IMPORTANCE OF THE GLOBAL MACRO-MARKETING ENVIRONMENT 2011

The global market is a very hazardous marketing environment which consists of those variables largely out of the control of the organisation. These variables are constantly changing, where developments and changes such as, changes in demographics and expectations of global consumers, can change the nature of competition.

Coffee Shop Market

The coffee shop market is a well-established market with high degree of competition both at national and at international level as the market for coffee shops extends throughout the world.

The market is affected by factors such as national and international economic, legal and political factors, currencies and pressure groups. However, great knowledge of the environment helps organizations to isolate very significant factors to focus on, allowing more focused strategy to be implemented.

Knowledge of the global marketing environment is therefore very crucial to the survival of this market, as this knowledge could be the ultimate source of competitive advantage.

1. It can reduce the risk of failure,2. They aid international and global strategy planning,3. Choice of markets and marketing mix -- They aid decision making on strategy

implementation; which markets to enter and the appropriate marketing mix,4. They enable the organization to assess the risks of investing and conducting business

between and within different countries.5. They allow organizations to identify which of the uncontrollable variables to focus on

more.

Differences in Culture among Global ConsumersWith the progressive recognition of the differences in consumption behaviour from the different cultures of global consumer, knowledge of global marketing environment can:

Reduce the risk of failure Aid global strategy planning

Starbucks in BrazilBrazil is well-known as the land of coffee, but Brazilians do not like coffee. Most coffee houses in Brazil sells poor quality and it is consumed as a soft drink, while on other places of the world it is consumed as an aromatic experience more than a drink. By understanding the Brazilian market for coffee houses, Starbucks has successfully localized itself in the Brazilian market without changing the product experience.

Global Marketing Environment Atiqah Ismail

IMPORTANCE OF THE GLOBAL MACRO-MARKETING ENVIRONMENT 2011

It localizes its traditional cappuccino with a Doce de leite edition, which is a Brazilian traditional cream (Nes, 2010). Starbucks has identified and understood the marketing value of Doce de leite – this is a cream that most Brazilians were eating as kids and with which they have a lifelong relation with. Starbucks has successfully localized its famous Starbucks Cappuccino by combining it with a local touch of traditional product.

Convergence in Consumer consumption Pattern Identification of new opportunities in the global market

Population of China and Russia have developed a taste for coffee (Mintel, 2011).This creates an opportunity for coffee shops, where coffee shop market can potentially flourish in these increasingly wealthy economies. These opportunities also increases the need to understand markets, the potential and threats, in other countries, in helping coffee houses to adapt (standardize or customize) to the different marketing environments of other countries.

Understanding global markets allows coffee shops to identify new opportunities, for example, coffee shop market is in its mature stage in the Western economies such as USA – however in Japan, the market for coffee shops is growing and not very much saturated (Japan Marketing News, 2008).

The Emergence of New Economic PowerhousesWhilst China and Russia are increasingly importing higher –quality Arabica beans, this has led to the increase in price of Arabica bean, affecting many coffee retailers and coffee houses worldwide (Mintel, 2011).

This shows a rippling impact of market developments of some economies on the market. Hence, forecasts and knowledge about trends and developments of other economies and their market environments may help mitigate the costs of this increase in costs – or having to pass higher prices onto customers.

Global Marketing Environment Atiqah Ismail

IMPORTANCE OF THE GLOBAL MACRO-MARKETING ENVIRONMENT 2011

Knowledge of Competition in the Marketing Environment

Changing Nature of CompetitionCompetitors are not only limited from within the coffee shop market. It competes intensely with in-home coffee products (Mintel, 2010).

Competitors Influences:

Coffee shops are losing their USP as non-specialists are increasingly focusing on expanding their hot drinks ranges and improving the product quality.

Increased preference for in-home fresh ground coffee pods amongst coffee consumers, as in-home coffee innovations are closing the quality gap between these two markets – however, its potential is limited by the importance consumers place on convenience.

This may be a form of opportunity for the coffee shop market to respond to, in order to maintain the market -- although it can also be a threat if ignored.

This challenge from global marketing competitive environment to this market could be for it to seek a different way to add value in order to achieve a new form of competitive advantage, so as to maintain its consumers who are increasingly flooded with competing substitutes from outside the coffeehouse market.

It is therefore, important for coffee shops to identify its competitors and try to predict their developments, in order to compete effectively and strategically.

Identifying and Matching the Needs of Global ConsumersA change in global consumer lifestyle towards convenience in developed economies such as UK, USA and Japan.

Japan is now increasingly becoming a 24-hour society, where workers continue to work long and anti-social hours. This trend is further under-pinned by a rising number of single-person households, which continue to contribute to the demand of easily accessible products for on-the-go consumption. Consumers desire for convenience, contributed to the rapid development of chained coffee shops. In Japan, opening hours for coffeehouses are likely to be extended in order to better suit the consumer lifestyles.

Although the recent global recession may threaten this market, however Euromonitor (2011) forecasted that it is unlikely to affect the demand for convenient product, as recession can lead to longer working hours. Consumers seek convenience due to lack of time as a result of increasingly busy lifestyles.

In the UK – consumer lifestyles also create a positive influence on this market, as consumer lifestyle is moving towards a hectic lifestyle where coffee culture fits into this trend. The need for coffee as stimulant and convenience boosts coffeehouse market among white-collar workers, young and professional with no family. Visiting coffeehouse is also a well-

Global Marketing Environment Atiqah Ismail

IMPORTANCE OF THE GLOBAL MACRO-MARKETING ENVIRONMENT 2011

established habit amongst consumers, with many seeing it as an affordable regular treat which is also driven by consumers’ continuing demand for convenience products (Mintel, 2011).

Changes in the Global Economic Environment

Inflation has also been rising in the UK in 2010 and 2011 (BBC, 2011) making disposable income very tight and consumers are becoming more cautious in their spending (Mintel, 2011), potentially harming the out-of-home coffee market, as expenditure out-of-home coffee are seen as an affordable luxury and especially with the presence of competition from outside the market.

This awareness can prepare the market to mitigate potential damages, and hence reducing risks.

Interdependency with Coffee-producing Countries

The market’s interdependency with coffee-producing countries creates more importance for the market to be more aware of its global-macro environment.

Potential influences:

Adverse weather conditions, poor coffee harvest and crop diseases – coffee supply and price fluctuations.

Almost all coffee-producing countries are underdeveloped, such as Kenya, Brazil and Indonesia – political instability – can have a negative influence on the supply-side of the coffeehouse market.

The coffeehouse market is exposed to volatility of coffee price fluctuations, which may be caused by adverse weather condition in coffee-producing countries and poor coffee harvest. Almost all coffee-producing countries are underdeveloped (Berndt and Durant, 2006), such as Kenya and Indonesia, with the political instability of some coffee-producing countries, can be a negative influence on the market.

These macro-environmental factors is out of the control of any organization, however, the knowledge or the ability to foresee emerging trends, can help organizations to prepare itself or to mitigate any potential significant damage, such the cost of having to pass high prices onto the consumers, by perhaps adopting lean service or lean retailing.

By: Atiqah Ismail

Global Marketing Environment Atiqah Ismail

IMPORTANCE OF THE GLOBAL MACRO-MARKETING ENVIRONMENT 2011

Importance of the global macro-marketing environment

Reference:

BBC, (2011). Families '£910 worse off this year', says CEBR report. [Online] Available at: http://www.bbc.co.uk/news/business-13029870 [Accessed 18.05.11]

Berndt, C.E. and Durant, T.C., (2006). The Fall of Communism and the Rise of Starbucks: The Making of the Specialty Coffee Revolution. [Online] Available at: http://www.chaight.com/Communism_and_Starbucks___Draft_v%5B1%5D._2.01.pdf [Accessed 18.05.11]

Euromonitor, (2011). Hot Drinks in Japan: Demand for Convenience. [Online] Available at: http://www.portal.euromonitor.com/Portal/Pages/Analysis/AnalysisPage.aspx [Accessed 20.05.11]

Japan Marketing News, (2008). Starbucks Japan brews up new approaches. [Online] Available at: http://www.japanmarketingnews.com/2008/04/newst.html [Accessed 18.05.11]

Lee, K. and Carter, S., (2009). Global Marketing Management. 2nd ed. New York, NY: Oxford University Press.

Mintel, (2011). Coffee Shops UK, February 2011. [Online] Available at: http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=545197 [Accessed 15.05.11]

Mintel, (2011). Coffee UK, April 2011. [Online] Available at: http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=545333 [Accessed 15.05.11]

Nes, E.F., (2010). 4 Lessons to Learn from Starbucks in Brazil. [Online] Available at: http://thebrazilbusiness.com/article/4-lessons-to-learn-from-starbucks-in-brazil [Accessed 17.05.11]

Global Marketing Environment Atiqah Ismail