Strategic Challenges Faced by Starbucks – Research Paper – tare Arigbodi
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Strategic Challenges Faced by Starbucks
The assignment focuses on the case of Starbucks Corporation and analyses the strategic challenges that the company encounters. Using knowledge gained from the MN3100 module and relevant academic literature and research done in order understand the organisation, along with relevant concepts and theories the aim is to identify the issues and apply the appropriate theories and models to give suggestions on how Starbucks can tackle these challenges. The analysis will include assessment of the external and internal factors and competitive forces that affect Starbucks, identified using the SWOT analysis model and PORTER’S 5 FORCES model. Then strategic recommendations will be made using the Outside-in and value approaches. In doing so, I have structured my work in the following way. First the essay will start with a brief introduction and company overview of the Starbucks corporation, followed by SWOT analysis and PORTER’S 5 FORCES table of the challenges that I have identified and summarised into bullet points. Then there will be the discussion of the current and recent strategic challenges that Starbucks faces. Then recommendations on how Starbucks can to solve these problems using relevant theories. Finally, I will conclude with a summary key points discussed and possible recommendations.Company OverviewStarbucks Corporation is an American company and coffeehouse chain, it is a premium roaster, marketer, retailer of specialty coffee around the world (Geereddy, N, 2012). It was founded by three partners Jerry Baldwin, Zev Siegl, Gordon Bowker with a vision to educate American consumers about the fine coffee drinking experience. Then in 1987 the chain was sold to the current CEO, Howard Schultz, to be rebranded. The company operates in 68 countries across North America, Europe, Asia, Middle East and Africa and has about 182,000 employees across over 24,000 stores located worldwide. Their products range from premium teas, coffees, fine pastries and a wide selection of treats. Starbucks also sell a selection of tea and coffee products and license their trademarks through other channels that include licensed stores, grocery stores and national food service accounts. Starbucks also markets its products mix with other brand names within its portfolio of companies, which include Teavana, Tazo, Seattle’s Best Coffee, Starbucks VIA, Starbucks Refreshers, Evolution Fresh, La Boulange and Verismo.
The company’s structure is very customer-oriented and its mission statement from the company profile is as follows: “Our mission is to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.” Starbucks’ core competencies can be described by their premium product mix of high quality beverages and snacks at accessible locations and affordable prices, along with providing each customer a “Starbucks Experience” through its supreme customer service and a community to share in the coffee drinking experience. Starbucks had total revenue of $19.16 billion (as of 2015) and has maintained a share of 36.7% in the US market with a very strong global market position (Geereddy, N, 2012). Some of Starbucks competitors are COSTA coffee, PRET-A-MANGER, Dunkin Donuts and also independent local coffee shops.StrengthsStarbucks holds a Strong Market Position with a significant geographical presence and 36.7% market share in the United states. Also one of the most recognized brands in the premium coffee segment, (Geereddy, N, 2012).Starbucks has good human resource management; the company has been listed as Fortune Top 100 companies to work for in 2005.Starbucks has achieved customer brand loyalty through the use of loyalty based programs.  Starbucks has also taken advantage of technology efficiently by using Starbucks App which supports their growth every year. (Geereddy, N, 2012).WeaknessesProduct recallsStarbuck although unique have expensive products, especially with economy being sluggish can affect the company.Starbucks has been involved in a number of legal proceedings.Starbucks has an overdependence in the United States market, generates a high percentage of total revenue from the US, which makes it sensitive to prospects of US economy and growth.OpportunitiesWith already successful innovative strategies such as the mobile app, there is opportunity for more technological advancement.Starbucks entry into developing and emerging markets such as Asia, Africa as there is saturation in developed markets.Starbucks can expand their product mix especially recently venturing into tea and fresh juice through the smart acquisition strategy, (Geereddy, N, 2012).ThreatsThe specialty coffee market has become intensively competitive.Starbucks may suffer from significant fluctuations in the market prices of high quality coffee beans. Increased Market SaturationHealth and Wellness trends within the beverage industryForceStrengthBargaining Power of SuppliersWeakLarge variety of coffee suppliersCoffee is not a rare resource/ resources are not rareLow switching costs for StarbucksThreat of Substitute ProductsStrongLow switching costsCustomer brand loyaltyLarge variety of substitute productsBargaining Power of Customers/BuyersStrongLow switching costsLarge variety of substitute productsSmall size of individual buyersCompetitive RivalryStrongStarbucks has a large number of competitors such as McDonalds and also local specialty coffee shops.It’s also easy for a customer to switch from Starbucks to other brands. (Greenspan, R, 2015).Starbucks has a large diversity of rivalsThreat of New EntrantsModerateThe barriers entry into coffee market are not highNew entrants find it difficult to compete against Starbucks due to moderate costs of doing business and supply chain development. (Greenspan, R, 2015).Saturated Coffee IndustryLow switching costs for consumersAccording to a Starbucks website on a post dated December 4th, 2014, published after investor day, Starbucks revealed details of its five-year plan to accelerate profitable growth. The CEO Howard Schultz said “Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today’s disruptive global consumer, economic and retail environments.”
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By: tare Arigbodi
Submitted: April 3, 2017
Essay Length: 3,137 Words / 13 Pages
Paper type: Research Paper Views: 441
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