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Environmental analysis as a means to customer

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Article in J for International Business and Entrepreneurship Development · January 2008

DOI: 10.1504/JIBED.2008.019156

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 188 J. International Business and Entrepreneurship Development, Vol. 3, Nos. 3/4, 2008

111
2 Environmental analysis as a means to customer
3 satisfaction: the case of Starbucks in Cyprus
4
5
6
7 Demetris Vrontis*
8 School of Business, University of Nicosia, 46 Makedonitissas Ave.,
9 P.O. Box 24005, 1700 Nicosia, Cyprus
1011 Fax: 00357 22 355116 E-mail: vrontis.d@unic.ac.cy
1 * Corresponding author
2
3 Harry Kogetsidis
4
5 School of Business, University of Nicosia, 46 Makedonitissas Ave.,
6 P.O. Box 24005, 1700 Nicosia, Cyprus
7 Fax: 00357 22 355116 E-mail: kogetsidis.h@unic.ac.cy
8
Abstract: Customer satisfaction is the extent to which a product’s perceived
9 performance matches buyers’ expectations. The key to successful and profitable
2011 business rests with identifying the needs and wants of the customer and
1 providing goods and services to satisfy these needs and wants. This paper
2 examines how environmental analysis can help Starbucks, the leading specialty
3 coffee brand and retailer in the world, to achieve customer satisfaction in its
recently targeted market of Cyprus. The paper concludes that the company
4 should pay particular attention to its customers’ cultural preferences and should
5 offer the host market not just coffee but a real coffee experience.
6
7 Keywords: customer satisfaction; food industry; marketing planning; situation
8 analysis.
9 Reference to this paper should be made as follows: Vrontis, D. and
30 Kogetsidis, H. (2008) ‘Environmental analysis as a means to customer
1 satisfaction: the case of Starbucks in Cyprus’, Journal for International
2 Business and Entrepreneurship Development, Vol. 3, Nos. 3/4, pp.188–204.
3
Biographical notes: Demetris Vrontis is Professor of Marketing and the Dean
4 of the School of Business at the University of Nicosia in Cyprus. He is also a
5 Visiting Faculty for Henley School of Management (UK), a Visiting Fellow at
6 Manchester Metropolitan University (UK) and Leeds Metropolitan University
7 (UK), a Visiting Professor for Vorarlberg University (Austria) and an external
8 examiner at Nottingham Trent University (UK) and Cape Peninsula University
of Technology (South Africa). He is the author of eight books, the founder and
9 editor of the EuroMed Journal of Business, and the editor for the World Journal
40 of Business Management. His research interests are on international marketing
1 planning, branding and marketing communications, areas that he has widely
2 published in over 55 refereed journal articles.
3
Harry Kogetsidis has been a lecturer in the School of Business at the University
4 of Nicosia in Cyprus since 2002, having previously held an academic post at the
5 University of Luton, UK, since 1994. His academic interests are in the areas of
6
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8

Copyright © 2008 Inderscience Enterprises Ltd.

 Environmental analysis as a means to customer satisfaction 189

111 systems and management science. He has published a number of papers in

2 peer-reviewed journals and has presented his work at international conferences.
He has also developed material for MBA programmes by distance learning and
3
trained managers in management science methods. He is a member of the UK
4 Systems Society and of the Operational Research Society.
5
6
7
8 1 Introduction
9
1011 During the past decades, the concept of marketing has changed dramatically. It has
1 evolved from a focus on the product and on making a ‘better’ product, where better was
2 based on internal standards and values. The objective was profit and the means to
3 achieving the objective was selling or persuading the potential customer to exchange his
4 or her money for the company’s product or service.
5 The marketing concept holds that the key to successful and profitable business rests
6 with identifying the needs and wants of the customer and providing goods and services to
7 satisfy these needs and wants. Increasingly, companies have come to recognise that this
8 different approach to doing business is essential in today’s environment. Consumers are
9 now better educated and more sophisticated than before and, thus, far more demanding as
2011 far as their wants and expectations are concerned.
1 Customer satisfaction is the extent to which a product’s perceived performance
2 matches a buyer’s expectations. If the product’s performance falls short of expectations
3 then the buyer is dissatisfied. If performance matches or exceeds expectations then
4 the buyer is satisfied. As a means to customer satisfaction, businesses should be
5 marketing-orientated, where customer needs, wants and requirements are identified and
6 offered to the consumer.
7 Starbucks is the leading specialty coffee brand and retailer in the world. The
8 company’s mission is to ‘establish Starbucks as the premier purveyor of the finest coffee
9 in the world while maintaining our uncompromising principles while we grow’
30 (www.starbucks.com). To achieve this, the company aims to give not just coffee but a real
1 coffee experience to its customers and to keep them happy at all times.
2 The aim of this paper is to examine how situation analysis, the first and most important
3 stage of marketing planning, can help Starbucks in its effort to achieve customer
4 satisfaction in its recently targeted market of Cyprus. A brief introduction to the company
5 and to Cyprus are given in the next sections, followed by a brief account of the importance
6 of customer satisfaction and the role of marketing planning in achieving it. The paper then
7 presents the results of situation analysis aiming to facilitate customer satisfaction with the
8 company’s products as well as service in the Cypriot market and offers some suggestions
9 to the company in order to increase its degree of acceptance in the particular market.
40
1
2 2 The company
3
4 Starbucks Coffee Co. was founded in 1971, opening its first store in Seattle’s Pike Place
5 Market. When Howard Schultz, Starbucks’ chairman, first joined the company in the early
6 1980s, Starbucks was already a highly respected local roaster and retailer of whole beans
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 190 D. Vrontis and H. Kogetsidis

111 and ground coffee. A business trip to Italy opened Schultz’s eyes to the rich tradition of
2 the espresso beverage and espresso drinks became an essential element of Starbucks’
3 vision. Schultz bought the company with the help of investors in 1987 and created a new
4 type of store – a cross between a retail coffee-bean store and an espresso bar/café – that
5 became Starbucks’ signature format in the 1990s (www.starbucks.com).
6 Until 1996, the year in which Starbucks opened its first overseas location in Tokyo,
7 Japan, 676 stores had already been opened across the US. Today there are more than 600
8 retail locations in Japan alone and, with the opening of approximately five new stores per
9 day worldwide, Starbucks is becoming one of the most recognised and respected brands
1011 in the world (www.starbucks.com).
1 Starbucks’ corporate goal is to become the leading retailer, as well as the leading brand
2 of coffee in each of its target markets, by selling the finest quality coffee and related
3 products and, also, by providing superior quality customer care and service. In order to
4 achieve this, the company needs to keep the 40 million customers that visit its stores each
5 week worldwide happy at all times, maintain their loyalty and pay particular attention to
6 their cultural preferences in all its locations worldwide.
7 In the words of its chairman, “You get more than the finest coffee when you visit a
8 Starbucks – you get great people, first rate music and a comfortable and upbeat meeting
9 place. . . We establish the value of buying a product at Starbucks by our uncompromising
2011 quality and by building a personal relationship with each of our customers”
1 (www.starbucks.com).
2
3
4 3 Cyprus
5
6 Cyprus is situated in the North East of the Mediterranean and is its third largest island,
7 with an area of 3572 square miles. The island’s mild climate and ideal weather conditions
8 have made it a popular destination for tourists, particularly from Western Europe. Its
9 economy is, therefore, based to a large extent on the tourism industry, as well as a quite
30 well-developed services sector.
1 Cypriots have a tradition for consuming coffee, both at home and in local cafes.
2 Drinking coffee is also seen as an opportunity for social gatherings between friends,
3 relatives and colleagues. Prior to Starbucks’ entrance to the Cypriot market, consumers’
4 needs were met mainly by a large number of local cafes.
5 Starbucks opened its first store in Cyprus in 2003. The location chosen was in its
6 capital, Nicosia, at the heart of its main shopping district. To respond to the high
7 acceptance of its products in the market the company has now opened four more stores on
8 the island.
9
40
1 4 Marketing orientation and customer satisfaction
2
3 The concept of marketing has changed dramatically, with its early focus on production
4 being replaced by a significant emphasis on the needs and wants of the consumer and,
5 therefore, on the concept of customer satisfaction. This transformation of marketing
6 covered the successive stages of production orientation, sales orientation and, finally,
711 marketing orientation.
8
 Environmental analysis as a means to customer satisfaction 191

111 4.1 Production orientation

2
This era was characterised by the focus of company efforts on producing a good or service.
3
More specifically, management efforts were devoted to achieving high production
4
efficiency, often through the large-scale production of standardised items. Sales, finance
5
and personnel were seen as secondary. The underlying philosophy towards customers was
6
that they would purchase the products, provided that they were available in sufficiently
7
large quantities of a suitably low price.
8
9
1011 4.2 Sales orientation
1
The sales orientated company is one where the focus of company efforts switches to the
2
sales function. The main issue here is not how to produce but, having products, how to
3
ensure that this production is sold. This is illustrated in Figure 1.
4
5 Figure 1 Sales orientation
6
7
8
9
2011
1 4.3 Marketing orientation
2
The marketing concept holds that the key to successful and profitable business rests with
3
identifying the needs and wants of customers and providing goods and services to satisfy
4
these needs and wants (see Figure 2).
5
6
Figure 2 Marketing orientation
7
8
9
30
1
2
Increasingly, companies have come to recognise that this different approach to doing
3
business is essential in today’s environment. Consumers are now better educated and more
4
sophisticated than before and, thus, far more demanding as far as their wants and
5
expectations are concerned.
6 Customer satisfaction refers to the extent to which customers are happy with the
7 products and services provided by a business. Gaining high levels of customer satisfaction
8 is very important to a business because satisfied customers are most likely to be loyal, to
9 make repeat orders and to use a wide range of services offered by the company.
40 There are many factors which lead to high levels of customer satisfaction including:
1
2
goods and services which are customer focused and, hence, provide high levels of
3 value for money
4
customer service giving personal attention to the needs of individual customers
5
6
after sales service – following up the original purchase with after sales support such
711 as maintenance and updating.
8
 192 D. Vrontis and H. Kogetsidis

111 Satisfaction has long been considered the cornerstone for evaluating the strength of a
2 company’s relationship with its customers. Customers are most likely to appreciate the
3 goods and services that they buy if they are made to feel special. Consumer orientation is
4 critically important for customer satisfaction. Every company should undertake market
5 research and understand consumers’ needs and wants. A well thought, designed and
6 applied marketing plan would lead to customer satisfaction. For this to be achieved, all the
7 necessary stages and steps starting from market research and situation analysis have to be
8 followed. The situation analysis for Starbucks in Cyprus is discussed in detail in the
9 following section.
1011
1
2 5 Marketing planning and situation analysis
3
4 5.1 Marketing planning
5
According to Fifield and Gilligan (2000), marketing planning is a process of
6
7
analysing environmental, competitive and business factors affecting business units
8 and forecasting future trends in business areas of interest to the enterprise
9

participating in setting business objectives and formulating corporate and business
2011
unit strategy
1
2
selecting target market strategies for the product-markets in each business unit
3
establishing marketing objectives
4
5
developing, implementing and managing programme positioning strategies for
6 meeting target market needs.
7 Marketing planning aims not only to decide what product would be profitable to make but
8 also to identify the needs and wants of the consumer.
9 Marketing planning should not be taken in a vacuum but against the background of a
30 series of guidelines and priorities that are determined by corporate and business
1 management. For a marketing plan to be effective it has to be part of business and
2 corporate planning.
3 The design of a marketing plan is critically important for every organisation,
4 regardless of its size or type. Planning yields benefits for all companies:
5
6
it encourages systematic thinking
7
it forces the company to sharpen its objectives and policies
8
9
it leads to better coordination of company efforts
40
it provides clearer performance standards for control.
1
2 It is, therefore, evident that companies that desire to prosper should develop a coherent
3 marketing plan. It is evident that a number of factors influence marketing planning
4 decisions. These include all stakeholders that have expectations from the organisation or
5 are affected in any way. These are outlined in Figure 3.
6
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 Environmental analysis as a means to customer satisfaction 193

111 Figure 3 Influences upon marketing planning

2
3
4
5
6
7
8
9
1011
1
2 5.2 Situation analysis
3
4 Situation analysis is the first and one of the most important stages in marketing planning.
5 This is because a company’s ‘strategic fit’ with its environment is central to its strategy
6 and further effective strategies cannot be developed without firstly analysing the
7 environment in which the company operates (Vignali et al., 2003). It is suggested that the
8 environmental scanning of both the external and the internal environment of the company
9 is a necessary prerequisite stage to strategic formation (Vignali and Vrontis, 2004).
2011 The company’s external environment covers its macro- and micro-environment. The
1 macro-environment consists of forces such as social, cultural, legal, economic, political
2 and technological. Within this are included factors such as demographics, green issues and
3 larger societal and environmental forces. The micro-environment includes other
4 environmental constraints, such as the structure of the market, suppliers, customers, trends
5 in the market and competition (Vignali et al., 2003).
6 Equally important is the company’s internal environment, which incorporates the
7 examination of the company’s marketing mix (product, price, place, promotion) and
8 service mix (people, physical evidence, process management). An analysis of the internal
9 environment also covers other factors, such as sales, profitability, market share and
30 customer loyalty. An internal audit examines the company’s own resources and supplies
1 suggestions as to its strengths and weaknesses.
2 After considering both its internal strengths and weaknesses and the external
3 environmental influences that affect it (opportunities and threats), a company is in a
4 position to develop an effective marketing plan. Failure to understand the external and
5 internal capabilities may lead to complete failure. A detailed illustration of the factors that
6 need to be considered in the internal and external audits is presented in Figure 4.
7 The following sections present the results of an external and an internal analysis,
8 which aim to facilitate customer satisfaction with the company’s products as well as
9 service in the Cypriot market. Some references to the issue of customer satisfaction as far
40 as the company’ operations worldwide or in certain key markets (e.g. the American
1 market) are concerned are also made there.
2
3
4
5
6
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8
 194 D. Vrontis and H. Kogetsidis

111 Figure 4 Situation analysis

2
3
4
5
6
7
8
9
1011
1
2
3
4
5
6
7
8
9
2011
1
2
3
4
5
6
7
8
9
30
1
2
3
4
Source: Vrontis (2003)
5
6
7 5.3 External analysis
8
The external environment is made up of forces over which a company has limited, if any,
9
control and covers both the macro- and the micro-environment. The macro-environment
40
consists of forces such as SLEPT factors – social, legal, economic, political and
1
technological. Within this are included factors such as demographics, green issues and
2
larger societal forces. The micro-environment includes environmental constraints, such as
3
the structure of the market, suppliers, customers, trends of the market and competition
4
(Vignali et al., 2003).
5
6
711
8
 Environmental analysis as a means to customer satisfaction 195

111 5.4 Macro environment/SLEPT factor analysis

2
3
5.4.1 Political/legal
4 Political and legal factors have to do with the general political and legal environment in
5 which a country operates. Cyprus is characterised by political stability and, since May
6 2004, it is a full member state of the European Union. The legal system of the country is
7 also seen as favourable to companies wishing to enter the Cypriot market, with no
8 particular government restrictions on entry or to operation in the local market.
9
1011 5.4.2 Economic
1 Economic factors are concerned with consumers’ purchasing power and spending
2 patterns. Cypriots have a relatively high purchasing power and are willing to spend a bit
3 more in return for a better product or service. This has enabled Starbucks to set its prices
4 in the local market slightly higher than both those in other countries and in the local cafes.
5
6 5.4.3 Socio-cultural
7 Socio-cultural factors are all those forces that affect the values, perceptions, preferences
8 and behaviours of the people in a society. These forces include shifts in values and culture,
9 lifestyle changes, as well as any demographic changes. In recent years Cypriots seem to
2011 have changed their habits as far as drinking coffee is concerned. These days it is not only
1 young people but also older parts of the population who enjoy going to a café. People also
2 enjoy having a cup of coffee and meeting friends or colleagues after work or even during
3 a break, something that is in line with most European countries. As the founder of the
4 company has put it, Starbucks is trying to create ‘a third place’ for its customers – a place
5 between home and work where people can come to get their own personal time out and to
6 have a sense of gathering.
7 At the same time, a large number of Cypriot men and women are smokers, some of
8 whom are social smokers, meaning they only smoke when in social gatherings. This
9 suggests that the restriction on smoking inside Starbucks may appeal to the non-smokers;
30 however it may also have a negative effect on the smokers’ decision to visit it.
1
2 5.4.4 Technological
3 Technological factors are all those forces that create new technologies, products and
4 market opportunities. Cyprus is a country where changes and new technologies are
5 embraced. This has helped Starbucks to enter the Cypriot market and to retain its high
6 standards, particularly as far as the preparation of quality coffee is concerned.
7
8
9 5.5 Micro environment/Porter’s five forces
40 Porter’s (1985) Five Forces model can be used to identify the competitive forces for the
1 company through a structural analysis of the industry in which it operates. This can be
2 illustrated through Porter’s (1985) five competitive forces (see Figure 5).
3
4
5
6
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8
 196 D. Vrontis and H. Kogetsidis

111 Figure 5 Porter’s five forces for Starbucks

2
3
4
5
6
7
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9
1011
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2
3
4
5
6
7
8
9
2011
1
2
3
4
5
6
7
8
9
30
1
2
3
4 5.5.1 Threat of new entrants
5 Starbucks is a large multinational company, which means that economies of scale have
6 already been achieved. It is, therefore, rather difficult and costly for new players to enter
7 the Cypriot market. The threat of new entrants is therefore considered to be low at present.
8
9 5.5.2 Industry rivalry
40 In Cyprus, the concentration of companies in this industry is high. However, the main
1 competitor of Starbucks is Costa Café, both of whom are quite different from their
2 competitors in that they are well known international brands that use a self-service
3 system – a new concept for this industry in Cyprus. In October 2006, another international
4 coffee shop chain, Gloria Jeans Café, has also entered the market; however it is too soon
5 to evaluate its impact on the Starbucks’ market share. What is different about both Costa
6 Café and Gloria Jeans Café is that they allow smoking inside their premises at designated
711
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 Environmental analysis as a means to customer satisfaction 197

111 areas. The lack of more competitors in this exact type of service puts industry rivalry at a
2 medium level.
3 Local cafes are also competitors even though they are not international brands. They
4 offer the same product and pleasant surroundings while usually offering lower prices than
5 Starbucks. They also have waiters, serve a local coffee favourite (frappe), more food
6 options and they allow smoking. Finally they are more flexible in adapting their menus
7 according to the customers’ needs and wants. Including them as Starbucks competitors
8 immediately sets the industry rivalry level at high.
9
1011 5.5.3 Threat of substitutes
1 With the exception of Costa Café, there are no other substitutes for the product and service
2 that Starbucks offers. Fast food restaurants, such as McDonalds and Burger King, ice
3 cream shops and local cafes are highly differentiated from Starbucks in terms both of
4 product and service offered. The threat of substitutes is, therefore, considered to be low at
5 present.
6
7
5.5.4 Power of suppliers
8
9 Starbucks chooses suppliers who fulfil certain requirements, such as value, quality, service
2011 and practices. The company cannot be threatened by its suppliers, as it is taking an
1 integrated approach to ensure a long-term sustainability of quality coffee, while at the
2 same time building mutually beneficial relationships with coffee farmers and communities
3 with whom business is conducted.
4
5 5.5.5 Power of buyers/customers
6 Customers do not seem to have too much bargaining power over the variations in price,
7 the place of distribution and the product offerings. The company, however, aims to satisfy
8 its customers and gain new ones through the use of innovative ideas and, generally, by
9 offering new products.
30
1 5.6 Internal analysis
2
3 The internal audit examines the company’s own resources and supplies suggestions as to
4 the company’s strengths and weaknesses (Vrontis and Vignali, 1999). Internal
5 considerations are mainly controllable by the company and, therefore, companies should
6 mostly avoid any problems from this area. It is evidently proven that product development
7 and strategic formation are based upon the internal organisational capabilities. The
8 internal audit examines the company’s own resources and supplies suggestions as to its
9 strengths and weaknesses.
40
1 5.6.1 Product
2 Starbucks offers a range of coffees and other beverages as well as a good variety of
3 pastries. The company buys the finest coffee beans and has set high standards for product
4 quality. The company only uses suppliers who meet strict selection standards.
5 When Starbucks introduced a new cold coffee drink, called Frappuccino, in its home
6 market in the summer of 1995, this proved to be a big hot-weather seller. By July of the
711 following year, Starbucks coffee flavoured ice cream was the top selling super premium
8
 198 D. Vrontis and H. Kogetsidis

111 brand in the coffee segment. In 1997, two new low-fat flavours were added to complement
2 the original six flavours, along with two flavours of ice-cream bars – they were all well
3 received in the marketplace. In response to customers’ requests for a lighter coffee option,
4 the company introduced Frappuccino Light in the summer of 2005 – a lighter blended
5 coffee option with the same delicious taste. Both versions of the product have been
6 extremely popular in the Cypriot market – particularly in the summer months when
7 temperatures in excess of 35°C are common, even until the end of September.
8 In 2006, the American Customer Satisfaction Index – a national economic indicator of
9 customer evaluations of the quality of products and services available to household
1011 consumers – gave Starbucks good marks for quality, even though it didn’t give the
1 company the same marks for value (www.bus.umich.edu). Unfortunately, there are no
2 similar figures available for the Cypriot market for comparison purposes.
3
4 5.6.2 Price
5 Starbucks prices in Cyprus are slightly higher than those in other countries and are
6 regarded to be comparable to the cost of living in this country. The company’s profitability
7 in Cyprus is higher compared with other countries – something that is thought to be the
8 result of the high level of acceptance of Starbucks in the Cypriot market, rather than the
9 direct result of charging higher prices for the company’s products.
2011
1 5.6.3 Place
2 Before coming to Cyprus, Starbucks was only known to people who lived or travelled
3 abroad. To facilitate the brand’s acceptance in the local market the company opened its
4 first store in Cyprus in one of the most central points in its capital Nicosia. This managed
5 to increase its brand awareness in the local market dramatically in a very short period of
6 time.
7 Starbucks stores are typically clustered in high-traffic, high-visibility locations. When
8 the company opens a new store near an already established one, the idea is to relieve long
9 customer queues and to improve customer service. The interior of each store is also
30 carefully designed, which aims to create a place that is not only conveniently located but
1 also comfortable and relaxing.
2 Worldwide and, more particularly, in its home market, the company has been building
3 its new stores in markets that already had Starbucks locations – thereby cannibalising a
4 certain amount of its own sales – and in markets with low population density. Nevertheless,
5 Starbucks sees ever more customers spending even more money on each visit (Lund, 2000).
6 It might often seem like there is a Starbucks coffee store on every corner in most major
7 cities and neighbourhoods, yet not everyone is quite fortunate enough to have the
8 ‘Starbucks experience’ in their urban areas and nearby homes. With 73% of its stores
9 concentrated in just fifty markets, the company has plenty of room to grow. In the US, for
40 example, analysts believe that the company has room to double its chain of coffee shops
1 without over-saturating the market (Bruss, 2001).
2 Since coming to Cyprus in 2003, Starbucks has opened a total of five stores in busy
3 areas around the island. Although there is still room for further expansion, the company
4 has managed to offer to the local market a well known brand that local people used to see
5 only during their trips abroad. The high degree of acceptance of the brand in the local
6 market confirms the high level of customer satisfaction with the company’s product as
711 well as overall concept.
8
 Environmental analysis as a means to customer satisfaction 199

111 5.6.4 Promotion

2 Starbucks does not use advertising as a promotional tool and instead finds other ways to
3 promote its brand. Among these, word of mouth and product sales promotion are of
4 paramount importance to the company and are, therefore, widely used worldwide and in
5 Cyprus in particular. As part of its commitment to make a positive contribution to the
6 community where it does business, Starbucks recently announced its collaboration with
7 the ‘Make a Wish’ Foundation of Cyprus – a charity organisation aiming to support
8 children with cancer. This is part of the company’s dedication to creating hope and
9 opportunity in communities where employees and customers live and work. The company
1011 is also committed to community development through socially responsible investing and
1 has built a diversified portfolio of projects aimed at this goal.
2
3 5.6.5 People
4 Starbucks is the prototypical example of a company that understands the connection
5 between engaged employees, satisfied customers and increased profits. The goal is for
6 Starbucks’ employees to be able to answer customers’ questions. Customers are then
7 willing to spend more because of their good experience and they communicate their
8 experience to others. This has been found to be the case with Starbucks, with heavy users
9 returning twenty times per month (Lillich, 2004).
2011 Starbucks realises that its people are the cornerstone of their success and that their
1 ideas, commitment and connection to customers are the essential elements of the
2 ‘Starbucks experience’. The company follows a quality training strategy – a
3 comprehensive quality control training programme which is designed to cultivate skills
4 and knowledge in coffee making and delivering the product at each stage of development.
5 Each employee of the company has to go through a very extensive training programme
6 that facilitates strong knowledge in coffee, product expertise and a commitment to
7 customer service. All Starbucks employees in Cyprus participate in this quality control
8 training programme and are offered continuous training on customer satisfaction.
9 The company also offers an innovative, comprehensive employee benefits package for
30 both full time and part time employees (Berry, 1995). By creating employee satisfaction,
1 Starbucks is able to retain friendly and courteous employees, thereby creating customer
2 satisfaction and increasing the future value of the relationship with Starbucks to the
3 customer (Bolton and Bhattacharya, 2000).
4 As the Starbucks chairman likes to point out, we are all in the people business.
5 Employees and customers are two sides of what should be a mutually beneficial
6 relationship. If either side is badly served, the other half will inevitably feel the effect and
7 the company’s bottom line will suffer (Gurney, 2002).
8
9 5.6.6 Physical evidence
40 Starbucks offers great attention to the surroundings of its stores, where the right
1 combination of lighting, music, furniture, coffee cups, employee uniforms etc. are
2 considered to be of high importance. Cyprus is no exception to this, with all stores being
3 carefully furnished with ambient light and a variety of creative art works depicted around
4 the walls. The idea is not to provide heavily invested surroundings but, rather, to set the
5 right mood for their customers to enjoy themselves.
6
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 200 D. Vrontis and H. Kogetsidis

111 Starbucks is all about engagement: customers are called by name to retrieve their
2 fully-customised drinks. Even the cups themselves speak to a certain taste culture. The
3 message to the customer is clear: come and feed your caffeine habit but also sit, relax,
4 work and chat. The Starbucks goal is to build a long-term relationship with its customers
5 resulting from the experience of spending time at the store (Manning, 2006).
6
7 5.6.7 Process management
8 As process management is concerned with the way in which customers are dealt with from
9 the moment of initial contact right through to sales follow-up and after sales service,
1011 Starbucks has to ensure that customers are happy at all times. This way, all its customers
1 will be able to enjoy not only a cup of coffee in a nice environment but also being part of
2 the ‘Starbucks experience’.
3 According to a 2004 Harvard Business School case study, a Starbucks analysis of
4 customer satisfaction found that the average ‘unsatisfied’ customer stuck with the chain
5 for a little more than one year, made 47 visits during that period and spent a total of
6 approximately $200. By contrast, the average ‘highly satisfied’ Starbucks customer
7 patronised the chain for more than eight years, made an impressive 86 visits per year and
8 spent a little more than $3000 over that period (Reibstein, 2005).
9 Based on the company’s estimate, marketing would have to invest $40 million annually
2011 to sufficiently reduce waiting times and convert its unsatisfied customers into highly
1 satisfied ones. Starbucks deemed the investment worthwhile based on the revenue that these
2 now highly satisfied customers would contribute over the long run (Reibstein, 2005). Apart
3 from reducing waiting times and increasing customer satisfaction, this improvement also
4 protects market share as well as increasing sales and profits (Almquist, 2005).
5
6 5.7 SWOT analysis
7
8 Situation analysis can generate a great deal of data and information for marketing
9 planning. This information, however, provides little direction to managers preparing to
30 develop a marketing plan if it is not structured in a way which clarifies both present and
1 anticipated situations and provides some direction for action (Ferrell and Hartline, 2005).
2 A widely used framework for organising and utilising the pieces of data and
3 information gained from the situation analysis is SWOT analysis. SWOT analysis is a
4 merging of the external factors (external analysis) with the company’s own characteristics
5 (internal analysis), resulting in an assessment of the organisation’s opportunities. This
6 merging brings together the company’s strengths, weaknesses, opportunities and threats in
7 order to identify a strategic niche that the organisation can exploit (Robbins and DeCenzo,
8 2005). A SWOT analysis for Starbucks in Cyprus follows:
9
40 5.7.1 Strengths
1
High quality of products
2
3
high brand awareness – the company holds a position in the top 100 brands in the
4 world
5
high visibility locations for its stores
6
711
economies of scale
8
 Environmental analysis as a means to customer satisfaction 201

111
a well-trained workforce

2

an innovative company constantly improving its range of products
3
4
emphasis on specific needs and requirements of the local market
5

strong relationship with suppliers
6
7
a strong non-smoking policy (for non-smokers).
8
9 5.7.2 Weaknesses
1011

Lack of parking facilities
1
2
popular local ice-coffee ‘frappe’ not on the menu
3

local people not accustomed to the concept of self-service
4
5
more attention should be given to customers after their order has been taken and
6 their food and/or drinks delivered to them
7

a strong non-smoking policy (for smokers).
8
9
2011 5.7.3 Opportunities
1
Changing customers’ attitudes/tastes
2
3
good standard of living
4
economies of scale already achieved
5
6
favourable legal system.
7
8 5.7.4 Threats
9
30
A well known international brand as the main competitor and one recently added
1
high concentration of cafés in the town centre area
2
3
maturity stage of the market
4
other branded products in the food industry (e.g. McDonalds, Burger King).
5
6 The company’s brand name and perceived quality are undoubtedly its main strengths as
7 far as its operation in the Cypriot market is concerned. In just three years Starbucks has
8 achieved its aim of making people who had never tried or even seen its products before
9 very keen fans of the ‘Starbucks experience’. These people are willing to pay a bit extra
40 in order to enjoy this experience and this is perhaps the best evidence of their degree of
1 satisfaction with the company and its products.
2 The fact that local people are not used to the concept of self-service or even that certain
3 popular local drinks are not on the menu do not seem to create any real problems for the
4 company. On the other hand, the self-service concept and the fact that a cup of coffee at a
5 Starbucks in Cyprus tastes exactly the same as in any other Starbucks store around the
6 globe are factors that loyal customers of the company value, as they see them to be part of
711 the ‘Starbucks experience’. It is suggested that the company finds a way to deal with the
8
 202 D. Vrontis and H. Kogetsidis

111 rather significant parking problem – a big price to pay for selecting central locations in
2 busy areas of the island.
3 The changing customers’ attitudes on the island and, in particular, the fact that going
4 to a modern café and enjoying a cup of coffee and a good time out with friends or
5 colleagues is now the norm rather than the exception provides an excellent opportunity for
6 the company to expand its business on the island. To do this the company should pay
7 particular attention to its customers’ cultural preferences. It is evident that Starbucks is
8 taking this seriously without deviating from its values and this has given the company its
9 international reputation. For example, Starbucks is the only company in this industry, in
1011 Cyprus, operating a strict non-smoking environment in all its stores. Without deviating
1 from the ‘Starbucks experience’, the company has also managed to keep the significant
2 number of its customers who are keen smokers happy by creating well protected seating
3 areas outside the store, where customers are allowed to smoke.
4 Starbucks should also be aware of the threat provided by Costa café – its main
5 competitor in the Cypriot market. Costa café is also a highly successful company which
6 offers a well known brand and a similar concept. However, given the experience in other
7 markets where these players have co-existed for a number of years and the fact that
8 Starbucks has particularly loyal customers, this threat does not seem to be major, provided
9 that the company continues to be customer centric and pay the same degree of attention to
2011 customer satisfaction as it always has.
1 It is clear that every business, no matter how well run, occasionally makes a mistake
2 with a customer. How such mistakes are handled is critical to the reputation of the
3 business. The customer will remember how a problem is resolved and will be sure to tell
4 his or her friends. It is, therefore, important that marketing research and a SWOT analysis
5 are constantly carried out by the company and customers’ perceptions of the company are
6 closely monitored. This will facilitate customer satisfaction with the company’s products
7 and service and minimise problems and mistakes in the planning process.
8
9
6 Conclusions
30
1 Customer satisfaction is seen as a response to an evaluation process. Customer satisfaction
2 with a company’s goods and services is often seen as the key to a company’s success and
3 long-term competitiveness. In the context of relationship marketing, customer satisfaction
4 is often viewed as a central determinant of customer retention.
5 Starbucks has always remained completely customer centric. Its mission statement aims
6 to ‘develop enthusiastically satisfied customers all of the time’. As customer-organisations
7 go, Starbucks is as customer-orientated as they come (Brown, 2003). The company enjoys
8 an excellent reputation and is seen as one of the main brands in the world. Its high quality
9 of products and the concept of the ‘Starbucks experience’ have produced loyal Starbucks
40 customers throughout the world.
1 It is necessary that the company constantly undertakes market research and carefully
2 examine its strengths and weaknesses, as well as opportunities and threats, in all markets
3 it has targeted. Market research can guide Starbucks properly to design its marketing
4 strategies and tactics and be in a better position to gain high levels of customer
5 satisfaction.
6 It is also very important for the company to deal with customers’ cultural preferences
711 in all its locations worldwide in order to maintain customer loyalty. This is increasingly
8
 Environmental analysis as a means to customer satisfaction 203

111 important in global markets, where cultural differences, values and preferences play a very
2 important role in customer satisfaction with the products or services being offered. It is
3 suggested that Starbucks set different strategies and approaches for each market it targets
4 in order to make the ‘Starbucks experience’ part of the host country.
5 Finally, it is suggested that Starbucks continues to support charity events and to
6 participate in local activities. Its emphasis on community activities can enhance the
7 company’s relationship with the local market and the host country.
8 Given the experience of the company in global markets and its high degree of
9 acceptance in the Cypriot market thus far, there is no doubt that the company will continue
1011 to develop enthusiastically satisfied customers all of the time and to offer the host market
1 not just coffee but a real coffee experience.
2
3
4 References
5
6 Almquist, T. (2005) ‘Selling to your CFO’, CMO The Resource For Marketing Executives, October
7 2005, retrieved 28/09/2006, available from: http://www.cmomagazine.com.
8 Berry, L. (1995) On Great Service, New York: The Free Press.
9 Bolton, R. and Bhattacharya, C. (2000) ‘Relationship marketing in mass markets’, Handbook of
2011 Relationship Marketing, Thousand Oaks, Canada: Sage Publications.
1 Brown, S. (2003) Free Gift Inside!!, Oxford: Capstone.
2 Bruss, J. (2001) ‘Starbucks aims high’, Beverage Industry, Vol. 92, No. 12.
3 Ferrell, O.C. and Hartline, M.D. (2005) Marketing Strategy, Ohio: Thomson South-Western.
4 Fifield, P. and Gilligan, C. (2000) Strategic Marketing Management: Planning and Control,
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30 retrieved 28/09/2006, available from: http://www.purdue.edu/UNS/html4ever/2004/040913.
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Lund, B. (2000) ‘Starbucks’ brand power’, December 2000, retrieved 28/09/2006, available from:
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Manning, B. (2006) ‘Measure engagement, not satisfaction’, iMedia Connection, July 2006,
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5 Porter, M. (1985) Competitive Advantage: Creating and Sustaining Superior Performance, New
6 York: The Free Press.
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8 The Resource For Marketing Executives, May 2005, retrieved 28/09/2006, available from:
9 http://www.cmomagazine.com.
40 Robbins, S. and DeCenzo, D. (2005) Fundamentals of Management, New Jersey: Pearson-Prentice
1 Hall.
2 Vignali, C. and Vrontis, D. (2004) Global Marketing and Export Management, UK: Foxwell and
3 Davies.
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6
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111 Vrontis, D. (2003) ‘McDonald’s – the impact of the external environment on its international
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of Management Cases, Vol. 6, No. 2, pp.30–40.
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4 Vrontis, D. and Vignali, C. (1999) ‘An entry strategy report for Dairy Crest in Germany: a
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5 pp.393–408.
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