Marketing Analysis

STARBUCKS COFFEE KOREA

Hyerim Lee
ID : lm0002srvsrv0119

“I DECLARE THAT THIS ASSIGNMENT IS ALL MY OWN WORK AND THAT I HAVE
ACKNOWLEDGED ALL MATERIALS USED FROM THE PUBLISHED OR
UNPUBLISHED WORKS OF OTHER PEOPLE. ALL REFERENCES HAVE BEEN FULLY
CITED”
 Table of Contents

1. Executive Summary 3

2. Introduction 4

2.1 Starbucks Corporation 4

2.2 Starbucks Coffee Korea 5

3. Situation Analysis 6

3.1 External Analysis 6

3.1.1 Porter’s Five Forces 6

3.1.2 PEST Analysis8

3.2 Internal Analysis 10

4. SWOT Analysis 12

5. Marketing Strategy 13

5.1 Marketing Mix 13

5.2 New Marketing Strategy Proposal 15

6. Conclusion 19

7. References 20

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1. Executive Summary

Starbucks Corporation is the world largest American coffeehouse chain, which has 29,324
stores more than 75 markets around the world by the end of 2018. It was founded by three
business partners in 1971, and is headquartered in the city of Seattle. Starbucks recorded
consolidated net incomes of $6.3 billion in 2018, up 11% over the prior year [ CITATION
Sta18 \l 1042 ]. There are 291,000 estimated employees, who work for Starbucks including
191,000 people in the U.S. as of September, 2018[ CITATION Abh18 \l 1042 ] , and many
subsidiaries including Seattle's Best Coffee, Teavana, and Tazo. Starbucks sells not only
coffee products, but other beverages, light refreshments, and merchandise in supermarket and
convenient stores as well as coffeehouses[ CITATION Sta195 \l 1042 ].

Picture 1 Starbucks Coffee Products (Starbucks, 2019)

In this report, we will take a closer look at Starbucks in Korean market. Starbucks Coffee
Korea Co., Ltd. is the fourth largest number of stores in the world following after the United
States, China, Canada and Japan[ CITATION sta181 \l 1042 ]. The way in which stores are
operated in the United States and their vision are applied to the Korean market. Based on
humanity, they put much emphasis on special experiences in their stores as a part of the daily
routine. It has been combined with Korean unique culture and other environmental factors, so
Starbucks Korea became a unrivalled coffeehouse chain. Throughout this report, we will be
looking at its internal and external situation, and analyze the marketing strategies, which are
currently used in Korean market. Furthermore, it will be dealt with its implications and
improvement plans with new marketing mix.

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2. Introduction

2.1 Starbucks Corporation

Starbucks Corporation is an American coffee franchise brand that sells not only coffee, but
tea, juices, desserts, mugs, and tumblers. The name ‘Starbucks’ came from the American
novel, Moby-Dick and is named after a character, Starbuck who is the chief mate in the book.
The logo of Starbucks is an image of mermaid called Siren in the Greek mythology
[ CITATION Gil08 \l 1042 ].

Figure 1 Evolution of the Starbucks logo

The first branch of Starbucks was opened in Seattle, Washington, U.S. in 1971, by three
partners, Jerry Baldwin, Zev Siegl, and Gordon Bowker who were the students of the
University of San Francisco. At first, it was a retail store that sold roasted coffee beans,
however, in 1987 it was acquired by Howard Schultz who was the CEO of Starbucks from
1986 to 2000 and from 2008 to 2017 and was reborn as a coffee shop. Starbucks has grown
rapidly since then[ CITATION Edi11 \l 1042 ].
As from early 2019, Starbucks operates approximately 30,000 locations around the
globe[ CITATION Sta19 \l 1042 ] . It is the largest beverage chain in the world and among the
food chain it has been ranked second-most valuable fast food brands worldwide in 2018 after
McDonald’s. When it comes to the number of Starbucks stores in the world, it had the most
stores over 14,000 in their home country. China had the second largest number of stores
accounting for 3,521 stores. Following countries are Canada, Japan, and Korea (Republic of
Korea). As a leading coffee chain, it recorded annual income of 24.72 billion (U.S. Dollars)
in 2018[ CITATION sta18 \l 1042 ]

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 2.2 Starbucks Coffee Korea
In Korea, Starbucks first opened its Seoul location in front of prestigious Ewha Womans
University in 1999. In December 2000, it established Starbucks Korea as a 50-50 joint
venture with Shinsegae which is one of the largest department chains in Korea. In July 2004,
it opened its 100th store in Itaewon and operates about 1,260 stores as of January
2019[ CITATION Mac19 \l 1042 ]. It is the fifth highest number after U.S., China, Canada and
Japan. According to research, the city with the most Starbucks locations in the world was
founded in Seoul, South Korea with 284 stores, followed closely by New York City, U.S.
with 277 as of May 2014[ CITATION sta181 \l 1042 ]. With regard to sales revenue of
Starbucks in Korea, it has gradually increased from 617 billion won (532 million dollars) in
2014 to 1.52 trillion won (1.3 billion dollar) in 2018 surging about 150% during the past five
years[ CITATION sta19 \l 1042 ].

Figure 2 Starbucks Sales revenue in Korea from 2014 to 2018[ CITATION sta19 \l 1042 ]

The success of Starbucks in Korean market is directly traceable to the consideration of both
organization’s objectives and Korean cultural demand. As economic growth has increased in
Korea, it has driven a growing demand for coffee. It enables people afford to spend
disposable income on a cup of Americano or Latte with a piece of cake. Also, in Korean
culture, there were many meeting places so called ‘Da-bang’, which means a tea room and
served tea or instant coffee in the 70s and 80s. The newly opened franchise coffee shops like
Starbucks replaced its traditional tea rooms. Many different social brackets not only business
men but also students and mothers waiting to pick up their children gather in its space for
different purpose[ CITATION Ede15 \l 1042 ].
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3. Situation Analysis

3.1 External Analysis

3.1.1 Porter’s Five Forces
• Competitive Rivalry : Strong Force
Owing to economic growth referred to as ‘the economic miracle on Han river’ after 1960 in
Korea, the lifestyle had been changed in many different ways that led surging demand for
coffee[ CITATION Lee18 \l 1042 ]. Starbucks in Korean market faces strong competition with
other coffeehouse chains such as Coffee Bean, Pascucci, Mac Café (global franchises), Ediya,
Twosome Place, Angelinus, Cafe Bene, Hollys (domestic franchises). According to the
Korean Economic Institute of America (2019), there are more than 49,000 coffee shops on a
national scale and 18,000 stores in it capital city, Seoul. Therefore, it is quite clear that the
coffeehouse industry is already saturated in Korea and became more competitive.

• Bargaining Power of Suppliers : Weak Force

With increasing the number of coffee chains in overheated Korean market demands for coffee
bean have been soaring. Although coffee beans are greatly influenced by environmental and
political factors, there are over seventy coffee-exporting countries and numerous coffee beans
suppliers all over the world[ CITATION ICO19 \l 1042 ]. The suppliers compete against one
another to win a contract with large companies such as Starbucks. Furthermore, coffee
franchise companies are supplied with good quality coffee beans since they try to make a
contract which ensures price stability with coffee beans suppliers. These external factors that
there are enough an aggregate and large variety of suppliers weaken the bargaining power of
suppliers.

• Bargaining Power of Buyers : Moderate Force

Customers are volatile and sensitive to the flavor of coffee and the ambiance of the
coffeehouses. People are susceptible to the internal or external environment like price
policies, political issues or health concerns. Recently, there have been increasing demands for
differentiated services and high quality products such as specialty coffee according to
economic growth in Korea. Besides, many people are interested in sustainable coffee certified

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as organic cultivation and fair trade, so it is easy to shift to other brands that meet the latest
trends with low switching costs.
Nevertheless, Starbucks has the largest loyal customers among Korean coffee franchise.
Starbucks received the highest score in the coffee shop satisfaction survey of the Korea
Consumer Agency. According to the report, Starbucks ranked 3.83 out of the total score 5
among the top 7 coffee chains[ CITATION KCA17 \l 1042 ]. When it comes to psychological
traits, human beings are irrational and unreasonable so people have tendency not to change
once they get used to something[ CITATION Dan08 \l 1042 ]. Therefore, the bargaining power
of buyers is not that high strategic issue in Korea.

• Treat of New Entrants : Moderate Force

Coffeehouse industry has relatively few regulations and low entry barriers, so it is easy to
open a new store in Korea. Recently, the National Tax Service announced that the growth rate
of coffee chain stores was 72.8% in three years [ CITATION Nat17 \l 1042 ]. Besides, it has
been increasing the number of coffeehouse chains which have differentiated features like
high quality coffee beans, special offers, outstanding services or unique store concepts. For
example, in May 2019, the California-based coffee shop chain, Blue Bottle Coffee launched
its second overseas branch in Korea. It is famous for its unique design and drip coffee with
special coffee beans, so it attracts many people though high pricing [ CITATION PRN19 \l
1042 ].

However, looking into the number and kind of coffee stores in Korean market, it seems
reaching saturation point. There are already many giant coffee franchise companies like
Starbucks, Coffee Bean, Ediya, etc. Also, many coffee shops that have been opened easily
due to the relatively low barriers to entry have difficulties maintaining it. According to
comparative study between opening and closing rate of new coffeehouses for the last three
years, it can be seen that many coffee shops are not easy to overcome competition. New
opening rate is gradually falling and closure rate is increasing [ CITATION Bor18 \l 1042 ].
Thus, Porter’s Five Forces analysis shows that Starbucks faces the moderate threat of new
entry in Korean market.

• Threat of Substitute Products : Strong Force

There are many external factors which directly affect to the business of Starbucks
Corporation. People can easily buy the coffee products in convenience stores, vending
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machines or supermarkets. Starbucks competes with numerous substitutes not only coffee
products but other beverages such as Juices, sports drinks, soda, beer, etc. Even customers
can choose different types of products like ice cream, bread or cigarettes as their limited
budget. Those substitutes are usually cost less than Starbucks products, so low switching
costs entice consumers to buy other products. In accordance with technological advances,
people can enjoy high quality coffee in their own places with new home coffee appliances.
Therefore, the Five Forces analysis of Starbucks in Korea indicates strong threat and potential
negative impact on its business.

3.1.2 PEST
• Political Factors
It is clear that coffee house chains can be affected by various political factors. Since
Starbucks is an American coffee chain company, it is necessary to consider not only the
relationships between U.S. and coffee bean producing countries, but also the political
situation in Korea. Regarding to the level of political situation within Korea, it is relatively
stable. Also the attitude of government and consumers towards American companies,
Starbucks is not hostile[ CITATION KCA17 \l 1042 ].
However, in Korea there is growing concern over the fact that Starbucks dominates the main
commercial markets by taking advantage of the law that company-operated stores are not
restricted and limited by distance. The small business organization resists this phenomenon
and there is the bill under consideration by the National Assembly[ CITATION Jeo19 \l 1042 ].

• Economic Factors
According to economic indicators, the GDP of Korea is ranked 12 th in the world. Looking at
the unemployment rate (3.80%) and inflation rate (0.40%), these indicators imply that Korean
economy is relatively stable[ CITATION TRA19 \l 1042 ]. The economic growth of Korea
enabled people to afford disposable income on coffee products. Due to rapid economic
development and rising income levels demand for coffee has skyrocketed and coffee
consumption in Korean comprises about 6% of the total Asia Pacific market. In terms of its
imports, Korea is the seventh largest coffee importer in the world[ CITATION ICO19 \l 1042 ].
Nevertheless, this is not just optimistic situation and upbeat mood since there is problems
about rising labor costs and high rents. In Korean market, despite remarkable
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accomplishment that the sales reached over 1 trillion won (855 million dollar) for the first
time in 2017, Starbucks Korea's operating margin (operating profit to sales ratio), which
represents the company's profitability, stood at 9%, the lowest level in the past decade. By
comparison, its operating margin in the Americas in the same year was 22.9%, which was 2.5
times that of Korea. The biggest causes are rent and labor costs and the increase costs in both
segments exceeded the operating profit growth rate (25.3%). According to Starbucks Korea,
rents and labor costs are increasing around 30% each from the previous year [ CITATION
Sta19 \l 1042 ].

• Socio-Cultural Factors
Korea, which is ranked the 7th largest importing country in the world and consumes about 512
cups of coffee per capita per year, is a country with a large coffee market that is no
exaggeration to say "Coffee republic". In Korea, coffee has become not just a drink but a
social and cultural activity that cannot be missed in everyday life. Along with economic
growth, lifestyle has been changed in many ways. It became common modern daily life that
people start a day with a cup of coffee and have a chat with their friends or a meeting with
coworkers in a Coffee shop[ CITATION Lee16 \l 1042 ]. Also another social reason for coffee
consumption is attributed to increasing health consciousness. Many studies have shown that
an adequate amount of coffee per day may beneficial to both physical and psychological
health[ CITATION Bae14 \l 1042 ]. Caffeine included in coffee was successfully combined
with the workaholic culture, which has contributed to become the world’s 12th largest
economy. Coffee became a necessity as a drink, which gives tension and vigor in our daily
life. These traits related to social and cultural factors indicate opportunities for Starbucks in
Korean market.

• Technological Factors
With the advancement of science and technology, people can easily enjoy the same quality
coffee by touching of one button at home without going to a coffee shop and waiting in a
long queue. Newly produced home coffee machines come in wide variety of types such as
manual, automatic and capsule machines or accessories. This external factor could be threat
for Starbucks business. However, many coffeehouses also take advantage of technology and
set up high end coffee machines that guarantee high quality and stable taste. Buyers are
willing to pay for relatively expensive coffee, as coffee shops offer the best flavors of coffee
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by skilled baristas. Besides, coffee industry has been associated with various science and
technology for customer services. For instance, Starbucks Korea invented an application
about an order system, which is called ‘Siren Order’ for the first time in 2014, and it is widely
used in many other countries. Furthermore, Starbucks Korea came into the spotlight with
upgraded Siren Order system connecting with Bixby, voice recognition programs of Samsung
Electronics on April of 2018. In addition, they make full use of new technology such as drive-
through system with facial image and vehicle plate recognition software. These technological
factors might be threats for Starbucks, but they could turn crisis into opportunities by IT
skills.

The IT systems invented in Starbucks Korea

• Call my name • Drive Thru video ordering system
• Siren Order • My DT (Drive Thru) Pass
• Air filtration system in the store • Cashless store

Picture 2 Siren order, Drive Thru video ordering system, and Air quality management
(adopted from Starbucks Korea, 2019)

3.2 Internal Analysis: BGC Matrix of Starbucks

Starbucks has introduced many strategic business units, not only coffee, but tea, light
refreshments, and drinkwares. As mentioned earlier, coffee sales are already popularized and
saturated in Korean market, so it is needed to look to further potential markets. Starbucks
products can be divided into beverage group such as coffee, tea, and other drinks, food group
including bakery, cake, sandwich, salad, and ice cream, and merchandise products like mugs,
glasses, tumblers, accessories, and schedule books. Applying current situations into BCG
Matrix, coffee sales are already the ‘Cash Cow’, which makes a profit without any effort
needed. However, owing to increased interest in health, tea products could be under the
‘Question Mark’ category indicating low market shares but high business growth rates.

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Besides, various cakes, regional or seasonal products, and merchandises became the ‘Stars’
with steady sales growth. As illustrated below, if the introduction of other products in
Question marks would be successful in Korean market, the products could shift to the Star
category, and further to the Cash Cow.

Figure 3 BGC Matrix applied to Korean Starbucks Products (created by author, 2019)

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4. SWOT Analysis
STRENGTHS
• Strong brand power
• Many loyal customer in certain age bracket
• Stable coffee quality at each store
• 50:50 Joint venture between Starbucks and
Korean conglomerate, Shinsegae
• innovative sales promotion
OPPORTUNITIES
• Stable domestic political environment
• Amicable attitude towards American companies
• Increasing coffee consumption
• High ranked GDP and low unemployment rate
• Lifestyle change and growing health awareness
• Unique Korean ‘tea-room’ culture
• Introducing of high-end coffee machines
Table 1 Starbucks Korea SWOT Analysis (created by author, 2019)
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WEAKNESSES
• The high pricing policy
• Heavy influence by the U.S. head office policies
and limited discretion
• Increasing royalty fees (5% of annual revenue)
• Using single-use items
• Inflexibility in products
THREATS
• Growing concern about its market dominance
without regulations
• Soaring rent and labor costs
• Saturated coffee market
• Increasing demand for other beverages
• Development of home coffee machines
• Unstable prices of subsidiary materials
5. Marketing Strategy

5.1 Marketing Mix

• Product
Starbucks product quality has high priority in the position of marketing mix. They make an
effort to guarantee same flavor and quality and offer customized services in any stores around
world. Not only coffee, Starbucks has extensive menu selection such as teas, smoothies,
frappuccinos, pastries and brief meals. Especially, in Korea, there are special products
reflecting regional or seasonal characteristics. It has been proven to be successful in both
Starbucks and local communities[ CITATION Sta191 \l 1042 ]. Besides, entering the stores
customers face a wide range of merchandise such as limited-time mugs and tumblers which
are displayed in glass cases. This is a big part of its sales and related with promotion
activities[ CITATION sta182 \l 1042 ].

• Price
Starbucks tries to sell not just a cup of coffee, but their brand image through the
differentiation strategy. They adhere to its premium pricing policy which has been a success
strategy especially in Asian countries. It is targeting certain age brackets, twenty to thirty
career women with both high and moderate income. Compared with other countries, in
Korea, Starbucks affords high rent and labor costs, so it might be reflected in its pricing
policy[ CITATION Sta191 \l 1042 ].

• Place
They have expanded coffeehouses in large commercial areas, which have relatively many
floating population rather than small stores focusing on take-out menus according to Korean
sedentary culture and lifestyle[ CITATION Sta192 \l 1042 ] . When it comes to the other
channels to reach its products, people can find a bottle beverage or a canned drink in grocery
shops[ CITATION Sta15 \l 1042 ] . Also, thanks to information technology, people can use
mobile application to pick up their tailored coffee without waiting in the long
queue[ CITATION Sta193 \l 1042 ].

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 • Promotion
Starbucks has known as the company which spends not so much money on its advertising.
According to statistics, Coca-Cola, PepsiCo and McDonald’s have spent billions of dollars
annually on their advertising, however, Starbucks spent a tenth on it[ CITATION sta183 \l 1042
]. Instead, they put much effort into other activities for better customer satisfaction and
building trust through word of mouth marketing. As another promotion activity, there are
various seasonal or regional products and merchandise. Starbucks Korea sells limited goods
every year bringing about 10% profit of total revenue. They introduced a design team to
differentiate merchandise in 2013. Korea is the only country with this team among the 75
countries that Starbucks has entered. Furthermore, the corporation uses online tools such as
social network service and the application[ CITATION Sta191 \l 1042 ].

• People
The founder and former CEO of Starbucks, Howard Schultz always emphasized ‘Human
Marketing’ and its first target was internal employees. Starbucks deems employees as their
first customers and endeavors to give them customer oriented mindset. As a customer, one
staff represents the organization and the service itself, and acts as a marketer for Starbucks.
That is why Starbucks call their employees ‘Partners’. They have had certain concepts of
talent for Starbucks as 3C, Coffee Man, Culture Man and Customer Man. When people join
Starbucks, all employees are hired as full-time employees and receive welfare benefits
including health coverage, education support, and bean stocks[ CITATION Sta194 \l 1042 ].

• Process
Starbucks Korea unveiled innovative services using IT technology which led many loyal
customers. Based on IT, the Siren Order and Drive Thru face to face ordering systems were
first developed at Starbucks Korea and even exported to overseas stores. The Siren Order
service is integrated with its mobile application, so customers can order and pay for the
beverages through their mobile devices. It is also a good localization case to introduce the
first video ordering system to the Drive-Thru in consideration of the characteristics of Korean
people. Besides, this in-car pickup service is linked to a plate number recognition camera, so
it enables drivers to pay automatically with a registered credit card. These processes make
Starbucks more robust in the marketplace[ CITATION Sta193 \l 1042 ].

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 • Physical Evidence
Starbucks not just sells coffee but it sells space. The term of the Third Places was originally
introduced by an American sociologist in the book, The Great Good Place [ CITATION Ray99 \l
1042 ]. As the third realm and sociable place Starbucks has maintained consistent store design
with brown and its symbol logo color, green. In addition to interior design and the music
played in the stores also strictly controlled by its headquarters. In particular, after persuading
headquarters for a long time, Starbucks Korea hung a signboard written in Korean language,
Hangeul in representing stores. Besides, considering air pollution as the main problem in
Korea, Starbucks Korea has improved indoor air quality through the latest technology and
collaboration with Korean major company, LG Electronics[ CITATION Sta191 \l 1042 ].

5.2 New Marketing Strategy Proposal

Considering external environment that Starbucks is facing in Korean market, new marketing
mix should be taken into account.

• (Product) Responding to environmental concerns

As the world economy developed, many people have been enjoying material wealth. As a
result, it caused many environmental problems such as global warming, air pollution, climate
change, waste disposal, etc. These environmental problems became a front-and-center
concern and many people are aware of acute environmental issues these days. Recently,
Korean Ministry of Environment enacted an amendment of an Act on resources saving and
recycling promotion in 2018. According with this new legislation, the use of plastic cups has
been prohibited in coffeehouses and other items such as plastic bags for packaging will be
banned[ CITATION Kor19 \l 1042 ].
To meet such high concerns on Environment, Starbucks also has taken action against
increasing plastic consumption. Beverages are served in glasses or mugs instead of single use
plastic cups. Also they recently introduced an alternative, ‘the adult sippy cup lids’, which
can replace more than one billion plastic straws per year that are used once and discarded
across the globe[ CITATION Tre18 \l 1042 ].
However, regarding its store expansion strategy opening a new branch in China every fifteen
hours, the environmental issues should be dealt with more seriously. The impact of the global
coffee giant chain, Starbucks on our ecosystem has been enormous. Despite of their effort to
15
reduce single-use items, only 1.6% of beverages are sold in non-disposable cups like mugs.
Furthermore, paper cups are used over eight thousand a minute and for those single-use paper
cups, 1.6 million trees are cut every year. Most of its paper cups are ending up in the
trash[ CITATION CLE19 \l 1042 ].
Therefore, Starbucks needs further actions as the global leading company. They should bring
in fully recyclable cup and expand its usage of paper or compostable straws all over its stores.
Taking one step further, they must lead the zero waste campaign closely with its various
promotions. With regard to packaged products sold in not only their coffeehouses, but also
supermarkets and convenience stores, packaging materials must follow regulations including
recycling requirements. This new marketing mix variable about environmental recognition
enables Starbucks to do sustainable management.

• (Promotion) A win-win approach : Community Involvement

As mentioned earlier, Starbucks stores are directly operated by the company in Korea, so it is
not under the limits on distance. Looking into current state more closely with attached maps
below, in Seoul, there are 30 Starbucks stores within one kilometer radius in Euljiro, 10
Starbucks stores within won kilometer from Mapo station to Aoi station and 13 places in the
intersection of Gangnam Station. Like this, Starbucks stores are concentrated in major
commercial areas in Korea. Some small business owners are arguing about ‘the infringement
of local businesses’, so it is true that there has been negative publicity about
Starbucks[ CITATION Jeo19 \l 1042 ].

Picture 3 Status of Starbucks stores in Euljiro and Gangnam, Seoul, Korea

In order to grow consistently in Korean market, Starbucks should take a win-win approach
with community involvement programs. It is a good example of successful community
16
association that they have developed local products reflected regional specialties. According
to Starbucks (2019), there are many regional beverages, which are made with each regional
specialty like newly harvested rice in Icheon, green plum in Gwangyang, chestnut in Gongju,
and peanut in Jeju. These special drinks have been sold 0.6 million cups in three weeks since
its launch and these activities are bringing up positive public opinion. Also, it could be
another win-win approach to develop Regional Human Resource Cultivation. It is important
to maximize profits by expanding the business, but for sustainability Starbucks should
encourage community participation in Korea.

• (Price / Place) Improving profitability

Despite its explosive growth and increasing sales, Starbucks relatively made poor operating
profits in Korean market. It would be attributed to outrageously high rent in Korea. Rents for
some stores in Korea are nearly equal to the rent level of the store in New York. According to
the research, Myeong-dong, the biggest commercial area in Seoul, was ranked the 8 th world
most expensive business district[ CITATION CUS18 \l 1042 ].

RANK LOCATION RENT (US$/SQF/YR)

1 NEW YORK, 5th Avenue 3,000
2 HONG KONG, Causeway Bay 2,725
3 LONDON, New Bond Street 1,720
4 MILANO, Via Monte Napoleone 1,433
5 PARIS, Champs-Élysées 1,407
6 TOKYO, Ginza 1,200
7 SYDNEY, Pitt Street Mall 1,000
8 SEOUL, Myeongdong 914
9 ZURICH, Bahnhofstrasse 883
10 VIENNA, Kohlmarkt 490

Table 2 Top 10 business districts ranking in high rents in the world[ CITATION CUS18 \l 1042
]

This high rent level led to several uncovered problems such as high pricing policy and
relatively low wage level in Korean market. When it comes to Starbucks coffee pricing, it is
more expensive in Asian countries including Korea as compared with the States [ CITATION
Val16 \l 1042 ]. Even though it has many solid loyal customers, an extravagant price could
make people turn against Starbucks. On the contrary to high pricing of Starbucks, the wages

17
of Starbucks Korea are relatively low compared with other countries. According to Latte
Index that “measures how many cups of coffee minimum-wage earners in different cities can
buy with their hourly pay”[ CITATION Pau17 \l 1042 ], people cannot afford to buy two cups
of Starbucks latte with their minimum wage in Korea.
In order to improve profitability, they need to adopt a different strategy. Starbucks is known
as that the ‘Place’ variable has been considered as important factor and their stores have been
opened in good locations, so they had to manage skyrocketing rents in Korea. However, they
need to develop new market such as opening new branches in places where rents are not high
since Starbucks has been successful and had many loyal customers in Korean market. It will
enable to deal with rising rent and labor costs and revise their pricing policy.

6. Conclusion

Starbucks could be a good example of a corporation that has proved successful with their
marketing strategies. Especially, Starbucks Korea made various attempts to apply with new
technology such as Siren Order system, Drive-thru video telephony services and vehicle plate
18
recognition system. Instead of spending millions of dollars on advertising, they focused on
space and experience marketing, and have developed innovative menus for the younger
generation.
Nevertheless, corporate social responsibility should not be neglected. They should respond
more actively to the inevitable environmental and community issues facing currently. Also,
there are many unsolved problems such as roaring rent and labor costs in Korean. To be a
more stable and reliable company, sustainable management is recommended through creative
new marketing mix and continuous interaction with customers.

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