Abstract It is essential to take the market segmentation of Starbucks into account when analyzing the company’s business model. Marketers use various segmentation variables to categorize the consumers into specific groups based on particular distinctive attributes. In this way, they are able to design different marketing strategies for each segment. Starbucks Corporation uses geographic, demographic, and psychotropic variables to structure its market. This paper describes Starbucks’ market segmentation and marketing strategy. It provides the variables the writer will use to compete with the retailer in his specialty coffee business. It also details the product differentiation and positioning strategies that will enable the coffee shop to compete effectively in the market. Starbucks’ Segmentation Variables Marketers use market segmentation to divide a target market into groups bearing similar attributes or needs. They use geographic, behavioral, lifestyle/psychotropic, and demographic variables to organize markets into segments (Kotler & Armstrong, 2014). The geographic segment includes consumer groupings defined by administrative units (geographical regions) and physical factors, such as climate. Marketers also use demographic variables such as age, gender, and income level, among others, to organize a given market. Additionally, firms that offer multiple brands use psychotropic variables, such as lifestyle, to organize a market into different segments. In the writer’s opinion, Starbucks Corporation organizes its market based on three variables, namely, demographic, psychotropic, and geographic. The company then uses product differentiation to satisfy the different customer groups. With regard to geographic segmentation, Starbucks has retail outlets distributed in different locations. Each of these outlets reflects the tastes and preferences of the local consumers. Although the outlets are similar in design, they differ in terms of product category (coffee and baked food) and size. Additionally, Starbucks uses geographic variables to segment its international markets. According to Kotler and Armstrong (2014), firms planning to enter new markets categorize countries or regions based on geographic variables such as “income levels, religions, languages, customs, and political stability” (p. 112). In the writer’s view, Starbucks uses the same segmentation criteria to enter and thrive in foreign markets. The company also provides a broad range of teas and baked goods with variable dietary content to cater for different tastes and preferences. Its menu contains nutritional information that clients can read before placing an order. Additionally, the firm has an online community dubbed ‘Coffeehouse’ that enables patrons with similar tastes to interact ( Our Heritage , 2010). In this view, Starbucks divides its market into psychotropic segments based on lifestyle factors and customer traits. With regard to demographic segmentation, Starbucks’ various outlets have facilities that appeal to the all generations and income groups. Each outlet has comfortable seats and lounges as well as free internet (Wi-Fi). Specialty Coffee Business A specialty coffee startup can face stiff competition from big retailers like Starbucks. To compe