|Type of paper:||Case study|
|Categories:||Starbucks International business|
Starbucks is an American coffee making company that has over 27,000 branches worldwide. The company was started in 1971 and has its headquarters in Seattle, Washington. The current Chief Executive Officer is Kevin Johnson who was preceded by Howard Schultz. The mission of the company is "To inspire and nurture the human spirit- one person, one cup and one neighborhood at a time."
The company's vision when it first started was to make it a national company with passionate and satisfied employees. The company has however evolved a big deal and changed the strategic vision to reflect a more international approach. There was a revolution in the strategic vision of Starbucks between 2011 and 2012. The return of Howard Schultz as the CEO of the company led to the renewal of the business strategies and operations of the company. Starbucks experienced a drop in the revenue of the company between the years 2008 and 2011. The decline in revenue can be attributed to the economic surge at the period.
Howard Schultz implemented numerous steps that were adopted by the company which saw an increase in the amount of revenue and profits for the company since 2012. The company now aims at improving the satisfaction of customers and that of employees, who are referred to as partners in Starbucks. The company has principles by which the employees operate. Howard Schultz once said that the vision of the company is not about coffee but about the people who are associated with the brand. The company highly values its employees, stakeholders, and the customers. Howard stated that they are not in the business of serving coffee to people but instead in the business of people serving coffee. This statement illustrated that people are at the center of the operations of the company (Thompson, 2012).
Starbucks further places a lot of value on the quality of the coffee that they make. The brand distinguishes itself from competitors by emphasizing on the quality and ethics of the coffee making process. The company achieved 100% ethical satisfaction in farming in 2015. The company since 2012, has ensured that the farmers who produce the coffee are well compensated and that the company only gets the best quality coffee.
To ensure that the ethical standards are met, the company launched a program called the Coffee and Farmer Equity. This program provides the promotion of the quality of the coffee. The quality is achieved through the improvement of the standards within which the coffee is produced. The conditions include the environmental and economic conditions of production. The program also ensures that the coffee farmers are well compensated for their products. Numerous competitors of Starbucks have gotten into a controversy over poor compensation of farmers. The companies have been accused of exploiting the farmers by paying less while selling the coffee for high profits. The implementation of the C.A.F.E program ensures that Starbucks practices high ethical standards in the purchasing of the coffee beans. Another aspect of quality that is emphasized at Starbucks is the packaging of coffee beans. The company was the first to use Flavor lock technology.
According to Porter, five main forces of competition are experienced in the market. These five forces are used in the analysis of competition dynamics by companies to gauge the success of the company products in the market. The five forces are the threat of new entries, rivalry in the industry, the challenge posed by substitute products, the bargaining power of suppliers and the bargaining power of buyers.
In the coffee industry, the company continually faces competition and thus has to keep coming up with new and innovative ways to stay ahead of the competition. The entry of new coffee shops into the market is relatively easy compared to other industries. There are few barriers to new entrants into the market. The entry into the international market, however, requires high amounts of capital. To combat the threat posed by new entrants, Starbucks promotes aspects of loyalty among customers. The company highly engages customers in the company. The company further trains employees on how to handle customers to ensure satisfaction. The company, in 2012, adopted a more innovative approach to marketing and customer engagement through social media platforms. The company invites any comments, complaints, and suggestions that customers may have on their social media platforms. The company also launched the 'My Starbucks' campaign where customers can give any ideas that they may have to improve the service at Starbucks. These concepts encourage loyalty to the brand (Kotabe & Helsen, 2014).
Another threat that the company faces is the high rivalry in the coffee industry. The brand faces competition both in the US and in foreign markets. The contention is especially high in foreign markets. Every place has an existing coffee shop that is preferred by the majority of the people. Convincing people to try out the new coffee shop in town can be quite difficult. Starbucks, to ensure they stay ahead of rivals promotes quality in the products. The Starbucks brand is associated with a higher class, more luxurious kind of people. The brand capitalizes on its reputation to capture the market. The company focuses on quality across all its branches to maintain a high standard of performance across the board. The high standards ensure that the name of the company is associated with high quality.
The company also started offering customized products in various locations while maintaining the overall appeal and primary products. The company now offers snacks that differ according to the location. The company further offers alcoholic drinks such as wine in select locations. There are different names for the coffee products offered in different locations. The company, therefore, gives a local feel to its products while still maintaining the essence of the brand. This ensures that the company can secure a portion of the local market at new branches. The company further engages in Corporate Social Responsibility programs to advance a positive reputation for the company (Schemeil, 2013).
Another threat in the coffee market is potential substitutes. A substitute product is a product that uses different technology to produce a product that fulfills the same need among consumers. The reason that consumers may go for the substitute product is that of the price factor or quality. The substitute product may also have a niche in the market; this is where a certain section of the market prefers the substitute product. The use of coffee can be substituted with tea, milk or water. These substitutes are cheaper than coffee. To subvert this threat, Starbucks offers tea, milk, and water in its branches. These products ensure that customers who prefer the substitutes of coffee will still get served at a Starbucks branch. This also ensures that Starbucks stays ahead of competitors.
The other force in Porter's analysis is the threat that is posed by the bargaining power of suppliers. The bargaining power of the supplier is increased in cases where there are few suppliers. The supplier will have more power over the operations of the company if the company is highly dependent on the supplier. The supplier can also increase the price of the product or supply to competitors of the company. To cope with the power of the supplier bargaining, Starbucks came up with the Coffee and Farmers Equity. This ensures that there is a solid agreement concerning the purchase and the production of the coffee beans. The agreement ensures that the coffee that is supplied to Starbucks is of the required quality and at a price that has been agreed upon. The agreement also protects Starbucks against any lawsuits that may come up concerning the production of coffee beans. Overall, the company took measures to ensure that there are assured suppliers and that the suppliers are loyal to the Starbucks brand.
The fifth force in Porter's analysis is the bargaining power of the customer. The bargaining power of a customer is the ability to influence the price and operations of the company. The bargaining power is higher if the customers have other options regarding companies that sell the same product. In highly competitive markets, the bargaining power of the customers is high. Starbucks has come up with customer loyalty programs to combat the bargaining power of the customer in a highly competitive industry. The company emphasizes quality and value of the customer. Quality ensures that customers stay loyal to the brand. The company also has subsidized prices in some branches for repetitive customers. The quality of products offered by the company ensures that it stands out from competitors. The reputation of the company also serves in ensuring that the company gets repetitive customers. The company also offers after sale services such as acting on complaints and suggestions. Customers can reach out to the company through its social media platforms or through its website to give any complaints and suggestions that they might have concerning the service at Starbucks (Haskova, 2015).
The environment of any company plays a big role in the success of the company. Factors in both the external and internal environment of the company highly determine the level of production and profitability of the company. The main factors in the internal environment that should be considered are the culture of the organization and the structure of the firm. The culture of a company refers to the norms and values that are practiced in the company. The culture at Starbucks emphasizes the qualities of ethics, professionalism and customer service. Employees see the company as being more than just a profit making institution; they consider the company to be a livelihood for the customer. The company also values the aspect of diversity among employees. The external factors of the environment should be considered through PESTEL analysis where the company reviews the political, economic, social, technological, environmental and legal factors.
The organization should carry out a SWOT analysis to assess the sustainability of the operations and production of the company. The SWOT analysis will look at the strengths, weaknesses, opportunities, and threats that face the company. The strengths and weaknesses are highly internal to the organization. The culture, Human Resource systems, and structure of the organization define the rate of production of the organization. These systems could either be a strength or weakness in the organization depending on how suitable they are to the organization. The opportunities and threats to the organization are mainly external. New markets provide new opportunities for the organization. Competitors pose a threat to the organization.
In conclusion, Starbucks should take measures to decentralize the operations of the company. The process of decentralization should involve more autonomous operations in the branches of the managers in these branches. Decentralization will enable more level of customization of the products and services that are offered in different branches and hence more customers which will bring more profit. The operations should, however, be to the expected standards. The managers should be well informed of the expected standards and the best practices of the organizations. The company can also adopt the aspects of franchise and license to reduce the amounts of expenses.
Kotabe, M., & Helsen, K. (2014). Global marketing management.
Schemeil, Y. (2013). Bringing international organization in: Global institutions as adaptive hybrids. Organization Studies, 34(2), 219-252.
Haskova, K. (2...
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