Starbucks' Global Strategic Management - Case Study Example

Starbuck’s Coffee Management Case Study Student Name: Institution: Date: Introduction In any market environment where competition is inevitable, companies develop strategies which make them dominate the market. This has also been the case for Starbuck Coffee. Formed in 1971 with the aim of selling coffee beans and equipment, the company has currently expanded to roast coffee and sell drinks as well. Starbuck coffee has many coffee stores in various countries in the world such as Canada, Puerto Rico, the United Kingdom, China, Hong Kong and even India. The company is rated the largest coffeehouse in the world with over 140,000 employees and five million customers on a weekly basis (Bussing-Burks, 2009). Starbuck’s Coffee deal with many products such as hot and iced espresso beverages, salads, pastries and sandwiches, fresh brewed coffee, coffee and non-coffee beverages. The machinery used in making the end products include the coffee brewers, coffee grinders, and espresso machines. Other products are compact disks, books and gifts that are given to customers. The realization of all these has been made possible through understanding the importance of company branding, that makes a company to prevail despite the stiff competition from other companies in the same industry. Over the years, the management of Starbuck’s Coffee has maintained the importance of developing and maintaining its brand. Through proper customer satisfaction, the company has beat its competitors to become the most preferred one in the market. As a marketing strategy, the company has a number of internet domains such as Starbucks.com and Starbucks.net, which enable customers to access information about their products online. In addition, the company has many copyrights for products such as promotion and packaging materials as well as packaging materials. The marketing strategies developed and applied by the company have enabled it to dominate the market despite their high prices. The company enjoys a monopoly in the market since it has total control over its high prices of goods. Despite the stiff competition from other companies in the beverage industry such as MacDonald’s, the logos developed plus the splendid services offered have placed it at the top in the industry. By doing all these, the company realizes its mission, which is, “providing the customers with an opportunity to take good coffee, while engaging in discussions in a relaxed atmosphere”. Discussion According to Michael Porter, the success of any company is determined by five factors. These include; the bargaining power of the customers, competition, entry of new products into the market, entry of new companies into the market within the same industry and ha bargaining power of the suppliers. All these factors when properly taken care of, can scale up a company even in the wake of very stiff competition within the market (Magretta, 2012). For Starbucks Coffee Company, the competitive advantage within the market enables it to thrive despite all other difficulties experienced in the market place. There are many other coffee houses, but this company enjoys a monopoly in the market despite the high prices of its products. The increased market competition is made possible by the ability to offer products of very high quality to the consumers and branding which increases the preference of its products in the market. The company also has very clean and well maintained stores which reflect the cultures of the communities within which they operate thus increasing their competitive advantage. The increased competitive advantage has also been facilitated by the global brand recognition as well as market expansion. Through product mechanization and quality branding, Starbucks has increased its market share. In the United States alone, the company is the best-selling coffee company with a 36.7% market share. The expansion of the company in the global market has also helped in increasing its competitive advantage. The presence of stores in more than sixty countries globally increases the market niche of the company and reduces competition from other companies within the beverage industry. The efficiency of a company also depends highly on the employees working within the enterprise. The high competence of the employees at Starbucks increases the performance of the company in the market (Bussing-Burks, 2009). Having realized the importance of these employees, they are provided with a healthy working environment, retirement benefit schemes, and stock options. The result is quality customer services which translates to effective market share. The company also produces goods of very high quality without compromising on the standards to capitalize on the quantity. The range of goods offered by the company also cuts across all age groups, hence increased diversity. Important in any business scenario is how a company markets its products. Marketing strategies can also result in the failure or success of any given company. The marketing tools offered as well as the manner in which it is done are, therefore, essential. In the case of Starbucks Coffee, proper marketing enables it to penetrate into the market and maintain a solid base. The company invests a lot in technology thus keeping at the same level with the changing world. Starbucks App, which is an application for both apple and android gadgets enables customers to log in and find details about the company. In addition, the company also has internet domains for marketing such as Strabucks.net and Starbucks.com. All these internet sites increases access to its products by consumers without necessarily going to the stores physically. The customers can also purchase products online, at the comfort of their houses and have them delivered to them. All these factors put together have increased the competitive advantage of the company over the others in the beverage industry. As a result of properly set and executed strategies, the company is able to exaggerate the prices of its products and still remain relevant in the market. In ensuring that the company remains at the top of all the other companies within the beverage industry, the management of Starbucks coffee uses selected and well implemented leadership, structure, information and control systems in running the company. Among the leadership strategies exercised by Schultz is the training of the employees. All the employees that are hired by the company are required to go through rigorous front line customer care training in Starbucks experience, service skills and bar technology. As a result, the employees interact with the customers as professionals and this increases the quality of services rendered. Another way through which strategy is implemented using information is branding. The properly calculated manner in which the company differentiates its products from other products in the market within the same industry ensures that the customers love its products. Having realized that branding is an important part of marketing, Schultz has ensured that the quality of the coffee and other beverages produced by the company are not sub standardized. This ensures that the quality of the products are as branded thus enabling the company to create a blue ocean, instead of competing in the market like the others. Human resource is another factor that is used in implementing strategy in the company (De et al., 2010). Schultz uses the notion that the success of his business depends on the human capital and thus invests heavily on his employees. Apart from offering training sessions that increase the employees’ skills in handling customers, incentives such as health and retirement benefits are also given to the employees. This way, the management is able to boost the morale of the workers, increasing their performance, and hence both internal and external competition of the company is enhanced. The international expansion of Starbucks Coffee to the 60 plus countries and the recognition of its brand by the customers in the market is not a product of good luck but strategy. To develop a market niche in the international market, Starbucks Coffee used a number of strategies which, over the years have proved to be successful. Among the strategies used by the company is the joint ventures. In the joint venture strategy, the company involved owns and manages the foreign operation. This kind of operation requires management assistance and training as well as a more direct investment (Mellahi, 2013). Through joint ventures, Starbucks is able to access knowledge by partnering with the locals thus establish the local culture in the enterprise. However, this strategy is challenging since there is the lack of technological control as well as the lack of engagement in the global market coordination. Another strategy employed by Starbucks in its international expansion is licensing. This plan involves a company, issuing the rights over patents, investments copyrights and designs to another company for a given period of time. This arrangement requires the licensee’s loyalty to the licenser. The method portrays great advantage to the company since the development costs are reduced. The company also uses its own wholly owned operations or subsidiaries in penetrating to the international markets. This kind of strategy allows full ownership of stock by the foreign company. A company can establish its own operations in a given country in two major ways. One way is through the Greenfield investment where the company establishes its operations within a foreign company. The other way is through the Brownfield investment, where a company uses another company in the foreign country to promote its products (Verbeke, 2013). In most cases, Starbucks Coffee uses the Greenfield option in establishing international markets. The use of a company’s own operations in a foreign environment is advantageous since it enables the company to exercise control over technology and engage in global strategic coordination. It is however limiting due to increased costs and risks. Other methods used include exportation and franchising. Conclusion From the above discussion, the success of Starbucks Coffee Company is driven by the proper implementation of strategies. From a small company in Seattle to 60 countries in the world, the company has risen above all challenges to remain one of the best in the beverage industry. The success of a business, therefore, require that the management uses the available resources to properly implement business plans. Involvement of employees is also very crucial and companies are encouraged to embrace employees’ welfare since it is significant in determining business success or failure. References Bussing-Burks, M. (2009). Starbucks. Santa Barbara, Calif: Greenwood Press. De, K. C. A, & Business Expert Press. (2010). Fundamentals of Global Strategy: A Business Model Approach. New York. Mellahi, K. (2013). Global Strategic Management. Springer International Publishing : Springer. Magretta, J. (2012). Understanding Michael Porter. The Essential Guide to Competition and Strategy. Boston, Mass: Harvard Business Review. Verbeke, A. (2013). International Business Strategy: Rethinking the Foundations of Global Corporate Success. 2nd Ed. Cabridge University press. Read More