Starbucks Utilizes A Differentiation Business Model By Offering An Overall Unique And High Quality Experience For The Consumer

Since Starbucks entered the coffee retail business, the company has made many trade-off business decisions. The first major trade-off was made when Howard Schultz wanted to acquire present day Starbucks from three entrepreneurs Baldwin, Siegel and Bowker. Therefore, Schultz prior to the acquisition made the trade-off to open his own coffee bar in 1986 instead of staying at Starbucks as the manager of retail sales and marketing. A bold feat, Schultz was able to replicate success and was offered to buy Starbucks for $4 million. At the time of the acquisition, many investors, including the former Starbucks owners, would not expect that the American consumer would pay a premium for coffee products. Schultz, after calculating the opportunity cost, was convinced that Starbucks would become a large coffee chain not only in the United States but internationally too. Reflecting this approach, Schultz’s trade-off worked. Starbucks, according to our book has revenue exceeding $13 billion and nearly 200,000 employees. The company has also expanded to 40 countries with 17,000 stores (Hill et al., 2015).

The industrial rivalry in coffee industry has increased to a large extent since 1987 and today Starbucks is facing tough competition from different small scale coffee shops and fast food companies.

In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.

The coffee industry has become a very competitive and expanding market segment in North America, including companies like Dunkin, McDonalds, Nestle, Burger King, Caribou Coffee, and Costa Coffee. The top leading coffee corporation in this market is Starbucks with Dunkin and McDonalds trailing close behind. This corporation has reached a maximum 36.7% market share, well above Dunkin ranking at 24.6% and McDonalds at 19%, with Starbucks and Dunkin making up over 60% of the market share (Geereddy, 2013: see appendix 1). Starbucks is a retailer, roaster, and marketer of high-quality whole bean coffee. With more than thirty blends of specialty coffee, hand-crafted beverages, smoothies, and teas, Starbucks’ mission is to inspire and nurture

Starbucks Incorporated is a Washington based international business who had a total revenue of over $22 million in 2017. Starbucks’ employees near 254,000 employees within 2016. This company is known for their coffees, especially around the holiday seasons, all over the world. Majority of their profits come from the American market while they are trying to expand into the eastern world. However, their customer experience and support allows consumers in other markets to want to be a part of the westernized experience. Starbucks has the opportunities to grow within their grocery store sales and to expand their brand, both in more products and in more stores. Starbucks is also affected by local coffee shop competitions and economic conditions constantly changing which hurt their profits. Regardless, Starbucks proves that they have a strong business model that allows them to stay as one of the international beverage leaders.

Starbucks can face threats of new competition by two types of competitors. Small high street cafes whose startup cost is very low, but they require some time to stabilize. Another is Mc Donald’s entering in the competition by bringing in a wide range of coffee products.

The threat of new entrant is low for Starbucks. This is because the beverage industry, especially coffee industry is highly saturated and also needs substantial financial resources to invest in buildings and properties in order to enter the market.

The Starbucks Corporation is the global leader in specialty coffee consumption. Arising almost overnight from a market in Seattle, Washington, the company today provides quality premium coffees with a superior level of customer service and at a premium price, around the globe (Isidro, 2004). Starbucks is an excellent example of a company that has successfully embraced a differentiation focus strategy tailored to providing a high quality, focused product, of which, for the company customers, price is in essence, no object. This paper will address the differentiation focus strategy, providing insight into what encompasses this strategy selection. Next, the author will highlight the marketing initiatives and the strategic alliances employed by Starbucks in concert with the differentiation Focus strategy. Finally, this paper will address the current economic conditions and how Starbucks at every

With time the small industry of coffee has modernized into a multibillion dollar industry that surrounds the world. With the growth of the industry there has been many world wide changes. Over the past 30 years coffee shops have jumped to the front of the public culture. New coffee shops have changes the face of American cities along with British, German, Colombian, Kenyan and Indonesia towns to name few. (Coffee a comprehensive guide to the bean, the beverage, and the industry) Around the world coffee has become part of the daily culture and coffee shops have grown to accommodate the massive demand that people ask for. Without the growth of the industry there would be a shortage of the product and many would have to go without their beloved beverage. In the United States alone there has been a massive increase in the number of coffee shops. In 1980 the number of coffee shops was a year 2,000 and by 2008 there was an astonishing 27,715. (Coffee a comprehensive guide to the bean, the beverage, and the industry) This was an increase of over ten times in the short time. 11,000 of those stores, almost half, were Starbucks one of the biggest coffee brands in the worlds. The growth of Starbucks is due to the work of Howard Schultz a worker for the company before they became as massive as they are today. Starbucks started very small in Seattle, Washington in the mid 1970’s. Howard bought out the owners and then went on to turn the small company into a massive corporation. (Coffee a

Starbucks operates in the highly competitive retail coffee industry. The barriers to enter this industry are low. The number of firms is high. The product offerings are similar. Their competitors are quick-service restaurants, such as McDonalds and Dunkin’ Donuts, specialty chain coffee shops, such as Dutch Brothers and Tim Horton, convenience shops, such as 7-eleven, and local ‘Mom and Pop’ coffee shops (Starbucks Corporation,

Strategy is a balanced problem, sometimes difficult (Allard, 2004). Ultimately, the strategy is about making a choice, the company will succeed if chose a unique strategic location which is different from the position of each competitor (Markides, 2000). One of the key ways Starbucks has pursued since its inception is the separation of items, separate items such as premium items, regional, espresso drinks, notorious and noteworthy customer interests, becoming a highly valued counterparty high.

Founded in 1971, Starbucks has taken the coffee industry by storm. With thousands of licensed stores around the world, Starbucks is arguably the largest coffee company around. They’re well known for their handcrafted premium coffees and teas; which are also sold in many retail and grocery stores like Wal-Mart and Metro respectively. They also serve a variety of original and fresh food items to further their brand and help satisfy their customers. This ensures that Starbucks has the greatest opportunity to dominate the market; as they are saturating every area available. Higher exposure and customer loyalty leads to increased growth and profit for the company. Starbuck’s approach is heavily focused on the differentiation strategy; which requires the company to develop products and service that are unique in their market. Companies who use this strategy must serve customers at an exceptional level; with all departments being high quality. Instead of following the industry’s main competitors, Starbucks recognized that they could take advantage of the missing products in the coffee industry. Instead of following chains like Tim Horton’s and Dunkin Donuts, seeks to provide exclusive that are admired by their audience. Differentiation is incredibly attractive as it allows the company to be more flexible with their products and has the highest potential to be very sustainable – especially at a low cost. Starbuck’s specializes

Starbucks pricing strategy has been criticized for that reason, when there are other coffee brands that provide the same quality with much lower costs (Business teacher organization, n.d). This high pricing strategy makes the company’s products less accessible to a large population of lower-middle class and lower class as well (Lombardo, 2015). On July 2015, Starbucks increased its prices from 5 to 20 cents. This change has brought the price of a large Starbucks coffee to USD 2.45 in most US stores (Dudovskiy, 2015). The company said that labor and rent expenses were the reason behind this increase (Terifs, 2015). The problem is that these high prices can pose some weaknesses on the company’s success in the developing countries (Geereddy,

Starbucks is considers the one of the most famous coffee store brand in the world, based on the case we can find that it is on the leading position of coffee market, it has a significant sales growth compare other brand in the market. But in recent year it seems start to facing more challenges from different aspect and these challenges had became a resistance of its business expansion.

Many argue that Starbucks is overpriced but there are many more that pay those prices day in and day out, sometimes even multiple times a day. When asked, customers appreciate the experience that Starbucks offers compared to other coffee companies. Furthermore, Starbucks has been able to transfer their business model internationally with their consistency by providing the “Starbucks experience” across the world. Creating the Starbucks experience for every customer allows baristas within the stores to connect with people on a personal level by creating an all-around positive experience. This unique experience has led the company to be successful worldwide.In order to be successful within the international market, the company made sure to continue to follow their business model. In addition to following their business model, the company also established a joint venture with a local retailer. This allowed the company to gain insight on the tastes and preferences of the locals. Although their coffee is good, Starbucks would not want to introduce the company to something new without first getting their business. Furthermore,