Starbucks enjoys its competitive advantage on a number of criteria
Starbucks strategies have made them one of the most recognizing coffee brands globally. Starbucks has been able to sustain their competitive position in massive rivalry and established themselves as the number of coffee shop in the world because of the quality of the coffee. Starbucks at the present day it has also been able to create a strong, loyal base of customers because of their friendly service and amazing products. Starbucks was also able to survive the crisis of 2008 in the financial department beautifully. By the year 2008 Starbucks was running on losses with a net income of about -53% yet by the year 2009 they not only cope up with their losses but was also able to gain profit of about 24% (Duke,
2018).
Starbucks enjoys its competitive advantage on a number of criteria; those are mentioned as follows
According to VRIO
According to the research analysis of VIRO, the study showed that the financial resources of Starbucks are usually of high value, thus helps in investigating in external opportunities.
Again according to VIRO Starbucks analysis, the local foods products here highly differentiated because of its high-value sources (Goswami,
2018).
The VIRO analysis also showed Starbucks customers as one of the valuable resources to the organization. The workers here are highly trained, leading to more productive output.
A patent is also considered as a valuable source as it would allow the brand that is Starbucks to sell its products without any interference (Misbra and Sachan, 2018).
The VIRO analysis also showed that Starbucks distribution network is a value chain as it helps to reach out a lot of customers on a daily basis which kept on increasing over time.
The VIRO analysis shows that cost is not a valuable source as the method of production is way more costly than completion cost affecting the overall profit margin (Blake,
2019).
The research and development department at Starbucks is considered to be non-valuable according to VIRO as it has proved to be costly comparing the innovation that it provides to the organization. There have been very few new innovative breakthrough products in the past few years (\Nair and Weber, 2017).
The financial position of Starbucks is declared as rare as few companies of this field enjoy the strong financial position.
The patents of Starbucks are known as the rare source as identified by the Starbucks VRIO analysis. This patent is not so easily available and also not possessed by any of its competitors.
The distribution value chain source is also declared as the rare source by VIRO in Starbucks analysis as the competitors would require a lot of time and investment to have a better distribution network than Starbucks (Nguyen, 2016).
The financial resource of Starbucks is costly to imitate as declared by VIRO analysis of Starbucks. The company gained the sources after prolonged years of profit (Azriuddin et al. 2020).
Though the local foods of Starbucks are not costly to imitate as declared by VIRO and hence lots of its competitors are seen to imitate its food products.
Even the employees of Starbucks can easily be imitated and not that costly as declared by VIRO as other firms also can train the customers to be more skilled (Li, 2017).
Value Chain- the term value chain is used for the understanding and segregation in different useful and wasteful activities in each step of the development process of the product. It also states that if values are added at each step of the production, then the value of the ultimate product also increases, thus makes Starbucks achieve higher degrees of profit margin (Li et al. 2019).
The resources and capabilities of Starbucks are as follows-
Brand Equity- From the beginning, Starbucks was able to create a good brand image for itself in the minds of the customers. It is known all over the world as an ethical and accountable premium brand. It can be said that Starbucks’s brand image has helped in faster growth of the brand. The strong representation of the brand is because it has maintained its quality and customer service (Atzori et al. 2018).
Pricing strategy- As Starbucks is a premium coffee brand, its pricing strategy is one of its key strengths. It targets mainly the coffee lovers of higher status. However, its customer is willing to pay the higher charges because of its quality and customer service (Han et al.
2019).
Variety of product range- A variety of different beverages and food items has helped Starbucks having a competitive advantage over the others. It keeps on experimenting with new unique flavours to add to its coffee range. Apart from coffee, it has also been serving beverages and snacks. Hence it gives a lot of variety to the customers to choose from (Voigt et al. 2017).
Customer loyalty-Starbucks has been enjoying a strong loyalty base from the customers. The customers keep on returning back to Starbucks mostly for its quality of beverages and food and customer service. Starbucks has also given individual attention to all its employee members for fulfilling experience. The quality and variety of beverage and food choices have made the environment welcoming for millions of customers all over the globe (Wu, 2017).
Customer service- this is another source of competitive advantage Of Starbucks, it has made customer service as its cultural logo from the beginning of its establishment. In contrast, other brands got to know the importance of customer service later (Mason et al. 2017).
HR management- Human resource has been one of the significant assets of a company. Starbucks has been investing in it for its employee satisfaction as they keep their employees at first priority; this has helped Starbucks in bringing more productivity and performance of their employees. By the year 2018, Starbucks has employed more than 291000 employees among them, 191000 were native to the US (Kopsidas and Politi, 2016).
Leadership- Leadership is also a criterion that provides strength to a brand, thus provides a competitive advantage. Starbucks has witnessed some of the strongest leaders of the decade, like Howard Schultz and Kelvin Johnson. They have focused on improving creativity and enhancing ethics (Smith, 2017).
Supply Chain Management- the strong supply chain management of the company also aids in providing strength and competitive advantage to the brand. The brand has always focused on the good quality of coffee beans. Thus it has been selecting its farmers and suppliers carefully (Ulsido and Li, 2016).
Global Network- the large wide network of Starbucks has proved to be one of its competitive advantages. At present, there are more than 29.324 stores are present worldwide. Starbucks has been the largest coffee brand for the last couple of years in the US (Pascucci, 2018).
The Starbucks core competencies are defined as high-quality coffee and food products that are usually accessible in locally and at a cheaper price, a community that shares coffee drinking experience and different choices. Starbucks has always been practising good ethics and practices. Starbucks enjoys its competitive advantage on quality, service, culture and ambience. Starbucks control its important business steps directly. At present, there are a number of trade agreements globally who are making sure that the coffee industries be successful. Hence also with the growing economy, the consumer is more likely to seek for a higher quality of products such as higher qualities of coffee grains. Not be forgetting that these are only the international chains. In contrast, the local chains within each of the specific country are also a part of the competition which intensifies the rivalry even more (Cruz et al. 2020).
Recommendations
The recommendations for the CEO of Starbucks to improve the company’s performance in the next three years would be as follows-
It can be recommended that Starbucks should follow strategies of differentiating its products even more that can also lead to varying of the price. For an example Starbucks can start creating a menu known as “saving menu ” where they can sell some products at a lower price and hence attract even more customers of all status to come and enjoy the food, thus making a strong customer base (Nsabimana and Amuakwa-Mensah, 2018).
They can also consider opening “Starbucks cart” that can be opened in smaller express places where stores cannot be established. These “Starbucks cart” would eventually attract more customers as it will be accessible to the people from whom it was not accessible before. Moreover, if the “Starbucks cart manages to sell the products at a cheaper price without altering the quality of the food, then that would draw the attention of a larger group of consumers (Wu, 2017).
If the cost of the products of Starbucks is made more affordable, then it would be the most attractive company for the consumers internationally. Thus having a competitive advantage over the other companies by feeding more customers and having a good share in the market (Li et al. 2019).
Starbucks must have the growth strategies to help them increase in their market share and focus more on its personal growth. As at this point of time Starbucks is at its maturity stage of business life cycle hence the implementation of growth strategy would help the company to stick around in this successful phase for a longer period of time (Liang, 2018).
Other recommendations that can be included are
Survival and offensive mode to the robust improvement and development of competitors who also seek to work in the same industry. Should be offering the customers with a wide selection of diverse food and experience them with unique and innovative taste and food concept. Making Starbucks as a sustainable competitive advantage (Budiastra, 2020).
To improve the management of store operations by improved layout and inventory. Increasing in the operational effectiveness both in the local as well as international context and increasing the productivity and capacity of Starbucks using improvement in the operational department and management department. To strengthen the global supply chain management in developing countries and emerging markets. Maintaining their quality management and quality control (Palmieri et al. 2018).
As Starbucks is no longer the only dominant player in this field, hence they are required to convince the general customers that coffee quality and the taste is superior in comparison to other companies.it is a very significant step because most of the time the competitor of Starbucks McDonald’s is compared with the Starbucks coffee. Hence these top competitive firms are no doubt threats to the Starbucks industry in the race of providing the “premium coffee” comparable to Starbucks. Still, at a cheaper price, this is the tactics followed by McDonald’s as they provide the same type of coffee about at a cheaper price in comparison to Starbucks. Moreover, the renewal of the SB brand name can help in the success of Starbucks at a greater extend (Kuo et al. 2019).
Starbucks stakeholder’s report
The common internal and external stakeholder’s of Starbucks is –
The internal stakeholders- employees, subsidiaries, shareholders and management.
The external stakeholders are- customers, environment, government, suppliers and investors.
The one prioritized stakeholder’s group that has been selected from Starbucks is Customers.
The customers of Starbucks is about 50% male and 35% female. But when looking at the income distributions, then females have wider distribution incomes in comparison to males. The target customers of Starbucks are usually the urban city affluent people; The company expects its core customers to be educated with an average age of 42 years with an average income of $90,000. In demographic segmentation, the main target market of Starbucks has been expanded as many youngsters have become their target audience ageing from 25-44 which comprises of about 49% of their overall business and the next large group is the young adults or teenagers especially in the age range of 18-24 years, they also are capable enough to bring about a sale of 40% (Aklimawati et al. 2016).
One of the main reason why Starbucks was able to grow so fast locally as well as internationally is because of its strong base of customers t=who keep coming back to their stores. The latest earning report of Starbucks showed that it has reached to nearly 24,000 stores across the globe. Starbucks was able to sustain its customers by offering affordable luxury in the forms of decent beverage drinks and food. It is the king of third place to most of the customers visiting regularly; it is not like their home or office its more like a relaxing zone for most of the customers (George, 2019).
Starbucks has been focusing on the demography more significantly than ever before, thus making the customer service as their main priority by paying their employee’s above-average salaries and added benefits of tuition reimbursement and health insurances (Aklimawati et al. 2016).
The Mendelow’s matrix for analysis the influence and interest of customers, mendelow’s Matrix is generally a tool that is usually used by the organization to understand the attitude of their stakeholders, in this case, this case the customers are considered. Mendelow’s Matrix is mainly done at the starting of the project or before setting out a strategic objective. According to this matrix the one group who has lower levels of interest in the organizational operations or have limited influence in the organizational activates are placed in group A also known as Apathetic Grid that is lower power, lower interest similarly the group B or defenders is comprised of individuals with a high rate of interest but low power, the third one is High power of the customers but little interest or Latent Grid, and Lastly, high power of the customers and high interest is promoters grid (Nsabimana and Amuakwa-Mensah, 2018).
The appropriate communication strategy to the chosen group would be initiating proper advertising, publicity, lunching offers, using media and other social networking platforms, sales promotion and so on. All these means are important for communicating and getting close to the customers (Do et al. 2019).