Analysis Of Starbucks Strategy

The Starbucks has started in 1971 and it has founded by three friends named Jerry Baldwin, Gordon Bowker and Zev Siegl. They opened a one small shop since they all have been interested in coffee business and eager for it. When they coffee shop open, they are selling gourmet coffee beans, brewing, fresh roasted, and roasting accessories. A small shop business has gone through well, at the point of time Starbucks was the largest roaster and coffee shop in Washington. It has distributed to six retail outlets. In fact, Starbucks has started opening outlets outside Seattle and it has opened one at Vancouver, Canada in 1992.

Starbucks has become a publicly traded company. With 165 retail outlets in 1996 and they have a chance to open an outlet in Tokyo, it was the first store outside of the North-America. In 1998, it extended within the Great Britain, purchasing about 60 stores of Seattle Coffee company and transformed them into Starbucks. Most of them became Seattle’s Best Coffee, Diedrich Coffee, Torrefazione Italia (iloveindia n.d.).

Starbucks is the largest coffeehouse company in the world, with 17,133 stores in 49 countries, including 11,068 in the United States, nearly 1,000 in Canada and more than 800 in Japan. Starbucks Coffee Company is leading among retailer, roaster and any brand of specialty coffee in the world. More than 9,000 retail outlets in Latin America, North America, Europe, the Middle East and Pacific Region. Starbucks promise to offer their customers the world’s best coffee and the finest coffee experience. They are also hopping to carry out with social, environmental and economic benefits within Starbucks premises. Having coffee and conducting with any kinds of meeting, gathering, and business talk is acceptable and make customers more comfy (Starbucks corporation 2008).

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Starbucks has increasingly innovated step by step and it makes them achieved in the market. Starbucks has achieved the top ten best place to work in the UK stores said by Financial Times in 2007. Again Starbucks was 11th best place to work in United States mentioned by Fortune magazine, in 2005 (Ezine Articles 2010).

Starbucks has gone through many challenges and finally it is become stable. Not only stable and also Starbucks is the market leader itself. There are plenty of businesses followers are following Starbuck strategy. However, Starbucks itself as leading in the coffee market, there are many business followers are becoming more and more. The more company follow means Starbucks facing more competitive environment.

Starbucks needs to innovate and creative all the time. Otherwise, the rest of the business of the business follower may take over the market. In this situation, Starbucks should make sure what kind of strategy they use and analyse how much it can be capable for long term.

Starbucks should understanding facts that consumer expending amount is limited based on their income. Since having the coffee at cafe` outlet is more for relax and costly, if consumers are willing to spend. However some of the consumers feel like focusing more on food and beverage and household items rather than sitting and drinking at coffee shop, they might have limited budget. Starbucks has innovated into joint venture business to increase the market share and hope to increase opportunity to get different demographic. Starbucks has jointed with Pepsi Company, Dreyer’s Grand Ice Cream Inc, and more innovated system with open music at all outlets for extra entertainment for consumers (AllFreeEssays 2010).

Today coffee consumers are become more and more. Affect of that, Starbucks has been receiving unexpected sales, it has growth dramatically. The upscale experience, and distinctive scent makes Starbucks competitors advantage. For the advantage of increasing profitability has given Starbucks to get opportunity of expanding the outlets to worldwide.

It could brings more business opportunities and to gain new different types of customers in the market. Branding is the one which carry out all the way to Starbucks till now. Starbucks acquired contracts with Albertsons, TAZO tea and they even know producing products which are currently sold at every location significantly contribute their growth.

The more growth that its claimed, there may have some risk involved in it. Due to practical and experience, Starbucks BCG stage has already turned it into maturity stage in life cycle of business. To be able to checking Starbucks’ strategic planning, it is an opportunity to find new ways and creative ways to be innovative. With increasing changes in the market, Starbucks has been changed their financial point of view. Currently they have turned from an external investment company into an internally invested company. This is the effective ways to help them expand and increase Starbucks’ ability to cover the liabilities (AllFreeEssays 2010).

Current situation & SWOT & BCG & LIfecycle

Environment effect (mission and vision )

Porter 5

Problem that starbucks face

Recover the problem

Research Questions

What is the current situation of Starbucks? To perform a situation analysis of Starbucks using SWOT.

Find out how Starbucks has maintained leadership in the coffee industry?

What is the competitive advantage that Starbucks has over its major competitors?

What are the challenges that Starbucks faces?

What are the current and future approaches that Starbucks employs to overcome its challenges?

Research Objectives

To know accurately more about how Starbucks become a leader in coffee industry.

To study the various aspects of Starbucks success strategy to date.

To understand how Starbucks is able to rise above its competition to be the market leader.

To analyse the challenges that Starbucks faces.

To understand how Starbucks overcome its current challenges and its future plans (backup).

Literature Review

Data Collection

There are many useful sources in our environment, from that sources, I have chosen some of the helpful information sources. There are from Internet, Newspaper, Magazine and Book. Internet is one of the very helpful sources I found out. I could search at “search engine” such as Google, Yahoo, AOL, and many others whatever I want to. It is what I can pronounce as major source among all sources. For example, when I wanted to find a book or magazine or newspaper information, I can easily search from the internet and it will show sources’ details such as where I can find/ buy this material, how I can get there, how much quantity available right now, and I may even buy a material through internet and it will come to my door step within few days.

Newspapers give me daily updated information and I can able to know the impact of Starbucks if they have updated. Advertising, promotion package, discount coupon and notice of any product development will be seen in the newspapers.

Since all the formal information can get from the newspapers, how would I get some informal information? It is too easy, some of the magazines are providing service as discuss and analysing and giving comments about some companies. This is the real fact that people recently thinking. Thus, magazine is also good information provider especially when I wanted to get the real public talks.

Other than surfing internet, looking into the books is the best ways I have found out. Seeking into the book can able to understand more of analysing, discussing and it is more specific than the general newspapers and magazine. Since newspaper and magazines has their owned word limit, they do not have a chance to write more than the limit. Getting information from books is much easier and more accurate since author is already being researched the article.

Research Methodology & Data Analysis (Current situation, SWOT, BCG, Product Life cycle)

A coffee shop, one of the stabilities coffee shops in world wide which is currently allocated in most of the countries in the world. Coffee has become one of consumers’ favourite drink and people are enjoy spending most of their time in the coffee shop. They may discussing business, meeting or dating with someone, taking break while office hour, Relax reading book while stress, chatting with friends and gathering party all these can be done in coffee shop.

Starbucks has completely understood all these consumers behaviour and it has already constructed. The most important thing in the business is to understand the current situation and to achieve it. Starbucks has faced many kinds of environment affects and it has successfully passed since many years ago.

Current Situation & Performance of Starbucks

Starbucks is one of the coffee consumers’ favourite coffee shops in the market. Its design & facility is unit, and its service standard is well established. Softly Background music giving pleasure to consumers. Silent and extra additional facility of providing free internet within the premise is automatically inviting customer to Starbucks. Merging of above all these service and facilities that Starbucks provided and combine with real taste of coffee bean will definitely makes consumers’ attraction.

Most of the consumers needs are done by in Starbucks shop and it has already achieved without complaint. As mention in above that Starbucks has already allocated his shop in most of the countries and these are the countries that Starbucks has been founded: United States, United Kingdom, Australia, Canada, Switzerland, New Zeland, Japan, Hong Kong, People Republic of China, Taiwan, South Korea, Kuwait, Lebanon, Israel, Qatar, United Arab Emirates, Bahrain, Oman, Saudi Arabia, Egypt, Philippines, Thailand, Malaysia and Singapore. Total 24 countries and people in these countries has already has a chance to touch Starbucks facilities and tasteful original coffee bean.

As to penetrate the customers in the market, Starbucks has extended their business as selling the cutlery and other kitchen items as Starbucks’ souvenir. All these goods marked with Starbucks’ logo. Those who crazy for the brand image will bring home and enjoy, such as enjoy drinking homemade coffee with Starbucks’ logo cup, and enjoy wearing Starbucks’ T-shirt.

Most of the people claim that Starbucks is already recognized by customers and it is successful in the coffee shop market. As for the successful business leader, it couldn’t be wrong if we claim Starbucks is in maturity stage. According to “Product Life Cycle”, Starbucks has gone through development stage, introduction stage, and growth stage and finally its situation is root into maturity stage.

There are always strength and weakness in business. Even a perfect business company, they have a weak point. However they used to have a recover or re-fertilize option to recover take back the business to normal situation. It is called SWOT analysis. With the SWOT analysis, it will get to know about business’s strength & weakness, opportunity (chances) for future/ current, and threats. Threats could be business rival, sometime because of environmental effects, and any other things that bad effect to the firm. To be getting know more about Starbucks, SWOT analysis is the good ways to understand more about Starbucks.

Strength

Starbucks is the number one best coffee retailer and its market share has increasingly risen. Its power of supplying is astonishing as already opened 16,000 coffee shops in worldwide and already located in 15 countries. This is the most powerful strength to opened 16k outlets in whole world. Over 16k coffee shop retails outlets are representing the image of the brand and high revenue in coffee market (Karth, D. n.d.)

Starbucks brand image is representing to high quality of coffee bean in the market. Its taste is just a different and let customer experience with different coffee taste. Excellent customer service is famous public relationship and its message to customer is “The Starbucks Experience”. Customers are supporting Starbucks as they appreciated the service of Starbucks. As for the coffee shop business, there are two types of desires that customer expect for. There are first, customer service and follow by taste of the coffee/ any drink that they are selling. Even if the taste of the coffee is fantastic and with ghastly customer service, Customer would definitely run away. Customer approached to coffee shop just because of relaxing, entertaining and enjoyment. Starbucks understood all these needs of customers and it has achieved. That is why Starbucks customer supporting power is unbelievable (Business Teacher n.d.).

Starbucks mainly focus on two types which are people and environment. If we merge together these two parts is what brings Starbucks coffee shop experience is so unique with others? People who are including all customers or employees or any stakeholders are the priority for the Starbucks. Which is all people and environment are included inside the Starbucks mission statement. Starbucks new mission statement is “To inspire and nurture the human spirit – One person, One cup, and One Neighbourhood at a time” (Answer Corporation n.d.).

To able to serve more to customer, Starbucks service standard is fixed. To become Starbucks Manager or assistant manager, Starbucks has trained to them at least 80 hours. For the coffee maker in Starbucks, they have to be qualified and need to go for training at least 40 hours. Only Starbucks allow staffs to start working after finishing their training. When coffee maker should pass 40 hours training, then only he/ she allowed to make coffee and drinks without senior coffee maker. Starbucks tried to minimize the problem and give employees to proper training for customer serving (Isabel Isidro 2004).

Starbucks not only focus on training, customer service, and productivity also trying to maximize the employees benefit. Starbucks make sure all its employees are enjoying working at their respective workplaces. For the mutual understanding of Starbucks and its employees, Starbucks care for its employees and all the employees understood that their employer care them. When employees are happy working at their workplace, ways of their services are improving and fully concentrate at work. This is the employees and Starbucks communication and Starbucks used to practice this ways. Most of the companies are forgot to manage this useful strategy since they have been focusing more in business, customer service and others. They might lose focus on relationship between employees and employer (Hanft. A. 2009).

The greatest things for Starbucks is customer remain sitting at Starbucks for unlimited time restriction with a one cup of coffee. Meanwhile, customer can increase his social network, group discussion, and any other socialization. Everything can be done at Starbucks either long or short term, Starbucks won’t even mind for it.

Weakness

Starbucks is usually meant for the premium customers. Since its original price is higher than normal coffee shop such as Food Court coffee shop, McDonalds, and KFC cafe`. It is maintaining the service standard and productivity purpose, however, this affects to make customer stopping to come to Starbucks outlet. Even though there are no such things as restriction customer, for the lower income level customers are unable to have a chance to sit and drink at Starbucks. Branding is most important part of Starbucks and its make less customer at the same time. Starbucks coffee bean might famous in the market, but it is only for those who can effort. Of course, once customer has a good taste of coffee he would probably visit again and again. So that lower income level customers do not dare to try Starbucks. It could be one of the weaknesses.

Since Starbucks is a coffee shop, all the products depend on coffee products. There no not much different type of coffee. Starbucks only (fully) depended on coffee bean product. If there is unforeseen circumstance that people suddenly stop drinking coffee due to some environmental factors, how could Starbucks survive? As completely depends on coffee industry company, Starbucks should have consider only diversify to other different product but not coffee or wait till the end of that environment effect finished (York, E. 2009).

Opportunity

Threats

Since Starbucks coffee is in the coffee industry, even it has his owned target market it is still in competitive situation. Starbucks used to have many competitors and it has been increased year by year. Even though Starbucks coffee is selling his owned price, either business follower or new entrants may copy from Starbucks. They may give either same price or even lower price to compete with Starbucks. Starbucks coffee is very competitive. If business followers are following the Starbucks price, Starbucks should not have to worry. Nevertheless, sometime they are having promotion & sales. In this case Starbucks need to make proper decision whether go for sales like competitors or just maintain the price. If Starbucks would not reduce the price as competitors, income will definitely drop.

To removing the bad employee is easy, however to maintaining one good employee is the most difficult. Some employees are working longer and they become the most experience person in this field. For these types of employees are very demandable and they wanted to be a different with others. They even openly ask for increasing salary, asking for promotion, and asking for long leave. Starbucks need to have a proper ways to control all the employees and need to keep on communication with them otherwise it can possibly increase company turnover.

What is the most considerable economic issue nowadays is recession. Recession is not only effect to coffee industry also effect to every business industries. With that effect, Starbucks has closed down first 300 and second time to another 300 stores. In totally of 600 Starbucks stores makes 6,700 employees to be jobless (The Business Journal 2009). Starbucks has already announced that they still have plans to stop the other non-store Starbucks coffee shop which is about 700. Most of them are involving even 350 of Starbucks headquarters. There is no need to be surprised since this recession does not meant to come direct into Starbucks only, it is for everyone either same business or different other businesses. The whole world needs to face this economic effect more or less depends on their respective investment in their business. The more capital you invested the more damages effected by economic recession.

As recession occurred, Starbucks’ competitors are ready to be taken advantage from Starbucks. People used less cash if we compare with previous time. Starbucks competitors are claimed to themselves as low price coffee in the market. Competitors are taking advantage based on the factors of recession. It would be surprised that McDonalds’ premium coffee is one of the famous and becoming Starbucks major competitor. Its coffee is cheaper than Starbucks, even a normal coffee in McDonalds is more cheaper and it is able to serve more quicker (The Associated Press 2009).

Recommendations

Conclusion