Basic Strategies of Starbucks - Research Paper Example

Marketing Case Analysis of Starbucks Introduction Starbucks is one of the international coffee and Spice Company that has survived the business market during a period of harsh market dynamics. The Starbucks case study outlines the historical journey that the company has sailed through to gain its current position. The company started from a humble beginning back in 1987 in US under the leadership of Baldwin, Bowker and Siegel, and now is one of the top international companies that supplies coffee products (Gamble & Thompson, 2013). The company has faced numerous challenges both from internal and external business environment, which have threatened the development of the company. The company’s management acted promptly, under the leaderships of the CEO Schultz, to resolve internal weaknesses and to adapt to the changing external market environment to ensure the survival of the organization in this industry. The survival of the company in tough market environment can be associated with the ability of the leader to work together with the company to satisfy all the shareholders of the organization. This essay presents an analysis of the Starbucks Corporation and the basic strategies that the company has deployed to win the coffee market. First, the paper will present the background of the company, covering its environment, the industry and the major players in the coffee industry. Next will be a critical analysis of the company’s strategies and the various emerging market conditions that underpins the organizational performance. This will provide a good ground to provide alternative approaches that Starbucks would have used to support its development strategy. Case study Analysis Starbucks is a company that started back in 1987 in Seattle, Washington by Baldwin, Siegel and Bowker. The company started with nine stores in the domestic market, and the main products include whole beans and coffee products. Schultz became the CEO of Starbucks in 1987, after acquiring the company and receiving a majority vote from the company directors. During this stage company ventured in the domestic market and Schultz helped the company to focus on the customer value model. This left Starbucks as a dominant market stakeholder in the marketing strategy. The company opened more stores in US to take advantage of the growing demand of coffee in the domestic market (Buchanan and Simmons 517). The companys vision was to satisfy the customers through unique coffee products that they had not tasted before. The company focused on diversifying its products when after a long debate they introduced the non-fat milk that the customers had shown positive attraction. Although this was a challenge for the company, they succeeded after aligning the store activities to meet the king rising demand of labour. Later on, they introduced food products that complemented the drinking behavior of their customers. Their intention was to diversify to meet all the needs of the customers in the most efficient manner. Therefore, Starbucks started preparing breakfast sandwiches among other foods ((Buchanan and Simmons 521). At the same time, the country diversified its business geographical coverage by launching new stores in regions with high customer profile. The company’s international strategy started late in 1995 through partnership with SAZABY ((Buchanan and Simmons 526-529). The main aim of the company was to open “living-room-in-a-coffee-house” or mini-outlets in airports, stadiums, airline offices and bookshops. However, the international market was a challenge due to different tastes and preferences and the existent of coffee market in these countries. On the other hand low competition in these new markets saw the company develop rapidly to open over 4500 locations in 43 countries outside the United States. The company experienced a heightened business challenge between 2007 and 2008, a time when the company experienced a flat growth rate. One of the reasons is because some of the strategies in this organization turned out against the initial company plans. For instance, the company taste changed when the company started selling foods, which unintentionally changed the coffee aroma that had attracted the customers into the company. Secondly, the onset of competition became a major problem for the company, as the economy was declining during this period. The main competitors included McDonalds and Dunkin Donuts, who also invested in foods and beverages. The beginning of 2007 was a time of economic recession in the world as fuel prices shot up and Starbuck experienced the retailers’ pain (Buchanan and Simmons 527-530). As the company attempted to reduce its expenses by replacing the furnishing and chair with less expensive ones, the customers found it an uncomfortable to rest for a cup of coffee. As a result, the company’s profits decreased considerably, and the organization was in the verge of collapse. A SWOT Analysis of the organization A SWOT analysis of Starbucks will help in revealing the strengths, weaknesses, opportunities and the threats of the company, which are important factors that influence its performance. One of the company’s strength lies in a strong customer-oriented marketing model. Over its history, the company has focused on providing products designed trough customer feedback. This helps to win customer loyalty and to establish a unique brand within the business environment. The companies endeavor to take care of the customer tastes saw its rapid developed into 4500 stores in 43 countries outside US. A second strength of the company lies in its customer expansion strategy, especially in the international market. The company’s ability to select global expansion strategies and to satisfy the customer tastes has helped the organization to increase the number of its customers. In addition, the company remained creative in designing unique products and in modeling its business profile (Buchanan and Simmons 517-29). For instance, the countries discovery of the window selling helped the company to increase its profit by over 30%. However, the company has a number of weaknesses that over time has suppressed its development. To begin with, the company has failed in developing a unique identity, which is crucial if the company has to remain unique. For instance, when the company diversified its products by introducing non-coffee products, the company lost its identity. For instance, an online comment compared Starbucks to McDonalds after the company lost its coffee aroma due to the smell of sandwich in the hotel. Secondly, the company failed in its domestic expansion by introducing too many stores that ended up being expenses rather than sources of income (Buchanan and Simmons 527). Since the domestic markets are always bound to saturate, it is a weak idea to expand extensively within this organization. Lastly, the company failed in introducing weak price-based models to reduce the prices of their products. While it was wise for the company reduce its coffee prices, it was a wrong idea to reduce the comfort of their coffee shops as this affected the customers tastes adversely. The company has numerous opportunities that can help to regain its market position and increase profits. To begin with, the company should focus on the emerging international market such as China and India where the public purchasing power is increasing more rapidly. This will help the company to increase its customer and profit from developing economies. Secondly, the company has the opportunity to extend its brand by focusing on other forms of drinks that have no effects on the coffee tastes. For instance, the company can stock juices and fruits in the company to meet the needs of visitors who may not opt for coffee drinks. This will help to meet the diversified tastes of the company. Various threats in the external business environment seem to push the organization out of profits. To begin with, competition in the coffee market has continuously increased from companies such McDonalds and Donuts who have focused on both the international and domestic markets. The ability of these companies to provide cheaper products makes them a favorite for many customers. In addition, economic changes in the business environment are pushing the expenses high especially in the fuel market. While the company is in a price-shifting phase, the company is spending more on fuel, which makes it hard to reduce its prices (Buchanan and Simmons 531). This is a severe threat that is seeing it lose a lot of profit, while the prices of products remain constant in a competitive market. Injecting Efficiency in Repositioning Starbucks In the changing market environment, the company has a challenge to use its strength and take advantage of its opportunities to overcome its weaknesses and market threats. To begin with, it is crucial that the company focuses on price reduction strategies to ensure that it provides affordable products to its customers (Zott and Amit 10-12). In a time of economic recession, price is an important factor that customers consider while purchasing from different shops. One strategy to reduce prices would be to employ part-time employees, who work on demand (Gamble and Thompson 124). This will help to reduce the high expenses that the company from paying full benefits for full time employees. The company can provide health benefits to win the loyalty of part-time employees. The organization can also reduce its expenses by closing a number of the domestic stores and using fewer stores to cover the needs of the domestic market. Secondly, the company should focus on diversifying its products to meets the diverse needs of the company. It would be a wise decision for the company to shun from selling food products that have jeopardized the company’s unique identity. To maintain the aroma that has been a major strength for the company in its history, the company should consider introducing fruit based drinks that may add to the fragrance of the smell in the company (Lussier 45). In addition, this will help the company to edge out its competition with McDonald, which is sells both foods and drinks within its shops. The ability of the company to diversify to more customer-focused products will give the organization an identity and help it to remain profitable through positioning in the market. Conclusion In conclusion, Starbucks is a company that has employed strong customer and employee-relations to model its internal business environment. Its ability to invest in quality has attracted many customers and helped it survive periods of market crisis. Its ability to remain flexible in decision-making and strategy modification helped the company to remain profitable. However, the company should consider alternative ways of reducing the expenses to be able to launch price-based strategies in the competitive market. For instance, the company should consider closing a number of domestic stores and employing part-time employees. This will ensure that the company’s investment cost is low and has enough money to launch focus on international markets. In addition, the company should consider diversifying its product by selling fruits and juices, which are unique to its identity, rather than foodstuffs that are affecting the aromatic coffee smell that customers have enjoyed in the shops. The ability of the company to launch a new strategy promptly will determine its ability to remain profitable in the severe market conditions. Works Cited Buchanan, Lauranne and Simmons, Carolyn. Trouble Brews at Starbucks. Richard Ivey School of Business, 2009. Gamble, John E, Arthur A. Thompson, and Margaret A. Peteraf. Essentials of Strategic Management: The Quest for Competitive Advantage. New York, NY: McGraw-Hill/Irwin, 2013. Print. Lussier, Robert N. Management Fundamentals: Concepts, Applications, Skill Development. Mason, Ohio: South-Western, 2012. Print. Zott, Christoph, and Raphael Amit. "The Fit between Product Market Strategy And Business Model: Implications For Firm Performance." Strategic Management Journal 29.1 (2008): 1-26. 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