University of Kent
What is the Leading Strategy of Starbucks in the Marketplace?
Businesses, on the whole, depend on being aggressive in their fields. When one business is competitive, it employs competitive tactics that enable it to get more customers, shut out competitors, gain more share of the market, but, more importantly, maintain at the cutting edge after achieving competitive advantage. The Starbucks company is one of several companies aiming to always be successful after the next 3 years in this regard. As a result, Starbucks is exploring strategies to improve its competitiveness and performance during the next 3 years. This Starbucks company is the franchise of coffeehouse and coffee business headquartered in Seattle, Washington, with locations and franchisees throughout the globe. Starbucks was established in 1971 by its new owner in Seattle city, Washington. This Starbucks has 30,000 outlets across the globe at the beginning year of 2019. This kind of coffee business has risen to prominence as a prominent representation of the second coffee wave. The second coffee wave is based on the same concept which famously established artisanal coffee. Moreover, in particular, darkly roasted coffee is renowned. In particular, for the past two decades, the third coffee wave has targeted quality-conscious coffee consumers by introducing coffee that is hand-crafted and focused on softer roasts. As an example, This Starbucks company is the one of biggest businesses that prioritize speed and security inside its operations, though as a result, it employs automated espresso equipment which improves coffee-making (Khan et al. 2018). Starbucks is now competitive in both the espresso and the fast-food industries as a result of this strategy. Starbucks has improved its economic market position. A business often establishes global competitiveness by differentiating the services and goods that it offers to the marketplace and therefore adding value to its market. Obtaining international competitiveness entails carving out such a space throughout the competitive environment, gaining market share in the international economy, establishing a foothold throughout the grounds, and becoming recognized for a specific good or service. This Starbucks Company has made a point of focusing on its efficiency. As a consequence, this company has concentrated on expanding its operations beyond a modest coffee house to include foods and beverages products. As a result, Starbucks has introduced creative and novel items, including the use of nut or oat milk instead of dairy. Theoretically, this Starbuck organization has grown increasingly successful as a consequence of significant expenditures in product diversity and development. Starbucks' competitive edge is built on the distinctiveness of its goods, which is a long-term strategy. Through that purpose, Starbucks distinguishes itself by using high-quality coffee and this provides high-quality customer satisfaction, which together makes up its Coffee Experience. That approach, in theory, improves Starbucks' competitiveness by providing well-trained employees, well-designed shops, as well as a comfortable climate. Starbucks has often had strong financial success as a result of excellent investment returns throughout these years (Kim, and Park, 2021). The competitiveness of Starbucks has allowed it to become a major coffeehouse chain and store in some nations, even those that are difficult to enter. Starbucks' competitiveness has been boosted by elements such as linked customer satisfaction, the reward Starbucks card, the usage of an Espresso maker machine, including roasting the best beans of coffee. This Starbucks competitive situation is shown in this study, as well as the actions Starbucks must do to compete effectively in the worldwide market and gain a long-term comparative advantage.
An external culture environment of a company refers to the factors that operate outside of the company. Political considerations, financial environment, social aspects, technical aspects, environmental problems, & legal aspects are all examples of external influences. This part of the paper provides an in-depth analysis of Starbucks company external environment which is based on this case research. As an example, Starbucks has a coffee business that first opened its doors in the year 1971 and it has since evolved to become a well-known worldwide company. This Starbucks organization is the biggest global coffeehouse corporation, and it managed to dominate the industry in terms of creativity and long-term sustainability (Mi et al. 2021). Starbucks' performance, as shown in this case study, is due to its ability to handle outside PESTEL issues. PESTEL analysis process is the methodology that allows companies to perform a comprehensive and in-depth examination and assessment of the components in their outside business environment. For this purpose, this PESTEL model methodology aids in identifying the most critical consequences in Starbucks based on micro or distant environment factors. Despite its present dominance throughout the coffee-making business management, Starbucks must continue to watch its micro or distant surroundings (Tien et al. 2017). As a consequence, Starbucks may be required to conduct a PESTEL study to meet this demand. Despite the negative factors impacting or hurting its company, this Starbucks Coffee store may be likely to progress to thrive. This strategy will only succeed if Starbucks maintains its efficacy in dealing with external environmental variables discovered via the Pestle factors in this study.
This part is such a PESTEL model study, and it is said several identifies a set of the government's effects on businesses. As a consequence, Starbucks company's macro or distant environment is influenced by external and political variables. The following are some of the main factors:
Regional cooperation, on the other hand, provides Starbucks with a unique chance to grow inside the world market. As a result, regional cooperation became an external element and a contemporary movement that Starbucks may use to obtain a competitive edge. In a perfect world, virtually every government inside the globe is implementing proper infrastructure-improvement initiatives. The development of facilities through governments in nations where the Starbucks organization has established and operated shops provide Starbucks with the chance to reach additional vendors and marketplaces (Subramaniam, 2020). However, this bureaucracy that exists in most nations harms Starbucks' performance in the worldwide market. Such bureaucracy, which is mainly seen in developing countries, is a concern as that makes it harder for Starbucks organization to grow. Govt policy is another political issue that exists in the micro or distant context for Starbucks. As an example, this Starbucks organization is required to pay its taxes in nations where it has coffee-houses and fast-food restaurants. These taxes, in and of themselves, are a challenge to Starbucks' worldwide competitiveness because it cuts into the company's revenue or profitability. The second political element influencing Starbucks' global growth is good governance or volatility. This Political stability method is evident in many of the nations where Starbucks has established a presence, implying that the economic climate is favorable to Starbucks, and this can be an advantage. When a nation is stable politically, though, it confronts Starbucks with such a difficult business climate, then it can be a danger (Nguyen, 2020.). However, over 99 percent of the nations where Starbucks has established a presence are politically safe and strong, indicating that Starbucks operates in a favorable climate for serving coffee and their fast food. This element or component of the Pestle factors essentially implies that political considerations provide Starbucks with additional commercial possibilities.
This element of the PESTEL evaluation method often relates to economic developments and circumstances that are critical to business. According to the research report's results, this Starbucks coffee business is confronted with the following issues from its micro and distant environments.
According to some, the strong economic growth seen in emerging countries, as well as falling unemployment levels, provide Starbucks with the potential to increase income from a variety of markets around the world. However, the increasing cost of labor in emerging nations is a component throughout the external factors of the business environment which poses a danger for Starbucks because it forces the company to invest more in labor and materials through vendors. The majority of these coffee beans used by Starbucks to make coffee are preferably obtained from poor nations (Fischer and Roy, 2019). Another economic issue posing a danger to Starbucks includes persistently high and falling inflation in certain regions. When deflation is strong, everything costs more, which means Starbucks may have to carry on the higher enormous cost of all its goods to its customers. Customers are likely to stop utilizing Starbucks goods if they discover that the price of using and buying these items is too expensive. As a result, economic considerations provide Starbucks with both possibilities and dangers.
This element of such PESTEL study or methodology illustrates the societal trends and circumstances that affect consumers and businesses in regards to Starbucks' activities. Starbucks must handle the underlying social or sociocultural external variables which exist in its microeconomic distant context to achieve this goal. These elements include:
These sociological variables, it might be argued, imply that Starbucks may use them to boost profits as a consequence of the increasing need for specialty coffee around the globe. Due to this rising middle working class as well as a flourishing coffee culture throughout the globe, the need for specialty coffee has increased (Dawson, 2019). Additionally, Starbucks now has the potential to expand its client base by creating health goods that interest or bring health-conscious people to Starbucks cafes. Importantly, most of these social variables are found in Starbucks' surrounding environment via the research study which provides Starbucks significant chances to grow their coffee company globally.
Starbucks, in particular, is affected by the following technical and external elements in its distant or microeconomic.
Starbucks gets the capacity or chance to improve its connected services and smartphone application as just a result of these external technical variables to generate or accomplish more income via mobile transactions. This business may also utilize new technology to boost the effectiveness of its production process and to boost the innovations used by coffee growers (Tsai et al. 2020). However, the increasing demands in specifically coffee maker machines in houses pose a danger for Starbucks because these machines serve as replacements for Starbucks' goods. As a result, technical considerations offer more possibilities than dangers for the coffee of Starbucks.
Starbucks is often exposed to environmental variables in its microeconomic or remote surroundings.
The aforementioned variables, in theory, provide Starbucks with sustainable marketing trends, since they concentrate on management processes or activities that have the least amount of environmental effect. As a result, the aspect of sustainability goals within supply activities of chain management contributes to the responsibility of corporate society. Starbucks does have the potential to improve its performance in several of these categories (Santos, 2020). As an example, Starbucks has procedures in place for resource efficiency. Starbucks does have the opportunity to sell much of its goods in biodegradable materials once again.
Legal considerations are related to company rules and legislation in this PESTEL conceptual approach. Its following is among the legal issues which Starbucks should deal with in its micro and distant environments.
Primarily, these legal elements mentioned above provide Starbucks with a chance to enhance their efficiency by complying with food safety standards and GMO laws referred to as "genetically modified organisms". This Starbucks organization is doing extremely effectively in these areas. Growing environmental standards and laws offer several opportunities for Starbucks, as the company is required to employ environmentally friendly methods including recyclable packaging (Silalahi and Liudi, 2018). However, rising employment restrictions in developing countries pose a significant danger for Starbucks because it attempts to enter the labor marketplace. Starbucks spends too much on its human resources because of the expensive labor cost. Regulatory requirements, in theory, provide Starbucks with possibilities. As a result, for Starbucks to compete effectively throughout fast-food and coffee markets, it must adhere to these regulatory requirements.
The Five Forces of Michael Porter provides a model which uses a technique to assess the degree of rivalry in a certain sector. This Starbucks organization also uses this model. It is shown as follows:
A) Competitive Rivalry: The competitive rivalry throughout the coffee-making business is divided. No one has the upper hand (Kumaresan, 2019). This implies that there isn't a lot of rivalry in this field.
B) Entrance Obstacles: There have been no entry-level barriers. New competitors, on the other hand, may add differentiation strategy and creativity to make a product. There isn't much of a risk of the entrance.
Figure 1: Five Forces of Michael Porter
(Source: www.cgma.org, 2019)
C) Threat of Replacements: Because numerous businesses provide comparable goods, these substitute threat products are significant. Pizza and burgers are good instances of these kinds of businesses.
D) Buyers' Negotiating Power: People have a lot of power, control, and influence because they can select which goods to buy based on quality.
E) Supplier Negotiating Leverage: Starbucks has formed dominating partnerships with its suppliers (Chowdhury, 2020). Because there are several coffee bean vendors, distributors' negotiating leverage is limited.
This section contains an examination or assessment of Starbucks' gaining competitive advantage in this field. In such an ideal world, a company obtains a long-term comparative benefit through delivering goods and services for customers at such a lower price than their competitors, generating a positive return on their good investment and outperforming the competition. This section evaluates Starbucks' competitive advantages using the VRIO, its cost structure, assets, skills, and competencies approach (Dalton and Thatcher, 2019). Abilities, in particular, play an important role in ensuring that a company remains profitable in the face of ever-increasing competitors. The VRIO model often represents the skills and resources which enable a lengthy and durable competitive edge. This preceding statement is prepared of this VRIO model, as per Michael Porter. The competitive edges of Starbucks sources are determined by the methodology described below.
Starbucks Organization has worked hard over these years to provide an engaging consumer experience, which allows it to build and sustain long-term relationships. Starbucks, in its ideal state, provides its Coffee Experience which entails more than simply great coffee. Enhancing customer's deep emotional attachments and feeling more comfortable while still being treated in Starbucks cafs as a result of the experiences (Magno, and Cassia, 2019). As a result, Starbucks shops are designed to create a pleasant atmosphere in the eyes of consumers, and they are conveniently placed. Starbucks' CEO thinks that the workers are the key to creating a good consumer experience. This Starbucks organization has responded by implementing a variety of perks, including acknowledgment, learning, company stock programs, preferred stock schemes, and medical services (HENG, 2019). Starbucks was included in Noble's annual survey of the top 100 Companies Besides for their competitive edge. Moreover, many other websites, like indeed, LinkedIn, a job portal, have named Starbucks organization as the greatest business or place for work in the year 2019. Consumer experience is, without a doubt, a critical competency and capacity which enable Starbucks to maintain a competitive edge.
Figure 2: Value chain of Michael Porter
(Source: www.researchgate.net, 2018)
Starbucks Gift Card is also another key to success. Starbucks famously launched this card, which comes with a slew of perks. The purpose of this card is to encourage consumers who return to Starbucks to complete additional purchases, resulting in increased loyalty (Romdhoni et al. 2020). Customers may also participate throughout the Starbucks User Experience Questionnaire to express their views and experiences with these services customers get at Starbucks. These products' purpose is to help Starbucks build long-term connections with its consumers. This Starbucks gift Card is, without a doubt, and a critical factor that allows Starbucks to maintain a competitive edge.
This gadget provides Starbucks with another competitive edge. This device, in theory, functions autonomously, allowing consumers to purchase and pay for coffee just without the assistance of the workers. As a result, this system lowers order wait times by delivering order coffee promptly for consumers (Darmawan and Suasana, 2018). Mastrena is the coffee brewing device. This device is a crucial asset to Starbucks since it allows the business to maintain a competitive edge over time.
Starbucks' best coffee beans are also another strategic asset. Starbucks coffee is made with some of the best coffee beans available. As a result, this company's employees regularly travel to find coffee suppliers which match their high requirements. In addition, Starbucks started buying Fair Exchange and Verified Natural coffees. As an example, Starbucks Corporation bought 15 thousand tons of verified organic and natural coffee beans in the year 2019. This Starbucks Corporation also makes coffee using the Mastrena device. This device should ideally be a professional Swiss espresso maker. As a result, even if the outlet of Starbucks is located in a global market, consumers will experience unique flavors when people visit one of the company's cafs (CHEIKH and ALAOUI, 2019). Starbucks derives its sustained competitive edge from the greatest coffee beans available. All coffee beans in this bag are of the finest quality. Once roasted these beans, they create coffee with a particular flavor that distinguishes Starbucks Corporation's coffee and attracts consumers from all over the globe where Starbucks operates coffee shops.
Starbucks' corporate identity and brand are other determinants of a highly competitive edge. Starbucks is undoubtedly a worldwide brand, allowing this to outperform its rivals inside the market. Domino's, Chinese Luckin Cafe in China, Britain Costa Coffee, Canadian Tim Hortons which is growing into the U.S.A, and Dunkin Donuts, which is not focused on these coffee products but is represented in certain countries, are examples of rivals for Starbucks (Choi, 2017). Furthermore, Starbucks' corporate reputation is a commodity that allows the company to maintain a competitive edge over time. Starbucks may use these skills, skills, and assets to acquire more consumers, provide goods at a cheaper price, and probably shut out all the rivals after achieving a durable competitive edge.
Starbucks, in particular, should consider adopting the following suggestions utilizing the goals of SMART techniques to enhance its performance over the next 3 years.
Stakeholders are defined as individuals that have a personal effect on businesses and, from this result, it has influenced directly on the operating performance of an organization. Consumers, workers, rivals, vendors, and a current organization's international business management are types of stakeholders. These appendices of Starbucks Stakeholders are as follows.
External or internal
Throughout the coffee drinks and fast-food industries, competitors start competing with Starbucks.
Starbucks gets its natural coffee beans as well as other basic ingredients from suppliers.
Starbucks Staff strives to guarantee that the company accomplishes its goals.
Starbucks' goods are purchased by consumers.
The management process of Starbucks is used for overseeing the company's operations.
Customers are selected from the set of stakeholders to examine throughout this area. Starbucks' clientele includes people of all ages, particularly kids, adolescents, youths, and seniors. Starbucks also has a massive client base that can be found all over the globe in places where the company operates shops or locations. Customers are drawn to Starbucks because of the excellent customer service it provides and the pleasant atmosphere created by its shop design. Customers that follow diets, including those with several lifestyle diseases like diabetes, choose health-conscious goods like specialty coffee. Starbucks has prioritized consumers as key stakeholders during the past 3 years.
Figure 3: Mendelow's matrix model
(Source: www.researchgate.net, 2018)
This Starbucks corporation focuses on consumers because they are the only ones who buy their coffee drinks and other goods, and from this result, Starbucks must continue to meet these customers' requirements by providing high-quality items. Customers are pleased whenever Starbucks meets their requirements. So this leads to increased devotion to Starbucks' coffee drinks and other goods (Rizqiningsih and Widodo, 2021). Customers have a lot of clouts and are very interested in Starbucks corporation. Mendelow's matrix method is an example for evaluating stakeholders' motives and their perspectives. This tool examines both the strength and degree of involvement that stakeholders have in the company's goods as well as the firm's selected strategies, as well as whether consumers can influence those plans. Mendelow's matrix method for Starbucks consumers is shown below. Starbucks should use a suitable consumer communication approach that includes physical features, nonverbal gestures, and communicate visually, which includes drawings, website, and signage.
Using Starbucks' marketing research can help to learn more about its leading strategy and the actions that Starbucks can take to remain competitive in the marketplace and to attain a competitive edge. Despite their present position as the top throughout this coffee-making business, Starbucks must keep monitoring their macro levels or monitoring system remotely. From this consequence, Starbucks will be forced to use the PESTEL study to meet this requirement. This Starbucks Coffee store may continue to be successful despite the negative factors that are impacting or hurting its company. Starbucks could also think about rebranding and increasing its investments in innovative development and quality management, among other things. In addition, these initiatives will guarantee that Starbucks' productivity helps to improve their progress within the next 3 years and that Starbucks corporation achieves a long-term competitive edge in the marketplace.
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