Starbucks Strategic Management - Assignment Example

Starbucks Strategic Management Summary of key issue facing Starbucks In the fiscal year that ended in 1996, Starbuckswas able to witness a leadership position with more than 1,000 retail locations in about 32 markets throughout North America and two other new stores in Japan and Tokyo. Also, the company has more than 20,000 employees, and it is creating opportunities each day for customers from across the globe. The company selects the finest Arabica coffee, and also hires the most talented people to ensure that it continues to offer highest quality products and services to its clients. The company makes sure that it creates a memorable moment for the coffee that it provides to its clients. The global business environment is offering a broad range of business opportunities and new clients, and thus allowing Starbucks to create different brands to cater for its market needs. The company is continuing to work towards realizing its long-term goals so as to emerge as the most reputable coffee company across the globe. However, despite the growth that the company is realizing, questions arise as to whether Starbucks is growing in the best way or whether it is exceeding its quest for growth (Richard Ivey School of Business, 2009). This paper will address the various issues that face Starbucks in its quest to emerge as the most preferred company in the world. 2. Issues facing Starbucks Every company that undertakes its operations in the global market place encounters a number of issues that hinder their progress, even in the case of the most profitable companies such as Starbucks. Though the company has managed to witness outstanding reputation, it is still facing a number of issues like any other company in the global market place. For instance, with the advent of financial crisis, most companies suffer from the state of the economy, and Starbucks is no exception. There has been a number of store closures as a result of poor economic performance in major economies around the world. The number of stores that Starbucks depended on various factors such as finalization of third party agreements, income tax, expected cost savings as well as other benefits that are affiliated with the closure of stores. For instance, with the growing competition, from various companies in different parts of the globe, Starbucks has been unable to cope with the deteriorating performance of its stores, and hence leading to their closure (Richard Ivey School of Business, 2009). Competition is a common state of affairs in every business enterprise. There are a large number of coffee stores in various parts of the world. As a result, it is appropriate for a company to be able to stand out in order for it to generate a substantial customer base. Since Starbucks has a huge number of competitors such as McDonalds and Nestle, it is appropriate for it to understand them, and know what they are doing currently so as to counter their actions, and adopt unique processes that can allow it to succeed in the market. Even though Starbucks continues to witness a number issues on a daily service, it has been known to handle them in a manner that is detailed. For instance, the company has adopted strategies that have allowed it to cope with the state of the financial market. In the prevailing operations that Starbucks undertakes, there are particular issues that limit its growth. There are also a number of issues in the company that are associated with the growth strategy of Starbucks. Today, stores no longer have the potential to grow like in the past. Also, most stores are trying to create a feeling of a neighborhood store. In this case, Starbucks has engaged in a broad range of initiatives aimed at facilitating innovation, in its operations, laying emphasis on coffee and revitalizing the quality of its beverages. However, most of these issues have not addressed the fundamental problem that Starbucks is facing (Richard Ivey School of Business, 2009). Starbucks is regarded as being a mass brand that is trying to command a premium price for offering an experience that is no longer regarded as being special. Starbucks should either bring down its prices, which would be driven by a considerable cut in costs structure, or to bring down distribution so as to restore the exclusivity that is associated with the brand. Though the opening of new stores and new product offerings have allowed the company to realize significant growth, this move has undermined the brand of Starbucks in a number of ways. The people who adopted Starbucks early valued an atmosphere that was club-like, since one was able to relax over a quality cup of coffee. These people often found themselves being among the minority. In order to grow, Starbucks appeared to catch the attention of its clients whereby speed in service delivery was facilitated by baristas. The company introduced other store formats such as Express, so as to cater for the second segment of its customers. However, today, most of its customers have switched on to other exclusive brands (Richard Ivey School of Business, 2009). Starbucks introduced a variety of new products to allow it broaden its appeal to clients. In this case, most coffee purists undercut the integrity of the brand that was associated with Starbucks. These purists also challenge those baristas who are forced to fight with the ever increasing complexity of menus that are meant for drinks. There are more than half of the customers who are known to customize their drinks. This leads to the employment of those baristas who have coffee passion as well as social skills. Today, however, most of the baristas do not have time to interact with clients at the company. The experience of the brand has gone down since the times for waiting have gone up. Additionally, the Starbucks price premium strategy seems to be less justifiable with regard to grabbing a substantial number of clients, since most of its competitors have improved the offering of their coffee, and lowered their prices significantly (Richard Ivey School of Business, 2009). With the startup of new stores and the launch of new products, Starbucks is only capable of creating a superficial growth. Such kinds of strategies are popular for making the management to take off their eyes from improving the sales that the stores make every year. This serves as a form of heavy lifting towards the retailing business, whereby the manager of a particular store is supposed to earn the loyalty of the brand as well as increase the purchase frequency of the brand in his neighborhood. The efforts that the manager of the store portrays become undercut whenever additional stores are opened. A point of saturation arises eventually, and thus leading to cannibalization of prevailing sales that the existing stores make. This not only ruins the health of the brand, but also the morale of the manager. 3. Alternative Assessment Lowering of prices Growing competition is one of the major issues that are facing Starbucks in its operations today. This is because a number of stores have been opened whereby they are offering brands that are similar to those of Starbucks. In order to cope with competition, in this case, Starbucks should make use of its dominant strategy and lower the price of its products beyond the capacity of its competitors. With lowered prices, more customers would tend to visit its locations, and hence boost its competitiveness. However, the drawback with this initiative is that the company will realize less profits as a result of reduced prices. Moreover, the other competitors would also lower the prices of their products leading to lowered profitability of the entire industry. Closure of non-productive stores Starbucks has a large number of stores in various parts of the world. Some of these stores are highly profitable while others are not. In this case, it is appropriate for Starbucks to close some of those stores that serve as a burden to the company. This way, the management of the company would be able to concentrate on the profitable stores and boost their competitiveness and profitability. However, the closure of the less profitable stores would have negative impacts to those people who are situated in areas that have no other quality coffee providers. Limit number of brands in the market Starbucks has a large number of product brands in the market. With these number of brands, the company has been able to address the needs of its diverse customer base effectively. This means that the company is able to witness a sufficient client base since it is able to address their needs adequately. However, most of the setbacks of this strategy is baristas end up being confused with the large beverage menu that they are forced to cope with on a daily basis. As a result, they end up being inefficient in the tasks that they are endowed with. 4. Recommendation The appropriate strategies that Starbucks should adopt is to embark on the closure of the non-productive stores as well as limit the number of stores that it has in the market. By closing the non-productive stores, the company can be able to focus on those that are productive, and hence streamline them to rhyme with the goals and objectives of the Starbucks. Also, by limiting the number of brands that the company has availed in the market, it can be able to limit the tasks that the baristas undertake in the enterprise, and hence allow them to be efficient and quick while delivering services to clients. 5. Implementation plan In order for Starbucks to boost its competitiveness in the market, it should implement strategies that can allow it to improve the performance of its prevailing stores as well as enhance the productivity of its employees. Later, recommendations should be made regarding how the company should be subjected to reviews by the management, employees, executives and other concerned parties. This would help to review whether the proposed strategies are appropriate for the business do adopt. Once they are approved, they should be implemented so as to allow the company to realize change in the market. Reference RichardIveySchoolofBusiness. (2009). Starbucks. Ontario: The University of Western Ontario. Read More