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As the request of the Potential Investors of Starbucks Hungary, this report examines the main marketing issues related to the new coffee shop. The relevant data was obtained by an internet - research of the facts of Starbucks, and by previous Marketing studies materials.
On the whole, Starbucks is the largest coffeehouse company in the world, which is illustrated by the fact, that Starbucks has 16635 stores in 49 countries. Furthermore since Starbucks was founded (1971) it's continuously expanding. As we all might know Starbucks sells drip brewed coffee, espresso- based hot drinks, other hot and cold drinks, and what is more they sell also salads, sandwiches, snacks, and mugs.
What is interesting from our point of view is that many of the company's products are seasonal or specific to the locality of the store.
In addition to the above findings, we can assume that if Starbucks has success everywhere it would have a great chance in Hungary too.
We can assume from the brand (Starbucks) itself, represents exclusiveness. Based on researches, we can state: people want to belong to the group that can afford drinking Starbucks coffee. We would consider these factors too in location decision.
The main objective of the marketing department was to give an idea on how much people would spend on this coffee.
In normal price variation, the demand for coffee is price inelastic, which means that when coffee prices show increases, consumers reduce their consumption. Furthermore Starbucks has its retail price, which means that on average coffee has to costs the same in every Starbucks coffee shop independent from the country. At this point we need to focus on our competitors as well, how they set their prices.
All in all since it is a premium brand that has to be reflected in prices as well, which means in a rough estimation (depending on the size and type) 4-6 euro/ coffee.
However at this point from our point of view, we can come up with some pricing techniques (reduced price...) especially when introducing the first shop to Hungary. This would attract quite a big pool of people, which is considered to be important in the first few months, by getting Hungarian know what Starbucks is.
Based on a previous study about Starbucks, we can make some conclusion on their target group that gives the majority of their consumers.
Not in every case people go to Starbucks, because of its' coffee, but it has a plenty of other reasons as well. Furthermore at coffee shops people can socialize, read, study, or just enjoy the music while drinking their coffee. So on one hand, we can conclude, that mainly young people
(University, College students) go there. On the other hand, people between the age of 15-64 make up the largest percentage of the population, that's why they will have a greater control of the market. This implies that the most important target market for Starbucks is people within this age group.
We consider as one of the key point in the whole process Promotion. If we make sure that people know about Starbucks, and they know when and where it's opening, it is easy to communicate it to them.
ATL:The Company advertises through print mediums, as Starbucks' target market tends to be educated people...
Advertises through TV, Newspaper, Magazines, and Internet
On the line, method would be customer to customer, to tell about the brand.
Although BTL tools are much more customer focused, than ATL, ATL tools are in this case more suitable. However we can't forget about the „strongest” advertising technique, where people spread the fame of Starbucks, therefore we need to focus on those people who are already our customers.
Place/ Where to open?
In the light of the above 3 main points we can assume that location decision is a strategic point.While population density is an important factor by determining the location, household income seems to be more crucial at this stage.
Therefore because of demographic issues the marketing department strong suggestion is to open Starbucks in Budapest. Based on a plenty of questionnaires and researches the 3 most popular areas according to our findings would be:
Váci Street, Oktogon, West-end City Centre
Váci Street: International Street, every foreigners visit it, a great place of chilling and socializing, wealthy people, students go there, surrounded by other facilities (fashion shops, restaurants...).
Not so easy to access, would cost a lot, but it would return fast.
Oktogon:Very easy to access, very busy, a lot of public transportation, many people turn up there, would be less expensive than at Váci Street. Does not have an exclusive flair, in case of a terrace it is dirty and not attractive. West-end City Centre:One of the biggest shopping centres in Budapest, great accessibility with public transportation and car, parking place, weather conditions does not influence consumption. In a closed area, rent of the store would cost a huge amount of money.
On the other hand, in Hungary the coffee shop market is not so much covered yet, so Starbucks has chances. By choosing a specific location, the previously mentioned factors are not enough to consider, we need to take into account such factors, as: where and for how much could we get raw materials from, do we have enough storage, but these questions again related mainly to operations/ logistics.
In the light of the findings above, it seems that the Introduction of Starbucks to the Hungarian market would be welcomed. Furthermore the viability of the project is shown by the fact, that the above mentioned locations have free capacity for Starbucks coffee shop.
Based on the above findings I strongly recommend opening Starbucks in Budapest. Since there is free capacity at each of the above mentioned locations, it is still negotiable, which place to choose out of the 3, although the marketing department would suggest Váci Street, because of its exclusivity, and internationality, though it would be an expensive (probably the most expensive) solution, we believe it would bring back the most profit after a short time.