Strategic Management for Business Assignment Sample

Introduction

The report aims at analysing various strategies used by Starbucks in today’s competitive environment and whether they will benefit them in the future. Starbucks is a well-known premium-class coffee retailer and cafe worldwide established in 1971. The report will take advantage of Porter’s generic strategy and Ansoff Matrix to identify the current strategy used by the company. It will also highlight the impact of strategies on a company’s growth along with its effect on future growth. SWOT analysis will be used to identify the opportunities and threats for proposing further recommendations.

Analysis

Starbucks is known to be the premier marketer, roaster, and retailer of specialty coffee. The company is operating in the food sector since 1971 at the cobblestone streets of Seattle’s historic Pike Place Market. The company is majorly known for offering fresh-roasted coffee beans, spices, and tea from worldwide to consumers (Chang, 2020). In 1987, Starbucks has started its next chapter as a coffee house and started to expand in other places. The primary mission of the company “is to nurture and inspire the human spirit- one cup, one person and one neighbourhood at a time”.

Figure 1: Starbucks- Logo History.

(Source: Starbucks Logo, 2021)

Other than that, their product offerings include a variety of ready-to-drink beverages like Starbucks double shot espresso drinks, refreshers beverages. Frappuccino coffee drinks, and many more. The company operates in different countries including Asia Pacific, North America, EMEA, and Latin America. They also have collaborative relationships with Tingyi Holding Corp, PepsiCo Inc, Arla Foods, Anheuser-Busch InBev, and many more for serving its ready-to-drink beverages worldwide. Their major products and services include coffees, teas, equipment, drink ware, food, and other products.

Core competencies of Starbucks and its contribution to its success

The primary competency of Starbucks has always been its capability to effectively leverage its differentiation strategies by providing a premium product mix of premium quality snacks and beverages. Their brand equity is developed based on offering the finest quality of coffee and other products to every customer so they can have a unique Starbucks experience (Clements, 2019). Its global brand equity and recognition are also described as its core competency as it is accountable for achieving huge success in the market they have expanded. Further, brand equity also helps in implementing strategies in the future that could be advantageous in achieving success and growth in the future as well.

Furthermore, its core competency of expertise in coffee roasting and hand-built beverages is also a major reason behind its success. Starbucks is known for picking up high-quality coffee beans which are sourced ethically and then tested, verified, and certified by third-party to assure that they will meet customer expectations. The quality of their coffee beans is must for its success and is a primary competency for achieving future success as well (Khushman, 2019). As they are known for their tasty coffee and other beverages worldwide so it is must keep the taste and quality in every product innovation.

The supreme customer experience offered by Starbucks is also determined as its core competency. It can be found everywhere whether it is the products they serve or the quality of comfort their stores offer to their customers. The interiors at Starbucks offer a unique and different experience to its customers that is must to hold a potential customer base. Other than that, Starbucks also monitors customer feedback and reviews so they can offer the best customer experience (Uarsakchai, 2020). They bring innovations in their services after analysing market demands and trends which is also great for meeting the emerging demands of the customer. Hence, these are some core competencies that help Starbucks in achieving success and growth and the impact of these competencies will be beneficial for its future growth and success.

Starbuck’s Generic Strategy and Intensive Growth strategies

Porter’s Generic strategy: There are three generic strategies including cost leadership, differentiation, and focus that have been segmented into four in a matrix. Utilising these strategies helps the company in achieving a competitive advantage (Islami et. al. 2020). Based on this, Starbucks Coffee utilises a broad differentiation generic strategy for achieving a competitive advantage. Utilising this strategy has always helped the company in attaining market competitiveness as it helps them in keeping their products and coffee different and unique from other competitors. For instance, the generic strategy helps the company in sourcing their coffee beans ethically sourced having the finest quality that is differentiate from other coffeehouse firms (Simpson et. al. 2020). On the other hand, Starbucks coffee also keeps the interior of their coffeehouse different from others. Their primary aim is to attract premium, high-visibility, and higher-income populations, and for this, they choose prime and strategic locations worldwide.

Furthermore, they frequently bring product innovations and introduce new products as per customer demands in the market which is also beneficial for the company to attain a competitive advantage. The product innovation and development of new products will be beneficial for its future growth as well (Razak and Pardhasaradhi, 2021). It is because the market demands and consumer preferences are changing continuously that enhance the essentiality of bringing uniqueness and differentiation in their products and services. The primary disadvantage they face for offering friendly and warm ambiance to people at a high cost is that they are not focusing on targeting middle-income people.

For its future development and success with the help of a broad differentiation strategy is that the company must keep innovate its products and services to keep it unique from its competitors (Chowdhury, 2020). The beneficial impact of this strategy would reduce if other coffee companies would bring similar products and services. Other than that, they also focus on optimising its supply chain by continuously focusing on searching finest and most sustainable ingredients to eliminate their environmental footprint.

Ansoff matrix

Ansoff matrix describes four intensive growth strategies that help in expanding into new market and safeguarding its position in current market the company operates in (Sukma et. al. 2019). The four intensive growth strategies include market development, product development, market penetration and diversification.

Figure 2: Intensive growth strategy.

(Source: Intensive Growth Strategies, 2020)

From the above four intensive growth strategy, Starbucks use market penetration, market development, and product development. Their primary intensive growth strategy is market penetration which helps in increasing their revenues in existing markets with the help of existing beverages and food products. The company has a global presence in around 78 countries and for achieving constant success and growth in these markets they take advantage of market penetration (Maamoun, 2019).

Utilising this strategy, they focus on building more licensed/franchised cafes and company-owned stores where the company isn’t performing well like the Middle East and Africa. This strategy will further helps the company in achieving success and growth in the market they already have existence. They can take advantage of advertising and promoting their products and services on diverse online platforms and can focus on offering loyalty cards, discount and vouchers to customers to attract more customers.

Figure 3: Product innovations at Starbucks.

(Source: Product innovations at Starbucks, 2018)

Furthermore, they utilise product development intensive growth strategy through the implementation of new products and services in existing markets. For this, Starbucks brings constant product innovation and uniqueness to add more revenues to the existing market (Chen, 2019). For instance, in January Starbucks has introduced new beverages for 2020 and diverse plant-based milk variants in three products including Coconutmilk Latte, Almondmilk Honey Flat White, and Oatmilk Honey Latte. It has been found that in today’s world, customers are demanding new personalised beverages. Starbucks is also adding new plant-based products to their menu to bring product development so they can add more into revenues.

Therefore, product innovations at Starbucks are highly necessary for its future growth and attracting customers to try innovations. Lastly, they utilise market development as their secondary intensive growth strategy. It helps the company in offering current product mix in new markets (Sawhney, 2018). Utilising this strategy, they aims at expanding into new markets using diverse market entry modes.

Strategic position and value proposition of Starbucks

The primary value proposition of the company is to keep them different and unique from other companies operating in the sector. This unique value proposition is to become the third place for customers after home and workplace. Other than that, customers can personalise their drinks and enjoy an exclusive experience. They also focus on offering the finest quality of coffee products that are ethically sourced that are highly committed to developing a global social impact. Further, their unique value proposition is highly focused on offering a better quality of products to its consumers so they can enhance the level of customer satisfaction. Their value proposition include innovation, convenience, variety, quality and brand (Pereira, 2021). For this they constantly innovate their products to enhance customer experience.

On the other hand, for maintaining quality they use high-quality beans and trained roaster to serve customers and for convenience they allow customers to place order online instead of standing in long queues. The company provide their customer with 30 blends of coffee and variety of sandwiches, tea, smoothies, salads and more.

Figure 4: Starbucks value proposition.

(Source: Pereira, 2021)

Moreover, the strategic positioning of the company is to lead in the coffeehouse chain industry. This positioning strategy is majorly consumer-based, stating that give more to the customer as they want. For this purpose, rather than just focusing on serving the finest quality of coffee they also offer their target market great store ambiance, social commitment, and environmental protection.

SWOT Analysis

*Strengths*	*Weaknesses*
· Strong brand image and brand reputation · Strong financial performance · Continuous growth in stores · Acquisitions · Broad diversification (City, 2021) · Finest-quality and taste · Strong loyalty program · Effective customer service	· High prices · Product imitability · European tax avoidance · Recall of products due to threat of allergens and contamination · Criticism for procurement practices
*Opportunities*	*Threats*
· Expansion in developing countries · Product innovation · Price diversification · Business diversifications · Bring in latest coffee technologies and trends · Coffee delivery services	· Market competitiveness from low-cost coffee sellers and big outlets as well. · Product imitability · Third-party delivery suppliers · Impact of Covid-19 · Change in consumer preferences

Recommendations

From the above analysis of its current strategy, it has been seen that they are focusing on bringing product innovation but SWOT stated that the threat of imitability is there. Various competitors are operating in the market imposing intense competitive threats. The biggest threat they face is from low-cost coffee sellers. Looking at this, it has been recommended that Starbucks must utilise its product development strategy from the Ansoff matrix to bring product innovation in the existing market at a low cost (Hupperich et. al. 2018). It will help them in targeting middle-class income as well instead of just focusing on premium-class people.

Utilising the diversification strategy from the Ansoff matrix, Starbucks can bring product innovation in new markets by expanding in developing countries. It has been recommended that Starbucks must utilise a market penetration strategy to grow in the existing market. From SWOT, it can be seen that they are dependent on third-party delivery services to deliver their food products. It decreases their profitability. The company must focus on developing its e-commerce application to deliver its services (Ingaldi and Ulewicz, 2018). It will also help them in increasing profitability and achieving success and growth in the existing market.

Conclusion

It has been concluded from the analysis that the strategies utilised by Starbucks are majorly accountable for its growth and success. The core competency of the company including excellent customer service, brand equity and position, and the finest-quality of coffee beans helps in differentiating them from other competitors. On the other hand, the company uses a broad differentiation strategy from Porter’s generic strategy to keep itself unique from its competitors.

Further, they utilise market development, product development, and market penetration to achieve success and growth in the new or existing market. SWOT analysis has been done and from that, it has been found that by utilising these strategies Starbucks needs to bring price differentiation and start their e-commerce application rather than delivering through third-party delivery service.

References

Chang, W.J., (2020). Experiential marketing, brand image and brand loyalty: a case study of Starbucks. British Food Journal.

Chen, S., (2019). The Product Life Cycle and Product Design. In The Design Imperative (pp. 123-142). Palgrave Macmillan, Cham.

Chowdhury, R., (2020). The Impact of Business Environmental Factors on Organization’s Change Management Process-A Study on a Multinational Company “Starbucks Corporation”.

City, Q., (2021). STARBUCKS CORPORATION.

Clements, M., (2019). Strategic Audit: Starbucks.

Hupperich, T., Tatang, D., Wilkop, N. and Holz, T., (2018, March). An empirical study on online price differentiation. In Proceedings of the Eighth ACM Conference on Data and Application Security and Privacy (pp. 76-83).

Ingaldi, M. and Ulewicz, R., (2018). Evaluation of Quality of the e-Commerce Service. International Journal of Ambient Computing and Intelligence (IJACI), 9(2), pp.55-66.

Islami, X., Mustafa, N. and Topuzovska Latkovikj, M., (2020). Linking Porter’s generic strategies to firm performance. Future Business Journal, 6(1), pp.1-15.

Khushman, A., (2019). An Evaluation of Entrepreneurial Activities and Growth Strategies–The Case of Starbucks Coffee House. Available at SSRN 3594916.

Maamoun, A., (2019). COFFEE-INFUSED COKE? YES PLEASE!. Global Journal of Business Pedagogy Volume, 3(3).

Razak, A. and Pardhasaradhi, S., (2021). Strategic Management Tools: Text & Cases. Readworthy Publications.

Sawhney, M., (2018). Starbucks: Driving Growth Through New Dining Occasions. Kellogg School of Management Cases.

Simpson, J., Kumar, P., Kemp, A., Awate, K. and Manning, K., (2020). 8.3 Diversification. Strategic Management.

Sukma, D., Lubis, P.H. and Utami, S., (2019). Analysis of Marketing Strategy of Minyeuk Pret Using STP, Ansoff Matrix, and Marketing Mix.

Uarsakchai, T., (2020). Investigation of the behavior of Starbucks consumers.

Online

Intensive Growth Strategies. (2020). [Online]. Accessed through: <https://www.mbaknol.com/strategic-management/ansoff-matrix-product-market-grid/#:~:text=Intensive%20growth%20strategy%20involves%20safeguarding,their%20current%20products%2Dmarket%20domain.>

Pereira. D. (2021). Starbucks Business Model. [Online]. Accessed through: <https://businessmodelanalyst.com/starbucks-business-model/>

Product innovations at Starbucks. (2018). [Online]. Accessed through: <https://seekingalpha.com/article/4035488-starbucks-part-iv-product-innovation-and-brand-elevation-to-drive-sales>

Starbucks Logo. (2021). [Online]. Accessed through: <https://1000logos.net/starbucks-logo/>

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