Introduction
Starbucks enjoys fame and success on a global scale. It is a coffee company whose story began in the United States and expanded all over the world. Starbucks boasts of presence in almost all the major cities around the world. Starbucks has endeared and sold its image to its clientele as a premium organization that offers quality products.
For a customer walking into a Starbucks shop, they do not only enjoy the coffee but also the social status that comes with associating with the Starbucks brand. The success of Starbucks, however, is enshrined in a journey of decisions, failure, and success. Starbucks was founded back in the year 1987 with a mere nine-store shop chain in Seattle, Washington. Now with a presence in over 55 countries and an estimated 13 billion dollar revenue return in 2012, one can realizes its success story in the coffee business (Thompson, n.d.).
The journey of Starbucks began in 1971 with the conception by Zev Siegel, Gordon Bowker, and Jerry Baldwin. The idea behind its design was to move away from the traditional coffee bar and instead develop a retail chain. The resounding goal by the creators was to develop a unique coffee retailing company that would offer its clients the premium and finest coffee in the world (Elms, Low, World Trade Organization and Temasek Foundation, 2013). .
The mission of the company was to ensure that it would nurture the human spirit through its coffee products one person at a time. In order to attain its mission, the company had to come up with principles that would allow it to achieve its end goal. One of its principles was to ensure that it would provide the best working environment for its employees in a way that would cultivate respect and integrity.
The second principle was in regards to embracing diversity. Application of excellence in roasting and purchasing coffee formed another key principle of the company. Focusing on profitability, enriching and positively impaction on the communities and ensuring satisfaction of the customers sum up the other principle that the firm developed.
SWOT Analysis
Starbucks as a company enjoys a number of strengths in its business sector. For one, the company has managed to develop a unique brand to its customer base and the world at large. It focuses on making sure that its image is strong enough, and this became critical in entering new markets and warding off competition (Thompson, n.d.).
The coffee offered at the Starbucks retail shops is usually of top quality. A customer walking into any of the retail shops around the world is guaranteed of quality products and services. Beyond the products and services, Starbucks has managed to develop a unique aspect of status and experience that a customer finds as an added element of the services of the company.
The huge profits and success have also allowed the company to heavily participate in corporate social responsibility activities which a go a long way in expanding the visibility of its brand. Despite the great strengths, the company has a number of weaknesses. For one, the price of its products is relatively high and thus discriminates against some customers. Up to 65% of the company’s market share is within the United States market (Thompson, n.d.).
This is a risky strategy when one considers the volatility and dynamics of the markets. A concentration in one area posits a greater risk in comparison to dispersion with relatively reduced the degree of risk. Another major challenge or weakness is in regards to the increasing health concerns regarding some of its products. Starbucks has a myriad of opportunities, which it can venture into.
For one, it can further diversify its menu and product offering and guarantee its clientele a greater diversity. Another opportunity lies in international expansion owing to its already proved strategy on the global market. Starbucks, however, has to prepare to face the challenges such as the fluctuations in coffee prices in the global market. The volatility of the global economy is also a major challenge and threat to the company. It leaves the company in a vulnerable position in owing to the volatility and unpredictability of the market.
Starbucks Competitive Strategies
The critical issues for the company from the case study include increasing and maintaining profitability regardless of the market dynamics and competition. Increasing competition from around the world also means that the Starbucks has to put its market share into consideration. Exploring means of entrance into new markets and expansion does offer the company a lifeline and competitive advantage.
With the fluctuating prices and production of coffee around the world, Starbucks has to find ways of reducing its costs. This can be achieved by finding new suppliers for its various products. In an effort to reach out to a greater market share, Starbucks also diversified on its products offerings by incorporating the sale of products the traditional retail stores (Thompson, n.d.).
This was achieved through partnerships with companies like PepsiCo and Tazo Tea. Constant innovation is also an element that the company focuses on to ensure that its stays ahead of the competitive market. By focusing on quality all along its value chain, Starbucks does guarantee its customers an experience of quality service and product.
Competitive Analysis
Starbucks has three major competitors according to the case study. Dunkin Donuts that has up to 6,700 coffee shops is one of the competition partners that Starbucks faces. American people preferred the Dunkin’ Donuts to those at Starbucks. Dunkin also increased its online marketing strategies and sports marketing that saw it increase its traffic by 61% (Rosenbloom, 2013).
McDonalds Maccafe with a population of up to 31,000 restaurants worldwide is the second major competitor that Starbucks had to contend with. The company has been the preferred restaurant in offering breakfast for years. It has also managed to increase its new line of coffee drinks including offering the frozen coffee for the summer season (Brizek, 2014).
Corporate Social Responsibility
Starbucks believes in the ideology that a good and stable business relies on a balance between social consciences and profitability. In exercising social consciousness, Starbucks focuses on ethically sourcing for its products from its suppliers. This ensures that it the company avoids lawsuits and it grants more benefits to the society (Thompson, n.d.). Starbucks also has a number of programs to cater for its environmental stewardship. It also focuses on making charitable contributions to ensure that the social well-being is elevated.
Recommendations
In relation the case study, a number of recommendations can be deduced. With the increased technological space and innovation, Starbucks should utilize these platforms to increase its marketing and advertising approaches to allow them to reach out to more customers. Utilizing platforms such as Facebook and Twitter, Starbucks can enhance its interaction with their customers thus increasing customer loyalty (Hitt, Ireland & Hoskisson, 2007).
There is no doubt in regards to the quality that Starbucks offers to its customers. However, there is a need for constant evaluation of suppliers in an effort to ensure reduced costs and better quality is attained for the customers. Strategies for expansion into new markets should be enhanced to ensure a better brand awareness is realized, and market share gained. Caution should, however, be exercised in the expansion process and should be characterized by cultural analysis prior to entrance. The menu at Starbucks has very few products for children customers. This is an area that has to be addressed if they are to tap the hugely unutilized market.
Conclusion
Having entered the global market, Starbucks had to contend with an increased degree of competition, complex market dynamics and cultural differences in the new markets. To remain at the helm of its market domain, Starbucks had to adapt to the market changes and to develop innovative means of retaining their market share. The case study analysis provided provides meaningful insights for the reader regarding the journey of Starbucks and its success trail and expansion strategies.
Growth and success of a multinational corporation are pegged on a myriad of components. All the systems within an organization should be able fluidly and efficiently operate if the company is to attain growth. The human resource component, planning, strategies and capital have to be managed efficiently. As exposed in the case study, the concept of success lies in the ability of a company to adapt to changing market dynamics and manage to remain innovative in to maintain its market dominance and customer loyalty.
References
Brizek, M. G. (2014). Coffee wars: The Big Three: Starbucks, McDonald's and Dunkin'Donuts. Journal of Case Research in Business and Economics,5, 1.
Elms, D. K., Low, P., World Trade Organization., & Temasek Foundation. (2013). Global value chains in a changing world.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2007). Strategic management: Competitiveness and globalization : concepts. Mason, OH [etc.: South-Western.
Rosenbloom, B. (2013). Marketing channels: A management view. Cincinnati, Ohio: South-Western/Cengage Learning.
Thompson, A. Arthur. (n.d.). Starbucks In 2012 Evolving Into A Dynamic Global Organization. Retrieved March 07, 2016, from http://qreta.com/starbucks-in-2012-evolving-into-a-dynamic-global-organization.html
