Starbucks Resources - Essay Example

Tangible resources: Starbucks financial and the physical resources are considered under the tangible resources. When we mean tangible, this translates to assets that can be seen since it has a physical form. This could be equipments, machineries, buildings and other structures. All of these resources helped and supported the Starbucks’ business level strategy. First of all, if we look at the financial resources Starbucks has strong financial resources. Why? Because some of the factors. The net earnings of Starbucks are increasing yearly from 1994 to 1999. In 1997, short Starbucks was able to pay its credit ( short-term) from its current liabilities since it has assets with the ratio of 1.3. In 1999 the net earning was 113 million comparing to 85 millions in 1998, which is around the 33% increase, on other hand the average annual growth of earning per share is about 22% and the average ROI is about 40.33%. These are indicators of a company’s financial strength which also attracts investors.In addition, four investment companies had rated Starbucks as a “BUY” which makes the company’s stocks attractive to investors. Second, Starbucks’ physical resources also have been strong along with the financial resources as manifested by its expansion. In 1996, Starbucks already 1000 stores most of which (32 ) are located in North America plus just two stores in Asia ( Japan). These stores are 100% owned by Starbucks. In 2006, it has established 6216 stores of which 1188 are outside of the US. This helped Starbucks to have a power on suppliers, when they purchase the raw materials. The Starbucks’s strategy is to be everywhere on main streets In addition, Starbucks is planning to open more stores in North America and other countries. These resources make Starbucks a leader in this industry. Intangible resources: In this part I will analyze three things that are very important in intangible resources, “Technology – Reputation – Culture”. First, Starbucks has unique and high technology services that make them have a big market share. Starbucks used own style of interior design of the stores; they used high tech for roasting and unique packing; they provided many additional products; such as, grinders, coffee mugs, and filters. Starbucks developed a good system to come up with unique taste of coffee that different it from its competitors. Moreover, Starbucks provided high tech to packing the coffee, because that’s will helps to keep the same taste of the coffee. The coffee has expiration dates, so the faster they use the coffee the better the taste. Apparently, Starbucks invested in packaging its image which has gained the loyalty of its customers. Second, Starbucks has a reputation and image of being “Third Place” has conquered many consumers. Starbucks considers its stores as third place to stay after home and work place to anyone. Also, they established the image that it is not only a place to drink and eat, but it also a place to spend leisure time. Although, they have these reputations and images, they spend little in advertising. Starbucks approach is “feeling” the ambience of their cozy coffee shop that exudes class and comfort. People want to be seen in Starbucks. Furthermore, Starbucks Company developed its store not just for coffee , it is the meeting place . The package comes with good employees, merchandising, and innovation. Human resources: Starbucks is selective when it comes to its employees. For example, Starbucks chooses people who are in college or university. They hired from this group because they were well-educated well, fast learners and work for fewer wages. Furthermore, Starbucks provides its employees with proper training to improve their skills to be able to communicate with any customers. Since coffee is their main product, the company provides some information about coffee to its employees to be able to answer customer’s questions. Starbucks motivates its employees by giving them higher wages than any company n the industry. Likewise, Starbucks provides the employees with health insurance, life insurance, free pound of coffee every week, and option of receiving Bean Stock. Starbucks human resource’s polices reflected their commitment to their employees. As a result, Starbucks low turnover rate, 60%, is better than their competitors. Capabilities: Ownership: Starbucks owns all of its stores in North America. They are located in high traffic areas which makes it very competitive thereby capturing the biggest market share on the industry. First, Starbucks owns 100 % of the stock in North America, England, Australia and Thailand; second, 50% in Japan and North Korea; third, 5% in Hongkong. Supplier chain: Suppliers are farmers, collectors, exporters, importers, millers and coffee sellers; so the supplier chain is long. They have an efficient supplier chain in Latin America, East Africa and Pacific Rim. Starbucks had a system that used computers to guarantee the quality of coffee beans, although it is hard for other coffee sellers to control the quality of coffee beans. Starbucks has the best transportation rates in the industry and has strong inventory. Training system: Starbucks requires their employees to attend demanding training courses. Although training is costly to Starbucks it ensures quality service to customers by the employees. Fourth real estate, Starbucks has flexibility to have stores on any location even if the place or corner is a trapezoid or a triangle. Starbucks has around 20 real estate managers in the United States. By the way, there are very strong relationships between Starbucks and these managers which assists Starbucks in getting prime best locations for each store in the United States. As we know, Starbucks resources and capabilities help to have sustainable competitive advantage among its competitors. The good quality service and unique taste of coffee that Starbucks provides also the good relationship that Starbucks has with supplies, customers, and employees helps Starbucks to hold and continues its competitive advantage. In addition, the growth strategy of Starbucks and best locations barrier competitors to compete on some location that is one of the reasons for Starbucks to keep its competitive advantage. Use Figure 7.2 to determine if competitors can imitate Starbucks’ resources and capabilities. Identification, Starbucks’ financial is strong, but it is open for public. However, it is easy for competitors to see and analyze it which it easy for the competitors to imitate. Incentives for imitation, Starbucks has build it brand and image on unique service and product from long time, which is not easy for competitors to imitate. In addition, Starbucks has an advantage from the preemption which is the good locations Starbucks has and the good relationship with real-estate managers and that is the reason to be so hard to for competitors. Diagnosis, it is easy for any competitors to diagnose Starbucks’ success because there is no secret on that’s. On other hand, the big challenge for any competitors is how to know the capabilities of Starbucks that made the success. When Starbucks had entered Pacific Rim ,it’s hard to say if Starbucks had succeeded or not due to two reasons. First, Starbucks does not own 100% stock in these areas. However, Starbucks had built and owned more than 5,000 stores in North America, and these stores had high profit. Second, they do not cover all demand for coffee in these areas. Over 40% of Asia’s population prefers tea rather than coffee. Starbucks faces hard challenges to change Asia’s culture on beverages. Resource acquisition, this is the most difficult factor to any competitors to imitate Starbucks. Because is the Starbucks has strong supply chain. What is the Competitors need? They need huge of capital to imitate Starbucks. Why has the company’s stock price been so weak of late? The stock price of Starbucks is so weak lately. There are many factors such as some of the Starbucks stores close to each other and you can see that in Washington, Seattle. For that reason Starbucks closed around 600 stores. Also we can say the increase in the coffee bean price because of some political issue between countries which is another factors. Also, many of the fast-food restaurants adopted serving coffee for customers such as McDonalds. Lastly, the recession affected the spending habits of consumers. Read More