Starbucks: History and Strategy Development - Case Study Example

Starbucks - History and Strategy Development Table of Contents Introduction 3 Task 4 Model 4 PESTEL Analysis 4 Model 2 7 Ansoff Matrix 7 Model 3 9 Competitor Analysis 9 Task 2 12 Model 1 12 Supply Chain Management and Distribution Strategy 12 Model 2 13 Quality 13 Model 3 15 Planning and Control 15 Conclusion 17 References 18 Introduction Starbucks Corporation is one of the most popular coffee brands in the world. In recent years, it is observed that the coffee market is changing significantly. With the changing trends, Starbucks has noticeably adapted itself in terms of strategy development which has in turn enabled it to achieve global recognition. It is an international coffee house situated in Seattle, Washington, United States. The company has 20,891 stores in 62 nations and also plans to add more 3000 stores over the subsequent five years, among them the half of the stores in the United States (Loxcel, 2013). The mission of the Starbucks is to establish the company as the foremost outlet of coffee shop in the world while providing a superior service to their customers, treating their customers with respect and enormity. Starbucks also endeavours to motivate and foster the human spirit as well as to become a respected brand in the world and a national company with ethics and guiding principles so that the employees are happy and satisfied by working in Starbucks. The main objective of Starbucks is to provide a better service to their customers (Starbucks, 2012). The paper intends to identify the marketing activities and performance of Starbucks as well as the operations management activities and performance of Starbucks. The marketing activities are mainly identified with the aid of three pertinent tools which include Ansoff Matrix, PESTLE Analysis, & Competitor Analysis. On the other hand, the operations management activities are identified with the help of certain essential tools which comprise planning & control, quality, supply chain and distribution strategy. With all these tools the current market scenario of Starbucks is known easily. Task 1 The marketing strategies and performance of Starbucks are identified hereunder: Model 1 PESTEL Analysis PESTEL analysis facilitates to analyse the problems or opportunities that an organisation might need to consider for efficiently handing its business functionalities. These problems or opportunities can arise from certain pertinent external factors such as political, social, economic and technological among others. Political Factors In the era of Globalisation, the way of executing business operations has been changing day-by-day. Companies are facing difficulties to survive based only in their domestic markets. They are spreading their business throughout the world. In this regard, it is observed that Starbucks over the years has also expanded their operations in over 50 nations globally. In this endeavour, the company has faced certain political influences in terms of tax rates or taxation policies, laws and legislations which are very important in the era of industrialisation. The level of political stability is also a crucial factor affecting the operations of the company. As Starbucks needs to procure coffee beans from foreign markets thus import and export related policies which include trade related agreements are crucial determinants for the company (Scribd, 2013). Economic Factors Companies want to reap more profits so that they can continue their sustained growth. As in recent years the world has witnessed a significant economic crisis, people globally are looking forward for cheaper and quality products. Price is becoming the main concern to the customers. Increase in the inflation rates and augmentation in unemployment rate are also crucial factors for lowering of demands of certain high-end products. The buying powers of the customers at times depend on the pricing of products offered by Starbucks. Thus, an increase in prices of raw materials at times compels Starbucks to increase their products’ price which in turn can affect its profitability (Scribd, 2013). Social Factors Social factors include the demographic aspects as well as the cultural facets of the external environment. Starbucks in this regard needs to possess a clear understanding of the society and the population as well as the consumer preferences and changing lifestyle of the customers among others. In the varied countries, in which the company operates, the tastes as well as preferences of the customers at times differ noticeably. Thus, it accordingly provides varied range of products to its consumers. To ensure compliance with stated virtues of provided guidelines, the company ensures to make ethical sourcing of supporting products. Moreover, it promotes respect as well as diversity in the communities in which the company functions (Slideshare, 2013). Technological Factors Technological changes play a vital role in most of the companies that operate globally which can affect the competitive edge of the companies in their operational markets. The incorporation of new technological factors such as supply chain system in the business of Starbucks can lower restrictions to entry which can help to enhance production level efficiency. By adopting newer technologies, Starbucks also provides higher standards of products in terms of quality. Starbucks uses state-of-the-art equipments within their business activities. It provides ‘one-click’ as well as ‘free’ Wi-Fi facility at each and every store of the company within the periphery of the US. Starbucks Digital Network can be accessed by the consumers through this Wi-Fi facility (Starbucks Corporation, 2013). Environmental Factors Starbucks is required to do an environmental scanning so that if there are any environmental issues related to those particular surroundings it can be easily recognized. The issues might come from the recycling of coffee cups where the process is not done effectively or unavailability of this particular procedure in any store of the company. The facets of energy usage and water consumption are other crucial factors for consideration (Slideshare, 2013). Legal Factors Different countries have their different rules and set of laws. Moreover, there are varied their taxation policies, trade policies and trade agreements that need to be abided by Starbucks in its global operations. The aspects related to employment law, health & safety regulations along with consumer protection factors have been affecting the operations of the company in recent years (Slideshare, 2013). Model 2 Ansoff Matrix The Ansoff Growth matrix facilitates a company to establish its product as well as market growth strategy. The Ansoff Matrix is as follows: Source: (Aaron Hoos, 2013) With the help of Ansoff Matrix, a company can pursue to develop its business strategies in an effective manner by the incorporation of suitable strategies. Market Penetration Market penetration is the initial phase of Ansoff matrix where only the existing products are sold only in the prevailing markets. In the case of Starbucks, firstly the company sold only coffee in the existing markets which was much more profitable to the company. The market penetration strategy necessitates greater investment in new market research. However, in due course of times, the company commenced extensive market penetration activities such as opening a number of stores in Asia as well as in other parts of the world. In the US as well, the company has opened many new stores to ensure its widespread availability (Pizam, 2010). Product Development Product development is the second phase of Ansoff Matrix where the new products come into being in the existing markets. In the case of Starbucks, the company firstly came into market with coffee but apart from that they also started offering from Krispy Crème Doughnuts and fresh field’s gourmet sandwiches’ to Greek pasta salads and assorted snacks. The company also started offering a widely developed menu. Starbucks also sold Frappuccions and other iced products. The main target of the company has been to be the worldwide coffee and allied products leader globally (Pizam, 2010). Market Development Market development is the subsequent strategy to augment market share. Starbucks commenced extensive expansion, in quest of unexploited segments of the domestic market, with greater population density. Geographic expansion was pursued for the development of the market. Starbucks has inaugurated various stores in new markets with its available offerings. They made a partnership with Barnes and Noble bookstore and Marriott Hotels to exclusively sell their coffee. Starbucks has partnered with numerous firms to expand its brand into fresh categories. It made a joint partnership with PepsiCo to stamp the brand of Starbucks on bottled Frappuccino drinks (Barnes & Noble, 2013; BizTimes, 2012). Diversification Diversification is the other strategy depicted in the Ansoff matrix which has facilitated Starbucks to spread its coffee business. It started to examine new store concepts. It also commenced offering European-style ‘family bistro’ along with a menu that featured a varied range of offerings which included ‘huckleberry pancakes’, ‘oven roasted seared sirloin’ along with ‘Mediterranean chicken breast on focaccia’. Apart from coffee, it diversified the business also in terms of launching music albums. It had taken a high risk growth strategy that worked for the company. Starbucks initiated its record label named as Starbucks Entertainment and has been thriving in terms of recording with artists like Paul McCartney. Starbucks Entertainment also promotes Arctic Tale, a film co-scripted by Al Gore’s daughter Christin amongst others (Starbucks, 2013). Model 3 Competitor Analysis The competitor analysis is conducted to find out the competitors of Starbucks and their strengths as well as weaknesses along with using that information to improve various efforts within the company. In the case of Starbucks, the prime competitors include Costa Coffee, Caribou Coffee & Coffee Republic. Caribou Coffee Caribou Coffee is the nation’s second leading coffee company and is also a contender of Starbucks as they both sell speciality coffee and good food stuffs. Caribou Coffee possesses huge online visitors, mainly the company understands the marketing strategy of each country and then it attempts to target the market. The company uses new advanced technologies to improve the efficiency which is completely different from their competitors. The company has introduced new modern technologies to increase the revenue of the company. It uses different advertising modes like digital media, radio and campaigns along with internet partnership to differentiate from its competitors. The employees of the Caribou Coffee work harder as they receive bonuses apart from their salary. The strong point of the company’s operations is that it possesses two major areas to meet consumers requirements i.e. facility area and pick and choose area to manage their customers during busy times (Caribou Coffee Company, 2013). Costa Coffee Costa Coffee is a British global corporation which possesses a sequence of coffeehouses and is a subsidiary concern of Whitbread. Costa Coffee is the largest series of coffeehouses in the UK. Costa Coffee as well as Starbucks is the long-standing competitors in the market of coffee products. Costa Coffee has determined to sell their products utilising a low quantity along with elevated margin sale approach whereas Starbuck sells its products along with many other diversified offerings apart from coffee (Wood & Bowers, 2011). Coffee Republic Coffee Republic is one of the UK’s foremost coffee chains. Coffee Republic provides to their customers food, coffee as well as drinks. They also provide Wi- Fi facilities to their customers to make their ambience and operations more lucrative. Home delivery facility is also available in Coffee Republic (Coffee Republic, 2013). Task 2 Operations management activities are a key component of successful performance of business operations of Starbucks. These activities enable the company to meet the specific requirements of customers in terms of taste, quality and timely delivery of products as well as services. In this regard, the three selected models or theories of operations management are supply chain management and distribution strategy, quality along with planning and control. Model 1 Supply Chain Management and Distribution Strategy A supply chain is the group of activities that facilitate to deliver a product or service to the consumers. Supply chain management is the business task that manages all of the network links, thereby coordinates a well-organized movement of different goods through the supply chain from suppliers to manufacturers and then to distributors, along with endorsing sharing of information such as the demand forecasts, sales data and sales promotion along the chain. Distribution is the final step in delivering the product to the customers along with, minimising cost and maximising profits. Long-term accords together with logistics suppliers as well as distributors of foodservice are key components of distribution strategy of Starbucks. The company functions retail stores and a network of distribution channels. These activities also comprise retail and grocery store licensing agreements, direct-to-consumer channels via mail orders as well as online (Cooke, 2010). Examples of distribution network of Starbucks are airports, schools, medical facilities, convenience stores, departmental stores, and movie theatres among others. The superior the number of channels the better the company’s market coverage as well as rate of growth of sales becomes. Starbucks commenced with merely one channel i.e. with the company-owned stores that were staffed cautiously and operated gainfully. Later, Starbucks franchised operations in other locations which include bookstores, and college campus among others. The company signed a licensing agreement which was formed with Albertson’s food chain with an aim to open coffee bars within its supermarkets. Only coffee is not sold, other food products are also sold with coffee. Starbucks uses multi channels of distribution for its products. This signifies that the company utilises more than one distribution plan. The first step is Starbucks sells its offerings by utilising a direct retail system in the stores which are owned by the company. In the second step, the company imports and processes coffee and then sells it under its own brand name in its own stores. Starbucks also sells its offerings in supermarkets along with shopping malls. Starbucks has distribution agreements with office coffee suppliers, hotels and airlines. With the help of manifold distribution channels, the company has inculcated an opportunity to target the market globally. However, it has to be very careful with the approach due to the potential of channel disagreement (MaRS Discovery District, 2012). Model 2 Quality With regard to the facet of quality, it is recognised that every cup of coffee has to meet Starbucks quality criterion in order to be deemed appropriate for purchase. High quality is an integral element for ensuring sustainability at every level of the coffee supply chain. Starbucks’ cup related quality standards are based on precise descriptions for each coffee purchased. Every coffee is expected to signify the flavour character distinctive to the country or region. All coffees are expected to provide an absolutely clean up vibe, with medium to heavy body and excellent fragrance. All washed coffees of Starbucks are prepared from high-quality hard bean. There are various qualities of coffee available which include Starbuck Fresh Coffee, Gourmet Dark Roast Coffee, Hot Coffee, Decaffeinated Coffee, Flavoured Coffee, Cold Coffee Drinks, Low Fat Milk, and Organic Milk. Apart from all these, Starbucks has expanded each store’s food offerings by offering a varied assortment of products comprising from Krispy Kreme doughnuts along with fresh field’s gourmet sandwiches to Greek pasta salads and assorted snacks. By presenting a stronger menu, the company has aimed to augment the average sales ticket of customers. Alongside coffee, all other products quality is also very good. Quality is of two types in terms of operations management i.e. product quality & service quality. Product quality is the compilation of features as well as attributes of a good that add to its capability to comply with given requirements. Service quality is a gauge of how fittingly the service level offered matches expectation of customers. Good service can provide a good image as well. Consumers expect to obtain value or the money they already spend to pay for any products they buy (i.e. food and beverages). They expect as well as demand that the baristas can provide the service they expect. Barista is the title for partners who work in Starbucks (Starbucks Corporation, 2013). Barista is responsible for forming Starbucks stores. If the consumers get best service quality then the consumers will be happy and it encourages consumers to come back again. Thus, the company needs to be very much careful regarding the service quality provided to the customers because the better service will help to augment the value towards consumers (Sutawidjaya & et. al., 2012). Model 3 Planning and Control Planning and control is a critical component of operations management which enables a company to direct its activities in an efficient manner. In the case of Starbucks, it is observed that the company efficiently plans its operational activities to reach to their desired level of output. It relates the overall operational process of Starbucks. The plan starts from setting objectives, their mission and vision. Mission is the central focal point of the company and also aids the operations functionalities at Starbucks to apply business strategy. Once executed, that same drive is utilised in order to sustain the energy level needed to maintain the business strategy, as well as everyday operations. The mission statement helps executive administration and Starbucks partners to sustain the highest quality with respect to the operations process. It also facilitates for Starbucks to be adjustable to changes in accordance with the market trends and new policies. These everyday operations can range from top executives preparing financial reports for the purpose of decision making to the frontline employees who arrange among the many drink offerings of Starbucks. Starbucks’ stores that keep hold of the same managers as well as baristas have the capability to present more tailored services to usual customers and will be adept with the appropriate processes to create drinks. Starbucks provides training not merely to their employees to make the coffee drinks but in terms of the soft skills required in intermingling with customers as well. Starbucks entails remembering usual customers and at times even their standard drinks. There is a high extent of visibility as well as customer contact from the scenario of point of order. It also benefits Starbucks to provide continual training to their staff in an attempt to better serve regular along with casual customers. Starbucks is strongly dependent on its ability to handle high volume tariff. Controlling is essentially the process of monitoring, comparing and correcting work performance. Main strategy of operating and controlling activities in Starbucks is to ensure high quality of products along with services. Consequently, the company generally refrains from using franchise. It has the entire control over quality of products in order to meet with customers’ satisfaction level and evades at times casual business operations of franchise buyers. The company should be very much careful regarding the quality of the product. The strategy of controlling the total mechanisms should be very clear. Business control system although at times is multifaceted; in practice it is quite straight forward. Control systems are designed and executed as a means to control resources and to ensure that employees act in a way that is favourable to their organisation. Effectual managers can exercise control systems as a tool amid others. Starbucks uses hierarchy control system to effective use (Paryani, 2011). Conclusion From the overall observation of the study, it is identified that Starbucks is a coffee based company which started its operations with coffee but later on moved with other products including beef, snacks and drinks. In this discussion, the main emphasis is given on the marketing strategies and the operational strategies of the company and how they affect the performance of the company in its current market scenario. It is observed that Starbucks has explored varied avenues of strategies in relation marketing approach which include market diversification, market penetration and differentiation among others. It has also remained focused on incorporating technological features in its operations activities to lure the customer to purchase their varied products on global basis. In terms of operations management activities, the distribution strategy and supply chain activities of the company are the backbone to ensure sustainable performance of the company in the long run. In order to certify product and service quality, Starbucks provides training to its staff so that they are able to reach up to the desired level of the consumers. These activities of the company have enabled it sustain its dominance in the global arena. References Aaron Hoos, 2013. Ansoff Matrix. Uploads. 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