Business-Level and Corporate-Level Strategies
Starbucks is an American company for the sale of coffee and coffeehouse chain. Starbucks is the largest coffee company in the world, with a network of stores (more than 20 thousand) in more than 60 countries. Starbucks sells espresso and other hot and cold beverages on its basis, and hot and cold sandwiches, pastries, snacks, and items such as mugs and glasses. Headquartered in Seattle city, Washington. Initially, the company was founded in 1971 by an English teacher Jerry Baldwin, history teacher Zev Sigl and writer Gordon Bowker, who opened a shop selling coffee beans in Seattle. When choosing a name for the store partners agreed on the name of the hero of Herman Melville's novel "Moby Dick" - the first assistant to Ahab, Starbuck.
In 1987, Starbucks stores have been sold for $ 4 million to Howard Schultz, the owner of the network of coffee houses Il Giornale (the former director of marketing of Starbucks). Its coffee store he renamed Starbucks, and the company - in the «Starbucks Corporation» (Shults, Yang, 1997).
Marketing complex used by Starbucks for the implementation of the marketing strategy and the achievement of financial goals, has a number of distinctive features from their competitors. Key business strategies that are applied by Starbucks:
creating an atmosphere in the coffee houses of Starbucks, which will lead to the return of people for coffee;
clearly inform customers with the value and commitment of Starbucks business, not just the company's growth plans, which are available in the media.
the relationship with customers are based on customer's immersion in the atmosphere of coffee cooking process. The company, throughout its existence, always focuses on the fact that all coffees are made from beans that meet stringent environmental, economic and social standards of quality, besides the coffee beans, which is more than seven days, are given to food funds.
Starbucks sets a strong and profitable competitive advantage of the product line by the wide differentiation of its coffee and related products in accordance with their capabilities and innovations. In addition to the existing more than 30 different coffee drinks, the range of products have been expanded from cakes to a variety of sandwiches and yoghurts. In order to reach a larger audience, the Company began to offer tea and drinks. Now not only coffee lovers can enjoy the atmosphere of Starbucks and quality products.
The company constantly invests its efforts in the development of new ideas, new products and new experiences for customers who liked Starbucks and became its regular customers.
One of the important business promotion strategies is the positioning of the prices of Starbucks products: "high quality at reasonable cost." However, the pricing strategy of the company set up prices for many goods higher than those of competitors to give them “the elite image”. Products at Starbucks are more expensive than those of competitors like Dunkin 'Donuts, Mc Donald's, since an effect of the perception of the company's products such as high-end and best quality, but at the same Starbucks maintains a strict control of the quality of its coffee, as well as service to all its customers. The favored strategy of the high price supports high quality status of the goods, as well as the company's brand. However, when compared with coffee establishments of premium level (Lavazza, Coffee Bean & Tea Leaf), their price is lower than the prices of companies in this category, respectively Starbucks captures another segment - the visitors, who appreciate the taste of coffee, but not willing to pay such higher price at the stores of the premium level. While there is a risk that customers will choose the cheaper goods, offering more expensive products, even though there are cheaper substitute products, in comparison Starbucks justifies the established price.
I think that this strategy is the most important for Starbucks in the longer term. Without this idea - Starbucks is not Starbucks, and itsupports the company's brand is at the proper level. This strategy is a distinctive competitive advantage, and so-called "golden mean" for consumers.
The corporate-level strategies.
Up until 1994 the main strategy of the company was becoming a leader in the sale of high-end coffee and the leading coffee brand in North America, which the company safely reached. Over 7 years, Howard Schultz was focused on growth, he wanted Starbucks to be in every region of America. Despite the fact that with the expansion the company's losses have increased almost twice (1.2 million US dollars in fiscal 1990), as well as overhead and operating expenses, and the company was losing money for three consecutive years, the expansion policy continued. Schulz stood his ground - "not to sacrifice the long-term integrity and value for short-term profit (Shults, Yang, 1997)."
One of the most important corporate strategy of Starbucks is to strive for the possibility of using the entire profit from the investment in the subsidiary, the use of profits in its sole discretion, the exercise of their own long-term marketing strategies. Continuous monitoring of all aspects of the business organization is one of the basic rules of the operating activity of the company, which is feasible mainly due to the expansion of the investment policy.
Gaining experience in the market, Starbucks company optimizes profits by saving on transportation costs, increases sales, and holds the same type of stores for all marketing activities. Due to the establishment of close friendly relations with suppliers, distributors, agents and consumers Starbucks delivers a single product all the coffee shops of its network, while respecting the uniform quality control of the products. This policy has led to the increase of competitiveness of the company.
Nevertheless, the opening of subsidiaries in airports, hospitals and universities proved to be impossible due to legal restrictions of this type of organizations. Therefore, to strengthen its own brand, the company in some cases choose the way of franchising. Selling franchises is a “sore spot” of Starbucks, income from franchise is several times lower than the potential income from operating activities. So when the company has an opportunity to buy the company that owns franchise or become a partial shareholder - Starbucks uses it successfully.
In 1994, Starbucks recognized that the coffee market was at the stage of maturity. It leads to slower growth on the unit of an open institution and profitability of the company. This factor has forced Starbucks to pay attention to overseas markets for future growth and the company has set for itself a new goal - "to approve the Starbucks on the positions of the world's major supplier of high-quality coffee, keeping with the growth and development of its uncompromising commitment to principles."
In order to build the company's business outside of North America, in 1995, Starbucks has created a subsidiary, Starbucks Coffee International with registered capital of $ 1.5 million., which began to open coffee shops in different countries. All of Starbucks, opened in foreign markets, either are owned by Starbucks Corporation or opened with the franchise or as a joint venture (Shults, Yang, 1997).
The partner selection strategy. Starbucks approach to international expansion is to concentrate firstly on the choice of the partner, and then on the country. When choosing a partner, Starbucks focuses on the fact that he has to share the values, culture and goals of the company and has to be interested in its development. Starbucks is interested in partners who can lead the entire process - from start-up to the opening of establishments in the foreign market.
The most important in the long term is a globalization strategy of Starbucks. "A company that masters only its domestic market will eventually lose" (Kotler, 2003)
The competitive environment.
McDonald's is a main competitor of Starbucks. Despite the fact that McDonald's has a slightly different market specialization, it is the main competitor of Starbucks at the US market and on the world market of coffee and snacks.
McDonald's on the business level adheres to the following strategies:
Strictly adhere to the standards of quality, sanitary condition of premises and equipment, service organization, working cashiers;
Continue implementation of the "Made for You" program, involving the installation of more sophisticated equipment, computerization and use of new methods of cooking, allowing customers to fulfill orders quickly and efficiently;
Increase attendance of restaurants, offering new and affordable specialties, increasing portions while maintaining the same price, organizing children's playground at the restaurants;
Improvement of the palatability of dishes and drinks.
Regarding to the coffee production McDonald's has a differ pricing policy than Starbucks. The coffee there has a cheaper price. McDonald's has a strategy as fast food restaurant and did not have any "elit" connotations, making it more affordable in terms of price.
Among corporate strategies can be identified, similar to Starbucks, the global growth strategy that allowed McDonald's to become one of the world leaders:
Developing the uncovered markets, partially own, partially - a franchise, with 90% of these new restaurants to be opened outside the United States;
Explore the possibility of a global infrastructure supplier companies, their experience in the management of complex institutions, the choice of locations of restaurants, marketing activity.
McDonald's and Starbucks global growth strategy is different in that McDonald's is betting on a product that is standardized and identical in foreign markets, while Starbucks adapts its product under each selected market.
McDonald's chooses the strategy of franchising, while Starbucks is trying to do the bias on their own or joint venture.
McDonald's and Starbucks are well known and strong brands, but they are different players. I believe that both companies have an undeniable chance to continue to grow and develop in the long term.
In conditions of slow-cycle and fast-cycle markets.
Slow-cycle and fast-cycle markets are distinguished mainly by the fact that a competitive advantage in the slow-cycle market more protected than in fast-cycle market as often characterized by high cost and long implementation periods.
After analyzing the basic Starbucks and McDonald's strategy, we can say that these two giants are able to survive in the conditions of both markets. Starbucks having a strategy of constant growth and adaptation in foreign markets, as well as high-quality work with partners in the long run on fast-cycle market has every chance of success. This is facilitated by the fact that at Starbucks special attention is paid for a training of the staff. Brand policy regarding human resources management involves a large investment in training and a bonus program for employees, as well as maintaining employee loyalty. (Kotler, Armstrong, 2009). The description of the fast-cycle market is very suitable the following statement: «Markets change faster than marketing» (Kotler, 2003). In the context of fast-cycle market Starbucks may also manifest itself successfully as it is able to be flexible and timely manner to respond to the challenges facing the time. It is proved by quite successful strategies:
Starbucks always has printed materials, which provide information for those who want to know more about coffee;
publishes and distributes a monthly newsletter " Coffee Matters ", which focuses on the romance and culture of coffee;
the introduction of express orders that can be made by phone.
Also Starbucks is not afraid of difficulties in the development of "complex" of new markets. This proves by Starbucks presence in the Japanese market.
It can be concluded that Starbucks has opportunities for successful development in the long term.
References
Armstrong, G., Kotler, P. (2009). Principles of Marketing. Prentice Hall, 961
Kotler, P. (2003) Marketing insights from A to Z: 80 concepts every manager needs
Shults, H. and D. J. Yang (1997). Pour your heart into it: How Starbucks Built a Company One
Cup at a Time. New York: Hyperion.
