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Starbuck’s Business-Level Strategy

Essay by   •  June 22, 2017  •  Case Study  •  679 Words (3 Pages)  •  5,274 Views

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Starbuck’s business-level strategy is the differentiation strategy. According to the textbook, pg. 122, differentiation strategy is “an integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.” Starbucks mission statement is “To inspire and nurture the human spirit – one person, one cup and ne neighborhood at a time. Starbucks values are with the assists of our partners, our coffee, and our customers at our core. Starbucks live these values: creating a culture of warmth and belonging, and where everyone is welcome; acting with courage, challenging the status quo, and finding new ways to grow our company and each other. Starbucks also values being present, connecting with transparency, dignity, and respect; and delivering our very best in all we do, holding ourselves accountable for results. Starbucks is performance driven, through the lens of humanity.

Starbucks holds around 33% of the market that sells coffee in the U.S. Starbucks has a large well- defined market segmentation. Almost 49% of Starbucks business is from its primary target age group of men and women between 25 to 40. Starbucks believes the hip, contemporary design, and consistent working on keeping its product current and fresh keeps this age group satisfied and returning. This target audience grows 3% annually. The young adults ages 18-24 make 40% of Starbucks sales. Starbucks believes placing its stores on or near college campuses has helped its appeal with this age group. College students can hang out, write papers, study, or in general just meet other students. The young adults group is growing at a 4.6% annually. The age group 13-17 is just about 2% of Starbucks sales. Most items for kids are purchased by their parents. Starbucks tends to not carter directly to kids to avoid high criticism about high calories and caffeine content in some of its drinks.

Starbucks plan of position in theses economic times for the five forces model of competition. First, the only threat of substitution to the coffee industry is caffeinated soft drink. Competitors like Pepsi and Coca-Cola offer drinks which have the caffeine inherent like coffee, at lower prices but the two products are completely different in flavor. Basic coffee may be considered but at lower quality other than a specialty coffee. Second, the threat of new entrants is almost nonexistent. The primary prevention to new entrants is the barrier to the industry. Companies with national distribution in the coffee industry at large experienced some discount thought bulk purchases and suppliers and greater infrastructure their advantages are small. This would involve low barriers to entry in the specialty in the coffee industry. Thirdly, the bargaining power of suppliers to the specialty coffee industry would be threated if the price or the quality or quantity of the Arabica beans which Starbucks primarily uses in production of dark roasted coffee. The suppliers of the Arabica beans are primarily located in Latin America, the Pacific Rim, and East Africa. These farms are numerous and unrelated to each other gives the very little bargaining power. Fourth, the bargaining power of buyers plays an important role determining the standpoint of the stakeholders. Starbucks five-year plan is designed to achieve three goals: Elevate the Brand, Elevate the Customer Experience, and Amplify Starbucks as a destination around the world. And the fifth, Starbucks rivalry among competing firms is very low. Some established companies would have need to achieve high volume of sales then small companies to achieve profit target. Starbucks for the full-year fiscal 2016, Starbucks grew consolidated revenue to a record $21 billion, an 11% increase over 2015. Growth was primarily driven by a 5% rise in global comparable store sales and the opening of 2,042 new stores globally, which outperformed prior class of new stores.

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