Starbucks - Strengths and Weaknesses of the Company in the American and Australian Markets - Case Study Example

Starbucks Name Institution Introduction It is the dream of every company to expand and conquer as many markets throughout the world (Grant, 2003). However, Elbanna (2009), states that very few companies manage this fete. For a company to be able to become embraced in the international market, it must have succeeded in creating itself as a recognizable brand in home nation and have the necessary business acumen and capital strength to create a niche in these markets (Fairholm, 2009). Most of the companies that have gone on to succeed in the global market were first successful on their own local soil. However, it should be noted here that there are very many and very diverse challenges that face these companies as they try to expand into international markets and very many of them succumb to these challenges (Dutton & Duncan, 1987; Bryson et al 2009). There are others though who go on to become global giants and capture the international market quite well. Starbucks limited is one such company. The company has managed through a relatively short time period to expand and grow into market and thousands of stores making it become a well recognized brand across the globe. And all this has been done in the midst of a lot of competition and pressure from the local and well established companies. This paper seeks to investigate various parameters that make Starbucks one of the most outstanding brands in the world. The strengths as well as weaknesses of the company especially in the American and Australian markets will be analysed here. The strengths of Starbucks will also be matched with the various opportunities that are available in the Australian market. Lastly the strategies of the company in Australian as well as New Zealand markets will be discussed and an analysis of how the company copes with its major competitors. Starbucks company- brief profile Before the paper embarks upon the discussion of the tenets described above, it would perhaps be important to provide a brief profiling of the Starbucks company so that we can have a little more insight into this company. Starbucks was founded in the year 1971 by three young investors. Later, these investors were bought out by Howard Schulz who became the CEO of the company and immediately embarked on an expansionist plan (Starbucks coffee company website, 2013). Since this buyout in the year 1987, Starbucks started expanding rapidly into both local and foreign markets. By this year, Starbucks company has over 20000 outlets and stores across the globe with American alone having over 13000 of Starbucks branded stores (Starbucks coffee company website, 2013). Currently, Starbucks is deemed to be the largest coffee house company in the globe following this expansion. This growth especially in the USA has been necessitated by some factors and strengths as outlined in the paragraph that follows. Strengths of Starbucks in the American marketplace There are a number of strategic factors that have contributed largely to the expansion of Starbucks on the American soil. One of these factors is the solid base that the company crops from. Starbucks was an operational and profitable brand and company even before its founders sold it to Schultz. People had already established some form of rapport with the company and they had come to like the products that the company offered. After the sale, Schultz quickly incorporated his own coffee shops in the Starbucks brands and started growing. From this base, the Starbucks stores increased in a geometric progression style and became a household name and brand. Another strength was the financial strength. Following the success of the initial stores, the company was able to have a solid financial footing and with this kind of financial strength, it was able to develop and create new stores rapidly. Lack of serious competition was also a thing that played to the advantage of the Starbucks Company especially in the United States. Though this paper acknowledges the presence of other competitors in the market during this period, these competitors lacked enough power in form of financials and the charismatic appeal similar to that of Starbucks Company. The company enjoyed a high level of staff retention mainly because it paid its staff well compared to other companies. These factors also enabled people to resonate clearly with the company. A very important factor that formed as strength of this company was the emphasis on quality of their coffee. Starbucks has a reputation of making the best coffee in the world. This reputation rolls over to the startup days of the company where the management laid much emphasis on the way the coffee sold in all the Starbucks outlets was made. The coffee had to meet a certain degree of quality and despite being priced above the market rate, people had a demand for the coffee. Weaknesses of Starbucks in American market Like two sides to a coin, any company must have both strengths as well as areas of weaknesses (Sihabet al 2012). Starbucks Company limited is no exception. In America, Starbucks has been accused of faltering on their quality. The target market feels that the company has grown so big as to have the quality of its coffee and products deteriorate. This has served to push away some of these customers. Starbucks has also been accused of not taking good care of their employees. Despite being among the highest paying coffee company in the USA, it has been accused of overworking its employees and underpaying them. This has led to a diminished image of the company and even a financial loss through fall of stock prices. When the image of a company falls in the eyes of the public, more often than not, the prices of the stock of this company plummet (Sihabet al 2012). Comparison of these strengths & weaknesses in the Australian market To a certain extent, these strengths and weaknesses that Starbucks face in the American market are duplicated in the Australian market. Perhaps the difference lies in the fact that Starbucks in Australia is partially owned through local partners. These local partners have an inherent knowledge of the local market and hence have assisted the company to grow despite the company earning less on equity. The financial strength is common here. Starbuck’s strength versus opportunities in Australian market Starbuck’s strength as have been detailed in the discourse above have resonated with the Australian market in a number of ways as outlined here. Firstly, Starbucks is a global and widely celebrated brand. As such, people will want to associate themselves with this coffee giant in a bid to bask in its glory. The Australian market is a bullish market where only the strongest of the companies survive. With its massive capital base, Starbucks is well equipped with the capacity to invest in this market and hit the ground learning. Another strength would be good management team comprised of very seasoned managers. These managers would foresee the opportunities in Australia and make the right and relevant decisions pertaining to modes of investing in the country. Australia’s population is also growing steadily, with increased births and decreased mortality rates in this nation. Many people are also migrating into the country to tap into the growing economy as workers or investors. This growing population forms an opportunity for Starbucks which sees growth in these areas. Starbucks marketing strategy in Australia and New Zealand For a company to create a niche in a new market, it must adopt a marketing strategy that would ensure that its objectives are fully met. Starbucks has employed a number of strategies to market the company in New Zealand and Australia. Understanding the need to also please the new generation market, the company has adopted the use of wireless internet in its stores. These stores have wireless internet technology that clients of the coffee stores could utilize for free. Already, the youthful generation has warmed up to these outlets and sales have started increasing. Advertising has also been carried out heavily to stamp in the company’s presence into the minds of the target market. When comparing this strategy with other competitors, Starbucks has pulled a first on them since no other competitor has offered these technological services for free. The major differences between the majority of these competitors and Starbucks perhaps is that while Starbucks is recognized as a global and ‘cool’ brand, the competitors are still old and somewhat boring. This has allowed both companies to coexist with each of them attracting a different kind of market across the board. Conclusion This paper has looked into Starbucks Company in a more refined detail. The strengths as well as the weaknesses of the company have been established and the marketing strategy both in local as well as selected international market unveiled. The paper concludes by stating that the potential and avenues of expansion of this company are still huge. References Bryson e al. (2009). Understanding strategic planning and the formulation and implementation of strategic plans as a way of knowing: the contributions of actor-network theory. The International Public Management Journal. 1-57. Dutton. J & Duncan. R. (1987). The influence of strategic planning process on strategic change. Strategic management journal. 8 (2): 103-116 Elbanna. S (2009). Determinants of strategic planning effectiveness: extension of earlier work. Journal of Strategy and Management. 2 (2):175 – 187. Fairholm. M (2009). Leadership and Organizational Strategy. The Innovation Journal: The Public Sector Innovation Journal. 14(1): 16 Grant. R.M. (2003). Strategic Planning in a Turbulent Environment: Evidence from the Oil Majors. Strategic Management Journal. 24(6): 491-517 Starbucks coffee company website (2013). About us. Retrieved October 7, 2013 from http://www.starbucks.com/ Sihab. M (2012). The Study on Strategic Planning and Organizational Performance in the Regional Government Owned Banks in Indonesia. International Journal of Humanities and Applied Sciences (IJHAS). 1 (3): 2277 – 4386 Read More