Starbucks is a giant in the coffee industry, with locations all over the world. The company has been around for decades and has had many different strategies to succeed. This essay will discuss starbucks’s strategic management tactics, their successes and failures, and what they can learn from them to improve future growth of starbucks.
Starbucks Corporation is a private limited company formed in 1971. The company operates in the specialty eating sector. The firms’ operation began with roasting and retailing ground and whole coffee beans, spices, and tea. Its operations were restricted to the Pike Place market in Seattle.
Prices start at $12
Prices start at $11
Prices start at $12
Starbucks has over 20,000 retail locations in 60 countries and is focused on gaining an optimal market share both domestically and internationally. The company’s main goal is to inspire and nurture the human spirit. Starbucks has taken a distinct approach to differentiate itself in the market by adopting innovative market tactics such as product differentiation and expansion.
The objective has been accomplished by specializing in unique goods. Starbucks has continued to provide a wide range of beverage alternatives, including coffee, tea, and juices, throughout the years. The company also sells fresh food items such as pastries, salads, and oatmeal.
The competitive landscape of the coffee market is changing significantly, and Starbucks has been able to capitalize on this by using a premium-pricing approach. Starbuck has utilized a distinct marketing strategy in line with its product differentiation plan. The company has achieved this goal through unconventional marketing techniques. The company prefers to focus on branding and high-level marketing rather than aggressive advertising, utilizing collaborations, partnerships, and word of mouth (Larson 2009).
The firm’s aim is to develop a strong brand image and enhance its reputation. As a result of the efforts mentioned above, Starbucks has established itself as one of the most trusted coffee brands in Australia. The company uses several effective marketing techniques, including providing high-quality coffee goods, ensuring maximum client satisfaction, and establishing itself as the third place for customers to frequent between home and work, as well as brand marketing and creating a Starbucks’ community.
Starbucks has established itself as a market leader in an industry that is increasingly competitive by employing distinct marketing methods. Starbucks has positioned itself as a market leader in the coffee industry by adopting innovative marketing techniques. The paper looks at Starbucks’ internal and external setting in detail to better understand it. A comprehensive strategic management analysis entails an examination of the company’s internal environment, which becomes apparent during this process.
Market Environment Analysis
The external business environment is a complex set of circumstances that firms must understand in order to succeed. Firms confront a variety of external factors, which emphasizes the importance of management teams having a thorough knowledge of their operating environment (Kotter & Schlesinger 2008, p. 136). The macro-environment should be analyzed, as well as the micro- and macro-environments (Gilligan & Hird 2008, p. 36).
Microenvironment analysis should also be included in the study, which entails evaluating the sector in which a company operates. The micro and macro environments vary from nation to nation. As a result, corporate management teams must analyze the country’s macro-environment while operating in that nation.
The PESTLE model is one of the methods that company management should consider in order to analyze the market environment effectively. Starbucks’ operations are influenced by changes in the macro-environment in its home market.
Porter’s five forces. It is critical for company management teams to comprehend the current industry trends in order to succeed in their respective industries. One approach for a business to get a better understanding of its own industry is to utilize the Porter’s five forces model (Grundy 2006, p. 215).
The model assesses the features of a specific industry by examining potential entrants, purchasers and suppliers’ bargaining power, the presence of substitute goods, and degree of industry rivalry. The current characteristics of the UK specialty eateries sector are shown in the chart below.
Because of the many coffee beans exported from other nations such as Brazil and Indonesia, the specialty eating places sector is characterized by reduced supplier bargaining power. The UK specialty eateries industry’s profitability potential has prompted most investors to consider whether or not entering the business.”
Importation is one of the most popular methods for these businesses to enter the market. The industry’s low investment requirement and the fact that no special expertise is required to get started has made it more appealing. With the rise of additional beverage types such as hot chocolate and tea, customers now have a wider range of choices when it comes to substitutions.
The low switching cost in the sector has kept buyers’ bargaining power high. Consumers’ price sensitivity is increasing as a result of the recent global economic recession and sovereign debt crisis (Miller 2009). As a result, Starbucks will be pressured to adapt to these market trends.
Despite the fact that there are a lot of competitors in the sector, it is characterized by a high degree of rivalry. Costa, Nero, Caffee Ritazza, BB’s, and Pucchino are some of the important companies in the business. Despite this fact, Starbucks has managed to secure an excellent market position.
Critical success factors
Every company’s success is determined by how well it follows the essential success variables. These factors vary from business to business and industry to industry. Starbucks, in its operation, has incorporated various critical success factors including global dominance, high customer service, and brand development. These elements have played an important role in the long-term growth of Starbucks.
Starbucks Strategic Analysis
One of the most important elements in establishing coherence between internal capabilities, resources, talents, and external variables that affect a firm’s operations is strategy development (Srinvasan 2005).
As a result, it is critical for management teams to assess the external and internal factors that may have an impact on their company’s overall performance (Ghani et al., 2010, p. 52). Internal analysis of a firm can be done with a variety of analytical techniques. The strategic factor analysis summary matrix is one example. Starbucks conducted internal factor analysis utilizing the chart below as an illustration.
Starbucks core capabilities/competencies
Starbucks has been focused on gaining a high level of competitive advantage, and to reach this goal, the company has developed a number of skills that aim at improving client satisfaction. Starbucks has developed its stores in such a manner that consumers may relax and enjoy them to improve client satisfaction. Because it has built up a solid financial and human resources foundation, the company is able to develop these skills.
Starbucks places a lot of emphasis on ethical and professional business practices and ethics in its efforts to serve clients. Starbucks was named one of the world’s most ethical businesses in 2011 (Environmental Leader 2011). With so much competition in the specialty coffee industry, Starbucks has built an excellent track record for product innovation.
As a result of our ten years of experience in the sector, we have a good handle on market and client innovation methods. The aim of the firm’s innovativeness is to allow it to satisfy the demands of various market segments. In addition, innovation helps the business to be successful in adapting to changing consumer tastes and preferences.
Starbucks has succeeded in the specialty and restaurants sector due to its marketing. Its success is attributed to a stronger market approach that includes product diversification and growth. According on an analysis of the competitive landscape, the UK appears to be a desirable market climate.
Starbucks has been able to implement its aggressive growth strategy because to the firm’s strong stability in the political and legal environment. The durability developed in the UK has allowed Starbucks to put into effect a rapid expansion strategy. However, the recent global economic crisis, as well as the ongoing sovereign debt problem, presents a significant obstacle for the company. It is obvious from Porter’s five forces that the specialty and restaurants sector in the United Kingdom is extremely appealing.
As a consequence, Starbucks should utilize proven strategies to take advantage of the business opportunities identified in this study. The company’s success in the UK market is due to its wide range of specialized resources, essential talents, and abilities. As a result of its efforts, Starbucks has established an effective human resources department. As a result of these activities, the firm has developed product improvement and quality compliance procedures. Other functions that it has created include product improvement and quality control.
Starbucks has developed a solid following among clients because to these talents. The abilities have also helped to strengthen the company’s areas of excellence. It is critical for Starbucks to assess its dangers and weak spots and make any required adjustments in order to continue operating in the future. External business environments should also be utilized by the firm.
In this paper, the strategic management process will be discussed in detail, based on the diagram depicted above. The various components will first be described, followed by a clarification of the various linkages between them in terms of impact. First and foremost, an explanation about strategic management is offered.
Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its goals, according to Fred R. David. The strategic management process may be divided into four stages: environmental scanning, strategy formulation, strategy implementation, and strategy evaluation. Finally, a strong strategic plan is required to succeed in the market.
The external environment being evaluated should be examined in three ways, according to Coulter (2008), namely the industry environment, the country or national environment, and the broader socioeconomic or macro context. The company’s operating environment is known as the industry environment.
The industry analysis considers the company’s competitors, its market position, and the firm’s history. Furthermore, the influence of globalization on a nation or national environment is investigated. As a result, it may become apparent if a firm must relocate its manufacturing to somewhere else in order to be competitive or profitable.
The broader societal or macro environment also considers factors such as government, legal issues, technological variables, and other elements that might influence the company and industry. The possibilities and dangers of a firm can be determined based on its external setting.
Opportunities allow a firm to capitalize on its strengths, minimize its liabilities, and counteract external hazards. Finally, threats may prevent a company from gaining competitive advantage or meeting its stakeholders’ expectations. As a result, in order to reduce the dangers for the organization, attention should be given to the company’s assets.
Strategic analysis and choice
“Strategic analysis and decisions involve an understanding of the fundamental underpinnings for future strategy at both business unit and corporate levels as well as the options for developing strategy in terms of both route choices and process.” (Johnson, Scholes, & Whittington, 2006). It is critical to analyze a firm’s strategy and choose the one that best suits its goal after it has been developed.
It’s critical to establish the company’s competitive edge right away in order to comprehend how it may compete within its competitive set. Additionally, managerial choices concerning the corporate-level strategy, such as the firm’s image, goods, and operations, must be evaluated.
Furthermore, the plan may change in the future, therefore careful consideration is required. According to Johnson, Scholes and Whittington (2006), goals are statements of certain results that are intended to be obtained. Often, objectives are expressed in financial terms such as desired sales or profit levels, and growth rates. Additionally, businesses have market-based objectives such as market share and client service.
In conclusion, objectives are more clearly defined goals that are consistent with a company’s mission. Furthermore, objectives may be divided into two groups: long-term aims and annual targets. Long-term goals can be seen as corporate-level goals in a multinational corporation.
The following are the long-term objectives that your business should strive to achieve in the next several years. These end goals, which will be met over a span of many years, are referred to as long-term. On a functional level, the long-term objectives are translated into yearly targets for a group of companies.
After the long-term goals, the grand strategy occurs. The grand strategy is more concrete and precise than the long-term goal. The long-term objectives and plans of the company are defined in this strategy. Organizational development and diversification, as well as divestiture and diversification, were key elements of this plan. Grand strategies are frequently regarded as the basic strategic approach for taking action, with a time period in mind (e.g., three to five years).
Combining the numerous grand strategies is typical among firms from many sectors, business product lines, or consumer categories. (2008) Wheelen and Hunger stated that there are three broad directional orientations known as “grand strategies.”
Here are the three phases of growth, stability, and retrenchment. Internal and external development might be seen as aspects of a project’s progress. Internal expansion, for example, is the extension of a company’s business activities. Staying the same size or growing slowly in a controlled way are two options for stability techniques. A corporation may use one of these huge plans as a starting point to achieve long-term objectives.
A functional strategy is a technique used by a functional department to meet corporate and business unit goals and strategies. It focuses on the development of a unique competence that may provide a company or a business unit with a competitive advantage. Each functional department has its own set of procedures. The numbers of different strategies vary depending on the number of functional levels such as human resources, food and beverage, and room divisions. Every functional approach is defined by a set of functional goals.
The following are the functional objectives that guided the development of the functional strategy: Profitability, market share, human talent, financial health, cost efficiency, product quality, innovation and social responsibility. Furthermore, functional strategies may be formed out of a company’s core competence or a distinctive competency derived from it. When there is a gap between the company’s core competency and its core capability, it becomes a unique competence of the functional strategy.
The term “policy” refers to rules and directives that outline the parameters under which actions should be taken, according to Mintzberg. The policies are recognized as an essential element in strategy execution, where they serve as a guide for decision making and address recurring situations. Furthermore, it provides consistency and coordination, especially within organizational departments. The company’s objectives may assist with the policies. Policies are defined by Mintzberg as “development to guide companies,” with different executives devoting more time to arbitrating the consequences of enacted policies rather than promoting the company forward.
The support of a well-managed firm is well-defined policies. Policies are created after a wide range of operational decisions have been made. A variety of operational choices might result in the development of a minor aspect of a company’s policy, which may be understood, form a sequence of decisions based on a pattern and guidelines, and eventually lead to the formation of policies (?). Strategic policies are long-term goals that guide the overall structure and direction of the company’s entity.
It’s critical to involve all employees in the company before putting the plan into action. Every work group, department, and division of the business must communicate and support the company’s strategy with its plans and actions, according to Thomson (2007). The strategy needs to be institutionalized before it can be implemented. In order for strategic leaders to motivate and stimulate their workers, they must first include them. According to (Wooldridge, 2003), middle management has the greatest impact on bringing operational levels inside a firm?)
The goal must be articulated and understood in order to encourage and stimulate the workforce. Assigning people to the value of specific tasks will improve their quality, creativity, and customer service response. Feedback may be given before putting the plan into action since employees must first understand it completely. It’s critical to get feedback so that you can adapt your approach accordingly. Within time, the external environment changes considerably.
Take note of any feedback you receive, and keep in mind that the strategy must be modified to match the external environment. Feedback on the corporate level is possible, as well as feedback on the functional level. It’s difficult to put the plan into practice at both the organizational and practical levels. The corporate level has diverse opinions and suggestions about the plan, whereas the functional level has its own culture that must be integrated with. To combine these comments it’s critical have a good fit between these levels.
Control and evaluation
The final stage in the strategy process is control and evaluation, at which time if the plan is effective, it may be measured and evaluated. Control and feedback are informal mechanisms that allow effort and results of implementation to be tracked and compared against intended goals. Okumus (2003) notes that control and feedback refers to formal as well as informal techniques for monitoring and comparing the success of a project’s execution.
The control and evaluation of the outcome may result in an outcome, which was intended and unintended consequences of the implementation process. These can be either physical or intangible. The method will lead to an assessment Okumus (2003) developed a process table that asks the firm questions after evaluating the strategy.
Following the strategy evaluation, Okumus (2003) discusses the method. Is it possible that the new approach has been put into action as planned? Do predetermined objectives have been achieved, and is the company’s performance determined by this? The objective of Strategy is to achieve greater income, hence enhancing corporate success.
The relationships between the various components. “The Strategic management is defined as the set of decisions and actions that lead to the creation and implementation of plans designed to achieve a company’s objectives. A Strategic Management process is an information flow through interconnected phases of analysis toward the attainment of an aim.” (Pearce & Robinson, 2005).
The model of the strategy formulation process represented in the module Strategic Hospitality Management’s introductory course is made up of eleven components and depicts one of the most frequent forms of the model employed in strategic management. The company’s mission is placed on top of the model, representing its starting point for strategy selection. The goal, which was derived from the business’s vision, represents the beginning point for selecting effective techniques.
A firm’s objective, on the other hand, is influenced by external factors and a company’s profile. As a consequence, management must consider what sort of strategy is feasible and what the company wants to achieve in the long term. Long-term goals and grand strategy are determined by strategic inquiry and choice.
Long-term aims may be better defined as goals established at the corporate level of a multinational corporation. Annual objectives are determined by long-term aims and function as a step-by-step method for recording short-term achievements that contribute to the company’s long-term aim.
The company’s strategic business units are held accountable to these goals. Long-term objectives are changed into a Grand strategy – more measurable and clear – at this level. At the functional level of a multi-business corporation, strategies are put into action and annual targets are attempted to be achieved.
Strategies are institutionalized based on rules and methods, culminating in the company’s strategy implementation. The final component of the strategy development process mentioned above is control and evaluation.
This is the fourth stage in the process of implementing a strategy. It documents how well and successfully the new approach has been implemented. “The strategic management method is dynamic and continual. When any one of the major elements in the model is modified, it necessitates modification of all other components.” (David, 2001) The quote above refers to feedback that is part of this continuous process for producing effective plans.
Feedback may be directed toward the company’s control and evaluation of the strategy, which links its outcomes back to the company’s profile and mission. All levels of the many-business firm, particularly at the corporate level since it is the authorizing organ of a business, can benefit from improvements. On the other hand, feedback will emerge at the institutionalization stage when a company’s inner circle of employees -the functional level – provides strategy.
The external environment should be guarded from a harmful impression by thorough institutionalization, which would prevent unfavorable comments. Finally, the implementation of a new strategy necessitates careful planning and participation from all concerned parties. A plan may fail if certain parties do not collaborate. As a result, literature advises that “(…) personal diligence, dedication, and sacrifice” (Wheelen & Hunger, 2008) are required in the execution of any new strategy.
Several versions of the strategic management theory exist in literature, but the underlying idea is always the same: “(…) Strategic management allows an organization to be more proactive than reactive in sharpening its own future;” (David, Benefits of Strategic Management, 2001). Although the nomenclature and arrangement of the components may vary somewhat, the model provides a useful framework that names all elements and parties involved that must be considered while developing a new strategy.
Furthermore, it is critical to realize that strategy development, execution, and evaluation processes may have to be modified on a regular basis rather than just semi-annually (David, The Strategic-Management Model. 2001).