Case Study : ' Qso 600 Milestone Three ' Essay

As the world’s number one specialty coffee retailer, Starbucks sells coffee drinks, food items, coffee beans, and coffee-related accessories and equipment. In addition, Starbucks sells whole-bean coffees through a specialty sales group and grocery stores. Starbucks has grown beyond coffee into related businesses such as coffee-flavoured ice cream and ready-to-drink coffee beverages. The purpose of this paper is to analyze Starbucks business strategy, customer value proposition, company’s operations and the risks to financial results and reporting in the short term.

Within the coffee industry Starbucks Corporations has grown from a small shop to a leading coffee distributor, proving to have financial strength and determination to continue growth. With the weakening economy the continued success of Starbucks

* Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time.

Starbucks utilizes a differentiation business model by offering an overall unique and high quality experience for the consumer. From the high-quality food and drink options, to the uniquely roasted coffee and supreme customer service, Starbucks aims to provide an experience unobtainable anywhere else. Starbucks also focuses heavily on rapid expansion by seeking out profitable geographical areas and overcrowding those areas with stores in order to exploit profits and slow down competitors. Starbucks’ compliments this with its horizontal acquisition strategy, extending their product line through acquisition of competitors. This provides Starbucks with a differentiation strategy focused on providing a diversified product mix

A company should also be aware of the threats of competing in a particular industry. One such threat is the one of political unrest or currency changes in the counties from which it acquires its beans. If Starbucks can’t get the high quality beans they will not be able to survive. This is another reason for the vertical integration. Another threat is the one that their competitors create. Their competition is not only from other large international coffee houses but also from small local coffee houses in specific areas. Once a retail coffee outlet gets set up and acquires customers it is hard to capture these people. This is why Starbucks must concentrate on defining its brand image. The coffee retail business is also very easy one to enter because of the little capital that is required. However this is changing because of the quality that is becoming expected.

Starbucks being a national brand is bound to face controllable and uncontrollable events. Be that as it may, there are several approaches which the company can use to take a hold of theses events. Until now, Starbucks seems to have been successfully managing these circumstances.

As a well-established coffee retailer and over 35 years of success, Starbucks is at the maturity stage in the product life cycle. It is in this stage that Starbucks needs to shift gears and focus on marketing program modifications by increasing the number of customers and customer visits (Kotler, 2009, pg. 185). While improving service will attract first-time customers and retain current ones, further marketing modifications will need to be made if it wants to continue to grow. More advertising, distribution, sales promotions, and personal selling are a few of the ways to modify the marketing program.

Starbucks roasts high-quality coffee beans to make espresso drinks and sells coffee products through multiple retail channels. The company has over 24,000 stores in 70 countries. Starbucks target market is affluent adults ages 18-40. This market segment makes up 49% of the company’s sales. In addition to targeting a specific market, the company employs a differentiation strategy. Along with the high-quality coffee, the company offers an experience within their stores which justifies higher products. Some aspects of this “coffee experience” include free Wi-Fi, friendly baristas, fast service, and comfortable seating. Also, the company relies on new product development as a strategic choice. This includes adding alcoholic beverages and food to its coffee shop. All of this is done with the idea of making the higher priced product worth it for the consumer.

Starbucks started in 1971 and by creating a cozy third place to customers beyond home and work and offering a slightly higher price yet fine quality coffee, within 25 years, it had opened just over 1000 stores. In order to maintain its leadership position, Starbucks had continued pursuing growth opportunities by selling Starbucks products through mass distribution channels and expanding its retail footprint. Along with the rapid expansion and success, Starbucks has encountered financial downturn in 2008, and the rise of competitors from both high price independent coffee shops, smaller coffee chains that resembled pre-expansion Starbucks model, to low price fast food restaurants chain McDonald’s and Dunkin’s Donuts has deteriorate the

The threats to the Starbucks Corporation are associated with competitive rivalries in the coffee market, rise in price of raw materials, cultural and political factors related international business.

Starbucks Corporation, originally founded in 1971, but purchased by Howard Schultz in 1987, is the market leader in selling gourmet coffee (Starbucks, 2008). Starbuck's main objective is to establish itself as the most respected and recognized coffee brand in the world (Fact Sheet, 2008). Starbucks has accomplished this objective and experienced much success through their competitive strategy of clustering several stores within the same community and through their distinctive competencies of roasting and selling the quality coffee while providing high quality customer service. The question is, can Starbucks continue their market share growth with rising competitors? Should they focus more on their international operations?

Starbucks could choose to continue doing business in a slightly modified manner. The first thing that can be taken into consideration is the way that Starbucks sells its products. They could partner up with companies in other complementary industries, like airlines (coffee on flights),

Although it has fallen behind globally, the strong branding of Starbucks makes it an excellent candidate for expansion in new markets. The success of in home brewing machines such as Keurig is another great opportunity for the company. Starbucks has recently had success offering new products, although they should be cautious of deviating too much from its core product, this is a great source of also can use economies of scale to purchase. Starbucks is known for its high-quality coffee, and that quality comes with a price (David Campbell, 2011).

These partners include not only food scientists from the R&D team but also the environmental impact manager. This ensures that ideas which seems feasible to the R&D team will also incorporate sustainability into all aspects of its operations. By doing so, Starbucks would ensure that new products will sell well and at the same time fit in with the company’s image, vision and strategic objectives.

In terms of competition and the forces, which could limit the success of Starbucks it is important they stay ahead or even with other companies concerning innovative products. Many more micro companies are coming up with new products with a similar quality and a lower price/cost. It is important that Starbucks continues to search for innovative products to continually satisfy their customers. At the same time “rivalry” amongst Starbucks and smaller providers of coffee will continue to increase as the demand for coffee continues. The buyers bargaining power is significant as they can determine the cost, type of product, quantity and ultimately