Starbucks Coffee Company has established as its own market and artistry in the Coffee gastronomy line for more than 30 years. Providing over 60 types of coffee, Starbucks has kept the name and brand alive since 1987 where a small and friendly workforce aim to create national brand – The Starbucks Experience. Jerry Baldwin, Zev Seigl, Gordon Bowker and Zev Siegl were the ones who opened the first Starbucks in Washington in the year 1971. They sold high-quality coffee beans and equipment. The name “Starbucks” was named after the chief mate of a whaling boat, Pequod, Starbuck. The company started out by only selling roasted coffee and not brewed coffee. The coffee was bought directly from plantations. Through the rise and fall, but rise again, the vitality of Starbucks achievements lies on attributes beyond strategic management practices. “It’s not about the Coffee; it’s about the people behind the Coffee.” - as quoted by Howard Schultz the CEO of Starbucks. There were issues with the strategic management process in Starbucks. During Howard Schultz return as a CEO, he has implemented 3 strategic initiatives to increase the sales annually. The 3 strategies is to help improve the current state of the US coffee retail business, to build Starbucks own experience such as the ambience in the shop and lastly is to look into the organization structure such has improving on customer service and reducing cost. The importance for an approach of customer service and right leadership principles are the one that can help the company succeed.
Porter’s Five Forces Analysis
The strategy management process is a series of analyses that assists company to develop a strategy that generates competitive advantages (Barney and Hesterly 2012: 22). External analysis is one of the important analyses to identify the critical threats and opportunities in its competitive environment (Barney and Hesterly 2012: 26). The “five force framework” is one of the most influential that developed by Professor Michael Porter of Harvard Business School. The five forces framework identifies five most common threats that firms are facing in the local competitive environment. (Barney and Hesterly 2012: 52). Environment threat is any individual, group, or organization outside a firm that seeks to reduce the level of that firm’s performance. Threats increase a firm’s costs, decrease a firm’s revenues, or in other ways reduce a firm’s performance (Barney and Hesterly 2012: 54). The “five force framework” suggested the five most common environment threats are (Barney and Hesterly 2012: 54); i.The threat of entry.
ii.The threat of rivalry.
iii.The threat of substitutes.
iv.The threat of suppliers.
v.The threat of buyers.
The Threat of Entry
New entrant refer to firm that has recently started its operation or threaten that will begin soon (Barney and Hesterly 2012:54). In a recent article published by Timeout Singapore revealed the eight new cafes in Singapore are worth to visit (Timeout Singapore 2012). One of the reasons motivated new entrances is its superior profits that Starbucks is earning (Barney and Hesterly 2012: 54). The threat of entry depends on the cost of entry or existence barriers. The “five forces framework” identified four important barriers. There are (Barney and Hesterly 2012: 56). i.Economies of scale.
iii.Cost advantages independent of scale.
iv.Government regulation of entry.
Economies of scale
Economies of scale exist in an industry when a firm’s costs as a function of its volume of production. As Starbucks is a chained Cafes and has 84 cafes island wide (Starbucks 2011a), as such Starbuck does enjoy advantages on the economies of scale. Product Difference
Brand identification and customer loyalty serve as entry barriers to new entrant (Barney and Hesterley 2012: 58). Starbucks set out to be a traditional Italian coffee bar that practises Italian...