Starbucks Continues to Define Coffee Essay

  • Length: 7 pages
  • Sources: 4
  • Subject: Business
  • Type: Essay
  • Paper: #84823878

Excerpt from Essay :

Business and Corporate Strategies

Analyze the business-level strategies for the corporation you chose to determine the business-level strategy you think is most important to the long-term success of the firm and whether or not you judge this to be a good choice. Justify your opinion.

The most influential competitive business-level strategy that Starbucks has put in place is differentiation. Starbucks focused on creating an aspirational and consistent brand that would translate to different product markets (Thompson & Strickland, 1999). Starbucks offers a wide variety of coffee products, drinkware and accouterments, music and Wi-Fi, and personalized customer service (Flight, 2007). But the key differentiation perceived by Starbucks customers seems to be the ambience that is at once soothingly familiar and intellectually exciting (Thompson & Strickland, 1999).

Starbucks customers perceive that the company provides value through the beverages it provides and through a particular sensuality that is referred to as The Third Place Experience (Thompson & Strickland, 1999). The Starbucks cache isn't derived solely from the price of a cup of Starbucks coffee, a symbolic statement of status and discretionary funds that has become a bit timeworn (Flight, 2007). What seems to compel customers to seek out a Starbucks store wherever they are is the familiarity and the welcome. It is not an accident that Starbucks has become a de facto second office -- or even the only office -- for business people; Starbucks doesn't ask customers to give up their tables and move along. This is the essence of Third Place.

The overarching corporate strategy that strongly contributed to Starbucks popularity was to create an aspirational brand. Brand consistency, a consumer-driven expectation strengthened by large fast food chains, is important to Starbucks' customers (Thompson & Strickland, 1999). To insure consistency, when a new Starbucks store opens, a selection of the most competent baristas are sent to work during the launch and to train the baristas who will eventually work in the store (Thompson & Strickland, 1999). Starbucks developed an internationalization strategy to enable the company to open stores and franchises in countries across the globe (Hoovers, 2014). Although the idea for Starbucks stores was conceived in the coffee bars of Italy, for many years, the Starbucks Coffee Company was a local enterprise (Thompson & Strickland, 1999). Founded in 1971 Pikes Place Market in Seattle, Washington, the company set out to provide the finest fresh-roasted coffee in the city (Thompson & Strickland, 1999). Pikes Place Market is a top tourist attraction in the Pacific Northwest; the popularity of the marketplace drew people from all over the country and around the globe. Visitors to Seattle who sampled the Pike Place roasted coffee wanted to be able to access Starbucks coffee in their own hometowns. In 1981, Howard Schultz visited a Starbucks store, downed a Sumatra, and the very next year, was working for the company (Thompson & Strickland, 1999). On a visit to Italy in 1983, Schultz was captivated by the hand-crafted Italian caffe and the special role that the coffeehouses played in the daily lives of Italians (Thompson & Strickland, 1999). Following a short stint when he established his own coffeehouse, Il Giornale, Schultz returned to purchase Starbucks along with other investors (Thompson & Strickland, 1999). Howard Schultz expanded his vision for Starbucks Coffee Company well beyond the evergreen state of Washington. Starbucks growth was astronomical and the marketplace was soon saturated (Hoovers, 2014).

2. Analyze the corporate-level strategies for the corporation you chose to determine the corporate-level strategy you think is most important to the long-term success of the firm and whether or not you judge this to be a good choice. Justify your opinion.

Starbucks employs a dominant business form of diversification. Through a strategy of internationalization, Starbucks has been able take its growth to new markets where the evolving product lines could be reinvigorated in global markets (Hoovers, 2014). Evidence of Starbucks diversification is both vertical and horizontal, with innovation and collaborative business partnerships acting as key drivers of diversification. Starbucks takes a no-holds-barred approach to diversification, as can be seen in the establishment of many business units within the company (Flight, 2007). Starbucks maximizes its capacity to innovate through effective application of its core competencies and, as a result, has mastered diversification in a number of product markets (Flight, 2007).

Starbucks coffee products span a wide array: Ready-to-drink hot and cold beverages, flash-frozen Via® packets, the K-Cups®, and bagged coffee beans (Hoovers, 2014). Starbucks is integrally involved in the Fair Market business of coffee growing, ethical trading, and coffee plantation conservation (Hoovers, 2007). The fair trade coffee beans Starbucks selects are high quality, and Starbucks puts considerable resources into farmer support centers, loan programs to coffee growers, responsible coffee purchasing practices, and forest conservation efforts (Hoovers, 20070. This is heavy lift for Starbucks but the company is committed to better futures for coffee farmers and the mitigation of business impacts on climate change. Starbucks established the Coffee and Farmer Equity (C.A.F.E.) program, an initiative that has began more than a decade ago in conjunction with Conservation International (CI) (Flight, 2007).

Starbucks recent emphasis on global markets illustrates the company's approach to diversification. Starbucks designed an entry strategy to the Chinese market that would be inoffensive to Chinese culture (Wang, 2012). Starbucks eschewed conventional advertising and promotions in order to avoid any appearance of attacking the Chinese tea-drinking culture (Wang, 2012). Starbucks was careful to locate stores where they would be highly visible and receive high (Wang, 2012). Moreover, Starbucks introduced tea-based beverages in order to begin eroding the boundaries between the tea-drinking and coffee-drinking cultures (Wang, 2012).

The middle class in the Peoples' Republic of China (PRC) rapidly accepted Western standards of capitalism as bourgeois class goals (Wang, 2012). Chinese consumers find luxury goods and the pursuit of enriched lifestyles acceptable, having given up the old perspectives of decadence and nationalism (Wang, 2012). Indeed, the Chinese government supports consumption of luxury good, and this is particularly apparent in certain cities in China (Wang, 2012). The exclusivity associated with Starbucks products articulates well with China's national orientation toward luxury goods.

Clearly, China is not one homogeneous market; Starbucks diversification strategies in China have, of necessity, been employed to address many Chinese markets (Wang, 2012). Northern Chinese culture differs radically from that in eastern China, and this difference is reflected in the reduced spending power inland compared to that in coastal cities (Wang, 2012). An important component of Starbucks' diversification strategy has been the establishment of regional partnerships to aid expansion in China (Wang, 2012). Insights regarding the preferences and tastes of Chinese consumers have resulted from these partnerships (Wang, 2012). Examples of these regional partnerships include a joint venture with Beijing Mei Da coffee company in Northern China, a partnership with Taiwan-based Uni-President in Eastern China, and collaboration with Maxim's Caterers in Hong Kong in Southern China (Wang, 2012).

3. Analyze the competitive environment to determine the corporation's most significant competitor. Compare their strategies at each level and evaluate which company you think is most likely to be successful in the long-term. Justify your choice.

Starbucks' competitive advantage is built on product, customer service, and brand attributes. Yet, coffee consumption patterns are changing in much the same way as entertainment media. People are moving to digital modes of entertainment, which is either home-based or accessed through mobile devices. Fewer people go to movie theaters to watch films and fewer people purchase CDs to listen to music. The corollary for coffee companies is that consumers seem to be easily converted to substitute coffee products that can be delivered in their homes, often in association with a coffee maker or single cup brewer. The point is that the boundaries between coffeehouse coffee and grocery store coffee are diminishing. Starbucks and every other major brewed coffee seller have developed individual serving options for instant coffee (Flight, 2007). Particularly note that K-cups and single-serve instant coffee tubes are completely portable, and business offices are increasingly installing specialty brewing machines; the overarching change is diminished influence of the convenience factor and the taste factor in consumer coffee choices (Flight, 2007). Moreover, Starbucks competition must be viewed for different product types, some of which are sold in coffeehouses and some of which are sold in grocery stores (Flight, 2007).

Starbucks has considerable leverage derived from its brand and Third Place Experience. However many buyers and sellers participate in the coffee brewing industry, barriers to entry are relatively small, and the threat of substitute products is very real -- a matter Starbucks has addressed directly through the aggressive development of its Tazo® brand (Flight, 2007). If the coffee brewers market was perfectly competitive, consumers would opt for the cheaper coffee at Duncan Donuts, McDonalds, Burger King, and so on. These competitors have reduced Starbucks' market share, but only marginally as market segmentation demonstrates that very different target markets are associated with the fast food coffee copycats and Starbucks (Flight, 2007).

Hoovers lists Starbucks major competitors as McDonald's Corporation, Nestles S.A., and Dunkin' Brands Group, Inc. (Hoovers,…

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