Exploring Strategy: Starbucks - Case Study Example

Exploring Strategy: Starbucks (Strategy Evaluation) Introduction to the Starbucks Company and its Strategy The Starbucks Company, established in 1971 is one of the leading coffee companies in the globe. Researchers have described Starbucks as among the top companies by different researchers. It focuses on selling premium coffee in its unique coffee houses and giving customers a unique experience. The company has a global reputation because of its unique experience defined by an outstanding atmosphere, exemplary customer service, and a diverse range of products. In the recent past, the company has expanded both locally and globally and now has branches in more that eighty countries across the globe. Moreover, the company still seeks to expand into more regions (Aiello, Giorgia, and Dickinson 303). The Starbucks’ experience has been constantly present in the developed world, explaining why it has earned a remarkable market share in the developed regions. Starbucks has been keen on identifying emerging markets in other regions of the world, especially in the Asian countries that have registered fast growth in the recent past. Starbucks’ main strategy is product differentiation, explaining why the company has been venturing into launching new products that suit the needs of the identified target market. The company has a range of premium products targeting its esteemed customers and conforming to their unique needs. Over time, Starbucks has moved on to achieve focused differentiation. Moreover, the Starbucks Company has adopted an expansion strategy in an effort to ensure its presence in both local and international regions. These strategies have contributed to the increased profitability of the company (Bussing-Burks 79). Evaluation of Starbucks Strategy One of Starbucks’ strategies in focus differentiation is in accordance with Porter’s Generic Strategies. Web. http://www.smiletemplates.com/powerpoint-diagrams-charts/porters-generic-strategies/02475/ According to Porter’s generic strategy, differentiation involves the designing of a diverse range of products. This happens through high levels of innovation and creativity in an effort to provide customers with a diverse range of unique products. Without doubt, the Starbucks Company has achieved this strategy because it has a diverse range of products that its customers can choose. Initially, Starbucks offered coffee, but has lately differentiated offering different flavours of coffee and other beverages as well. Starbucks product differentiation has extended beyond the availability of a premium product mix to include numerous strategic locations and exemplary customer service, attached to the premium products (‘Starbucks Case Study [Electronic Resource] : Strategies For Enhancing Packaged Coffee Sales’ 75). Therefore, Starbucks has established itself as a premium brand. Worth noting is the fact that Starbucks differentiation has been a response to customer’s needs for different coffee flavours and their need to have a choice of beverages. Both product and service innovation are some of the critical driving forces in the coffee industry. This explains why the Starbucks Company has faced the compulsion of product line expansion and differentiation. In addition, the Starbucks Company has ventured into market segmentation in an effort to develop a focus strategy. Notably, the company has identified market niches that its competitors have often overlooked. Starbucks has studied the preferences and the unique needs of customers within the identified niches. This explains why the company uses its rare resources and capabilities to satisfy the needs of the target market. The company has outstanding core competencies in customer service and qualified employees, factors that make it appealing to many customers. This has served to increase the customer loyalty. For many years, Starbucks has enjoyed the long standing loyalty from some of its customers (Miles 395). The feasibility of this strategy depends on whether the company will continue investing in research and development in an effort to identify emerging customer needs in its target market and creating new products to satisfy those needs. Web. http://www.uhu.es/45122/temas/P&SC/Theme1_StarbucksCoffe_CaseStudy.pdf As highlighted above, the coffee industry depends on innovation of products. This is one of the unique driving forces in this industry. Evidently, has taken notice of these driving forces and developed its differentiation strategy in an effort to exhibit its innovation potential. Many companies in the industry have focused on innovation as well and have produced a new range of products in the market. The ranges of products are the substitute products that the Starbucks Company has to consider before launching or developing new products. The company has been under the pressure of ensuring that its products are of superior quality and have more value in the market than those of the competitors. The reason why Starbucks has managed to remain a leader in the industry is the extensive research and development prior to launching new products. Starbucks has maintained a routine of introducing seasonal drinks on an annual basis. The company takes notice of the prevailing economic situations and ensures that its products not only fit the customer needs, but also conform to economic conditions in an effort to ensure high product performance in the market ("Marketing Strategy And Alliances Analysis Of Starbucks Corporation" 89). Starbucks has undertaken unique service innovation through the establishment of the Starbucks experience. This has been possible through extensive employee training in order to ensure that they deliver quality services as well as the continued maintenance of Starbucks coffee houses to complement the premium products. The Starbucks Company allows its customers to listen to music as they enjoy coffee of different flavours served by cheerful employees in a favourable atmosphere allowing customers to relax. Service innovation and differentiation has proved to be Starbucks outstanding core competency. Service innovation and differentiation are rare resources because only a few competitors can achieve it. The company’s strategy is acceptable and effective because it has earned Starbucks global reputation as a premium brand. Without doubt, the company has been making the best strategic choices in an effort to thrive in the highly competitive industry (Aiello, Giorgia, and Dickinson 305). The Starbucks Company has also focused on partnerships and collaborations as well as acquisitions in an effort to ensure extended product innovation. This is an additional driver in the coffee industry. Therefore, Starbucks took the initial step in collaborating with companies such as Pepsi, Noble, Barnes, Kraft, and Nordstrom. Other partnerships include Starbucks’ ties with Whole Foods, Danone, and Green Mountain in an effort to expand its range of products. The company has made numerous acquisitions over the years with some of the latest being the purchase of Teavana and La Boulange in an effort to diversify the products in its menu. Without doubt, the Starbucks Company has responded to some of the strongest driving forces in the industry and formulated effective strategies that have earned the company a competitive advantage. It has given attention to an additional driving force in the industry, which is a lifestyle. In an effort to respond to this driving force, the company has ensured that the Starbucks brand represents the third critical place in the life of an America. This is after the home and work areas whereby many people spend their rime (Aiello, Giorgia, and Dickinson 310). In order to make sure that the Starbucks coffee store qualifies as the unique third place in an individual’s life, it has collaborated with Apple and made other acquisitions in an effort to ensure that Starbucks coffee houses have relaxing music. Notably, Starbucks also partnered with Concord Music Group in an effort to develop recordings that would be available at all Concord Music Group coffee houses. This is part of Starbucks service innovation in an effort to make the Starbucks brand premium. In addition, Starbucks strategy identifies its goal to become a recognized brand across the globe. This explains why the company has focused on an extensive expansion both locally and internationally. The purpose of the rapid expansion has been to ensure that the Starbucks experience is present in all the parts of the globe. The Starbucks Company has registered an increased number of both company owned stores and franchised stores. According to statistics from the first quarter of the 2014 financial years, Starbucks has 10,125 company owned stores. On the other hand, franchised stores are about 10, 394. This means that the Starbucks Company has over twenty thousand stores. Starbucks expansion of stores serves to increase its revenue immensely. In each of the company owned stores, the Starbucks Company enjoys a hundred per cent of the returns. However, in its franchised stores, it gets a certain percentage paid in terms of royalty fees. In order to continue its expansion strategy, Starbucks has the plans of establishing over 1,500 new stores in the Asia pacific region and South America (Bussing-Burks 80). Moreover, the company plans to achieve a triple number of stores in china alone by 2015, which will translate to 1,500 coffee houses. Starbucks also intends to register a double number of its stores in South Korea to about 700 stores. In 2012, Starbucks opened the first store in India, and the company will expand in the next few years. Without doubt, the Starbucks Company has embarked on an extensive and rapid expansion on the international platform. The company is present in more than 80 countries with stores owned either by the company or through franchised stores. The Starbucks strategy of expansion is in response to expansion as one of the critical driving factors in the industry. Many coffee companies have ventured into international markets. The Starbucks Company has achieved a competitive advantage through its extensive expansion. However, the feasibility of this strategy depends on whether Starbucks can identify emerging markets and exploit the opportunities countering the expansion efforts of its competitors (Bussing-Burks 96). Moreover, the Starbucks Company has registered a level of saturation in some regions. Although this is in line with their strategic plan, the company should ensure that its saturation does not lead to excessive cannibalization. Alternative Strategy for Starbucks The strategy for Starbucks described above represents its blue ocean strategy that it developed in order to create an uncontested market space. Starbucks does not sell coffee, but rather sells an experience. People who go to Starbucks store are in search of a relaxing environment where they can take coffee, hold conversations, and relax. The blue ocean strategy has helped the competitors of Starbucks to become irrelevant over the years. However, it is evident that many competitors have recognized the value of the blue ocean strategy and are proving to outdo Starbucks (Gallaugher, John, and Ransbotham 100). Currently, the Starbucks Company is likely to be sailing in the red ocean whereby it has to beat its competitors and exploit any existing demand. However, Starbucks can restructure its strategy by using the blue ocean strategy in the digital era. Online marketing has become one of the key strategies used by companies to increase brand awareness. Moreover, online marketing introduces a new platform that can ensure that a company develops close relationships with customers. Therefore, Starbucks should focus on applying the blue strategy online. The company enjoys a remarkable global reputation a factor that it has an audience in its online platforms. The company has all the potentials of exploiting everything that online platforms can offer. Starbucks should focus on dominating the online space as one of the key moves that can ensure that it has a competitive advantage over its competitors. Since Starbucks has a remarkable number of customers, it can earn a lot of attention online. On a daily basis, the Starbucks registers over 9 million visitors to its physical stores. This means that the company can have a stronger force online. From its Facebook page, the company earns attention from more than 34 million people. Despite this potential, the company has not exploited its online space. It can seek to exploit this online space by personalizing the customer experiences. Currently, the company has great content on its website, but it has not ventured into the level of personalization it exhibits in its physical stores. If Starbucks can give individuals an opportunity to personalize their experience online, then it would move back to the blue ocean (Chua, and Banerjee 240). An online user experience will allow customers to place suggestions of their drinks and make order online. They would then organize for delivery in the nearest Starbucks’ physical store. Moreover, Starbucks could also use the online user experience while making decisions on potential combinations of drinks that it can launch into the market. This can happen if it allows users to vote on the best combination. Moreover, it can also extend the user experience to be available in mobile applications. Without doubt, the Starbucks Company needs to create a higher level of customization and promote the online user experience. It can reduce its physical locations in an effort to dominate its online space. In order to avoid trading in a market space full of competition, Starbucks will need to focus on online content and interactivity as the new value innovation (Chua, and Banerjee 245). This will enhance the customer experience enabling it to remain unique by promoting the reputation of its brand through valuable connections to its loyal customers. Work Cited "Marketing Strategy And Alliances Analysis Of Starbucks Corporation." (n.d.): OAIster. Web. 9 Dec. 2014. Aiello, Giorgia, and Greg Dickinson. "Beyond Authenticity: A Visual-Material Analysis Of Locality In The Global Redesign Of Starbucks Stores." Visual Communication 13.3 (2014): 303. Publisher Provided Full Text Searching File. Web. 9 Dec. 2014. Bussing-Burks, Marie. Starbucks. Santa Barbara, Calif: Greenwood Press, 2009. eBook Collection (EBSCOhost). Web. 9 Dec. 2014. Chua, Alton Y. K., and Snehasish Banerjee. "Customer Knowledge Management Via Social Media: The Case Of Starbucks." Journal of Knowledge Management 17.2 (2013): 237-249. PsycINFO. Web. 9 Dec. 2014. Gallaugher, John, and Sam Ransbotham. "Social Media And Customer Dialog Management At Starbucks." MIS Quarterly Executive 9.4 (2010): 197-212. Business Source Complete. Web. 9 Dec. 2014. Miles, Patti Collett. "Competitive Strategy: The Link Between Service Characteristics And Customer Satisfaction." International Journal of Quality & Service Sciences 5.4 (2013): 395. Publisher Provided Full Text Searching File. Web. 9 Dec. 2014. Starbucks Case Study [Electronic Resource] : Strategies For Enhancing Packaged Coffee Sales. [S.l.] : Datamonitor, 2007., 2007. OhioLINK Library Catalog – LR. Web. 9 Dec. 2014. Read More