Starbuck's Strategy and Internal Initiatives Case Study

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[. . .] The other organizations have been in the packaged coffee area for an essentially longer period. In fact, they have been in this business for a century than Starbucks, which began to enter this division, just a couple of years back with the structuring of its Global Consumer Products Group fragment (Thompson & Shah, 2010).

Apart from the two extensive consumer item organizations, the Starbucks items additionally confront rivalry with substitute items like caffeinated beverages, sodas and other non-alcoholic refreshments. The rivalry in the specialty coffee industry is not cost-based, unlike the other industries. In this industry, utilization of coffee is not subject to the cost of the item or commodity but on the separation between every item and various value adding variables, like the nature of client services, company image, brand recognition, or brand. Therefore, the specialty coffee sector is not sensitive to adjustments or movements in price.

Threat of New Entrants

The entry of new players in an industry can carry the rivalry into new, larger levels. New participants, most particularly vast ones, carry new limit, the craving to acquire market share in the industry and vital resources likely to trigger a shake-up or a revamp of the present competitive positions of organizations in the industry. To secure the players' positions in the industry, they need to set up high barriers for new contestants. These obstructions incorporate economies of scale, item differentiation, capital prerequisites, and costly inconveniences free of size, access to channels of distribution and government policies. Major players regularly constrain new contestants to come in at a cost inconvenience. The force them to invest or spend much cash on processing, research and development, distribution channels, marketing, financial aspects and all parts of the business (Thompson & Shah, 2010).

The specialty coffee industry today is undoubtedly commanded by Starbucks, having no equivalent or bigger organization in size that contends straightforwardly against the organization. On the other hand, the industry is open to all potential adversaries particularly to substantial organizations engaged with the consumer items and retail network business. For instance, the new contestants in the coffeehouse business today like McDonald's, Dunkin' Donuts, and Burger King are three extensive organizations challenging Starbucks' predominance in the industry. These new contestants can equal Starbucks competencies in parts of marketing and distribution channels. They have the ability to bring new resources that can generate a shake-up in the industry, but not yet enough to topple Starbucks from its current market position. With the three huge organizations' entry into the specialty coffee retailing section, Starbucks' position is likely shaken. Risk of Substitute Products as demonstrated by Porter are items that come from different commercial ventures and can create a trade off for items in the underlying business.

In the specialty coffee market, substitute items might be those non-alcoholic mixed drinks, like tea, fruit juices, soda drinks, energy drinks and other caffeinated beverages. These are sources of substitute items, which the purchasers can buy in place of coffee. The main direct substitute for specialty coffee is the normal coffee, but the normal coffee is acknowledged a significantly lower quality than specialty offering and accordingly does not show a danger to specialty coffee. Whilst there are numerous potential substitutes, a cup of specialty coffee is still what customers like to buy. Item differentiation and brand image assume a paramount part in this industry. Specialty coffee products are distinctive in numerous perspectives from the substitutes (Thompson & Shah, 2010).

Coffeehouses offer a cup of coffee as well as the experience to sampling specialty coffee like what Starbucks is putting forth. Companies producing soft drinks and non-alcoholic beverage makers are on a mass marketing, offering their items in retail stores, departmental stores, and supermarkets. On the contrary, coffee houses offer a unique third place for its purchasers to enjoy their coffee. Hence, the danger of substitute items is not critical or is not recognized a major constraint in the specialty coffee segment.

Buyer's Bargaining Power

In any industry, customers are always a powerful force. They have the capacity to pressure companies to lower their prices, put a company against its rivals, and demand improved services for a company. This indicates that they influence the fall and rise rate of industry profits. Porter argues that buyers can become powerful if the items they buy into an industry are standard of undifferentiated. In this case, one specialty coffee exists; buyers have moderate bargaining power.

Bargaining Power of Suppliers

Comparable with the purchasers, suppliers can additionally exert an impact on the players in an industry. Suppliers can increase haggling power and could be a potential danger to industry players as far as industry benefits. They can expand or diminish the nature of the items in a given industry. Michael Porter additionally sketched out the major sources of suppliers' bargaining power. He contends that a group of suppliers is powerful if:

• Many organizations dominated it and more concentrated than the industry it offers to clients.

• Its products are differentiated and unique, or in case, it has advanced switching costs

With only one specialty coffee required for the industry like Arabica, there are thousands of plantations and private coffee cultivators developing this definite coffee bean. This gives the coffeehouse organizations additional decisions to swap existing suppliers in case the latter request higher costs for their coffee beans. Thus, the suppliers are differing and widespread and the industry players exert more impact and get a bigger share of the benefits of the industry over the suppliers (Thompson & Shah, 2010).

Recommendations

Following the above analysis, this section forwards the following Recommendations:

Formulate Strategic Marketing

Strategic marketing is a vital component in any business. As uncovered above, the organization's failure to draw a marketing plan led to a gap in its value chain, which has made a noteworthy decay in the organization's brand image/reputation. The organization needs to have a direction within the marketing enclosure to enhance its picture and brand recognition. Advertising is concerned not just about special commercial exercises. A marketing plan enables an organization to comprehend the economic situations and the requirements and inclination of the clients whilst thinking seriously about different organizations who are additionally competing in the same sector.

It includes fulfilling the client's needs and wants and administering associations with stakeholders. A business has just two capacities, one of which is innovation and the other marketing. The goal of advertising is to make new clients and communicate with all its stakeholders (clients, shareholders, and workers). An organization cannot adequately actualize any action when no correspondence with all its stakeholders is made. This is the function of marketing. In the case of Starbucks, it has made minimal respects to marketing as confirmed by its minor percentage of budgetary allocation for the seed value creating activities.

Improve Standing of Stock Market

To enhance the trading of its stock market, Starbucks needs to show that the organization is a productive business. This can just be carried out if the organization will press on to show that it has a practical command of its brand/image notoriety and recognition. The organization needs to stop the present downturn in profits and sales. In order to do this, the organization must start and execute changes inside the organization as proposed previously. Securities exchange investigators are nearly overseeing the Starbucks share's profitability and performance.

Subsequently, the organization should upgrade its notoriety by indicating substantial and significant changes in its operational and marketing exercises to show that the organization is in charge of its future and that it can uphold its current leadership in the specialty coffee industry. Besides that, the organization can additionally indicate that it has the proficiencies to step into new markets. Thus, analysts will not delay in giving a high rating to the organization, and investors will not be hesitant in putting their money into the Starbucks stock (Thompson & Shah, 2010).

Conclusion

A strategic change is the call of the day for Starbucks. Maybe, the organization will return this time to its existing business models, strategies, and practices know if these models still fit with the market conditions. The organization has been in the business for two decades and undoubtedly has been the industry leader in just about the same length of time. Nonetheless, since economic situations change as proved by the present events and proceeding globalization of business sectors, the organization may need to change its strategies. Starbucks might have as of recently saturated its current market or its strategies might have been going into an alternate course, one that is going far from the goal market scenario (Thompson & Shah, 2010). As has been what is indicated, the organization needs to execute a strategic change. Its management practices may need to be reexamined. The client establishes what a business is. In this sense, Starbucks might as well recognize what the client needs, what they require and what they prefer, not the reverse.

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Starbuck's Strategy and Internal Initiatives.  (2013, October 7).  Retrieved February 22, 2019, from https://www.essaytown.com/subjects/paper/starbuck-strategy-internal-initiatives/2424009

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