Starbuck's Strategy and Internal Initiatives for Profitable Case Study

  • Length: 10 pages
  • Subject: Business
  • Type: Case Study
  • Paper: #89738645

Excerpt from Case Study :

STARBUCK'S STRATEGY AND INTERNAL INITIATIVES FOR PROFITABLE GROWTH

Starbuck's Strategy and Internal Initiatives to Return to Profitable Growth

Starbuck's Strategy and Internal Initiatives to Return to Profitable Growth

Strengths

Weaknesses

Opportunities

Threats

Michael Porter's 5 Forces Model

Industry Competition

Threat of New Entrants

Buyer's Bargaining Power

Bargaining Power of Suppliers

Formulate Strategic Marketing

Improve Standing of Stock Market

Starbuck's Strategy and Internal Initiatives to Return to Profitable Growth

As Starbucks was expanding, another emphasis was set on hiring talented leadership in managing the huge momentum of the organization. Significant amount of resources was geared towards developing an organizational infrastructure, which would satisfactory support the expected prospective size of Starbucks. Schultz accepted that numerous business visionaries failed by not making the correct systems and processes to guarantee a suitable establishment for their entrepreneurial divisions to be actualized. Together with his partners, he made the planning, legal logistics, accounting and financial important for the company to go national in the late eighties. A defining moment for the firm was in the 1990s, when substantial amounts of clients in San Francisco, Los Angeles, Chicago and other major urban towns started drinking Starbucks coffee consistently (Thompson & Shah, 2010). It appeared that Starbucks had hit a crucial mass. Their belief in word of mouth over the conventional marketing campaigns was starting to obtain long anticipated profits.

Senior administration accepted intensely that the most imperative of their organizational assets was the relationship encouraged between Starbucks and the representatives. The company's philosophy was embedded in the way that each dollar earned passing through the hands of a Starbucks' representative. Therefore, the representatives had a significant impact on client's estimation to Starbucks. Starbucks puts incredible attention on employee confidence and satisfaction levels. Numerous policies inside Starbucks have been adapted to make its inner culture agreeable for workers. They include their inventive full health insurance program for all representatives working more than twenty hours a week. In 1993, Starbucks preceded its combative extension and moved into the East Coast market by building presence in Washington. This development has proceeded. Today, Starbucks operates more than sixteen thousand stores globally and utilizes a hundred and fifty workers. The company grosses approximately ten billion in annual income and is opening five new stores each day. The organization presently markets to five percent of the planet cafe drinking market. It is probable that they will offer more (Thompson & Shah, 2010).

Starbucks rivals players both inside the specialty segment and against those outside the specialty coffee segment. A few samples of contenders inside the specialty coffee sector like Tully's coffee, Caribou Coffee, and other minor chains. Those outside the specialty market include Proctor & Gamble, Dunkin Donuts, McDonalds, and various other coffee serving foundations. Starbucks leverages the loyalty of its customers, premium quality coffee, and the comfortable climate of its stores to battle competition.

Introduction

Established in 1971, Starbucks is presently positioned as the world's chief roaster and retailer of specialty coffee. Starbucks' triumph is the aftereffect of their dedication to brand improvement and development in the market center. Since its presentation, Starbucks has been committed to the core qualities of furnishing clients with premium cafe and a community space. Innovative improvements have permitted SBUX to stretch operations. Such enhancements incorporate new entertainment items, beverages, recently through Ready Brew, a premium instant coffee item.

Analysis

SWOT Analysis

An evaluation of the internal organizational qualities and external elements is fundamental keeping in mind the goal to have a clear perspective of the Starbucks' abilities and position in the industry. An assessment of the organization's qualities and shortcomings and the threats and opportunities confronting it will help in confirming the organization's anticipated activities and strategic changes.

Strengths

The primary strength of Starbucks is its flawless brand image and reputation. The organization is known to convey high caliber items and client services. Regardless of its excessively priced cup of coffee, produced utilizing high caliber Arabica beans, the vast majority of its clients keeps returning to the store to feel the "Starbucks experience" the organization has guaranteed to its clients. In this way, the cost of its coffee is not the issue but the nature of the services the organization gives to its clients. The coffee is remarkable and divine, but it is not the main excuse for why customers like to visit every day. The spot has vigor and is well run.

Besides its solid brand, Starbucks also has access to high quality raw materials and resources (Thompson & Shah, 2010). They obtain their Arabica beans exclusively from coffee plantations. Portions of its raw materials from Fair Trade affirmed. The organization also has worthwhile access to channels of distribution. Its commercial stores and coffeehouses are spotted in strategic ranges. Some stores are just about a short distance away or are sometimes facing one another on either side of the road. Starbucks is additionally known to treat its workers well, paying its staff with above-market wages and salaries.

Weaknesses

One of the shortcomings of Starbucks is its horribly overpriced coffees. Whilst the organization focuses on the well-off executives, youthful and old, as its essential market, the present investment conditions make the clients get sensitive to costs of products and commodities. The recurrence of client visits may be reduced because of the present economic scenario. Consequently, Starbucks' current price strategy might be inappropriate and must be revised. Besides the pricing technique, the Starbucks coffeehouses' reputation as lavish "Third Place" appears to be vanishing. With stores mostly facing one another, the lavish experience that the clients needed appears to be reducing. It is progressively coming to be like a fast food chain; just the costs of its items are much higher (Thompson & Shah, 2010).

Opportunities

Regardless of the present economic turmoil, a few opportunities are accessible for Starbucks to develop. Its penetration in consumer products appears to be performing productively that other segments, U.S. households, and global segment. In its Second Quarter Report of the 2012 financial year, the organization expanded its operating income to six percent in spite of a two percent drop of income, contrasted with the same period the previous year (Thompson & Shah, 2010). Its different segments have altogether higher declines in profits and revenues. This implies that the organization can capitalize progressively on the global consumer items segment whilst recuperating from the other two business segments.

The global business sector has additionally demonstrated a great promise for Starbucks. The economies of the rising markets are developing at a fast pace. The organization can capitalize on this development by combatively venturing into these nations. Utilizing its central strategies demonstrated within the past segments and recommendations at the end of this work, the firm can expand its income and benefit by penetrating into the developing markets.

Threats

The entry of two vast organizations and their quick rise in the specialty coffee market presents the soundest danger to Starbucks' strength. McDonald's and Dunkin' Donuts are imposing rivals to Starbucks. These two organizations have the proficiencies to match the Starbucks' marketing activities and distribution channels. The two fast food chains can emulate Starbucks as far as financial resources. Starbucks still faces the same old aged criticisms about the overpriced coffee. Consequently, its image is, no doubt threatened, particularly now that the economy is not improving. The present worldwide economic emergency likewise represents a threat to Starbucks (Thompson & Shah, 2010). As reflected in the organization's economic reports, its revenues and profits are on the downward trend because of the disheartening economic condition.

The organization's stock shares are likewise not productive in the stock market trading, principally because of its low revenue and income. The economic crisis worldwide is pounding on the organization's profitability. Starbucks' strengths far exceed its shortcomings. The organization's shortcomings relate to its pricing technique. It might be seen that its notoriety as a rich coffeehouse is decreasing, but that could be cured by actualizing a new strategy, which have been recommended. Even with the numerous opportunities, the organization can overcome the dangers postured by new industry entrants and global economic crisis by capitalizing on its strengths.

Michael Porter's 5 Forces Model

This section applies Michael Porter's five forces model to understand the position of Starbucks in the current specialty coffee industry.

Industry Competition

The most great among the five forces is industry competition. It has the most amazing potential to affect the competitiveness of the industry and thus the rate of benefit for organizations. Although the collective strength of the five forces confirms a definitive benefit potential for an industry, industry competition is the integral component in the determination of such benefit rate. If rivalry inside the industry is calm, or there are just not many contenders, the rate of benefit is ordinarily higher, but if the rivalry is extreme, organizations cannot hope to win fabulous investment returns (Thompson & Shah, 2010).

The organization is likewise engaged in the consumer item segment offering packaged coffee drinks, ready to drink coffee, whole grain coffee, and other comparable item depictions. In the consumer items section,…

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