Starbucks
Corporation, doing business as Starbucks Coffee, is an American global coffee
company and coffeehouse chain based in Seattle, Washington. It is the largest
coffeehouse company in the world, with 23,187 stores in 64 countries. Their
products are: roasted and handcrafted high-quality, premium priced coffees,
tea, fresh food items and other beverages. They also sell coffee and tea
products and license their trademarks through channels such as licensed stores,
groceries etc.
Starbucks
primarily operates and competes in the retail coffee and snacks store industry.
The core competence of Starbucks has been its ability to effectively leverage its
cornerstone product differentiation strategies by offering a premium product
mix of high quality beverages and snacks. Their brand equity is built on
selling the finest quality coffee and related products, and by giving each
customer a unique “Starbucks Experience”, which is supreme customer service,
clean and well-maintained stores, thus building a high degree of customer
loyalty.
Its other core
competence is its human resource management's values-based approach for building
very strong internal and external relationships with suppliers, which drives
the successful deployment of its business strategy of expansion into
international markets, horizontal integration through smart acquisitions and
alliances that maintains their long-term strategic objective being the most
recognized and respected brands in the world.
Starbucks, with its size and scale, has
the power to take advantage of its suppliers but under its coffee and farmer
equity program, it gives its suppliers a fair partnership status, which gives them
moderately, low power. The suppliers in the industry also pose a low threat of
competing against Starbucks by forward vertical integration, which lowers their
power. Starbucks also forms a highly important part of the suppliers business,
due its size and scope, which make the power of the suppliers lower. Thus,
suppliers pose a moderately low bargaining power.
Starbucks Founder Howard Schultz |
Starbucks has a
significant geographical presence across the globe, maintains a 36.7% market
share in the United States and operates in over 60 countries. It is the most
recognized brand in the coffeehouse segment and is ranked 91st in the best
global brands of 2013. Starbucks effectively leverages its rich brand equity by
merchandizing products, licensing its brand logo. Such strong market position
and brand recognition allows the company to gain significant competitive
advantage in further expanding into international markets and also register
higher growth in both domestic and international markets.
They give the
highest importance to the quality of their products and avoid standardization
even for higher production output. Starbucks has stores in some of the most
prime and strategic locations across the globe. They target premium,
high-traffic and high-visibility locations which has earned them a significant competence
and advantage to be able to penetrate prime markets. Their stores are visually
appealing, being designed to reflect the unique character of the neighbourhood
they serve in and environmentally friendly. They provide free Wi-Fi, great
music, great service, warm atmosphere and an environment of community meeting,
which forms a wider part of the ‘Starbucks Experience’. The main aim here is to
make their stores a ‘third place’ besides home and work.
Starbucks is known for its employees. They are
the main assets of the company and they are provided with great benefits like
stock option, retirement accounts and a healthy culture. Thus, the effective
management of its human resources translates into great customer service. Their
stores are community friendly, by recycling and reducing waste, thereby building
goodwill among communities where they operate.
Just as Apple did
with iTunes, Starbucks efficiently leverages technology with its mobile
application ‘Starbucks App’ in both iOS and Android. They make significant
investments in technology to support their growth every year. It has a cult
following status among consumers and they have also implemented loyalty-based
programs to drive loyalty with the Starbucks Rewards programs and Starbucks
Card. The Starbucks Card is a value card program that provides convenience,
support gifting, and increases the frequency of store visits by cardholders and
integrated with their mobile application.
The increasing
saturation and of the US market makes its international strategy even more
important. Starbucks has made an entry into many countries, with India recently
joining the list with a joint venture. Starbucks sees a great growth potential
in further expanding into emerging and developing markets. They leverage their
size, experience, financial prowess and efficiencies. Starbucks recently
started to expand their product mix by venturing into the Tea and fresh juice
product offerings with a smart acquisition strategy.
One of the key
strategies that Starbucks followed since its inception is that of product
differentiation with its premium product mix, locations, reputation in coffee
beverages and supreme customer service that translated to building a premium
valued brand that is costly to imitate for competitors. Starbucks also followed
a shrewd strategy of strategic alliance and making smart acquisitions.
Starbucks didn’t follow the franchising model and operated company oriented
stores and joint ventures in international markets.
Another crucial
strategy for Starbucks’ growth has been expansion into key developed and
emerging markets for geographical diversification, and it has been highly successful
with operations spanning 64 countries. All these strategies have derived
considerable competitive advantage for Starbucks over its competitors.
Thus, Starbucks is
an excellent example of spotting opportunities and making effective utilisation
of the same. Their culture is thus that it can adapt to any environment which
has helped them grow in so many markets. Efficient management of their human
capital and their suppliers, their foray into technology and their supreme
customer relationship management have ensured that Starbucks is here to play a
long innings in the coffeehouse segment.