Starbucks Saudi Arabia: Marketing Strategic Plan

Executive Summary

In 2000, Starbucks Corporation opened new branches in the Kingdom of Saudi Arabia. The move was in line with the company’s global expansion strategy. The uniqueness of the Saudi Arabian market, however, calls for a strategic marketing plan. Such a strategic plan, when put in place, would enhance the growth of the corporation in the Kingdom.

In this report, the company’s strategic marketing plan in the Kingdom of Saudi Arabia is outlined. The outlined strategic plan is capable of realizing the 20% annual growth rate projected in the Saudi Kingdom. The current and near-future analysis of the Saudi market is also carried out. Residents of Saudi Arabia have consumed tea and coffee for a long time. It is part of their culture.

Coffee is the main product generated and distributed by Starbucks. To this end, Saudi Arabia provides a rich market for the company’s products. In the report, a SWOT analysis (strengths, weaknesses, opportunities, and threats) of Starbucks Saudi Arabia is carried out. The test depicts the position of Starbucks in the Saudi Kingdom. Consequently, the best approach for effective marketing is determined from this analysis.

A two years projection of sales and expenses, coupled with an implementation schedule for the plan, are also highlighted in this report. Also, performance metrics and contingency plans are reviewed to indicate the best approach to realizing Starbuck’s marketing objectives in the Kingdom of Saudi Arabia.

Marketing Strategic Plan for Starbucks-Saudi Arabia

Section 1: Situation Analysis

Overview

Starbucks has approximately 65 stores in the Kingdom of Saudi Arabia. With such a network of stores, one can argue that Starbucks has a firm establishment in the Kingdom. The company’s presence in the Kingdom is in line with the corporation’s the Middle East and North African penetration strategy. Starbucks products have been well received in Saudi Arabia, especially considering the coffee drinking culture of the Arabs. The company entered the Saudi market in 2000.

However, several issues affect Starbucks ‘ presence in the Kingdom of Saudi Arabia. For instance, the western culture portrayed by Starbucks has conflicted with the Arab culture on more than one occasion. It is important to note that Starbucks is operating in Saudi Arabia as a foreign investment. At times, multinationals tend to carry with them their home culture when entering new and foreign markets. Despite the good business reported in this new market, Starbucks ‘ Saudi Arabia marketing strategy requires conforming to the Arab culture in Saudi Arabia. To this effect, it is important to customize the marketing strategy to address the unique cultural issues in Saudi Arabia.

Market Summary

Starbucks is a multinational corporation in the coffee industry. As such, the company holds up- to- date information with regards to the Saudi market. The Saudi market is incorporated into the broader strategy of the Middle East and the North African market segments.

The Saudi market has a lot of potential for growth. Such potential is evidenced in the rapid growth experienced by Starbucks since penetrating the market in 2000. Consumers span the entire Saudi society, making the market more attractive to foreign investors like Starbucks. Starbucks holds a lot of information regarding the market. As such, the company’s strategic marketing seeks optimal utilization of that information.

The year 2012, for instance, indicated a steady coffee market in the Kingdom of Saudi Arabia. According to Euromonitor International (2013), a steady pattern of total volume growth manifested throughout the 2012 period. The coffee beverages market attained a 6% growth in Saudi Arabia in 2012 (Euromonitor International 2013). Also, western culture is rapidly taking root in the kingdom, especially with regards to drinks, food, and clothing. Saudi Arabia boasts one of the largest young generations in the Middle East. It is noted that this generation is made up of individuals eager to adopt western culture in their lives. Thus, the market has immense potential that can be exploited by Starbucks.

Currently, trade is good in the Kingdom of Saudi Arabia. Also, western-style coffee shops are gaining popularity in the country. People are embracing the new culture of drinking coffee in shopping malls and other outdoor venues. One of the reasons for this may be the increasing number of expatriates in this country. Disposable income in Saudi Arabia is increasing. The increase in disposable income implies improved or positive sales of coffee and other Starbucks products in the long term. As already indicated above, coffee and tea are culturally sanctioned drinks in Saudi Arabia. To this end, the popularity of fruit teas in this market means growth for Starbucks products.

The volatile environment in the Middle East, especially with regards to politics, is, however, a major concern for Starbucks in the region. Although Saudi Arabia is relatively calm about neighboring countries, the recent Arab Spring is a source of concern not only for Starbucks but also for other foreign investors in the region. The company should, therefore, ensure all its investments in the country for any eventualities that may arise in the future.

Saudi is very essential to Starbucks as a standalone market for its wide range of products. Strategically, Saudi is a key growth market. The country also provides a focal point for extended investment and growth in the Middle East market.

Starbucks Saudi Arabia SWOT Analysis

Overview

Every functioning business organization must exhibit attributes related to external and internal environmental interactions. To this end, Starbucks Saudi Arabia exhibits strengths, weaknesses, opportunities, and threats related to the industry. Irrespective of the company’s global position, Starbucks has a unique ethical reputation. According to Lee (2012), Starbucks was voted by Ethisphere Magazine as one of the most ethical businesses in the world in 2010. The corporation remained on the list for four consecutive years. Therefore, the success of Starbucks y in Saudi Arabia and other parts of the world comes as no surprise.

SWOT analysis refers to an analytical tool used to determine the overall strategic position of an organization. The acronym stands for strengths, weaknesses, opportunities, and threats. According to Baines, Fill and Page (2011), strengths and weaknesses entail the internal resources and capabilities of the organization. Such capabilities and resources are determined from the perspective of the customer. Opportunities and threats, on the other hand, refer, to the external issues with the potential of influencing organizational performance (Baines et al. 2011).

The following SWOT analysis indicates the strengths and weaknesses of Starbucks Corporation in Saudi Arabia. It also indicates the opportunities and threats faced by the corporation in this market.

Strengths

The strengths exhibited by Starbucks Saudi Arabia include the unique capabilities and qualities that make the organization stand out in the market. The capabilities and qualities also make the company more competitive in the market. Starbucks Saudi Arabia strengths include:

  • Brand identity: Starbucks Saudi Arabia maintains the company’s brand, with or without heavy marketing.
  • Variety of products: Starbucks Saudi Arabia offers not only coffee, but also other beverages, snacks, and accompanying products.
  • The corporation’s stores’ ambiance: When offering its products, Starbucks Saudi Arabia maintains a relaxed ambiance that appeals to all customers.
  • Quality of products: Starbucks products seek excellence at all times. For instance, the coffee beans are acquired globally about quality.
  • Starbucks Saudi Arabia’s ethical reputation: The ethical standards in this company rank above common standards.

Weaknesses

Weaknesses are internal shortcomings of the organization. They negatively affect the competitiveness of the organization in the market. The following are some of Starbucks Saudi Arabia weaknesses:

  • The multiplicity of products: The numerous products offered by Starbucks Saudi Arabia might ultimately result in deterioration of quality.
  • The multiplicity of stores: Investment in more stores and locations increases the risk of losses for the organization. Currently, the company has more than 60 stores in Saudi Arabia. Such a number may be risky considering such environmental factors as violence and economic downturns.

Opportunities

Opportunities refer to conditions external to the organization. The conditions, when exploited, have the potential of bettering the organization (Baines et al. 2011). Starbucks Saudi Arabia has the following opportunities:

  • Ahead of competition: Starbucks Saudi Arabia has availed VIA instant coffee in the Saudi market ahead of the competition. Availability creates a greater competitive advantage for the company.
  • Increased customization: Opportunities for increased customization of Starbucks products enhance customer satisfaction and loyalty.
  • Increased reach: Starbucks has the potential of increasing its reach into the Kingdom of Saudi Arabia. Partnerships with local groceries and beverage shops can enhance this.

Threats

Threats to Starbucks Corporation in Saudi Arabia constitute those external factors that may negatively influence the success of the organization in the present or the future. Threats faced by Starbucks Saudi Arabia include:

  • Direct competition by other coffee and beverage producers.
  • Lack of sufficient and effective marketing strategies.
  • The Middle East is a politically volatile region. Political instabilities may lead to financial losses for the company.
  • The economic recession poses a threat to any business operating globally. The same applies to Starbucks in the Kingdom of Saudi Arabia.

Competition

Competition for Starbucks Saudi Arabia in the industry has increased lately. According to Bilgin (2008), Starbucks Saudi Arabia faces competition from such establishments as Turkish coffee houses that have sprouted in the country. Such competition takes the perspective of culture, with the Starbucks brand viewed as a form of imperialism.

Other major competitors affecting Starbucks in Saudi Arabia include Nestle Middle East and Unilever. Indirect competitors include Al Rabie Saudi Foods Co., Aujan Industries among others. The competitors span the entire food and beverage industry (Business Monitor International 2012). Therefore, the need for a broader strategic marketing plan for Saudi Arabia becomes more apparent.

Product Offering

Starbucks Corporation offers a wide range of products that constitute a major brand portfolio. The main products, however, are beverages, with coffee being the primary product (Starbucks 2013). Other products offered by Starbucks Saudi Arabia include fresh food, merchandise, and handcrafted beverages.

Consumer products constitute common revenues for Starbucks. The products include coffee and tea, Starbucks ice cream, and other ready-to-drink beverages like the bottled Frappuccino. Other ready-to-drink products include espresso drinks, juiced and iced teas among others.

Keys to Success

The key to success for Starbucks in Saudi Arabia includes marketing strategy capable of generating cultural acceptance for the brand. Also, it is paramount to meet the requirements of the customers to beat the competition. Addressing these two factors will ensure the success of Starbucks in the Kingdom of Saudi Arabia.

Critical Issues

Starbucks Corporation has recently established its presence in the Saudi market. However, there are critical issues that need to be addressed to ensure the success of the company. Chief among these issues is enhancing the acceptance of the Starbucks brand in the Saudi cultural fabric.

According to Bilgin (2008), large multinational corporations, such as Starbucks, are associated with powerful nations in the world. Such an association can render their brands to various consumer interpretations. For instance, at times, Starbucks is regarded as a symbol of western cultural imperialism in the Middle East. Such perception is viewed as a threat to religious beliefs or national sovereignty, negatively affecting the brand.

Starbucks Saudi Arabia can reverse this perception by incorporating local cultural practices, symbols, and values into its operations. The company should develop a strategy to promote perceptions of quality and prestigious brands. When this happens, consumers’ desire for association with the brand will outweigh the negative perceptions. Other critical issues faced by Starbucks in Saudi Arabia are competition and the severe cultural constraints on women. The exploitation of women as a demographic target in maximizing consumer spending is very limited.

Section 2: Starbucks Saudi Arabia: Marketing Strategy

Overview

The American Marketing Association provides a working definition of the marketing concept. It is viewed as functions, establishments, and procedures that are targeted at creating value with regards to a given product (Baines et al. 2011). Therefore, marketing strategy addresses the needs or goals of marketing. According to Baines et al. (2011), a marketing strategy focuses on addressing the issues about the long-term realization of an advantage for the entire business organization or given business unit. Strategic marketing is vital to the realization of marketing objectives.

Mission

Starbucks has a global mission that drives its business on the international market. The company aspires to: “…inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Starbucks 2013, par. 3). Starbucks seeks to reach out to all humanity regardless of their locality with its products.

Opening branches in the Kingdom of Saudi Arabia was in line with this mission. Also, the entire population in the country uses Starbucks products. As such, the products of Starbucks Saudi Arabia fulfill the organization’s mission. Reaching out to all people and convincing them to use Starbucks products is not easy. The marketing strategy must have the mission as its central objective. Failure to realize this mission would imply failure for the entire marketing strategy.

Marketing Objectives

Starbucks ‘ marketing objectives range from international to local. A key global objective of Starbucks Corporation is a global expansion (Starbucks 2013). Locally, the objective translates to further expansion in the Saudi market by increasing the market share. Quality is also a major objective at Starbucks. The corporation provides customized products to meet customer demands. Also, even though the main product is coffee, Starbucks caters to different customer demands through diverse products, such as tea and snacks.

Other objectives of Starbucks in Saudi Arabia include:

  • Minimizing brand threats.
  • Attaining price competitiveness.
  • Acquiring cultural status and blending into the local Saudi culture.
  • Maintaining high ethical standards.

Financial Objectives

According to Business Monitor International (2012), the future of the Saudi Arabian consumer sector is expected to be bright. Currently, Saudi Arabia has a robust economy. The economy is anchored on heavy government spending, high oil prices, and increased consumer confidence. The Saudi government’s monetary policy impacts positively on the development of consumerism culture in Saudi Arabia (Business Monitor International 2012). Consequently, Starbucks seeks to benefit from these opportunities. It is expected that the worth of the Saudi fast-food sector will increase to around US$4.5bn by 2015 (Business Monitor International 2012). Since Starbucks is in the food and drinks industry, it stands to benefit from this increased wealth.

Starbucks seeks to attain at least 20% annual growth in the Saudi hot drinks and beverage industry. Business Monitor International (2012) estimates coffee sales to grow by 77.7% between 2011 and 2016. Therefore, Starbucks Saudi Arabia has an excellent growth opportunity in the Kingdom.

Markets

Target markets involve the market segments or portions that a business organization aims to supply with goods and services (Baines et al. 2011). Strategically, a business targets a specific segment of the market to promote its products. It is not possible or advisable for the business to target the entire market segment.

However, target markets in the hot drinks and other beverages industry are broad. Traditionally, coffee and tea are consumed in large quantities in Saudi Arabia. Currently, tea consumption is higher than coffee consumption. But the trend is expected to change by 2016 as indicated earlier in the study. The strategic marketing opportunity for Starbucks Saudi Arabia is therefore immense.

Coffee is the major product distributed by Starbucks. The company also offers tea products. Consumers of coffee and tea are drawn from the entire Saudi population. Both the young and the elderly consume these beverages. Starbucks coffee shops target town residents, tourists, and white-collar workers. However, the premiumization of the Saudi drinks industry has significantly expanded Starbuck’s target markets. Due to premiumization, more consumers are switching to packaged tea and coffee. Consequently, the consumer base for Starbucks packaged products is influenced positively.

Positioning

The positioning of Starbucks products in Saudi Arabia is vital to the success of the company in this market. The positioning approach for Starbucks will lead to the creation of a leading and affordable hot drinks and snacks company. Company reputation and industry experience would facilitate the attainment of this positioning perspective.

The mission of the company involves inspiring the human spirit in all communities. The proposed positioning perspective will effectively support the mission. The positioning is competitive since the target market is made up of individuals drawn from the majority of the Saudi population.

Strategies

There are various strategies that Starbucks Saudi Arabia can utilize to realize the strategic marketing objectives mentioned earlier. Strategies are more meaningful when they realize sustainable competitive advantage for the organization. Starbucks boasts of a prestigious brand name, ethical reputation, and renowned quality of products. The price leadership strategy, which is achieved through cost reductions, augurs well with the brand and quality aspects of the company. The strategy would facilitate enhanced market penetration, leading to the realization of the growth objective.

Blending Starbucks products with the local culture in Saudi Arabia would ensure sustainability in the market. The company will assume Saudi cultural and traditional symbols, as well as conform to local social norms to bond with the consumers. Starbucks does not rely a lot on advertising. However, in the case of advertisements, the company should focus on the generation of social identity for the brand in the country. The notion of Starbucks as a symbol of Western imperialism would be eliminated through local advertising. Market leadership positioning would secure the desired market share for the company. Most of the aspects necessary to achieve this are already evident in Starbucks. They include the establishment of a superior brand and a positive ethical reputation.

Marketing Mix

For the optimum realization of value, business organizations offer more than one product in the market. The products are, however, concentrated more in the same industry. The marketing mix refers to the portfolio of products offered by a given business organization.

Starbucks Saudi Arabia utilizes the four Ps strategic marketing concept to enhance its local operations. The four Ps denote product offering, place, price, and promotion (Baines et al. 2011). Starbucks Saudi Arabia offers several hot drinks, snacks, and other beverages. The ambiance enjoyed in Starbucks outlets meets the requirements of the place. However, simplicity is needed to penetrate the Saudi Arabian market. The reason is that too much ambiance can be intimidating for middle and low-income customers.

Starbucks seeks market leadership through low prices. As such, localities and ambiance can be used to define product prices. Establishments in affluent neighborhoods would exhibit greater ambiance and higher prices than those in low-income neighborhoods. Also, the media would greatly facilitate the promotion of products and cultural integration.

Market Research

Market research plays an integral role in the operations of Starbucks. There is a need to conduct in-depth research in the Saudi market, especially due to the religious beliefs, values, and customs of the Saudi people. Research can make or destroy the ambitions of Starbucks in Saudi Arabia. Outsourcing local industry reports, for instance, is necessary. The company needs to do this in the next two years when implementing this plan. Contracting local research agencies to work with Starbucks personnel in marketing research will increase the reliability of the results. The reason is that local research firms understand the local market better. Also, engaging local personnel will make the company more acceptable in the country. Operators of Starbucks outlets should seek customer feedback to use every available channel. The Saudi market is very diverse. Therefore, the utilization of local personnel would facilitate the marketing process.

Section 3: Starbucks Saudi Arabia: Financials

Overview

Several financial measures are essential for strategic marketing. According to Baines et al. (2011), some financial measures function as marketing performance metrics. There are several financial marketing performance metrics. They include, among others, profitability, gross margin, and market share volume. Performance metrics come in handy in monitoring customer engagement, sales, and lead generation. The customer relations management database will greatly enhance market research and satisfaction of customer requirements. Monitoring sales would give the actual returns on investment.

The following analysis provides an overview of Starbuck’s Saudi Arabia break-even assessment based on projected financials. Sales forecasts and expense forecasts form the basis for the break-even analysis. The link between these financial measures and marketing strategy is established.

Starbucks Saudi Arabia Break-Even Analysis

Starbucks Saudi Arabia Project Sales. Source: Author
Figure 1:Starbucks Saudi Arabia Project Sales. Source: Author

As indicated earlier in this report, Starbucks projects annual growth of 20% in sales throughout the Kingdom of Saudi Arabia. The Break-even point of a business is realized when the total revenues equal the total costs. Therefore, using the projected sales and costs for Starbucks Saudi Arabia, the breakeven point can be easily determined.

Sales Forecast (Projected over 2 Years) and Expenses Forecast (Projected over 2 Years)

Sales forecast

To achieve the 20% annual growth rate in Saudi Arabia, Starbucks needs to realize the following projected sales through this marketing strategic plan. The projected sales are as follows:

Sales 2014 2015
Retail 5,967,4580 6,960,950
Customized Products 501,290 1,081,550
Total Revenues 6,468,740 8,042,500
Net Earnings 368,400 463,700

Expenses forecast

Direct Cost of Sales 2014 2015
Retail Products 65,000 85,000
Customized products 80,000 89,000
The subtotal direct cost of sales 145,000 174,000

Section 4: Controls

Overview

The main reason behind the development of this Starbucks Saudi Arabia strategic marketing plan is to provide a guideline for the organization’s marketing process. Several areas of performance will require monitoring to determine the success or failure of the marketing initiative.

The control focus areas will include:

  • The monthly and annual sales volume.
  • Profitability.
  • Gross margin.
  • Consumer satisfaction.
  • Product awareness.
  • Relative industry product prices.
  • Product availability or distribution.
  • Consumer complaints.

Implementation Schedule (2 Years)

The following schedule will be used in implementing the strategic marketing plan outlined in this report. The schedule will plan the duration between 2014 and 2015.

The listed tasks should be completed by the given dates if Starbucks is to realize the strategic marketing objectives.

Task Start Date End Date Description Budget in $
Strategic Marketing Plan Generation 1/ 2/ 2014 1/5/ 2014 Detailed marketing plan 180
Advertising 1/6/2014 30/12/2015 Local Media Advertising 200 000
Corporate social Event #1 12/ 12/ 2014 15/12/2015 Weekend get together, offering products at half price 50 0000
Corporate Social Event #2 10/8/2015 13/08/2015 Participating in community local events 35 000
Exhibitions 18/6/2015 22/6/2015 Exhibition in malls and shopping centers 12 000

Market Organisation

Consumers of Starbucks products are drawn from every sphere of Saudi society. It is noted that almost the entire population constitutes potential customers and consumers for Starbucks products. The fact is evident given that drinking tea and coffee is part of the Saudi culture. The market will be organized based on social strata or classes. Market segments will be made of the upper class, the middle class, and the lower class. Although Starbucks is a prestigious brand, this market organization will not affect quality. On the contrary, the location of Starbucks outlets and their ambiance will determine the choice of customers.

Organizing the market like this ensures that the entire population is catered for. Locations will facilitate convenience for every section of society. The lower class population will, however, be targeted more through packaged products. It is noted that this market segment usually seeks the comfort of their homes to cut costs.

Contingency Planning

Despite the extensive strategic marketing planning, changes in internal and external environments may alter the plan. The changes may positively or negatively influence the plan. Such factors as inflation, political volatility, and changes in economic policies may influence the outcomes of the plan negatively. To this end, the plan has a lead duration of two years from the date of implementation. Minimal alterations are made during this period. Insurance against the entire process expenditure minimizes negative outcomes from the process.

The report provides a blueprint for the strategic marketing plan. However, the flexible nature of the plan leaves room for changes on short notice. Starbucks ‘ marketing department has the authority to introduce necessary changes in the plan. The changes will reflect the changing market environment.

Section 5: Conclusion

Saudi Arabia is a perfect investment choice for Starbucks products, especially considering that coffee and tea are culturally sanctioned drinks in the kingdom. Realizing the strategic marketing objectives will require determination on the part of the company. Starbucks is facing stiff competition in Saudi Arabia. Political, cultural, and economic factors are bound to influence the outcomes of the marketing strategies in a significant way. Starbucks exhibits western culture in several ways, an issue viewed suspiciously in the Middle East. Therefore, the company must work hard to overcome this. Blending into the Saudi culture and lifestyle is important to achieve sustainability in this market.

Starbucks has a major competitive edge over other players in the Saudi market. The company’s brand name, as well as quality and ethical reputations, places it ahead of the competition in the country. Therefore, the implementation of the marketing strategy and realization of the organizational goals in the Saudi kingdom is attainable for Starbucks.

References

Baines, P, Fill, C & Page, K 2011, Marketing, 2nd edn, Oxford University Press, New York.

Bilgin, E, 2008, ‘When Starbucks meets Turkish coffee: cultural imperialism and Islamism as ‘other’ discourses of consumer resistance’, Advances in Consumer Research, vol. 35. no.1, pp. 808-809.

Business Monitor International 2012, Saudi Arabia food and drink report Q3. Web.

Euromonitor International 2013, Coffee in Saudi Arabia. Web.

Lee, K 2012, Starbucks coffee: case study. Web.

Starbucks 2013, Starbucks company profile. Web.