Stock Market and Starbucks

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Individual Case Memo (I) – Starbucks and Crisis of Confidence
Submitted by Adriana Chan 2001473967

Q.1) What is Starbucks’ strategy?
To build the most recognized and respected coffee brand in the world, Starbucks has to adopt a Focus Differentiation strategy. From sourcing to marketing, Starbucks has a clear and focus strategy or policy to ensure the company grows towards the direction of their long-term goal. 1) Market share strategy: As Henderson (1979) states, “In a competitive business, it (market share) determines relative profitability.” In order to penetrate the specialty coffee market, Starbucks opens over a thousand retail stores, mainly in the top 50 U.S. markets. Starbuck’s concept of store clustering, which often placed the retail stores across from one another or on the same block, allowed Starbucks to maximize its market share in a given area and to build a regional reputation. Its real-estate approach also allowed Starbucks to take any retail spaces to open up a new store. 2) Sourcing System: Starbucks has a diversified source of its coffee beans to offer a greater palette of coffees to its customers while being able to maintain a hedged position. Besides, it maintained a very good relationship with the exporters by working directly with them and providing training to them. Such close relationship enabled Starbucks to be the first to get the best quality coffee beans. Also, since Starbucks is the biggest high quality coffee buyer in the world, it can enjoy the benefit of economies of scale. 3) R&D and Q.C. system: to ensure the quality of Starbucks coffee, Starbucks undertook a great deal of research to develop its roasting and blending recipe and this recipe can hardly be copied by its competitors. Starbucks is also very conscious on the quality control. In addition to the 3 stages of sampling, Starbucks also cares about the packaging of its coffee to ensure only the best Starbucks coffee be served to its customers. No coffee

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