How to Gain Competitive Advantage through Efficient Consumer Response Strategies - Essay Example

? Starbucks Cooperation Starbucks Cooperation Starbucks Corporation is a worldwide coffee company found in America located in Washington’s Seattle. The corporation is also a major coffeehouse chain and it is known to be the largest coffee company worldwide. It has numerous coffee stores in most of the developed countries including the United States, Japan, China and Germany among others. The World Cocoa Foundation also recognizes Starbucks as its active member. The cooperation is considered to be the most successful coffee company for decades; this is as a result of using their well schemed development strategies to steer its competition. Starbucks has always been determined in establishing a large network of its stores both in America and all around the world. The cooperation leads in selling coffee as a result of selling its products at a premium rate in order maximize their profits. There are several questions about Starbucks that may need answers. Will the glamor of sensualist Starbucks coffee be retained or will more engaging options shake the success of Starbuck’s main coffee products? Will advertisement help Starbucks maintain its position as a world leader coffee chain producer? The most appropriate point to begin from is evaluating the current coffee market; undertaking an analysis to determine the level over which consumers need the designer coffee is important. Starbucks faces stiff competition from its major competitor such as McDonalds, Dunkin Donuts and Caribou coffee. The management has been engaged to ensure that the company maintains its well-known reputation as major coffee chain cooperation. Recently, Starbucks’ competitor McDonald launched its campaign on Mccafe in which its aim is to sell coffee at a relatively low discount as compared to Starbucks. McDonalds enjoys the advantage of an excellent podium from which it can face its competitors as a result of establishing numerous stores that gives it easy access into the markets. Dunkin Donuts as well is not relaxed; Dunkin is seen to use its doughnuts and other menu items on the stage. The customer has the option of choosing between a coffee donut and a mug of coffee. Externally, Starbucks also deals with daily competitive challenges. For instance, in Singapore, The Coffee Bean and Tea leaf is always on the forefront to contain the giant coffee chain store. For Starbucks, manageable development results to embracing business plans and operations to meet the requirements of Starbucks’ stakeholders currently while sustaining, safeguarding and ensuring the availability of natural and human resources that may be required in the future. Each and every coffee store in Asia eyes Starbucks. The coffee chain has established 1,744 stores in the Asian Pacific with Singapore having a total of 92 stores. Recently, Starbucks announced the establishment of 100 new stores with each in Philippines and Malaysia. Starbucks never waits for its competitors is when to follow the suit. It has been seen to be expanding its markets outside America to increase its profitability. Starbucks recently purchased Teavana Holdings at a cost of $620 million in an effort to expand its markets. Starbucks is faced with some challenges in the event of serving its customers. One major challenge is the price of coffee beans as factor behind the company’s major profit. Starbucks’ profit and coffee price hugely rely on coffee price beans which are a product and stands not to be altered by Starbucks. As a result of hedge money, climatic conditions and other related factors, the cooperation is in a position of not able to approximate the price of its coffee and the cooperation’s profitability. Product pricing is another major setback. Starbucks’ product and services experience makes the company to charge high prices on its coffee. In contrast, McCafe premium coffee is selling at a lower price as compared to Starbucks’ premium coffee and was well assessed. After review, another challenge faced by Starbucks is negative publicity. The public has been criticizing the company over its weak efforts to become a greener company. The public also says that the company is a tax evader and always treats some of its suppliers poorly. Challenges always arise in a business, but they should not compel the management to shut down their operations, instead they should make the management to look for solutions to solve such occurrences. One of Starbucks’ solutions to its wooing problems is to extend its supplier network. Starbucks doesn’t own coffee farms but instead buy them from several esteemed suppliers. The suppliers are majorly found in Africa, South America and Arabia. For Starbucks to maintain its major supplies meant for its activities in Asia, cease from depending on bad or good harvests in South America and Africa and be economic in shipping costs, the coffee chain has to expand its network of suppliers. The company may also initiate farming operations that are geared towards supplying the company with coffee beans. For instance the company may decide to acquire huge tracts of land and grow its own beans in regions where suppliers tend to be unstable. Starbucks should increase its product offering. For instance, the cooperation should opt to increase the number of coffee outlets that serve beer and wine, in addition, introduce new products that may satisfy the needs of their customers. This will enable customers to have wide variety to choose from. Wide range of products will result to wide range of customers hence increase in profitability. Starbucks should also take the advantage of emerging economies. Opportunities are present in China and India in which Starbucks have a relatively low number of outlets as compared to other developed nations. This can be a great opportunity for Starbucks since most of its giant competitors have not exhausted such markets. The company as well should focus on expanding its retail operations. Since it does not only manage coffee franchises and coffeehouses but as well sells some products through retail outlets; the company should develop a large channel of retailers in with an aim of increasing its sales volume. The firm can take advantage of emerging retail trends in other countries like Nigeria, Kenya, Ghana and South Africa among others. This will see the company increase its income as a result of offering its coffee products at retail levels in potentially emerging markets. One of the most appropriate alternatives for Starbucks is to majorly rely on retail services. Commercial market arena has developed to an extent where sales from retails do not have monopoly on the consumer world (Finne & Sivonen p346). To expand on this, consumers at one time extensively depended on retail shops for their goods, but presently, online marketing has evolved, wholesale outlets are becoming rampant, centers of liquidation and in some cases one can decide to go straight to the manufacturer. Since Starbucks sell merchandise products, retail outlets still remains the best place to ensure increased sales in its products. Retail outlets offer a variety of goods and customers are exposed to products they did not know they needed. Through consolidating several merchandised products at one point, a company drastically increases its sales volumes. Starbuck Financials The fiscal year ended in on 2nd October 2011 and 30th September 2012 which included a total of 52 weeks. Equivalent store sales percentages for fiscal year 2011/2012 are calculated omitting the last week. All references to store are included, not excluding data for new store unveilings, are recorded net of linked store seizure, unless otherwise stated. Overview Starbucks reports for fiscal 2012 shows the strength of business global structure. The company continues to execute on its new regional operating structure which was implemented at the start of fiscal year 2012. The company has four operating segments that can be reported from: Europe region, Middle East territory and African Continent (“EMEA”); China/ Asia Pacific (CAP) and relevant channel development. Each territory is managed by operating territory president. Total net revenues rose 14% to $13.4 billion steered by global equivalent sales growth of 8% and a 50% surge in Channel Development income. This progress drove increased sales force and occasioned in relatively higher operative margin and net incomes equated to fiscal 2011. This aided mitigate the effect of increased commodity costs, mainly coffee, which adversely affected operating income approximately by $214 million for the same year, approximately 160 basis points of effect on operating margin. The following table summarizes the company’s 2012 revenue. The figures are in thousands $. Period Ending 2012 Sep 29, 2013 Sep 30, 2012 Oct 2, 2011 Total Revenue 14,892,200   13,299,500   11,700,400   Cost of Revenue 6,382,300   5,813,300   4,915,500   Gross Profit 8,509,900   7,486,200   6,784,900   Operating Expenses Research Development -   -   -   Selling General and Administrative 5,681,200   5,149,200   4,737,000   Non Recurring 2,784,100   -   -   Others 621,400   550,300   523,300   Total Operating Expenses -   -   -   Operating Income or Loss (325,400) 1,997,400   1,728,500   Income from Continuing Operations Total Other Income/Expenses Net 123,600   94,400   146,100   Earnings Before Interest And Taxes (201,800) 2,091,800   1,844,400   Interest Expense 28,100   32,700   33,300   Income Before Tax (229,900) 2,059,100   1,811,100   Income Tax Expense (238,700) 674,400   563,100   Minority Interest (500) (900) (2,300) Net Income From Continuing Ops 259,700   1,594,500   1,419,400   Non-recurring Events Discontinued Operations -   -   -   Extraordinary Items -   -   -   Effect Of Accounting Changes -   -   -   Other Items -   -   -   Net Income 8,300   1,383,800   1,245,700   Preferred Stock And Other Adjustments -   -   -   Net Income Applicable To Common Shares 8,300   1,383,800   1,245,700 Sources: www.investor.starbucks.com Americas business maintained its strong momentum and subsidized 75% of total net incomes in fiscal 2012. The revenue progress for the year was steered by an 8% increase in comparable store trades, consisted of a 6% rise in traffic and a 2% rise in average voucher. The growth, together with a continued attention on operational efficiencies, brought increased sales pull that offset the effect of higher price commodity. The company intends to foster driving sales increase and profitability through upheld store efficiency determinations, new store progress, and increasing the company pipeline of new items offerings to ensure rise of income allover. EMEA total net income for fiscal 2012 increased 9%, primarily steered by increased income from company operated retail stores. An increase in license store revenues of $27 million as well was a contributory factor behind increased net income. This is basically due to higher product purchase by consumers. Reference Finne, S., & Sivonen, H. (2009). The retail value chain: How to gain competitive advantage through Efficient Consumer Response (ECR) strategies. London: Kogan Page. Read More