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.
Starbucks is able to give this lifestyle the quality experience that has attracted such a market in the United States, people are able to enjoy a luxury coffee in the store, but also on-the-go. However, Chinese consumers of Starbucks have different tastes, “they value space and couches on which to relax in the afternoons” (Burkitt). So in order to address these desires, Starbucks is adding stores that have 3,800 square feet that can accommodate large groups of friends, family, and businesses employees coming together for the afternoon. The company is also not also relying on income rises in households to attract the Chinese to Starbucks; they are relying on lifestyle in the emergence of a shifting lifestyle. In order to attract the rising Chinese population too openly or subconsciously identify to more “cosmopolitan tastes” they have adjusted the store layouts in accordance to culture and aesthetical appeal of the geographic location.
However, the company must work to address the identified threats, especially the threat of substitution linked to the increased availability of home-use specialty coffee machines. On the other hand, Starbucks cannot do much but to avoid the threat of bureaucratic red tape. Overall, the PESTEL/PESTLE analysis framework indicates that Starbucks Coffee has plenty of room for further global growth. The preceding analysis proves the point that Starbucks is operating in a relatively stable external environment. The main reason for this is the fact that it operates in the Food and Beverages space which means that despite the recession, consumers cut down on the consumption to a certain extent and not completely.
Unlike before, not all baristas were hand-picked who had mastered ‘both’ the hard-skill and soft-skill required for the job. Moreover, the diversification of customer base and increased product portfolio meant that they had to deliver ‘customer-made’ beverages as quickly as possible and maintain the ‘customer intimacy’ quotient at the same time. The above table clearly states that the most profitable / valuable customer for Starbucks is a ‘Highly Satisfied Customer’ with an average lifetime revenue of
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.
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.
It has allowed the company to have additional effective system more responsive to environment. It has also amplified its effectiveness. The information system utilize by Starbucks is one of its significant resources that delivers a clear benefit on its competitors. Starbucks is expenses are big amounts of money on the development of this system and nowadays it is one of its fundamental capabilities For this solid business, a strong supply chain is required, especially if you take into account that both coffee and other items are obtained through suppliers located in different parts of the world and must be delivered to more than 16 thousand points Of Starbucks sales, which serve more than 50 million customers a week. The creation of a simple and comprehensive logistics system was fundamental for the company because it allowed it to optimize the management of its extensive supply chain.
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.
Fluctuation in global coffee prices owing to changes in supply and demand, weather and climatic conditions affect profitability and revenue generation efforts at Starbucks. Starbucks has no power to determine the global prices of coffee making it one of the major weaknesses that affect Starbucks. The second weakness at Starbucks is the high vulnerability to changes in the United States market because of a high concentration of store locations in the US. A huge percentage of Starbucks stores are located in the United States making the company very vulnerable to US economy changes such as the 2008 recession. A slow US economy critically affects Starbucks and will have an impact on revenue and profitability.
Starbucks is a company that are very well known so easy to attract customers. Third, Starbucks should further improve its technological progress and expand its stores as the future of starbucks sales will increase let alone the united states of the people who depend on coffee if not overcome from now on there can be a buildup of customers who can make people lazy to buy at starbucks and move to another