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ANALYZE STARBUCKS MARKETING STRATEGY IN VIETNAM MARKET Contents I. Introduction.............................................................................................................................................................1 1.1 Company history..............................................................................................................................................1 1.2 Products............................................................................................................................................................1 1.3 Vietnamese Market..........................................................................................................................................1 II. Macro-environment Analysis...............................................................................................................................2 2.1 Political factor...................................................................................................................................................2 2.2 Economic factor................................................................................................................................................3 2.3 Social factor......................................................................................................................................................3 2.4 Technological factor.........................................................................................................................................3 III. Micro-environment Analysis...............................................................................................................................4 IV. Starbucks market segmentation and target market selection.........................................................................4 4.1 Market Segmentation......................................................................................................................................4 4.2 Characteristics of the target market..............................................................................................................6 4.3 Positoning: Define company’s USP for your chosen target market............................................................7 V. Marketing Mix.........................................................................................................................................................7 5.1 Product..............................................................................................................................................................7 5.2 Price...................................................................................................................................................................8 5.3 Place..................................................................................................................................................................9 5.4 Promotion.........................................................................................................................................................9 5.5 People, Processes, Proves (For services).....................................................................................................11 Conclusion.................................................................................................................................................................11 References.................................................................................................................................................................13 I. Introduction This is a market report of Vietnamese market which Starbucks Company aims to enter in order to expand global market. Overall, Vietnamese market is a potential for Starbucks because of some primary reasons. Firstly, the company has much inside strength, such as good market share, strong financing and quality of products. Secondly, Starbucks’ market is large, and Asian market has highest increase in revenue, which is a good side for the company. Thirdly, the company sees that most microenvironment and macro-environment are beneficial in order to enter Vietnamese market. 1.1 Company history Starbucks Corporation - the largest coffee and Coffeehouse Company in the world, is based in Seattle, Washington. It was found by Jerry Baldin, Zev Siegl, and Gordon Bowker in 1971, and currently, Howard Schultz is the chairman and chief executiveofficerof Starbucks. Starbucks has a variety of brands, namely Seattle’s Best Coffee, Teavana, Tazo, Evolution Fresh and La Boulange, but Starbucks Coffee is the most famous brand. Our objective is “to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time” so that people come to Starbucks to chat, meet up and work. To achieve this, the company is continuing to open new global stores in the U.S, China and some potential countries in Asia. Through 45 years of rapid development, Starbucks Corporation achieves remarkable success. 1.2 Products Starbucks operates in different fields with different customer segments, and coffee is the main business. Starbucks offers roasted and handcrafted high quality coffee, tea, a variety of fresh food items and other beverages. Besides, the company also sells equipment types, such as grinder, specialty brewing and coffee maker. In all these products, coffee makes up 73% in the percentage of products (Starbucks fiscal report, 2015). 1.3Vietnamese Market Overall, after doing analysis of industry and market, Vietnamese market can be potential for Starbuck for 3 main following reasons. Firstly, it is a potential big coffee consumption market. Vietnam’ population is large and increasing over time. According to the General Statistics Office, Vietnam’s population reached 96.2 million people in 2017, including 15-64 age group, and accounted for 70,54% (CIA, 2017). Secondly, coffee consumption market reached 287.34 million USD in 2012. Mintel predicts this figure would reach 573.74 million in 2016 which made Vietnam become be top 5 of coffee consumption in Asia-Pacific. Thirdly, Asian market is the second largest market of Starbucks, and Starbucks is now presenting in 16 countries in the China/Asia Pacific region and having remarkable achievements. First of all, this segment has the highest revenue in four main segments in 2015, reached more than 2300 billion USD. Besides, among Asian countries, China, Japan and South Korea are three markets that have the largest number of stores in Asian market. From these success in Asia, Starbucks has desire to enter Vietnamese market. John Culver, president of the China and Asia Pacific region said: “We’ve been in the region going on 16 years, and given our success in Thailand, Singapore and Malaysia, as well as our overall financial performance, we see Vietnam as the next natural entry point,”. II. Macro-environment Analysis This section applies PESTEL analysis tool to indicate the most important factors of the macro environment in Vietnam, including the Political, Economic, Social and Technological factors. In the sphere of this thesis, the Environmental and Legal factors are ignored as they do not have considerable effects. 2.1 Political factor Vietnam is one of the most politically stable countries in South East Asia. In Vietnam, Vietnamese Communist Party is the only party which takes the lead the country in order to keep political, social and economic stability. Mr. Victoria Kwakwa, the World Bank’s Country Director for Vietnam said “Vietnam has done well in ensuring macroeconomic stability over the past year, which has been underpinned by moderating inflation and strengthening external accounts”(The World Bank, 2013). In addition, to encourage the economy to grow, Vietnam Government creates many policies to attract the Foreign Direct Investment (FDI) into Vietnam. Therefore, Starbucks can enter Vietnamese market without any difficulties. On the whole, Vietnam has a stable political situation. Although there are still several problems about political in Vietnam, both Vietnamese Government and citizens are trying to solve them. Therefore, Vietnamese market is still a good choice for Starbucks. 2.2 Economic factor Vietnam is one of the Southeast Asia’s fastest-growing economies and has aim to be a developed country in 2020. According to the World Bank, the gross domestic product (GDP) in Vietnam is increasing. Besides, per capita income also increases. In addition, Vietnam Consumer Price Index (CPI) also rises in recent years. According to the report of General Statistics Office of Vietnam, just in 2016, CPI increased from 100.17 Index points in January to 103.31 Index points in September. From these data, it is safe to say that Vietnam is a potential market for any business. The economy is growing which is an ideal trend that makes Vietnam becomes a good destination for Starbucks to extend their business. 2.3 Social factor Vietnam has a large and young population. In addition, the labor force in Vietnam is growing with 1.3-1.5 million new workers per year, especially skilled and well-educated graduate workers. Besides, the labor cost in Vietnam is cheap , just equal 1/3 of that in China. It will be easy to the company to seek and hire employees. Additionally, because of developing of economy, Vietnamese has a higher standard of living; as a result, Vietnamese willing to spend more. Beside that the taste of Vietnamese also changes, and the demand for eating out increases, so the number of restaurants and coffee shops increases. In brief, both the current situation and the trend of changing in Vietnamese social are advantageous for Starbucks because it provides opportunities to exploit this market. 2.4 Technological factor The information technology in Vietnam is developing rapidly. In 2012, there were about 7 million desktop computers and laptops were used which means of every 100 inhabitants, there were around 7.86 computers. In 2013, the numbers of mobile phone subscribers was about 124 million and more than 33 million people which was around 37% of population is connected to the internet. In 2014, Vietnam ranked 20th in the world for the number of internet users and 20% of the total internet users have already made purchases online (VETICA, 2014). According to this data, it is clear that the technology in Vietnam gradually improve. It can be a good tool that helps Starbucks to advertise, distribute and consume their products. III. Micro-environment Analysis Vietnamese coffee market has been almost saturated with market share divided equally for many big brands such as Nescafe (32%), Trung Nguyen coffee (23%), Vincafe (38%) etc. Besides the street coffee store, Starbuck has to emulate the international brands such as Coffee Beans, Dunkin Donut, Gloria’s Jean coffee so on, the domestic brands that have already had a certain place as Trung Nguyen coffee and Highland coffee, and some coffee shops are emerging recently as Phuc Long coffee or The coffee house. However, among these competitor there are two main rivals of Starbuck when entering Vietnam: - Trung Nguyen coffee: most common brand, 1000 coffee stores in Vietnam, provide traditional Vietnamese coffee with strong flavor. Their product are attract to small segment of adults and and cultured tourists. - Highland coffee: Highlands Coffee has nearly 100 shops, mostly in large cities. Since the very beginning, it has been positioned as the coffee for businesspeople and highincome earners. Market surveys show that customers choose Highlands Coffee because of the “good drinks and large space”, “good service attitude” and “diverse products”. IV. Starbucks market segmentation and target market selection. 4.1 Market Segmentation With the rapid expansion, Starbucks targeted customers of every age group and expanded to include rural communities, ethnic neighborhoods, and others. A large portion of coffee drinkers is found in urban areas where most of educated, employees and working professionals live in. Target customers of Starbucks range from the age of 16 to 40 in both females and males but female customers account for the majority of sales customers. The company focuses on the middle and upper social class who want to enjoy quality coffee with free-connected wifi, in relaxing atmosphere, chat with friends or relatives or even be a place to work. Starbucks segments their customers into three groups: Young and teenagers (16 – 24 years old) who live in rich families or they have a good background. Adults (25 – 40 years old)who are working, have high income or professional careers. Tourists (Foreigners come to Vietnam) also become target customer of Starbucks in Vietnam. Following Viet Nam National Administration of Tourism, the number of international visitors come to Vietnam in 2017 reached 12,922,151 visitors, this result shows that tourists can be a feasible target customer in Vietnam. Starbucks focuses on expanding its market share to those with stable incomes from 19 years old and over in urban or major cities in Vietnam such as Ho Chi Minh City and Hanoi and then expanding to other locations due to the average coffee price. According to data of the Statistics Department of Ho Chi Minh City and Hanoi, the average income per capita reached 5,428 USD and 3,600 USD respectively, this is a good reason for Starbucks to expand market into Vietnam. More important, Hanoi and Ho Chi Minh City defined as national central cities to become potential places for Starbucks open stores in. First of all,Hanoi is not only the capital of Vietnam but also the cultural and political center of the country whereasHo Chi Minh is the largest city in Vietnam in terms of population and economy; the second in terms of size and one of the most important economic and cultural centers in Vietnam. Besides, Da Nang, Hai Phong, Can Tho inherently attract so much attention from tourists, passers as well customers and always crowded of people. To determine the number of potential consumers on the market, we should start from the number of citizens in two main cities which are Ho Chi Minh and Hanoi and from them take only number of the falling into our target group of customers. According to General Statistics Office of Vietnam and The Central Intelligence Agency, the number of population in Ho Chi Minh City and Hanoi are 8,61 million and 7,82 million respectively. Following The Central Intelligence Agency (CIA), the population of Vietnam in each group age structure in 2017 are: 15-24 years: 16.23% 25-40 years: 44.56% Having in mind that we have total population in Ho Chi Minh city and Hanoi, we can calculate the number of people in each group of these two cities below: Age Young and teenagers (16 – 24) Adults (25 – 40) Tourists Ho Chi Minh City 1,4 million Hanoi 1,27 million Total 2,67 million 3,84 million 3,49 million 7,33 million 6,1 million 4,95 million 11,05 million Following Vietnam Chamber of Commerce and Industry, the percentage of the middle class of Vietnam in average is 30%, so we can calculate the number of people in the middle class in Ho Chi Minh city and Hanoi: Ho Chi Minh City Hanoi 1,15 million 1,05 million According to Vietnam Trade Promotion Agency, the domestic consumption rate for coffee is 10% so the consumption people for drinking coffee in two cities are 115,000 people in Ho Chi Minh city and 105,000 in Hanoi. As General Statistics Office of VIET NAM, the percentage of foreigners visitors come to Vietnam and enjoy drinking coffee is 10%, so we got the amount of people is about 1,1 visitors. In conclusion, the market potential is the number of potential buyers, an average selling price and an estimate of usage for a specific period of time. By applying the general formula for this estimation, we have: MP = N × MS × P × Q Where: MP = market potential N = total number of potential consumers MS = market share—percent of consumers buying from you P = average selling price Q = average annual consumption We got the result of number of potential consumers: 1,325,000 x 0,12 x 3,1 x 0,1 = 49,290 4.2 Characteristics of the target market Starbucks has segmented their customers into three groups: young adults-teenagers (1624), adults (25-40) and tourists. Young adults are usually students and teenagers. With money to spend, they choose Starbucks as a place to meet up, study and hang out. Starbucks appeals to this segment as a cool and fancy brand. This segment is also very sensitive with new products advertised on Starbucks social media channels. Adults are primary customers here at Starbucks, accounts for nearly 50% of its total sale. They are urban residents educated and affluent. This segment considers Starbucks as a place to have professional meeting and enjoy quality coffee and relaxing atmosphere into work. Furthermore, this segment also has diverse tastes and interests and they are well aware of their needs. Having advantage is a well known worldwide brand. Starbucks in Vietnam has a small segment for tourists. Coming to a foreign Asian country, many tourist opt for Starbucks as a safe choice of beverage. Moreover, Starbucks store are easily accessed if they are located in the areas where tourists reside in Hanoi and Ho Chi Minh City. 4.3 Positoning: Define company’s USP for your chosen target market The USP of Starbucks is a relatively simple one: premium coffee. It has never claimed to offer the cheapest coffee, but by offering their own style of an enriched upscale coffee experience. They have managed to carve out a large niche of coffee loving people. The premium coffee experience that Starbucks claims to offer is what makes it stands out from its peers and this includes not just the high quality coffee, but also employee-customer interactions, environment and ambience offered, compete with various conveniences. The motivation is customers when buying at Starbucks is more than just purchasing and enjoying quality coffee. The reason they are willing to pay more is not simply about good catering service, it is about the feeling of pride prestige and self-esteem when they buy from a cool and trendy worldwide coffee brand. Each cup of Starbucks purchased is customized by the buyer themself from customizable drink menu to having their own names written on cups giving the customers control on their own orders creates a sense of belonging. Therefore the feeling of consuming Starbucks products makes them feel unique and special. V. Marketing Mix 5.1 Product Starbucks offer a range of exceptional products that customers enjoys at store, at home and on the go. Starbucks brings the customers the experience of Italian freshly brewed coffee. Besides traditional menu of espresso, latte, TAZO tea, smoothies, ice blended, Frappuccino, hot chocolates and variety of cake such as muffin, cookie, sweet cakes, sandwiches so on, Starbuck coffee also offer different types of roasting coffee (Blond roast, medium roast, dark roast) and grain coffee. Entering Vietnamese market, Starbucks wants to keep its own flavor and uniqueness of Arabica coffee to differentiate with Vietnamese coffee which mainly is Robusta coffee (It has a slightly bitter taste that usually is offset by sweetened, condensed milk). However, Starbuck can customize the products to suit Vietnamese consumer taste. It would be a good idea to add more types of coffee drinks that illustrate Vietnamese style like Asian Dolce Latte và Dolce Misto. These two kinds of coffee was inspired by traditional milk tea coffee of Vietnam which are familiar with Vietnamese. With strong brand name of Starbucks as the world largest coffee house chain. According to Starbucks “Exceptional coffee can only come from exceptional beans”. They want to make sure their beans meet the highest standard of quality. Starbucks taste more than 1000 cups of coffee a day to verify the superior taste that all of consumers have come to expect. A batch of coffee is tasted at least three times before it’s approved, so every time customers take a sop of Starbuck coffee, it’s a sip that they will love. Starbucks is also noted for the continued placement of its easily identifiable logo front and center of its coffee cups and pouches. Packaging of take-away coffee are simple, elegant plastic cup and paper cup with outstanding Starbuck mermaid logo. Drink ware (mugs and tumblers) is favorite by many eco-friendly consumers. Plus discount are applied on purchases when customer bring their own Starbuck drink ware to the stores. It is a brilliant way to keep customers engage with the brand. Customer’s enjoyment of food and drink are enhanced by eye-catching packaging. Starbucks offer consumers excellent services and focus on personalization to keep direct emotional engagement with customers. Starbucks recognizes that it's not just about the product, it's also about the experience. Each Starbucks location you walk into has the same look and feel. Baristas serve your coffee to you by name. And if it isn't exactly what you ordered, they make sure to correct it and ask how they can make your experience better. 5.2 Price Starbucks has a simple price strategy: High price, high quality. This pricing strategy takes advantage of the behavioral tendency of people to purchase more expensive products on the basis of the perceived correlation between high price and high value. If customers feel they are getting a good deal, they are willing to pay more. A single cup coffee in Vietnam costs from 35,000 VND to 80,000 VND ($1.6 – $3.5), while tea and the other drinks cost from 55,000 VND to 105,000 VND ($2.5 - $4.6) Starbucks has always believed to serve the best coffee possible with the best design cup in the best place. Starbucks stores are usually in prime locations at a neighborhood gathering place for meeting friends and family. Therefore, it can charge a higher price for bringing customers the best experience to cover the costs of marking its products. Through this pricing strategy, the company maintains its high-end specialty image 5.3 Place Seattle-based coffee chain Starbucks has seen expansion on a large scale in recent years, more than doubling over the last decade to more than 27 thousand in 2017, cover in many countries all over the world. In Vietnam, they can sell their products through direct stores with beautiful coffee-space and retail partners at the central lines have many facades, near offices, in central malls or supermarkets where a number of customers will come, for example: District 1, Tan Phu Districts, Binh Thach Districts are some main districts in Ho Chi Minh City; Hai Ba Trung District, CauGiay District, HoanKiem District in Hanoi; even in big buildings like President Place, SC Vivo City, mPlazza, Pearl Plazza. Airport is also an ideal place for Starbucks in order to open store. The company has an obvious vision to both directly and indirectly spread their products from producers to customers. 5.4 Promotion First of all, Starbucks mainly sells their products direct to customers at stores that means personal marketing. Starbucks approaches directly with the customer and determines a customer’s wants and needs. The company also organizes events in which people of the regions will be asked to visit the venue and interact with its workforce. The visitors will be given free samples of the products so that they can test their quality and taste.Besides, Starbucks gives discount for customers on special days such as: “50% off on any summer beverage”, “Enjoy 30% off on opening celebration”. Starbucks also organized meaningful campaigns like: Challenge "Starbucks Moments” or “Experience the First Starbucks Reserve Store” to attract more customers. The company also has many other promotional activities, which included printing information on tee shirts, mugs or phone case. Vietnamese, especially young people, will be strongly attracted by social networking sites. In addition, the presence of Starbucks on Facebook, Instagram or Pinterest will turn coffee into a hobby that consumers can easily share with friends and family. For example: Starbucks regularly offers preferential treatment through the form of like, share, comment on social networks, thereby increasing the interaction rate as well as the coverage of the product to the users. Easy to see one of the strongest channels are through social media like Facebook, which has 334, 024 people like and 332, 441 people follow page; Instagram with 56,5 thousand followers and so on. 5.5 People, Processes, Proves (For services) Together with providing the coffee products, Starbucks also offers customers excellent consumer services and benefits. Coming to any Starbucks stores, customers can have direct emotional engagement with staffs. Quality is the key factor to attract more loyal customers and good services keep customers’ satisfactory in order that they would raise high perception about Starbucks, hence adding more value to the company. Understand the important of services, before lauching new stores, Starbucks had hired their staff and trained them for months to ensure an excellent front-end staff that will serve not only high quality cups of coffee but aslo cautions and comfortable environment. The company really takes attention to Human Resources Management and Strategy because they believe that happy employees will produce higher efficient result, bringing higher satisfactory for customers. The staff are encouraged to remember loyal customers’ names, be friendly, and always try to help customers choosing the best coffee or drink according to their own taste. Starbucks has a training and rewarding strategy that would motivate employees, and at the same time would attract talented people.It is no wonder why everyone wants to frequent to Starbucks that much and become a loyal member. Being a loyal member comes with a lot of benefits. To reward for loyal customers, Starbucks give membership cards called “Starbuck reward”. Customers buying at Starbucks will receive Star point and be able to upgarde to a higher membership level. Another reason that customers should drop by a nearest Starbucks store to enjoy a comfortable atmosphere called the third place. Starbucks is neither home nor work but a community space where people can meet. Purchasing a cup of Starbucks also means that consumers get a pleasant, cozy workplace with free Wi-fi and charging stations (elcectronic socket). Conclusion In conclusion, Vietnam is an ideal place to do business for some reasons. Firstly, Vietnam has a stable social with many policies, which creates favorable conditions for the company. Secondly, the Vietnam’s economy is quickly growing during recent years. It means that the income of Vietnamese also increases; as a result, they willing to spend more money to buy goods and services. This will be a good condition that helps the company to get more revenue. In addition, when Starbucks enters to Vietnamese market, they will not need to worry about the labor because it is a one of strong point of Vietnam. Besides, the developing of technology is also an advantage of Vietnamese market. This not only is a tool which helps the company to advertise and distribute their goods, but also helps to keep quality up and price down. Last but not least, the coffee industry in Vietnam is fast-growing with several strong competitors, so the company can have changes to compete and assert their brand. References Coffee chains fight for market share. (2015). Retrieved from http://english.vietnamnet.vn/fms/business/133084/coffee-chains-fight-for-market-share.html Du lịchTPHCMcánmốc 6 triệulượtkháchquốctếnăm 2017. (2017, December 15). Retrieved from http://voh.com.vn/chinh-tri-xa-hoi/du-lich-tphcm-can-moc-6-trieu-luot-khach-quoc-te-nam2017-256412.html Hanoi Tourism Department. Retrieved from http://tourism.hanoi.gov.vn/ In 2017, Hanoi tourism received nearly 24 million visitors, earning 71 trillion. (2017, December 12). Retrieved from http://kinhtedothi.vn/nam-2017-du-lich-ha-noi-don-gan-24-trieu-luotkhach-thu-ve-71-ngan-ty-dong-305231.html Number of Starbucks Stores Globally, 1992-2016. (2016). Retrieved from https://knoema.fr/infographics/kchdsge/number-of-starbucks-stores-globally-1992-2016 Starbucks. Retrieved from https://www.starbucks.com/about-us/company-information Vietnam Average Monthly Wages. (2017). Retrieved from https://tradingeconomics.com/vietnam/wages Vietnam coffee market in 2017 through numbers - Part 1. (2017, June 06). Retrieved from http://www.vietrade.gov.vn/tin-tuc/thi-truong-ca-phe-viet-nam-nam-2017-qua-cac-con-sophan-1 Vietnam consumer spending. (2016). Retrieved from http://www.tradingeconomics.com/vietnam/consumer-spending Vietnam GDP. (2016). Retrieved from http://www.tradingeconomics.com/vietnam/gdp Vietnam Information. 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