Issues of the Development of Brownfield Sites

Issues of the Development of Brownfield Sites Introduction: Brownfield land, or previously developed land (PDL), â€Å" is that which is or was occupied by a permanent structure, including the curtilage of the developed land and any associated fixed surface infrastructure.† This is the definition given in Planning Policy Statement 3 (PPS3) Housing, by the British Government, however in the United States the definition has been notably tweaked over time. The US Environment Protection Agency in 1997 quoted brownfields as being â€Å" abandoned, idled or under-used industrial and commercial facilities where expansion or redevelopment is complicated by real or perceived contamination.† This description was however updated in 2002 to become â€Å" real property, the expansion, redevelopment, or re-use of which may be complicated by the presence or potential presence of a hazardous substance, pollutant or contaminant.† The development of brownfield sites has been an area of great debate and discussion for many years. There are numerous issues surrounding their re-use from almost every viewpoint. Developers have historically been reluctant and unenthusiastic to make use of them for any new planned schemes for a variety of reasons. There can be great costs associated with the cleanup of a brownfield site depending on its previous employment. Further to this, legislation held every past and present owner of brownfield property completely responsible for any pollution or contamination to nearby people or property thereby presenting a large risk for potential developers. As time has passed by, non-built-up space available for construction of any type of buildings has diminished and therefore the Governments of most countries have made policies in a bid to control over-expansion and prevent urban sprawl. Clearly this has an impact on brownfield sites and their usage or potential regeneration. Another important area that warrants discussion is what has been termed as ‘sustainable development defined as, â€Å"development that meets the needs of the present without compromising the ability of future generations to meet their own needs.† (World Commission on Environment and Development, 1987) Sustainable development has become an objective which Governments throughout the world strive for. It is the core principal underpinning planning and aims to ensure a better quality of life for everyone, now and in the future. Poor planning can lead to run-down town centres, unsafe and dilapidated housing, and the loss of countryside. (HMG, PPS 1 Delivering Sustainable Development, 2005) Governmental policies are often introduced, altered or even eradicated depending on the state of the economy. A recent example is the reduction of Value Added Tax (VAT) carried out by the Government in the United Kingdom (UK) which was an attempt to try to limit the effects of recession by putting extra money in the pockets of consumers. Brownfield land can be affected in many ways by changes to existing economic policies and particularly planning legislation and guidelines, for example, they were brought very much more in to the spotlight with the establishment and enforcement of greenbelt land. This said, it is not just directly linked policies that can influence brownfields. The Government has five main economic goals and land use impacts on a number of these main goal areas particularly the protection of the environment, economic growth and unemployment. Research Question: The purpose of the project is to explore the issues surrounding brownfield sites for developers and the Government alike; including the incentives and support they offer, as well as restrictions they must adhere to or can receive. Further aims are to develop a deep understanding of land use focussing on brownfield land, the necessity for its redevelopment and consequences if it is left deserted and barren. The question itself centres on how the Government aims to encourage and drive new development towards brownfield sites or PDL, and whether the policies, legislation, and guidelines they introduce or modify are accomplishing this. Aims and Objectives: To investigate the current regulations, guidelines and policies regarding the re-use of brownfield or previously developed land. To understand whether these measures are strong enough to encourage the use of brownfield or previously developed land, and study their effectiveness. To discover whether the quantity of brownfield land being redeveloped has risen since these regulations and incentives have been in place. To examine the major issues and obstacles hindering the re-use of brownfield land. Research Methodology: This chapter describes the method of data collection and gives reasons why these methods were chosen. The research encompassed three different means of data collection. Documentation, journals and book research. A case study method of research. A question based interview with a property professional. Documents, books and journals from the Government, professional bodies, public libraries and the internet will be reviewed as data sources. These will offer official information on policies or guidelines as well as help to analyse the findings from case studies and the questionnaire. Documentation in this form will help to present reliable, certified and unbiased information on brownfield redevelopment in general and further helpful information. This information will include Government reports, policy statements on the environment and planning, incentive plans, consulting reports of sites carried out by professional bodies, as well as market research and statistics. Through studying this data the researcher will be able to gain an in depth understanding of the regulations surrounding brownfields and their redevelopment, but also more detailed knowledge and comprehension of the many aspects involved. A case study method of research, involving two large scale developments, was decided upon as a reflection of the redevelopment process of a brownfield site. These will give an insight from the beginning all through the various stages to the final new usage being carried out upon the site. It will be possible to measure the success of brownfield redevelopment, primarily it will be successful purely if there is a new use for the site rather than if no redevelopment occurred at all, and it lay derelict. Brownfield redevelopment is a complicated economic, social and environmental phenomenon requiring a close and in-depth study. Further to these studies a questionnaire interviews conducted with developers for property investment and development companies, to gain a developers viewpoint on the subject of brownfield redevelopment. Five professionals were contacted and asked for their opinions on the issue. The answers to important questions on the subject will help determine the current outlook on new development projects and whether professionals are still looking at greenfields. Literature Review: Definition of Brownfield Land/Sites Brownfield sites are found in former industrial, commercial and residential areas normally in cities, however many are also found in older suburbs or small towns. (Greenberg M et al, 2001) Often Brownfield sites can be traced through economic history and the evolution of industrial areas. The industrial revolution caused great heavy industrial development in certain areas across the UK; they located around transport links including rivers, the canal network and railways. As time passed, after the wars, deindustrialisation and industry decentralisation occurred and therefore the old factories and some housing became obsolete, leaving Brownfield sites often in central city zones. The Increased Importance of Brownfields For a long time Brownfield sites were not a major concern for Governments worldwide, they were just derelict or abandoned sites, eyesores, waiting for new owners and uses. â€Å"In the 1990s business and community leaders began to see the successful redevelopment of brownfields as a major policy issue.† (Gorman H S, 2003) Brownfield sites are increasingly important as space is not a multiplying entity; furthermore with planning controls now restricting certain land to remain as open space, land for new development opportunities is harder and harder to come by. Brownfields offer a great alternative development option to Greenbelt (or open space) development. As one of the Governments goals, protection of the environment implies the idea of trying to retain as much open space as possible, as well as preventing urban sprawl. Furthermore in its continued aim for sustainable development, open space is highly important, as well as ensuring new development schemes are energy efficient and as non-detrimental as possible to the environment. One of the central policies to endorse these objectives and impact on brownfield re-use is the introduction of green belts (or green belt land) around settlements where planning permission is extremely hard to gain for any proposed construction. The first official proposal to retain open spaces around developments and provide open space came as early as 1935 made by the Greater London Regional Planning Committee. Since then the codification of greenbelt land and its extension to areas other than London occurred in 1955, with the control policies still remaining valid today. (HMG 2001, PPG2 Green Belts) Green belts now cover approximately 1,556,000 hectares or about 12% of land in England. In PPG2 Green Belts the Government sets out guidelines on the re-use of buildings or sites on green belt land, but there are more strict controls and expansion or extension is almost impossible as it would conflict with the openness of the land. This said there is at a willingness to consider schemes on what is protected, heavily regulated land when all said and done. Overview of Governmental Intervention In the United States the Government there have what is called a ‘smart growth policy which is â€Å"centered on Brownfield redevelopment it directs legislation, dollars, and governments moral powers toward attracting developers and individual investors, non-profit organizations, and community groups to neighbourhoods with underutilized or abandoned properties rather than to pristine Greenfields.† (Greenberg M et al, 2001) As this highlights, by the use of legislation and cash incentives the Government can influence development towards Brownfield sites. The UK Government did not have the same style of strategy under one name like this ‘smart growth policy, but instead had many directives covered under areas such as planning, housing provision targets, fiscal incentives and sustainable development. They have since with the help of research and studies conducted from and by other organisations, designed a ‘national brownfield strategy. Government Targets Since the late 1990s the Government has endeavoured to reach the target set that 60% of new housing in the UK is to be built upon previously developed land. (HMG, PPS3, 2006) â€Å"With our new policies in place, we expect local planning authorities to be able to raise the national proportion of new homes to be built on previously developed land to 60 per cent over the next 10 years.† (John Prescott, House of Commons Debate, 23rd Feb 1998) After this aim was announced, there was great debate over whether it was achievable. It was, and continues to be a high target and therefore measures needed to be taken to ensure its fulfilment. In 1999 Friends of the Earth claimed that the goal was attainable but only if central Government provided more guidance and assistance to local planning authorities, particularly in the case of clean up policy for contaminated land. (Environmental Data Interactive Exchange, 1999) The Government has also set targets for the number of new homes, and al so their, and non-domestic buildings energy efficiency in a movement towards sustainable development. In 2007, Gordon Brown made housing a priority and promised 2 million new homes by 2016, and 3 million by 2020 with a further clause that homes built from 2016 onwards would be zero carbon. (HMG, 2007, Building A Greener Future: Policy Statement) At Budget 2008 strict targets for carbon emissions were set on non-domestic buildings when the Government announced its ambition that all new non-domestic buildings should be zero carbon from 2019. (HMG, 2008) Measures to Influence Development towards Redevelopment of Brownfield or PDL At Budget 2001, the UK Government stated: â€Å"The Government wants to improve the confidence of owners and investors to bring contaminated land back into productive use and assist with the costs of doing so. Budget 2001 introduces a 150 per cent accelerated payable tax credit for owners and investors for the costs they incur in cleaning up contaminated sites. This is part of the Land Remediation Relief (LRR) incentive, contained within the Urban White Paper, November 2000, and introduced in 2001. These measures make the development of these sites more viable, helping to tackle the legacy of previous industrial uses and reduce the pressure to develop Greenfield sites.† The LRR introduced the 150 per cent tax incentive as well as bringing in the possibility for companies to elect that capital expenditure on qualifying land remediation expenditure is allowed as a deduction in computing its profits. Furthermore companies can opt to receive a payable tax credit in exchange for an y qualifying land remediation loss surrendered to the Exchequer the rate of the payable tax credit being 16 per cent of the loss surrendered. The credit is restricted however to the lesser of 16 per cent of the uplifted expenditure or 16 per cent of the companys unrelieved loss for the period. (HMG, Urban White Paper, 2000) It is fair to suggest that the Government is following up on the original policies made and the concerns expressed by Friends of The Earth. Primarily, the LRR has been updated and in doing so planning controls and incentives enhanced. There has also been action taken by the use of surveys and reports completed and recommendations made to the Government. ‘Tax incentives for development of brownfield land: a consultation is a document produced in March 2007, and illustrates the two fiscal, tax incentives the Government has introduced to promote brownfield regeneration. The document is ‘a consultation in which the Government proposes the removal of one of the tax breaks, but the enhancement of the other. The two forms of fiscal incentive offered are firstly an accelerated 150% tax credit which helps with costs incurred in the cleanup of the site. The second measure is landfill tax exemption, introduced in 1996 when landfill tax began. Landfill tax is a tax on the disposal of waste collected by landfill site operators, aimed to encourage waste producers to produce less waste. There are some exemptions, and the one particularly relevant to brownfield regeneration is that which relates to waste arising from the cleanup of contaminated land. It was intended to ensure that landfill tax does not act as a barrier to developing contaminated land. When the relief was introduced in 1996 there were few alternatives to dealing with contaminated land other than landfill, however as time has passed new technologies have emerged, making on site decontamination the preferred option. It is the Governments belief that on site decontamination is the better solution due to the high environmental impacts of landfill itself and its demand for space, the harm to the environment caused by the transportation of this waste, and the securing of recycling materials. These ‘costs to the environment as the Government explains are necessary to consider in the same way as PDL itself. Another area mentioned is that the regulatory environment has changed since 1996, and has altered how waste is handled and regulated considerably. Since October 2007 all waste has had to be treated before it is sent to landfill, and liquid waste has been banned from landfill sites. In 2005 the ‘Hazardous Waste Directive applied increased controls to hazardous waste resulting in the prices for it to be taken as landfill rising sharply, and the paper points out that landfill tax would now only be a small proportion of the overall costs of sending hazardous waste to landfill. Also in this document the Government expresses a desire to update and amend policies if necessary pointing out that all measures taken must be monitored and possibly altered to ensure maximum compliance and success. â€Å"The Government remains committed to these aims and to the continuation of the relief, but after 6 years of operation it is time to consider how the scope and take up of the relief can be improved to help it more efficiently deliver the objectives set out in 2001.† (HMG, Tax incentives for development of brownfield land: a consultation, 2007) It is important that the necessity to potentially alter regulations, incentives or policies to guarantee the best results is acknowledged by the Government, as it shows a willingness to be proactive and manage the issue. Further to this report however the Government carried out its proposed changes to the existing LRR. In the 2008 ‘Pre-Budget Report there are some separations made between PDL itself, and alterations to the conditions of relief given. It is stated that legislation would be introduced in the ‘Finance Bill 2009 extending LRR to cover expenditure on remediating long term derelict land if the land has been derelict since 1st April 1998. Additionally the land will only qualify if the land was already derelict when acquired by the claimant, and moreover a list of qualifying expenditure is published. â€Å"The relief will be available on specified expenditure. The qualifying costs are expenditure on the removal of: post-tensioned concrete heavyweight construction; foundations of buildings or other structures or machinery bases; reinforced concrete pilecaps; reinforced concrete basements; or underground pipes or other apparatus for the supply of electricity, gas,water or telecommunication services or for drainage or sewerage.† (HMG, 2008, Pre-Budget Report) Towards a National Brownfield Strategy In September 2003, English Partnerships produced an advisory document to the deputy Prime Minister having been appointed as special adviser to the Government on brownfield issues. They intended to compose a comprehensive National Strategy for brownfield land. In their report, English Partnerships express a very significant detail that brownfield, or PDL, continues to be created, stimulated by economic and social factors and that a key challenge is to ensure the pace of reuse exceeds the pace of new creation of this land. Their concern is that it is an on-going issue and requires far more than just refocusing new schemes, but to address the subject of this newly created brownfield land. A further chief observation made is that PDL must be differentiated between. There are marked differences, some sites have no need for encouraging policies or legislation to be made for developers to appreciate a new use and realise the profit of carrying out their new planned schemes, these are described as ‘self resolving. There may be little to no time between when the site becomes obsolete, or unused, and then is regenerated in to something different or merely updated. This could be land currently in use, but which once redeveloped may have a higher value, and therefore more commercial value. These sites naturally therefore may be called ‘commercially attractive sites. Fairly evidently the report then distinguishes between ‘marginally viable and ‘non-viable sites, which are reasonably self explanatory, in that they lack attraction to developers due to clean up and preparation costs exceeding potential profits in the latter, or only offering a small profit in the former. Finally ‘non-development sites are explained as being suitable only for ‘soft or amenity use, with their values severely reduced and not necessarily related to the costs of bringing them back in to use. Here more than just the financial returns must be considered, the social costs and benefits are principal and are difficult for the private sector to take in to consideration, overall implying a clear role for the public sector, in more than just a policy making manner, but as a regenerator itself. (Towards A National Brownfield Strategy, English Partnerships, 2003) Government Response to English Partnerships The Government responded to the recommendations made by English Partnerships, with a number of policy creations and claim to be â€Å"successfully encouraging the re-use of more brownfield sites reducing pressure for development on greenfield land.† (HMG, Securing the Future Supply of Brownfield Land, 2008) English Partnerships made nine policy recommendations in their submission to the Government and all of nine of these were accepted in the Governments response, several of which were confirmed in the ‘Housing Green Paper Homes for the future: more affordable, more sustainable, 2007. This Green paper emphasised the necessity for local authorities â€Å"to prioritise brownfield land in their plans and to take stronger action to bring more brownfield land back in to use.† (Syms P, Land Remediation Yearbook, 2008) This document claims that around three quarters of new development takes place on brownfield land compared to less than 60% ten years ago in 1998. Furthermore a year on year reduction in derelict and/or vacant brownfield land is highly promising and hence the stock of this land is diminishing. This relates back to a concern raised by English Partnerships, about the continuing problem of PDL, its growth as land becomes naturally derelict or unused, and the necessity to address this. A Developers Considerations and Perspective: The prime concern for any private developer and their company is unashamedly profit maximisation, and the amount of time before that profit is realized. (Ratcliffe J, Stubbs M, 1996) The property development industry is risky which is why there are both high levels of profit and loss that can occur to developers. Risk carries great significance for the developer of any scheme, and can be the factor that decides whether to pursue the intended development or shelve the plans all together. The process of property development can be split in to a five stage process according to John Ratcliffe and Michael Stubbs, they write that from the initial idea to the disposal of the property at the end, the stages can be divided thus: Concept and initial consideration Site appraisal and feasibility study Detailed design and evaluation Contract and construction Marketing, management and disposal (Ratcliffe J, Stubbs M, Urban Planning and Real Estate Development, 1996) Developers and Brownfield Land Brownfield land varies greatly in its character in terms of size, location and the severity of contamination, while the constant and only common consideration for the developer is profit. The same point can be stressed about greenfield or greenbelt land too although realistically only in terms of size and physical characteristics, and not contamination severity. There are of course a number of other considerations; planning regulations and whether permission will be granted carry great importance, as the project may have to be altered due to planning constraints. The second stage of property development, ‘site appraisal and feasibility study as called by Ratcliffe and Stubbs, during which the developer must research the land thoroughly weighing up its credentials. At this stage the brownfield site or PDL may be rejected on the basis of infeasibility in the developers eyes. This rejection may lead to a different site needing to be considered and utilized, or a change in the scale or intended use of the proposal. When deliberating where to construct their new planned and profitable scheme, the obvious, most simple and least time consuming option, would be a greenfield site. There would have been no previous uses of the site, apart from perhaps agricultural, and highly unlikely a use that would have contaminated the site and thereby demand high clean up costs, or demolition of previous structures. Greenfield sites are very often on land of sole ownership making the task of purchasing the land far more straightforward, than having to trace and, or, consolidate ownership to bring together the parcel of land required and desired for the project. Case Studies: This chapter introduces the case studies of brownfield regeneration that has occurred and relating the projects to some of the measures taken by the Government to encourage development of brownfield sites or PDL. Norwich Riverside Re-development The Norwich Riverside development is a fine example of a successful project on contaminated brownfield land. It is a large site very near to the city centre, and was the largest and most significant site that had become available for redevelopment for years. Therefore it was highly important the best possible use was made of the opportunity. Historical Context The site was originally industrially used, it was close to both the railway and river providing good transport and supply links. As long ago as the early 20th Century the firm Boulten and Paul had located their ironmongers on the site, making many things from agricultural tools to aircraft during the war periods. By the mid 1980s however, owing to deindustrialisation, many of the industrial uses had declined or ceased operations and the majority of the site had become vacant and derelict. Other uses included the Harrington oil and gas works and timber yards were also present. Another user of the site was British Rail and their sidings were too left unused and derelict, leaving the site looking forlorn and unsightly. (David Simmonds Consultancy, 2004, Sargent P, A Place in History) The Site The site itself is large in size, 17 hectares or 42 acres, and is located south east of Norwich city centre on the banks of the river Wensum next to the railway station and Norwich City football club. Due to its previous heavy industrial use, it was highly contaminated and carried a tidal flood risk, therefore much work was necessary to rectify these issues. The site did not have good access either both by road, and for pedestrians and cyclists. The New Development The site was seen to provide an opportunity for major expansion of the city centre which was an aim of Norwich City Council (NCC) as their desire was to attract ‘shed style retailing and limit the shift to ‘out of town. The completed scheme today is mixed use offering residential, in the form of 224 housing units combining town houses and flats most of which with secure parking. There is also a 15% allocation of affordable housing. In terms of retail, there is a food superstore, Morrisons, and 7 other retail units; Boots the chemist, JD Sports, Argos, Mamas and Papas, JJB Sports and Going Places Travel. A further 2 units with service operations, Big Yellow Self Storage Company and STS Holburn Tyre Centre are also present. There are leisure facilities provisions as well with a 14 screen UCI multiplex cinema, a bowling alley (Hollywood Bowl), nightclubs (Square, Brannigans and Time), restaurants (Frankie and Benny, Nandos, Pizza Hut, Old Orleans), bars (Wetherspoons, Norweg ian Blue), and a health club (Fitness Exchange). A major swimming and recreation centre which was particularly important to the council that it be incorporated, as there was a need for this in a central location. (riversidecentrenorwich.co.uk) 1800 car parking spaces including a new six-storey park with 740 spaces provide sufficient car parking for both leisure development and rail users. The railway station itself has been remodelled to integrate in to the adjacent project. New access links with a new inner ring road, as well as pedestrian and cycle connections to the historic King street area. â€Å"Riverside now represents a new quarter that compliments the city centre in accordance with recent Government planning policy guidelines, in a location with existing public transport infrastructure improved by a new interchange for buses, taxis and cyclists.† (David Simmonds Consultancy, 2004) Redevelopment Issues There were a number of serious concerns and questions raised with the major scale redevelopment of Norwich Riverside, from infrastructure issues to planning necessities and development obligations. In 1994 the council first started work with local stakeholders and potential developers designing new planning guidelines for the regeneration of the site, but it was not until 1999 that the first phase of construction was completed. The council had originally assessed the development potential of the site in 1987 after the closure of Boulten and Paul, and their plans envisaged a fine-grain redevelopment of mixed use. Due to these problems with the site, it became well known within the countrys development industry as a difficult project with a significant commercial and investment risk which logically acted as a barrier to attracting backing. Part of the delay, and bearing a great significance to the research question of this project, was that the council were attempting to use the redevelopment of Riverside as a major part of regenerating the city centre and providing services that were previously lacking. Naturally this objective brought with it some major development obligations for the scheme to provide. One such target was to supply a new swimming pool and recreation centre as this was lacking in a city centre location. A very well designed centre was created by Richard Jackson intelligent engineering, and now has a value of  £5.7 million. (Richard Jackson plc, 2009) Further constraints were that the council wished to steer ‘shed style retailing in to this area of the city to rein in the increasing move to ‘out of town shopping becoming prevalent. (Norwich City Council, Riverside development) As is often the case with brownfield redevelopment the site was quite heavily contaminated, evidently this required cleaning up, which was achieved by the use of an innovative soil clean-up method called bio-remediation. Furthermore as mentioned previously, the site was at risk to flooding, and therefore the ground level had to be raised. These are both costly and time consuming processes to complete, over  £5 million was spent remediating the site. Another obstacle that can occur with brownfields and did indeed in this case was serial ownership and the difficulties involved of tracing all owners and forging agreement between them of the intended plans. The Boulten and Paul works were owned by Gazely Properties Ltd having purchased the works after its closure in the 1980s. The railway lands were owned by British Rail Property Board until its privatisation when they were transferred to Railtrack pre Network Rail. These two, Gazely Properties and Railtrack ultimately founded a joint development company on an equal partnership basis. The other land included in the site area was in the possession of NCC. The proposed plan itself for a mix of residential, leisure and ‘shed style retail was acceptable to most members of the local community, some residents rallied against this form of urbanisation due to the aesthetics of the retail not fitting in with the historical city. Despite their efforts however, the council stuck with the plans and agreed that it go ahead as planned with reference to the importance of the food store which would serve the south east of the city. When the site came to ascendancy as a hub

Hubspot: Inbound Marketing Essay

HubSpot is an online marketing software company that utilizes inbound marketing, a system which pulls prospective customers to a business and its products. Although inbound marketing has been highly successful and the company has reached its milestone of 1,000 customers, HubSpot is now faced with the dilemma of which direction to steer towards, while considering the viability of inbound marketing at a larger scale. HubSpot must decide whether to target the Marketing Marys (MM) segment, the Owner Ollies (OO) segment or both. We recommend that HubSpot focus on the OO segment. Our strategy is to actively grow this market segment, lower the churn rate and increase the retention rate. By targeting this segment, it will help HubSpot further its goal of becoming an industry leader in the Leads, Analyze and Qualify Traffic sectors of the inbound marketing industry. Our recommendation is based on quantitative analysis which showed that the OO segment is more profitable than the MM segment. Considering the $1000 acquisition cost of OOs and their current pricing, the breakeven for this segment is 2 months. In addition, the lifetime revenue for the OOs is estimated to be $1. M (Exhibit B). In contrast, the breakeven time calculated for the MMs is 9 months with an estimated lifetime revenue of $1. 6M. In addition to quantitative analysis, we also considered qualitative factors in determining our recommendation. We determined that inbound marketing should remain the primary marketing system because it is a user-friendly and a cost efficient product and most importantly, it is HubSpot’s guiding philosophy. Inbound Marketing, a core value and strength, will continue to differentiate HubSpot from its competitors as it grows. In choosing to target the OO segment, we are assuming that OOs will continue to migrate to HubSpot’s hosted content management system at the same rate. The plan is to foster the OOs through retention programs and an improved quality customer service department. The company can lock the customer into a one-year contract at a discount or offer initial free consulting services. In addition within this timeframe, HubSpot’s salesforce will promote the advantages of migrating to the CMS system. We considered alternatives such as targeting both OO and MM segments or focusing solely on the MM segment. However, according to the company product timeline, it takes more than 3 months to develop new products and processes so the alternative of targeting both segments was rejected. As a new company, HubSpot has limited resources to service the diverse client base, which will cause product growth to lag behind servicing customers’ needs. In the long run, this will put the company at a less competitive position in the industry. Additionally, we also considered targeting only the MMs because this segment realized the most growth during the last four months of 2008, perhaps indicating long term growth potential. We rejected this strategy as a result of our expense breakeven analysis: it takes 4 ? times longer to breakeven with MM customers than it does with OO clients (Exhibit B). Finally, while we realize that the shift in focus could potentially lead to loss of market share within the MM segment, we believe that the gain in OO segment will offset the loss in the long run. In conclusion, we recommend that HubSpot target the OO segment. We identified HubSpot’s goals as growth within the OO segment, a lower churn rate and an increased retention rate. HubSpot can accomplish these objectives by promoting the CMS system and implementing a new customer contract initiative. As the company moves towards accomplishing these goals, it will no doubt become a market leader in the online software marketing industry.

Coca-Cola Market Opportunity

The Coca-Cola Company has long been a worldwide business. The first soda fountain sales to Canada and Mexico were recorded in 1897 with the first international bottler established in Panama in 1906. Coca-Cola entered China in 1927 and the 100th country, Sierra Leone, in 1957. Today, the Coca-Cola Company is the largest beverage company with the most extensive distribution system in the world. In the first two decades of the twentieth century, the international growth of Coca-Cola had been rather haphazard. It began in 1900, when Charles Howard Candler, eldest son of Asa Candler, took a jug of syrup with him on vacation to England. A modest order for five gallons of syrup was mailed back to Atlanta. The same year, Coca-Cola travelled to Cuba and Puerto Rico, and it wasn't long before the international distribution of syrup began. Through the early 1900s, bottling operations were built in Cuba, Panama, Canada, Puerto Rico, the Philippines, and Guam (western Pacific island). In 1920, a bottling company began operating in France as the first bottler of Coca-Cola on the European continent. In 1926, Robert W. Woodruff, chief executive officer and chairman of the board, committed the company to organized international expansion by establishing the Foreign Department, which in 1930 became a subsidiary known as the Coca-Cola Export Corporation. By that time, the number of countries with bottling operations had almost quadrupled, and the company had initiated a partnership with the Olympic Games that transcended cultural boundaries. Coca-Cola and the Olympic Games began their association in the summer of 1928, when an American freighter arrived in Amsterdam carrying the United States Olympic team and 1,000 cases of Coca-Cola. Forty thousand spectators filled the stadium to witness two firsts: the first lighting of the Olympic flame and the first sale of Coke at an Olympiad. Dressed in caps and coats bearing the Coca-Cola trademark, vendors satisfied the fans' thirst, while outside the stadium, refreshment stands, cafes, restaurants, and small shops called ‘winkles' served Coke in bottles and from soda fountains. The company began a major push to establish bottling operations outside the USA. Plants were opened in France, Guatemala, Honduras, Mexico, Belgium, Italy, and South Africa. By the time the Second World War began, Coca-Cola was being bottled in forty-four countries, including those on both sides of the conflict. Far from devastating the business, the war simply presented a new set of challenges and opportunities for the entire Coca-Cola system. The entry of the United States into the war brought an order from Robert Woodruff in 1941 ‘to see that every man in uniform gets a bottle of Coca-Cola for 5 cents, wherever he is and whatever it costs the Company. This effort to supply the armed forces with Coke was being launched when an urgent cablegram arrived from General Dwight Eisenhower's Allied Headquarters in North Africa. Dated 29 June 1943, it requested shipment of materials and equipment for ten bottling plants. Prefaced by the directive that the shipments were not to replace other military cargo, the cablegram also requested shipment of 3 million filled bottles of Coca-Cola, along with supplies for producing the same quantity twice monthly. Within six months, a company engineer had flown to Algiers and opened the first plant, the forerunner of sixty four bottling plants shipped abroad during the Second World War. The plants were set up as close as possible to combat areas in Europe and the Pacific. More than 5 billion bottles of Coke were consumed by military service personnel during the war, in addition to countless servings through dispensers and mobile, self-contained units in battle areas. But the presence of Coca-Cola did more than just lift the morale of the troops. In many areas, it gave local people their first taste of Coca-Cola. When peace returned, the Coca-Cola system was poised for unprecedented worldwide growth. From the mid-1940s until 1960, the number of countries with bottling operations nearly doubled. As the world emerged from a time of conflict, Coca-Cola emerged as a worldwide symbol of friendship and refreshment. The Coca-Cola Company is now operating in more than 200 countries and producing nearly 400 brands; the Coca-Cola system has successfully applied a simple formula on a global scale: provide a moment of refreshment for a very small amount of money-a billion times a day. The Coca-Cola Company and its network of bottlers comprise the most sophisticated and pervasive production and distribution system in the world. From Boston to Beijing, from Montreal to Moscow, Coca-Cola, more than any other consumer product, has brought pleasure to thirsty consumers around the globe. 1. Trace the Internationalisation / Globalisation model of coco cola. 2. What were the Triggers & Motives for coco cola to global? 3. Why do you think coco cola was so successful despite the fact that ‘food & drinks’ preferences are highly local like in case of tea/ coffee?

Marketing Portfolio for Starbucks - Free Essay Example

Sample details Pages: 10 Words: 2978 Downloads: 4 Date added: 2017/06/26 Category Marketing Essay Type Case study Level High school Did you like this example? Marketing Portfolio for Starbucks 1.0  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Executive Summary The report examines and analyses a portfolio of advertisements from Starbucks. The main segmentation criteria used by Starbucks is psychographic segmentation, targeting customers based on their lifestyle and attitudes. Starbucks aims to create loyal customers and reduce brand switching by offering a wide variety of products and special coffees regularly. Don’t waste time! Our writers will create an original "Marketing Portfolio for Starbucks" essay for you Create order Using a combined push-pull strategy, the company mostly relies on advertising, promotions, personal selling, Internal marketing, and public relations, all making good use of AIDCA formula. An important part of this strategy is the (basically) exclusive distribution channel used in the UK and the premium pricing strategy supported by augmented products such as after-sales service. Overall, think these adverts serve the company well by communicating why Starbucks is unique. 2.0  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Company Description Starbucks was chosen because it is one of the most admired and successful coffee companies in the world with more than 6,000 self-operated and licensed stores in 38 countries outside USA (Starbucks Coffee Company, 2008). It serves more than 30 different brands of blend coffee as a roaster and major retailer, as well as iced beverages and other related products. In the UK, Starbucks is the leading operator of branded coffee shops based on turnover (Key Note, 2009). Starbucks primarily competes with other coffee shops, which include outlets that are principally involved in selling coffee and other hot and cold drinks, usually along with some snack foods, such as muffins and cakes, such as Costa Coffee and Caffà ¨ Nero. Of the approximately 10,000 coffee shops in total in the UK and the Republic of Ireland, the major branded chains account for around 30% of all coffee-shop outlets (Key Note, 2009). In terms of turnover, Key Note (2009) estimates that the total turnover of all coffee shops in the UK and the Republic of Ireland was  £4bn in 2008, with branded coffee shops gaining about 35% of total coffee-shop revenues (about  £1.4bn in 2008). Starbucks also indirectly competes with retailers that offer coffee-shop facilities but are engaged mainly in selling other items, such as department and bookshops, as well as retailers that derive their sales mainly from the sale of food, such as Subway and McDonalds. 3.0  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Overview of the Adverts in the Portfolio Seventeen adverts are included in the portfolio in the Appendix. Ten of these are print adverts, while two are from the companys US website, two are pictures taken of promotional material at Starbucks shops, one is a screen grab of a television ad available on Youtube, and two screen grabs from Starbucks UKs Facebook page. Various creative approaches are taken, but mostly you will notice a minimalist approach taken to how the adverts are created, especially in the print adverts and there is generally one clear message in each ad. However, the adverts in the Appendix have been categorised based on the market segment that they predominantly target: serious coffee drinkers, socially conscious coffee drinkers, and non-coffee drinkers, with a fourth category added to reflect the fact that food items are also an important revenue stream for the company. 4.0  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Segmentation, Targeting, and Positioning The main segmentation criteria used by Starbucks is psychographic segmentation, targeting customers based on their lifestyle and attitudes about ‘fairtrade food (Solomon et al., 2002). The core consumer for Starbucks is the ‘serious coffee drinker (upscale market), which it tries to reach with adverts and other promotional material that reflect the quality of the coffee that it serves, as well as displaying its dedication to providing its customers with the best coffee (Pictures 1, 2, 4). The third ad in the first series is a screen grab from the US website, showing a range of special coffee blends that the customer can try at the store each week for eight weeks. The final picture in this series shows in-store promotion for the companys new ‘Via brand of coffee that customers can buy and brew at home, again targeted at those who want a good coffee experience. With the increasing emphasis on corporate social responsibility, Starbucks is also seeking to develop a market of consumer that are interested in their products being socially conscious. The adverts in this series (Pictures 6-10) talk directly to those consumers who are interested in changing the world, one cup of coffee at a time. So these adverts are still aimed at coffee drinkers, but these adverts help the company to project an socially responsible image – flavourful, lively, multifaceted can define the company as much as the (Starbucks) RED coffee (Picture 9). Above everything, Starbucks is a lifestyle brand and the company aims to attract a wider demographic of customers and so offers several products for the non-coffee drinker (or the less hardcore coffee drinker) who still wants to be a part of Starbucks social environment. The third set of adverts (Pictures 11-15) is aimed at these people, with the first three adverts being for the Frappachino blended beverages, also known as the Summer Drinks flavours, which serve to help the company to reposition itself in develo ping the non-coffee iced-beverage market. The third ad in the series is especially powerful in getting across the idea that Starbucks is not only about coffee. The final series of adverts (Pictures 16-17) also fits into this category somewhat, because (while the food is accompanied by coffee in both promotions), these adverts also show that there are other reasons to indulge in Starbucks other than coffee. This STP strategy seems effective, since the serious coffee drinkers, socially conscious coffee drinkers, and non-coffee drinkers segments are distinct segments, have common needs, respond to market stimulus, and can be reached by marketing (Jobber and Fahy, 2006). The segmentation and targeting used by Starbucks allow the company to position itself as a (socially conscious) high price-high value brand. 5.0  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Consumer Buyer Behaviour Consumer decide on which brand they want to choose based on either the functional benefits, the emotional benefits, or both (Jobber and Fahy, 2006). The function or performance benefits of the brand are important to consumers, but they also choose particular brands because it can be used to express their personality, social status, or affiliation (symbolic purposes) or to fulfil their internal psychological needs, such as the need for change or newness (emotional purposes) (Solomon et al., 2002). Some researchers present purchasing as a problem and is often presented as the buyer decision-making model: problem recognition, information search, evaluation of alternatives, purchase, post-purchase evaluation (Jobber and Fahy, 2006).   For high involvement products, such as high priced products/services (economic risk) and products/services visible to others (psychological and social risk), the consumer often goes through an extended decision-making process that includes all these ste ps. However, with the prices ranging from  £2 for a basic espresso to over  £4 for hot lattes, Starbucks prices are among the highest in the UK, but in the general scheme of things coffee is a low-involvement product. This means that consumer are often engaged in a limited decision making process, or they may see coffee buying as an impulse purchase or a routine purchase. Additionally, if consumers are loyal to a specific brand, they would tend to buy coffee without much information search or evaluation of alternatives (Jobber and Fahy, 2006). Starbucks is trying to get consumers to get more involved in the product in several ways. First, Starbucks is marketed as a status item (Pictures 11-15) and so it is more high involvement (has more economic, psychological, and social risk) than unbranded coffee or cheaper coffee from Subway or McDonalds. Second, the company is using various campaigns, such as ‘Bold Coffee campaign (Pictures 3 and 7) and the ‘Via taste challe nge recently conducted in the UK (Picture 5) to get consumers to come into the store continually and try its products. This is a good use of buyer behaviour theory, which predicts that customers may switch brands just to try something new (Jobber and Fahy, 2006). By providing customers with a new flavour to try each week, Starbucks actively manages customers natural inclination to try new things. And by emphasising its socially responsible behaviour, Starbucks is also providing consumers with more benefits on which to evaluate its products (Solomon et al., 2002). Starbucks is also making good use of consumer buyer behaviour theory by building a strong brand to which customers are loyal, meaning that these customers do not even consider other brands when they are going for coffee, they will immediately choose Starbucks because it is the coffee for anyone who really loves coffee (Pictures 1-5). These adverts are generally aimed at all the stages of the buyer decision-making process . For example, Pictures 14 and 15 are adverts that are aimed at the problem recognition stage as these adverts lets the consumer know that these products are available and seek to arouse their motivation to visit Starbucks. Most of the adverts help with information search because they provide information on the functional and emotional benefits that the product can provide. This is the same with evaluation of alternatives, because the aim of all these adverts is to keep Starbucks within the consumers evoked set. This is helped by reinforcing the prestigious brand name and providing consumers with a range of tastes and aromas. Pictures 14 and 17 are two of the adverts that are asking consumer for action, to purchase something. Finally, Pictures 6-10 and 12 help with post-purchase evaluation, as it reinforces to the consumer the benefits of paying  £4-5 for a cup of Starbucks coffee and thus reduces post-purchase dissonance (Jobber and Fahy, 2006). 6.0  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Promotion The most common promotional mix elements used by Starbucks are advertising, Internet marketing (Picture 7), personal selling, public relations, and sales promotion.   In terms of advertising, Starbucks spend a small percentage of its revenue on advertising (Subhadra, 2003), relying to a greater extent on its image advertising, such as movie and television placement, in order to promote the success of the business (Kembell et al., 2002). When it does advertise, Starbucks uses print media a lot (as evidenced by the majority of adverts in the sample), as the companys target market tends to be educated people who do more reading than average (Kembell et al., 2002). In terms of Internet marketing, Pictures 7, 10, and 17 show that Starbucks spends a lot of its promotion time and money on interacting with customers. Its Internet promotions are often done in a manner that lets customers interact with the product or leave comments, even if they are not directly able to interact with St arbucks staff. The company engages in personal selling through their passionate baristas in the store. As indicated in Picture 4, the focus is on customer service by providing the perfect cup of coffee to customers every time. In terms of public relations, Pictures 7 shows one aspect of this, as the company is often engaged in charitable causes and highlights this through its promotional material. Finally, there is also sales promotion, as highlighted in Picture 5, which takes the form of samples. In terms of promotional strategy, the company uses a push strategy, which involves the active engagement of customers using direct selling channels and emphasising promotion and advertising (Jobber and Fahy, 2006). At the same time, there are elements of a pull strategy being used, as the company has developed a highly visible brand to encourage customers to seek out its products. 7.0  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Communication strategy The message that Starbucks is sending in each advert is very clear. For example, the adverts represented in Pictures 1, 2, and 4 are very clearly expressing the quality of the coffee that consumers should expect to get when they visit Starbucks. The same can be said about the adverts in Pictures 12-16, which clearly show that Starbucks is not only for coffee and also that the high quality that is offered to coffee drinkers are also offered non-coffee drinkers. Similarly, the adverts in Pictures 6-10 clearly express the companys social conscience. The adverts effectively communicate the companys brand values by making good use of the AIDCA formula: attention, interest, desire, conviction, and action (Jobber and FAhy, 2006). The clean palate and the bold fonts used easily catch peoples attention and can generally be read from afar. Similarly, the way the products or brand is presented tend to draw interest. Other adverts present testimonials (Pictures 10 and 17), while several ask for action (such as Pictures 3, 5, and 14). 8.0  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Pricing There are different pricing strategies available to firms and each will be optimal in different situations (Jobber and Fahy, 2006). One strategy is premium pricing, which is also called a high price-high quality strategy, and this allows the firm to charge higher prices because there is something unique about the product. Exclusivity is partially derived from price because more expensive products exclude some consumers who might like to buy them (Solomon et al., 2002). It is therefore expected that the high status products will to cost more than the mundane brand. In line with this, Starbucks adverts do not contain pricing information because product pricing is premium, which is due to the companys commitment to quality products and a high level of customer service. Indeed, the only time price is mentioned in the sample of adverts is when the company is depicting low prices as suspicious (Picture 6) and how higher prices can change the lives of others (Picture 7). In this way, the pricing strategy is again used to reinforce the brand as being socially responsible and helping to justify the price (and reduce dissonance). The premium pricing strategy has to be carried out throughout the life of the product (Solomon et al., 2002). For example, using deep discounts and other price promotions are generally not   the best tactics when selling status goods. Therefore, while Starbucks will use promotions where it gives customers things for free for trial (Picture 5), it does not engage in price promotions to any extent (Kembell et al., 2002). 9.0  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Product The marketer has a lot of control over the product offered. The core benefit that Starbucks offers is providing customers with an opportunity to take a break from their busy lives in a relaxing atmosphere. The tangible products that are offered include coffee and tea beverages, whole bean and ground coffee, food items, and coffee-related equipment. In terms of the augmented product, Starbucks offers after-sales service in the form of wireless connections and atmosphere in store, as well as providing customers with some education about coffee and coffee making and an interactive website. As noted, Starbucks is as much about the experience of drinking coffee (or some other drink)   as it is about the coffee or the tea itself. This indicates that Starbucks brand is about its product, its people, as well as the in-store experience (Strehle and Cruickshank, 2004). The brand is communicated very effectively by the adverts, especially the repeated brand logo which uses complex graphi cs to help in product identification. The elements of the brand communicated through the adverts in the portfolio include: high quality coffee, rich taste, variety of choices of complementary food and beverage, warm, friendly, and homelike store atmosphere, and socially responsible/caring. 10.0   Ã‚  Ã‚   Place Exclusivity is partially derived from whether a good is available. By limiting the number and type of distribution outlets in which consumers are able to purchase the product, marketers restricts access and thus protect the perceived exclusivity of the product (Solomon et al., 2002). To main this exclusivity, the main distribution strategy for Starbucks is sales through stores, which is explicitly stated in Pictures 10 and 14 although most of the adverts bring across the message that Starbucks is a coffeehouse. The company is now embarking on the sale of ‘Via ready brew coffee, to complement its sales of coffee beans, all of which are available directly from the store only. The adverts are definitely trying to pull customers into the store to try new coffee flavours and new products (Thomson and Strickland, 1999). Having products available only through Starbucks is congruent with the image the company wants to portray. 11.0  Ã‚  Ã‚  Ã‚   Critique and Recommendations The brief exposition presented shows that Starbucks uses a variety of elements within its adverts, but most importantly, these adverts reinforce the companys position as a (socially conscious) premium quality coffeehouse. These simple adverts that focus on quality and experience seem to serve Starbucks well by telling the story of what makes the company special; highlighting what customers can expect to get from Starbucks that they cannot get elsewhere. The main areas in which others compete with Starbucks is on price, and so the adverts are reiterating that price is not always the most important thing by communicating the companys unique position and value to its to customers. Starbucks marketing strategy continues to be one of its main strengths as it uses traditional advertising less than many others, instead relying to a greater extent on its image advertising (Kembell et al., 2002). This has made the company image on its key areas of success and as consumers have become mor e socially responsible, Starbucks has followed that trend in incorporated that aspect into their image as well. Going into the future, it is important that Starbucks positions its brand as an experience so as to entice new customers. Bibliography Isdiro, I. (2004). Learning from Starbucks: 10 lessons for small businesses, 04 October. Available online at www.powerhomebiz.com/vol144/starbucks.htm [accessed 24 March 2010]. Kembell, B., Hawks, M., Kembell, S., Perry, L., and Olsen, L. (2002). Catching the Starbucks fever: Starbucks marketing strategy. Unpublished paper. Missouri State University. Jobber, D. and Fahy, J. (2006). Foundations of Marketing. Berkshire: McGraw-Hill. Key Note (2009). Coffee Sandwich Shops 2009. Key Note Market Reports. Solomon, M., Bamossy, G., and Askegaard, S. (2002). Consumer Behaviour: A European Perspective. Harlow, Essex: Pearson Education Ltd. Starbucks Coffee Company (2008). Company Fact Sheet 2008. Available online at https://www.starbucks.com/assets/company-factsheet.pdf [accessed 24 March 2010]. Starbucks to promote ‘FairTrade coffee. (2002). PeopleandPlanet.net, 19 September. Available online at https://www.peopleandplanet.net/doc.php?id=1750 [accessed 24 March 201 0]. Strehle, P. and Cruickshank, M. (2004). Starbucks: International Business Concept and Starbucks in Germany. University of Lappeeranta: GRIN Publishing Scholarly Papers. Subhadra, K. (2003). Starbucks international operations. ICFAI Centre for Management Research. Available online at: https://www.icmr.icfai.org/casestudies/catalogue/ Business%20Strategy1/Starbucks%20International%20Operations.htm [accessed 24 March 2010]. Thomson, A. and Strickland, A. (1999). Strategic Management: Concepts and Cases. McGraw-Hill.