1971, when the ‘Starbucks experience’ begun, Starbucks was just a small coffee shop in Seattle, USA. Today, Starbucks, named after the first mate in Herman Melville’s Moby Dick, is the world’s leading retailer, roaster and brand of specialty coffee with millions of customer visits per week at stores in North America, Europe, Middle East, Latin America and the Pacific Rim.
Thus,within not more than three decades, Starbucks’ offering of distinctive blend of quality coffee, neighbourly camaraderie and a unique coffeehouse culture combined with an aggressive growth strategy helped it to become the most famous specialty coffee shop chain in the world and a global company: In 2007, it run more than 15,000 stores worldwide by employing more than 172,000 people. But in the same year 2007 - despite revenues of USD 9.4 billion - Starbucks had to report a first-ever decline in same-store sales.
As early as the mid-1990s, analysts had been predicting that Starbucks could not sustain such strong growth, especially in same-store sales. For more than 10 years, Starbucks had consistently beaten these expectations. By 2007, however, Starbucks unprecedented size, combined with the uncertainty of the economy,had placed the company in a new competitive game.
As a result, in early 2008, Starbucks announced a series of initiatives to cope with the new challenges and to prepare for a successful future – all of them based on renewing the focus on customer experience and slowing down expansion. But what constitutes the Starbucks strategy that has been that successful in the past? What were the main drives of the considerably growth of the Starbucks business? And is the Starbucks strategy flexible enough to adapt to the current challenging market conditions?
After the introduction of the Starbucks business in terms of vision, mission and history, this assignment focuses on answering these questions by analysing Starbucks’ strategy and its key drivers of success in chapter 2. This analysis is done with the model of the ‘strategic diamond’ that is introduced in the beginning of chapter 2 as working basis. The assignment ends a comprehensive analysis of the challenges Starbucks is facing today and how it prepares to successful handle them.
Table of Contents
1 Overview
1.1 Introduction
1.2 The Starbucks Business – Vision, Mission and History
2 The Five Elements of Starbucks‘ Strategy
2.1 The Idea Behind the Strategic Diamond
2.2 Arenas - Where Starbucks is Active
2.3 Vehicles - How Starbucks Gets to the Business Arenas
2.4 Differentiators – How Starbucks Wins in the Marketplace
2.5 Staging - Starbucks’s Speed and Sequence of Moves
2.6 Economic Logic – How Starbucks Obtains Its Returns
2.7 Starbucks Strategic Diamond – An Integrated Approach
3 Conclusion
3.1 Challenges Starbucks is Facing Today
3.2 How Starbucks Prepares for a Successful Future
Objectives and Core Themes
This assignment examines the strategic development of Starbucks by applying the "Strategic Diamond" framework. It investigates how the company established its global leadership in the specialty coffee market and analyzes whether its strategy remains robust under current, challenging economic conditions.
- The application of Hambrick and Fredrickson's "Strategic Diamond" model to corporate strategy.
- An evaluation of Starbucks' growth drivers, including product innovation and aggressive expansion.
- A detailed analysis of the company's vertically integrated value chain.
- The impact of internal and external challenges on comparable-store sales and brand perception.
- Strategic initiatives implemented in 2008 to regain market competitiveness and customer loyalty.
Excerpt from the Book
Vertical integration to ensure control over the whole value-creation stages
Starbucks is committed to selling only the finest whole bean coffees and coffee beverages. To ensure compliance with its rigorous coffee standards, Starbucks controls its coffee purchasing, roasting and packaging, and the distribution of coffee used in its operations. The company purchases green coffee beans from coffee-producing regions around the world and custom roasts them to its exacting standards for its many blends and single origin coffees. Thus, Starbucks had built and maintained an organization that is much more vertically integrated than many of its competitors being structured in a way that enabled centralized control over virtually the entire value chain. Starbucks controlled nearly every aspect of the processing and distribution of its products: From the gate of the coffee farm to the door of the retail store, Starbucks is directly involved with each step of the value-creation process. Starbucks exerts significant influence over its suppliers in terms of sustainability practices and the treatment of farm workers. Once the raw harvest is purchased, it is roasted in company-owned facilities and shipped the product to stores in special Flavour Lock bags.
Summary of Chapters
1 Overview: Introduces the history and vision of Starbucks, noting its rapid rise to global market dominance and the recent stagnation in same-store sales.
2 The Five Elements of Starbucks‘ Strategy: Analyzes the company’s business model using the "Strategic Diamond" framework, covering arenas, vehicles, differentiators, staging, and economic logic.
3 Conclusion: Discusses the major challenges currently facing Starbucks and details the strategic initiatives introduced to navigate a difficult economic future.
Keywords
Starbucks, Strategic Diamond, Specialty Coffee, Retail Strategy, Vertical Integration, Corporate Social Responsibility, Expansion Strategy, Market Segmentation, Customer Experience, Financial Performance, Competitive Advantage, Product Innovation, Brand Management, Economic Logic, Supply Chain Management
Frequently Asked Questions
What is the primary focus of this assignment?
The assignment focuses on analyzing the business strategy of Starbucks, specifically identifying the key factors that drove its historical success and assessing how those strategies are being adapted to handle current market challenges.
Which strategic framework is utilized for the analysis?
The analysis is based on the "Strategic Diamond" framework developed by Hambrick and Fredrickson, which encompasses five critical elements: Arenas, Vehicles, Differentiators, Staging, and Economic Logic.
What are the core research questions?
The document addresses what constituted the successful strategy of the past, what drove the company's significant growth, and whether the strategy is flexible enough to adapt to current challenging market conditions.
Which scientific method is employed?
The work employs a qualitative analysis of corporate strategy, utilizing the "Strategic Diamond" model as a theoretical working basis to evaluate Starbucks' internal and external operational data.
What are the key themes discussed in the main body?
The main body evaluates Starbucks' product categories, expansion vehicles, differentiation through quality and service, corporate social responsibility, vertical integration, and its financial performance over time.
How is the success of Starbucks' differentiators measured?
Success is primarily measured through customer satisfaction surveys, which highlight attributes such as store cleanliness, convenience, staff quality, and the overall premium coffee experience.
Why did Starbucks change its approach to store expansion in 2008?
Starbucks shifted its strategy to scale back store openings in the U.S. and close underperforming locations to improve operational efficiency and refocus on the core "customer experience" amidst economic uncertainty.
How does Starbucks utilize technology to improve its future outlook?
The company introduced the website "MyStarbucksIdea.com" to foster direct communication with customers, allowing for the crowdsourcing of ideas and direct engagement to clarify brand policies.
What role does the "Pike Place blend" play in the company's current strategy?
It serves as a key initiative to renew the focus on the company's core coffee business, honoring the company's history while attempting to boost sales and reclaim brand identity.
- Quote paper
- Nadine Pahl (Author), 2008, The Idea Behind the Starbucks Experience, Munich, GRIN Verlag, https://www.grin.com/document/124546
