The researcher of this study aims to look into Starbucks that is currently in a very tough situation where prices in the industry are going down and competition is increasing. Also customers are not feeling the same for the company as they used to feel. …
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The paper tells that in today’s tough business environment it is extremely difficult for firms to expand their operations and remain profitable. Strategic management has become important for firms in order gain competitive advantage over other firms. Starbucks is a known name not only in United States of America, but all over the world. The company made the coffee culture famous in the US and reshaped the perception of people regarding coffee houses. The rapid growth of the company made it an extremely famous brand throughout the world. The strategic management of the company was excellent in its starting years beyond doubt because they developed a market which was not there. The company led the way in Coffee houses in US which is something commendable. Starbucks is currently at a stage where market is getting saturated as many new firms have entered the market. The company now has to compete with firms like McDonalds that has great infrastructure and a significant hold of the US market. Other small firms are also entering the industry providing consumers with more option. Current position of Starbucks is like a lion that was once the ruler of the jungle but who is now getting tired and old. The brand of Starbucks is still considered valuable by experts, according to the case study, but still the company does not hold the same customer base it did in previous years. This is mainly due to the saturation of market and loss of business to rival firms.
Price competition is also hurting the company now because the purchasing power of consumers has reduced. Starbucks used to sell its coffee at premier prices and customers also were not price conscious, but all this has changed. With a slowing economy consumers have become price conscious and they are switching to cheaper alternatives. This situation is something new for the company as Starbucks was always able to charge premium prices from customers. Environment is getting tough for the company due to pricing competition. The company has now decided to close stores and it is again not a good sign. Closing stores will create a negative perception of the brand and the news will hurt the value of the name of Starbucks. Also the company was unfamiliar with downsizing as it continued to grow for a substantial period. If we look strategically the policy of ‘growing and growing’ created problems for the company. The standards were not met and now customers are not feeling the same in coffee houses of Starbucks. This is the current position of the company vis-a-vis the environment in which it is operating. The customers are not satisfied and the name of the brand is in jeopardy. Company has compromised its ambiance and taste, which were its differentiating factors, while following the path of rapid expansion and growth. Resources wise strategic position is also weak. The main resource of the company were its ‘partners’ but even they are feeling the pressure now. The environment of Starbucks gave exclusivity to the consumers and employees knew the customers personally. This created a special environment for customers. But now employees of the company are not able to personalize with the customers because Starbucks has ceased to be a place to sit and chat. Starbucks also started to use standardized machines instead of brewing which again was a huge compromise. This was done to enhance efficiency but it ended up reducing sales because the taste was not the same. The experience
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