Starbuck\'s Augmented Porter Analysis Starbucks\'

Starbuck's Augmented Porter Analysis

Starbucks' Augmented Porter Analysis

The article a Fresh Look at Industry and Market Analysis (Slater, Olson) the authors recommend a revised framework based on the Porter Five Forces Model. The most significant differences between the Five Forces Model and the augmented model for market analysis as suggested by the authors is the consolidation of competition and the defining of a new category, Complementors. There is also a defining of Market Turbulence in the revised framework as a stand-alone attribute, taking into account the recessionary climate globally recently and the more turbulent economic times in aggregate since the Porter Model was created over twenty years ago (Slater, Olson, 16). The augmented model for market analysis is ideally suited for analyzing Starbuck's, as the chain continues to evolve. Each of the six areas of the augmented model for market analysis is applied to Starbucks Coffee.

Complementors

As defined in the article a Fresh Look at Industry and Market Analysis (Slater, Olson, et.al.) complementors are those products that augment and strengthen a company's core products. For Starbucks this would be the addition of breakfast sandwiches and the increasing reliance they have on selling music CDs. Additional complementors that Starbucks has are the strong focus on the overall customer experience. This is the competitive differentiator relative to well-entrenched regional chains including Dunkin' Donuts. The fact that customers visit Starbucks to visit with friends, have class meetings or relax away from school or work also adds to the highly differentiated nature of customer experience being a major complementor of the chain as well. Over the last several years, Starbucks has continued to focus only on those areas of their business model that would support and strengthen the overall customer experience.

Composition Competition

The article makes the point of disruptive vs. sustaining innovations. Starbucks practices disruptive innovations from a product standpoint continually, as they often invest more than the industry average in Research & Development (R&D), and also have been known to have continual new product development happening in each hemisphere,. Preparing the next generation products in real-time. Starbucks also has a strongly seasonal focus to their new product development process, which leads to new drinks and food products being tested in one hemisphere that for seasons on another. Australia is often relied on as a test market during the western hemisphere's winter months, in anticipating of major product introductions during the spring and summer throughout North America. Starbucks also concentrates more on the most dominant chains vs. The myriad number of mom-and-pop shops scatted throughout the nations it competes in.

Customers

The Starbucks brand generates many of the most loyal customers for coffee globally today. A typical Starbucks customer will visit on average twice as many times compared to any competing coffee retailers' store. This has been attributed to both the aspirational nature of the brand, where upwardly mobile professionals identify and embrace the brand and trust its products to be consistently good in addition to the customer experience factor that fuels greater customer loyalty overall. These two factors of aspirational value of the brand and customer experience are what also make this factor a very critical opne in the augmented analytical framework.

Market Growth

The growth of coffee retailing continues to be flat, only generating 5% growth on a compound annual basis (Joo, Min, Kwon, Kwon, 490). This is forcing coffee retailers to concentrate on highly differentiated approaches to selling. For Dunkin' Donuts their approach is to branch out into retail channels with their coffee being available in grocery stores. Other competitive strategies include creating satellite locations and smaller airport kiosks, a strategy Caribou Coffee has tried in the northwest U.S..

Market Turbulence

The rapid pace of disruptive innovation in coffee retailing is increasing, as Starbucks is now challenged by McDonald's entering the high end of the coffee retailing market with their McCafe brand of customized coffee beverages. There is also a shakeout of smaller chains that are struggling to stay profitable on coffee sales alone. Competitors are increasing the variety and uniqueness of items offered to differentiate relative to the customer experience Starbucks concentrates on. The turbulence of the market will continue as smaller competitors continue to focus on expanding into offering entrees, fast food companies offering higher-end coffee beverages, and retailing becoming a new area of competitive focus globally as well.

Profitability, Risk, Strategy