Case study on Starbucks strategy and internal initiatives to return to profitable grown - Term Paper Example

? Case study on Starbucks strategy and internal initiatives to return to profitable grown Case study on Starbucks strategy and internal initiatives to return to profitable grown Introduction The study of Starbucks Company focus on a multifaceted journey through its implication into market dominance, culture, and its development of a brand similar to integrity, longevity, and loyalty. Comprehending the Corporation’s growth into an international star and the strategic approaches they utilized to get there starts with the origins of the product itself; coffee. Starbucks acquires its strength from expansion capacities, diversification, and novelty to accomplish a strong financial operation basing on its retail store operation. The corporation has precisely used several strategies to stay at the top of the market through good leadership alliance, branding techniques, use of new technologies, and maximizing its profits at all times. Innovative techniques and products have been the major building stones for Starbucks to maintain its leadership in the market and to return to profitable growth. Starbuck’s Business Model According to Henricks, a business model is a brief representation of how a unified set of decision variables in a business’s strategies, architecture, and economics will be addressed to achieve a competitive advantage in a certain market. From the analysis of the company’s strategies, Starbucks has been found as a business that enjoys a high level of customer loyalty, and for a long time has had a significant competitive advantage over other less popular coffee-products companies using their entrepreneur approach to business basing on customer intimacy and innovation (Henricks, 2007). Starbucks business model evolves with time to meet the needs of its customers. It treats its employees well, such as insuring their health, has a long resourced fair trade coffee, and offers mobile offices to masses of unemployed workers and freelancers looking for jobs. The Corporation as done before will always entangle its share of critics, but generally it has a set a pace for other companies to learn from. Starbucks value proposition Starbucks was much successful in the 1990’s. It has set initiatives to return to this profitable growth by making the customers the centre of its success. Starbucks gives the first priority to its customers in its value proposition. Its value is compelling since it places the clients and the service offered to them above everything else. Though the Corporation is a retail-coffee store, its value proposition is not exclusively on coffee, rather on coffee culture and the coffee drinking experience. With this strategy, Starbucks moves away from the practical gains offered by the coffee, like stimulation, taste, and focuses on the quality of its products and the indefinable gains of the experience of customers drinking its coffee. Thus, Starbucks value proposition is not based on coffee or other products, but on the experience of drinking coffee in the company’s store incorporating the product with the emotional gains of consumers. Starbucks vision for the business Starbucks vision is to establish itself as a premier supplier of the finest coffee globally while maintaining its categorical principles as it grows. The company visualizes a growing business with loyalty to its customers, delivering quality products, and innovative customer benefits. Strategies to achieve the vision With the objective of being the most recognized and appreciated coffee producing brand in the world, Starbucks has some strategies to achieve this. The company concentrates on employee satisfaction and working as a team, as well as customer satisfaction through a favorable environment and high standard coffee. In addition, it uses only the best coffee beans in brewing the various blends and thus achieves the vision of producing the finest coffee. The main objective of Starbucks is to grow by first valuing its employees. Starbucks approach its employees with excellent comprehensive and compensation benefits package. It believes that sharing its success with its employees and customers who created that success will help them think and act positively towards the company as well as associating with it as if they own it. According to Thompson and Strickland, successful strategies should be well matched to the opportunities in the market and the threats to external development. This means crafting offensive steps that capitalize on the company’s most promising market opportunities and unpleasant moves that prevent the company’s long-term profitability. In my view, the strategies put forward by Starbucks to achieve its mission match well with the market conditions in the coffee producing industry. This is because the coffee industry is so competitive, and by Starbucks using a strategy to create a good environment for employees, consumers, and for finest coffee, it achieves an ability to attract the best employees in the industry, who can contribute to the success of the company. Such an alliance also allows it to create a sustainable delivery of high quality coffee as compared to those of its competitors (Thompson, Strickland, & Gamble, (2007). Starbucks Vision, Mission, and Values Starbucks Mission statement communicates the reasons for its existence, and how it aims to serve the major stakeholders; employees, investors, and customers. Its Mission statement is to motivate and nurture the human spirit, that is, a single person, for a single cup and a single neighborhood at a time. It clearly describes the dream and the prospects of the company to be the most popular coffeehouse worldwide and to be the most positively ranked brand by all target groups around the world. Starbucks vision statement focuses on establishing it as a superior supplier of the best coffee worldwide. In the mission statement, there are six guiding principles that are significant in communicating the corporation’s key values. These include: Providing a good working environment and treat each other with dignity and respect Applying the best levels of excellence to the buying, roasting, and delivering fresh coffee Embrace diversity as a necessary concept in the way of running business Contribute absolutely to the environment and the community; Recognizing that profit making is among the key components for future success, and satisfying customers always. The company has used the core values principles as a guide to return to its profitable growth. They are the ingredients for its business, just like the coffee products it supplies. Starbucks begins and ends with the core values, which clearly outline relationships among the stakeholders on a daily basis. For instance, one of the employees, (let us call her Shergill) starts her day with activities that she loves most. Scheduled to work during the busiest hours in the stores, she concentrates on keeping the client areas neat and favorable. As she works, her efforts are absolutely noticed, especially by her colleagues. They also know that the store shines a little brighter in her presence, and they keep complimenting her work. This is to show how employees are committed to providing the best services in the company, to please their customers, and at the same time to ensure the success of the company in the end. Measurements being looked at in the financial and strategic objectives Starbucks have put in place some measurements to see if the company’s financial objectives are being met. Such measures include cash management strategies to help assess accurately the current financial position and what should be done to achieve the future objectives. With this measure, Starbucks gets more details of any calculations of cash brought in and expenditures (Thompson, Strickland, & Gamble, 2007). Their current assets are sometimes used to change the cash flow reports and details of the financial statements. More efficient, the company’s current assets are altering every statement that may affect its cash management strategies. To return profitable growth, Starbucks would have to manage its assets and cash equivalents in a different manner than what they were doing prior to their decreased assets. Specific actions that demonstrate management is actively managing “strategic execution process” Managers at Starbucks have actively involved themselves in staffing the Corporation with the required expertise and skills, intentionally developing and intensifying strategy-supportive competencies and organizing their employees in working hard to offer quality services to customers. Moreover, they have allocated sufficient resources to tasks critical to strategic success, such as organizing to get the finest coffee beans from the suppliers. Best known practices are used by these managers to carry out central coffee producing activities and pushing for on-going improvement in their productivity. By periodically reassessing how employees work, Starbucks employees precisely pursue useful improvements and changes, thus offering the best products and services to the consumers. Above all, their hard work is evident in the way they exert the internal leadership required to push implementation forward and continue improving the strategic execution process. For instance, when Starbucks encounters weaknesses, managers look into the matter and rectify efficiently and in time to enable a continuous supply of coffee products. The principal competitive pressures in Starbucks market I will use the Michael Porter’s Five Forces Model to analyze the environment around Starbucks to create a precise understanding of the present specialty coffee market. Starbucks operates within the industry rivalry context, where it competes with various small and large scale specialty coffee businesses, mostly distributed in different regions. However, these specialties are dissimilar from Starbucks in some ways. From the company’s annual reports, it was reported that Starbucks competitors for coffee beverage sales are always quick-service cafes and most particularly, coffee shops (Thompson, Strickland, & Gamble, (2007). The pressure is high since it was reported that, in all markets in which Starbucks do business, numerous competitors exist in the specialty coffee beverage venture. It continues to experience direct competition from complex opponents in the U.S. quick-service cafes and well-established firms in international markets as well as in the United States ready-to-drink coffee drink market. A strategic group map for Starbucks Key success factors in Starbucks industry Starbucks success factors can be associated with five factors. First is its capacity to plan a strategic business model and taking some main advantages of a number of demographic groups. Ability to attract the best employees by implementing a superior healthcare policy while reducing expenses and offering equity possession to all the employees. Strategic international partnership allowed it to develop a sustainable supply chain of the finest coffee The above three factors enables it to promote a community setting in which casual social contact takes place The ability to adapt to the evolving dynamics of its consumer demography A SWOT analysis Strengths Diversity of products AN established trademark, logo, developed brand, patents, and a website High visibility offices to get the attention of customers Starbucks operated retail stores Motivated and valued employees in a good working environment An established. Pleasant relationships with suppliers Loyalty to customers Globalized Leads the market in coffee industry Coffee is the last socially recognized addiction Strong financial base Widespread and reliable Weaknesses Too much focus on expansion rather than internal focus Competitors regularly increase in number in a developing market Cross-functional management Self cannibalization Ex[pensive coffee and related products Opportunities Advances in technology Expansion into retail business Upcoming supply channels New products Brand extension Supply agreements On-going domestic domination of segment New international markets Threats United States market saturation Competition from street carts, coffee shops, supermarkets, restaurants, and other specified caffeine products Volatility of coffee prices in third world countries Consumer trends to focus on more healthy diets and disregard caffeine harmful publicity from poorly treated coffee suppliers weak state of global manufacturer of specialty coffee corporate behemoth picture isolation of younger, local market segments political and cultural issues in foreign nations Distinctive competitors of Starbucks The distinctive competitors for this company are: Superior innovation or quality; the chain really offers its customers best coffee in a comfortable and positive meeting environment. Its branding is done in a manner that all target groups accept the products. A favorable working place; Starbucks was ranked in 2008 for the 10th time as one the “fortunes” 100 best firms to work in. It is also the most admired company in the U.S. Its human Resource and work culture enables this success (Grant, 2008). Brand reputation; a quality reputation for coffee products, overall attention to offering services, and consistency in its service. Powerful financial growth; the company has showed a stable increase in operating profits and income for a long time, thus trusted by consumers Core competencies They include outstanding customer services, firm focus on quality products, ongoing product advancement, its quest to expand globally, and recognized care for the employees. Ratios to describe Starbucks Growth rates in percentage Starbucks Coffee industry S&P Sales 11 11.5 3.5 Sales (5-Year Annual Average.) 7.16 8.28 8.15 Dividends (5-Year Annual Average.) NA -0.02 5.2 Net Income 0.1 3 -0.7 Net Income (5-Year Annual Average.) 15.52 15.9 6.9 The generic strategies that Starbucks fit in As seen today, Starbucks seem to fit in the differentiation generic strategy. This is evident in its powerful marketing abilities, as well as basic research and growth, with individual as dissimilar to quantitative measurement objectives. It also has unique products and skills. Starbucks accomplishes this by distributing specialty coffee. Strategic advice to Starbucks in the next 2-5 years Basing on data analysis, it was found that Starbucks actually does not have franchising for its business. It is advisable that the company’s site emphasize that it has opportunities to get aspiring franchise to keep in touch with. From Starbucks license agreement, there is a rule that it can permit a smaller business to operate through selling quality products belonging to Starbucks, under the condition that it still own the product. By doing this, Starbucks can increase its sells anywhere in the world and maximize its profits. References Grant, R. M. (2008). Contemporary Strategy Analysis. Malden: Blackwell Publishing. Henricks, M. (2007). The Starbucks Business Model: Entrepreneur, Retrieved from: http://www.entrepreneur.com/article/173256. Principles of Management. (2007). Developing Mission, Vision, and Values. New Charter University. Chapter 4. Retrieved from: https://new.edu/resources/developing-mission-vision- and-values. Thompson, A., Strickland, A., & Gamble, J. (2007). Crafting and Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases. New York: McGraw-Hill Companies, Incorporate. Read More