Starbucks Case Study
Starbucks organization was started in 1971 by three academics Jerry Baldwin, Zev Siegel and Gordon Bowker. The first Starbucks site opened in 1971. The organization started as a single shop focusing in high quality coffee as well as other brewing products. Starbucks later grew to become one of the largest roaster in Washington with several locations. In 1981, the organizations CEO Howard Schultz, acknowledged a great opportunity and started working in collaboration with the founder Jerry Baldwin. At one point, the two made a trip to Italy in search for new products. In their trip, Schultz recognized a prospect of bringing the organization in the community environment he found in Italy. Thereafter, Schultz opened his own Italian coffee house Il Giornale, which was very successful. Initially, the company business started as Starbucks Coffee, Tea and Spice in Seattle, Washington. The organization began as offering whole and ground beans, which were of higher quality as compared to locally available products in the market. Starbucks serves different type pf coffee products globally.
Starbucks Strategic Approach in Gaining Competitive Advantage
The organization strategic approach in gaining competitive advantage is differentiation. Since the initial opening of the begin Pike’s Place store, the organization has distinguished itself with a focus on high quality product and customer service engagement. The organization CEO, Schultz has ensured that organization upholds the core element at the same time remaining supple and responsive enough to respond to the shifting market conditions. Over the years, the organization strategic approach, has however continued to evolve without compromising with the company’s essential values.
After Starbucks’s expansion to Italy, Schultz’s vision for Il Giornale and later Starbucks has been the establishment of global chain of Italian-style espresso restaurants, which would provide a suitable meeting place for the public (Thompson & Shah, 2013). Moreover, through his vision, coffee drinks were considered as the major revenue producers despite the fact that beans and coffee-making equipment were also sold. In the preceding years, the organization strategy has transformed and expanded to take in new products offerings and markets, for instance, contracts with other restaurants, airlines organizations and hotels to serve Starbucks coffee. The organization, for instance, initiated a joint undertaking with Pepsi to sell ready-to-drink coffee drinks in the super markets, a partnership with Dreyer’s Grand Ice Cream to sell the organizations branded coffee tastes, a partnership with Apple iTunes to sell music selections among other ventures. These initiatives have increased Starbucks organization competitive advantage.
The organization strategy resulted in good company performance. While the organization had initially been opposed to franchising and only preferred company owned stores, licensing became a critical element of the expansion approach. In the same way, whereas the original strategy was a nationwide expansion, the strategy progressed to include international and global growth. The organization growth in different part of the world is in itself a good indication of the organization’s good performance. At one point, the organization CEO, Jim Donald due to the declining sales went ahead and began closing disappointing stores (Thompson & Shah, 2013). This willingness to incorporate strategic adjustments has assisted the organization to retain a competitive advantage and henceforth a good performance.
Starbucks’ organization main internal environment change is the realization of the significance of competitive markets. As a way of meeting the competitive market, the firm realized that human investment is key. This resulted in the organization establishing employee benefits to both full-time and part-time partners. This is aimed at ensuring the organization attracts inspired employees with adequate skills and effective work habits.
In the 1990s, the organization leadership felt that it was time for Starbucks to shift into the mainstream markets. This process was spearheaded by Howard Schultz, what proved to be a continues series of undertakings to enlarge Starbucks’ product offerings beyond its traditional retail stores. Additionally, this development was also aimed at increasing the organizational product sales in a wider variety of distribution channels and different market segments. The increase of sales channels and marketing segments were intended to make the organization products easily reach both the existing and new clients in their places of work, where they shopped or dined. The development was objected at capitalizing the companies growing brand awareness and brand-name strength to the market for a sustained long-term growth in revenues and profits (Thompson & Shah, 2013).
The organization markets have been attractive as evidenced in the financial results. Despite the fact that an organization can tend to focus on financial metrics at the expense of other factors, Schultz’s stress on upholding a strong employee relations and social responsibility initiatives helped the organization to maintain these attractive markets, which will continue to stand for quality and sustainability in the future. Having a strong consumer loyalty is important for the future growth of the organization. Through effective leadership from Schultz, Starbucks has proven itself to have a strong attractive market, which is significant in the attainment of the long-term vision of the firm. As a result of the market attractiveness, the organization has been in position to also to take advantage of increased consumer spending.
Attractive Market Segment
The organization has a diverse market segment. There are several steps that were put place in meeting the needs of these segments. One of the development that the firm initiated was the formation of an in-house line sales group that was to begin marketing Starbucks coffee products to all restaurants, airlines, hotels, universities, hospitals, business offices, country clubs, and select retailers. The initial consumers or segments of the organization coffee included, Horizon Airlines, a regional carrier centered in Seattle, and United Airlines (Thompson & Shah, 2013). Afterwards, there were several arguments as to whether the organization coffee was to be sold in airlines and if it made sense. The antagonists of the development argued that there were several equipment that were used to serve coffee in the planes. Moreover, there was also the possibility of organization’s reputation damage if the coffee sold in the airlines did not meet the quality standard. This agree on the best way to handle quality control on the planes.
The specialty sales group also managed to establish several coffee making equipment in hotels, serving Starbucks coffee in each room. Starbucks also signed an agreement with Wells Fargo to serve coffee services at some of the organizations sites in California. Moreover, the specialty sales group started working alongside other leading institutional foodservice distributors, for instance, Sysco Corporation and US Foodservice, to enhance the distribution of Starbucks products to other hotels, restaurants, office coffee distributors, educational and health care institutions among other enterprises as part of their market segments.
This expansion of market segment by the organization saw it generate additional revenues from providing whole bean and ground coffees and other varied Starbucks products to around 21,000 food service accounts (Thompson & Shah, 2013). As a way of reaching the expanding market segment, Starbucks and PepsiCo also signed a partnership referred to as the North American Coffee Partnership, which established new coffee-associated products in bottles or cans. These products were to be massively distributed through Pepsi channels. Some of the products that were as a result of this venture included, Mazagran, a lightly flavored carbonated coffee drink, which did not attain much success. Other products were later developed.
Generally, the organizations overall retail sales mix involved beverages, food items, coffee making equipment, whole bean coffees that served different market segments. Each product mix in every store was different depending on the size and location of each opening. In most cases, larger stores contained a large variety of whole coffee beans, gourmet food items, teas, coffee mugs, coffee grinders, coffee making equipment, filters, storage containers, and other accessories to serve a varied segment (Thompson & Shah, 2013). On the other hand, smaller stores and kiosks mainly served coffee beverages, a partial assortment of whole bean and ground coffees and other coffee-drinking accessories (Thompson & Shah, 2013). The menu offerings at Starbucks stores also reflected the local cultures, for example, the menu provision at a store in North America comprised of a selection of muffins, whereas a store in France did not have muffins but instead included locally served French pastries (Thompson & Shah, 2013).
The market segment of the organization is attractive. This is because Starbucks has tried to reach to all to all kind of market segments. These incudes the employees, students, travelers, families just to mention a few. Nonetheless, I still believe that that the organization has not so much served the children market segment. The children are the most attractive market that any organization needs to target because of the likelihood of more sales. Parent would go outside their way to ensure that the children get what they want.
Key Success Factors of Starbucks Market
The greatest success factor for Starbucks in the market is the price. The highly competitive market sees the organization products as undifferentiated product. Therefore, the prices of Starbucks top-quality coffees sourced is determined by the supply and demand conditions during the time of the purchase. As a result of the big customer loyalty and dominancy in the market, the organization enjoys the freedom of setting the prices that are benefiting the firm.
Starbucks Mission and Vision
The organization conveys a strong sense of organizational resolve to address the company’s fundamental beliefs and guiding principles. The organizations mission and vision statements imitate the firm’s focus on management in the coffeehouse sector. The mission statement to “enhance one another through diversity and excellence for the success of the organization,” which is a demonstration of what the company wants to attain as a business entity. Starbucks Coffee’s vision statement “to establish Starbucks as the greatest organization in coffee products globally maintaining the principles of growth, that demonstrates what the organization wants to accomplish in future. Through Starbucks mission and vision statements, the firm take a leading role in the activities of its personnel, and shows the clients what the corporation is capable of attaining. Particularly, the firm’s mission statement illustrates to customers the benefit that they can receive from the organization. The organization has no conflicting actions in regard to its vision and mission.
Organizational Unique Resources and Capabilities
Starbucks boasts of its quality environment, product, deals, alliances, and general structure. It is aware that its valuable reputation will always make clients to return. No organizations match Starbucks in the industry. This is because it requires much time and effort to establish a repute similar to Starbuck’s and it would be very hard to contest. Starbucks flourishes on its reputation and effectively utilizes the doors it opens. This offers Starbucks a lasting advantage
Increased Staff Retention
Starbucks gains from increased workforce retention by ensuring that there are no training expenses and hiring skilled employees that are invested in the organization. This feature is very significant in a world whereby employment turnover is generally very high. Establishing a structure that enables an organization to handle its workers like Starbucks is hard and Starbucks utilizes its experienced workforce by promoting from within. This offers Starbucks a lasting advantage.
Starbuck’s costly mechanized equipment is useful in saving time and forming a consistent taste. Currently, few coffee sellers have shifted to the automated systems. Increased competition can make other organizations to purchase such machineries any time. This offers Starbucks an advantage that is temporal.
Starbucks has been able to create buzz because of having a marketing strategy founded in logo and store recognition. The company does not also force people to buy its product through overwhelming them with reasons they should purchase it. It would be very easy simple for another for any organization to switch to adopt Starbuck’s form of recognition marketing. This fact offers Starbucks a provisional advantage.
Major Product Line
The product, which Starbucks avails on the market is what produces most of its profits. Unluckily, coffee all over the market and other quality alternatives are available. This makes Starbucks to be on same playing field with its rivals.
Starbucks greatly values customer service, and clients often believe that they will always be handled well while in Starbucks. This is absolutely an important capability and it can be easily implemented by other companies. Therefore, Starbucks works hard since it is aware of the fact that even competitors use the same tactic.
Company’s Strategy Success
The Starbucks strategy has been successful since it has often entailed broad thinking. Besides clustering its stores, the Starbucks strategy encompasses participating in smart joint ventures with the best organizations, for instance, their fruitful partnership with Pepsi-Cola Co., and developing fresh, new projects, which included a new product line of hot sandwiches and breakfast food and new beverages like coffee liqueurs. The Starbucks strategy is currently also extending online, enabling clients to pre-order and prepay for commodities through the Internet. Starbucks has still managed to make its clients happy and depend on modern means of enticing new clients, which is its strategy.
Improving the Company’s Overall Strategy
Increasing the knowledge of the great projects that Starbucks accomplishes for local communities
Several partners and clients are not aware that Starbucks fosters local volunteering and any person can find a community service project through its website for community service. Additionally, few partners and clients know that Starbucks has community stores that give part of their proceeds to local non-profits.
Increasing Non-Coverage Time
Many partners have longed for explicitly planned non-coverage time for training, coffee tastings, lean-up, and linking allies with store directors. It will be significant to the company since members will get connected and be able to evaluate their morale as well as performance.
Creating Time for Coffee Learning as Well as Coffee Conferences That Involve Clients
The company has not allocated enough time for coffee training and the majority of clients do not have a tasting when in the stores. One tactic of extending eagerness for the entire bean coffee wall is by sharing the love of coffee with clients. An individual understands a subject matter well clearly when he/she is able to teach others. Therefore, it would be exciting to establish a client coffee master program.
Starbucks organization is among the leading multinational corporations. Despite several challenges, the firm has been successful in its operations globally. The organization strategies, for instance, differentiation has been key in leading the firm to its success. The firm’s mission and vision statement sums up the value and objective of the organization.
Thompson, A., & Shah, J., A. (2013). Starbucks’ Strategy and Internal Initiatives to Return to Profitable Growth.