Starbucks: An Analysis of the Company's Competitive Advantages

Starbucks has strong leaders on the management team. Managers have to be able to delegate responsibility to his or her employees in order to keep the company running successfully and keeping Starbucks on the top of the coffee store market. The managers have learned how to bring out the best in each employee and get them to work to the best of his or her ability. Doing this has led to Starbucks employees being happy and doing the best job for themselves and the company.

For more than three decades since Starbucks started its operations, the company was considered as a leading coffee chain operator. However, in 2008, the company faced a significant financial downturn that almost cost it its position in the marketplace. Through strategic planning and adopting a differentiation strategy, Starbucks, under the CEO Howard Shultz, recovered from the financial decline to regain a competitive advantage over other big companies like McDonald's and Panera Bread. This paper will discuss the business strategy and management for Starbucks Company and emphasize the importance of business strategy. It will cover the strategic basics of Starbucks, its financial downfall, an analysis of its profitability and a comparison with its key competitors as well as its technological threats and opportunities.

Several key success factors exist for Starbucks, a leader in the coffee industry. They include

First, Starbucks has effectively applied the product differentiation strategy. To achieve it, the company has specialized in different product mixes, aligned its business locations to a specific ambiance that suits the context, and varied the customer experience, thus resulting in a higher customer service satisfaction. Further, Coskun, Basligil, and Baracli (2008) note that Starbucks prides in having their customers enjoy a premium service. Therefore, the company’s signature strategy has worked well thus far, as competitors find it difficult to imitate. Second, the enterprise has coordinated its acquisition and portfolio strategy, thus consolidating the market. As discussed in the background chapter, Starbucks has a portfolio network of eight brands under its stable. Third, Starbucks’ international expansion strategy has worked well, with a presence in 70 countries (Starbucks, 2017). These factors, coupled with its financial capability, offer Starbucks an edge over its

“Opportunities and threats are often external to the firm and cannot always be anticipated” (Nickels, 2010, p. 17). Starbucks’ opportunities include expansion of menus offered for sale, expansion to other countries, and franchising opportunities. Starbucks limited menu is one of its weaknesses; however, it may also be considered as an opportunity. Although Starbucks does impeccably well in serving its specialty beverages, its limited food menu items are clearly an opportunity. It can add more revenues by expanding its menu items to other gourmet food items and drinks. Moreover, it appears that although Starbucks has expanded in multiple numbers of countries, it can continue its expansion in some underserved and growing regions in countries in Southeast Asia. Finally, even though Starbucks licenses its trademark, it can expand and start franchising its stores. Franchising provides for additional revenue and operators worldwide.

1.Analyze the business-level strategies for the corporation you chose to determine the business-level strategy you think is most important to the long-term success of the firm and whether or not you judge this to be a good choice. Justify your opinion.

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

Starbucks has a great deal of potential by continuing to pursue overseas markets. A prime target of opportunity lies in China, where Starbucks currently operates barely 200 stores, and is already profitable at the store level and presents enormous growth opportunities (www.businessweek.com).

these steps Starbucks can manage it supply chain and erode substitute’s products that put caps on

Starbucks has a significant geographical presence across the globe. It has been recognized for its high quality coffee and for the exceptional service experience they provide. It is the first coffee retailer in the world with the highest market share (Business teacher organization, n.d). Nowadays, Starbucks has operations in over 60 countries and a total number of 22,519 stores as of June 28, 2015 (Starbucks website). Also, it is the most recognized brand in the coffeehouse sector and is ranked as one of the most admired companies in America in 2015 (Starbucks website). Starbucks effectively strengthen its brand equity by merchandizing products and licensing its brand logo out. This strong market position and brand image has given the company a significant competitive advantage for growing in both national and international markets (Geereddy, n.d).

Starbucks also constantly introduce new and promising supply strategic strategy along with ethical environmental goals such as C.A.F.E. Practices. Those strategic moves allow them to gain control of their own coffee suppliers which will drives its business to grow tremendously in the international market for the next few years to come. Strong business model is also a key factor which allows Starbucks to take the right steps to ensure their long term goals are successful, as they own a multinational business model which allows them to have a widespread of products that can be customized to suit national requirements. Nevertheless, having such robust business model, Starbucks ought to have continuous improvements and continue building its goals and expectations else their business will be in a downfall situation; therefore, it is important for them to set their objective and strategies clearly and react decisively for any challengers they may face in the dynamic

The last strength would be that Starbucks have a drive thru. A drive thru is very convenient for those who are in a rush or just want to order their food in the car. Moreover, some examples of weaknesses would be the higher price points, lack of items in the food category, and generalized standards for most products. Although Starbucks always says that their products are the highest quality and the company's experience is unforgettable, the relatively higher prices of Starbucks products make them less accessible to the large population of lower-middle class and lower class consumers. Also, while Starbucks might be known for their frappucinos, pumpkin spice lattes, and big chocolate chip cookies, they don’t exactly have the most unique food market. Starbucks lacks a variety in the food category where consumers don't have a wide range of options to choose from. The last weakness is that most Starbucks products are also based on generalized corporate standards that make the products less aligned with cultural demands in some markets. Three examples of Starbucks’ opportunities would be the expansion of product mix and offerings, global expansion, and partnerships with other companies. Lately, Starbucks started to expand its mix by adding Tea

Next, opportunity is expand Starbucks to emerging economics. This is because there are great chance for coffeehouse in India and China (Jurevicius, 2013).In addition to that, Starbucks has huge opportunity to expand their business in Asia, Africa and middle east where it has minimal presence there. In Asia, the economic growth rates are high in which it is easy for them to expand there

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

Starbucks is viewed as one of the world’s most valuable brands and creates a product experience beyond coffee. Taking coffee into a multinational revolution has led to their success. This all started in Seattle’s Pike Place Market back in 1971. The name of the company was derived from the famous American classic novel Moby-Dick. Starbuck was the 30 year old chief mate in the story. In the early 90’s, Starbucks expanded outside of Seattle and then international at an exponential rate. Today there are over 21,000 Starbucks coffeehouses in the world.