Regardless of the time of the year, weather, and country, there will be people drinking, buying, and making coffee. The coffee culture has expanded immensely with the introduction of global corporations providing hot drinks like Starbucks and Dunkin. There are many variations from bitter ice to seasonal pumpkin coffee, all of which are loved and purchased by coffee drinkers. Most of the known to humans coffee-making methods and hot drink types can be easily purchased at Starbucks or Dunkin. It has even entered the state of routine, so people stop noticing the differences between the producers as long as they get their desired drink. The problem is that the coffee made at the two cafes is similar, and it is difficult to differentiate for a casual buyer. However, there is a slight difference in taste between Starbucks and Dunkin coffee, which draws the careful attention of biomedical informatics scientists.
People usually associate coffee with a bitter taste, which may be a huge public delusion. When Tyler (2018) from Business Insider decided to compare Starbucks and Dunkin shops in downtown New York, she claimed bitterness as her coffee quality indicator. Tyler (2018) went to both bakery shops and structured an overall overview of the two, purchasing a cold brew as her final say. She stated that Dunkin’s drink was not “bitter, but … strong” and “super refreshing” (Tyler, 2018, para. 14). Still, Tyler (2018) preferred Starbucks for its stronger bitterness and cheaper price, emphasizing a less “watered down” state (para. 21). Although it may be just what is needed after a short sleep and before a long work-day ahead, a coffee expert Erika Vonie told Grub Street that professionally made pure coffee, espresso, should be “immediately sweet and creamy” instead (as cited in Richardson, 2018, para. 3). Interestingly, Vonie later declared Dunkin’s espresso a winner compared to Starbucks’ “over-extract[ed]” coffee, which prevented the sweet and creamy taste (Richardson, 2018, para. 7). In a chase for more customers who think of coffee as bitter, Starbucks makes their coffee too burnt to be enjoyed by experts like Vonie.
Bitter coffee taste forces many to add significant amounts of different sugars and syrups into their drinks, which can result in health problems. The impact of caffeine on the human body has long been debated in the medical world, which connects it to cardiovascular side effects (Grosso et al., 2017). Additional amounts of regular sugar and sugar-based syrups included in coffee making limit research conducted and can be harmful (Grosso et al., 2017). Problems linked to caffeine and in-coffee-sugar consumption are a part of medical informatics scientists’ approach to ensuring food safety. The healthcare data science can significantly improve the state of public treatment through discovering new innovative solutions and updating medical knowledge. The lack of cohesive and concrete information on all possible relationships between caffeine and human health pose an opportunity for informatics experts. More research in this field can go as far as confirming several benefits of coffee consumption, such as the prevention of chronic diseases (Grosso et al., 2017). Thus, the growing and widely practiced coffee culture has great potential for research, in which biomedical informatics is closely involved.
Both Starbucks and Dunkin companies make great and affordable coffee, which is enjoyed by millions of regular coffee drinkers worldwide. Even though their methods of making and selling hot and cold drinks differ, there are many similarities. For many, the difference is almost undiscoverable because their preferences are based on individual perceptions and experience with the products. Some might prefer bitter coffee, while others lean towards a sweeter version. The influence of caffeine and sugar on human organism has been an issue of major interest. Therefore, the industry stores an enormous potential for health informatics, which aims to ensure safety and prevent harmful outcomes.
Starbucks Corporation is a leading coffee company in North America. The company‘s history dates back to 1971 when it started as a tiny sole coffee house with Gordon Bowker, Jerry Baldwin, and Zev Siegl as the pioneers. Within the first twenty five years of its operation, the company had only managed to expand internationally.
During this period, Starbucks opened several outlets for example in Chicago and also started producing other products for example Frappuccino beverages and Starbucks Ice Cream. It was not until the year 1996 that the company began oversees expansion with Japan being the first country where they set up their operations, followed by Hawaii and Singapore in the same year. In this paper, the foreign direct investment as a method of expansion adopted by Starbucks is going to be tackled.
Starbucks foreign direct investment
Starbucks prepares products like coffee and supplies it to user across the globe. According to Aswathappa (p. g 100), the company has made huge investments all over the world.
The company started as a single store in Seattle over 30 years ago but today, Starbucks is a global roaster and retailer of coffee. The company currently operates in about 40 countries outside US having 13,000 stores in total. According to Aswathappa, “the investments made by starbucks in 40 countries outside US are typically of Foreign Direct Investment (FDI)” (Aswathappa pg. 100).
When Starbucks began its ventures abroad, the strategy used was licensing the format of the company to foreign operators. With time, they were disappointed because they lacked the full control over such a company and hence were not able to achieve their intended aim of producing the best quality coffee and its products and customer satisfaction.
Starbucks therefore adopted another method of venturing into international market: The foreign direct investment. Using this method, two patterns are involved. New operations investment method involves the setting up of business that was non existent in the foreign country. The other method is the fusing or purchasing of an already existing company in the country.
Starbucks has used both methods to expand internationally but has majorly used the second method. Joint venture with another company abroad gives it several advantages over the first method: the new operations investment method. This is because the second method is relatively cheap as there is no much cost involved in the setting up of factories but they use the already existing equipment of the company they are merging with.
The other advantage is that Starbucks shares responsibilities with the foreign company. The benefit from such a venture is mutual. Starbucks benefits from the foreign company’s familiarity with the local culture, language and other important factors like the political situation of the host country (Aswathappa p.g 101). On the other hand, the company benefits from Starbuck’s expertise and other important skills needed in the success of the business that both parties would not come up with on their own.
Starbucks has also ventured into oversees market through purchase of foreign companies. This also solves the problems of cultural disparity that could be a factor if they set up new operations in the country. Other problems like the high cost of purchasing and setting up of equipment are reduced.
Japan is an example of a country where foreign direct investment has worked for Starbucks. When Starbucks started its operations in Japan using the licensing method, they were disillusioned because they did not have the control they wanted over the company.
They later corrected this by having a joint venture whereby both companies had equal and shared responsibilities. Starbucks also offered to train the people working in the company by sending some of their employees there. The training would include customer service and other core values held by Starbucks.
Considering that employees working with Starbucks form the vital core of the company’s success in terms of selling the company’s image to the general public and performing the day-to-day operations, there is the need for the company to hire people who can maintain positive interactions with customers.
This can be achieved through a rigorous process entailing job analysis, job specification, and job description by the human resource department. For instance, for Baristas (bar persons), the following should form part of their job specifications and descriptions: Job Specifications; Candidates eligible for the position of baristas will possess the following skills, knowledge, and abilities;
Knowledge of different brands of coffee,
Be eager to learn new concepts,
Ability to learn the art of coffee brewing,
Be self-motivated, creative, adaptable, team-players, and passionate, and
Ability to maintain a large array of regular customers
Job Descriptions: Baristas will be charged with the following duties and responsibilities;
Brewing and serving coffee to the customers in real-time,
Receiving and responding to customer needs/orders quickly,
Reporting to their immediate supervisors on issues regarding customer complaints and preferences, and
Helping in designing strategies to address customer issues particularly complaints and customer preferences.
In a functional organization, work should be delegated to different departments in order to reduce confusion and ensure that work efficiency is maintained. This forms the essence of organizational departmentalization. Therefore, the most appropriate form of departmentalization suitable for Starbucks is product-service departmentalization.
Under this form of sub-dividing work into respective departments, different products or services are assigned to specific departments and personnel. As a result, products or services with unique demands and customer preferences are given the maximum attention (Robins & Coulter, 1999).
Product-service departmentalization is very important for Starbucks considering the range of products the company offers including different brands of coffees such as coffee mocha, espresso, and cappuccino among others. The wide product range is coupled with unique customer services such as interior designs, which encourage different customer behaviors and conduct (Reilly, Minnick, & Baack, 2011).
Besides, Starbucks’ cafes are located in different areas, and thus it is difficult to adopt other forms of departmentalization. Hence, in order for the products and services offered by Starbucks to grow and prosper relative to customer needs and preferences, there is the need to give more attention to each product or service independently.
As for stores offering food products and lunch, it is imperative for such stores to adopt the same form of departmentalization. As noted in the above discussions, unique products and services require more attention in order to maintain growth and prosperity among customers.
It is also to be expected that stores offering food products and lunch have a variety of products and services some of which are universal while others are unique in many aspects.
Therefore, it is important to organize such stores into product-specific departments to ensure timely response to customer needs and preferences (Robins & Coulter, 1999).
From the look of things, it is apparent that Starbucks’ Howard Schultz has been practicing a centralized or bureaucratic system of organizational management. With the vast number of Starbucks’ coffee joints, it is no doubt that a bureaucratic organization will face many challenges.
The situation can also worsen when a manager/CEO concentrates on business expansion while overlooking other market dynamics such as business competition. Therefore, when an organization begins to experience financial problems of the kind experienced by Starbucks, it is important for the top management to encourage decentralization of power and decision-making processes within the organization.
The beauty of such a system is that the top management makes enough time to concentrate on formulating strategies while delegating the day-to-day operations and other decision-making responsibilities to their juniors (Robins & Coulter, 1999). Accordingly, with decentralization, there is rapid responsiveness to customer needs and preferences, employee motivation, and cultivation of new businesses processes.
As noted earlier, Starbucks can be regarded to as a bureaucratic organization in which business processes, techniques, and regulations are systematically defined and handed down the management line.
However, due to the inherent disadvantages associated with such an organizational structure, there is the need for Starbucks to modify its organization to include flat structures, downsizing, and outsourcing. By reducing the number of layers through which information travels from the baristas to the CEO, workers are given the opportunity to report directly to the top management.
This is the essence of flat organizational structures. Coupled with downsizing which in essence refers to cutting down on low-value activities, a flat structure will enable Starbucks’ top management to respond to customer needs and preferences by getting first-hand information from its personnel on the ground (Robins & Coulter, 1999).
Furthermore, considering that Starbucks has embarked on increased business expansion over the years, there is the need to outsource the services of other organizations to try and reduce the number of its operational assets and employees if necessary. The idea behind outsourcing is that the company will be able to identify certain tasks where its employees and business processes perform best and maintain them while delegating other tasks to organizations with the relevant expertise and personnel.
For instance, Starbucks can adopt ‘home-shoring’ whereby workers are encouraged to help with customer service from the comfort of their homes. Overall, Starbucks stands a better chance of getting back to its previous status through initiating the right business strategies and processes.
References
Reilly, M., Minnick, C., & Baack, D. (2011). The five functions of effective management. San Diego, CA: Bridgepoint Education.
Robins, S.P., & Coulter, M. (1999). Management. Upper Saddle River, NJ: Prentice Hall.
In contemporary business arena, companies are engaging in corporate social responsibilities activities in the effort to increase their market base and create good relationship with customers. Corporate social responsibility (CSR) involves activities that a company engages in for the direct benefit of the community. Despite the focus being on community welfare, CSRs have an indirect benefit to the company especially in sales, brand creation, and marketing. This paper discusses the structure of Starbucks corporate social responsibility program.
Brief History of the company
Starbucks is world’s number one coffee and coffeehouse company; the company has embraced the spirit of corporate social responsibilities in its business. It is situated in 55 countries; the first branch was opened by Jerry Baldwin, Zev Siegl, and Gordon Bowker on March 30, 1971 (Starbucks Corporate website). Starbucks Company has over 666 stores distributed across Europe. The branches have been developed through buyouts and franchising.
Though the branches are operated and managed differently they have a similar code of conduct that they must uphold always (Starbucks Corporate website).
Corporate social responsibilities undertaken by the company
As a matter of social corporate responsibilities, the company has a number of charity programs which it finances they are; Water conservation financing, this is done through Ethos® Water policy where when somebody purchases the brand then 5 cent goes to the project.
The company is engaged in youth programs aimed at training youth on entrepreneurial strategies. In 2009 a total of $2.1 million was used to finance 71 grants. The company has also entered into Bono’s (RED) For Charity where it donates money to assist those suffering from HIV.
The company has a system called Shared Plane, where it aims at doing business in a way that is friendly to the environment. The system involves the producers and local community to adopt ethical production method which does not pollute the environment. The company has embarked on recycling of its waste products up to 70%. The move is to ensure that there are minimal disposal to the environment.
The company uses large amounts of water in its productions, however in a move to conserve water; it recycles over 70% of its waste water. In the effort to reduce green house emission, the company has embarked on massive energy efficient methods. This involves the use of electricity to roast coffee beans in place of charcoal (Starbucks Corporation).
Methods and strategy of Starbucks CSRs
The approach taken by Starbucks to manage its corporate social responsibility involves analysing the prevailing situation in the world and coming up with the right intervention. The strategy aims at developing long lasting policies that the community can benefit from even after the withdrawal of the company.
Other projects are aimed at promoting peace among community for better community of communities. The company has one of the world’s respected supply chain system which address corporate social responsibilities from a wider approach, according to the system, the company only buys from farmers who have produced their coffee beans in an environmentally friendly manner.
Starbucks corporate social responsibilities can be ranked among the best in the world; they not only address current issues facing a community but also ensure that the systems they have developed will be sustained for long periods.
Although there are some companies that seems to be doing better than the company, credit should be given on the efforts and programs that the company has engaged in. The company’s sales and marketing team collaborates with the corporate social responsibilities to come up with the right programs for the company.
Corporate social responsibilities programs aims at creating a healthy relationship with customers, it is among the strong points that the company considers in its customer relation management programs. In the event of an in eventuality, the company has set some funds to address such issues with the seriousness they require.
Global issue that Starbucks has not engaged in yet
Although efforts made by the company can be applauded, the company has limited its focus in developed worlds and have played minimal stake in developing countries. One problem facing the developing countries is poverty; there are no programs that aim at reducing or eradicating poverty in developing countries. Some companies which are doing better than the company, for example Toyota Corporation, have micro-financing programs in developing countries as efforts to eradicate poverty in the areas.
The main reason that the company should focus in developing countries is because the nations are potential markets in the future. Developing countries have the potential to industrialize if only they can be given some financial and ideas boosts, the Starbucks has the potential of nurturing developing countries potential.
Works Cited
Starbucks Corporation Official Wesite. Starbucks Corporation. Web.
Starbucks is a company that is well known for the importation of the best coffee from all over the world. Currently, Starbucks operates in 48 countries with 16,000 stores (Starbucks Corporation, 2011).
History of corporate responsibility in Starbucks
According to Starbucks Coffee Company (2002), Starbucks engages in corporate responsibility at organizational and retail level and environmental matters are included in the company’s mission statement.
Changing climate
Global warming
Global warming and climate change have been of great importance to Starbucks since these affect the long term sustainability of the production of coffee (Starbucks Corporation, 2011).
Unusual occurrences of natural disasters
Since natural disasters occur unexpectedly, Starbucks strives to carry out CSR in environmental issues so as to attempt to reduce the occurrence of natural disasters which occur as a result of preventable causes.
Farmers and food products suffering
In 2001, the prices of coffee dropped $0.48/lb which was the lowest price recorded over the previous 30 years (Starbucks Coffee Company, 2002). Price drops affect coffee growers the most especially farmers who own small farms which are owned by their families.
Audit of human impact on our environment
CSR enables the corporate world to take note of environmental effects of human activities. Starbucks identified that they can keep track of the effects of their production, manufacturing and distribution activities through a well designed CSR program.
Consequently also audits companies and includes their impact on environment
Since it is not only the activities of Starbucks that leads to environmental degradation, the company also carries out audits for other organizations. Their CSR operations include CSR consultancy services which are offered to other companies.
Consumer Reaction
More prone to buy energy efficient goods
Because of climatic changes and effects such as global warming, consumers became more cautious of the products which they bought. Starbucks has invested in green housing and energy and water conservation strategies which they apply at store level.
Willing to spend more on organic food
Consumers have also become more likely to buy organic foods because there are increased cases of diseases such as cancer, high blood pressure, liver problems and obesity which are associated with lack of healthy diets. Starbucks hence seeks to make their coffee as natural as possible through the green initiatives.
Consumers going for environment and socially responsible companies
Consumers have become willing to buy products from companies which are involved in environmentally friendly operations due to anti-globalization protests that emerged (Heal, 2008). This also steered Starbucks to venture into CSR consultancy business.
Government fines and public condemnation towards socially irresponsible companies
To avoid government fines and public condemnation, Starbucks had to take action in regard to their operations since coffee production was associated with deforestation, use of pesticides and waste products from paper production.
Benefits to implementing stronger “green initiatives”
Profit
Regaining lost environmentalist customers
Customers who were previously lost due to concerns about the company being involved in globalization and unethical business practices will also be regained as a result of the deep involvement of Starbucks in green initiatives and the improved PR (Wehr, 2011).
Edge over competition
Since the company is more involved in CSR and environmental conservation than other companies, it stands a better chance of developing presence in areas that are urban or remote.
Investor confidence
The green initiatives ensure that coffee supply for the company’s operations will be sustainable in the long term. This information convinces the general public to invest in Starbucks without having to worry about negative social repercussions.
References
Heal, G. M. (2008). When principles pay: corporate social responsibility and the bottom line. New York: Columbia Business School Pub
Starbucks is world’s number one coffee and coffeehouse company; Jerry Baldwin, Zev Siegl, and Gordon Bowker founded it on March 30, 1971. The company’s first branch was at Seattle, Washington; currently it has outlets in more than 55 countries (Starbucks Corporate website). The company has one of the most respected and effective supply chain-management systems. This paper discusses the supply chain network adopted by Starbucks.
What methods do they use?
The company has an internal robust supply and logistic department that has the role of pioneering all supply demands in the company. In other countries, where it gets it coffee, the company has collection points that it can get coffee beans in raw and roasted form.
The system aims at ensuring the company gets adequate supply of coffee and other material used in production at the right time, at an appropriate cost and quality. The company buys raw materials from the United States where it has its head quarters, but it has diversified its team to coffee producing countries like in the East African countries where quality coffee is grown.
To maintain good relations with suppliers, the company has a favorable buying price and bases the buying on the quality and the production method as adopted by the farmer. In countries like Ethiopia and Kenya, the company has implemented farmer’s education programs with the aim of facilitation the production of environmentally friendly coffees.
Quality and efficiency in delivery of coffee beans and other material in the company has the main concern in the system.
The company supply chain has the following goals:
Quantity goals: Adequate supply of materials in a company when they are needed
Supply of quality materials for various purposes in a business at all times (quality objective)
Supply of materials at a competitive price (price objective) (Simchi-Levi, Kaminsky and Simchi-levi 12-23)
What is their system for evaluating the program in terms of quality, social responsibility, and success factors?
The initial approach that the company has to ensure it gets quality is to procure for the commodity from those countries that are known for their quality coffee, they include countries like Kenya, United States, Brazil and Ethiopia. After having the appropriate channels to get the commodity, they then have to vet for its quality.
When supplies are made, they have to be graded as a measure of determining the quality they have. The higher the grade the higher the cost of the commodity, in large consignments, after every fifty bags, the one must be opened and contents verified.
As a matter of social corporate responsibility, Starbucks operates a fair trade policy in areas that it collects coffee; it is involved in projects like road maintenance and education systems. In the hunger of protecting the environment, the company has started training centers for farmers on how they should farm without polluting the environment, to support environmental conservation further, the company pays a higher premium for coffee produced with minimal use of chemicals.
The following are the critical success factor of the company:
Offer quality services and products
Increase the welfare of stakeholders (stakeholders include suppliers)
Conserve the environment
Attain and maintain customer loyalty
Respect for the people and teamwork (Starbucks Corporate website).
Works Cited
Simchi-Levi, David., Kaminsky Phillips, and Simchi-levi, Edith. Designing and Managing the Supply Chain. New York: Mcgraw Hill, 2003. Print
Being a lead coffee retailer with over a billion customers and an annual growth rate of six percent, Starbucks coffee company had to exploit lots of opportunities, hence, enabling it to witness that kind of growth over the past years. Expanding its horizons into more and more countries outside the United States, the company has been able to broaden its customer base plunging into countries like India and Japan which have witnessed a substantial growth in the rate of coffee consumption (Pride and Ferrell 2010).
The realization of this level of success did not come easy since it required a very accurate autopsy of the prevailing conditions and consequences. This fact, hence, brought procedure to ensure that human errors of judgment would be limited as much as possible to light.
Evaluation, hence, came in quite handy so as to enhance the accuracy with which inferences on the subject matter were made. Starbucks acquisition and even collaboration with other companies like the Maxim’s Caterer by majorly depended on the inferences arrived at as a result of serious evaluation . Infrastructural developments including marketing chains, supplier chains and the physical operation of stores necessitated the carrying out of a lot of research.
When the firm opened its retail branch at the China world trade centre in Beijing witch adopted a strict resemblance to the Chinese culture, for instance, the store was still able to attract many customers despite the fact that it was decorated in an American way and offered internationally acclaimed trademark coffee brands (Wheelen and Hunger 2010).
After identifying appropriate strategies which would enhance the company’s success, its main battle would be how to implement them. The company’s improvement of its stake to fifty percent in a joint venture in Shanghai, for instance, opened an opportunity for it to fully own and operate a store outside the United States for the first time in two years (464).
Despite the opposition which was received from the Chinese residents who were opposed to the introduction of western coffee chains, continued persistence and implementation of various techniques saw the company turn tables to become the most preferred coffee retailer in China deriving approximately ten percent of its total revenue from China (Pride and Ferrell 2010).
Starbucks also implemented stringent measures to keep competitors at bay so as to enable it cut a niche for itself as a powerhouse in the coffee business. These measures worked to their advantage since a reasonably steady growth rate was witnessed during this period.
In order to achieve success in any business environment, it is important that effective management and control are put in place. Since Starbucks had no option but to join hands with other firms when it first plunged into markets outside the United States, effective control was deemed necessary.
Control created an atmosphere that allowed other stake holders the autonomy to actively engage in the running of the partnerships and, hence, encouraging profit maximization (Wheelen and Hunger 2010).
Since the acquired companies did not share the same work ethics with the Midwestern culture, effective control also enabled the westward leaning managers to cultivate these ethical values in their employees so as to encourage cooperation and enhance team spirit. These two elements would, hence, come in handy in boosting the firm’s performance.
In conclusion, it is, hence, logical to attest to the fact that the application of these three important elements in Starbucks coffee stores’ operations outside the United States largely contributed to their success.
Works Cited
Pride, William M., and Will Ferrell. Marketing. Mason: Cengage Learning Inc, 2010. Print.
Wheelen, Thomas L., and David J. Hunger. Strategic Management and Business Policy toward global sustainability. Boston: Pearson Education Inc, 2010. Print.
Starbucks is one of the well-known coffee house chains. The company is represented in many countries of the world. The brand of Starbucks has gained the popularity among people of different ages and represents one of the notable examples in the history of marketing and management.
The aim of this essay is to describe the macro-environment of the firm and to analyze the uniqueness of Starbucks.
Macro-environment
The firm operates at the three levels of the environment: macro, micro, and the internal level. Each of them exposes the company to various risks as well as provides the opportunities for growth. The macro environment is the level, which determines the long-term perspectives of the company (The marketing environment n.d.).
The macro-environment consists of seven major elements including the demographics, economy, political factors, legislation, socio-cultural factors, ecological and geographical factors, and technology (Marketing assignment help n.d.). For example, the technology plays a crucial role in the long-term success of Apple.
The innovative activity is the important part of its business. The development and launch of iPhones and iPads have been accomplished due to the hard work of the R&D team of the company and its substantial financing (Apple n.d.). Besides, the economic situation determines the performance of the company, to the large extent. In the years of the economic downturn, the consumers tend to be less willing to pay the significant price for the new models of iPhone or for other Apple’s products.
Starbucks brand uniqueness
The innovative forward looking marketing strategy was the primary determinant of the Starbucks brand uniqueness (What makes Starbucks 2012). “Unlike other companies, Starbucks has stayed away from promoting itself through ads in a billboard, newspaper, ad space or a poster.
It has relied on the dictum “Real Simple is Real Effective”” (What makes Starbucks 2012, n.pag.). Starbucks’ marketing strategy was focused on the product quality, customer satisfaction, innovation, “word-of-month” advertising, viral marketing techniques, strategic partnerships, and social responsibility (What makes Starbucks 2012).
However, the company has faced serious problems recently. The management has decided to close a substantial number of the stores. The analysts claim that the overexpansion has led the company to the loss of its uniqueness (Malhotra 2008). The consumers claim that the Starbucks’ stores lack the warm atmosphere and seem to be too much sterile and uncomfortable (Malhorta 2008).
VRIO resources in Starbucks’ strategy
“VRIO analysis of Starbucks’ value chain indicates that the firm has core competencies in the areas of human resources management, marketing, and operating retail locations” (Gates et al. n.d., p.3).
In the context of VRIO analysis, the company gained the competitive advantages from the corporate culture, its brand reflecting people’s lifestyle and values, sales and retail locations, procurement, and the firm infrastructure (Gates et al. n.d.).
Conclusion
In order to sum up all above mentioned, it should be said that Starbucks has been a leading coffee house chain for decades. The macro-environment creates the threats and opportunities for the business. In order to survive, the company needs to have a well-defined strategy.
The success of Starbucks can be explained by the uniqueness of its brand and the innovative marketing strategy. However, the performance of the firm deteriorates from year to year. The specialists claim that Starbucks losses its uniqueness due to its overexpansion. VRIO resources contribute to the competitiveness of the firm.
References
Apple. CNNMoney. Web.
Gates, R., Hogan, M., McCarty, L., Ramachandran, A., & Reed, T. Starbucks Coffee: Strategy Analysis MGMT 526. Web.
Malhorta, H. B. (2008). Starbucks: victim of its own success? The Epoch Times. Web.
The following review is an analysis of Great Cups Coffee Co. (GC3) with Starbucks. The present report provides a detailed analysis of the competitive analysis of Starbucks and GC3 . The first part of the report will deal with the web analytics of Starbucks and show how the competitor is successful or unsuccessful in making its online presence work.
Figure 1 shows that there is a great deal of traffic in the website. Daily page viewers actually provide the percentage of internet users worldwide are viewing Starbucks’ website. The figure shows data for the last 6 months. The data demonstrates that there is a decline in the number of visits to the website and it follows a cyclical pattern.
Visits are more from mid-October to mid-November. The traffic to the website has been high from December through January. However, for the months of August through early October traffic has been low. Web analytics tools show that in the past one month, page views for GC3 have increased by 3% while that of Starbucks has declined by 7.5%. for three months period, GC3 has seen an increase of 180% viewership while Starbucks faced only an increase of 30% viewership.
Figure 1: Website Traffic for Starbucks.
Figure 2: Page views for GC3.
Page views
Change
1 month
0.000012
+3%
3 month
0.000011
+180%
Figure 3: Top Queries from Search Traffic at GC3 and Starbucks.
GC3
Starbucks
Query
Percent of Search Traffic
Query
Percent of Search Traffic
1
keurig
17.85%
starbucks
38.38%
2
k cups
10.32%
coffee
2.30%
3
k-cups
3.17%
starbucks locations
2.16%
4
k cup
2.55%
starbucks menu
1.58%
5
great coffee
2.47%
starbucks nutrition
1.17%
6
k cups cheap
2.36%
company
1.14%
7
kcups
1.33%
starbucks coffee
0.84%
8
kuerig
1.24%
starbuck
0.83%
9
keurig k cups
1.08%
starbucks card
0.73%
10
buy coffee beans online
1.03%
starbucks.com
0.69%
On comparing, the search queries for the GC3 and Starbucks are provided in figure 3. The table demonstrates that the top searches related for Starbucks is the brand itself while that for GC3 is Keurig. GC3 seem to have to favourite search items are Keurig and K-cups.
A comparative analysis of Starbucks and GC3 based on demographics of viewers and the analysis shows that the age of the viewers to GC3 are less compared to the total number of 18-24 year olds on the Internet. On the other hand, the number of 18-24 year olds is just marginally low for Starbucks. Most of the people surfing GC3 website belongs to the age group of 35 to 64 years while that for Starbucks is 25 to 34 years.
In terms of education, the viewers of Starbucks page are usually been to College while for GC3 the viewers did not attend college or have been to some college. Mostly females surf the Starbucks website while that for GC3 cannot be specifically stated. GC3 is surfed by viewers who mostly have children while Starbucks website is surfed by those who do not have children. GC3 website is surfed mostly from home while Starbucks website from work.
There is a distinct difference in the income group of the viewers visiting GC3 and Starbucks. The former has viewers who mostly belong to the income group of $30,000 to $60,000 and above $100,000. While that for Starbucks is $60,000 to $100,000 and above $100,000. This difference indicates that mostly people with high-income groups surf the Starbucks website.
In both the websites, the maximum viewers are Caucasians. Further, in terms of geographic coverage, Starbucks is viewed in 10 countries including Asian and European countries while that of GC3 is viewed only in the United States. This can be viewed from the data derived from Google Analytics data as shown in figure 4, 5, 6, and 7.
Figure 8 shows that the visitors the main interest areas shown by visitors on the website content. Mostly the viewers viewed information of coffee and tea, non-alcoholic beverage and loyalty card programs. From this it can be observed that the two strong areas of the marketing strategy of Starbucks is focus on the core product that is coffee and tea and providing customer loyalty programs that helps customers to get discounts or gifts and the company retain its existing customer.
Figure 9 shows that traffic in the websites is largely different. Traffic is much higher in Starbucks mainly due its greater franchise and larger marketing apparatus.
Starbucks has traffic of 1.2 million while that of GC3 is a meagre 63 thousand. Unique users for Starbucks are 470 thousands while that for GC3 is 22 thousand. Further, it can be said that Starbucks has greater presence worldwide while GC3 concentrates only on the US market. 97.8 percent of the viewership of GC3 is from the United States .
Figure 9: Traffic comparison between GC3 and Starbucks.
Starbucks
GC3
Unique visitors (estimated cookies)
1.2M
63K
Unique visitors (users)
470K
22K
Reach
0.00%
0.00%
Page views
6.1M
320K
Total visits
1.1M
53K
Avg. visits per cookie
0.88
0.85
Avg. time on site
6:00
8:00
A few strong marketing strategies that Starbucks has taken are as follows:
Starbucks has a strong franchise network that helps it attain a greater penetration into the world market. Starbucks has gained presence in countries like China, France and Canada that GC3 has not. Therefore, it has greater market presence due to its geographical expanse.
Starbucks concentrates on selling coffee and tea but has adopted customer retention strategies such as customer loyalty program that has gained a viewership of 11.3 times affinity to be clicked on its website according to Google Analytics. Loyalty of the customers especially on the Internet is vital to increase sales and gains positive word-of mouth promotion .
From the above analysis, it can be said that GC3 has a very low presence and traffic to the company website is very low. When compared to the traffic of Starbucks, it was insignificant.
Further, Starbucks has employed innovative ideas for marketing such as customer loyalty and expanding geographically while GC3 has concentrated solely on the American market. Further, the demographic targeting of GC3 is also constricted to a single age group and income group while Starbucks catered to the taste of large demographics. Therefore, GC3 should try to increase its brand building exercise and increase its geographical expanse.
Schafer, J. B., Konstan, J., & Riedi, J. (1999). Recommender systems in e-commerce. EC ’99 Proceedings of the 1st ACM conference on Electronic commerce. New York: ACM.
This report will put in place an operational strategy for the turnaround of the Starbucks Australia segment after a widespread closure of stores. The report analyses the competitive environment of the company and come up with the possible solutions to the problems of Starbucks Australia.
The report will also address the long term survival strategy for the Starbucks Australia so as to meet it meet its global market leadership and great customer experience targets. All the proposed solutions in this report will be in line with overall global management strategy for Starbucks Corporation.
Global Coffee Industry
The global coffee industry has been experiencing crisis of low coffee prices and generally low profitability in the whole value chain. This has led to coffee farmers mostly small scale entrepreneurs in central and South America to incur losses yet they are supposed to be breaking-even.
The evident lesser process of coffee were as a result of high supply of coffee in the market. With this excess supply, quality of the green coffee went down. This not only posed problems to the producers but also industry players including Starbucks Corporation which is a global leader.
With cheap and low quality coffee in the market, competitors of Starbucks capitalized on this so that in the long run there were low sales on Starbucks stores. Several challenges also accompanied this internal coffee crisis; consumers felt that they had less significant benefits in the whole coffee value chain. This structural problem needed the whole industry players to put together an industry strategy to check on the glut and increased quantity of defective coffee in the market.
Starbucks Growth strategies
Starbucks being the worlds’ premier roaster and retailer of coffee has had a long term strategy of being the global leader in the coffee industry. The company’s’ growth strategy has enabled the company to spread to over 50 countries as indicated in their 2009 financial report.
The company has achieved this position as a global leader and respected coffee brands through their good business plan of the store level efficiency, being innovative in their products, strategic channels of distribution, great customer experience in the retail stores and building of strategic linkages through licensing of different stores and joint ventures.
Starbucks corporation actually appreciated the strategic management strategies for increasing the shareholders value though, like any other multinational it has experienced different challenges in several locations which in the past has even worsen to an extend of downsizing by closure of several stores both in the US and international markets including Australia.
Downsizing in a corporation is a strategic move usually designed to add value to the shareholders in the long run but mostly viewed by the customers and the other industry players as failure of an institution. With the aggressive global expansion strategy and the concept of market blanketing, Starbucks was bound to meet different challenges as much as it gained in other geographical locations.
Challenges facing Starbucks globally
Global expansion on its owned posed challenges relating to the political and legal factors, economic trends in different states, competition from local firms, consumer preferences, technological challenges and social-cultural issues. Starbucks like any other commercial corporation also do have an overriding goal of adding stockholders value through remaining profitable. This brings the strategic decision making accuracy into focus.
All strategic decisions are arrived at after a rigorous process of evaluation of internal and external environment with all strengths and weaknesses having been taken into consideration. The company strategy is mainly to take advantage of its strengths and be cautious on its weaknesses hence it usually draws a road map unto the company’s future position.
Starbuck in their strategic endeavor of being a global leader in the roasted coffee market has faced lots of challenges especially in being compliant to different political and legal environments. This is a challenge which has been achieved through their concept of strategic alliances through joint ventures and licensing of various global distributors.
The Starbucks concept of serving high quality coffee products has given the company the image of serving the economically stable members of the society. This means that with high quality at stake, the company will lock themselves out of mass market where all products are served.
The economic abilities of different countries has made Starbucks to be limited by the economic situations in different locations since some in some countries like in developing nations spending $5 on a cup of coffee is impossible. This has limited their growth strategy.
Different social-cultural background globally has been a challenge Starbucks has been facing. Different cultures have their favorite foods and drinks this puts Starbucks coffee including their concept of great store experience face a challenge of irrelevance and resistance.
Starbucks challenges in Australia
Starbucks Australia is one of the leading global segments. The Australian Starbucks has experience lots of challenges which lead to a closure of several retails stores. An analysis of the cause of the closures revealed several challenges regarding the locations of the different stores, unprofitability and low demand among other reasons. The following are some of the critical challenges facing Starbucks Australia;
Poor marketing
The Starbucks Australia did not do a lot of commercials and expected to ride on their fame on the US markets consequently leaving this critical business responsibility. Selling the high quality aspect of their coffee could have been very easy but forgoing such important strategic responsibility was a failure on the segments management.
Without aggressive marketing apart from the branding aspect, Starbucks just left the market to their competitors including Gloria coffee, Melbourne and Espresso. Also poor location of Starbucks stores contributed to their poor marking strategy. Most stores were located in non strategic areas with low number of potential customers. This is another factor which greatly contributed to the unprofitability of this stores hence had to be closed.
Employee Motivation
Starbucks Corporation worldwide had been known to be one of the good employers but the Australian segment has issues with poor staff remunerations consequently experiencing a less motivated workforce.
Maintaining a highly skilled human resource gives a competitive edge to an institution. With a scenario of having expatriates’ performing an initial local operational market penetration strategy without prior market experience in Australia while the local management is later employed with low pay, the company is bound to face lots staff turnover.
Pricing policy
The Starbucks pricing policy should have been restructured to suite Australian market. The Starbucks prices of the different coffee products were perceived too high and products were only purchased for leisure treat and not as a necessity drink. The pricing concept should have been made even very local backed up by an aggressive marketing.
Coffee products
The Starbucks products were perceived as international and this gave the local market an illusion that the products were not theirs hence unnecessary. Starbucks though with a very nice corporate social responsibility did not build attachment with the local community.
Rapid expansion
With expansion as their corporate strategy Starbuck Australia should have had a localized approach which would have allowed for a market testing. It was not necessary for more than fifty stores to be closed yet the local management should have known that a particular number of stores could have been optimum for the Australian market. Uncontrolled expansion always can cause erosion of the shareholders funds which makes the overall objective of expansion a futile exercise.
Recommended strategy for Australia
The Starbucks Australia’s challenges are all strategic management problems with little business policy problems. Strategic managements entails decisions which are unstructured and affecting the going concern aspects of the business entity (Choo, 2002). It is the role of the top management to make decision after assessing their internal environment and also the external environment which is usually to some extent very unpredictable.
According to Harley (2004) strategic management decisions for global corporations will always aim at maximizing the profitability consequently the shareholders value. These decisions will always include expansions and where necessary downsizing of operations.
Starbucks Australia segment would scale up its operations again if proper marketing, strategic alliances, proper analysis of the industrial and general environment for the corporation is done Australia. The following proposed solutions based on porters’ competitive forces model would most likely work for Starbucks Australia.
Marketing
For the case of Starbucks Australia, it is a common fact that Starbucks marketing concept of blanketing a location did not work for the Australian segment showing that some unique Australian marketing is required. The blanketing marketing idea has been the key to market penetration by Starbuck especially in the US market but it is always good to appreciate that different environments require different solutions.
For the Australian segment it will be a nice idea if Starbuck will give it a try to the concept of commercial advertising since most of its competitors have been doing the same. Australian awareness of the Starbucks products should be increased through a more effective promotion, advertising and marketing.
Marketing through networking and customer experiences will only be supportive for the case of Australian segment unlike the US segment. Starbuck marketing should be as creative as ever, localizing its brand does not necessary mean losing the original brand concept. Even a localized packaging concept should be able to allow them a market penetration opportunity.
Strategic Alliances
Starbucks has been entering into strategic alliances in other countries. For the case of Australia, it will be much strategic to do the same. There are a lot of local coffee stores and firms which Starbuck can make a joint venture offer or a takeover bid where necessary. This will make the competitors strategic partners of Starbucks.
Trading under a locally registered wholly owned subsidiary for Starbuck not only can allow a local attachment and market but it also spreads the business risks for the corporation. With the culture of Australian having more attachments to their own cultures, foods and enterprises coupled with the human tendencies of ‘appreciating their own’, it will be necessary that Starbucks should have any form of strategic alliance with a local firm.
Financial Aspects
Most of Starbucks stores closed in Australia have not been able to break-even in the business showing that costs management might also have contributed to the loss making scenario. Starbucks Australia should also have a management change so as to align the financial management and cost control with the corporate Strategy of expansion.
The financial management aspect will enable Starbucks Australia an opportunity to develop a product mix that will allow the company experience increased sales with a low cost production.
Financial management Strategy is always underlying every corporate strategy hence for an efficient and successful project implementation, it necessary to ensure that the company’s financial management strategy and team is in place (Vernon, 2008). This team should have the relevant capacity and experience in the market segment where the project will be implemented.
Industry environment
This is the environment under which Starbucks Corporation operates globally and even locally in Australia. This environment will constitute; suppliers, competitors, substitute products and new entrants. Porters’ competitive forces model is founded on the view of the firm within its industrial environment.
Competitive forces faced by firms include; supplier bargaining power, customer bargaining power, substitute’s threats, and fresh entrants threats (Mellahi, 2000). Starbucks Australia has faces almost all of these competitive forces in their Australian market hence necessary actions are required to counter. With these forces resulting in the downsizing of Starbucks Australia’s Segment, the following remedial actions will be necessary;
Bargaining power of suppliers
Starbucks supply chain globally is well established and efficient. Failure to for a corporation like Starbuck to maintain on its quality standards and fair pricing of its coffee will allow competitors an upper hand in the market. Starbucks Australia should consider an option for local suppliers so as to reduce on their costs of importing from the US.
It will be much cheaper if Starbucks can be strategic and negotiate with a local coffee supplier for branding in Australia. It should also used technology to build a value chain relationship with local suppliers. This will give an upper hand in the competition and can even play a role as a major distributor other than retailing after all its major objective is profitability. With the global presence of Starbuck, building proper linkages with supplier can in fact give them strategic advantage in the coffee business. Since the retail business has faced enough challenges, Starbuck should give it a try to compete at the distribution line, a higher level competition.
Bargaining power of customers
Customers are very critical for the success of any corporate business. They are the greatest test of products quality. With no grouping of customers to fight for their interest, they will only express themselves in terms of low and high demand (Slack, 2009). If the customers demand for a product is high it indicates high quality and a very fair price.
For the low demand of Starbucks products the pricing and preferences qualities have been the most contributing factors. Starbucks should therefore head the customers’ feedback and try to meet their needs hence they got no business being in the market.
Substitutes and other products
Substitute products in the Starbucks Australia segment posed a major threat to the Starbucks brand in Australia. Even though known to be an international brand with high quality, Starbucks products couldn’t compete effectively to beat Gloria and Melbourne coffee brand.
It is now necessary that Starbucks if it still requires regaining the Australian market should engage in an innovative product differentiation exercise. It should be able to penetrate the market with wide ranging products in varying prices. This product mix should be able to cover the whole market clusters from the low income to the high end market. Substitutes of Starbucks products mainly tea and cocoa are not their main threat but their impact should only be checked through rigorous marketing and promotions.
Competitors’ actions
With the entrance of Starbucks in to the Australian market, its competitors definitely didn’t like it. The competition for customers has gone up and to some extend Starbucks is giving in some market share to its competitors. Starbucks has faced a serious price challenge where it has been perceived as dealing with overpriced products.
Though this branding is relevant to the high end market usually other potential customers would be denied a chance to be part of the clientele. Starbucks should be able to practice price and product differentiation or develop innovative products to fit to the low end market. It is necessary that Starbucks should develop products that are low cost that are able to compete effectively in the local market.
These products should have an image of being locally processed products and it should actually have an Australian concept in its processing. With the local sourcing of inputs and low cost local concept products by a local brand or firm, I do believe that Starbucks will successfully beat competition in Australia and definitely achieve its global expansion strategy
With the firm grip on the worldwide industry, Starbucks should be able to be much profitable and competitors will not benefit from the economies of scale. The Gloria jean coffee, Espresso and local Melbourne coffee will be local and small scale but they are taking a share of the coffee market in Australia consequently Starbucks should be careful of their actions. Starbucks policy on great customer experience should be used in this market so as to retain customers.
New entrants
The coffee industry is very competitive and lucrative therefore new investors into the industry are bound to get in. Starbucks Australia needs to be maintaining their market share and profitability. In order for this threat to be countered, Starbucks should therefore maintain high level customer retention and high quality products.
General Environment
This is an environment which is outside the industry. This will include the Political, population, social, global and economic environment. Starbuck Australia is affected by the Australian government corporate tax rates and other regulations but the major challenge of the institution has not been political.
Starbucks Australia should take advantage of the high percentage of the young population since most coffee consumers are the youth. The demographic spread initially did not favor the initial locations of the Starbucks stores therefore various stores had to be closed due to low population in their customer catchment area. Population spread therefore is a necessary consideration in the location establishment of the Australian Starbucks stores.
The social tie between the Starbucks products and the local community is a necessary. This is because the Australians perception of Starbucks as a foreign coffee brand should be curtailed so as to improve on their demand. The economic environment is one challenge that usually poses threat to demand of industrial products but for our case this challenge is not the cause of Starbucks Australia’s problems.
Conclusion
Starbucks Corporation Australia has downsized because of a wrong market penetration strategy coupled with operational inefficiencies. With a clear global corporate strategy of being the market leader, store level operational efficiency and great customer experience which could not work for Starbucks Australia.
This calls for a more localized operational strategy which will include effective marketing and promotion plans, proper financial management strategy, product differentiation and necessary supply chain management.
Global strategy needs leverage on cutting edge technology, compliance to the regulatory authorities and employee welfare among other issues so as to have successful execution. Starbucks Australia can turn around and this turn around need not be based on blanketing marketing strategy but a relevant Australian segment operational strategy.
References
Choo, W., & Bontis, N., 2002. The Strategic Management of Intellectual Capital And Organizational Knowledge. 1st ed. London: Oxford University Press.
Harley, W., 2004. Global strategic management. 1st ed. Texas: Wiley.
Mellahi, K., 2000. Strategic management: an introduction to business and corporate strategy. 2nd ed. New York: Pearson Education.
Slack, N., 2009. Operations and process management: principles and practice for strategic impact. 2nd ed. California: Prentice Hall.
Vernon, H., 2008. Global strategic management: the essentials. 2nd ed. Texas: Wiley.