Being the result of company’s overall market performance, the competitive advantage is one of the most important characteristics, since it allows investors to estimate the potential business growth. Starbucks is a world known, 5th most admired company. It is successfully operating, which can be described within the four competitive advantage building blocks: innovation, efficiency, quality, and customer responsiveness.
The company is recognized as the high quality product producer: it cares about providing customers with best coffee beans by arranging agreements with certain coffee farmers all over the world; Starbucks operates a list of factories for a better control of roasting coffee beans and assuring fresh products, as well as it has lately purchased “its first coffee bean farm in Costa Rica along with the opening new seven “agronomy and farmer support” centers in Ethiopia” (Trefis, 2014); moreover the company uses best coffee machines equipment and constantly trains its employees – partners to meet high service quality requirements. Meanwhile, Starbucks’ innovation applies to its products and, as the result, company’s product portfolio expansion (examples: limited-time offering Frappuccino, Starbucks’ expanded breakfast sandwich platform, etc.), and to introduction of the various mobile applications, such as Starbucks Mobile Order & Pay app, which is now being used by more than 13 million of consumers in US only (Walsh, T., 2015). Company’s efficiency can be easily tracked by the financial data: “the strategy of hedging coffee prices for longer duration has given the giant coffee brewer and edge over its competitors” (examples: the fixed-priced coffee agreements with suppliers and virtual lockage of its coffee needs) (Trefis, 2014); Starbucks is constantly showing share value increase and provides its investors with higher dividends each year; the strategy for key acquisitions like Evolution Fresh, La Boulange, and Teavana has lead to broader product offerings, and resulted into additional income. The most targeted company’s direction is responsiveness to the customers: it provides clients with a desired “third place” that is comfortable and convenient by location, since placed within an easy walking distance; Starbucks cares for keeping the beverages prices within the same level; the free wi-fi is available for every visitor; for those in rush the company provides pre-order mobile application and tests “smaller express stores in New York City that would reduce client wait times” (Lorenzetti, L., 2014); the usage of My Starbucks Rewards, gift cards and other loyalty programs has lead to a 9 million Starbucks MSR members.
I find Starbucks’ competitive advantage sustainable since the company “targets a more affluent demographic of coffee drinkers that typically exhibit strong brand loyalty, making demand for its coffee more inelastic with respect to price fluctuations” (Trefis, 2014), and due to the high cost of entrance barriers for the competitors to reach the same level, the only sufficient fear for the company is a coffee beans price increase.
References
Walsh, T., 2015. 1 massive competitive advantage that sets Starbucks apart from competitors. The Motley Fool. [Online]
Available at: http://www.fool.com/investing/general/2015/02/12/1-massive-competitive-advantage-that-sets-starbuck.aspx
[Accessed 2nd March 2016].
Symington, S., 2015. 3 ways Starbucks is ahead and shoulders above the competition. The Motley Fool. [Online]
Available at: http://www.fool.com/investing/general/2015/10/01/3-ways-starbucks-is-head-and-shoulders-above-the-c.aspx
[Accessed 2nd March 2016].
Lorenzetti, L., 2014. Fortune’s world’s most admired companies: Starbucks, where innovation is always brewing. Fortune. [Online]
Available at: http://fortune.com/2014/10/30/starbucks-innovation-cafe-to-classroom/
[Accessed 2nd March 2016].
Trefis, 2014. Why Starbucks has an edge over competitors despite rising coffee prices. Nasdaq. [Online]
Available at: http://www.nasdaq.com/article/why-starbucks-has-an-edge-over-competitors-despite-rising-coffee-prices-cm358945
[Accessed 2nd March 2016].
Mordoukoutas, P., 2013. Starbucks and MacDonald’s winning strategy. Rorbes. [Online]
Available at: http://www.forbes.com/sites/panosmourdoukoutas/2013/04/25/starbucks-and-mcdonalds-winning-strategy/#13201f4e2160
[Accessed 2nd March 2016].
