Starbucks and Strategic Analysis - Case Study Example

Business-Level and Corporate-Level Strategies Overview Starbucks Corporation is one of the biggest American based coffeehouse companies which possess significant number of retail stores in different countries throughout the globe. The company was established in the year 1971 and serves its vast customer base with high quality coffee beans, snacks, hot as well as cold drinks and salads among others. The company instigated its business operations as the only producer of extraordinary quality of coffee. The mission of the company is to foster and encourage human spirit to use its different products maintaining a healthy alliance with the community. Apart from the mission, the prime objective of the company is to obtain a leadership position being one of the most recognized and well-respected business corporation in the world. In order to accomplish this objective, the company plans to expand its retail stores in different regions throughout the globe introducing new quality products incessantly (Lee, n.d.). The essay intends to analyze various business-level and corporate-level strategies of Starbucks. Moreover, the determination of appropriate business-level and corporate-level strategies which are most important for the attainment of long-term success of the company will also be discussed henceforth. Various aspects, such as the analysis of the competitive environment and comparison of the strategies of both Starbucks and its most prominent competitors will also be portrayed in the essay. A Brief Analysis of the Business Level Strategies of Starbucks The major objective of forming and implementing business-level strategies for Starbucks is to prevent its current business position and thereby attain a significant competitive position over its chief business market contenders. In relation to business-level strategies, it has been viewed that Starbucks injected abundance of resources for raising the infrastructure of the organization in order to provide long-term stability and sustainability. The various business-level strategies of the company have been described hereunder. Differentiation Strategy Starbucks follow the business-level strategy of differentiation through which it focuses upon enhancing the quality of the products substantially, raising customer services and performing other important features so that it can distinguish its products, obtaining an edge over its major competitors. Contextually, it can be viewed that by employing the business-level strategy of differentiation, the company has been able to expand its functions in different areas acquiring a distinct leadership positioning in the international restaurant industry (Larson, 2008). Diversification Strategy Apart from differentiation strategy, Starbucks also follows the policy of diversification as business-level strategy due to the saturation of the coffee market particularly in the US and the lessening margin in gross profits. It was fundamentally owing to these reasons that Starbucks opted to follow a diversification strategy rather than a concentrated business strategy (Streeter, Henn, Neal and Menses, 2012). Concentration Strategy In reference to the strategic operations of Starbucks, it can be apparently observed that simultaneous with its incessant penetration activities, the organization also focuses on practicing concentration strategies in the business level. It is in this context that the organization renders due consideration towards preserving its core competencies when expanding in different regional contexts. This in turn assists the organization to develop distinct brand recognition amid the customers obtaining a competitive edge over other major market players (Scribd, 2012). After acquiring a brief idea about the different business-level strategies of Starbucks, it can be comprehended that diversification strategy can act as the most important business-level strategy for the company bringing long-term success. It is fundamentally owing to the reason that the diversification strategy would support the company to form strategic alliances with various companies and will also provide a synergy effect to dominate in the business market effectively. With due concern to the fact, it can be stated that the diversification strategy would be the best choice for Starbucks to improve its profitability as well as productivity in the long-run. A Brief Analysis of the Corporate Level Strategies of Starbucks Corporate level strategies are commonly implemented with the sole intention to foster growth and sustainability of the company within the industrial context. With a similar intention, Starbucks also emphasizes on practicing various corporate level strategies as described hereunder. Maintenance of working environment Starbucks preserve highly competitive working environment for its employees in its different retail outlets with due significance to its recruitment practices and operational attributes to render rewards and recognition. From an in-depth perspective, it can be stated that the company attempts to maintain it effective working environment in order to gain greater degree of internal strength and thus, this strategy can be regarded as a corporate-level strategy of the organization. This particular strategy also assists in obtaining greater satisfaction amid its employees and thus augmenting its efficiency towards delivering better quality products to its valuable customers and increasing its profitability by a greater extent (Berger, Buchman, Chase & Hsu, n.d.). Maximize market penetration Another corporate strategy adopted by Starbucks is to maximize its market penetration activities to obtain a greater market share in the global industry context. Through market surveys it can be possible for the management to accomplish its objective to acquire the leading positing in the international restaurant industry. To be precise, it is through market surveys that the company shall obtain enough information to guide its strategic growth observing its competitors in the market (Starbucks Corporation, 2011). From the above observation it can be comprehended that the most important corporate strategy adopted to maintain its sustainability by fostering a collaborative and simultaneously competitive working environment, inculcating rewards system and healthy recruitment procedure. It is in this context that the strategy can be identified to facilitate internal organizational strengths thereby preserving organizational productivity in the long-run. At a larger context, it is also quite likely to facilitate long-run profitability. Competitive Environment Analysis In today’s international business scenario, no industry is exclusive of fierce competition. The external environment of Starbucks can also be observed to witness high degree of competition fundamentally owing to the inclusion of a greater number of market players in the international context along with technological demands and continuously altering customer demands. Even though the inclusion of new entrants tend to be the most common threat witnessed by already established brands, Starbucks faces a distinct obstacle because of the expansion of larger and more versatile brands such as McDonald’s. In its recent market strategies, McDonald’s was observed to expand its business functions in the coffee brewing market through its sub-brand McCafe. When comparing the features of McCafe and Starbucks, a significant degree of similarity can be observed in terms of product variety, quality concerns as well as price based on regional demands. In the similar context, it can also be stated that McCafe have to witness lesser challenges than that witnessed by Starbucks when attempting to capture a larger market share through effective business level and corporate level strategies. For instance, being a sub-brand, McCafe enjoys a certain degree of financial liberty as well as the virtues of its mother brand in terms of high brand recognition, brand awareness and huge market share. Additionally, another competitive advantage enjoyed by McCafe over Starbucks is that it owns the versatility to serve its customers with various other complementary products such as snacks, beverages and even meal facilities. Conversely, Starbucks concentrate on serving its customers with coffee beverages along with a few selected snack options (Rice, 2009). With an in-depth perspective, converse to the business strategy of Starbucks (i.e. concentrated strategy), McCafe emphasizes on versatility and continuous innovation which plays a vital role to attract new customers as well as retain the valuable ones surprising them with fresh offerings. On the other hand, Starbucks focuses on preserving its authenticity in delivering high quality coffee beverages in varying flavors bringing diversification to its product line strategies. Besides, in relation to the corporate level strategies practiced by Starbucks and McCafe, it can be stated that both the brands focus on building a healthy working environment. Thus, from an overall perspective towards the current competitive position of Starbucks in the world market, it can be stated that McCafe has the greater chance to sustain in the long-run. This is fundamentally owing to the competitive edges enjoyed by McCafe over Starbucks in terms of lesser financial liabilities, greater brand awareness and larger market share of its mother brand McDonald’s. Differing viewpoints towards the competitive position of Starbucks in slow-cycle and fast-cycle markets Competitive dynamics possessed by particular companies are often identified in relation to slow-cycle and fast-cycle markets. The analysis of Starbucks’ business level and corporate level strategies with reference to slow-cycle markets reveal that the company renders significant concern towards its sustainability issues as can be observed with reference to its employment practices. This particular characteristic can also be observed in the business practices of McCafe. However, one particular difference can be witnessed in this context between the business level strategies implemented by the two brands. To be illustrated, Starbucks focuses on a conservative strategic practice while McCafe can be observed to implement aggressive competitive strategies to strengthen its industry positioning. Hence, it can be stated that in the slow-cycle market, Starbucks would have a greater competitive advantage over McCafe. However, in relation to fast-cycle market, McCafe can be identified to gain a competitive advantage over Starbucks owing to its ability of implementing variations within its product line in accordance with the alterations in the customer demands. Starbucks in this context can be observed to lack competency being highly focused on its concentrated business level strategies. Hence, the overall discussion exhibits that the competitive position of Starbucks will differ according to the market trend. References Lee, K. (n.d.). Case Study: Starbucks Coffee. Retrieved from http://www.itsmekathleen.com/pdf/starbucks.pdf Larson, R. C. (2008). Starbucks a Strategic Analysis. Retrieved from http://coe.brown.edu/documents/StarbucksaStrategicAnalysis_R.Larson_honors_2008.pdf Rice, D. (2009). Starbucks and the Battle for Third Place. Gatton Student Research Publication, 1(1), pp. 31-41. Scribd, (2012). Case Study: Starbucks – Planning. Retrieved from http://www.scribd.com/doc/29588611/Starbucks-Planning-Case-Study Starbucks Corporation, (2011). Fiscal 2011 Annual Report. Retrieved from http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTI0MzYyfENoaWxkSUQ9LTF8VHlwZT0z&t=1 Streeter, B., Henn, C., Neal, J. & Menses, C. (2012). Starbucks. Retrieved from http://www.scribd.com/doc/4939593/Starbucks Slideshare, (2008). Starbucks’ Strategy. Retrieved from http://www.slideshare.net/tommy2cruise/starbucks-strategy Read More