Competitive Strategies for Starbucks Coffee - Case Study Example

Starbucks Coffee Name Institution Date Q1 Starbucks’ international strategist, Schultz employs a number of competitive strategies as suggested by Michael porter. These generic competitive strategies include and not limited to the following. Cost leadership strategy This strategy aims at achieving competitive advantage for developing an edge that makes a company improve the volume of sales and makes it different form the competitors. In addition, cost leadership strategy enables a company to become a leader in cost minimization in the industry. In a bid to cut costs, starbucks adopts joint ventures instead of foreign direct investments. This is because joint ventures enable the company to cut all costs that comes with engaging in foreign direct investments. For instance, Starbucks entered into joint venture with Pepsi Cola Company to invest in making bottled Frappucciano. This joint venture bounds Pepsi Cola Company to contribute certain amount of money to cater for the production of Frappucciano. Notably, Starbucks successfully enters into joint venture with Dreyer’s Grand Ice Cream Inc whereby the two companies cater for the cost of producing the leading brand of coffee ice cream in the United States. These joint ventures help Starbucks to cut their costs and as such they can be termed as cost leadership strategies. The focus strategy This strategy involves a company concentrating in a particular market segments and understanding the dynamics of the needs of the customers in those markets. This focus on a particular market segment prompts a company to produce specific products and low-cost products for that market. This market puts off competitors from entering such market segments. Notably, Starbucks has entered sixty (60) markets outside North America. Consequently, through partnership with international foreign agencies, Starbucks was able to open the international coffee house in Tokyo in the year 1996. To appeal to different markets, Starbucks strives to address local needs of each market. This is informed by the fact that each market has its own needs and requirements. Moreover, the partners chosen by Starbucks must demonstrate brand-building skills and knowledge of the local market needs. This enables Starbucks to meet the needs of each specific market based on the information they get from their partners in those international markets. Additionally, Starbucks is able to monitor sales through a point-of-sale system which receives information about the sales made each day at the headquarters in Seattle. This system of tracking sales enables the company to identify the markets which demand more of a particular coffee brand and as a result invest in increasing supply to such markets. Notably, executives of Starbucks are able to monitor the buying trends in different markets and thereby advise the CEO accordingly. Moreover, the information shared by the executives to the management of the company is useful in making decisions concerning different market segments. These decisions touch on the efforts to address the needs and requirements of the customers in different market segments. The differentiation strategy This strategy involves a company making its products different and more attractive than those products of its competitors. This strategy depends on the nature of the industry within which the company operates as well as the nature of products and services. Moreover, the durability, functionality and brand image also matter to the success of the differentiation strategy. Notably, Starbucks produces the number one coffee brand in the United States. This is as a result of successfully adopting a differentiation strategy. Moreover, Starbucks has brought a difference in making bottled coffee. This has happened through cooperation with Pepsi Cola Company. The fact that Starbucks recruits experienced personnel to prepare coffee drinks makes their products unique to the target customers. This implies a differentiation strategy whereby the products that Starbucks sells to the customers are of higher quality and different form the products that their competitors sell to the customers. Whereas other coffee houses mainly target the customers who visit their restaurants to take coffee, Starbucks has gone beyond that and targeted airlines. It is noteworthy that Starbucks supplies coffee to Canadian and united emirate airlines. In addition, Starbucks supplies coffee to different hotels such as Starwood Hotel and Hyatt Hotel. This extension of target makes Starbucks gain access to large markets and thereby giving a clear indication of differentiation strategy. Q2 Howard Schultz, the chief global strategist of Starbucks is a master and user of leadership skills to lead the company into making profits and achieve global expansion. Through his leadership, the company is able to establish global partnerships with other companies across the globe. To start with, Schultz embarked on global expansions to reach sixty markets outside North America. Moreover, Schultz is careful in choosing Starbucks’ international partners based on corporate culture and the need for meeting the market needs. Notably, Howard Schultz believes in leadership whereby the leader hires smart people than himself and allows them to showcase their expertise. This leadership practice has made Schultz recommend qualified people to take up key positions in the strategic management of Starbucks in the international frontier. In terms of structuring international markets, Schultz has proposed a team of executives to monitor the trends in the global markets. These executives gather information from the point-of-sale system every night, which they use to make decisions concerning different market segments. Moreover, Schultz works with experienced managers whom he allows to carry on with their daily tasks without interference for the success of Starbucks. These managers supervise the tasks performed by the workers majority of whom are drawn from universities and community groups. Consequently, the managers report to the executives of Starbucks. This structure creates Starbucks’ good public image and enable the company offer quality service to the customers. Howard Schultz believes in the utilization of information and control systems to make decisions in Starbucks. For instance, Schultz initiated a plan to establish a system to monitor sales every day. This initiative started by hiring an IT specialist to come up with a point-of-sale system which would enable managers to closely monitor the sales. The monitoring of sales enables the managers to get feedback on how fast or slow the company’s products are selling in the market. Consequently, the managers would use the feedback to formulate corrective measures to enable Starbucks increase its sales volumes in different market segments. This initiative makes Starbucks to remain a leading coffee dealer in the international market. According to Samson (2015), the human resource department plays a critical role for any company to succeed in the international market. Howard Schultz understands this fact well and it is for this reason that Schultz hires smart and experienced people to work for Starbucks. For instance, the ‘baristas’ are qualified and experienced individuals who are specialized in making coffee drinks. Moreover, Schultz recommends training of employees who make coffee drinks. This training is crucial for creating Starbucks’ good public image and enhances the quality of service that the employees offer to the customers. The good public image and customer satisfaction enables Starbucks to attract more customers thereby making huge profits. Q3 Joint ventures This refers to a form of partnership where companies form different countries share the costs of undertaking a certain investment. In addition, the principles guiding jot ventures requires that companies in a joint venture share profits according to the ratio of their contribution in the joint investment. Moreover, joint venture is used as a strategy by companies when they want to go international for the purpose of minimizing costs of investing in the international markets. Similarly, Starbucks aims at minimizing costs when it forms joint venture with Pepsi Cola Company to jointly invest in making bottled Frappucciano. This investment benefits Starbucks in that they are able to find their way into the international market at low cost. In addition, Starbucks forms a joint venture with Dreyer Ice Cream Inc. This joint venture enables the two companies share the cost of producing the leading coffee brand in the United States. Licensing This refers to the form of engagement where a company (licensor) gives copyrights marketing rights to another company (licensee) to market and sell the products of the licensee at a fee or royalty. In this strategy, the licensing company gains the benefits of having its name and products reach the international markets without any cost. In addition, the licensor earns revenue in terms of fee and royalties. For instance, Starbucks may license companies outside the United States to use its brand name in marketing and selling their products at a fee. This engagement helps Starbucks to gain revenues and popularity in other countries away from the United States. Company-owned operations/ foreign direct investments This refers to the practice where a company, on its own, finances and executes investment decisions in a foreign country. It is a form of investment where a company enters and operates in a foreign market without establishing links with other companies in the host country. For instance, Starbucks enters and operates in markets outside United States like Australia and Philippines. To successfully undertake company-owned operations in international markets, Starbucks studies the foreign market adequately so as to understand the macro environmental factors in those foreign markets. Foreign direct investment enables companies to have full control of their operations as they are able to control their own activities. Moreover, in a foreign direct investment, the company enjoys all the profits from the investment and shoulders all the costs related to the investment. References Samson, D. & Daft, R.L. (2015). Management. 5th adtn. South Melbourne, Vic: Cengage Learning Australia. Read More