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Strategy Formulation
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Starbucks Strategy Formulation
Starbucks is a business that strategically operates in a very competitive environment with strong rivals; thus, the executives need to come up with inherent and operational risk essential in planning the long-term goals and objectives of the business effectively. Starbucks has been ranked as one of the best coffeehouses globally that was started way back in the 1970’s up to the current day. The business introduced their branches in close to 16,000 places across the globe which gives it a competitive advantage among other competitors such as the Donuts that similarly produces the same products and services (Vecchiato & Roveda, 2010). Also, the business has continuously dominated in their operations through the introducing new goods that are also an innovation strategy in remaining steps ahead of the competitors.
Starbucks Pursuing Markets
It is clear that the business plans to enlarge its operations into the global markets via the joint ventures that incorporate many organizations coming together with the aim of pursuing the same goals and opportunities. Through taking this step, the joint ventures that the Starbuck Company seeks are set up more as a partnership (Flamholtz & Randle, 2012). Recently, the business engaged in a joint venture with the Tata global beverages to start opening and operating its cafes located in India thus increasing the company’s marketing base. Also, through the method of joint ventures and partnership, the organization is focusing on enlarging its geographical cover to Asia with much focus centered on China and India. Some of the reasons why it plans to focus on these areas are due to their growing economy, significant population and the constant interest in coffee.
Unique Value
Since the organization continually differentiates itself from the competitors, the organization has created a unique value proposition through becoming the “Third Place” for the clients thus planning to make a cup of coffee “affordable luxury” for the planned markets. Starbucks typically follows the retail business model where it possesses and operates a majority of its stores internationally (Vecchiato & Roveda, 2010). Also, with the emerging markets in China and India, the business has included parts of the franchise business model into its technique with the aim of capitalizing on the expansion; yet keep control of its business via the core mechanisms. Starbucks concentrates on enhancing its value proposition through providing China and India with high-quality goods and services.
Resources Sustaining Competitive Advantage
Starbucks Company requires resources that are primarily the sources of any competitive advantage, be it tangible or intangible assets in the planned areas of business expansion. They include stable financial status, effective management appropriate in the timely decision-making process and efficient human resources. As a way of maintaining a competitive advantage, the company has planned to diversify its undertakings through increasing the time of its evening operations and providing more recreational structures for their esteemed clients. The franchise is also renovating their stores as a way of keeping their brand alive and offering discounts at their new cafes (Flamholtz & Randle, 2012). The company has also planned to enlarge the use of its mobile application used in ordering and payment of their products and services and is strategically known as a game changer initiative. The system allows clients to make their orders and pay online before the actual visit thus saving on some time that can be used on fulfilling other things. After the success of the introduced mobile application and loyalty system, the business has also planned to introduce remote delivery services in China and India that will be expanded to more areas internationally over the time.
Business Management Strategy
According to Roper, S., & Fill, C. (2012), Starbucks employs a full differentiation technique that is focused on a more significant segment of the entire market. The company has made the business well-known for tailoring to broad consumer’s wants through coming up with orders that meet their desires, no matter how complicated or detailed they thus satisfy consumers. The organization is also well-known for its quality goods and services together with stringent rules outlining how their coffees are to be prepared and served. The management has plans of adopting a flexible mechanism for its business and delegates some authority to the managing team that will be charged with the responsibility of planning and coming up with goals together with examining the operations of subordinates.
Vertical Integration
Vertical integration is described by the number of phases in a product’s or service’s value chain in which an organization engages. Thus, the former chief executive officer describes Starbucks business model “vertical integration to the extreme” since the business purchases and roasts all its coffee products and sells it within the whole organization-owned stores. The reasons behind the business’s vertical integration are to control experience and keep the level of quality much better as opposed to relying on external partners and avoid the many issues associated with coffee more so when dealing with suppliers (Hill, Jones & Schilling, 2014). Starbucks has efficiently integrated backward via purchase agreements done with coffee growers, an organization owned bean roasting plants, business owned warehousing and distribution facilities, and coffee bean company in Costa Rica and China.
Strategic Alliances
A strategic alliance is typically considered as an agreement for cooperation among two or more independent institutions to come together and offer services aimed at achieving a common goal and objective. Unlike the joint venture, organizations involved in a strategic alliance do not need to incorporate a new entity aimed at furthering their objectives; but collaborate while staying apart and distinct (Hill, Jones & Schilling, 2014). Therefore, Starbucks has relied on a strategic alliance with Kraft foods for a long time to get its already packed coffee products onto grocery store shelves.
Starbucks Competitive Advantage
The business has sustained its competitive advantage over its competitors through the critical and creative thinking of the management, and its team members as it has produced the best coffee beans and launched client’s loyalty program on an international scale. Other differential strategies that give the business a competitive advantage is the roaster and tasting room division, internal institutional structure of Starbucks and consumer’s centric regulations. The organization also launched the reward card initiative for their clients where they can avail discounts and other bonuses (Flamholtz & Randle, 2012).
Organizational Chart of Starbucks
References
Flamholtz, E. G., & Randle, Y. (2012). Corporate culture, business models, competitive advantage, strategic assets and the bottom line: Theoretical and measurement issues. Journal of Human Resource Costing & Accounting, 16(2), 76-94.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Roper, S., & Fill, C. (2012). Corporate reputation: brand and communication. Harlow: Pearson.
Vecchiato, R., & Roveda, C. (2010). Strategic foresight in corporate organizations: Handling the effect and response uncertainty of technology and social drivers of change. Technological Forecasting and Social Change, 77(9), 1527-1539.
