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Starbucks was established in 1971 in United Stated. Starbucks is a leading retailers and roaster of coffee industry with more than 15,000 stores in 50 countries such as Australia, Canada, Germany, Malaysia, Russia, and Thailand. Starbucks has expanded their business and market share around the world by providing the best quality of coffee. Starbucks uses joint venture to expand their market with the local coffee shop and restaurants. The company focuses on sharing mission with partner to create values and prestige to reach goals. The company is also concerning about to protect the environment.
Starbucks uses Porter’s Five Force strategy to apply with their industry structure. As Starbucks has success in the coffee industry, and expand to both international and local market with high competition that can cause impediment. Starbucks has variety of products so they consider many ways to produce the coffee such as healthy coffee products, to reach customer’s demand. This report also uses SWOT to analyze Starbucks’s situation which include external and internal environment. Moreover, it is describing the core competence such as brand awareness, human resources, and identity products which can bring up competitive advantage which include differentiate advantage and cost advantage to have more efficiency.
As Starbucks is one of the leaders in coffee industry however the company needs to concern about market by doing more research, developing for customer service as well as products that can create more unique and differentiate in their brand image. In addition, Starbucks has to aware for financial situation as well as the global economic to protect themselves that may happen in the future.
Starbucks coffee has mission statement to achieve the objective of the company. The first mission statement of Starbucks was “To establish Starbucks as the premier purveyor of the finest coffees in the world while maintaining our uncompromising principles as we grow.” (“Study Finds,” 2008) Refer to the first statement; Study Finds (2008) stated that since Starbucks confronted with decreased revenue from the recession and grew the number of competitors such as McDonald and Dunkin Donut so the company had changed the mission. According to Starbucks (2010) stated that the latest mission which changes in 2008 is “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”.
Moreover, the company has mission to the environmental as well. The statement mentioned that “Starbucks is committed to a role of environmental leadership in all facets of our business.” (Starbucks, 2010) According to Starbucks (2010) the company accomplishes the environmental mission statement such as sharing knowledge and conceives the environmental issue to partners, applying the package with by think for environmentally friendly, Responsible for environmentally friendly, and motivating all of partners to be a part of company mission.
According to the corporate mission of Starbucks (2010) the company applies the business strategy to accomplish their mission. In case of Starbucks company focuses on differentiate strategy.
As Starbucks’s coffee is very unique itself, first of all the company focuses on the best quality of their products by finding the source of coffee beans and roasting them with great care as well as best coffee making machine to serve to customers. (Starbucks, 2010) In addition, company is also developing the standard of living of employees who grow the coffee. (Starbucks, 2010) Second, that is their partners. Starbucks combines several partners both local and international with the same standard, policy, and identity of its company by treating each other with admire and prestige. (Starbucks, 2010) Third, Starbucks connects with customers by laughing and upraising the lives of its customers. The company provides the best human connection with the customers from the beginning of process until they gone even the loyalty customers, the staff need to know customer’s name. (Starbucks, 2010) In addition, Starbucks also designs the store with enjoyment of customer’s life. (Starbucks, 2010) Forth, Starbucks is also considering about the people and the place. At the beginning, the company is focusing on creating their store as the place for everyone to go to work and home. (“Study Finds,” 2008) Moreover, Starbucks decorates the store which providing the relaxation, and atmosphere for all customers especially young people. Several studies (“Study Finds,” 2008; Heher, 2010) Some stores have variety of books such as magazines, newspapers, articles and journals which provide to customers. (“Study Finds,” 2008) Starbucks is also creating the store with comfortable and attractive atmosphere which well seat, and music as well as the light foods such as bread, muffin, and cake. (“Study Finds,” 2008) Moreover, Starbucks gives the member card to the loyal customer to access the internet to motivate customer enjoy during rest time. (Anonymous, 2009) Last, Starbuck’s mission statement is concerning about the ethics and environment which the company applies to their business strategy. At the beginning, Starbucks has opened the store with share the market share with the local coffee shops but the company tries to have good relationship with local neighbors. (“Study Finds,” 2008)
Industry Structure (Porter’s five Forces)
In the industry structure, this report is analyzing the Porter’s Five Forces with coffee industry. For instance, Starbucks coffee current situation can be divided into five keys such as industry rivalry, potential new entrants, substitutes, suppliers, and buyers.
Firstly, industry rivalry, in the local coffee market, there are many local coffee shops that existing in the market with low price and good quality. Thus, the existing competitors at the same level with Starbucks are not much in the market due to the company provides the best of coffee bean by caring the process from selecting the raw material until serving to customer. (Starbucks, 2010) However, industry rivalry is not high in the present market but it can be increased in the future.
Secondly, potential new entrants, as the coffee industry is easily to run the business as well as study the process of making coffee. It can causes the investors would invest to this business even the big company such as McDonald and Dunkin Donut. McDonald, for example, in the year 2008 had planned to launch the coffee bar in its business with baristas coffee making equipment which serve of espresso, lattes and other refreshments with the lower cost than Starbucks. (Guy, 2008)
Thirdly, substitute products, refer to coffee is consuming product. There are many company provide the substitutes in consuming market that can replace such as soft drink, liquor, beer, alcohol, and fruit juices and other healthy drinks. As Starbucks’s target market is young people, some care about health, and some need to party. Therefore the customers can change their drinking behavior to other substitute products instead. For example, coffee has high calories with contain with full cream milk, syrup, and chocolate as well as the whipped cream which can causes of obesity. (Leong, 2010)
Next is bargaining power of supplier. As Starbucks emphasizes on the best quality of coffee, and find out the supplier by themselves. They have signed long term contact with farmers. What is more, Starbuck provides knowledge and activities to farmers to grow the coffee to suppliers. Starbucks can control the price of the raw materials by themselves. Therefore, suppliers have less power negotiated and an increased price as well as reduce the quantity due to the company has high bargaining of suppliers.
Lastly, bargaining power of buyers, the coffee market has high competition. There are many local coffee shops that can complete the market share with lower price than Starbucks. The buyers can change the attitude to buy low price products as well as the healthy drink such as fruit juice. Therefore, the bargaining power of buyers is high due to the customer has many options to buy so the company may focus on brand loyalty to maintain the income.
SWOT analysis can divide into 2 parts such as external and internal analysis. . External analysis is focusing on the Opportunities and Threats. Internal analysis is including the Strengths and Weaknesses within organization (Anonymous, 2010)
External Analysis (Opportunities and Threats)
Global expansion, Starbucks uses joint venture with other company to lunch new products that will sell in the convenient and grocery stores. (Starbucks Newsroom, 2010) Japan, for example, “Starbucks will launch Starbucks ORIGAMI® Personal Dripâ„¢ coffee, a convenient, single-use pour-over brewing system that allows customers to freshly brew a cup of Starbucks coffee wherever they are. Starbucks VIA® Coffee Essence will also be available in grocery and convenience stores.” (Starbucks Newsroom, 2010) Moreover, in 2004, Starbucks is joining with Hewlett Packard to provide customers can make their own music CD by choosing and creating their own CD. (Marketingteacher.com, 2010)
Economic recession is one of the threats that Starbucks faced. It is because customers avoid the extravagant coffee products so the company had closed many stores as well as customers may change the drinking behavior to low cost coffee drink with similar quality. (Collon, 2010) Both global and local coffee industry has high competition such as McDonald, and Dunkin Donuts. As competitors have specialty coffee which similar as Starbucks so they can snatch their market share. (Glover, 2009) Some countries oppose the coffee because of less nutrition which may causes obesity, and high calories. (Berinato, 2010) High price of products can lead low income consumer find substitute products. Some daily product have unstable of price therefore can cause of high price of Starbucks’s products. (Marketingteacher.com, 2010)
Internal Analysis (Strengths and Weaknesses)
Starbucks has strong brand awareness. Starbucks is the big coffee company which has high number of stores approximate 16,709 stores worldwide and 11,181 stores in the U.S. (“Study Finds,” 2010) According to Marketingteacher.com (2010) stated that “the organization has strong ethical values and an ethical mission statement.” Starbuck has good financial position to expand their market both international and local. (Starbucks Corporation, 2009) The company has unique store’s design that good atmosphere to attract customers which include they can use stores for meeting with friend, accessing the WI-FI internet, and relaxing with music. (“Study Finds,” 2008). The company also has strong team management such as manager, baristas, and farmers. Moreover, Starbucks is also has well train of staffs to meet customer satisfaction. (Starbucks, 2010) Starbucks concerns about environmental friendly so the company has brand reputation. For example, Starbucks persuades the customers to use the recycle cups as well as the cup manufacturers to save the environment. (Starbucks Newsroom, 2010)
Starbucks innovates of coffee making machine can less of staff skills. (Koehn, Besharov, and Miller, 2008) Refer to fast expansion of stores; it is quite difficult for Starbucks to control employees in the different areas. According to Koehn, Besharov, and Miller (2008) stated that as the Starbucks is the big coffee company, they has many customer waiting when the peak hours so it can cause of resign that effect with company will loss efficiency staff. Therefore the company’s expansion would slow down and loss profit. As Starbucks focuses on environmentally friendly so their products can high costs. (Koehn, Besharov, and Miller, 2008)
Refer to Starbuck’s company profile, according to Vitez (2009) pointed out “Core competencies are specific skill sets that bring a competitive advantage to business operating in an economic market. These competencies are seen as important factors that improve the end products produced by the company.” What is more, core competencies are also including capability of specific knowledge and innovate, production processes, customer relationships or employees that can develop the firm to be the market leader, differentiate, and brand awareness. (Vitez, 2009)
Refer to Starbucks Corporation, the core-competencies is quality coffee which sells at premium prices. The company applies their strengths with core competencies. There are three main keys such as Starbucks brand awareness, human resources, and unique products. Moreover, the company places core competencies with company to bring up their business has competitive advantage.
According to Value Based Management (2010) refer to Porter’s competitive advantage is defined as the action of the organization’s strategy to compete and successful in the market which can divide into 2 basics such as cost leadership and differentiate. What is more, both 2 basics are widely but it can combine as focus. (Value Based Management, 2010) In addition, competitive advantage will focus to using both resources and capacities to accomplish lower cost and differentiate of products. (“Study Finds,” n.d.)
Refer to Starbucks Corporation; the company maintains its competitive advantages. According to Espejo (2008) stated that
Starbucks sustains competitive advantage by constantly looking for new ideas, new products, as well as new experiences for guests. For example, the company hires designers to come up with artwork for commuter mugs. Starbucks’ forte is incorporating differentiated features such as their different flavored coffees that no other company offers. Market trends are constantly being monitored by Starbucks as well. They study every city’s personality and how their products can best fit into the community.
Thus, Starbucks applies the concept of competitive advantage that look at their company which focuses on the differentiate advantage to apply in business as well as cost advantage.
Starbucks uses the existing resources such as quality of products, human resource, and environmentally friendly that can different with competitors.
First, Starbucks looks at their products by using the best quality of coffee. As the company selects coffee to get the best flavor, it is because the company has the experts who have more than 40 years experience of coffee. (Starbucks Newsroom, 2010) They have proficient of roasting and blending the best quality of coffee even selecting the coffee bean as well. (Koehn, Besharov, and Miller, 2008) For example, the customers who taste instant coffee of Starbucks, they feel the taste is the real coffee which bitter than others instant coffee. (Pinsker, 2009) In addition, Starbucks has created the new flavors such as Starbucks Natural Fusions which include Vanilla, Caramel, and Cinnamon to the market that is unique at their product. (Starbucks Newsroom, 2010)
Second, Starbucks focuses on operational of human resources. The company treats staffs and partners by providing the well training to meet customer satisfaction. The firm also provides staff to have human interaction with the customers not only making coffee but also eye contact, gesture, smile and talking with each other. (Juan, n.d.) Moreover, Starbucks is also focusing on partners both local and global. The company treats its shareholders with admire and prestige. (Starbucks, 2010) What is more, Starbucks always gives knowledge to the farmers who grow coffee beans by training, supporting, and providing the knowledge as well as the activities to employees. (Koehn, Besharov, and Miller, 2008)
Last, Starbucks concerns about the environmentally friendly which refer from their mission. The company attempts to reduce store to use the paper cups and concerns more about using the recycle cups. United States and Canada, for instance, the company motivates customers to be a part which help save environment by using their own reuse cup as well as using ceramic mug instead of plastic cups. (Starbucks, 2010) It can be found that in 2009 Starbucks uses paper cups less than before. (Starbucks, 2010)
Refer to Starbucks’s coffee is the premium and specialty coffee. The cost can be high so the company creates ‘Seattle’s Best Coffee’ as a second brand with lower price to serve the customer with low income as well as customer’s need. Several studies (Mitchell, 2010; “Study Finds,” 2010; Starbucks Newsroom, 2010) According to Mitchell (2010) mentioned that “And the sub-brand has created a new logo for itself that looks like an open-mouthed smiley face with a drip of coffee.” As Starbucks creates the second brand to serves for the airlines, book shops, and movie theatres. Several studies (“Study Finds,” 2010; Starbucks Newsroom, 2010) Moreover, they supplies at all fast food outlets such as Burger King and Subway. Several studies (Mitchell, 2010; “Study Finds,” 2010; Starbucks Newsroom, 2010)
Starbucks Corporation has run the good strategy. However, there are some weaknesses that can lead the potential competitors take advantages. Therefore to maintain the coffee industry leader, the company needs to follow some rule and solve problem.
As Starbucks is dramatically increased in the global market, the company uses the joint venture strategy to enter international market. The firm uses joint venture with the local coffee shop and restaurants to expand their market. Then licensing agreement is one of strategy that Starbucks uses. Thus, the financial support does not a problem of expansion the market due to the company get profitable in coffee industry. Moreover, Starbucks focuses on big and wealthy city as well as the large population to open their stores. In term of global expansion, it is quite risk for the company due to the company need to consider about diversity of culture and preferences. Therefore, Starbucks should do more research about culture, preference, and consumer behaviors before invest to that countries. Moreover, some countries concern for health. As Starbucks’s coffee, most products contain high calories such as full cream milk, whipped cream, and sugar. The company should provide products that can meet the customer’s satisfaction. To avoid customers change drinking behaviors to substitute products. After Starbucks does research and invest to that country. The company should create the product that can be healthy drink for people who concern for health such as healthy coffee drinks. The company should monitor the staff’s behavior of each country should have same standard. Moreover, Starbucks expand very fast both local and international to reach the profitable. It is quite difficult to manage many staff from the different areas so the company should build the inspection team to observe each area to have same standard as company’s mission. What is more, the company should provide the benefits to all staff and partners as well as farmers both local and international, to make the staff’s loyalty. The employees may have positive thinking about company and respect as well as less resigns. Apart from that, expansion to international, the company should study and research the stability of politics, economy, social and culture, and technology of those countries before invest.
Refer to customer relationship, as Starbucks always considers how to reach customer satisfaction by training their staff to interact with making coffee as well as eye contact, smile, and talk with customers. (Juan, 2010) However, these behaviors can lead their staff be unnatural. Moreover, during the peak hour, there are many customers waiting long queue, this situation can make employees get stress and customers waste time. Therefore the company should push more training to their staff. Moreover, the company should provide activities for staff to involve. For example, during the low season, the company may provide their employees and customers join together such as singing, playing game, and dancing. As providing activity to staffs, it let customer feel to be part of Starbuck as well as it can make customer loyalty due to they feel enjoy and relax. In term of environmentally friendly, the company should use the recycle cups instead of paper cups to save the earth and global warming. The firm may encourage their customer to use their own cups and reusable cups. The customers may feel to be a part of help the earth. In addition, to improve the better services, the company should do more research such as questionnaires or survey from customers who walk in to stores and provide customers to give comments or suggestions as well as customer can provide comment via Starbucks’s website. (Koehn, Besharov, and Miller, 2008) What is more, to increase the sales volume, Starbucks should use their potential strategy to motivate new customer to see the worth and advantages of best coffee that they provide.
As Starbucks succeeds in coffee industry by using strong strategies to bring up as a leader. Nevertheless, the company needs to protect some failures and bring its business keep going steadily as well as maintain the sales and profit in the future. The potential fallout can include competitors, economic crisis and human resources that Starbucks has to concern.
Firstly, competitors are including both international and local coffee shop and big company such as McDonald and Dunkin Donut. Those competitors have high potential to go into the market and seize the market share. As they are also have specialty coffee and lower price than Starbucks. Therefore the customers those countries may change their drinking behaviors to buy price market. Moreover, customers who concern for health can easily change attitude to substitute products such as fruit juice industry instead of coffee even the company provides the best quality of coffee. Moreover, coffee contain caffeine can risk with consumer’s health. Some competitor companies may have good strategy which can produce best coffee and health coffee drinks to grab the market that can reduce coffee market as well
Secondly, the company needs to consider for economic crisis. At the beginning Starbucks has success in the sales and profit as well as reach the goals. However, according to Simon (2009) pointed out that “But now that the economy is languishing in a deep and painful recession, things may be tipping. The lack of social services and the steep cuts in state and local spending may be turning from a one-time advantage for Starbucks to a newfound disadvantage.” Moreover, nowadays, financial situation is still fluctuating so it can cause with Starbucks’ profit as well.
Lastly, human resources can be one of problem that leads Starbucks fail. Regarding to Starbucks expands the market both global and local quickly as well as their employees are come the local area so it is quite difficult to control. It is because they are from different culture and social. As Starbucks always have activities and good welfare such as health insurance for full time and part time job but it may hard to create staff’s loyalty due to the employees may lack of personality and quit a job. Moreover, staff cannot interact with customers well because of individual behaviors. In addition, Starbucks provides training to employees but they are inattention. They may think to get just money. All of mention can lead Starbucks customer’s loyalty as well as cannot reach their objectives.
Starbucks has the strong missions to reach their goals.
They have quick expansion to global and create the brand awareness in worldwide. They are also not only focusing on the brand image but also concern of employees, customers, partners as well as farmer by providing good welfare and benefit. Moreover, Starbucks is still concerning for the environment and protecting the earth. In addition, they apply their strategies to meet the customer satisfaction as well as create customer’s loyalty.
Nevertheless, expansion to worldwide, there are many potential competitors that can grab the market share because they also can provide good products and services. Even though, the economic recession can cause to decrease their profit. In the international market, it is not only the coffee industry but also other industry such as food and healthy drinks can snatch their market share as well. Hence, Starbucks needs to adjust them to match with situation and keep the brand image as well as be leader in the coffee market.
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