STRATEGY AND DEMAND FORECAST 1 Carmen Hendrickson Southern New Hampshire University 06/09/2019 “To inspire and nurture the human spirit – one person, one cup and…

Carmen Hendrickson
Southern New Hampshire University
“To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”. (Starbucks, n.d) The corporate mission of Starbucks says it all; in a continuation, the theme to inspire, Starbucks will need to articulate a marketing strategy that will successfully allow them to integrate alcohol into current drink menu items. The three basic strategies that Starbucks will use during the launch of this business plan include but are not limited to determining a price point, responsiveness of the test markets and differentiation from competitors. Starbucks drinks have never been associated with lower pricing among competitors. This strategy will align with Starbucks business model, which seeks to establish a brand and offer quality products instead of simply being satisfied with the lowest quality and lowest prices. The current plan is to develop a targeted marketing campaign in major cities across the United States, which will serve as a test market. This product will only be available at selected flagship stores and only offered aboard once the results are in from the designated test markets. It will embrace a best-cost provider strategy to price the new product in a way that gives the customers more value for their money, thus we will be implementing penetration pricing, with the intent to attract a larger contingent of customers away from competing brands. The idea is to use a better mix of product benefits and a lower price to lure customers only modestly satisfied with existing products. (Kokemuller, 2019)
We have factored in about an $8.00 price increase to each drink item that will include Rum or Vodka. We also have decided to cap the amount of alcohol in each drink to between 2 – 4 ounces based on the drink size of a Tall (12 oz.) or Venti (16 oz.) Customers will not be able to add an additional shot of alcohol to their drink, as we will not be customizing the alcoholic portion of the menu. If the product is launched prior to 2020 Starbucks will have complete saturation of the current market, as there are no other known competitors that exclusively sell coffee in combination with alcohol, outside of local pubs or bars. This business concept is a distinct illustration of differentiation because there are no other companies who can reach the consumers in this industry due to an untapped market. This strategy will concentrate on a narrow segment of customers and provide them with a unique product package with customized attributes (Polo & Weber, 2010). Last, a responsive marketing orientation or test market will be utilized throughout the first 2 years of the product used to ensure that the company responds to the expressed needs of buyers.
Demand forecasting and supply forecasting are critical to track in the food and beverage industry. This method allows the user to monitor and forecast product development that is generated from increased customer satisfaction; it reduces inventory stock outs, and allows a more effective production of pricing and marketing efforts. (Ahmed, 2017) Popularity of Starbucks products and the existing demand of alcoholic beverages will guarantee the company of a favorable demand for the new product based on total market saturation. For the first six months, Starbucks will closely monitor the designated test markets located at the flagship stores. With this being a new product in the market, relying on various sources such as customer feedback, and investor inputs will be the best route. After the initial year, Starbucks will transition over to utilizing the time-series forecasts, which projects past experiences into the future. This will be the best strategy for the blended beverages because forecasting will never be perfect therefore, it will be better to use historical data. A weighted moving average method will be used to forecast the demand of the new product. This method will apply a weighting scheme of 0.5, 0.3, and 0.2 on the last three units of demanded product. The demand for the first three months is estimated to be 50000 units, 60,000 units and 70,000 units respectively. For the fourth month, the demand will be (0.5*70000+0.3*60000+0.2*50000) =63000n units. The demand for the fifth month and the sixth month will be (0.5*63000+0.3*70000+0.2*60000) and (0.5*64500+0.3*63000+0.2*70000) respectively. This will be 64500 units for the fifth month and 65150 units for the sixth month.
This method is preferred to the Simple Moving Average because it follows demand more closely by using the most recent data and weighing it accordingly (Denning Institute, n.d.). This means that the WMA method is more accurate than the corresponding the Simple Moving Average which measured data equally. It is also relatively easy to implement compared to other advanced methods. Blocher, Mabert, Soni and Venkataramanan (2004) also found that the WMA method performed better than smoothing methods such as the Croston’s method.
Ahmed, M. (2017, March 29). Seven reasons why you need to forecast in supply chain. Retrieved from https://www.supplychaindigital.com/top-10/seven-reasons-why-you-need-forecast-supply-chain
Blocher, J., Mabert, V., Soni, A., & Venkataramanan, M. (2004). Forecasting Including an
Introduction to Forecasting using the SAP R/3 System. Retrieved from
Denning Institute. Weighted moving average. Retrieved from
Kokemuller, Neil. (2019, February 13). Penetration Vs. Skimming Marketing Strategies. Small Business – Chron.com. Retrieved from http://smallbusiness.chron.com/penetration-vs-skimming-marketing-strategies-61569.html
Mission Statement. (n.d.). Retrieved from https://www.starbucks.com/about-us/company
Polo, E., & Weber, W. (2010). Competitive Generic Strategies Evolution and the Importance of
Michael E. Porter. Revista De Gestão, 17(1), 99-117.
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Carmen Hendrickson
Southern New Hampshire University
Carmen Hendrickson
Southern New Hampshire University

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