Diversification of Starbucks

Topics: Coffee, Starbucks, Coffeehouse Pages: 5 (1461 words) Published: March 5, 2011
For companies, they all want to have bigger market share and earn more profit. So they will find many ways to penetration into the market like diversification. Diversification strategies are used to expand firms' operations by adding markets, products, services, or stages of production to the existing business. The purpose of diversification is to allow the company to enter lines of business that are different from current operations.There are basically two broad forms of diversification as related diversification and unrelated diversification. Starbucks is the largest coffeehouse company in the world; they not only sell coffee and coffee beans also sell other drinks, salads, sandwiches and snacks. Besides they bought the Hear Music Company and develop other business except coffee.

Related diversification, occurs when a company develops beyond its present product and market whilst remaining in the same area. For example, Starbucks Corporation buys roasts whole bean coffees and sells them along with rich, specialty coffees, pastries and confections, and coffee-related accessories and equipment through company-operated retail stores. It also sells premium coffee beans through other channels of distribution, including coffee distributors, hotels, retailers, warehouse clubs, and restaurants; which are collectively called Specialty Operations. Starbucks offer their coffee cup in their retail shops as well.

Unrelated diversification is a corporate-level strategy based on a multibusiness model whose goal is to increase profitability through the use of general organization competencies to increase the performance of all the company’s business units. Companies pursuing a strategy of unrelated diversification have no intention of transferring or leveraging competencies between business units or sharing resources. For example, Hear Music is the brand name of Starbucks’ retail music concept. Starbucks bought it in 1999. in 2002, they produced a starbucks opera album and in 2006, the company created starbucks entertainment, one of the producers of the 2006 firl Akeelah and the Bee. Retail stores heavily advertised the film before its release and sold the DVD. Starbucks also partnership with Apple to collaborate on selling music as part of ‘coffeehouse experience’. Customers would be able to browse the iTunes Store at starbucks via Wi-Fi in the US, targeted at iPhone, iPod touch and MacBook users.

Firms may choose to diversify because diversification may benefit the firm’s owners by increasing the efficiency the firm. There are few efficiency-based reasons for diversification.

With diversification, firms can easy to have more customers and more market shares. For example, starbucks use the best coffee beans to make coffee and produce the perfect cup of coffee so they can started in 1973 and keeps going today. Until starbucks provide us not just a single cup of coffee they have bottled drinks, brewed coffee, chocolate beverages, espresso beverages, frappuccino blended beverages, kids’ drinks and other kinds of drinks. With these different products so starbucks can successful so many years, in different countries and have different position customers. Besides drinks, starbucks also service like breakfast, sandwich, salad and other snacks. It changes the coffee give us the impress just make us wake up, it already become one kind of people’s life style.

Firms Diversify also can get the economies of scale and scope. Starbucks’ packaged coffee and tea business is growing. The company sells Starbucks-branded coffees and teas through arrangements with grocery stores as well as retailers such as Costco and Wal-Mart. As consumer spending picks-up with an improving economic environment, we expect further growth in Starbucks’ packaged coffee and tea revenues. The company's retail sales mix was roughly 61 percent coffee beverages, 15 percent whole-bean coffees, 16 percent food items, and 8 percent coffee-related...
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