Sawbucks Strategies Thesis

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Sawbucks Strategies

With the current global economic downturn, the company's strategies will need to be sufficiently diverse so as to cover two parallel levels. On one hand, the company will need to promote a prudent approach, one that will minimize the costs and expenses so that financial situation will remain stable and help Starbucks through the current economic situation. On the other hand, the organization also needs to have an outlook towards the future, capitalizing on its numerous strength and opportunities in order to ensure that the market leader position it currently benefits from will remain in the future as well. In view of these different aspects, the following strategies can be proposed and implemented in the short and medium term:

Control costs and expenses

This strategy needs to be concurred with the following three, because the organization can indeed deliver both a cost reduction and a parallel development of its business. This strategy will also help partially solve the problem brought about by the high overall unit costs relative to key competency. The high unit cost shows that there may be potential problems with the cost management in the company that will need to be solved with a sustained strategy of cost reduction.

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The cost and expense control should be targeted both towards those areas of the business that are no longer profitable and towards areas that are not necessarily part of the core business. In terms of the first aspect presented, an analysis and evaluation will need to be made in order to determine which brands and locations are not delivering from a market share and financial point-of-view. As mentioned, the analysis will need to comprise both brands and stores. This will mean an overall evaluation of the brand portfolio -- in some cases, some of the products will be performing well in some countries or regions, but not so well in some of the others. In these cases, the evaluation will need to consider the overall effect on the company's profitability.

TOPIC: Thesis on Sawbucks Strategies Assignment

At the same time, some of the locations that the company has been developing may be performing at lower levels. In these cases, it is necessary to have an evaluation both of their present and future potential in order to determine whether it is still a good idea to retain these stores or whether they are not likely to have a significant turnaround in the next period of time.

Obviously, with these type of reductions in terms of products and stores will also come a reduction in the personnel allocated for these segments. While this downsizing is probably decreasing morale, on the other hand, it is freeing significant financial resources that will be used to support the profitable brands and products, develop new ones and implement the strategies that deal with the international expansion of the company.

2. Develop the brand portfolio

The fact that the company already has strong and recognized brands in its portfolio allows it to experiment and develop new brands based both on traditional coffee, as well as some of the more targeted brands. An example of the latter category could be healthy and organic products, which greatly appeal today to the health-conscious individuals.

The development of the brand portfolio is also based on the fact that, as the SWOT analysis has shown, the company benefits both from a strong global brand image and from the reputation it has developed of quality products. With this type of reputation, new products introduced to the market can benefit from a 6 to 9 months period of grace during which customers are willing to try them. Because of this, the actual cost of developing and launching new products is likely to be lower than in other conditions.

At the same time, the development of the brand and product portfolio of the organization should also capitalize on the international exposure that the company benefits from. Launching any type of product in a country where Starbucks is relatively new will most likely decrease the risks associated with such an act, including financial and operational risks. In developing countries and especially in the countries that have experienced an economic development in the past decades (countries of Eastern and Central Europe or China, for example), despite the overall lower income per capita, the openness to try out new products that the company might bring is significantly high and important.

3. Pursue an aggressive marketing campaign

Certainly, the company is well-known across the world, as has been pointed out in the previous paragraphs of the paper, but this is something that needs to be supported with constant investments in the company's image and brands. At the same time, such a strategy would also allow the company to continue to be considered edgy and up-to-date with the younger generation, as well as its traditional consumers.

The marketing campaigns need to be contemporary and associated with some of the current events. For example, given the different perspectives of coffee and some of the meanings that can be associated with such a drink, the company could decide to sponsor some of the cultural events of the year, in a similar manner that Pepsi has sponsored some of the pop concerts throughout the 1990s and after 2000, helping to calibrate the brand for the newer generation. Starbucks could thus be associated with new dimensions of its brand, such as cultural diversity, openness to culture and cultural events etc.

As any consistent marketing campaign, it would also have an important and fundamental informational component. The marketing strategy would aim to bring additional information to potential and current customers both about the existing products and some of the innovations that the company is working on, as well as on the new products that would be launched.

4. Expand internationally by opening new stores in other countries

Just as much as expanding and diversifying the company's brand and product portfolios, expanding internationally will ensure the future sustainable development of the company. Expanding internationally will need to be done especially in developing countries, where the market is not yet saturated and where some of the competitors that the company has in established markets such as the United States and Europe have not made their entrance.

Such developing markets can be regions such as Central and Eastern Europe, China or India. Many of these markets share common characteristics. In all cases, there is a great potential, with large populations (probably about 2.5 billion inhabitants in the regions mentioned) that have increasingly high income levels (with the countries in Central and Eastern Europe, for example, accession to the European Union in 2004 and 2007 have regulated the markets in terms of legislation and business conditions, making them very attractive for foreign companies that have invested significantly here, including in human resources and higher salaries).

At the same time, the fact that these are new markets is a great advantage for a company like Starbucks, mainly because it can capitalize on the desire of these new consumers to adopt some of the marks they associate with Western culture. The enthusiasm for having a coffee at Starbucks has not yet entered a routine of picking up a coffee on the way to work in the developing markets.

The company will need to have a proactive approach and actually develop these markets, including in terms of the consumers' tastes and preferences. In many cases, these markets can also represent regions where some of the products that no longer work on the Western markets can see their life prolonged. The international approach will also require a customized marketing campaign. This means that the company will need to look at particular cultural differences between its different international markets and customize its approach so as to best match the particularities of that respective place. This would probably bring more results than a global, standardized approach.

Finally, the company will also need to expand its human resources so as to fully embrace its international and global position. This will include investing in training human resource from host countries, which can be hired at lower wages, thus also targeting the first strategy described here.

Decision Criteria

The strategies described in the previous paragraphs are based on the SWOT analysis and on the identification of the company's most important strengths, weaknesses, opportunities and threats. The first strategy took into consideration two elements identified with the SWOT analysis. First of all, the company has shown alarmingly high overall unit costs relative to key competencies, which triggered a cost reduction strategy.

On the other hand, the threats in the industry come not only from the competitors (although from this perspective as well a cost reduction strategy is most adequate), but also from the current economic condition. The economic downturn is affecting all companies through a decrease in demand for most products. In order to ensure a stable financial approach and development, a cost reduction strategy was suggested.

All other three strategies take into consideration the positive aspects of the company, along… [END OF PREVIEW] . . . READ MORE

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