what kind of diversification strategy Starbucks has used in the Acquisition of Teavana
Q1.According to the case, analyze and discuss what kind of diversification strategy Starbucks has used in the
- Acquisition of Teavana
Starbucks had announced that they are takeover all Teavana units. The strategy is that yield other than new brands being incorporated into currently at their locations. At the time, the company had to grow Teavana in malls. The Teavana Brand is now $1B brand staple within Starbucks and expanding their stores. During they were work to shore up the brand portfolio, Starbucks has to yet find out the way to diversify its retail portfolio. Starbucks had taken the acquisition to heart throwing itself into the expansion of the speciality tea brand. Again Fizzio is not competing with the Coca-cola or Pepsi according to the above case study.
- Launch of Fizzio Handcrafted Sodas line.
Starbucks relies on the Italian soda, with lightly flavours with syrup or shot. Starbucks continues offering, the brand has started towards soft drinks by launching its newly Fizzio handcrafted soda line. Starbucks had come to know during surveys that people want more refreshing cold beverages while summer Fizzio is made to order each time. Taecharungroj, V. (2017) reiterates that it gives more refreshing beverage choices with more ingredients. Now this time they create more complicated flavours for Fizzio soda line. They are also rooted in other classic flavours but again they deliver an experience like no other sodas in the current market. The manufacturing process of the soda begins with real brewing of the batch, then ingredients develop to complex and layered flavours and each Fizzio soda is handcrafted individually for each consumer. Consumers can enjoy golden ginger ale, spiced root beer and also lemon ale which contains high fructose corn with more than 100 calories or at times less.
Q2. What is the major reason for diversification strategy for Starbucks? Discuss the advantages and disadvantages of their diversification strategy
Diversification refers to the taking of action of an existing firm diverges into a new business opportunity. Most companies tend to diversify because it ensures that there is proper and maximum utilization of resources and capabilities. However, diversification helps assists companies escape from the unattractive environment and also industries just like in the case of Starbucks. In the recent past, Starbucks has lost a lot of customers majorly because they have commoditized their coffee experience which has made the markets to look down upon them but through diversification, all these problems experienced by the Starbucks can be solved.
Diversification can be a strategic change among the firm, In the case of Starbucks, they decided to change their logo. This step move focuses on ensuring that the brand attracts more consumers. With the acquisitions of companies such as Teavana, EvolutionFresh, and La Boulange café they are well on their way creating an economy of scope that will be unmatched by its competitors. I believe that these acquisitions were spot on, and impeccable decisions by the management of Starbucks. The reason being is that these subsidiaries share the same principle values that Starbucks has installed since it was initiated
Advantages of the diversification strategy
It helps to maximize the use of the underutilized resources and manpower
Diversification also helps the company or the firm to move away from the declining activities.
A diversified firm reduces the surprises that may arise in the process
Disadvantages of the diversification strategy
A diversified entity has limited investment in a segment, this makes the entity not to maximize on the profits and this will hinder the development chances that might arise
Diversification into a new market will require new skills and if the firm lacks the experts in the relevant areas this will be a set back to the firm.
It makes an entity to respond slowly to the changes that might occur in the market, This will make a firm to run a limited number of operations.
If the diversification process of the Starbucks is not carried in an advanced manner then the firm may lead towards several directions at the same time which will make the company go bankrupt.
Q3. According to case Starbucks has decided to implement product diversification strategy in 2013, Make short research about Starbucks and discuss the outcomes of this diversification strategy, Did they succeed or fail? Do you think it was the right strategy for them?
Since the day of Starbucks inception, they have become an instant leader in the coffee industry. According to Geereddy, N. (2013) with only a few minor hiccups in market share and its overall stock performance is the gold standard in today’s world of reliable and exquisite tasting coffee. By creating value through its product diversification strategy, mass marketing platforms, and constant revamping of its diverse product range it is no wonder how this company has become the giant that it is.
According to the case study above diversification was done through acquiring of the tea market and moving it forward, By acquiring Teavana and incorporating it properly into the Starbucks brand the company is likely to have a float even if the coffee prices go down, they also introduced a new approach to the drink and this made them succeed in the diversification strategy but soon there will be hard times for Starbucks and they may see a slow decline in revenues. Which will ultimately decrease their stock price because of the maturing market but if they emphasize on the US operations that make up 76% of their total revenues and show a core competency for establishing differentiated premium products there is no reason this stock will not continue its trend of growth.
REFERENCES
Geereddy, N. (2013). Strategic analysis of Starbucks Corporation. Harward [Електронний ресурс].–Режим доступу: http://scholar. Harvard. edu/files/nithingeereddy/files/starbucks_ case_analysis. pdf.
Taecharungroj, V. (2017). Starbucks’ marketing communications strategy on Twitter. Journal of Marketing Communications, 23(6), 552-571.