The Industry demand has changed due to a shift in consumers’ attitudes towards healthier products. This placed Starbucks’ coffee culture at risk and threatened the company’s future. Starbucks has tailored their menu to include more organic and healthy product mixes, venturing into tea, bread and fresh juice products (Geereddy, n.d). Starbucks’ cornerstone product differentiation strategies and Human Resource Management are the main impacts to strategy formulation. Starbucks’ is a premium valued brand; costly to imitate.
The strategy that Starbucks uses is broad differentiation where they seek to differentiate their product offerings from rivals’ with attributes that will appeal to a large variety of consumers. The key market characteristic for the strategy of differentiation to work is that buyers’ needs and preferences are very diverse and cannot be satisfied with a standardized product offering. This is an evident characteristic of the market because consumers all have different preferences on the way they like their coffee. Which is the reason why Starbucks offers many different product options like lattes, skinny lattes, coffee, iced drinks, blended drinks, etc. They also offer fruit cups, water, and bakery items to provide even more options for their consumers.
Because of these conditions, Starbucks prefers to handle its own supply chain, open company-owned stores, and has resisted franchising in fear of giving up its control over selling a high-quality product. Because coffee was the core service at Starbucks, the job of purchasing was not outsourced. The experience came with the original owners of Starbucks when only coffee beans were sold. The entrepreneurs buying the coffee were considered connoisseurs of quality coffee and had many years of “coffee” experience. As a result of this experience, customers were educated about coffee, and it became a value-added service at Starbucks.
Strong brand identification or high capital requirements can minimize the threat for competitors. As a brand Starbucks holds very strong reputation in the market. For people Starbucks is like second home as when they get tired of being home or workplace they can sip a coffee there and feel relaxed, which can relate in a bad manner for the new entrants. For Starbucks the threat of new entrants is modest as they have their own standards that are very high to compete with by the other firm. Locally there are many other coffee shops that are developing.
Starbucks sees the advantage of turning to local partners as the most effective way to reach out to their target and consumer market. If Starbucks were to do this by itself, it would be very difficult for them to face the bureaucracy, infrastructure, distribution, business practices and challenges, therefore it would be a great
But the core of the company remains fine coffee in its variations. Pricing Premium pricing strategy is used at Starbucks, which means that this strategy is aimed at taking advantage of the behavioral pattern of people who tend to purchase more expensive items based on the perceived relation between high value together with high price. Among the competing products Starbucks beverages are more extensive, for instance, McDonald's range of drinks. With the help of the current pricing strategy, Starbucks supports its high-quality image on the market. The company's high-end brand image is maintained by the firms generic strategy.
\ 5. Market Structure According to Pitek (2009:4) they have possessed the capacity to make a standard for their espresso and in which they require their client base to be misrepresented costs for a measure of their different mixes. With use of the Starbucks logo, quality, and different trademarks, they separate their espressos their rivals. Starbucks prides itself on being totally not the same as some other café and its rivals, which is a motivation behind why Starbucks has turned out to be so fruitful. The organization's procedure to concentrate on their centre abilities to separate themselves has made Starbucks into an espresso powerhouse.
Running head: Starbucks Coffee Company: More Than a Cup of Coffee2There are two major dynamics in the twenty-first century that presented global change inour global societies: Bottled water and Starbucks. There was simply no reason to consider thatanyone would pay for water, and to the majority of society a cup of coffee was just that, a cup ofcoffee. The greatest new things were instant coffee and the Mr. Coffee coffee-maker, and coffeecenters were the office breakroom, college gathering places and, the kitchen table. There wasnot even a job description for a “Barista.” However, in 1971, a small coffee and tea retail store,located Seattle’s landmark Pikes Place Fish Market, was destined to become a global retailer ofnot only coffee and tea, no longer would a cup of coffee be viewed as just a drink (Joyner, 2006).Starbucks has created a social culture that is as palatable as their beverages. Theirmission statement and adherence to their core values serve as the foundation for theirmicroeconomic positioning as an economic leader in the global coffee industry.
The threats in the operating environment can also be overcome by differentiating products offered at Starbucks from those of the competition in terms of better quality, impeccable service delivery, and augmenting customer service and quick response to queries. Developing a huge social media presence and offering product information and pricing through social media is the other strategic recommendation for Starbucks aimed at accessing a large audience and meeting the needs of technology-savvy generation that forms a huge bulk of Starbucks clientele (Hajli, p. 112). This will allow Starbucks to increase its physical and online market reach and expand the information on the company overcoming challenges on physical
Product: Starbucks mainly specialized in coffees and but also sells other beverages such as premium quality teas, ice-blended beverages, pastries and some of their merchandise like for instant tumbler and mugs. They still continued to innovate more of their products to cater to attract more people to buy their product. For example, in 1994, Starbucks starting selling Frappuccino at their store. Price: Starbucks announced in 22nd September 2010 that there will be an increase of prices for their beverages due to the increasing prices of raw materials such as coffee beans. They tried to maintain the prices to make it affordable to everyone.