Coffee and Starbucks

Topics: Strategic management, Coffee, Coffeehouse Pages: 11 (3343 words) Published: March 9, 2013

The organization’s strategic position3
External drivers affecting this organization6
Value adding in Starbucks9
Sustainability of Starbucks’s strategic position13


Starbucks, the biggest coffee retailer in the world, grows from a small, regional business into the undisputable leader in the specialty coffee industry. It arrives in the UK in 1998 with the acquisition of Seattle Coffee Company in the UK as its starting point. As soon as it expanded, many native coffee stores were driven out of business and other big rivals were forced to quicken their growth to beat this new invader. From then on, Starbucks remained the market leader leaving others far behind until recently some coffee giants such as Costa are catching up. In view of the big susses of Starbucks in the UK, this essay tries to analysis its competitive strategies which are the core elements to its success. In the second part, the organization’s strategic position is described. In the third part, the external drivers affecting this organization are illustrated. In the fourth part, the value adding in this organization is thoroughly analyzed. Last, the evaluation of the sustainability of the organization’s strategic position is made.

The organization’s strategic position

1) Based on generic strategy
Strategic position is a position taken by an organization to gain competitive advantages at present and in the future, which includes the devising of the right goals of the organization, developing optimal strategies based on the goals and the present environment, and putting these strategies into practice to realize the goals (Porter, 2001). According to Porter’s generic strategy, an organization's strategic position is given by its choice of competitive advantage, cost leadership or differentiation, and its choice of competitive scope, narrow or broad (Porter, 1985). So, organizations can take four different strategic positions, as shown in the following diagram. Coast leadership refers to being a low cost producer for a given level of quality by targeting a broad market. Differentiation refers to the offering of unique attributes that are valued by customers. It is also a strategy targeting broad market. Cost focus means adopting cost leadership strategy in a narrow target and differentiation focus means adopting differentiation strategy in a narrow target. [pic]

Source: Porter, 1985, Competitive Advantage
According to this generic strategy model, Starbucks obviously positions itself in differentiation strategy in UK. As a coffee maker, Starbucks differ itself from others through the quality of its products and its consistently superior consumer experience. Starbucks has strong research and development capabilities to ensure high level of product quality. Moreover it focuses on product innovation. For example, Starbucks has differentiated its product lines to include teas, sodas, ice creams, foods, etc in UK. As to its targeted market, Starbucks has a very broad scope. In 1998, Starbucks purchased the Seattle Coffee Company in the UK, which had 60 retail locations, and built the business to 300 shops. Starbucks's marketing strategy was to go all-out in new markets, opening stores quickly and putting pressure on rival firms there (Karolefski, 2009). On the other hand, thought Starbucks are making its effort to cut cost in UK, the cost of sales including occupancy costs and operating expenses are still high enough to negatively affect its profit. So, it seems that Starbucks cannot achieve low cost at present. Therefore, it is no doubt that Starbucks in UK has positioned itself as a differentiation competitor. 2) Based on Strategy Clock

Since Porter’s generic strategy is criticized as too simple and not collectively exhaustive (Kotha and Vadlamani, 1995), it is necessary to analyze Starbucks’s...

References: Barney, J., 1996, Gaining and Sustaining Competitive Advantage, NY: Addison-Wesley Publishing Company
Barney, J
Johnson, G., Scholes, K. and Whittington, R., 2005, Exploring Corporate Strategy, NY: Prentice Hall
Porter, M., 1985, Competitive Advantage, NY: The Free Press
Porter, M., Strategy and the Internet, Harvard Business Review, 79(3), pp 16-20
Porter, M., 1985, Competitive Advantage: Creating and Sustaining superior Performance, NY: Prentice Hall
Porter, M., 1998, Competitive strategy: Techniques for analyzing industries and competitors, NY: Free Press
Partridge, L
Priem, R and Butler, J., 2001, Is the Resource-Based Theory a Useful Perspective for Strategic Management Research? Academy of Management Review, 26 (1), pp.22–40
Starbucks, 2009, Available at:, Access [01/09/10]
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Eurocheapo, 2009, The cheapest coffee in London, Available at:, Access [01/09/10]
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