Starbuck Corporation, based in Seattle, United States is the leading coffee brewer in the world. Starbucks has stores in over 55 countries around the world, and dominates the American market by over 70% market share (Allison, 2012). The company is known to produce quality premium coffee products with highly effective customer care service. With its global network, Starbucks is a clear manifestation of a company that has embraced product differentiation to suit each market they venture. The company has very strong brand recognition, with highly consistent products and brand. On the community front, the company is known to engage its employees and resources in community projects. It has also maintained a sound financial performance in the recent past. The company adopts a management strategy in line with its external and external environment, which guides their commitments to specific values. In order to understand Starbucks’ management strategies and operations, the paper will focus on SWOT analysis, which will help unlock the reasons behind the company’s success as well as its weaknesses that may have limited some of its endeavours.
Starbucks has a brand that is unmatched within the coffee industry. With the increased brand recognition and consistency, the company has managed maintain a healthy financial performance in the recent financial years. This is no surprise since the company global market share is over 54 percent and that of North American market is over 70 percent. Since 2009, the company’s annual sales have averaged 33 billion, nearly 70% more than the second largest company by sales, Subway (Allison, 2012). Backed by the strong brand image, high standards of ethical values, innovativeness, and over 5,500 widespread international stores, Starbucks is way above its competitors.
Starbucks has limited customer base due to narrowed target of high end consumers. The continually rising prices of their products have locked out majority of the young consumers who may not afford (Wolk, 2008). With the increasing number of competitors, the company sometimes suffers congested stores, which gives the company bad image. The company is also not so strong internationally, despite its dominance in the American market (Larson, 2008). The management can be viewed as cross functional, hence limiting their decision-making criteria. Recently, Starbucks has experienced a decline in satisfied customers, raising concern with the capacity of the store to hold onto the increased market share. The company is also limited to affluent regions, and has no stores in suburbs, limiting their ability to acquire new emerging consumers.
Despite the challenges and competitions, Starbucks still has opportunities to strengthen their market position. The company can expand its market share by spreading their business to the emerging markets. While doing this, the coffee maker can make more products to suit those new markets. The company can use its MyStarbucksIdea.com to seek for ideas to innovate more. This can widen their knowledge on the new trends in technology and business ideas.
There has been uproar and allegations that Starbucks is going against the ethics of international trade by sourcing for coffee beans from Arabia and Africa, where child labour is rampant. Coffee bean farmers in these developing countries have also accused Starbucks of unfair trade activities. This has prompted several rights groups who criticize and protest against the company’s fair trade policies, labour relations and their lack of environmental initiatives. Some of the cultural values in the international market may not be in line with the “Starbucks Experience” values (Larson, 2008). The insistence on luxury brand may affect the company’s acquisition of new class of consumers of young people, who may not have the financial ability to buy Starbucks products and services. This is compounded by unstable economy with rampant recession in the recent years.
It is without doubt that Starbucks has made a name as a successful brand, with the help of differentiation focus strategy. The company’s use of word of mouth to spread their message and marketing for strategic alliances has been a success. However, concerns have been raised on the increased competition from other companies and restaurants that offer coffee products (Wolk, 2008). Of more concern is the company’s failure to make changes to pricing and product quality. It is therefore important for Starbucks to monitor the activities of the competitors and see how they can counter the imminent competition. The increased specialty coffee shops are likely to pose real challenge to the company’s pride in quality and premium products. Another area is to increase customer experience. When customers have positive messages about a company, prices don’t count much (Allison, 2012).
It is also recommended that Starbucks should strive to implement various marketing strategies that would enhance brand awareness. It is noted that Starbucks’ reliance on alliances as a marketing strategy does affect their brand recognition, at least in the global market. The current trend in competition therefore calls for more aggressive strategies that would ensure they capture new markets.
Starbucks is the world’s no.1 coffee shop, with the global dominance of up to half of the global coffee consumers. In North America, the company controls over 75 percent market share. The company’s aggressive alliances have given it an edge over its competitors. Although, specializing in premium products with higher pricing strategy targeting high end consumers, the company has managed to maintain market leaderships for many years. However, worries are emerging over the years that competition is growing stronger everyday, thus the need to review the company’s strategies, especially on matters marketing and brand extension. It should make plans to venture into emerging markets and reconsider store locations to reach more prospective consumers.