Coffee and Starbucks Business Strategy

999 Words4 Pages
INTRODUCTION
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.
BUSINESS STRATEGY
The Starbucks former strategy was centered in offering a high quality product to a narrow consumer segment (coffee lovers), therefore, a
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Starbucks suppliers have high bargaining power due to the fact that the demand for coffee is high in global level and coffee beans can be produced only in certain geographical areas.
However, the threat of new entrants is medium in that the coffee market is changing. The need for ambiance and a place to share is losing edge to the on-the-go alternatives, and should a new entrant come along with a different business model there is room for threat.
THREE MAJOR SOURCES OF RISK
STRATEGIC
Starbucks positions their products based on quality and image. It is critical that Starbucks position their brand for what the brand stands for: an innovative industry leader that produces high quality products. Brand image, as already shown, is a goal that all the future functional strategies will work to attain.
OPERATIONS
The risk of market saturation - One risk that faces Starbuck 's is its ability to maintain profitability with opening such a large number of stores in such close proximity to each other. Starbuck 's may want to consider slowing this expansion in order to maintain profitability.
REPORTING - Commodity risks and their volatile impact on profit and loss - Starbucks have a big exposure to dairy—to milk and didn’t have any means of fixing price with their suppliers. When it comes to coffee, Starbucks’ coffee trading group, which buys coffee worldwide, executes the risk management. Starbucks measure their
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