Starbucks: Generic Strategies - Essay Example

Starbucks Table of Contents Question 3 Question 2 4 Question 3 5 Question 4 5 Question 5 6 References 7 Question Any organisation can be analysed on the basis of Porter’s generic strategies. Three generic strategies are cost leadership, focus and differentiation. Starbucks has been adopting ‘differentiation’ strategy. Such strategy has enabled the company to target a particular segment of market and clearly differentiates itself from the competitors. Starbucks does not market its brand as a low-cost service provider. Rather the Starbucks brand is presented as such a company that provide premium quality coffee at a premium price. Starbucks always ensure that each and every customers of it leave the store after having a unique experience that will be carried on throughout rest of his/her life. Furthermore Starbucks does not follow traditional aggressive advertising strategy; rather it focuses on high-level branding and marketing practices (Larson, Marketing Strategy and Alliances Analysis of Starbucks Corporation). Word-of-mouth has been a widely practiced marketing communication strategy by the company. The ‘differentiation’ generic strategy provides sustainable competitive advantage to the company. Starbucks intentionally avoids traditional promotional approach. It believes that its brand is promoted through excellent in-store service, quality of the product, premium price and unique customer experiences. Such a strategy has definitely provided sustainable competitive advantages to the company. As far as customer response is concerned, Starbucks is very quick to respond to all their customer queries. Starbucks is committed to provide a unique experience to all its customers. It has all the required resources in order to support and sustain all its rapid response activities. Question 2 Starbucks is one of the most successfully marketed brands in the world. The company has 16,706 stores (including both company operated and licensed) throughout the world. The company’s long term objective is to have 15,000 U.S. stores and 30,000 stores in the entire world (Horovitz, Starbucks aims beyond lattes to extend brand). Starbucks’s mission says that it is working for inspiring and nurturing human spirit – “one person, one cup and one neighbourhood at a time.” Generally strategic planners of any organisation develop the long term objectives in seven major areas which are profitability, competitive position, productivity, employee development, technological leadership, employee relations and public responsibility. Moreover quality of any long term objective can be evaluated on the basis of five factors namely flexible, motivating, measurable, suitable and understandable. If the long term objectives of Starbucks are measured on the basis of these criteria it will be found that the objectives are developed in the two main areas – productivity and competitive position. Starbucks’s objective of opening 15,000 stores in US is nothing but a step to solidify its competitive position in the country’s market. Furthermore the objective of having 30,000 stores throughout the world is also developed in order to strengthen the competitive position in the global market. Increase in stores is also likely to increase the productivity of the company. These objectives of the company are very much measurable and flexible in nature. They are measurable because they are represented in quantitative form and they are flexible because they can be modified based on the changes in the external environment. It is needless to say that each of these objectives is motivating for the management of the company. Starbucks is working towards achieving these objectives. Question 3 Starbucks focuses on five grand strategies that are turnaround, horizontal integration, market development and joint ventures. However some of these strategies are not in alignment with the long term objectives of the company. First of all Starbucks has recently decided to close almost 1000 of its stores throughout the world in order to cope up with the lowering of demand which is a result of global financial turmoil. Among these almost 800 stores are closed in US only. Now, since the company’s long term objectives are regarding opening of new stores throughout the world, it can be said that it’s grand strategy and objectives are not in alignment. As far as market development is concerned, it is likely to help the company to attain its long term objectives. In order to achieve its long term objectives, Starbucks has to form several ‘joint ventures’. Starbucks is already involved in partnerships with the two consumer foods giants – Kraft and Pepsi Cola. Kraft is the company’s distribution partner. In 1998 Kraft agreed to distribute and market the speciality coffee beans of Starbucks (Anonymous, Kraft to Put Starbucks Beans in Groceries). Such joint ventures are likely to help the company in the process of attaining its long term objectives regarding opening up new stores not only in the US market but in the entire world. Question 4 Recent global financial turmoil has badly affected the company’s sales. In the first quarter of 2009, the company’s net revenue was 2.6 billion dollars which was down by almost 6% from the previous year’s figure (Starbucks, Starbucks Reports First Quarter Fiscal 2009 Results). As far as the net revenue is concerned, in 2009 the company managed to earn 9.8 billion dollars whereas in 2008 its revenue was almost 10.4 billion dollars (Starbucks, Fiscal 2009 Annual Report). Considering such financial condition, the company’s major short term objective is to improve its financial health as early as possible. This objective meets all the quality related criteria to be an effective short term objective. It is very much measurable and it has strong link with the long term objectives of the company. Moreover it is decided on the basis of present condition of the company. Hence it is an effective objective in terms of relative priority. Attainment of this objective is very important for the company in order to achieve its long term objectives. If Starbucks wants to take its number of global stores to 30,000 it will need huge amount of capital which can only be gained by increasing sales significantly. All the activities starting from developing new infrastructure and increasing human resources require massive volume of capital. If Starbucks achieves its short term objective (increase in revenue) successfully, then only it will be in a position to achieve its long term objectives. Question 5 It is already stated that Starbucks believes in word-of-mouth marketing. In other words the company is heavily dependent on the concept of viral marketing. Now in the present internet dominated global environment viral marketing can be done most effectively if the social networking media like Twitter, LinkedIn and Facebook are used. It is found that Starbucks is relying on this concept and effectively using these social mediums. Starbucks is heavily using YouTube, Twitter and Facebook with the objective of getting closer with the customers and followers (Anonymous, Starbucks Discovers Integrated eMarketing Communications). It is observed that Starbucks has recently identified the efficiency of eMarketing techniques. In order to achieve its short term objectives, the company is utilising business blogs, SEO, email marketing, pay per click advertising and business social networking as the company can attract more number of customers (Anonymous, Starbucks Discovers Integrated eMarketing Communications). Each of these functional tactics is helpful for the company in the process of attaining short term objectives. If all these e-marketing strategies are successfully implemented, they will be more beneficial for the company as compared to any conventional marketing strategies. The possibility of success of these online marketing strategies is very high as the number of people using internet is growing on a continuous basis throughout the world. As a result the company will be successful in gaining sustainable competitive advantages. References Anonymous, Starbucks Discovers Integrated eMarketing Communications, 2009. PR Log. < http://www.prlog.org/10302086-starbucks-discovers-integrated-emarketing-communications.html> Anonymous, Kraft to Put Starbucks Beans in Groceries. 1998. New York times. < http://www.nytimes.com/1998/09/29/business/kraft-to-put-starbucks-beans-in-groceries.html> Horovitz, B. Starbucks aims beyond lattes to extend brand. 2006. USA Today. Larson, R. Marketing Strategy and Alliances Analysis of Starbucks Corporation. 2009. Faculty Publications and Presentations. Starbucks, Starbucks Reports First Quarter Fiscal 2009 Results. 2009. Starbucks Newsroom. Starbucks, Fiscal 2009 Annual Report. 2009. Starbucks Corporation. < http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjczNTB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1> Read More