Strategic Management Analysis: Starbucks II

CHAPTER 1

INTRODUCTION

Brief History

Starbucks is the largest coffee chain in the world with more than 30.000 stores operating all over the world. Starbucks originated in the USA, it’s headquarters are located in Seattle, Washington DC. Starbucks started out as a small company, founded back in 1971 by Jerry Baldwin, Gordon Bowker, and Zev Siegl, that used to be a roaster and retailer of whole coffee bean, tea leaf, and spices in a store in a historic Pike Place Market in Seattle. The three Starbucks founder had two things in common, they all come from a educated background and they all loved coffee and tea, which is why they invested some money and borrowed some as well to open the very first store in Seattle. The name “Starbucks” came from the name of the first mate in Herman Melville’s classic novel titled “Moby Dick”. The Starbucks logo is a two-tailed siren from the Greek mythology.

Another great inspiration to the Starbucks founder is a coffee-roasting entrepreneur from Dutch called Alfred Peet. He imported fine arabica coffee beans into the United States during the 1950s and opened a small store called Peet’s Coffee and Tea in Berkeley, California in 1966. This inspired Starbucks to sell high-quality coffee beans and equipment as a base in their business model, and Peet’s became the first supplier of green coffee beans to Starbucks. They then purchased a used roaster from Holland and experimented to create their own unique blends and flavours.

Starbucks stood out in Seattle, leaving all of their competitors with their high quality and fresh roasted coffees. They became so successful that by the early 1980s, they had opened four stores in Seattle.

Vision

Starbucks’ company vision is “to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow”. Pointing to be the head purveyor implies that Starbucks Coffee needs to realize authority in giving its products, particularly coffee of the finest quality. The company accomplishes this component of its vision explanation by proceeding its multinational development as one of the biggest coffeehouses and coffee companies within the world. Be that as it may, it isn’t however clear on the off chance that Starbucks successfully addresses the “finest coffee within the world” component of its corporate vision. Examiners and faultfinders point out that coffee from McDonald’s or Dunkin’ Donuts may be way better than Starbucks coffee in a few viewpoints. In any case, Starbucks addresses the “uncompromising principles” component of its corporate vision articulation. These standards incorporate moral conduct and a warm culture. The company maintains these standards, particularly amid Howard Schultz’s authority as CEO. Moreover, the company fulfills the “growth” component of its vision explanation, as showed within the proceeding worldwide development of the trade through new Starbucks outlets. The company presently has more than 28,000 areas around the world. In this way, the commerce successfully addresses its corporate vision.

Starbucks Coffee’s vision statement is brief, clear, and motivating, particularly in terms of accomplishing and keeping up the chief status within the coffeehouse and coffee industry. This focus on administration may be a spark that challenges administration and other individuals of the company’s human assets. In addition, the corporate vision is steady in terms of pertinence to future trade scenarios at Starbucks Enterprise. For example, the “premier purveyor” component is anticipated to stay pertinent within the long term. In any case, the company comes up short to incorporate modern commerce operations and items within the corporate vision articulation. For illustration, tea, baked goods, and stock (shopper merchandise) are presently part of the item blend, as sketched out in Starbucks’s promoting blend or 4P. These items are not however included within the company’s corporate vision articulation. Hence, a proposal is to make strides Starbucks’s corporate vision by including these pieces of data with respect to different items, to form the vision so that it will represent the company correctly.

Mission

Starbuck’s company mission is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”. This mission statement reflects what the company does to keep its commerce running. It is obvious that target shoppers are given accentuation in this corporate mission. The taking after components of Starbucks’s corporate mission articulation impact key administration in developing the business.

Starbucks Coffee “inspires and nurture the human spirit,” beginning with its workers. To address this component of its mission explanation, the company keeps up a little company culture, where affinity and warmth are vital. In this way, the corporate mission could be a coordinate determinant of Starbucks Coffee’s corporate culture. In expansion, the same component of the company’s mission articulation relates to customers’ encounter. The trade expands its warm and little company culture to its clients. For illustration, employees’ and customers’ to begin with names are utilized at Starbucks cafés. Too, the plan of these coffeehouses points for warmth and coziness. These approaches motivate and sustain important and warm connections including workers and clients. Another calculate to consider in Starbucks Coffee’s corporate mission explanation is that it shows a individual and slow approach. The “one individual, one container and one neighborhood at a time” component appears that the company guarantees significant affect on each worker and client. In parallel, this portion of the corporate mission implies that Starbucks Coffee plans to ceaselessly and continuously develop the commerce, one put or neighborhood at a time. A great point approximately Starbucks Coffee’s mission articulation is that it is adequately unique to form it appropriate to future trade scenarios. In any case, this corporate mission does not fulfill numerous of the ordinary characteristics of perfect mission articulations. For illustration, Starbucks’s mission articulation does not illuminate almost target clients, sorts of items, and target markets. Whereas the company presents a feature of its commerce reasoning, the coming about corporate mission needs enhancement to fulfill perfect traditions. In this way, it is prescribed that Starbucks include such pieces of data in its corporate mission explanation to move forward the coordinating of the explanation with the trade and its operations.

Objectives

Starbucks has the objectives to be the number one coffee provider in the world by maintaining their high quality and high standards in their business operations.

Core Values

1. Creating a culture of warmth and belonging, where everyone is welcome.
2. Acting with courage, challenging the status quo and finding new ways to grow our company and each other.
3. Being present, connecting with transparency, dignity and respect.
4. Delivering our very best in all we do, holding ourselves accountable for results.

Market And Consumer Segments

Starbucks’ target market is regularly depicted as princely or tall wage (around $90,000). That’s why each princely neighborhood encompasses a Starbucks not distant absent. In any case, various Starbucks cafes are encompassed by middle-income neighborhoods where individuals do not have such tall incomes. Why? Since these individuals moreover have optional wage and are willing to spend it on premium coffee drinks. They may not spend lavishly on other things as regularly as the higher salary clients, but they appreciate treating themselves to their favorite coffee and, in some cases, a breakfast sandwich, nibble or dessert to go with it. While Starbucks moreover has standard clients who are dark coffee perfectionists, those individuals aren’t the company’s target showcase. Starbucks courts those who are willing to plunk down $10 for a nibble and refreshment without considering approximately the taken a toll.

Competitors

Starbucks has been battling its competitors, Dunkin’ Donuts and McDonald’s McCafe for the best position as coffee ruler for a few a long time. The company, which started near to 50 a long time prior with a single area, has experienced amazing development and victory. In Q4 2018 alone, the company opened 604 unused areas, bringing the coffee behemoth’s worldwide store check to over 29,000. With a Starbucks on each corner, the company is regularly considered the go-to coffee put to work and socialize, a concept that compares to the company’s promoting approach.

Extend Of Its Marketing Operations

1. Launching seasonal beverages to attract customers.
2. Offering merchandise, limited and unlimited.

CHAPTER 2

ANALYSIS AND DISCUSSION

1. INTERNATIONAL OPPORTUNITIES

Increased Market Size

The amount of potential customers in a segment. It is important for a business to identify the size of the market they are trying to penetrate or an existing market before launching a new product. Just like any other companies, with Starbucks trying to increase their market size which they already dominates, they will earn more profit, but they have to create new strategies.

Economies of Scale and Learning

Economies of scale is when companies achieved cost advantage a more efficient production and lower costs due to the large distribution of costs across the products manufactured. Learning can also be the benefit. By expanding internationally, businesses can obtain new knowledge about the new markets and how to serve them. By expanding internationally, Starbucks can achieve economic of scale with more stores distributed all around the world. This means that Starbucks will have lower costs, and it indicates that they have achieved economies of scale.

Location Advantages

Starbucks is one of (if not) the largest coffee outlet in the world. With over 30.000 stores distributed all around the world, it is proven that Starbucks really take it into good consideration for their stores locations before opening one. This can be seen by the success of each Starbucks outlet wherever they are.

International Strategies

There are 3 international strategies that Starbucks can choose from. International strategies is a planning created by a company to help them expand their market wider, in this case, overseas.

The first one is Multidomestic Strategy. Multidomestic strategy focuses more on domestic responsiveness rather than globally. This means that they focus on listening to their domestic customers and customizing their products or services so that it can fulfill the local customers needs.

Second one is Global strategy. Unlike multidomestic strategy, global strategy customize their products to suit all of their markets abroad.

The last one is Transnational Strategy. This strategy focuses on both domestic and global markets. This strategy make sure that they can earn maximum profit abroad while also listening to their local customers.

The most suitable international strategies for Starbucks is the global strategy, although in the video it is stated that Starbucks fail in Australia, but this strategy has worked for them all over the world. That said strategy is, Starbucks standardized their products all over the world rather than adapting their products to suit the local taste.

2. CHOICES OF INTERNATIONAL ENTRY

The most suitable international entry strategy that Starbucks can implement, is licensing. With licensing, Starbucks can save up unnecessary cost and time efficiency from analyzing the market and learning the potential customers’ behavior. They just sell their licensing to other parties which then will manage the outlets and of course with supervision from Starbucks.

The second one is wholly-owned subsidiary. This has been done by Starbucks when they are trying to penetrate into a existing and familiar market to them, for example when they are opening a new outlet in the United States.

3. COMPETITIVE RIVALRY

Competitor Analysis

1. Dunkin Donuts

Dunkin Donuts is one of the longest donut shops in the United States. They are known for their donuts, and also their coffee. Dunkin Donuts operates in more than 35 countries with more than 11.000 stores worldwide.

2. McDonald’s McCafe

McDonald’s McCafe is a brand by McDonald’s that serves coffee

Market Commonality

In the coffee business that Starbucks operates in, anywhere around the world there will be competitors whether it is a cheaper substitute, or the products with the same quality. Therefore, the market commonality is high

Resource Similarity

With Starbucks competitors mainly also operates in the same sector which is coffee shops, it is safe to say that the resource similarity is also high

Driver of Competitive Behavior

In a competition, a business has driven behaviors that drive them to be competitive in the market.

Awareness

Awareness is when a company realize that there are opportunities to be taken. In Starbucks’ case, they are aware that coffee is one of the most drank beverages in the world, therefore they realize that if they can produce high quality coffee, they can stay on top of the competition.

Motivation

Motivation is what gives the business the push to be better and ahead of their competitors. With Starbucks, the company is motivated to serve high quality products which the customers appreciate. This is what keeps Starbucks to push forward.

Ability

Starbucks ability is that they produce high quality products to every details starting from the basic until the coffee is in their customers’ hands, which is from the coffee beans until their baristas in their coffee shops.

Likelihood of Attack

First Mover Benefits

Back in 1970s, Starbucks has the first mover benefits as there were almost no coffee shops in the United Stets that serves high quality arabica coffee beans. Starbucks are the pioneer when opening their shops.

Organizational Size

With over 30.000 stores distributed worldwide, Starbucks organizational size is massive. They dominate the market of coffee shops.

Quality

Starbucks vowed to always serve high quality beverages from high quality coffee beans roasted in the house. This mean that every customer will receive only the best coffee from them.

Likelihood of Response

Type Of Competitive Action

By serving high quality beverages to their customers, Starbucks have been doing what they do best for a very long time. This helps them to secure their spot on the top of the competition for a very long time.

Actor’s Reputation

Starbucks’ reputation is already well known all around the world. Without a doubt, Starbucks has established itself as a strong brand in the market, therefore its not difficult for Starbucks to get to the top and staying on top of the competition.

Market Dependance

All around the world, whenever people think of coffee, almost every time the first thing that came to their mind will be Starbucks. That means that the market is highly dependent on Starbucks.

            Outcome

                        Market Position

                        Starbucks lead the market by a significant margin.

Financial Performance

Starbucks’ financial performance has hit a new low in 2020 because of the whole pandemic situation all over the world, but even with all that, Starbucks still generate quite a lot of revenue in 2020. This shows that Starbucks is not going to be shaken with the whole competitive rivalry.

VALUE CREATING DIVERSIFICATION

Company creates value creating diversification to provide more value for the company and their shareholders to climb up the market.

Related Constrained Diversification

This type of diversification has high operational relatedness and low corporate relatedness, which 70% of the company’s revenue came from their dominant business which shares the same resources and activities between businesses.

Unrelated Diversification

This is a type of diversification where less than 70% of the company’s revenue came from their dominant business and there are no common links whatsoever between businesses. It has low operational relatedness and also low corporate relatedness.

Both Operational and Corporate Relatedness

This type of diversification is used by companies that has high operational relatedness and corporate relatedness by constantly sharing the activities between businesses.

Related Linked Diversification

This type of diversification has low operational relatedness and high corporate relatedness. 70% of the company’s revenue came from their dominant business but there are limited links between businesses.

Starbucks’ Value Creating Diversification

Starbucks applies “Both Operational and Corporate Relatedness”. This means that Starbucks shares the same resources and activities in their business whether it is their beverages or foods.

CHAPTER 3

SUMMARY AND SUGGESTIONS

Summary

Starbucks is the largest coffee chain in the world with more than 30.000 stores operating all over the world. Starbucks originated in the USA, it’s headquarters are located in Seattle, Washington DC. It was founded back in 1971. Since then it has grown into a coffee shop that almost everyone in the world recognize. Starbucks has a vision which is “Starbucks’ company vision is “to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow”. Indicating to be the head purveyor suggests that Starbucks Coffee should realize specialist in giving its items, especially coffee of the finest quality. The company fulfills this component of its vision clarification by continuing its multinational improvement as one of the greatest coffeehouses and coffee companies within the world. Be that because it may, it isn’t in any case clear on the off chance that Starbucks effectively addresses the “finest coffee inside the world” component of its corporate vision. Analysts and faultfinders point out that coffee from McDonald’s or Dunkin’ Donuts may be better than Starbucks coffee in many perspectives. In any case, Starbucks addresses the “uncompromising principles” component of its corporate vision enunciation. These guidelines consolidate ethical conduct and a warm culture. The company keeps up these measures, especially in the midst of Howard Schultz’s specialist as CEO. Additionally, the company fulfills the “growth” component of its vision explanation, as showed within the proceeding worldwide development of the trade through new Starbucks outlets. The company presently has more than 28,000 areas around the world. In this way, the commerce successfully addresses its corporate vision.

Starbucks’ target market is regularly depicted as princely or tall wage (around $90,000). That’s why each princely neighborhood encompasses a Starbucks not distant absent. In any case, various Starbucks cafes are encompassed by middle-income neighborhoods where individuals do not have such tall incomes. Why? Since these individuals moreover have optional wage and are willing to spend it on premium coffee drinks. They may not spend lavishly on other things as regularly as the higher salary clients, but they appreciate treating themselves to their favorite coffee and, in some cases, a breakfast sandwich, nibble or dessert to go with it. While Starbucks moreover has standard clients who are dark coffee perfectionists, those individuals aren’t the company’s target showcase. Starbucks courts those who are willing to plunk down $10 for a nibble and refreshment without considering approximately the taken a toll.

The most suitable international entry strategy that Starbucks can implement, is licensing. With licensing, Starbucks can save up unnecessary cost and time efficiency from analyzing the market and learning the potential customers’ behavior. They just sell their licensing to other parties which then will manage the outlets and of course with supervision from Starbucks.

The second one is wholly-owned subsidiary. This has been done by Starbucks when they are trying to penetrate into a existing and familiar market to them, for example when they are opening a new outlet in the United States.

The most suitable international strategies for Starbucks is the global strategy, although in the video it is stated that Starbucks fail in Australia, but this strategy has worked for them all over the world. That said strategy is, Starbucks standardized their products all over the world rather than adapting their products to suit the local taste. Starbucks applies “Both Operational and Corporate Relatedness”. This means that Starbucks shares the same resources and activities in their business whether it is their beverages or foods.

Suggestions

In my opinion, Starbucks has done a great job in establishing itself as the biggest coffee seller in the world. However, as a Starbucks consumer, I have a suggestion for Starbucks which to look for new ideas like new types of drinks, new flavors, new marketing strategy as what they have been doing has worked great for them but it’s starting to become repetitive, its like they are doing the same thing over and over again.

References

https://www.investopedia.com/articles/markets/101315/who-are-starbucks-main-competitors.asp

https://eduzaurus.com/free-essay-samples/analysis-of-starbucks-market-segmentation-and-targeting/

https://smallbusiness.chron.com/starbucks-target-audience-10553.html

https://www.theleadermaker.com/core-values-starbucks/

https://www.starbucks.co.id/about-us/company-information/mission-statement

http://panmore.com/starbucks-coffee-vision-statement-mission-statement

https://www.britannica.com/topic/Starbucks

https://investor.starbucks.com/financial-data/annual-reports/default.aspx

https://www.ukessays.com/essays/marketing/strategic-management-analysis-of-starbucks-coffee-marketing-essay.php

https://coschedule.com/blog/starbucks-marketing-strategy/

https://www.qsrmagazine.com/consumer-trends/5-ways-starbucks-innovating-customer-experience

Starbucks 2020 Annual Report