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Starting with the latter, it seems obvious that the organization should continue its international expansion, because it will increase its market share, as well as its long-term revenues. At the same time, international expansion will help the company diversify its customers and tap into the new markets of Asia and Central and Eastern Europe.
The international expansion should be pursued through the internal instruments of the company alone rather than through entering alliances or joint ventures. The main reason for this is that such alliances might dilute the brand rather than bring palpable positive elements to the company's development.
However, expansion should also be done internally through the diversification of the portfolio of brands and products. This will imply investing in research and development, but also an important marketing campaign, aimed both at maintaining the global brand and in informing the potential and current customers about new developments, new products, as well as on existing ones and current trends.
The costs involved with these three strategies will most likely be quite significant. However, this is a sustainable effort to capitalize on the company's strong global brand image and on the fact that the company has always been associated with quality products, customer service and unique atmosphere. In the same manner, when the economic crisis passes and the global economy starts to rebound again, the company will find itself in a privileged position as compared to its competitors.
Starbucks is operating in the premium coffee market, offering premium products at premium prices. Lately, the company has also diversified into other industries, such as the music industry, but it remains, primarily, a company operating in the retail coffee industry. Its history and quality of products have ensured a leadership position on market for the last decades.
However, currently, there are several threats on the market, coming both from the competitors and the economic downturn. The latter seems to have contracted the premium coffee market, mainly because individuals are no longer as willing to pay as much as $4 for a coffee product. They have turned to cheaper product, to the regular coffee or to simply brewing it in their own homes before going to work.
In terms of competitors, several companies have developed similar business formulas based on premium coffee and a pleasant coffee shop atmosphere. Among these, one can enumerate The Coffee Shop. It is difficult to differentiate one's products from similar products that another company develops, which is one of the threats for Starbucks. As a leader in the market, there will always be a temptation from some existing Starbucks customers to go and try products from other companies.
As the economic downturn passes and the global economy resumes its growth, one is expected to see the rebound of the coffee retail industry as well and, possibly, the addition of new competitors to the market.
As mentioned, the company's focus should be both in the present and in the future. In the present, the company is affected, as all other economic actors, by the current economic crisis. In order to counter the effects that this crisis may have, the company should have a prudent, financially sustainable approach that will include a cost reduction strategy aimed at cutting out those products that are no longer profitable and giving up on stores in some regions that, again, are not turning the right figures.
The company also has to focus on its future and on the future development of organization. For this, expanding internationally seems like the best recommendation. There are several developing markets around the world, where the potential customers have increasing incomes and where Starbucks could benefit from the idea of new and innovation that it can bring about in these markets.
A final recommendation is that the future and present approaches should be well balanced in terms of costs and expenses. On one hand, the company needs to invest in its future development, but, on the other, it also needs to watch out for its costs, especially since the SWOT analysis pointed out to this as being one of the company's weaknesses. Balancing development with the cost reduction strategy will probably be the most important and difficult challenge that Starbucks management will face.
1. Starbucks 2008 Annual Report. On the Internet at http://media.corporate-ir.net/media_files/irol/99/99518/AR2008.pdf. Last retrieved on July 12, 2009
2. Starbucks Corp. report. December 1999. On the Internet at http://www.johnson.cornell.edu/parkercenter/docs/studentresearch/1999_fall/sbux.pdf. Last retrieved on July 12, 2009
3. Prinzo, Reid. Starbucks Company Analysis. Associated Content. On the Internet at http://www.associatedcontent.com/article/87149/starbucks_company_analysis.html. Last retrieved on July 12, 2009[continue]
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