The External Environment and Its Effect

International Journal of Marketing and Management Research
Vol. 8, Issue 1, January 2017, Impact Factor; 5.108ISSN: (2229-6883)

www.skirec.orgEmail Id: skirec.org@gmail.com
THE EXTERNAL ENVIRONMENT AND ITS EFFECT ON STRATEGIC MARKETING PLANNING:

A CASE OF STARBUCKS MALAYSIA
Grace Chok Yee Swan

MohdYaziz Bin Mohd Isa
M.S.B. Siddiq
UniversitiTun Abdul Razak,
Malaysia
ABSTRACT:
The purpose of this research is to examine the effects of external environment pertaining to the
marketing strategy of Starbucks, a coffee chain in Malaysia. An external environmental analysis has
been conducted to examine the environment in which the company operates. These paper
overviews several theoretical approaches to explore the strategic marketing planning process of the
Starbucks Malaysia.
KEY WORDS: Marketing Strategy, External Environment, Strategy Tactics Grid, Differentiation
CASE PERSPECTIVE:
This case has been developed as a basis for academic discussion for exemplifying the issues and
perspectives of managing, leading and strategizing rather than to illustrate either effective or
ineffective handling of any business or management situation. It is based on the information publicly
available through company reports, brochures, pamphlets, leaflets, newspapers, magazines,
websites, or other such material. It should not be viewed as a typical business case, but rather an
insightful and comprehensive elucidation of what we expect the students of a management program
to understand appreciate and demonstrate when they review, analyze, and discuss a highly
competitive environment from the standpoints of leaders of a corporate enterprise.
INTRODUCTION:
The coffee industry has been expanding rapidly all across the world. Malaysia used to be known as a
tea-d i ki g atio hi h as fa ousl k o fo its tehta ik pulled tea . Ho e e , the
aromatic coffee has drawn consumers to inculcate a coffee culture in the local beverage market.
Coffee culture has been hugely accepted in Malaysian society because of the wide expansion coffee
chains, both international and local brands such as Starbucks and Old Town White Coffee. Over the
An International Double-Blind, Peer Reviewed, Refereed Open Access Journal - Included in the International Indexing Directories
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last few years, the international coffee outlets have been opened every corner especially in cities
and towns, and the coffee culture is gaining popularity among the young and professionals. In light
of this, research has shown that there is a positive correlation between the GDP per capita and the
amount of coffee demanded in Malaysia. Thus, the market has the possibility to rely on more coffee
products to boost the economy of Malaysia.
The ambience of a coffee house has provided a place for fast-paced Malaysians to sit down and
enjoy the calm, invigorating environment. A coffee house like Starbucks provides a convenient meet-
up spot that is suitable for every age. Young people like college students are keen in meeting each
other in coffee houses to socialize and complete assignments while working adults prefer going to
Starbucks because they are willing to spend on better products and services using their disposable
income to improve their quality lives. The older adults are agreeable to the modest price of a cup of
coffee and snack with a laidback and casual environment.
Most of the Malaysians have the perception that drinking coffee is a part of western culture and
ideology. Therefore, sipping coffee on a daily basis and for leisure with a unique name encapsulates
a highe sta da d of life i Mala sia. “ta u ks i te esti g app oa h has fou d itself a huge lie tele
in Malaysia. Many go to Starbucks not only to indulge a cup of Frappuccino or Americano but to
e jo the “ta u ks E pe ie e e ause the perceive it as trendy and exciting. Hence, Starbucks
has established itself as an aspiration brand, and is able to charge premium price for its coffee in
Malaysia.
In order to sustain loyal customers as well as new potential non-coffee drinkers, Starbucks applies
the differentiation marketing strategy which started off for coffee beverages and now for non-coffee
products as well. Starbucks is one of the largest coffee marketers in the world. Starbucks provides
variety of products such as premium roasted and handcrafted priced coffees, tea, juices, a range of
pastries, cakes and other beverages. What started off as a coffee hub has transformed Starbucks to
diversify into related food and beverages business as well as to offering merchandizes to expand
their differentiation strategy? They also distribute their products, mainly coffee; and license their
trademark through other channels such as licensed stores and retailed hypermarkets to increase
their competitive advantage.
STARBUCKS’ OPERATIONS IN MALAYSIA:

Starbucks was originally founded in Seattle, a city in Washington in the north-western of the United
States of America, in 1971. The company focused on selling coffee beans, roasting machines and a
wholesale business for local restaurants. Before Starbucks existed, Howard Schultz (the founder and
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current Starbucks CEO) owned a coffee bar named II Giornale, before buying Starbucks for USD4
million. Initially, Howard proposed an idea of serving coffee in a homely cafe to the original owners
of Starbucks, but it was rejected. This happened because their concept of Starbucks was to sell high
ualit offee ea s a d ot to se e offee, as that as ot the o pa s o je tive.
Afte the a uisitio , Ho a d “ hultz s offee a , II Gio ale as e a ded to “ta u ks Coffee i
year 1987. That was when Starbucks really began taking shape and the business started blooming
and achieved incremental sales, about 84% in year 1991, after suffering losses due the overhead and
operating expenses for first two years, arising from rapid expansions. Even after 25 years of
establishment, Starbucks is still undergoing rapid expansions of the coffee chain.
Starbucks Coffee entered into foreign market when it opened its first store outside of America in
Japan in year 1996. From that time onwards, Starbucks expanded drastically on a global scale by
establishing more stores. The 25,085 total stores worldwide as on October 2, 2016 consisted of
company-operated and license stores in over 75 countries. In 2016 alone, it opened 2,042 new
stores including the first Starbucks stores in Cambodia, Kazakhstan, Andorra, South Africa, Slovakia,
and Trinidad and Tobago. Fu the o e, the o pa sa ual evenue has tripled in the past ten
years, attaining USD 21.3 billion as on October 2, 2016. Due to global expansion strategy, Starbucks
has the largest numbers of stores in the world in the coffee chain industry. Thus, the company
produces the highest revenue annually in the industry. As a matter of fact, Starbucks came second as
the ost alua le fast food a d o ld ide as o pa ed to M Do ald s hi h as pla ed fi st
within the broader quick-service industry. This proves that Starbucks has a strong market branding
and has set a high entry barrier for newcomers and existing coffee outlets.
I , “ta u k ope ed a e sto e i Mala sia. “ta u ks p i a st ategi optio fo e te i g
i to Mala sia s a ket is th ough li e si g st ategies. Be ja a Co po ation Berhad is the company
that has been approved to operate the license to allow Starbucks to function throughout Malaysia.
Starbucks Coffee International and Berjaya Corporation Berhad formed an enterprise by the name of
Berjaya Starbucks Coffee Company Sdn. Bhd. Their first store in Malaysia was opened at KL Plaza in
Jalan Bukit Bintang, Kuala Lumpur on the 17th December 1998. The Starbucks Coffee Malaysia has
been selling products such as espresso, coffee drinks, non-caffeinated beverages, pastries, coffee-
related accessories and equipment, gift and merchandise, souvenirs and confections. The company
has e pa ded to “a ah a d “a a ak, a d su essfull su passed the sto es ilesto e i
October 2016. To date, it is into its 16th year of operations, proudly holding the most favorite coffee
place for Malaysians, and also a productive member of communities across the country.
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SITUATION ANALYSIS AND MARKETING PLANNING: A THEORETICAL OUTLOOK:

Situation analysis helps the company to identify its own strengths and weaknesses, correlating with
the external opportunities and threats. Furthermore, a strategic analysis enhances its strategy and
p o ides detailed feed a k o the o pa s u e t situation. The environment covers many
aspects comprising of two main areas: the micro-environment and macro-environment. The micro-
environment consists of environmental constraints such as the structure of the market, the
suppliers, customer, trends, public and competition. The macro-environment includes forces such as
social, cultural, legal, economic, political and technological ones.
Marketing plan (Figure 1) is the fundamental base that ensures the companies are on track with
trends in the market place, aside from studying customer needs and their competitors (Dibb, 1996).
Proactive planning ensures that resources are used effectively, and also to prepare alternative or
a kup pla B he thi gs do ot tu out as pla ed o u e pe ted thi g happe s. The
importance of the internal and external environment and the relationship it has with the
development and implementation of strategic planning is crucial; and should be strongly encouraged
to companies that want to achieve profit in the competitive arena. A company is only able to
e e ute a d suppo t its st ateg if it has st ategi fit ith the e i o e t. Othe tha st ategi fit,
a company needs to assess marketing opportunities, thorough research and focused target markets,
understanding marketing objectives and developing a plan for implementations and control.
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Figure 1- The STRATICS PROCESS –Marketing Planning
STARBUCKS AND ITS EXTERNAL ENVIRONMENT:
POLITICAL/LEGAL FACTORS:
“ta u ks sales a e affe ted politi al fa to s, di e tl o i di e tl . The ai fa to is its ea s of
sourcing of raw materials having significant affects upon its business in a direct political manner. The
countries such Costa Rica, Tanzania and Rwanda from which Starbucks purchases its coffee and
other raw ingredients are susceptible to natural disasters such as earthquakes, tsunamis and wars.
Co se ue tl , “ta u ks o t e a le to e ei e a d sell a offee ea s to its outlets if it fa ed
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with uncertain circumstances. Therefore, Starbucks focuses upon social and environmental norms to
protect the brand aspect in everything it does, from providing a living wage that is directly paid to
individual farmers to monitoring yielding techniques with low pollution rates. This gives importance
to fair trade practices. Another important standpoint of political factors is the need to follow the
laws and regulations in countries from where Starbucks purchases its raw materials. The increased
political awareness and activism in developing countries have made this essential. Most of the
countries are upgrading their infrastructures, which creates an opportunity for Starbucks to gain
access to more resources and markets. However, external factors such as bureaucratic red tapes still
pose threats to Starbucks because it hinders them from entering into the developing countries.
ECONOMIC FACTORS:
Before considering global expansion, Starbucks should examine the economic growth of developing
countries and the rate of unemployment to create an opportunity for Starbucks to gain additional
revenues. Starbucks has to deal with rising labor and operational costs in its quest for global
expansion. Other factors which can affect Starbucks are the local currency exchange rates, local
e o o i e io e t i diffe e t a kets, a d ta atio le el. As a hole, the ou t se o o i
g o th efle ts o su e u i g po e that dete i es “ta u ks p ofita ilit .
TECHNOLOGICAL FACTORS:
Technology enhances the minimal usage of envi o e t. It oi ides ith o e of “ta u ks
issio s hi h is de elopi g i o ati e a d fle i le solutio s to i g a out ha ge . The o pa
is in a good position to leverage with other companies such as Apple and Android to create an
application on the smart-phone software. Customers are able to treat their phone as a card whereby
it s a s the Q‘ ode as ell as sto e usto e s details. It helps to ide the o ile a e easil a d
also enables mobile payments. Other than that, beginning from 2011, Starbucks had a breakthrough
in brewing coffee that carries the same aroma and flavor of Starbucks coffee which is the Starbucks
VIA®, an instant coffee. It took the team 20 years to make a breakthrough that finally enables
“ta u ks lo al usto e s to d i k same coffee anywhere and anytime. In addition the company has
installed Wi-Fi in each outlet for the comfort of the customers to surf the web for work and study
while enjoying a cup of Starbucks coffee.
SOCIO-CULTURAL FACTORS:
In Malaysia, the coffee culture is growing among Malaysians with the increase of coffee cafes. The
demand for coffee is increasing in Malaysia as growing middle class Malaysians start to inculcate the
habit of drinking coffee. Therefore, Starbucks has the opportunity to increase its revenue following
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the increase in demand for specialty coffee. Besides, Starbucks also caters to health-conscious
consumers by offering an array of healthy products such as homemade granola, packed banana, fruit
juice and personalized drink. Consumers are able to request their preferred beverage according to
their preferences such as full cream milk, or they can request for either low fat milk or soya milk. The
service provided by Starbucks indirectly gives consumer the feeling as though they created their own
beverage themselves.
I elatio to that o su e s eha io to a ds “ta u ks is i flue ed th ee pe spe ti es hi h
are cultural, social and personal factors (Consumer behavior in relation to premium products, 2015).
Basi all , Mala sia s a e d a to “ta u ks e ause of the “ta u ks e pe ie e hi h gi es the
feel of being in a Western country. Malaysians are heavily influenced by the westerners; hence they
are willing to experience westernized culture, deemed to be t e d . Most of “ta u ks o su e s
aefo the Ge X a d the Mille ials , a d this o pa has set the as thei ai ta get to
i ease e e ues fo e e sto e. Mala sia s o all ould ha g out at a ak stalls a d sip
coffee with friends, but sipping coffee in a different environment certainly gives a whole new
dimension for them, and people seem to enjoy the new classy concept.
ENVIRONMENTAL FACTORS:
Starbucks recognizes that environmental responsibility is essential for our future. Starbucks focuses
on operating with minimal environment impact of its business activities. Starbucks even applies
corporate social responsibility in the supply chain. The company is committed to a role of
environmental leadership in every aspect of its business ("Starbucks Shared Planet - Our
Responsibility," 2009). One of the ways that Starbucks embraces the environment is through
promoting its fair trade coffee. This practice has been adopted so that local farmers are able to
receive economical and sustainable prices for their coffee, and get extra profit for the betterment of
their communities and businesses (Davids, 2009). Hence, as a multinational coffee company,
Starbucks has banned itself from exploiting local coffee farmers. Other than that, Starbucks offers
RM2 off if the customer brings his/ her own Starbucks tumbler to the store when purchasing a drink.
This is to e ou age usto e s to i ul ate the ha it to go g ee . “ta u ks is u e tl g o i g i
popularity in support for environmentally friendly products. Starbucks in Kuala Lumpur Malaysia is
working in collaboration with the Society of Interpreters for the Deaf (SID) in operating a store
dedicated to providing employment opportunities for Deaf employees. There are currently 10 deaf
employees and th ee hea i g i pai ed e plo ees, e plo ed at its Ba gsa Village outlet. “ta u ks
commitment to excellence in the workplace has resulted in winning much recognition, including
E plo e of Choi e the Mala sia H‘ A a ds .
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CUSTOMER TASTES:
Malaysia is a country with a diverse culture with set of values and beliefs that affect the sales
a ti ities. Fo tu atel , “ta u ks p a ti es t a s atio al st ateg that e ou ages it to thi k glo al,
a t lo al i Mala sia ithout o p o isi g osts, p odu t quality and operating effectiveness.
Thus, this ensures a high profitability and opportunity to expand to other regions and countries in
the future. Starbucks knows that in order to be successful, it has to realize the need for local
differentiation and responsiveness. It is risky for global brands to try to assimilate their business to
local markets due to cultural differences. However, Starbucks succeeded in overcoming the
conflicting environmental and cultural factors. As a result, Starbucks was able to gain access to new
customers.
PRODUCT:
Starbucks aims to serve a standardized set of beverages and products that have similar taste
ega dless hethe ou e i Thaila d, Aust alia o U.“.A. “ta u ks sells so e of the e ha dizes
which are different in prints which follow norms and preferences according to the country of
operation. These merchandizes suit best for souvenirs. Vignali (2001) stated that adaptation is vital
in aspects such as consumer preferences, customs and laws. Like in Malaysia, Starbucks adapted
their products following the religious laws and customs such as Syariah and then obtaining the Halal
certificate. It is compulsory for every global brand to undergo comprehensive inspections by Muslim
clerics to ensure that their products and services are halal and do not contain any element or
ingredient of a pork product. As a result, Starbucks customized the menu of beverages which is
different from that in the U.S.A. in order to tailor for Malaysians consumers but the standardized
taste has been retained. Occasionally, Starbucks would put i effo ts i adapti g i to Mala sia s
diverse culture. It can be seen during the main festive seasons such as Christmas, Hari Raya Aidilfitri
and Chinese New Year, when the company would offer promotions, merchandizes and Starbucks
Card that appeal to the local market. As a matter of fact, in 2003, Starbucks invented an original
handcrafted coffee in conjunction with Mid-Autumn Festival named Strawberry Cheesecake
Frappuccino. It is earnestly hoped that Starbucks will constantly innovate and offer the best products
to engage their customers in new and exciting ways.
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STRUCTURE OF THE MARKET/COMPETITION:
The f a e o k of Po te s Ge e i Co petiti e “t ategies p o ides a e aluatio of the positio a d

strength of the Starbucks within the coffee industry, keeping up its competitive advantage over its
rivals. It provides a proper identification of the landscape of the industry (Thompson, Strickland &
Gamble, 2007). Differentiation is aimed at the broad market that involves the production of a new
product or service that could be perceived throughout its industry as unique. Starbucks is known for
its top-quality coffee beans from the start. The company managed to compete with its rivals by
differentiating its business.
The company has the first mover ad a tage he e it de eloped the o ept of Thi d Pla e to
sustai usto e s. The Thi d Pla e o ept is eati g a e i o e t that ese les usto e s
thi d pla e esides o ki g e i o e t a d ho e as thei fi st a d se o d pla es. “ta u ks
i te ds to ele ate usto e s e pe ie e at the sto e goi g at g eat le gths f o displa i g
merchandizes, the artwork, the playlist and the aroma of all the blended coffee to arouse the love
for coffee and create a comfortable place to work or chill while sipping on their coffee.
Other than that, Starbucks Malaysia is operating the business using the differentiation strategy in
term of broadening and refreshing its in-store product offerings. Even though Starbucks is a coffee
chain, it also caters for non- offee a d health o s ious usto e s. “ta u ks does t a o its
product differentiation to coffee beverage but also expands to teas, juice drinks, music CDs, and
s a ks. As lo g as “ta u ks p odu t diffe e tiatio does ot st a a a f o its elated business, it
ill add o e o petiti e ad a tage. B a d lo alt lo e s usto e s se siti it to p i e. I eased
costs are usually passed down on to the buyers by increasing the price of the beverages. Starbucks
has been consistently generating high profits because of the differentiation strategy that creates a
stronger barrier to face competition from possible competitors. Starbucks has been able to sustain
for 16 years in business because it leverages its core competencies further. The company leverages
its resources internationally by capitalizing in the coffee industry. It is a huge player in gaining access
to esou es a d apa ilities i fo eig a kets. A Po te s Fi e Fo es a al sis displa s the i te sit
of the competition in the marketplace. Starbucks is able to identify the intensity of the threat of
rivalry/potential entrants and threat of new/potential entrants as well as threat of substitutes,
bargaining power of suppliers and buyers.
THREAT OF RIVALRY/POTENTIAL ENTRANTS: HIGH TO MODERATE:
The coffee industry is experiencing a monopolistic competition, whereby there are many producers
of coffee that are differentiated from one another. The competition in the coffee industry is
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moderately high because Starbucks enjoys a significant market share. Therefore, Starbucks is
pressured to maintain its competitive advantage with its premium products. Many of the new cafes
are seeking to increase market share against the big player, Starbucks. Hence, there have been many
new cafes opening in Malaysia. Consumers are able to receive the same service and quality from
coffee houses, which are slightly cheaper and there are also varieties of food. Coffee industry has a
great potential in Malaysia, and it has yet to reach maximum saturation level.
THREAT OF NEW/POTENTIAL ENTRANTS: MODERATE:
In Malaysia, the coffee industry has threat of new/ potential entrants at moderately high level with a
monopolistic competition structure. There are many proprietorship enterprises who own their own
café houses such as Third Wave Cafe, The Pulp and Espresso Lab. What separates these cafes from
Starbucks is that they are less commercialized, but more authentic and personalized. For the people
who are enthusiastic about coffees, they serve different types of coffee making such as siphoning or
cold brew. At a localized level, small coffee shops have the capability to compete with the likes of
Starbucks and McD Café. The government agencies provide encouragement and support for local
entrepreneurs. As regards local cafes, some Malaysians would certainly prefer supporting them than
the global brands, though the people in general do not have a mind-set of domestication. The
customers look for quality, to be original and unique. Moreover, it involves no switching costs for the
customers. The local coffee shops have resources and capabilities to compete with the large
commercialized brands like Starbucks who have achieved economies of scale by lowering production
cost, and improved efficiency with a huge market share. Starbucks is playing a dominant role, and
has economies of a larger scale and scope. It has a learning curve advantage and favorable access to
raw materials with the relationship it has built with the suppliers. Despite Starbucks monopolizing
the coffee industry in Malaysia, a segment of consumer population would still prefer its very own
local coffee. Hence, local cafes may still win the hearts of the locals even though competing against
Starbucks is not an easy task.
THREAT OF SUBSTITUTES: HIGH:
The risk of losing customers who are able to look for substitute products is a threat which will have a
significant implication as a market force. There will always be variety of foods and beverages that
customers can choose over Starbucks. The factors that affect this substitution are the price and
ualit . “ta u ks offee is p i ie tha othe o petito s e e ages e ause “ta u ks offe s the
finest quality coffee beans. This market force is reinforced by the fact that there is no switching cost
invol ed i epla i g othe si ila p odu ts. Coffee houses su h as Esp esso La , Glo ia Jea s Coffee
and Dr. CAFÉ are a few of the potential avenues for substitutes for the social experience, which is
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akin to that of the Starbucks. Most of the Malaysians prefer cheaper products that could somewhat
replace the expensive products. Even though, Starbucks has its own customers who would prefer
ualit o e p i e, it a t affo d to e o pla e t a d eed to o ti uousl keep up ith the e
rivals. Therefore, Starbucks has ventured into selling coffee maker, premium packs in retail stores
but this threat is still a concern, and would continue to be so in future.
BARGAINING POWER OF BUYERS: MODERATE TO LOW PRESSURE:
The bargaining power of buyers is moderate because it is closely related to the market force and the
rate of substitution products. Consumers are able to choose between which coffee chains they
prefer based on the price, preferences, quality of coffee and service. Furthermore, there is no cost
for switchi g a offee hai to a othe . Ho e e , o su e s a ot i flue e “ta u ks a ket
pricing because the price of coffee bean is not subsidized by the government. Starbucks should be
concerned on how much the customers are willing to pay for a premium coffee before they consider
opting for reasonable competitor products.
BARGAINING POWER OF SUPPLIERS: LOW TO MODERATE PRESSURE:
“ta u ks ai supplie s a e f o ‘ a da, Ta za ia, Costa ‘i a, Chi a, and South America and so
on. The main chain suppliers of Starbucks provide quality coffee beans and premium Arabica coffee
grown in selected regions, which makes the cost switching between substitute suppliers as
ode atel lo . “i e “ta u ks is a highl i po ta t lie t fo the supplie s usi ess, due to its
size and scope, it has the power to dominate its small and medium suppliers. However, Starbucks
provides local farmers with resources and expertise to minimize the production cost to improve the
quality of coffee and increase the yield of coffee. Other than that, Starbucks implements a fair trade
practice under its coffee and farmers equity (C.A.F.E.) program which gives its suppliers a fair
pa t e ship status. It di e tl lesse s those supplie s a gai i g po e .
COMPETITIVE POSITIONING:
Rumelt (1980) stated that competitive advantages are positioned with superior resources, superior
skills or a superior position. Normally, a firm can achieve better when its resources and skills are
sufficient, and as a result they do better than the competitors. Each industry or market segment
requires specific skills and resources to acquire competitive advantage. Many competitors use
location, product mix and store environment differentiation to establish market niche. Positional
advantage is how the company strategizes using resources and expertise to survive in the
competition. Positional advantage can be evaluated from the aspects of the form of size,
differentiation product and service from rivalries and branding. In order for a firm to be successful,
its strategy and tactics need to be synchronized to be efficient and effective (McDonald and Leppard,
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1993). Strategy and tactics are planned after analyzing the situational environment of the company.
As long as environmental forces remain constant, the position will remain constant. Positional
ad a tage a e e aluated f o the aspe ts of the fi s size o s ale, diffe e tiatio fo
competitors and successful trading names.
Figure 2: Strategy Tactics Grid
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It can be seen from the figure (Figure 2) that Starbucks Coffee Malaysia is positioned to the top left
of the matrix, which indicates that it is positioned at thrive. This is because its stores are flourishing
at every corner in Malaysia effectively and efficiently. This indicates that Starbucks Coffee Malaysia
is u i g p ofita l a d ot asti g ti e o esou es. As su h, e e tl “ta u ks a keti g
strategy was announcing a RM9.00 on a tall sized Frappuccino to end November and welcoming
December if an individual uses his/ her Starbucks Card or RM10 if he/ she is a non-member.
Starbucks is effective in gaining the outcome as this promotion will definitely invite a big crowd to
Starbucks during the promotion hour (5pm-8pm). Besides, Starbucks Coffee Malaysia may only lose
a small amount of profit just for that day since the original price is RM14/cup but it is able to gain
new, potential, or loyal customers. It is also efficient in encouraging customers to own a Starbucks
member card so that they can redeem any promotion in the future. In a way, Starbucks gains profit
offe i g the e e a d fo ‘M . He e, “ta u ks st ategies a e the ke fa to s fo the to
sustain in Malaysia for the past 16 years! It knows how to attract its customers to keep purchasing
its products. For example, once a year, Starbucks would offer a free journal or handbag if the
consumers have bought 15 drinks within a month. This is one of the tactics for continuous business
and for gaining a loyal customer base in return.
Based o “ta u ks i te atio al pe fo a e so fa , it is thriving because firstly, it is a
multinational company, having tremendous resources and capabilities, backed by pragmatic
leadership. This company abides with its ethical standards to be an environmental leader even
though it is competing with other coffee hai s i Mala sia. “ta u ks ai o je ti e is to
establish Starbucks as the premier or the finest coffee in the world while maintaining [its]
u o p o isi g p i iples as the g o Co pa Fa tsheet, .
PORTER’S GENERIC STRATEGY GRID:

Each coffee outlet can be distinguished by its tactics and strategies of achieving competitive
advantage in a crowded coffee industry. Other than considering its industry structure, Starbucks
should identify its position within the coffee industry. This positioning of Starbucks will determine
the competitive advantage within the four positions which are cost leadership differentiation
op ight p odu ts a d se i es a d fo us offe i g a spe ialized se i e i a i he a ket . The
further along, the Focus St ateg is su di ided i to t o pa ts: Cost Fo us a d Diffe e tiatio
Fo us . These a e sho i the Figu e elo .
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Figure 3: Porter’s generic strategy grid
O e of the issio s of “ta u ks Mala sia is to i spi e a d u tu e the hu a spi it- one person,
o e up a d o e eigh o hood at a ti e . A o di g to “ta u ks Mala sia, e e sto e is pa t of a
community, and [they] take [their] responsibility to be good neighbors seriously. Starbucks focuses
fully on humanity and embracing diversity among their customers. Overall, Starbucks falls on the
Cost Focus and Differentiation Focus because it increases profit by saving costs on production while
charging industry-average prices on the beverages, pastries and merchandizes and concentrating on
a particular niche markets and understanding the dynamics of the market and the demands of
customers when operating globally. Starbucks need to be creative on its product mix and supply
chain to sustain its position in the marketplace. It is challenging to serve customers from different
types of market segments, and provide them an average cost or well-specified products in the
market. Hence, Starbucks knows that it needs to build a strong brand loyalty amongst its customers.
As a result, this increases its competitive advantage among its competitors such as Coffee Bean and
Tea Leaf, Dr Café and San Francisco Coffee in Malaysia.
“ta u ks positio i g i the ost fo us seeks ost advantage from suppliers of coffee bean.
Starbucks Coffee emphasizes on environment and providing the best hospitality to the customers.
They do not emphasize economies of scale. These factors have influenced the service and
accommodation that Starbucks provides as well as its brand image. That is why the price of the
p odu t is high, a d it ate s fo uppe a d iddle lass seg e ts of the a ket. It is “ta u ks
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responsibility to make customers feel that the price they are paying is appropriate corresponding to
the factors mentioned before.
Differentiation strategy is adopted where the firm diversifies from its competitors by innovating and
enhancing its products to provide a unique value to the existing as well as potential customers.
Starbucks Malaysia s di e sifi atio is th ough pe ei ed supe io ualit p odu t hi h eats its
rivals and high brand image and recognition. In Malaysia, Starbucks feels the responsibility to fully
engage with their customers and partners, and to promise to make a perfectly made beverage for
them. Starbucks holds regular new product launches to further strengthen the Starbucks experience.
For example, it follows the four seasons or the major festive seasons. This has enticed customers to
try on the limited edition beverages which increase the sales due to their curiosity such as
Peppermint Mocha, Toffee Nut Crunch Latte and Teavana Red Ribbon Green Tea Latte in
conjunction of Christmas season. The company also applies promotion and packaging for further
differentiation su h as the ‘a a the e ups a d u -one-free-o e f o p to p o e e
Friday. Starbucks is known for its internationally renowned identity for serving high quality coffee
with outstanding and friendly service. With the brand loyalty, they are able to set a premium pricing
policy in many markets where economic conditions allow that.
Strategic marketing planning
BCG:
The Boston Consulting Group (BCG) matrix in Figure 4 improves the strategic view of a
multidivisional firm; and, thus, is utilized as decision-making aid for strategic marketing plan.
“ta u ks a ide tif the sto es st ategi positio th ough the Bosto Co sulti g Mat i . The BCG
matrix includes 4 divisions which are Question Marks, Star, Cash Cows and Dogs.
Figure 4: BCG
Page 50
Starbucks is identified to be in Star division. This is so because it has high market growth rate with
the wide expansion all over the world including Malaysia. It has successfully expanded to Sabah and
Sarawak, and successfully surpassed the 226 stores milestone in October 2016. It indicates that
Starbucks will be residing in Malaysia for a long run because its growth and profitability are still
increasing tremendously. Since Starbucks receives high revenue annually, it indicates that it
subsequently receives substantial investment. This quadrant includes forward backward, horizontal
integration, market penetration, market development and product development to operate its
business. Starbucks offers its product from the manufacturer to the end user who buys the
beverages and food. It has managed to penetrate into the global market and adapt to the home
ou t s ultu e i t odu i g p odu ts that suit the . Othe tha that, “ta u ks i te ds to
maintain a consistent environment for target customers. Thus, it focuses upon marketing its high
quality coffee to the high income, upper class with consistency and good standard. The company
wants to ensure that the value, culture and environment are well-preserved throughout the globe.
That is how it maintains competitive advantage from the other rivals as well as maintains a high
market growth rate.
CONCLUSIONS:
Effe ti e a keti g st ategies a d ta ti s a a hie e a o pa s issio . We a ot u de i e
the significance of analyzing the environmental forces thoroughly. There are a number of
u o t olla le a ia les that affe t “ta u ks a keti g st ateg a d ta ti al i ple e tatio i
Malaysia. Hence, some well-known models have been used to identify the factors that have to be
faced by Starbucks such as PESTLE, st u tu e of the a ket a d Po te s Fi e Fo es a al sis as ell
as e a i i g “ta u ks usto e s a d p odu t adaptatio ithi its i te alizatio st ateg i
Malaysia. All of these models assist in the strategic decision making to determine the success of the
company.
Even though it has been said that Starbucks targets customers are from upper and middle class, it
did ot o p o ise ith its alue a d ultu e he it e pa ded i Mala sia. “ta u ks did t lo e
the cost of the beverages even though Malaysians complain the overpriced drinks. However,
Mala sia s a e still d a to “ta u ks e ause it a ages to ai tai its o e alue hi h is to
inspire and nurture the human spirit – o e pe so , o e up a d o e eigh o hood at a ti e . It s
not about the o e alue, it s the ti e alue spe t fo ou self ith ou lo ed o es. “ta u ks
did t ha e a ha d ti e adapti g i to the Mala sia ultu e a d elief e ause the did a p ope
research before entering into a joint venture with Berjaya Corporation Berhad. Furthermore, the
Page 51
external environment analysis guides Starbucks to align with its marketing mix activities. With a
continuous analysis, Starbucks will be able to achieve its desire to achieve economies of scale and a
consistent culture as well as core values worldwide.
Fo “ta u ks i te alizatio st ateg , the o pa s effe ti e ess a d p ofita ilit a e ei fo ed
thei st o g o petiti e positio a d a ket sha e. “ta u ks su ess is a hie ed adapti g to
a ou t s so io-cultural environment and keeping their main goal which is to establish Starbucks as
the premier purveyor of the finest coffee in the world. Starbuck is in a thriving market. The
o pa s st ateg a d ta ti s ha e helped to i p o e the a keti g pla i g i o de to provide
maximum efficiency and effectiveness.
Apart from that, Starbucks is implementing cost focus and differentiation focus strategies (generic
strategies). In terms of differentiation, Starbucks constantly needs to compete with its competitors
from products and quality of coffee beans. Starbucks standardizes its blend of coffee to maintain the
same taste and excellence across the world. Most of their products are personalized following the
culture and customs of the market Starbucks operate in (Florence, 2013). In doing so, Starbucks
achieves its competitive advantage globally as a number one coffee chain in the world. They have a
transnational business model that encourages them to offer a universal product to fulfill the national
eeds. It is a hie a le ith the thi k glo al, a t lo al st ateg , esulti g i a pe ei ed high ualit
product and retaining a good brand image as well as recognition.
Hence, Starbucks should continuously look for innovative alternatives to avoid market saturation
he u i g the usi ess o ld ide. “ta u ks o ept is ot o l e pa di g its a ket ut also
dominating the coffee industry as a whole. It is recommended that in its future international
expansions, Starbucks should analyze its market using the value chain analysis to identify the degree
of ho oge eit of a e ou t o pa ed to the e isti g “ta u ks outlets. This a al sis ill
further enhance economies of scale through the transferability of the resources and capabilities
from other countries.
Since Starbucks is mostly promoted by word of mouth, they gain cost advantage and thus they
should be able to offer drinks that are low cost. Otherwise, Starbucks could order coffees from local
suppliers such as Tenom coffee and co i e it ith its o i g edie ts to p odu e Mala sia s o
“ta u ks d i k. This ill defi itel i ite o e a id lo al offee d i ke s to d i k at “ta u ks. I
sho t, “ta u ks o siste tl eeds to update o Mala sia s ultu e to i o po ate it i to its system
and products to sustain life-long patronage from its loyal customers.
Page 52
REFERENCES:
1. Vignali, C., Vrontis, D. and Vranecevic, T. (2003) Marketing Planning. Analysis, Strategy and
Tactics, London: Foxwell and Davies.
2. Vrontis, D., &Pavlou, P. (2008). The external environment and its effect on strategic
a keti g pla i g: A ase stud fo M Do ald s. J. I te atio al Busi ess a d
Entrepreneurship Development, 298.
3. Roby, L. (2011). An Analysis of Starbucks as a Company and an International Business. A
Senior Thesis Submitted in Partial Fulfillment of the Requirements for Graduation in the
Honors Program Liberty University Spring 2011.
4. Company analysis of Starbucks Coffee Malaysia. (2015, March 23). Retrieved from
https://www.ukessays.com/essays/marketing/company-analysis-of-starbucks-coffee-
malaysia-marketing-essay.php.
5. PESTLE Analysis of Starbucks. (2015, February 25). Retrieved October/November, 2016, from
http://pestleanalysis.com/pestle-analysis-of-starbucks/
6. Starbucks PESTEL Analysis. (2015, October 22). Retrieved from http://research-
methodology.net/starbucks-pestel-analysis
7. SMITHSON, N. (2015, September 12). Starbucks Coffee PESTEL/PESTLE Analysis &
Recommendations. Retrieved from http://panmore.com/starbucks-coffee-pestel-pestle-
analysis-recommendations
8. http://www.slideshare.net/VikkasMalhotra/starbucks-casestudy-16466939
9. Thompson, A. A., Strickland, A. J., & Gamble, J. (2010). Crafting and executing strategy: The
quest for competitive advantage: concepts and cases. Boston: McGraw-Hill/Irwin.
10. http://www.starbucks.com.my/coffee
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The External Environment and Its Effect

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The External Environment and Its Effect

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International Journal of Marketing and Management Research

Vol. 8, Issue 1, January 2017, Impact Factor; 5.108ISSN: (2229-6883)

THE EXTERNAL ENVIRONMENT AND ITS EFFECT ON STRATEGIC MARKETING PLANNING:

Grace Chok Yee Swan

STARBUCKS’ OPERATIONS IN MALAYSIA:

SITUATION ANALYSIS AND MARKETING PLANNING: A THEORETICAL OUTLOOK:

Figure 1- The STRATICS PROCESS –Marketing Planning

STARBUCKS AND ITS EXTERNAL ENVIRONMENT:

STRUCTURE OF THE MARKET/COMPETITION:

The f a e o k of Po te s Ge e i Co petiti e “t ategies p o ides a e aluatio of the positio a d

Figure 2: Strategy Tactics Grid

PORTER’S GENERIC STRATEGY GRID:

Figure 3: Porter’s generic strategy grid

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