Starbucks strategic positioning and competitive advantages in the coffee market

STARBUCK'S

CASE ANALYSIS: STARBUCKS

Starbucks Case Analysis

Starbucks Case Analysis

Situation Analysis

Suppliers

Competitors

New Entrants

Strengths

Weaknesses

Opportunities

Threats

Strategic fit

Many individuals all over the world walk into Starbucks daily for their cup of coffee, but it is more than the costly coffee that brings individuals in day after day to the shops across the globe. Starbucks offers a high-energy atmosphere and helpful employees who help clients in any issue or question they might have with the coffee or service. People buy the product because of symbolizes and the status position coming along with it. Although various business designs are available, the concepts and framework of Starbucks is a good design to follow, due to its nationwide and international success. This paper investigates the strategic fit of Starbucks as a business and further shows how it survives even through hard economic times. By looking at the market and company situational analysis, the paper will figure out where Starbucks stands on the global coffee market. At the end, the paper will offer strategic suggestions for Starbucks and how applying the techniques.

3.1.1 Suppliers

Because Starbucks is a large corporation, it can apply enough pressure on its providers. However, it opts to utilize this power, arguing it has never been in their best interest. Starbucks does not function by a design in which it 'squeezes down' its providers. It treats the connection as collaboration. Some of the providers have grown with Starbucks and have designed their companies around its development. It has great operating requirements for its providers and needs to ensure proper earnings so that the providers can meet these standards. These great requirements include ecological policies such as energy preservation, packaging, and agricultural techniques as well as worker benefits. Starbucks is aware of the significance of the health of the overall provider "ecosystem." Dairy, green coffee, paper products, and employees are the major inputs in their function (Pahl, 2008). Coffee is a product and an unpredictable industry. In a latest coffee problem, prices decreased significantly that many farm owners were incapable to maintain business. Starbucks is completely reliant upon its coffee providers and requires a top quality bean. It mitigates risk to guarantee its providers through agronomy programs it has designed in coffee generating areas. It works with the farm owners educating useful agricultural techniques and providing potential plants up to par. It is growing its provider platform as it develops its retail platform (Grimm, Lee & Smith, 2006).

3.1.2 Customers

For Starbucks, the threat of customers is low due to a low chance of backward integration, differentiated items, varied client platform, and their ability to influence customer preferences. The number of People in America consuming specialized coffee is increasing daily. In addition, there is a notion that Starbucks items are of good top quality than other locations. Studies indicate that the specialized coffee market is growing in the U.S. And People in America will continue to buy Starbucks items. It is unlikely that clients will engage in a backward integration by drinking homemade coffee to substitute Starbucks coffee items. The company offers highly differentiated items, which decreases buyer threats. The product has become a household name in the U.S. And overseas. Starbucks offers a high-energy atmosphere and helpful employees who help clients in any issue or question they might have with the coffee or service (Grimm, Lee & Smith, 2006).

3.1.3 Competitors

Starbucks brought specialized coffee to the market, and now it can be found at gas stations and supermarkets. Competition can be seen from two perspectives: item and location. If competition can be found in the item, then all locations that offer coffee may be a rival. If rivalry can be found in the coffee encounter, then Starbucks may be competing with coffeehouses. Experts typically identify Dunkin donuts and smaller stores like Deitrich Coffee, New World Restaurants, and Caribou as Starbucks' opponents (Pham-Gia, 2009). While the entire coffeehouse industry is expanding, the company continues to acquire more business when compared to other fast food restaurants. If we increase the industry to include donut stores, then Starbucks business reduces. Starbucks is the prominent opponent in terms of product experience and coffeehouses market. On the contrary, rapid growth has attracted contenders from other restaurant stores including McDonald's and Hamburger King, whose new coffee items, presents increased rivalry for established coffeehouses (Pahl, 2008).

3.1.4 New Entrants

New entrants have a room in the coffeehouse market, but new newcomers face powerful limitations to entry to contest with Starbucks in the coffeehouse section. Starbucks enjoys the best geographical places in significant places and the suburbs. The price of copying Starbucks' property would be very great. Starbucks has a positive relationship with many of the reasonable business growers including providers of top quality beans. There are so many reasonable coffee farm owners to form collaborations, and the company has strong connections with most of them. When a new comer has much better access to raw materials, it increases the cost of rivalry. With more experience, the company has structured its procedures behind the counter, discovered how to open shops successfully, and has become experienced in working with providers to be more effective. Such a curve benefit is important to newcomers that wish to contend on a large scale (Grimm, Lee & Smith, 2006).

3.2 Internal Analysis

3.2.1 Strengths

A couple powerful points that Starbucks has is that it leads the coffee market. The first strength is its fast speed of development, not only locally but also worldwide. Many of the shops that are starting are coming from the worldwide market. Starbucks is also financially stable which was confirmed during the economic problems during 2009 and 2008 (Pham-Gia, 2009). Its stock price might have dropped, but its earnings hardly took a hit. Starbucks also has powerful brand identification by customers. It is known for its top quality products and its customer friendly atmosphere. Starbucks' has many powerful points that will bring it through the years to come (Pahl, 2008).

3.2.2 Weaknesses

Although Starbucks has many powerful points, it also has weak points. One of Starbucks' significant weak points is its cost. McDonald's uses Starbucks' high-cost straight against the organization in their marketing strategies. Another weak point is that 75% of its earnings are centered on its coffee items and other specialized drinks. This implies that with the increasing prices of beans, that Starbucks will take an immediate hit every time the cost of coffee increases. Dunkin donuts and McDonald's both concentrate first on food and then coffee; thus, it makes them less insecure as a business to the increasing coffee costs all over the globe. Overall, the weak points of Starbucks do not over-shadow its strengths; therefore, it is a powerful and viable business (Pham-Gia, 2009).

3.2.3 Opportunities

The worldwide industry is the main source of opportunity for Starbucks as a company. In countries with increasing economic systems, such as the BRIC countries, there is increasing middle and upper classes that want to buy specialty coffee. The countries are developing and growing their preferences towards coffee. With South America set to be the world's biggest coffee customer in the world by 2020, it provides a huge niche for Starbucks to more fervently penetrate and propagate (Pham-Gia, 2009). India is also a developing nation that has lately started to accept the coffee industry. With Starbucks expecting to get into Indian market, there are high chances for achievements in the nation. Entrepreneurs in India have turned away from tea and adopted coffee as the nation has started to witness economic achievements (Grimm, Lee & Smith, 2006).

3.2.4 Threats

The last problem that needs to be analyzed is the threats the company is experiencing and will experience later on. A significant threat that it has to deal with is competitors, of which McDonald's is an emerging opponent. McDonald's can launch their McCafes in present franchise shops all over the globe, and they are targeting European countries. This gives McDonalds a leg up on Starbucks. If McDonald constantly opens McCafes through European countries and other areas around the globe because of the low starting expenses they experience, it could greatly decrease geographical opportunity benefits that Starbucks has over rivals like McDonald's (Pham-Gia, 2009).

4 Strategic fit

One of the key strategies that Starbucks followed since its beginning is that of item differentiation. This involves offering differentiators such as top quality item mix, places, coffee drinks image and superior customer support that helped to build a top quality respected brand, which is costly to mimic for opponents. Starbucks has also followed a shrewd technique of strategic partnership and ideal acquisitions. They did not follow franchising model and company focused shops and joint ventures in worldwide marketplaces. Starbucks has made some significant acquisitions like Tea items, Bay Bread and Evolution Fresh.

Market penetration: This technique has been used to acquire more market share of items that are currently offered. The company has focused intensely on developing the quality daily encounter and differentiation of the encounter as a place to enjoy. In addition, Starbucks has desired to increase the methods of providing its items outside of the traditional shop. It has started out licensed retail places inside of supermarkets and established alliances with Kraft Foods, PepsiCo, and U.S. Foodservice, to distribute items to supermarkets and other food suppliers (Pahl, 2008).

Market development: the company designed the specialized coffee industry in the U.S. By teaching the American consumer. It also modified a product into a specialized offering as per customers' preferences. Since the beginning, Starbucks has developed this niche and continues to develop it as it expands into worldwide marketplaces.

5 Recommendations

Practical suggestions must be able to fix Starbucks' greatest issues. The first suggestion comes from the external diagnosis. Starbucks needs to pay more attention to item innovation. One of the determinant driving causes in the coffee market that functions as a positive impact is item advancement. The market must consistently endeavor to establish new item offerings for two reasons: to continue to entice new customers that do not buy from the current item mix and to serve differentiated products from competing companies. Starbucks needs to meet its customers' requirements, as they are part of the item advancement formula (Pham-Gia, 2009). Penetrating into Russian, South America, India and china can be very fulfilling for Starbucks, both strategically and financially. The company could use its financial strength to invest in the expansion without needing new debt. Some people think Starbucks needs to apply the franchising strategy to improve its retail impact and set up brand power quickly. As the leader in the coffee market, Starbucks can charge premium fees to generate extra income sources (Grimm, Lee & Smith, 2006).

6 Conclusion

Starbucks has managed a competitive advantage since bringing quality, bistro-style coffee options to the public. In order to remain current, it will need to pay attention to its primary capabilities. To fight opponents such as McDonalds and other coffee stores, they will need to create new value advancement by improving the client experience by making an investment in online content and interaction. Rather than developing more new products.