K-cups when they can buy something similar for a lower price. The price of each box of K-cups differs on the type of coffee.
Having a wide variety of different kinds of flavors compared to other competitors can put Starbucks ahead of their competitors. Starbucks, however, was one of the first companies to sign an agreement with Green Mountain Coffee Roasters back in 2011. This has given Starbucks a competitive advantage in the market for branded products sold in grocery stores. Some of the other smaller brand names that are sold in Kcups include Caribou Coffee, Cinnabon, and Krispy Kreme. These smaller brands have not impacted the sales of Starbucks K-cups.
The market for specialty drinks is ighly competitive due to the changes in the quality, innovation, and price (Starbucks, 2014). Starbucks must be aware of the present and future competitors that may arise as the change in the market continues. Economic Environment Over the last three years Starbucks has seen a positive trend in the growth of their organization. Starbucks provides a premium product that was in less demand prior to 2011. Starbucks saw profits slump prior to 2011 due to the lower demand.
This industry is highly sensitive to the macroeconomic factors that affect the growth in household disposable income, which during the ecession caused downward pressure on the revenue and profitability margins in the industry (Geereddy, n. d. ). The industry’s demand for premium coffee and snack products are mainly driven by a number of factors which include disposable income, per capita coffee consumption, attitudes towards health, and world pricing of coffee and demographics (Geereddy n. d. ). In 201 1, the economic environment began to improve for Starbucks, and they posted strong earnings.
In the fourth quarter, despite a weak economic environment, Starbucks managed to beat top and bottom line estimates on rowing sales and higher tickets at its stores (Fontevecchia, 2011). They also had substantial international expansion and solid consumer products revenues (Fontevecchia, 2011). The companys consumer products group (CPG) delivered with revenues up to $242. 2 million, which CEO Howard Schultz highlighted the importance of K-cups and packaged coffee for the brand (Fontevecchia, 2011). The partnership with Green Mountain Coffee to distribute the K-cup has allowed Starbucks to branch out into a new market.
Starbucks can now provide their premium product to consumers where a Starbucks store is not readily available. The consumer can enjoy a single serving of Starbucks premium coffee from the comfort of their home, and no longer has to find a store. The company is benefiting by jumping into the single-cup coffee business (Krantz, 2013). The growth in the consumer products group, with the launch of the K-Cup, contributed to continual growth into 2013. Starbucks’ revenue had grown by more than for six straight quarters, fourth quarter 201 1 thru first quarter 201 3 (Krantz, 2013).
Schultz states “Starbucks today is executing in all markets and across all channels, and we have never been better positioned to go hard nd go fast after the tremendous opportunity that lies ahead” (Fontevecchia, 201 1). As the economy continues to improve, the amount of household disposable income should continue to grow. This growth of discretionar income will increase spending on consumer products. In addition to hig household disposable income, per capita coffee consumption IS expec?? increase in 2014 (Geereddy, n. d. ).
Social Environment The social environment includes general cultural and social traditions, n and attitudes. When these things change, there is often a need for a nel product (Peter & Donnelly, 2015). Coffee was first discovered in the Ethi Highlands. By the fifteenth century’, on the Arabian Peninsula, the Arabs the first to develop not only coffee but began its trade. Coffee was not c drink in homes, but also in public coffee houses (NCAIJSA, 2014). The popularity of coffee houses was unparalleled, and people frequented tl- for all kinds of social activity.
Not only did they drink coffee and engage conversation, but they also listened to music, watched others perform, kept up to date on current news events (NCAUSA, 2014). The culture bet each coffee house was born. Today, you cannot go into a Starbucks Witt eeing a group of people on a comfortable couch laughing or in deep conversation while sipping on a hot cup of coffee. The atmosphere with Starbucks leaves consumers with a positive vibes. A relaxed environmer allows consumers to enjoy their time spent drinking coffee catching up friends or using the WIFI hotspots to finish up work.
When consumers 1???? these good vibes are shared with friends and family at home. In 2011, Starbucks entered into a five-year partnership with Keurig to distribute coffee brand and their various coffee selections through their K-cups br (Starbucks, 2014). Starbucks in turn agreed to sell Keurig products onlin well as in grocery stores. Since the inception of their partnership, Keurit distributed over 2 billion Starbucks K-cups. With Starbucks introducing t K-cups in the market, their hope is that consumers will bring the same conversation and laughter into their homes.
It allows consumers to enjc Starbucks coffee with the convenience of being able to make it right in t own home. Political Environment/Legal Environment Starbucks believes that conducting business ethically and striving to do right thing are vital to the success of the company. (Starbucks, 2014) In espect to the political environment for Starbucks, the company has successfully considered risks and analysis for expanding the company worldwide, and any negative political impact in those regions.
At this tin there are no critical or outstanding issues with the use of the K-cup trademark patented by the Green Mountain Coffee Roasters Inc.