Abstract
The coffee industry is found to be greater compared to the sales from soft drinks and other beverages. Two of the best companies when it comes to coffee and to other pastries are Starbucks and Dunkin’ Donuts. Dunkin’ Donuts reported to just slightly outperforms Starbucks when it comes to overall coffee sentiment. However, it was also discovered that Starbucks takes the lead when it comes to regular coffee while Dunkin’ Donuts leads when it comes to iced coffee.By looking on the core values and the strategic management of these two similar organizations, the paper aims to explain how they operate and who is superior over the other. The SWOT analysis of the two companies will also show the similarities and differences of the two in terms of their operations and success.
Starbucks and Dunkin’ Donuts are two corporations which aim to please their consumers with their diverse products and efficient customer services. It has been found out that Starbucks’ revenue has been increasing with its domestic and international expansion. Dunkin’ Donuts on the other hand sustains its revenue from their diverse product and loyal customers who appreciate their market strategies by giving free coupons and with their products which have lower prices. Both companies want to give the highest quality of products and services to its consumers. Both companies also face the threat of the fluctuating prices for their raw materials that is why Starbucks deliberately needed to increase their prices.
Overall, it was researched that Starbuck, which has the bigger revenue has a better strategic management and has stronger core values with their diverse workforce. Internationally and domestically, Dunkin’ Donuts is lagging behind in terms of expansion and the weakness of the company relies on the poor franchise relations.
Organization Names
According to a recent study conducted by the National Coffee Association, coffee consumption is greater than soft drinks for the majority of Americans. In fact, the coffee sales are increasing by 20% every year and it accounts nearly 8% of the $18 billion US coffee market. When it comes to coffee sentiment, Dunkin’ Donut slightly outperforms Starbucks, however, in terms of overall revenue; Starbucks is the one ahead of (Mersdorf, 2014).
Dunkin’ Donuts is an American global coffeehouse chain and doughnut company which is based in Canton, Massachusetts in Greater Boston. The company was founded by William Rosenberg in 1950 in Quincy, Massachusetts. Since it was founded, the company has grown to become one of the largest coffee and baked goods chains in the world with over 11,000 restaurants in 33 different countries(Upadrashta, Holsted, & Slade, 2012, p. 4).
The company operates in a highly competitive part of the food retail industry. The company focuses on brand recognition, customer service, product quality and competitive pricing in order for it to maintain its market share. Studies show that the company’s recent earnings have been constantly strong and its sales revenues have been growing domestically and internationally. With its core values, the company was able to rebound slowly from recent recession; however, it stays behind many of its larger competitions which have demonstrated stronger financial health. By the end of July 2011, the company only made 20% of its sales from donuts and 60% of its US sales from their coffee and other drinks which is behind Starbucks’ and other competitors like Krispy Kreme(Upadrashta, Holsted, & Slade, 2012, p. 4).
In 2015, the Dunkin; Brands experienced a positive year compared to the challenging food distribution environment in 2014. The company expanded more than 18,800 outlets in 60 different countries in its 65 years of operation. At the end of 2014, the company has nearly 100% of franchise business model which included about 11,300 Dunkin Donuts restaurant and 7,500 Baskin-Robbins locations.
One of the core strengths of the company is brand recognition which is also part of their company culture and strategic objectives. With its strong loyalty line, it became one of the most recognizable quick service restaurants in the globe. Another important strength of the company is its convenient services. The stores offer customers with time saving opportunities that are important during the rush hours in the morning. A lot of its location also offer drive up services and others are located in busy places like airports, train stations and other travel ports which are in need of fast services (Scrudato, 2015).
The company has two weaknesses it has to address in order to be ahead of its competitors: its poor franchise relationships and lack of domestic expansion. Based on the company’s history, there are a significant number of lawsuits against its franchisees. The lack of domestic expansion is also one of the reasons why Dunkin’ Donuts could not surpass Starbucks in its sales in the US. The current map of its restaurant suggests that the company should be able to build stores in the Northeast of the country (Scrudato, 2015).
However, the opportunity for international expansion became open to the company with the expansion efforts in Europe, China and Middle East generating over 19,000 locations and this is expected to expand to 30,000. Another opportunity that the company is looking into is diversifying its menu. For many years now, the company entertained the idea of breaking into the lunch and dinner parts of the day over the years. It added new sandwiches and drink options to its menu to be able to meet the growing demand of its customers (Scrudato, 2015).
The main objectives of the company areexpanding the brand nationally and grow internationally with focus and discipline. The company plans to reach these objectives by completing short term operational tasks, investing in product development, sales, marketing and production. The company plans to expand by introducing new products, sales strategies and by increasing its production. It plans to grow by encouraging a balanced lifestyle options to its consumers and identifying new product opportunities and also introducing employee training programs. However, Dunkin’ Donuts has a strong competition over companies like Starbucks which is their number one threat. Aside from that, the raw material costs for coffee and other commodities are always subject to fluctuations (Scrudato, 2015).
Starbucks on the other hand is an American coffee company that also owns a coffeehouse chain that is based in Seattle, Washington. It is considered to be the largest coffeehouse company in the world with over 21,500 stores located in 65 different countries which includes China, Japan, and Canada and in the United Kingdom. The company culture of Starbucks focuses on values like respect and diversity which is also the core of their leadership competencies. Their goals of diversity and inclusion include a diverse workforce and increasing the cultural competencies of their employees and also developing a diverse network of suppliers ("Diversity and Inclusion | Starbucks Coffee Company," n.d.).
Starbucks has been internationally recognized and leads ahead of Dunkin’ Donuts. The company’s main strength is its strong financial performance making them the number one coffee and beverage retailer in the world. With its value of $4 billion, its brand and mind recall among its customers symbolizes excellence and quality compared to its consumers. The company is also known for its people management with its positive and welcoming workplace for its employees and this is because of their goal of diversifying their workforce.
However, just like Dunkin’ Donuts, one of the company’s weaknesses is the fluctuating prices of its raw materials. This is also the reason why its products are more expensive compared to the products at Dunkin’ Donuts. In order to address this problem, the company has an opportunity to expand its supplier network and also the range of suppliers from which it orders its sources (Roby, 2011).
Overall, Starbucks is ahead of Dunkin’ Donuts. In terms of global strength, Starbucks plan to double its existing stores in countries like China and Brazil. Dunkin’ Donuts on the other hand, although the company has plans for more expansion globally, they are following a steady track with fewer stores in China and just recently passed the 3,000 mark of retail stores outside the United States. In terms of organizational strength, Starbucks still has the lead over Dunkin’ Donuts since Starbucks focuses on its core strengths rather than focusing to generating more franchise stores like Dunkin’ Donuts. The more franchise stores Dunkin’ Donuts have, the less control it has how the stores run (Magee, 2011).
With pricing and menu diversity however, Dunkin’ Donuts is ahead of Starbucks. Technically, Dunkin has cheaper products compared to Starbucks and is much more popular to customers in an economic downtown. Dunkin’ Donuts also has a diverse number of products compared to Starbucks because the company also owns the Baskin-Robbins chain. However, the profitability and sustainability still claims Starbucks as superior (Magee, 2011).
References
Champagne, C., &Iezzi, T. (2014, August 21). Dunkin’ Donuts And Starbucks: A Tale Of Two Coffee Marketing Giants | Co.Create | creativity + culture + commerce. Retrieved from http://www.fastcocreate.com/3034572/coffee-week/dunkin-donuts-and-starbucks-a-tale-of-two-coffee-marketing-giants
Diversity and Inclusion | Starbucks Coffee Company.(n.d.). Retrieved from http://www.starbucks.com/responsibility/community/diversity-and-inclusion
Magee, D. (2011, July 29). Dunkin' Donuts vs. Starbucks: Starbucks Leads the Scorecard. Retrieved from http://www.ibtimes.com/dunkin-donuts-vs-starbucks-starbucks-leads-scorecard-819741
Mersdorf, S. (2014, September 8). Coffee Controversy: Starbucks v Dunkin’ Donuts [Web log post]. Retrieved from https://www.newbrandanalytics.com/blog/2014/09/coffee-loyalty-matchup-starbucks-v-dunkin/
Roby, L. (2011). An Analysis of Starbucks as a Company and an International Business(Master's thesis, Liberty University).
Scrudato, R. J. (2015, April 21). Dunkin Brands: A Short SWOT Analysis. Retrieved from http://www.valueline.com/Stocks/Highlights/Dunkin_Brands__A_Short_SWOT_Analysis.aspx#.VZ4HP_mqob0
Upadrashta, P., Holsted, N., & Slade, T. (2012). Griffin Consulting Group.Dunkin' Brands Group.
