Starbucks Corporation

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STARBUCKS CORPORATION (paper 1)

Gordon Bowker, Jerry Baldwin, and Ziv Siegl founded Starbucks as a roaster and retailer of whole bean and ground coffee in 1971 in Seattle, Washington (Hoover’s, Starbucks, 2012).With the help of Howard Schultz’s retail expansion strategy, Starbucks globalize itself by exposing the company to households across the world. His strategy helped increase the company’s revenue. In 1992, Starbucks went public and had around 27 locations, which increased revenue to $173M in 1993. In 2012, Starbucks $13.30B revenue had more than 18,000 shops internationally. Its top competitors are Dunkin Donuts, McDonald’s, and Nestle.             Starbucks has been able to build and maintain a sustainable competitive advantage in the marketplace because of its value chain that enables expansion of stores both domestically and internationally. The company’s coffee shops can be found on almost every street corner, in bookstores, shopping malls, and office buildings. The idea of selling premium coffee in a certain retail ambience has broadened Starbucks market. Starbucks keeps its competitive advantage within its organizational culture. The company works closely with suppliers to bring high quality ingredients and coffee products to help differentiate them within the coffee industry. The company has coffee buyers who travel to coffee farms located in Latin America, Africa, and Asia to select the highest quality of coffee beans and establish a relationship with coffee growers. Starbucks also gains a competitive advantage by creating tight links with coffee growers by supporting farmers and their communities with loan programs, resources, and expertise in order to serve the highest quality of coffee. Starbucks purchases coffee beans from multiple geographic areas, which enables it to offer various types of flavors of coffee to customers. Starbucks with significant resources takes advantage of certain local factors such as low cost commodity and labor ship. In addition, a variety of sources help reduce the risk of being affected negatively as a result of weather conditions, economic, and political issues in coffee growing regions.  Starbuck’s long-term success is linked to the success of the thousands of farmers who grow its coffee (Starbucks, 2012). The company selects its suppliers based on their same values and commitment to social and environmental responsibility. Moreover, the company commits to produce responsively grown and ethically traded coffee. Starbucks operates its stores directly through licensing. Licensing enables the company to get low cost entry into foreign markets. During the global financial crisis in 2008, the company focused on closing some of their stores, “after rapid expansion of stores both domestically and internationally, Starbucks’ profit fell in half in 2008 to $315.5 million from the previous year” (Hsu, 2012). Starbucks decided to start a new rich variety of menu offerings and announced that it would pursue expansion into grocery items such as juices and teas, to increase revenue. Starbucks has also agreed to partner with different companies in order to hold competitive advantage in the industry. Through partnerships with food manufacturers, “it also licenses the Starbucks brand for such products as ice cream (made by Nestlé’s Dreyer’s Grand Ice Cream subsidiary), coffee flavored liqueur (Beam), and bottled Frappuccino (PepsiCo)” (Hoover’s, Starbucks, 2012) . Starbucks diversified its portfolio in 2012 by acquiring Seattle’s Best Coffee, Tazo Tea, Evolution Fresh, La Boulange, Torrefazione Italia Coffee, and Teavanna. Starbucks purchased Teavana holdings in December 2012.  Acquiring Teavana helps Starbucks not only enhance its customer base by including tea lovers, but it will also position Starbucks to become a global leader in the tea business.             Starbucks Corporation implements a related (horizontal) diversification strategy by using resources in order to gain market...
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