How Has Starbucks Company Managed to Gain Competitive Advantage in the Global Market - Case Study Example

Starbucks coffee Student’s Name: Instructor’s Name: Course Code: Date of Submission: Abstract Starbucks is one of the coffee houses performing well in the global market. The report discussed that Starbucks Company has applied the differentiation strategy to gain the competitive advantage in the market. Through differentiation strategy, the diversified needs of the consumers are met effectively, hence they are satisfied with the organization. Moreover, the multicultural leadership and hierarchical structure of Starbucks have also been used by Schultz to support the implementation of the differentiation strategy. In addition, the report discussed that the international expansion strategies that have been used by Schultz include joint ventures, licensing and partnerships. The report argued that market segmentation and cost focus strategies will improve the competitive advantage of Starbucks. Introduction Starbucks coffee is one of the leading coffee houses globally. The strategies which have been applied by Starbucks have enabled it to achieve the largest market share (David et al 2012). The company was founded in the year 1987 and has grown tremendously and operates in more than in 60 markets globally. In this regard, this report will discuss the strategies which have been applied by the management of Starbucks to achieve the competitive advantage. Question 1: Competitive strategy The overall strategy which has been applied by Starbucks is based on the differentiation of the products which are offered. This means that the products and services which are provided by the company are unique with the aim of meeting the needs of the target customers. According to the differentiation strategy, there are various strategies which have been implemented by the management to meet the needs of the customers (David et al 2012). The first strategy is the joint ventures. This is the strategy that is applied by the management to consolidate resources with the company of the same objectives to achieve better results by offering unique products. For instance in the US, Starbucks entered into a joint venture with the Pepsi Company to make bottled Frappuccino. As a result, the company has managed to share the resources and reduce the risks like the risk of introducing new products into the market. The other strategy which is applied by Starbucks to implement the differentiation strategy successfully is the multi-domestic strategy. In order to meet the needs of the local customers, licensing is done to local companies which have the same interests and license like the company to sale and distribute the coffee products to the customers (David et al 2012). The licensing of the companies helps to ensure that the needs of the domestic customers are incorporated into the coffee products. This is because local licensing aims at understanding the needs of the local customers and this can support the implementation of the differentiation strategy. There is also company owned operations strategy which helps to ensure that the needs of the local customers are met. This is because the company sees the global customers as the main contributors to the success of the company. The company owned operations include multi-domestic strategies that help to offer coffee products to meet the needs and expectations of the local customers (Hill & Gareth 2012). This is because in the global market there are different needs of the customers in terms of the cultures and societal beliefs. In this effect, the local needs of the customers and can be differentiated from those of the competitors in terms of quality and pricing. Question 2: How leadership, structure, information and control systems and human resources support implementing the strategy The cross cultural leadership strategy has been of great help in achieving the differentiation strategy. This is because the company operates in more than 60 countries and this means that the cultural diversity of the customers should be taken into consideration when embracing effective leadership. As a result, the cross cultural leadership strategy has been applied to support the implementation of differentiation strategy (Hill & Gareth 2012). According to differentiation strategy, the diversified needs of the customers have to be taken into consideration so that the local needs can be effective during leadership. Failing to consider the local leadership needs, the likelihood is that the coffee products will not be sold effectively in the market. In this effect, the coffee products have been differentiated in different global markets to meet the needs of the customers, hence leadership has supported the implementation of the differentiation strategy. In addition, Schultz has applied the hierarchical structure to manage the organization. The regional managers, record the sales from each section and send to the head office so that they can track the sales of each region. This means that the sales of the company have been effective in using the hierarchical structure (Hill & Gareth 2012). The president of the company is Schultz and each region has the regional managers. In this way, the regional managers help to collect the diversified needs of the customers and then incorporated into the corporate strategy of the company. In this way, the differentiation strategy has been supported by the top management hence implementing the differentiation strategy. Furthermore, the information and control systems which have been put in place by Schultz have also supported the achievement of the differentiation strategy. The overall manager hired one of the top technology specialists from MacDonald so that he can design a system to track all the sales from all the regions. The information is sent from all centers so that they can help to determine the sales from each region and where appropriate make recommendations (Mckeown 2012). The poor performing regions are reviewed and appropriate differentiation strategies taken to improve the performance of the sales in the identified regions. According to human resources, Schultz has managed to implement the differentiation strategy appropriately. The employee skills help to develop differentiation strategies effectively (Hill & Gareth 2012). For instance, the managers of Starbucks are competent and qualified and they have worked in organizations like Burger King. Moreover, the human resource manager hires employees from Universities and the local community so that they can help to identify the needs of the local customers. The hired people are also provided with opportunity to undergo 24 hour training regarding coffee making. In this effect, the workforce of Starbucks is competent in implementing the differentiation strategy. Question three: Which strategies has Schultz used in expanding Starbucks Internationally? There are mainly three strategies which have been used by Schultz to enter into the international market. The first strategy is the joint ventures. The company entered into joint ventures with other companies so that they can introduce the new products into the international market. For instance in the US, the Starbucks Company entered into joint ventures with the Pepsi Cola Company to make a bottled drink called Frappuccino (Mckeown 2012). Through joint ventures, the company managed to enter into new markets by using the trademark of the partner and in the process the customers can be aware of the coffee products. Furthermore, through joint ventures, it is possible to distribute the coffee products effectively to the customers using the channels which are used by the local company. In addition, licensing has been used by Schultz to promote Starbucks to international market. Through licensing, local companies were licensed to sell the coffee products of Starbucks and they can make the coffee products using the technology and systems which are used by Starbucks. In this way, the multi-domestic strategy is effective in ensuring that the needs of the local customers have been achieved effectively. Through licensing, there is effective marketing of the coffee products as well as distribution since the local company is at liberty to use the systems and distribution channels of the parent company. At the end, the parent market will take the full responsibility of making and distributing the coffee products fully to the market (Mulcaster 2009). The licensing strategy is effective because Schultz will be able to understand the needs of the customers hence it is possible to implement the differentiation strategy besides entering the international market. Moreover, the company owned operations have also been used by Schultz to ensure that Starbucks enters the global market successfully. For instance, the company has been successful in identifying the markets and selecting the partners to work. Through effective partnership, the resources and the market are shared and this helps to minimize the risks associated with entering into the global markets (Mulcaster 2009). However, the partners are selected with care so that they cannot contradict the values and systems applied by Starbucks. Through partnerships, the partners can share the market and be able to enter into new markets after doing the research about the market. In this effect, Starbucks has managed to enter into the international market appropriately. Recommendation In order to improve the competitive advantage of Starbucks, the cost focus strategy can also be implemented to manage the cost of the coffee products. Cost auditing will help to eliminate unnecessary costs, thus keeping the cost of production low (Mulcaster 2009). Market segmentation will also help to develop and implement appropriate strategies to meet the needs of each segment (Mckeown 2012). There should be high income and low income segments and prices the coffee products effectively. Conclusion Starbucks Company has managed to gain competitive advantage in the global market by developing and implementing effective strategies. The overall strategy which is applied by Starbucks is the differentiation strategy. Through differentiation strategy, the coffee products of the company met the diversified needs of the customers. In addition, leadership and structure have been used by Schultz to implement the differentiation strategy. The human resources have also been used to promote the achievement of the differentiation strategy. The workforce is skilled and possess required skills to support the implementation of the differentiation strategy. The international expansion strategies used by Schultz include joint ventures, licenses and partnerships. References David, B., David, D., Scott, S & Mark, S. (2012). Economics of Strategy. London: John Wiley & Sons. Hill, C & Gareth R. J. (2012). Strategic Management Theory: An Integrated Approach. London: Cengage Learning. Mckeown, M. (2012). The Strategy Book. New York: FT Prentice Hall. Mulcaster, W. R. (2009). "Three Strategic Frameworks." Business Strategy Series, 10(1), 68–75. Read More