Starbucks Strategy, Research Paper Example

Starbucks Strategy-Executing Process

Starbucks is the largest coffeehouse company in the world. Currently there are 18,000 coffee shops in about 60 countries. (Starbucks, 2014) They are best known for their specialty coffee drinks and teas, and the healthier food options that were recently added to their everyday menu. When Starbucks was founded, it was intended to be an American equivalent to a Milan coffeehouse. They designed their stores to be an important part of its community. One of their primary strategies was to provide a customer experience that exceeded all expectations.  Repeat customers are the best source of business. The other strategy was to form that emotional attachment with their consumers. This would eliminate the potential of these consumers frequenting their competition. Starbucks success has made them a household name, and that is attributed in large to their continual innovation and strategy-executing process.

Company Introduction

Starbucks has been continually committed to improving their business. “The corporate strategy and management approach adopted by a firm for instance influences its profitability in the long-term.” (Bowman & Helfat 2001) The company’s mission is customer driven and has to be adjusted as those demand change. Their commitment to their consumers are the key drivers in their strategy-executing process. This means at times the managers and employees have to make decisions at store level that best represents the company. For example, if a consumer is given the wrong drink and they return, the manager has the digression to give them their drink for free. It is in the best interest of the company for the customer to have a positive experience each and every time, and there is no set guideline for how that should be executed on store level.

Company Strategy

The company also understand that, “good strategy making is therefore inseparable from good business entrepreneurship. One cannot exist without the other.” (Charting, 2012) Their understanding of this concept has been a driving force for the company’s overall success. Starbucks chairman, President and CEO, Howard Schultz has more than grasped that concept. He lives it, through his own actions, and the staff which he surrounds himself with. Mediocrity is a place where businesses go to die. Schultz knows there will always be a strategist out there trying to one up them and get the upper hand in the coffee shop venue. This is why their decisions do not always represent minimal changes, sometimes they just have to jump off the deep end to get the best outcome for their consumers.

Starbucks has made their international presence and has done so with much success. However, each culture brings a different barrier than the other. “One way of building such a winning strategy would be expanding on the strengths of the existing practices while only focusing on realistic changes needed to achieve competitiveness in a dynamic business environment.” (Rees & Porter 2006) Starbuck’s original strategy was to capture the Korean market, so they executed that strategy by building Starbucks in their ideal locations in Korea. However, they found that Korea has coffee shops on every corner, and they sell it cheaper. This challenged Starbucks position in this market, requiring them to reevaluate their strategy. As a result they deemed the best strategy for success in this market would be to lower their coffee prices and capture their market once again.

Another strategy that Starbucks held very important in their vision is their store’s ability to capture an ambiance of an Italian coffee shop. Their strategy was not to be a place where their consumers go to ‘just grab a cup of coffee’. If a customer wants an ordinary cup of coffee, they can run through McDonalds, for much cheaper at that. There had to be a way to set themselves far apart from any potential competition. They executed that by created an environment that was welcoming and enjoyable. Where their customers can go, sit, and enjoy their coffee whether that is with their friends or on their own. They implemented Wi-Fi to encourage business meetings to take place over a cup of Starbucks coffee. A place for a college students to caffeinate during their late night cramming session. A staff that welcomes everyone that enters their door, the strategy has many different players within this execution process which is necessary to appeal to their consumers.

Starbucks also has a strategy executing process for many of their different products outside of their coffee shops. It is logical that in order to get Starbucks into more consumer hands, they need to have outlets through a variety of different distribution methods. It is hard to believe that there are not Starbucks on every corner, but there really are locations that Starbucks has not tapped into. Placing their coffee on the local market’s shelves, and their bottled drinks in gas station’s coolers simply broadens their consumer reach. It provides an alternate means for brand recognition as well. Their strategy is to be the top coffee dealer globally, and this is a very important part of the process for it to take place. Keeping a hands-on approach with their retailers will allow them to control their product placement and sales.

The company’s value and vision statement is not very complicated. It is a strategy to govern the company’s direction and ensure they are executing their plans appropriately. Howard Schultz has been a proven leader with the direction he has taken the company, and is credited in large for Starbucks being where it is today. Starbucks has become readily known for their growing, vibrant, and hugely profitable company that has obtained global recognition. This did not happen by chance. “He has developed and promoted a strategic vision from the beginning: to make Starbucks ‘the most respected brand name in coffee and for the company to be admired for its corporate responsibility’.” (Thompson, 2004) Respect for the company is not gained by notoriety, it is gained from personal experience, one cup after another. Not only has Starbucks focused on its own image, but it has focused on what it can do to give back to their communities as well.

Community Involvement

Starbucks has implemented a good balance in their corporate strategy and their responsibilities of being a good neighbor. They are involved in community service where both employees and members of the community join together for a common purpose. It could be cleaning a park, or building a garage, the community commitment is based on community need. There are community stores where members of the community can go to get education, health, housing, and even employment. It is a safe haven for the less fortunate to get the help they desperately need. Youth leadership programs allows them to help aid in creating extraordinary leaders by investing their leadership skills which will benefit the global market. They are shaping the future executives of the world. Clearly there are many strategies used to give back to the people who have helped make them successful, but it is an important part of what makes Starbucks who they are, and the credibility associated with their name.

With all of the different individuals who are involved with Starbucks, who or what can we attribute their overall success to? The answer, we believe, lies with an ingredient as central to Starbucks’s business as the premium coffee beans it roasts: Relationships. “Starbucks starts and ends with core values … [and] the core values emanate from and around relationships with people,” says Anne McGonigle, the company’s vice president for special projects. (Gulati,  Huffman, & Neilson, 2002) Their relationships are not segregated by the level of workers. The baristas are just as valuable as the central managers who oversees hundreds of stores. Every individual gives does their part for the company’s success. It is not just about getting the coffee in the customers hand and get them out the door, it is about creating a personalized relationship with their customers. The strategy of employee’s importance is executed through their role in the company. They extend profit sharing and tip sharing to all levels of employees within their stores. This makes it more of an ownership, and in turn the best potential customer experience.

The global presence does not necessarily mean that the company has a set standard that is implemented worldwide. Clearly they would not have the same success with in India as they would in the United States if they followed the same practice. This is another part of the company’s strategy, to continually revisit their markets to determine what is working well for them and what needs changed. Last year Starbucks had to raise prices globally, but especially in the United States and China, due to rising prices for coffee and other ingredients, but this year they are taking the hit from the rising coffee prices for the consumers. (Baertlein, 2011) Part of the price rise was due to the increase in coffee and part on inflation in general. Raising their prices did not negatively affect their consumers. Starbucks is known for their prestige and quality, and their increase in cost is almost expected.

A New Look

So where can Starbucks go now? They have conquered the international market and are common virtually everywhere. Their strategy now has evolved to adding a wow factor to their already established company.  “The coffee behemoth partnered up with Swiss train company SBB to convert a double-decker train car into a store that people could visit during their workday commute. Logistically speaking, it’s a smart move; instead of making busy customers come to them, they figured, why not just go to the customers? “It’s all about us meeting our customers where they are in their day,” says Bill Sleeth, Starbuck’s vice president of design for the Americas.” (Stinson, 2014) Taking over a train allows them to create their ambiance and provide transportation for their consumers all in one. Innovative thinking outside of the realms of how Starbucks usually operates. Brilliant strategy for accommodating their customers.

The question that comes into play regarding expanding to a train would be, is this strategy necessary? Perhaps it’s a bit extreme, but it provides a method of differentiating Starbucks. I can guarantee that no other coffee shop has taken over a train. There are Starbucks on every corner which is not a bad thing. But it can become too common as well. Creating a Starbucks train, that a factor that clearly differentiates. When the consumer wants plain and ordinary, they can opt to go to the corner store, pick up their coffee, and be on their way. But given the option to, ‘visit Italy’ on their commute while drinking their coffee. You do the math. The strategy is to set themselves apart from their competition, and this is one way they have successfully done so.

Conclusion

Starbucks success has made them a household name, and that is attributed in large to their continual innovation and strategy-executing process. Their strategy execution cannot be narrowed down to just one instance. They are continually making changes and implementing new processes to ensure their overall success. The executives of the company do not rest behind the success they have already had, they are striving to make the necessary changes and create new ventures when the opportunity presents itself. Their strategies regardless of how well they are executed need to be continually evaluated to ensure they remain in the best interest of the company. Starbucks is a great example of a company that has provided a positive environment for their employees and consumers through their innovative strategies, precise execution, and their continued growth.

References

Baertlein, L. (2011). Starbucks Sees Higher 2011 Coffee Costs. Business & Financial News, Breaking US & International News | Reuters.com. Retrieved from: http://www.reuters.com/article/2011/01/27/usstarbucks-idUSTRE70P8DE20110127

Bowman EH, Helfat CE. 2001. Does Corporate Strategy Matter? Strategic Management Journal 22(1): 1–23.

Charting A Company’s Direction: Vision and Mission, Objectives, and Strategy. (2012) Retrieved from http://highered.mcgraw-hill.com/sites/dl/free/0078112729/898107/Chapter02.pdf

Gulati, Ranjay; Sarah Huffman; & Gary Neilson. (2002) The Barista Principle — Starbucks and the Rise of Relational Capital. Retrieved from http://www.strategy-business.com/article/20534?gko=582b3

Rees, W.D. & Porter, C. (2006) Corporate Strategy Development and Related Management Development: the Case for the Incremental Approach, Part 1 – the Development of Strategy. Industrial and Commercial Training, Vol.38, No.5, 226-231.

Starbucks Corporation Company Information. (2014) Hoover Inc. Retrieved from: http://www.hoovers.com/company-information/cs/company-profile.Starbucks_Corporation.824509ef484db9e9.html

Stinson, Liz. (2014) With Stunning New Stores, Starbucks Has a New Design Strategy: Act Local.

Thompson, Arthur A. (2004) Starbucks in 2004: Driving for Global Dominance. University of Alabama.