Strategic Development of Starbucks

Strategic Development of StarbucksSTARBUCKS INTRODUCTIONThe Starbucks coffee bean c b opposite-up was founded in the category 1971. The starbucks headquarter is locate in Seattle, Washington (USA) Starbucks operates a kitchen stove of home runed coffee shops in nearly much(prenominal) than 35 countries of the world. The outlets ply hot and cold coffee drinks and few feed items much(prenominal)(prenominal) as beans, coffee accessories and tea leafs. The Starbucks declargons 7100 of outlets which located more than 10 countries but near of the storages placed in USA. The study process of enlargement of starbucks started from 1982 when Howard Schultz joined the confederacy in order to see the grocery storeing and the sell activities. Since then Starbucks has evolved from a crushed $0.5 million business to a whopping $6.4 billion of turn everywhere.In this subsidization the fourth dimension frame of 5-25 years and canvas development of Starbucks along with str ategies utilise and the present scenario of the organization with the swear out of Porters five competitive forces, SWOT abridgment and note value chain analysis. The future recommendations to Starbucks would everyplacely be take ond in this assignment.1 ANALYSIS OF THE PASTTHE STRATEGIC DEVELOPMENT OF THE STARBUCKSIn 1971 Starbucks was come in Seattle (USA)In 1984 Mr. Howard Schultz join Starbucks to boost up commercializeing and retailingStarbucks acquire 5 memory boards in San Franciscos peet coffee and Tea chain in 1984In 1985 Starbucks start the espresso bar concept in their storeIn 1986 Schultz left StarbucksIn 1987 Starbucks overstates in the American foodstuff by starting signal its outlets in British Columbia and ChicagoIn 1992 Starbucks get listed with its prime(prenominal) public be stick offering with 165 business comprise outletsIn 1996 Starbucks open its branch in Tokyo (JAPAN)In 2003 Starbucks continues to open branches all over the world and reached 64 00 0utlets worldwideIn 2008 the orbicular nook come upons Starbucks mischievously, due(p) loss in business Starbucks shuts 600 outlets all over the worldIn 2009 Starbucks released a public long-term growth strategy that included run into guest need for quality and value as key finish1.2 THE STRATEGIES APPLIED BY STARBUCKSIntegrate horizontally Starbucks has g unmatchable for acquisition of a large number of companies in abroad martplace, and expanded their outlets whole over the world. This strategy gave Starbucks a chance to reach guests whole over the world. For represent Starbucks acquired Seattles beat, Torrefazione Italia and Coffee People.Penetrate the trade To increase the market shargon, Starbucks has differentiated itself in providing a unique experience to its clients by plentiful specific themes in stores. The product mix consists of different crapulences to suit peoples needs. Starbucks have also direct(p) up boost up smart embed profitability with ot her crapulence companies such as Pepsi co and Kraft food.Developing the market Starbucks has develop the market for specialty coffee fabrication for America. In this context, Starbucks has created brand knowingness and demand for coffee stores amongst American population. This is enabled by better market brainstorm by dint of apt store locations and standardized services offered all with the world.Diversification strategy To pull higher market share, Starbucks has provided a diversify product mix. To move forward starbucks produced clean product linked with beverage business. This strategy helps Starbucks to grow both on the base of the operations and boilers suit proportion of services. They have developed unique products and at the very(prenominal) magazine acquired companies like Ethos water. The product specialty has been its result competence all finished since its inception.Alliances strategy The Starbucks also utilize alliance strategy to became player in th e leisure and service industry, and not only a specialty eatery business, Starbucks has tied up with companies like i-Tunes to create the Hear Music exertion and XM Studios to offer customized music services for Starbucks customer, which has helped Starbucks to attain a level of receding over a catch of time where even the nations where its presence is mute at a nascent stage.CSR strategy Starbucks have also utilise the CSR strategy to enhance the brand image and they also funded non-governmental organization to purify the level of literacy amongst the educationally backward communities. Starbucks also run the Green investment compevery campaign to reduce the usage of paper cups. A 10% ignore was have gotn to customers who brought their own spoils to the store. Its latest campaign of Fair- trade coffee has permeate on a subtle yet widespread manner.1.3 CRITICAL advantage FACTORS FOR STARBUCKSThe important factors that helped Starbucks to associate with success in the i nitial years of its operations are as followsMarket Research The factor market look into helps Starbucks to apply the strategy to move forward their business through expansion. In year 1980 Starbucks expanded to Chicago. This helped management to learn how to expand business over the country. In the years 1991 Starbucks moved to California. This was a major strategic finding that came in after a lot of market research.Employee Motivation and Rewards whizz of the major success factors of Starbucks has been its employee motivation and giving time to time surgery base incentives. One of the major steps taken by Starbucks to obey their employees was to increase the health and safety benefits for employees who worked more than twenty hours in a week. The top management to select the make up employee for the right byplay in the store in order to reduce employee turnover ratio.First Movers utility In the year 1987 under the supervision of Howard Schultz Starbucks open 150 stor e in the first 5 years. Being the only player in the market Starbucks profits were huge enough to stand them invest in their expansion proposals all over the world.Catalogue retailing In the primal years of the companys operations, Starbucks started the process of catalogue retailing. This played a major persona in determining the location of stores for Starbucks. Starbucks had a catalogue which comprised of a turn tail of packed coffee beans with their prices. Consumers from along the world ordered them and looking at the zonal preferences the store locations were decided.2. ANALYSIS OF THE CURRENT SCENARIOAS starbucks is a popular coffee company so we look at a scenario of the period around 2008 and 2009. In this percentage we will look at the strategies of Starbucks through SWOT analysis, Porters 5 forces analysis2.1 SWOT ANALYSISSTRENGTHSStrong mail Image Starbucks has been ranked amongst the top 100 brands in the world consistently over the last ten years.Innovative ma rketing strategies and its terms telling campaigns Starbucks have created brand awareness among the American population.High visibility of store in the market helps Starbucks to cajole more customers and make company more profitable.Starbucks has importanttained a high level of service through which it has achieved a consistent level of customer satisfaction with strong relationship with its supplier.The global presence of the Starbucks with quality based services of food and beverage, at the same time entertained their customer with music and internet in their stores.Starbucks is applying the in advance(p) strategy to provide unique themes in their store to make their customer loyal to brand.One of the strong strength of Starbuck is his CEO Mr. Howard Schultz. collectible to competent HRM strategy to motivate and time to time exercise based incentive and giving proper training to staff according to job specification.WEAKNESSESThe one of the weakness of Starbucks is lack of i nternal focus and too much retrieve to expand their business.Increasing number of the competitor in the growing market such as Dunkin Donuts, Nestle and Tim Horton (Bramhall).The dependency of Starbucks in US market, Starbucks company earn its more than 70% of revenue only from the US market however they have presence more 35 country in the world and market cannibalization.The weak financial position in the market due to the recent global recession in the 2008.Starbucks has loss in the share price and they have shut more than 600 stores.OPPORTUNITIESThe continuously expand their store globally with expansion into the retail market and advancement of engine room by using different kind of coffee machine in their store.Emerging planetary market specially BRIC nation Brazil, Russia India and China to plan to expand in these countries.Starbucks also continue to expand in the boorish sector of US and also segment the high populated state of the city.Brand expansion through dealing T- shirt and coffee mug to their customer in their store on discounted rates. baneSCompetition in the market (restaurant, street cart, supermarket, other competitor such as McDonalds and Dunkin Donuts. The chain such as Dunkin Donuts and McDonalds do not serve coffee is a centre of attention product but they give food as well to their customer in cheap prices than Starbucks.US market saturation and coffee prices volatility in developing coffee producing country such as Brazil, India etceteraUS consumer trends towards more health ways and away from caffeine.The current scotch recession is a major threat for Starbucks since they had to close down a large number of stores around 600 stores leading to declining profits and large level of unemployment.Large size of the Starbucks Corporation ca rehearse in decrease in quality of customer services.2.2 STARBUCKS VALUE CHAIN ANALYSISAll firms consists of activities that connect together to develop the value of business, Starbuck chief( prenominal) activity includes in the value chain humane resource management, marketing and retailing operations.In this section of assignment the value chain can be used to analyze the different competencies of Starbucks and then competencies will be discussed in later section.The core competencies of the Starbucks lie in its human resource management, marketing and retailing activities. infrastructure In this activity includes planning of store locations, controlling such as financing, accounting and corporate strategy etc (lynch 2003).Human alternative Management Due to the global expansion the Starbucks faces a lot of problems in the management human resources. Starbucks have faced the problem of high level of employee turnover, but deploying right human resource still remains one of their key competencies. The company still believes that employees are its biggest summations. Starbucks continues to maintain a high level of corporate culture due to above industry standard em ployee benefit plans and employee stock exchange and ownership plans.Procurement The procurement relates to purchasing the material that is essential for Starbucks. Efficient procurement of the starbucks is about buying highest quality coffee on lowest prices form developing countries.Marketing Marketing of Starbucks play a vital grapheme to boost up profitability globally as Starbucks is strong coffee brand. just about of the advertising campaigns include, online advertising and store advertising.Retail Sales Starbucks is mainly focus on store retailing around 80% Starbucks sales come from store sales. Consistent upgradation of service levels by hiring the right people for right job in store through efficient HRM uses.2.3 ANALYSIS OF THE STARBUCKS USING PORTERS FIVE FORCES MODELCOMPETITIVE challengerThe Starbuck faces strong competition from small national coffee players and large competitors in the market.The high price factor leads to decrease in sales compared to other c offee player all over the world.BARGAINING POWER OF SUPPLIERSThe overcrowded market of the US is the main cause of to increase the barraging power of supplier because most of the farmers growing coffee beans are now united together to sell coffee beans. They started certified coffee beans through the fair trade insurance in the US.BARGAINING POWER OF CUSTOMERHigh pricing is the main reason for decrease in sales.The low switching cost in the industry plays a electronegative factor to the companys growth by increase the bargaining power of buyer.THREAT OF NEW ENTRANTSThe specialty coffee industry does not put a high premium on economies of photographic plate. Most players in the specialty coffee industry have developed their own distribution channels in their own countries, thereby gaining greater economies of scale and reducing cost. The low cost imposes an entry barrier for new players who ask to set up an international chain, thus reducing their threat.The high differentiation wi thin the specialty coffee industry made possible to represent brand that could act as barrier to entry.The specialty coffee retail store may switch high cost to new player, cost such as ambience and skilled employee in the store giving complimentary drink or any food to make customer loyalty. Therefore it may become difficult for new player to set business in the specialty coffee. So threats from the new entrants relatively low.THREAT OF SUBSTITUTE PRODUCTSThe primary substitutes to the specialty coffee company such as Starbucks from the beverage companies make caffeinated soft drinks such as Pepsi and Coca Cola, which has the caffeine inherent in the specialty coffee at significantly pass up prices.(Quelch 2006)The tea is also a substitutes in some country such as UK, the English people like different kind of tea instead of coffee2.4 FINANCIAL PERFORMANCE OF STARBUCKSIn year 2008 Starbucks hit by the loss in share prices because of world economic recession and net income down by 70% and the figure 1.4 show that how badly Starbucks affected in the world economic recession hence the chairmen forecast the report of decline share prices to $ 9.33 of Starbucks Corporation.Starbucks is well positioned company to challenge any economic recession with strong cash flow and solid relief sheet. The year 2008 strongly hurt Starbucks with shutting down600 store, loss of 6700 job and $ 500mn operating cost saving for 2009. Mr. Schultz cut in their salary $1.2mn to $ 10000. hither in the figure 2.5 show that clearly result operation with the study of net revenue, balance sheet of between 2004-08 and also shown that the stores information in the percentage and store opened in the between 2004-08.2.5 ORGANIZATION twist OF STARBUCKS CORPORATIONFinanceMarketingCEO Howard SchultzHOWDeputy juristic residencyCFO AdministratorBoard of DirectorsGlobal Coffee ProcurementLegalGlobal LogisticSupply Chain OperationPartner Resource (Hr)Us Retail, Human ResourceDevelopment Greater China existence AffairsInternational DevelopmentConsumer Food ServicesConsumer insight survive US developmentGlobal beveragesGlobal DevelopmentMarketingSeattle Best CoffeeFranceInternationalEMEARetail JapanChinaStarbucks Coffee UsAsia pacificCIO And Digital VenturesNorth East/AtlanticNorth westerly / MountainSouth East/ plainWestern Pacific3. afterlife RECOMMENDATIONSStrategic future recommendation to overcome from the declining profits of the Starbucks would be mentioned below.3.1 work out INTERNATIONALLYExpand internationally is one of major strategy starbucks has applied to become most profitable specialty coffee company.The one of the major problem Starbucks face continuous declined in the sale of in stores. The main reason for this is Starbucks is self cannibalizing its own business in the United States. Cannibalization is the negative impact of a companys new product on the sales consummation ofits quick related products. Therefore Starbucks should focus more on scuttl e stores in growing economies such as BRICK nation where the product bribe power is high among the people of India and the Middle Eastern countries, Brazil and Russia rather than on just concentrating on US market.Starbucks should have to think about international expansion primarily for two reasons. The first reason beingness that because umpteen developing economies lack the penetration of specialty coffee chains. For many countries Starbucks can adopt the Market Development strategy to strengthen their brand, gain more market share and minimize their risks.Second reason for international expansion is that, migrating to different countries would give Starbucks a chance for product innovation. For drill Tazo tea was first tested and tried in the Japanese market and then it was introduced in US market.3.2 FRANCHISINGStarbucks should have concentrate on the franchising work like McDonalds is doing in to expand whole over the world. Most of the Starbucks stores are company owned company operated stores. This strategy is good but not good to survive long term profitability this increases the cost of control, it he case of franchising they can minimize control and concentrate more on building up their quality and maintain their high brand image, something interchangeable to what McDonalds, pizza hut and Dominos have done over the years in US market and globally.The practice of expansion through franchising would also help Starbucks in entering potential drop markets such as India and speared in the Middle East country. In India, the foreign direct investment (FDI) restrictions allow only 49% investment of paid up capital by any foreign retailer. This restriction is playing a major role in Starbucks entry to the country. Franchising would allow Starbucks overcome such problems.3.3 INTRODUCE homage CARDSTo make any company profitable the loyalty of customer may plays a vital for the Starbucks. It has been observe Howard Schultz has envisioned selling coffee at a lower price in order to attract new customers. According to my view the overall price cut would taint Starbucks brand image in the eyes of the loyal customers, who have been committed with the company due to strong brand image. However the price naked as a jaybird policy should not be left away completely. It should be practice at certain places where the demographic income is low, in other places discount should be introduced customer loyalty card and point reward system for guinea pig retail companies Tesco, Sainsbury, and Mark Spencer. With every purchase made at a Starbucks store points will be added to the customers loyalty cards. The customers will have schemes to buy off these points at specific time to get price discounts or scanty quantity of product.3.4 CORPORATE THEME STORESStarbucks can come up with a new theme of stores which is the corporate theme stores specially to accommodate in mind corporate people. In this theme, Starbucks should remodel store to d eclare in mind the interest of corporate people. Starbucks store should have to be situated in the commercial business places such as Westminster, Holborn in capital of the United Kingdom and if look at the US Manhattan in New York. The facility should include free Wi-Fi internet, corporate business Magazine and financial times paper availability in the morning. There should be any specific area in stores for corporate meeting to make extra revenue for the company.3.5 void THEME STORESStarbucks should also have stores with leisure theme that should have a comfortable and lively ambience that encourages people to come to the stores for a irenic time. These stores should have facilities such as soft music, instant digital photography for taking snaps and arranging get-togethers like parties and official meetings.Many pubs and bars have pictures of their regular customers and special events. Similarly, Starbucks can also have a wall dedicated to pictures of local customers or memor able events in the store. This will help Starbucks to maintain a close relationship with its customers and will attract potential customers.3.6 CONTINUOUS IMPROVEMENT OF THEIR PROCESSESA recent survey conducted in the year 2008 showed that people prefer more of McDonalds coffee than Starbucks. Starbucks recently has failed to deliver newer alien range of flavours. Variety is missing in their menu. Hence from time to time the company must review its coffee making process and reckon renovating their equipments and technology from time to time.3.7 EMPLOYEE TRAINING AND MOTIVATIONThe most important asset for any company is their employees, as Starbucks is expand already in more 35 countries in whole over the world with strong brand name with the closure of large number of stores and lay off of over 6000 staffs, Starbucks have lost a considerable amount of its employees. So to keep in mind the starbucks should have review on their recruitment processes and give them proper training reg arding to their work area. For the job satisfaction and to motivate group member company should have give performance based incentive and paid holidays. It should hence now identify new leaders for the future, from the existing sales team members. The company should have give the chance of cross training in other department of the company and according to the performance company should have to give internal job promotion.3.8 CORPORATE affable RESPONSIBILITY (CSR)For food and beverage company should also have to keep in mind environmental issue and minimize wait. Now days all service company are using Corporate brotherly Responsibility (CSR) as strategy and its work for brand awareness among domestic people. Starbucks should also invest more in developing products and services that are more eco friendly and would also enhance the companys brand image. For instance they should use porcelain and glass mugs in the stores rather than paper cups. This would minimize the usage of paper. excessively they should encourage customers to use recycle bins in stores that would allow recycling of food waste.REFERENCESLarson.C.Ryan 17/4/2008 Starbucks a Strategic AnalysisAnders, George, Starbucks brews a new strategy Fast Company July 2001 Issue 49144.Datamonitor Report Starbucks Corporation, whitethorn 2006 www.datamonitor.comAdamy, J. (2007, November 15), At Starbucks, Too Many, Too Quick, Wall Street Journal.2008, January 7 McDonalds takes on Starbucks http//online.wsj.com/article/sb119967000012871311.html2008, February 22 Starbucks Cuts 600 positions, http//online.wsj.com/article/sb120362397558983703.htmlhttp//www.starbucks.com