In business, organizations embrace broader strategies to counter competition. However, regardless of the strategies chosen, factors such as the target market as well as competitive advantage align the business towards countering any competition from rivals. Since its inception, Starbuck has employed a differentiation strategy. The firm has concentrated on a wider segment of the coffee market. Schilling (259) points out that since 2013; differentiation strategy has assisted the company remain the undisputed leader in the coffee business. According to Schilling (259), while embracing the strategy, Starbuck had accumulated over thirteen million dollars. Besides, it had over nine thousand branded cafes in forty locations around the world.
Should Starbuck lower its prices to rival MacDonald’s?
Since it was established, Starbuck has continued to embrace differentiation strategy to distinguish itself from other food chain competitors. According to Schilling (260), though the firm has dominated the U.S market, accounting for over 50% of special coffee for decades, the Macdonald and other companies such as Dunkin Donuts have sustained severe competition on this food chain. These two competitors have targeted Starbuck’s customer base with high-quality coffee at a lower price compared to Starbuck. These strategies employed by Macdonald’s justify Starbuck to raise its price to counter MacDonald’s move. Since the reputation of Starbuck is widely recognized, high price will not have a severe impact on its customer base.
Value Chain Activities
Improving service delivery and business operations has been a hallmark of Starbuck. One of the value chain activities Starbuck needs to address is advertising. Despite having a large number of stores located around the world, Starbuck face threats emanating from local competitors such as MacDonald’s and others Schilling (260). These competitors have been wooing Starbuck’s customers. Also, Starbuck faces global challenge from other established food chains. Starbuck will counter these threats by implementing effective advertisements and value chain. According to Schilling (261), Starbuck has been reluctant in investing in an advertisement. Starbuck spent less amount of money ($182.4) million compared to $ 787.5 used by Macdonald Schilling (263).
Starbuck used to rely on word of mouth as a cost cutting measure to carry out ad function. However, a new business environment has brought significant dynamics in the coffee market. Though the firm has consistently increased more budgets for this activity, more needs to be done to counter threats from perennial and new competitors in the industry.
Another activity which Starbuck needs to improve is the service. Superior service is necessary to retain and attract customers according to Schilling (263). Though this has been a defining feature for Starbuck over the years, the existing competitors have refined their service delivery; hence, Starbuck needs to review regularly its service delivery to ensure it is distinct compared to that of its competitors.
Starbuck’s Resources and Capabilities
Over the years, Starbuck has grown from strength to strength owing to its resources and capabilities. According to Schilling (263), Starbuck has professional and skilled human resources. The firm has highly invested in its employees through offering training programs to equip them with the skills needed in the coffee industry. Training offered by the company has contributed to higher employee retention, translating to lower costs, high-quality service as well as decreasing higher turnovers.
The firm has also invested in equipments (Schilling 263). The company has coffee automated equipment which helps in saving time as well have improving coffee taste at every taste of processing. The pieces of equipment Starbuck possess guarantees a competitive advantage over its rivals.
Starbuck is a brand known in the coffee world. The firm has used its name to gain a reputation around the world. A person identifies Starbuck with product quality and excellent customer service. The company has used this status to its advantage.
Starbuck is also forging a stronger connection with its customers. It encourages its employees to assists customers in making decisions regarding the types of grind, beans and espresso machines to select. It uses this strategy to establish a long lasting connection with customers. This capability has helped the firm retain its existing customers as well as attract new potential customers in its business.
Sources of Sustainable Competitive Advantage
Starbuck derives its sustainable competitive advantage from its customer experience. Over the decades, the firm has built and maintained a long-term relationship with its clients. Besides the fine coffee, the company provides, the design of the business stores allows “seductive environment to drink” for customers Schilling (263).
Starbuck has also invested in its employees as a primary strategy for competitive strategy. The case study illustrates that Starbuck has created an empowering tradition, ownership programs, and employee benefits (Schilling 263). Also, employees are empowered to contribute to organizational decisions. Starbuck also offers training programs to improve employee’s skills and knowledge.
Impact of Major Trends Affecting the Coffee Business
Ethics is among the trend shaping the coffee business. There is a concern over how employees picking coffee are treated. An example in the case is in Guatemala. The case shows that people picking coffee beans are poorly remunerated. In Guatemala, it is shown that coffee pickers are paid $ 3 a day (Schilling 265). This is unethical for a whole day’s work.
Another trend affecting the coffee business is technology. New forms of technologies are becoming a norm in the industry. It is, therefore, hard to keep with the pace of technology. For example, there are new technologies for handling advanced roasting of coffee beans.
Social effects have also arisen. People have raised the issue of high caffeine available in coffee. They view that the high concentration is not safe for some groups such as those suffering from certain diseases such as hypertension.
Key issues in Starbucks’ Industry Environment
The increasing importance of lifestyle check and minimizing intake of caffeine for some people with medical conditions is a critical issue. Starbuck has to follow this issue keenly. The business should address the issue by finding alternative for customers who cannot take caffeine. Perhaps, a decaffeinated option should be made available for this market segment.
Starbuck imports most of its coffee from as far as Guatemala. The issue of climate change may as well have an effect on coffee production making it more expensive in the long run.
Starbuck faces competition from its rivals such as MacDonald’s and Dunkin Donuts among other competitors. In this case, Starbuck should develop a healthy relationship with its customers and develop appropriate strategies to counter this competition.
How firm is Starbucks’ competitive position?
Starbuck is a strong brand in the coffee business. The brand has made the company popular with many people. It has firmly used its logo as a trademark in all of its cafes to entrench its brand among the consumers Schilling (263).
Also, the case study explains that the processing of Starbuck coffee beans is done ethically. This perspective has a positive influence on the company because consumers are increasingly concerned with corporate responsibility and sustainable production.
Starbucks’ performance to date
Starbuck has continued to perform better despite facing stiff competition from its major competitors such as Macdonald. The case supports this performance. For example, in 2013 the company recorded over 13 billion revenues. In 2012, the business made 17.6% profit compared to other competitors such as MacDold’s (16%), Dunkin Donuts (3.4%) and Green Mountain Coffee (10.9%). Overtime, Starbuck has endeavored to improve its products and services. It has achieved these processes through branding, building company reputation and engaging in corporate social responsibility. Also, the company has expanded, incorporating new menus with more drinks and food options. Schilling (266) shows that by 2013, Starbuck had acquired various businesses such as Evolution Fresh, Bay Bread, and La Boulange Bakery.
Work Cited
Schilling, Melissa A. Case 19: Starbucks. New York: New York University
