Case study: Starbucks-adding value to brand equity through an innovative brand image.

Author:Perera, Luiz Carlos Jacob
 
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  1. INTRODUCTION

    Economic, cultural, and social changes continuously impact the market. Each new scenario requires new rules and new formulas for success, leading to more effective strategies and the creation of a new paradigm, or the reinvention of old paradigms.

    The objective of this paper is to address the paradigms of brand image and brand equity. The evolution of economic, cultural, social, and corporative scenarios has shown that many benefits can be achieved with the combination of these elements. An image of innovative brand allows for a price premium on the product, when compared to another that does not present the same characteristics. This fact, expanded to the corporate level rather than just the product, means that companies with an innovative brand image will have a greater value. The case study will focus on the period from 1996 to 2000, of the Starbucks network, period in which the image of the brand begins to gain more coverage and depth in the minds of consumers, after the decision to internationalize the company. In the same period, there was also a strong expansion of the brand, through mergers, acquisitions and joint ventures, resulting in increased incentive to innovate and create new products and processes. Such initiatives, together, provide greater visibility, causing the strengthening of the brand image, and started an unprecedented process of aggregation of value to brand equity in the story of Starbucks. This situation leads to the central question of this paper:

    An image of innovation adds value to brand equity?

    The work is structured so as to facilitate the understanding and interconnection of the various stages: introduction, methodology, theoretical framework, propositions, methodology, verification of propositions (results), final considerations, and limitations of this paper.

  2. LITERATURE REVIEW

    2.1. Brand Origin

    Companies today seek to provide emotional benefits to consumers, invest in research and development, and the brand clearly reflects the company's culture and the benefits it wants to convey. Among the company's objectives there is also the brand equity (value of the brand), sales and market share, i.e. factors of value generation. As well as production, distribution, and marketing, the company is also developing management competence to deal with customer's relationship (PINHO, 1996).

    Consumers have developed a wide range of identities and began to consume according to personal desire, not just according to product performance. A personal choice is influenced more and more by the brand. Change and innovation are expected and the feeling created by people from the image that the brand conveys to consumers is increasing. Aaker (1998) summarizes that even taking a central role in the trade long ago, it was not until the twentieth century that branding and brand associations have become the core business for many companies.

    2.2. Definition

    Kotler (1995, p.195) defines brand as a name, term, sign, symbol, design, or a combination of these elements, used to identify products or services of one seller or group of sellers and differentiate them from their competitors and may include four levels of meaning: attributes, benefits, values and personality. Aaker (1998, p. 7), complements: "[...] so, a brand signals to consumers the origin of the product and protects both the consumer and the manufacturer of competitors who offer products that look identical".

    The model proposed by Sampaio (2004) stands out among other papers that deal with architecture of the brand, and states that brand is based on six pillars, arranged in two distinct groups: the first set is composed of real, rational, and objective attributes and the second is composed of imaging, emotional, and subjective attributes. The first group deals with issues such as idea and function, which together define the product and service, the essence of the product. Together with production, distribution, sale, and after-sale systems represent the product and form the real part of the brand. The second group considers the name, and the symbol of the family that originated the brand, concluding with the language and expressions used throughout the existence of the mark.

    [FIGURE 1 OMITTED]

    The suggested model is shown in Figure 1 and also inspired the establishment of the first proposition.

    PROPOSITION 1 :

    Starbucks has been consolidating its image through actions in all brand pillars.

    2.3. Identity and Brand Image

    Aaker (1998) argues that identity is a dimension of the brand, which must distinguish it over time, confirming its promises and defining the associations that it aims to obtain from customers. On the other hand, Kapferer (2004, p.165) simplifies stating that "[...] identity is what makes the brand unique and singular and different from others."

    The physical and psychological aspects of brand character or of brand personality are the ones that affect consumer preferences, and act as a perceptual stimulus for the construction of brand image. Thus, the identity should reflect the strategy and the values of the organization and have at least one element that allows differentiating the brand and capturing the attention of customers (Upshaw, 1995). The identity of the brand must be guided by the company itself and not by the market. The true identity is one that specifies, clearly and objectively, the forces, the values and the vision of the brand, and makes it an important tool for internal and external communication. The theoretical foundations of brand identity and brand image are the elements that inspire this new proposition:

    PROPOSITION 2 :

    The Starbucks's brand has elements of uniqueness and differentiation that are essential to create positive associations in the minds of the consumers.

    2.4. Global Brands

    There are sectors in which a unique brand is essential. Churruca and Garcia-Lomas (1998) and Kapferer (2004), agreed that when buyers are international, a global brand is paramount. For example, companies equipped with IBM technology would not understand its subsidiaries in Bogota or in Kuala Lumpur depend on the same products, presented with different brands. A single brand is also a necessity when it refers to an individual, similarly to a unique company. Cardin, Chanel, and other famous brands have their products purchased at the international level because they have the signature of its creator or are associated with a brand of value, such as La Coste and Nike that hold the central values and legitimacy. The same applies to the Starbucks products, whose main value is the confidence in the quality of the brand, hence the emerging new propositions.

    PROPOSITION 3 :

    Starbucks has managed to maintain its brand image even opening new stores in different countries with different cultures.

    PROPOSITION 4 :

    The internationalization strategy has strengthened Starbucks brand image.

    2.5. Internationalization Process

    The company that decides to expand its activities through internationalization will have to make key decisions about the processes and methods needed to achieve success. Cavusgil (1993), Yip (1995), Churruca and Garcia-Lomas (1998) and Costa and Lorga (2003) discuss these processes in their multiple aspects: research, products, technology, markets, organizational and management systems, forms of entry, alliances, etc.

    The company also has to decide on an entry strategy for the new markets. There are several options for a company to entry in international markets, as exporting, hiring, direct investment, etc ... However, regardless of the strategy it will require employees or partners who have greater knowledge of the new market and of the different business practices which are country-specific (CHURRUCA and GARCIALOMAS, 1998). From this discussion emerges the next proposition:

    PROPOSITION 5 :

    Starbucks is concerned with adopting specific strategies to enter international markets.

    2.6. Innovation

    The Oslo Manual (2005) highlights that product innovation is either the introduction of a new good or service or the introduction of a good or service that has been significantly improved in terms of its characteristics or planned uses. These include significant improvements in technical specifications, components and materials, incorporated software, user-friendliness or other functional characteristics. As innovation of process is concerned, the manual highlights that it would be the implementation of a new method...

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