Scientific research the impact of “product diversification” on starbucks’ revenue

Customer needs are important information that businesses must collect to have a successful product strategy and generate profit.. The authors have found one of the effective strategies t

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HO CHI MINH CITY UNIVERSITY OF FOREIGN LANGUAGES - INFORMATION TECHNOLOGY FACULTY OF BUSINESS ADMINISTRATION

ABSTRACT Businesses must always be creative, implement new business strategies, and launch products to attract customers and maintain business Customer needs are important information that businesses must collect to have a successful product strategy and generate profit The authors have found one of the effective strategies to help

"upgrade" the product, the product diversification strategy The objective of the report is

to collect information on how businesses implement their strategy and the impact on their revenue To conduct a research essay on product diversification, the researchers searched for the concept of key keywords in the essay from books and informational articles at reputable websites In addition, the data on revenue and percentage growth of the business were analyzed based on official information channels and annual reports on revenue results that the business publishes annually Product diversification is a smart strategy to help businesses expand their markets and ensure revenue growth The results

of this strategy helped Starbucks reduce the decline in revenue during the outbreak of the Covid-19 epidemic and quickly recovered afterward In each country that Starbucks visits, the menu of that place will have products with local characteristics, this is a testament to the process of actual research, diversifying products to meet the customer’s demand The success of a business will only be temporary if they do not create products

to suit customers’ tastes, maintain their excitement with new and unique products but still retain the characteristics of the business

TABLE OF CONTENTS

LIST OF CHARTS Chart 4.1.1 Quarterly revenue of Starbucks from 2018 to 20] àà ào Chart 4.1.2 Quarterly revenue of Starbucks from 2020 10 2022 ccccccccccccccctessetsssesssieees Chart 4.1.3 Annual revenue change of Starbucks from 2018 10 2022 ccccccccccceserttsesies Chart 4.1.4 Scale of large coffee chains in Vietnam im 2022 à ch no

LIST OF FIGURES

LIST OF TABLES Table 4.1.1, Starbucks' revenue and percentage oƒ change from 2018 to 2022 12

CHAPTER 1: INTRODUCTION 1.1 Overview

1.1.1 Product Diversification

Product diversification is a useful strategy chosen by many businesses to expand the reach of their products in the market, in accordance with market needs and society expectations For some industries at risk of recession, this stratetry often brings businesses a lot of benefits such as reducing financial risks, strengthening the brand, and maintaining the stability of the business in the market, especially this is "leverage" to help increase revenue

1.1.2 Revenue

Revenue is often mentioned in financial statements, which are considered the main indicator in evaluating the business performance of the business It is the total amount of money a business earns through its business activities during a specified period, which still includes input costs such as operating costs, raw materials, personnel management, and other taxes and fees Revenue is made up of various segments including operating activities, financial activities, deductions, and other charges (fines, taxes, and rental fees) This is an important indicator that is used as a basis for managers to adjust business strategies and plays a big role in representing the financial position of an enterprise 1.2 Reasons of Research

¢ Seeing the diversity in consumer behavior

¢ Realizing the importance of product diversification strategies

¢ Researching the increasing diversification of Marketing Strategies

e The researched brand is a brand that is well known for its ingenious advertising strategies

1.3 Research Objectives

® To find out another aspect of the products in businesses

® To analyse the data of the brand and their famous special products that led to their reputation and increasing revenue

¢ Presenting research on wisdom and risk in their marketing campaigns

© To prove that not only stopping high brand awareness, but the diversification method also helps businesses earn high revenue

1.4, Scope of Research: Starbucks

With more than 32,000 stores in 80 nations, Starbucks is the head roaster and retailer of specialty coffee in the world And with each product, they strive to bring both their legacy and an exceptional experience to life Starbucks focuses on building relationships with its customers Their target audience includes both male and female customers, mainly professionals with higher salaries, business owners, and people with high demand for quality of life

Customers often remember Starbucks with its quality, expensive drinks Besides, there are images of cups with the Starbucks logo as a special identification feature They always know how to create unique and meaningful marketing campaigns to expand its customer base Typically, the campaign “Every name’s a story” aims to create interaction between employees and customers Or the "I Am" campaign aimed at the transgender community in Barzil, when the campaign helped transgender people change their names for free, bringing great spiritual value Those are also the reasons why Starbucks is always at the top of the world's leading coffee chains

1.5 Research Structure

The report consists of 5 main chapters The researchers will summarize the content of the whole report, giving information about Starbucks and keywords of the selected topic in chapter | Chapter 2 will make research judgments on the relationships around reporting issues to increase the certainty of the arguments in the report Followed by chapter 3, the report has specific research methods to be able to provide analytical data in the next chapter The data will be analyzed in chapter 4, then the researchers will give the results after analysis The final chapter is Conclusion, where the researchers will summarize the contents of the report and make personal suggestions

Figure 1.5.1 Structure of Research (Author, 2023)

CHAPTER 2: LITERATURE REVIEW 2.1 Fundamental production

2.1.1 Marketing

Marketing is often defined in many ways as “selling” or “advertising”, but this is only one part of Marketing As defined by the American Marketing Association, Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, partners, and society at large More simply, Marketing can be understood as exchange activities that take place between sellers and buyers to facilitate mutual satisfaction Marketing is a crucial component of businesses if they wish to achieve long-term success

2.1.2 Marketing Mix (4Ps)

Marketing Mrx is the set of controllable variables that the firm can use to influence the buyer’s response (Kotler, 1967) It plays an important role in formulating a marketing strategy and developing products Currently, this model has been developed into many marketing combinations such as 7Ps, 8Ps or even 4Cs according to the complexity and improvement of modern marketing, proving that Marketing activities are no longer limited to tangible goods but also intangible services The 4Ps are the controllable variables in this case:

"Product" is one of the important factors of every business development plan In the 4Ps, the product is the goods and services marketed to the target audience When goods or services are of high quality and good features, they can easily attract consumers’ attention and help businesses earn profits

On the other hand, “price” is the only variable that is flexible and can change quickly, influencing the remaining activities as well as driving the distribution and promotion of the product Consumers often assume that high prices mean good product quality Enterprises need to determine a suitable price for the product to reach the target market and compete with competitors in the same field

“Place” is where used to bring products to customers Finding the right place to promote and sell products is crucial in reaching the right target audience No element in the 4Ps

combination works in isolation, and place is no exception, it can track product sales and take care of customers

“Promotion” is the last element of the 4Ps but an integral part of every marketing campaign This is when businesses find ways to advertise their products or services The basic purpose of this activity is to increase the brand's awareness and position in the market

2.1.3 Products

In this scientific research, the main factor exploited in the 4Ps is Product The definition

of products is anything that is offered for sale in the marketplace and can satisfy a customer's wants and needs (Kotler and Keller, 2009) The product is the result of a manufacturing process The manufacturing process is an essential part of any business It

is a production process consisting of a series of stages, a process that turns raw materials and ideas into products and services

2.1.3.1 Goods

Goods are tangible products, things that can be seen, touched, and used Several economic indicators can be derived from the supply and demand of goods to evaluate the overall state of health of the macroeconomy The goods are divided into two categories: Durable goods are a type of tangible product with a long economic life It can be used continuously for a long time, usually at least 3 years, and with the nature of not wearing out quickly, consumers do not have to buy repeatedly This type of goods is produced to serve consumers as well as manufacturing companies

Non-durable goods are goods used by individuals and businesses that need to be replaced regularly due to wear and tear or used up Many items in this commodity category are used to calculate the consumer price index The price inflation of nondurable goods is also closely watched as their price depends on the consumer's income and the amount of money they want to spend

2.1.3.2 Services

Services are other types of goods, but consumers cannot touch, just can use by experiencing Currently services are diverse and classified into four main characteristics:

Intangibility, Inseparability, Variability and Perish-ability (Kotler and Keller, 2007) The way services are produced and delivered to consumers is more complex than goods Because this form of merchandise needs to be served directly to the customer, risks can arise at the time of implementation and the supplier needs to be well prepared to deal with them

2.2 Relation between Product Diversification and FOMO affect

2.2.1 The origins of FOMO

FOMO effect is also known as FOMO anxiety This is an abbreviation of the phrase "Fear

of Missing Out" FOMO is a term used to refer to expressing a person's anxiety that they don't know or will miss out on information, events, or any decisions that they think should be This FOMO anxiety is also defined as when people have unwanted anxiety because they think others are having a better experience than they are (McGinnis, P J., 2004) This mentality has existed for a long time, but it was not until 2004 that it officially became the term widely used today

2.2.2 Product Diversification

Product diversification is an effective strategy that helps companies or brands expand their initial market scope Products may be more diverse in design, packaging, quality, and composition, or be accompanied by additional sibling items That's how companies and brands expand their products, to penetrate a new market

Compared to the case of multiple choice in the market, customers will be more comfortable with brands that offer them a wide variety of products in the same place On the other hand, this also helps businesses position their presence in the market, helping them to differentiate themselves from other competitors

Enterprises can diversify products by renaming products, it is applied when businesses want to penetrate international markets They can also resize products Change by increasing product quantity or size to reach value-driven customers, and by narrowing down to offer smaller retail customer groups In addition, products can also be diversified

by product extension processes They may choose to extend products by launching several versions of the same items, such as in different styles or colors or products with upgraded features It can create curiosity, and interest, and make possible trends in some

brands Customers are going to be attracted by the buying effects of the surrounding customers Inadvertently will be able to create a change in their consumption behavior 2.2.3 FOMO effect in business

FOMO is considered to create negative impacts on people's behavior and thinking but is applied as an "effect" in business It is a marketing strategy used to motivate consumers

to purchase or use a service by creating a feeling of fear of missing out or that a product

is being used or purchased by many others Customers are becoming more and more demanding in spending money to buy a product or service Traders need to capture different points in customer psychology Many consumers today always have a feeling of comparing with others Moreover, they always have the desire to upgrade themselves, to have the best and most unique things for themselves Having more editions of items for yourself is a trend in society Some people will always wish to be able to integrate and keep up with the trend Applying the FOMO effect will help customers feel that they are part of a community or trend and build customer loyalty by creating a connection between the customer and the product or service

However, if a business abuses this effect too much or applies it the wrong way, it will have the opposite effect That will make customers dissatisfied, feel forced, and gradually abandon, and ignore products that are deemed too small or too rare for them to buy

CHAPTER 3: METHODOLOGY 3.1 Approach Research

3.1.1 Sample

A sample is a small set of data that the researcher selects or draws from a large population by selection or pre-determining To obtain research data, testing the entire population is too expensive and time consuming Therefore, it may be more efficient to generate a sample based on conditions that are consistent across the population

3.1.2 Population

A population is the set containing all the elements and characteristics that can be measured and represented by that population Any sample selected from that population refers to a significant portion of the population, but not the entire population To measure

a population, it is necessary to provide the parameter the approximate standard deviation

or standard error of the statistical result

3.1.3 Qualitative

Qualitative data were collected through observation, video recording, or interviews This type of data is not represented by numbers, instead, it is classified based on the properties, properties, and characteristics of the thing or phenomenon of the research paper The collection of qualitative data can help businesses understand the desires of consumers, saving time in finding products that meet customer needs

3.1.4 Quantitative

Quantitative research is used to collect data from previously written articles, to investigate observable phenomena through experience using mathematics, engineering, and statistics After making statistics of data suitable for the research purpose, the researcher uses the ability to analyze logic and solve the relationships in the theory, thereby drawing conclusions and proposing useful solutions

3.2 Design of Research

This scientific study used a secondary research method to collect quantitative data It used aggregated and analyzed data from available sources as tools to create illustrative graphs The conclusion of the study was enhanced with the accuracy of data reports and

charts The concepts of the research object would also be clearly stated along with actual performance examples

3.3 Methods of Research

In research areas, primary and secondary were two main types of data sources With the primary, information is collected firsthand rather than using databases and other publications While secondary research involves data and literature complied from other sources and publications

3.3.1 Primary Research

Primary research is the method used to collect original data specific to a particular research project (Gratton & Jones, 2010), so information is collected firsthand rather than using databases and other publications However, this method takes a lot of time and money and may be exposed to risks due to external factors

Some of the common types that researchers use in their reports are surveys or interviews For surveys, individuals were asked to provide answers by selecting appropriate responses to specific research questions, such as about their feelings, beliefs, attitudes, and behaviors (Mrug, 2012) Through interviews, researchers will ask questions directly

to respondents or experts to collect data by phone or face-to-face

3.3.2 Secondary Research

The secondary data research method is a method of collecting and synthesizing data from available research documents or survey data previously collected by an organization or individual The concept does not involve generating new data, so for this method to produce effective results, researchers need a well-defined data source such as books, journals, governmental or non-governmental agencies, educational institutions, public libraries, and reputable websites

This method helps researchers easily synthesize and analyze available data, saving time and costs In addition, researchers can use large-scale data to compare and analyze subjects in different regions at different points in time However, the search and selection process can be subject to errors due to incomplete, inaccurate, or unsuitable data for the research purpose