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Starbucks Corporation is coffeehouse chain based in Seattle United States. Starbucks is the largest coffeehouse company in the world. Starbucks Coffee Company started his business in 1971 in Seattle’s Pike Place Market, USA. Presently Starbucks has more than 17,000 stores out of the world and more than 10,000 stores are only in North America. Star Buck’s aim is providing best and finest quality of coffee to the customers over the world. The Star Buck’s mission statement is that to top seller in finest quality of coffee but keeping in view of uncompromising principles while the company growing and wants more profit. The Star Buck’s have been planed to open 100 new stores in USA and more than 200 new stores over the world at the end of 2010. President and CEO of Star buck’s is Howard Schultz. (“Starbucks”, 09 Sep. 10,)
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“Change in turnover of the coffee industry due to only change in climate situation said by the International Coffee Organization (ICO). The International Coffee Organization is representing to 77 coffee producing countries. According to (ICO) risen in temperature by half a degree in coffee producing countries is faster than over 25 years past. This change has been created a panic situation in all those countries which are only depends on coffee production”. (Ariel Schwartz , 2010)
“In a meeting of coffee producers in Guatemala, roasters said that all instability in weather condition is only due to limited in Land and Water resources. According to National Coffee Association of Guatemala that production of coffee will be decreased up to 28% in Nine Latin countries in the first three months of 2011. The production of coffee has been already decreased in Columbia up to 30% to 35% which is low as compared to last 33 years. On the other hand ICO anticipated that demand of coffee will be increased from 132 million bags to 134 million bags in 2010 and each bag contain 60kilogram” (Ariel Schwartz , 2010)
What is Globalization?
Globalization means a chain or process of contact and incorporation among the people, different companies or Governments of different countries and this process create by International trade and investment and supported by Informational Technology. This chain or process affected on Political System, Environment and Culture and also on Economic Development and Prosperity of the world and also on human physical well being over the world. (Donald. J, 2008)
Basically Starbucks success based on modern Globalizations ideas. Howard Schultz joined Starbuck’s in 1882, after visited to Milan he decided that company not only sell coffee and espresso but also sell beans. Now in these days we are watching everywhere in the shape of Starbuck’s restaurant basically that was the idea of one man who visited the Milan and after that they decided to sell coffee beans because of only one person who took that idea from Italian cafes and implicated in America and in this way starbucks started its Globalization of business. Globalization of Starbucks basically engage in doing FARE TADE coffee in this way countries are developing and Globalization is spreading over the world.
Benefits and Challenges of Globalization Strategies and the supporting theories of Starbucks:
Starbucks always focus on profitability growth of the country and in this way starbucks new cluster stores taking place in aggressive market important places across the world. For this purpose Starbucks use and adopted following strategies for its international growth and maximizing its profit.
Alliances and Joint ventures strategy:
Starbucks in 1995 invested $1.5 Million and established a new company in the name of Starbucks coffee International, only for the expansion of the international business specific in Asian Region. Strategy was licensing to local retailers and stores keepers and sell coffee to them after them they sold to customers in this way starbucks only gained licensing fees and royalties on revenues. Starbucks strictly ensured that all stores following same formula of starbucks.
Starbucks Competitive Advantage strategy:
In this strategy Starbucks Focused on Differentiation .in this way always focused and preferences to on serve niche customers than rivals. Starbucks have very important and unique capabilities to serve target buyers from segmentation. Starbucks very profitable and have very good and extra ordinary resources and capabilities to serve niche buyers. (Porter, M., 1998)
Starbucks Global Market Mix Strategy:
Retail formula of starbucks is same in all over the world. There is no change in retail system and operates in same way throughout the world where Starbucks have its businesses. Advertisement of Starbucks product play very important role and have strong instrument in the success of business. The important thing of advertisement of starbucks is that that advertisement change by country to country according to their trend, culture, customs etc means there is no standardization of advertisement so in this way starbucks Advertisement is more effective.
Starbucks Corporate Strategy Overview:
Starbucks corporate strategy play vital role in the success of starbucks business and also expansion across the world. Starbucks provide maximum market penetration. Always provide very relax and attractive atmosphere for it’s business .Starbucks environment is very attractive and very good for its business. Always offer great and high quality products which are really become success of the starbucks and in this way starbucks earned maximum profit on its products.
Rapid store Expansion strategy:
Starbucks is expending their domestic and international stores over the world. Starbucks expansion on the base of approach is “Starbucks everywhere”
Product Supply strategy:
Starbucks coffee purchasing strategy is very important play role in the globalization of starbucks in this way starbucks strong relation with their suppliers and also strong commitments with their suppliers.
International store Expansion Strategy:
International store expansion also part of the rapid store expansion of starbucks across the world .Starbucks rapid growth and expansion play vital role in the success of its international operations. In this way company owned and licensing for open new store of Starbucks.
Employee Training and Recognition Strategy:
Starbucks has very attractive and potential way to hire new employee and after that proper training them and make them assets for the company after spending lot of money on their training.
Real Estate, Store Design, Planning and Construction Strategy:
Starbucks have broad range of store formats, Very good store locations, best visibility of stores, Control on average cost of the store and good Wi-Fi system.
Challenges faced and tackled in different countries:
At the time of globalization, Starbucks faced different issues in different countries and also resolved them.
The Japanese noted that they are adopting American products and trends for example blue jeans and coca cola etc. They warned they never buy coffee in paper cups and or accept interior non smoking environment. But starbucks proved them wrong. (“Launching Starbucks in Japan” July 29, 1996)
Initially in France, Starbucks also faced the problem of acceptance of disposable cup due to old and strong tradition in France and also other was point of political hate to American company. But on the other hand many youngsters start accept this paper cups and also they give their acceptance in caramel coffee and joined American tourist in Paris.
Starbucks was aggressively expanding in china where the nation prefers tea. The basic reason of success in china only giving concept of better lifestyle and to middle class nation just only keeping Starbucks beverages and affordable other things. (“Starbucks plans expansion into Hawaii”, August 6, 1996)
England is the 2nd biggest market of Starbucks. Here big issues is decreasing market share of the Starbucks or creating limitation on starbucks market shares.
There was big challenge of low prices in whole country and also famous of local products. There is culture to serving food with coffee so starbucks address the demand of Coffee.
Effectiveness and efficiency of existing operations of starbucks:
Starbucks business plans and business strategies are very successful. A Company creates strategies and maintain their operations only for success of the company and compete the competitors of the company in this way Starbucks also formulate many plans and create operations strategies for only how to compete the competitors in local and international market.
In the latest conference of Analyst of the starbucks, the latest operations announced are enhanced and improve stores and operations efficiency and reduction in extra cost and delivering perpetual growth of the company. According to the chairman presently every retail business spends very tough time but in this time starbucks still doing good and satisfied so for maintaining this standard. In this way maximum generate “Cash lows” enhanced the liquidity of the company ,control the extra cost or reduction in cost .starbucks will continue to improve their great potential USA market for taking more advantage for market growth and development of the business.
The major international operations of starbucks are issuing licensing of new stores and get them into joint ventures but mostly they focus on the quality of coffee. Starbucks deals with international suppliers and fix the prices of the coffee and give preference to fix price rather than fair trade coffee.
Starbucks Alternatives Strategies for achieving organizational goals
The following are alternatives strategies for achieving company goals.
Vertically growth in low cost countries:
Coffee industry is growing and there is lot of opportunities entering in new market with low cost. Starbucks has high brand so starbucks should expand its business and grow its profit through vertically growth in other low cost countries by introducing very strong and high quality and standard brand in those countries.
Use Experienced Employees:
There is lot of opportunities in food and non food items at the movement. It’s very easy to diversification to food and non food items .Starbucks should use experienced staff for diversification in other relative business of the company. This is very important strategy for achieving goals of the company.
Differentiate and use high brand:
Presently domestic competition on peak level and also financial crises are going on over the world. Starbucks should differentiate use high brand and high quality products to prevent and compete domestic competition and for keep remain market leader in coffee.
Diversification to related business:
Starbucks products are highly cost and Starbucks Company only based on coffee related items business. Starbucks should divert its business to other related business which will be benefit for it’s and in future in this way it will decrease dependency on coffee products.
Reduce cost and also reduce prices of the products:
Starbucks should control cost and try to decrease it and also decreased the prices of the products of the company and introduce them in low investment markets and should gain benefits from growing markets. In this way starbucks can easily survive and can keep leading position in coffee market.
Depend on International Alliances:
Increasing in the domestic competition and volatile in dairy and coffee products and Starbucks should depend on international. Starbuck mostly focus on expansion rather than internal system and strategies of the company. Starbucks should depend on international Alliances stores only avoiding the domestic competition of the companies as we know any domestic market is the main source of revenue generation.
Evaluate Consolidation and product market development alternatives:
Product/Market Growth Matrix:
“The Ansoff Product Market Growth Matrix is a marketing tool created by Igor Ansoff and first published in his article “Strategies for Diversification” in the Harvard Business Review (1957). The matrix allows marketers to consider ways to grow the business via existing and/or new products, in existing and/or new markets – there are four possible product/market combinations. This matrix helps companies decide what course of action should be taken given current performance”. By Ansoff: “Strategies for Diversification” in the Harvard Business Review in 1957. (McKean, 2009)
Product/Market Growth matrix
Market penetration: Existing markets, with Existing products.
Product development: Existing markets with new products.
Market development : New markets with Existing products
Diversification : New markets with new products
The product line strategy develops the product structure and make that more effective in this way the improve mission of the company. The product Market development is the very important strategy to modification in the structure of the product through changing colour, weight, size etc. (Prafull, GBU , 2010)
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Alternatives for the Product Market Development:
Starbucks should be creating partnership with the automotive manufacturers and should give license them in the name of starbucks. Starbucks should use its name as valuable assets due to strong reputation. In this way Starbucks can gain growth .The big challenge is demonstrate the automotive manufacturers .They might be hesitate to enter in agreement so starbucks should show its reputation and goodwill for gaining these agreements with that automotive manufacturers. Quality and good repute of brand is important for both companies.
Starbucks should create partnership with cafeterias of the well reputes colleges, schools and universities and give them license in the name of starbucks. Keep in view good opportunities in the market and want to become 1st brand in the market. Every school, college etc have cafeteria and small level food outlet so in this way starbucks can save their cost and generate more revenues from that strategy. The Kiosk market is potential growth market and need to decrease the market penetration and increase the revenue of the company from that market. On small level starbucks outlets can become more effective and profitable. Easy access and low cost can give more benefit of starbucks. These types markets very busy due to students and employees s well. Starbucks should be makes plans to take advantage from such type markets. Automated vending machines strategy is also very important and attractive for these markets.
Partnership with fast foods chain and granting license in the name of starbucks is another alternative for the development of the product market of the Starbucks. This alternative very important in this way starbucks can save its capital expenditure. Fast food outlets such like McDonald. For this purpose maintain standards and quality of starbucks products is very important. Starbucks will adopted approval system before granting license to investigate standard and quality maintain according to starbucks standard. This approach of partnership with fast food chain companies is base on very low capital investment.
Unrelated Development of Starbucks:
Diversification is main point for both types development related and unrelated. Unrelated development of starbucks can be following:
1. Launching Prepaid cards
2. Launching of music Café
3. Cobranded with yahoo
4. Breakfast with Kellogg and magazine called “Joe with time”
Directions and strategies of achieving unrelated Developments:
Starbucks Unlimited WI-Fi access to all Customers:
Starbucks offered to his customers free internet access in all stores of the company. Starbucks has its own digital network which will provide broadening internet access to its customers. Starbucks created its new own digital division only for this new strategy.
Starbucks Digital Network Strategy (SDN):
The starbucks free Wi-Fi and digital network system making starbucks stores “Third Place” after home and work place. The basic purpose of providing WI-FI access and SDN only to allow customers to spend more time in starbucks stores in this way good approach for selling more as they spend more time as they need or demand more. Some people get their beverages, coffee and go back to in their cars and some want to stay more in stores.
Mobile Phone Marketing Strategy:
Starbucks development through Digital networks, Free WI-FI access, chalkboards, Printed sign and digital screens in stores and now has been started Mobile phones marketing.
These all above strategies may not directly related with the objectives of the company but indirectly these all above mentioned strategies or alternatives ultimately increase the sale of the company ,attract the new customers and increase the profitability of the company.
Strategic Alliances and Joint ventures at Starbucks for avoiding failure of business:
Joint ventures & Alliances means create legal relationships between two companies to starting their operations together for the development of international trade. JV or Alliances are the way out in which we can enter easily in any new market with the aim of success and due to combine as team work of both companies. JV or Alliances basically reduce the risk entering in new market, access to modern technologies, maintain its strength of brands and also can reachable to local borrowers.(Business Week,2008)
Strategic Alliances with Growth strategy:
Growth strategy is the best example of Strategic alliances of Starbucks and in this way following Alliances should be creates of starbucks for avoiding failure of the business of Starbucks.
JV & Alliances with Pepsi-Cola
In 1994 for launching Frappuccino and DoubleShot mean coffee related drinks in bottle or in can and will sale at the channel of Pepsi-Cola
JV & Alliances with Kellogg
Joint ventures and Alliances with Kellogg for production of Breakfast products.
JV and Alliances with Yahoo
Starbucks Joint ventures and Alliances with yahoo for launching online dating site.
JV and Alliances with Dreyers
In 1995 Starbucks join ventures with Dreyers for coffee flavored ice cream and distribution of this flavor under the starbucks brand.
Thompson, the University of Alabama ,John E. Gamble, University of South Alabama, 2008)
Recommendation & Conclusion:
From many years Starbucks is single player in market as it’s gain brand name “luxury coffee” but with the entering of many new competitors so in this way starbucks no longer dominant player in coffee industry. The big threats of starbucks from new arrivals are from “premium coffee” as they are providing less expensive coffee. For example such like coffee in McDonalds, Dunkin Donuts but starbucks still have leader position due to positive behaviors of the people towards the starbucks. Following are recommendation for starbucks to overcome the chances of failure.
1. Strategies to refurbish “Starbucks Brand name”
Advertisement and Promotion
Control of coffee quality and variety
2. Strategies to maintain customer’s loyalty
Drive through Coffee
3. Strategies for Cost Efficiency
Always focus on Economy
Strategies towards Growth.
Expansions should be in new corporate markets.
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