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A Case Study on the Strategic Business Analysis of Starbucks Corporation 42150
A Case Study on the Strategic Business Analysis of Starbucks Corporation 42150

A Case Study on the Strategic Business Analysis of Starbucks Corporation 42150

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  • Pages: 19 (9860 words)
  • Published: October 27, 2018
  • Type: Case Study
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Table of Contents

1.0 Company Strategy 1

1.1 Sales and Market Share 2

1.2 Response to Changing Market Conditions and other External Factors 4

1.3 Entrance or Exit to Geographic or Product Markets 6

1.4 Merge or Acquisition with Rival Companies 8

1.5 Strategic Alliance or Collaborative Partnerships 9

1.6 Pursue Market Opportunities and Defense Against Company Threats 11

1.7 Research and Development, Sales and Marketing and Production 13

1.8 Strengthening of Capabilities and Correction of Weaknesses 15

1.9 New Businesses 16

1.10 Strategic Action Not Adopted 17

2.0 Growth Strategy and Operational Competencies 19

3.0 Local Market Strategy 25

4.0 Foreign Market Strategy 27

5.0 Future Challenges 32

Reference List 33

Bibliography 38

Appendices 39

1.0 Company Strategy

Starbucks Corporation (Starbucks) is a retailer of specialty coffee offering a huge variety from "hot and cold beverages, complementary food items, coffee-related accessories and equipment, teas and other non-food products through retail stores" (Datamonitor, 2007, p.4). As of 2007, Starbucks is estimated to have 39 stores all over the world. The company maintains its main operation in the United States, having its headquarters in Seattle, Washington and currently has 146,000 employees (Datamonitor, 2007, p.4).

When Starbucks first stared way back in 1971, the market for coffee was only limited to selling whole beans, as coffee stores in Seattle, where Starbucks was originally established, was also venturing in the same strategy. When current Starbucks chairman Howard Schultz came in the company and


introduced the idea of selling coffee and espresso drinks, the original management rejected the idea until Schultz decided to leave and have his own company; which eventually paved the way for him to purchase Starbucks in 1987 (Thomson, Strickland and Gamble, 2005). From then on, since the idea of selling specialty coffee in the American market is a relatively new idea, Starbucks has been easily and strongly accepted hence leading to the companyi??s local and international market dominance.

The value chain of the company (see Figure 4) could be primarily seen in the way in which Starbucks infrastructure is established such as good choice of strategic locations where there is most consumer traffic, in addition to the overall design and feel of their store. Corollary with this, the human resource management of the company has been also a major source of its competitive advantage as Starbucks assures that all of its employees are acting in accordance with the company's mission, vision and core values. The use of various technological advancements most especially in research and development both in its raw materials and machines used has been also deemed as very vital for the success of the company. Through these major factors added with the strategic logistic practices, operations, marketing and sales strategy and its customer service, Starbucks was able to establish a strong niche not only in America but all over the world.

1.1 Sales and Market Share

As of the end of the fiscal year of 2006, Starbucks was recorded to earn total revenue of 7,786,942 USD (Starbucks, 2007, p.18) which marks an increase of 22.3% since 2005 (Datamonitor, p.4). In relation with this, the operating profit o

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the company also amounted to $894 million in 2006 which marked an increase of 14.5% in comparison with 2005. Also, the net profit of the company amounted to $564.3 million in 2006 which was an increase of 14.1% in relation with 2005 (Datamonitor, 2007, p.5).

One of the major reasons for the continuous increase of the companyi??s revenues is tagged with its strong and effective use of innovative and cost effective marketing strategies that further build its image. Certain cost-effective marketing strategies like the use of billboards, use of freestanding inserts in news papers products and samplings and other innovative methods like paying for a day of free parking in a downtown area further makes its brand name strong (Datamonitor, 2007, p.5). In the same manner, the image of the company is further strengthened by its operational strategies such as those cited by the Wall Street Journal in April 2007 about making Starbucks very accessible to consumers. According to the aforementioned, the huge number of Starbuck stores all over New York was not viewed by its new store development director as a threat leading to market saturation, rather a strategy to solve the problem of increasing consumer traffic and long lines every afternoon (Wall Street Journal, 2007). It is with this respect that the principle adopted by Starbucks in terms of the capacity of a particular store to serve its customers in the span of three minutes and its decision to build more nearby stores do not really i??cannibalizei?? the profit of the company, rather further enhances its returns (Palmer, 2007). It is with this respect that the case perceives that major criticisms about the company having too many stores in addition to the unprofitability of some of them should not be seen as a factor that would cause Starbucksi?? downfall. The case believes that Starbucks through making its store more accessible and its brand shown almost everywhere is also part of its marketing and advertising campaign. By having consumers accustomed to see the company in almost any corner in the city, such would instill a psychological notion that indeed the Starbucks brand is successful and known, and if by any chance that a consumer wants to have a cup of coffee or simply relax, there is always a Starbucks store that would welcome him or her. The case believes that this strategy is also part of the campaign of Starbucks for its commitment to its consumers.

Albeit, profit margin of Starbucks from 2004-2006 appears to be very unstable. The study of Fergunson et al (2007) revealed that on 2004, net income of the company amounts to 390,559.00 while on 2005 it went up to 494,467.00 which make a 0.08 increase. However on 2006, Starbucks was only able to make 564,259.00 hence only a 0.07 increase. This could be highly attributed to declines on estimated annual sales expectations and the failure of the company to meet certain targets for their stores. As such, it is with this respect that even though the visibility of Starbucks creates a strong customer campaign, the outcome of these utilities was offset by low profitability

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