Business Research

Business Research

Assessment 1

Student Name: Lin Zhu Student Number: 12018708 Module Code: ST3S08 Tutor: Jun Zhang Word Count: 3885 Submit Date: 3-May-2013

Content 1.0 Introduction .......................................................................................................... 3 1.1 State currently situations .................................................................................... 3 1.2 The Aim and Objectives ...................................................................................... 3 1.3 Rational ................................................................................................................. 3 2.0 Literature Review ................................................................................................ 4 3.0 Research Methods ................................................................................................ 5 3.1 What has been researched? ............................................................................ 5 3.2 Methods for Primary Data Collection ........................................................... 6 3.2.1 Questionnaire ........................................................................................... 6 3.2.2 Focus Group Discussion............................................................................. 6 4.0 Findings ............................................................................................................... 7 4.1 Student questionnaire survey ........................................................................... 7 4.2 Focus Group Discussion .................................................................................. 11 5.0 Discuss and Analysis ........................................................................................... 11 6.0 Conclusion .......................................................................................................... 12 7.0 Recommendation ............................................................................................... 13 8.0 Reflective ............................................................................................................ 14 9.0 References ........................................................................................................... 16 10.0 Appendix ............................................................................................................. 18

1.0

Introduction:

1.1 State currently situations The following research report has been chosen due to the popularity of coffee among students. Topics about brand never fail to arouse people’s attention. Nowadays coffee plays an important role in people’s daily life.

There are two coffee giants are well known by all over the countries, which operate their own brand image quite outstanding. One is Starbucks, which currently is the biggest coffeehouse company in the whole world, with a record number of 17,009 (as of January 2, 2011) stores located in more than 50 countries such as Australia, UK, and China (Starbucks.com). The other is Costa, which a British multinational corporation headquartered in Dunstable, United Kingdom. It is the second largest coffeehouse chain in the world behind Starbucks and the largest in the United Kingdom (Costa.co.uk). Furthermore, it is project that investigates the causes and the effects of brand image. Brand image is the current view of the customers about a brand. It is a set of beliefs held about a specific brand (MSG, 2011). Brand image is the overall impression in consumers’ mind that is formed from all sources.

1.2 The Aim and Objectives This research project is main to investigate the influence of brand image of Starbucks and Costa Cafe’ on the students’ preferences. And aiming to explore what factors lead to those influences. The objectives of this research are: Ø To identify the reasons why some students prefer to go to Starbucks and some prefer to go to Costa. Ø To identify which reasons are influenced by the brand image of each of these coffee shops. Ø To identify reasons for students preferences which are related to staff performance.

1.3 Rational The main propose of this research is to explore the influence of Starbucks and Costa in the UK coffee market.

The reasons for undertaking this research because the result of it may be important to both the coffee shops and industry, give them a led for there future operating. And for customers can know more about the brand which they prefer. The details are as follow: Ø Starbucks & Costa: Having the awareness of brand image and customer preferences, find out potential opportunities for growth, so that those can get a better future for company’s development. .

Ø

Ø

2.0

The coffee industry of the US and the UK: As Starbucks and Costa is the absolute leader in their origin countries. The analysis of those two MNCs can give some guidance to its industry. In order to bring more profits to the industry itself and benefit more to the other companies which belongs to the same industry.

Customers: Customers’ preference is the core factor to determine whether the company’s operation is good or not. Hence, the research will give more information about how the company operates to customers; let them get a better understanding of the company’s brand culture backgrounds. It will help a lot for the customers’ choice making in the future.

Literature Review

Brand image was defined as “perceptions about a brand as reflected by the brand association held in consumer memory” by Keller (1993). These associations are any brand in the consumer's memory (Aaker, 1996).

Generally speaking, the brand image reflects the basic thoughts and feelings of consumers towards the brand (Roy and Banerjee, 2007). In the other words, brand image is a direct reflection of the company’s brand promise. If the company has done a good job of consistently communicating, the company’s brand promise through branded experiences, then its brand image grows positively (Gunelius, 2010).

Customer satisfaction has been widely accepted as an important issue for many marketing managers. It is commonly used as a marketing benchmark of a company's performance (Bennett, 2004). So it is important for a company to build its own brand.

As products and services are so easily replicable in today's environment the biggest challenge for companies to compete in the market place is how to differentiate their products from the competitors (Rundle, 2004). All other things being equal, the only feature that will help consumers identify and differentiate the product in the market is the brand. Product quality and price are no longer product differentiators. A strong brand image is the only asset a company can develop that cannot be copied. Companies must thus make serious commitment to investing in developing a brand strategy for their products and services (Palacio, 2010).

Compared those two coffee giant, Starbucks‘s brand recognition all over the globe has made it the world’s top brand (Interbrand, 1990), its from a unique “experience” to a ubiquitous mass beverage. Like Coca-­‐Cola's aspirations for coke, Starbucks’s lattes are frequently being the trump of its company (Athenaintl, 2012). In the other hand, Costa signifies luxury, excellence and perfection. The image of Costa is luxury and comfort with style.

Brand image is consisting of consumer knowledge and brand's diverse product and non-­‐product attributes belief. It is on behalf of individual consumers associate the brand, including the description and evaluation of all relevant information brand symbolism (Iversen and Hem, 2008). Thus, the brand image is an important buyer’s behavior determinants (Burmann et al., 2008).

However, not all of the impacts from brand image are positive. Starbucks had sales of £400m in the UK in 2012, but paid no corporation tax. It transferred some money to its Dutch sister company in royalty payments, bought coffee beans from Switzerland and paid higher interest rates borrowed from the other departments of operation (BBC News, 2012). As the Starbucks suffered in light of charges of tax avoidance lead its key brand metrics plummet, the negative emotions is linked with their brand image during a short period after that.

Meanwhile, Costa's Totnes pull-­‐out 'provoked fury' in 2012 as well. A lot of people were furious after Costa pulled out because the entering of Costa would damage the local food economy (BBC News, 2012). That is to say, Costa also needs to make a survey before the company expends its subsidiary in order to gain the positive impact for the company.

All in all, there is still a long way to go for both Starbucks and Costa to operating its brand image. As Egan cites in 1992, the original "brand" image, marketing and product level was later expanded to include services and an industrial product, skills and technology which brand management implies, has been extended to all levels of marketing imagery. The customers’ preference will be impacted when the company dealing with that in an excellent condition.

3.0

Research Methods

3.1 What has been researched?

The research methods have been adopted in this project includes the student questionnaire survey and focus group discussion. Primarily, a hundred of questionnaires have been distributed to target students in Cardiff, which means that the research has been selecting to conduct opinions from both grades, but from different university areas.

Furthermore, as can be seen from the fish bone structure; the dispersion of causal analysis process of brainstorming tool can give a help to exploration and identification of all

possible underlying factors (Paton, 2009).

Moreover, the fishbone structure is also known as focus on this issue did not take complaints or irrelevant discussion (Simon, 2011), as well as identifies the place is the lack of data, and help researchers to seek broader, as it is outlined in the previous chapter in order to write a more extensive review of the literature.

3.2 Methods for Primary Data Collection The philosophy of the research onion focuses on the thinking of the research process, by following a realism philosophy and comes in three parts, which are reality, actual and empirical. Moreover, the approach that is being followed is a deductive one, as it looks from general issues to specific ones. Furthermore, the strategies intend to focus on the way the research questions are being answered. This research uses both questionnaire, due to the method data collection and group discussion aiming to get a more flexible answer.

(Sources from: http://www.institut-­‐numerique.org/chapter-­‐3-­‐research-­‐methodology-­‐4ffbd 6e5e3391) 3.2.1 Questionnaire Zikmund (2010) regard a survey as ‘a method of collecting primary data based on communication with a representative sample of individuals’. The questionnaire research is a type of descriptive research, which is usually used for quantitative findings. A well-­‐designed questionnaire that is used effectively can gather information on specific components of the system This student survey of the research has been mainly carried out

amongst the students in Cardiff. This survey contains 100 questionnaires (50 in Cardiff and 50 in Glamorgan) in total, which aims to get 80 back; therefore 83 questionnaires were distributed eventually. (See Appendices 1).

3.2.2 Focus Group Discussion The focus group is a type of group interview. It usually involves more than four participants, and aims at a deeper exploration of a specific topic. With a focus group, the face-­‐to-­‐face communication enables the interviewers to collect more information from interactions within the group discussion (Bryman, 2007).

Through the group discussion, the respondents my feel more comfortable rather than filling out a questionnaire (Thomas et al, 2010); besides, with Elliott (2005) claimed that a major cause of using group interviews is because they provide appropriate descriptions of events on the spot.

In order to collect more useful qualitative data, two focus groups were classified. Considering the culture differences between the local and international students, especially for those international students (the majority of them are Chinese) may feel more comfortable by using their mother tongue during the discussion, two focus groups were run separately. Each group involves four respondents; meanwhile, each group was run by two researchers in the project team. Aiming to discuss how brand image impact the students purchasing behavior in their daily life.

4.0

Findings

4.1 Student questionnaire survey The figures shown below are the key findings of the student questionnaire survey in this project; it is mainly about the comparison between the Starbucks and Costa among the students in Cardiff.

Figure 4.1.1: Main elements for students’ preference First of all, from the pie chart above, it is clear to show the main elements for students choosing those brand coffees. Product quality is regarded as the most important factors, which occupy more than a half in total (51%). The brand image comes the second, ranking 15% of the total range. The third element is the product price, which occupy about 14%, very similar with the brand image. The rest of the elements such as the varieties of products, services quality and other reasons occupy 8%, 6%, 6% respectively.

Figure 4.1.2: Which coffee shops opens in /around your campus?

From the figure shows which coffee shops opens in or around the school campus. Obviously Starbucks owns the largest market share in the school campus, which the occupation of 72%. Costa only got 7%, which runs far away behind Starbucks. For 15% of the occupation, 15% students said

there are both Starbucks and Costa operating in or around their campus, that may led a competition of them. The rest of 6% is other coffee shops such as NERO or the self-­‐treat coffee machine.

Figure 4.1.3: Where do you regularly buy coffee?

This pie chart shows where does the students buy coffee regularly. To be honest, the majority of the students would like to choose coffee from other coffee shops because of the low price or some other reasons, which will be analysis later in the research report. Despite of this, the students who are willing to choose Starbucks occupied 35%, 6% more than the number of the students who would like to regard Costa as their first choice.

Figure 4.1.4: How do people know Starbucks and Costa?

From this bar chart, the methods of how people know those two coffee stores have been shown. The majority people both know Starbucks and Costa from their friends. And then, media assess and books, magazines are another two promote methods for Starbucks which occupied 37% in total, 12% more than Costa in the same way. Meanwhile, the Costa is mainly improving its popularity by using the leaflet and booklet in store, which

take over about 18% in total.

Figure 4.1.5: Evaluation for Starbucks & Costa Those two bar charts calculate the evaluation for Starbucks and Costa.

Form those diagrams; for the four elements, the global evaluation of the both Starbucks and Costa are moderate, which is given by the majority of the target people. However, a large amount of people thinks the taste of Starbucks is high (39%), 17% higher than Costa (22%).

4.2 Focus Group Discussion The results of student questionnaire survey provide amount of quantitative data, however, it is not enough for the research project. Some other qualitative data can be efficiently collected by running focus group, this allow the respondents to have the chance to express their real opinions.

The great majority of local group hold the view that both those two brand coffee are too expensive to the students afford. The fame and the quality of those coffees are undoubted. However, because of the great brand fame, there is always having a long queue waiting in the front of the door.

Moreover, the typical green/ red dress code is loved by the local students.

This is considered as the general success of their operation. Because everyone is quite familiar with that when people mention Starbucks and Costa. To sum up, local students do not care too much about the brand of the coffee shop. On the contrary, they would prefer some other machine coffee or some other unnamable but cheap coffee rather than those two big brands from the focusing group discussion.

On the other side, the beginning of running Chinese focus group was not that hard, because the majority of Chinese students are quite familiar with those two brands and even be the big fan of Starbucks or Costa. Those two brand coffee shop holds the large share of the Chinese market. Both Starbucks and Costa are opened in the majority of the first-­‐tier cities in China. On some level, sitting in Starbucks or Costa and having an enjoyable hi-­‐tea can be regarded as a Petty Bourgeoisie, which means own a happy life. The result of International group is tended to hold a positive view.

Compared the coffee price with China, the price here is much cheaper so that nearly everyone here can afford it. The international group thinks that the staffs here are well trained, this reflected in when someone is waiting for a long time in the queue or meeting some problems, the staffs always treated them very polite and the customers complains will be solved very quickly by the staffs or even managers. However, they still have some issues need to be improved. A member in the international group mention that sometimes too many people in the store may lead the staffs ignored the sanitation. Take the Starbucks in St. Davis as an example, because of too many people are waiting in the queue or searching a seat, the employees can not clean up some desktops timely.

5.0

Discuss and Analysis

The purpose of this research was to explore the impact of brand image and related to customers’ preferences. The indirect impact through brand image was found to be significant.

A brand is the sum of all the characteristics that make the customers offering

unique, which are ‘reputation, customer service, a promise, price, feeling, attitude, logo and product line’ (DeMenter, 2010).

Through such a survey, it can be seen that the Starbucks is more popular than Costa among the majority of target students because the great success of its outstanding brand image in the United Kingdom market.

The unique shop decor style of Starbucks is quite attractive, and its newly changing logo which aiming to embrace and respect the company’s heritage, and at the same time evolves the company to a point where can feel it's more suitable for the future (Howard Schultz, 2012). Such as Ahmed (2011) citied about Coca Cola in his research ‘Effects of brand love, personality and image on word of mouth’. Those special manifestations can make the young customers stop, stare and have the impulse to have a taste. And these young people are the key potential consumers of the brand chain in coffee shops (Spinelli, 2011).

Starbucks has an accurate positioning on its customer base, and it always selects the site around the heavy stream of people, especially the Mall or Campus.

However, the multiple shops of Costa are mainly located in the commercial center, aiming at attracting the people who know how to taste coffee.

In addition, the price positioning of Starbucks is “Affordable luxury for most people” while the price of Costa is much higher than Starbucks. Costa coffee believes in giving a “feel good factor” to its customers every time they visit it (Lindstorm, 2009). Furthermore, Costa is aiming to build a comfortable place to relax, chill, spend quality time and have a warm experience which not only brings back customers but through word of mouth attract new customers which may suitable for business person but not students.

Meanwhile, Starbucks thinks the retention space of people can be divided into the family, office and other places. Starbucks is committed to seize the third space; while Costa is devote to the perfect fusion of family culture and the feeling of manual coffee.

6.0

Conclusion

To sum up, “Brand image” is the customer’s net extract from the brand (Thwaites, 2007). As it is mentioned at the beginning of the report, there are three objectives of this report. Form this survey; there is a short conclusion for the research objectives.

Starbucks is more popular than Costa among the students in Cardiff. For the great success of Starbucks, the brand had three key elements: coffee, people, and stores. Stringent control over the quality and processing of the beans assured that the coffee would be of the highest possible quality. Outstanding store personnel were recruited and trained in coffee knowledge and customer service. Store design, atmosphere and aroma all contributed to the “ Starbucks Experience” (Rotman, 2011).

In addition, both Starbucks and Costa have some reasons, which influenced by the brand image.

For Starbucks, it is a very profitable brand, which was built upon a reputation for outstanding products and services. The company is a respected employer that values its workforce. The organisation has strong ethical values and an ethical mission statement as follows, 'Starbucks is committed to a role of environmental leadership in all facets of our business’ (DeMenter, 2010).

Meanwhile, Costa owns its favorable brand image as well. The products that boast of a very powerful retail. This includes a reputation for value of money, convenience and a wide variety of products. The main competence lies on the use of information technology (IT) to fully support its international logistics system. Therefore, Costa Coffee can see how their individual products perform within the United Kingdom, or even at stores at a glance. IT also supports the company’s efficient procurement. And Costa is able to deliver good customer care, as the limited amount of work would mean plenty of time to devote to customers (Gunelius, 2009).

Simultaneously, both those two brand giants are still facing some issues.

Starbucks has a reputation for new product development and creativity.

However, they remain vulnerable to the possibility that their innovation may falter over time. The organisation has a strong presence in the United States of America with more than three quarters of their cafes located in the home market. It is often argued that they need to look for a portfolio of countries, in order to spread business risk (StudyMode, 2005).

Although Costa is one of UK's largest company in coffee brewing and but has a weak control of its empire, despite its IT advantages. This could lead to a decrease in productivity in some areas where they have the least control.

Since Costa Coffee sells products across many sectors, the company may lack the flexibility that some of its more focused competitors possess. As mentioned by the target students, some of the company’s personnel still lack of the essential skills base in many areas. Moreover, according to the response of employees, the company is still vulnerable to the temporary losses of its vital staff such as being sick or leaving (StudyMode, 2010).

7.0

Recommendation

Starbucks should bring the price down, push out student discount or push out coupon to promotion. Starbucks can offer with specials on coffee drinks and selected food items during the Happy Hour from 4-­‐6, in order to expand its client base. The innovation should be developed. Starbucks could research and development more new taste coffee (Putwanphen, 2010).

Meanwhile, Do more promotion to deep the brand image impression for customers. Costa could focus more on its brand building, for instance, from websites. Compared with its competitor, Costa did not as well as Starbucks on the website promotion. A website can be a key part of brand image

because it can transmit information, impact experiential associations (Joanhimsthaler, 2002). Moreover, Costa should investigate what products need to be improved at the same time.

8.0

Reflective

In this report I’m being ask to create a further research about the work I did about the how brand image impacts students’ preferences on coffee shops in Cardiff with my group together.

The group members of mine are all doing the same course together and know each other very well, so that we did not have to spend too much time to decide what topic we should research and how to balance the work well.

Because everyone in our group is passionate about business ethics and international culture and the majority of us are coffee lovers. We made a good start of this project.

By the time we started our research, we found there are both Starbucks and Costa in the St. Davis, which is the biggest shopping mall in the center of Cardiff. It is a good chance for us to make a comparison between Starbucks and Costa. However, when we take the entire plan as an action, problems come out. We found it is hard to identify the students among so many people shopping or relaxing in St. Davis. Asking them one by one and send questionnaires to them could be a useless work, which is waste of time. So we change the plan slightly. We focus more on the school campus, asking the one walling or studying in or around the University of Glamorgan and Cardiff. The effect is very significant, we collected our questionnaire quickly and we got a satisfied answer with the survey.

Moreover, we held a focus group discussion between local and international students separately, which gave us a deeper understanding of the differences between those two brands. It is a quite interesting experience; I found the linkages between in-­‐class knowledge and real-­‐life projects. This year I am doing another two module International Culture and Communications and the Emerging Themes in Marketing, I chose the Starbucks as my target corporation for both of the two modules; the knowledge I learnt and gained from those modules were used during the research.

At the same time, we were doing the secondary research. I did research for the feedbacks of those two, got comments from social media such as facebook, twitter and YouTube.

In addition, some basic methodological techniques and approaches were used by us, such as pyramid structure and flat structure. In order to assisted to achieve all objectives effectively.

Finally, the conclusions are related to the aim and objectives that has been set out clearly in the introduction chapter.

There are still a lot of things I think we could have done better. We could have given out more sample questionnaires outside of university, in order to

ensure the statistics more reliable; the presentation slides could also have been developed better such as extend more literature review and methodology. Furthermore, it is hard to calculate the data from our questionnaire because there is some issues we have not take into consideration when we design the questionnaire.

From doing the survey, I improved my ability to communicate with others, and learn how to calculate and analysis the primary data. Organization appropriate, comprehensive information I get. I have to overcome the language barriers to fully express my thoughts clearly.

All in all, this is an enjoyable experience and I have learnt a lot from it.

9.0

Reference

Aaker, David A; Joachimsthaler, Erich. (2000) Brand leadership. New York ; London : Free Press

Carter, David E (1999) Branding: the power of market identity. New York : Hearst Books International.

Daniel (2010) Brand Image – Starbucks: How To Create a “B(r)and of brothers.

Available at: http://social-­‐brand-­‐value.com/2010/06/17/starbucks-­‐how-­‐to-­‐create-­‐a-­‐ban d-­‐of-­‐brother/ (Accessed: 21 February 2013)

Gregory, James R. (2004) The best of branding: best practices in corporate branding. New York : McGraw-­‐Hill

Hart, Susannah; Interbrand (Firm); Murphy, John M. (1998) Brands: the new wealth creators. Basingstoke : Macmillan

Karolefski (2002) Brand Channel. Available at: http://www.brandchannel.com/features_effect.asp?id=78 (Accessed: 22 February 2013)

Londontoolkit (2013) Coffee Shop Chains Prices In London 2013. Available at: http://www.londontoolkit.com/blog/investigates/coffee-­‐shop-­‐chains-­‐in-­‐lon don/ (Accessed: 21 February 2013)

Perls (2007) Starbucks-­‐losing its brand images? Available at: http://hueconsulting.blogspot.co.uk/2007/12/starbucks-­‐losing-­‐its-­‐brand-­‐im age.html (Accessed: 21 February 2013)

Stobart, Paul (1994) Brand power. Basingstoke : Macmillan

Small Business (2012) Who Is Starbucks' Target Audience. Available at: http://smallbusiness.chron.com/starbucks-­‐target-­‐audience-­‐10553.html (Accessed: 22 February 2013)

Starbucks (2012) Being a responsible company. Available at: http://www.starbucks.com/responsibility (Accessed: 21 February 2013)

Starbucks (2012) Our company. Available at: http://www.starbucks.com/about-­‐us/company-­‐information (Accessed: 22 February 2013)

Starbucks (2011) Starbucks Corporation. Available at: http://mhhe.com/business/management/thompson/11e/case/starbucks-­‐2. html (Accessed: 22 February 2013)

Tarlton (2013) Costa coffee standardizes reports on star pos printers. Available at: http://www.star-­‐emea.com/costa/ (Accessed: 21 February 2013)

Appendix: Questionnaire

VS

Preferences between Starbucks and Costa.

Coffee plays an important role in our daily life. There are two coffee giants, which we are familiar with, Starbucks and Costa. Which one do you prefer in your drinking habit?

Questionnaire Question (please tick appropriate boxes from each question below) 1. Which coffee shops opens in/around your campus? oStarbucks oCosta oBoth oNone Other, please specify 2. Do you drink coffee regularly? oYes oNo 3. How many cups of coffee do you buy per day from coffee shops? oOne cup oTwo to three cups oFour cups and more oNone 4. Where do you regularly buy coffee? oStarbucks oCosta oOther, please specify______ Please give us a simple reason for your choice: ________________________ 5. Do you prefer to drink in or take away? o Drink in o Take away 6. If you prefer to drink in rather than take away, please select the factor(s) below which influence(s) your decision: o Free Wi-Fi oPastime with friends oFor Study oHave a rest oJust enjoy the coffee oOther, please specify

7. Will you purchaseother products in Starbucks or Costa? If yes, what kinds of products would you like to buy? oVerismo™ System oDrinkware Categories (e.g Mugs, Tumblers, etc.) oDesserts or Snacks oSalad oCoffee Beans oOther drinks (e.g. Tea, Soft Drinks) 8. (1) How did you find out about Starbucks? Please tick as multiply: oLeaflet and Booklet from store oFrom friends oMedia assess (Internet & TV Ads) oBooks and Magazines (2) How do you know COSTA? Please tick as multiply: oLeaflet and Booklet from store oFrom friends oMedia assess (Internet & TV Ads) oBooks and Magazines 9. （1）Please rank STARBUCKS regarding the factors below，please tick the appropriate number.

Very Low

Low

Moderate

High

Very high

Price

1

2

3

4

5

Taste

1

2

3

4

5

Purchase

1

2

3

4

5

Convenience 1

2

3

4

5

Frequency （2）Please rank COSTA COFFEE with those factors below，tick the number you choose.

Very Low

Low

Moderate

High

Very high

Price

1

2

3

4

5

Taste

1

2

3

4

5

Purchase

1

2

3

4

5

Convenience 1

2

3

4

5

Frequency

10. （1）Which coffee shop do you prefer? o Starbucks oCosta （2）Rank the main reasons for your preference from the below 10 statements. (Rank the most important factor as 1, second important 2, etc. with the least important as 10)

o Brand Image of the coffee chain oVarieties of Products sold in the shop o Staff Services Quality o Product Quality o Product Price o Interior design/deco o Free Wi-Fi oLocation of the shop oProduct promotion oProduct Packaging 11. For the brand image of Starbucks and Costa, which kinds of adjective can describe them?

12. In your opinion, what would you like Starbucks/Costa to do in order to improve their services for students?

Personal Data Age: o18-20 Gender:

o21-29

oover 30

oFemale

Education: oUndergraduate

oMale oPostgraduate

THANK YOU! HAVE A NICE DAY! J

oPhD