Starbucks’ strategic management(英文版)

UNIVERSITY OF SUNDERLAND

SUNDERLAND BUSINESS SCHOOL

SIM336 Strategic Management

Use theoretical models to identify and analyse the success

way of S

tarbucks’ strategic management

.

（

3000 Worlds

）

Student Name: XXXXXXX

Student ID:XXXXXXX

Module Leader: Derek Harwood

Module Code: SIM 336

Hand in Date: 11

th

May 2012

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Make Your Nervious Relax--- Starbucks

Contents Page

Summary-Page1

1.0 Introduction

2.0 History of Starbucks

3.0 Starbucks Competitive Advantage in a Mature

Industry

3.1

Michael Porter’s 5 Forces Model

3.2 Porter

’

s Generic Strategy

–

Page

3.3 Industry PEST Analysis

3.4 SWOT Analysis

3.5 Starbucks

’

CSR Strategy

3.6 Porter

’

s Diamond Model

4.0 Conclusion and Recommendations Page-

Reference

Bibliography

Appendix

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Make Your Nervious Relax---Starbucks

Use theoretical model identify and analysis the success way

of starbucks’ strategic management

Executive Summary

The

purpose

of

this

analysis

is

use

theoretical

models

to

identify

and

analyze

the

success way of starbucks

’ development into an international giant

.

The brief history of Starbucks Company and then the following strategic models will

be

used

to

discussion

of

their

development:

Porter`s

five

forces

Model

，

Porter’s

generic

strategies,A

SWOT

Analysis,A

PEST

analysis

and

porter’s

diamond

Model .Above all strategy approach be used to identify the competitive position about

the

Starbuck

and

understanding

how

does

Starbuck

’

s

become

the

king

of

special

coffee industry.

1.0Introduction

In this report,a theoretical models will be used to reflect the practice of Starbucks in

relation to strategic analysis.

Strategic decisions are be used to achieve some competitive

advantage for the organization.

(Johnson et al 2005 P6)-1.

In this report,it will

concentrate on Starbucks’ co

mpetitive positioning approach and

the models /theories used to gain a competitive advantage over th industry rivals.

From this way to understand the Starbucks Corporation leads is

through an organization’s

insinuation into a culture, its dominance of a market and its creation of a brand

synonymous with loyalty, integrity and longevity.

At last, the conclusion and recommendation will be outline that Starbucks as a global

organization will still there to move forward in the further development and keep in a

competitive

position

in

coffee

industry.

At

the

meantime,

it’ll

provide

a

good

competitive advantage reference to other companies and push an industry evolving.

2.0Histroy of Starbucks

Starbucks is the world’s largest specialty coffeehouse,Which is start

ed in 1971 s and

started

to

opened

a

new

coffee

era.

Starbucks

made

up

of

Caffé

Lattes,

Espresso

Macchiatos,

Cappuccinos

and

Frappuccinos.

Starbucks

’

mission

statement

is

that

to

3

Make Your Nervious Relax---Starbucks

inspire and nurture the human spirit- one person,one cup and one neighborhood at

a

time

（

starbucks,2010

）

-2

Howard

Schultz,the

CEO

of

Starbucks

founded

the

first

specialty

coffee

store

in

Seattle Washington in 1986 . And soon after purchased the Seattle assets of Starbucks,

including

the

rights

to

the

name.

Starbucks

expansion

plan

met

with

tremendous

success.

Starbucks

penetrated

most

of

the

Northwest

at

an

ever

increasing

rate.

Starbucks then transitioned into the Midwest by opening in Chicago, soon thereafter

expanding

into

the

global

empire

we

know

today

Starbucks

operates

more

then

15,800 stores internationally and employs roughly 140,000 employees. It grosses $$9.4

billion

in

annual

revenue

and

is

opening

5

new

stores

every

day.

(Starbucks

Corporation, 2012) -3

2.1

Starbucks’

competitive adventage

Bob.D and Ron.M suggesting:

“

Competitive adventage is a term which help

orginazation to search for a favorable competitive position in an industry, the

fundamental arena in which completion itive strategy aims to eatablish

a profitable and sustainable position against the forces that determine industry

competition

”

.(Bob D and Ron M,P258) it is concerned with the basis on which a

business unit might achieve competitive advantage in its market.(Gerry Kevan

S,P242)

The Starbucks experiences can be found on two very distinct levels in the company:

1.

In its unique corporate s within the business creste a unique culture

for employees in which empowerment,entrepreneurship,quality,and service define

the values of the firm.

2.

In its passing down of these values to its partner,in turn,help create a

unique and personal experience for tanding these principles and

getting to know how Starbucks leadership and partners(the term Starbucks uses

for all its employees)have grown the company offers a powerful blueprint for

trabsforming your ordinary into your extraordinary.

Starbucks’

core competitive adventage can be attributed to two first leave

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Make Your Nervious Relax--- Starbucks

is the physical resources which is include starbuck

’

s high quality of products,suitable

store location and the highest-quality employees and the

consumer’

s loyalty index.

Above all factors have allowed Starbucks to stay at the forefront of the specialty

coffee industry.

2.2 Sources of

competition----

Porter’s 5 Forces Model

Porter

’

s five forces framework (see Exhibit 1.0) adapted from M.E. Porter,

Competitive Strategy,techniques for analyzing industries and competitior 1980,Free

Press,nght by the Free Press,a diviaion of Simon &Schuster

uced with permission. (Johnson ect.P80)It was originally developed as a

way of assessing the attractiveness(profit potential) of different such it

can help identifying the sources of competition in an industry or sector. Although

initially used with business in mind ,it is of value to most organizations. It is imply

five main forces shaping competition,and may be used to determine the adventage and

profit potential of a market or industry (Hooley G

.piercy N.F,2008).

Johnson et al,2008 define the five framework as:

?

TheIndustry Rivalry

?

The Potential for New Entrants

?

The treat of substitutes

?

The bargaining power of the firm

’

s buyers

?

The bargaining power of the firm

’

s suppliers.

2.3 Application of Porter

’

s 5 Forces model in Starbucks

Applying of Porter

’

s 5 Forces framwork to Starbuck

s’ formative years, which

surrounded Starbucks Corporation in 1987, when it was first acquired by Howard

Schultz. It will focus on the identification of the competitive environment in which

Starbucks was created.

Industry Rivalry

*

Coffee is one of the most popular beverages,with more than $$80 billion in retail sales

rmore,the coffee industry provides alivelihood for an estimated 25

million coffee farmers in more than 60 coffee-producing countries.(Starbucks annual

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Make Your Nervious Relax---Starbucks

report,2012)

With the specialty coffee industry has drastic increased,a lot of companies have

recognized the potential profit and ented into the specialty coffee competition.

Even Starbucks holds a dominant position in the specialty coffeehouse market ,but the

competitors include other specialty coffee chain and fast food restaurants has become

more and more active.

In the specialty coffee market closest is Caribou Coffee, which has 415 stores in the

United States which is less than 5% of Starbucks' 11,000 and counting. Its most

intense specialty coffeehouse competition is dispersed among the thousands of

independent or small-chain coffee shops around the nation and the world.

（

Caribou

，

2012

）

In addition

，

Van Houtte is an international supplier of coffee, coffee machines and

related support for over 60,000 offices and other places of employment in the United

States and Canada which is operates roughly 100 corporate outlets and franchises,

serving nearly 3 million cups of coffee per day. For nearly 100 years, Van Houtte has

established its credibility as a coffee innovator.

(Van Houtte,2012)

Besides, the fast food industry like Mc Donald

’

s, the world's largest restaurant chain

who has recently entered the specialty coffee segment is also become Starbuck

’

s

largest strong ld's has 14,000 stores in the U.S. and caters to a wider

demographic than Starbucks; McDonald's coffee sales increased 15% in 2006

.

In 2009,McDonald's coffee bars has add more than $$1 billion to McDonald's annual

sales.

Even,the growth of special coffee industry itself has slowed while the number of

competitors within the industry is still increased.

(

/hub/Specialty- coffee-industry-analysis

)

Potential for New Entrants

The economies of scale within the specialty coffee industry have increased as the size

of the top players has increased.

Treat of new entry will depend the extent to which there are barriers to are

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Make Your Nervious Relax---Starbucks

factors that need to be overcome by new entrants if they are to compete

successfully.(Gerry Kevan Richard W,P81)

In summary, the main competition in specialty coffee internal. But the huge potential

profit of special coffee is still attracted large of associated industry changed their more

attention to strategic stakes in the specialty coffee industry.

A lot of fastfood chain(example:McDonald's), have national

distribution channels

through which they can transport their specialty coffee at a relatively low cost

compared to potential new entrants who have no such developed distribution systems.

in addition to,Strong rear market and a large number coffee beans demand decides

they can have a good bargaining power by negotiating long term contracts with coffee

farmers

But,a lot of disadvantages for new entrants are still there.

With the industry matures, the demand of developing new market and the product

technology for new entrans becoming more high. The current competitors within the

specialty coffee industry has formed a more favorable market. It

’

ll makes more

difficult for new entrants to gain a solid customer base.

解决方案：

change from weak to strong

由弱到强

Controlled

access of distribution channels

Innovation&product differentiation

Threat from Substitutes

Substitution reduces demand for a parti cular

‘

class

’

switch to the alternatives-even to to the extent that this class of products or services

becomes depends on whether a substitute provides a higher perceived

benefit or value. (Gerry J,Kevan S. and Richard W,P82)

Tea

carbonated soft drinks.

碳酸饮料

Juices

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Make Your Nervious Relax---Starbucks

（方向：找饮料相关资料，寻找参数）

The force created by substitute products in the specialty coffee industry has decreased.

Many companies that presented the specialty coffee industry with a threat in the form

of substitute products have actually entered the industry and now compete directly by

offering their own premium coffee selections.

The primary substitute products still

posing a threat to the specialty coffee industry are the caffeinated soft drinks offered

by Pepsi and Coca-Cola.

主要的替代产品构成的威胁还是专业咖啡工业含咖啡因的饮料是提供百事

和可口可乐

However, even these substitute products pose little threat to the premium

coffee industry. In the past five years, studies done on the percentage of meals or

snacks that included a carbonated soft drink as opposed to coffee have shown a

reversal in consumer preference. Coffee has gradually gained preference over

carbonated soft drinks.

碳酸饮料

This is mostly attributed to the health concerns

associated with carbonated soft drinks and the new evidence showing coffee as a

relatively healthy alternative. (Harding, 2000)

（解决方案）

Bargaining Power of suppliers

（供应商的议价能力）

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）

The bargaining power of suppliers is also described as the market of inputs. Suppliers

of raw materials, components, labor, and services (such as expertise) to the

firm

can

be a source of power over the firm, when there are few substitutes. Suppliers may

refuse to work with the firm, or, e.g., charge excessively high prices for unique

resources.

?

?

?

?

?

?

Supplier switching costs relative to

firm

switching costs

Degree of differentiation of inputs

Impact of inputs on cost or differentiation

Presence of substitute inputs

Strength of distribution channel

Supplier concentration to

firm

concentration ratio

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Make Your Nervious Relax---Starbucks

?

?

Employee solidarity (e.g.

labor unions

)

Supplier competition - ability to forward vertically integrate and cut out the

BUYER

Over crowding of market

（过于拥挤的市场）

Rise in prices of coffee beans

（咖啡豆价格的上涨）

Choose Suppliers based on quality,social,environmential&economic issues.

（根据质量、社会责任、环境和经济问题选择

供应商）

With the extensive growth in the specialty coffee industry, supplier bargaining power

has changed in numerous ways.

Bargaining Power of Buyers

More options due to competitors

Large variety of products

The last component of Michael Porter's five forces analysis to be applied to the

modern specialty coffee industry is the force created by the bargaining power of

buyers. The primary buyers in the specialty coffee industry remain individual

consumers, who neither engage in concerted behavior nor individually purchase in

large volumes relative to the total sales of a corporation such as Starbucks. Unlike the

late 1980s, however, there are a few buyers who purchase in large volumes. These

large buyers are typically other multinational corporations who choose to serve

Starbucks brewed coffee in their offices. However, the effects of losing one of these

buyers to a competitor would not be detrimental to a company with a large sales

volume such as Starbucks.

(Adamy, With Starbucks, Investors Need Patients, 2008)

Summary: Five Forces Analysis of starbucks

Having applied Michael Porter's five forces model to the specialty coffee

environment which confronted Starbucks, a conclusion can be logically derived

regarding how the proportional effects of each force on the competition within the

specialty coffee industry has changed since 1987. Specifically, the force created by

industry rivalry has gone from one grounded in strategies of differentiation and focus

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Make Your Nervious Relax---Starbucks

while discouraging price wars to an extremely competitive environment where

differentiation is increasingly difficult and price wars are looming. The strength of the

force imposed by the potential for new entrants has decreased as a result of more

formidable barriers to entry. The bargaining power of both suppliers and buyers has

increased as a result of increased unity among the suppliers and the accessibility of

information to the buyers. The threat of substitutes is still insignificant given the

continued declining sales of carbonated soft drinks compared to coffee and

specifically specialty coffee.

2.4 Starbucks

’

Generic Strategy

Porters generic strategy framework is a management tool designed to help businesses

identifyan attractive and appropriate strategic position in a market

(appendix 2).

As

defined by Michael Porter there are three potentially successful generic strategies:

overall cost leadership, differentiation and focus. Overall cost leadership implies the

pursuit of cost reductions in all areas of a firm through tightly controlling overhead,

avoiding marginal, less profitable consumers and sacrificing research and

development, customer service, advertising and other areas not pertinent to the direct

manufacturing of a product. The generic strategy of differentiation involves the

creation of something that is perceived by the industry as being unique. This can take

on many different forms including but not limited to brand image, technology,

features, dealer networks and customer service. The last generic strategy mentioned is

focus, which targets a particular group, geographic market, or segment of a given

product line.

(Porter, 1998, p. 38)

A firm that focuses on the generic strategy of differentiation would demonstrate

strong marketing abilities; yet, Starbucks did not even run a television advertisement

until 1998. In fact, their advertising budget only constituted 4% of their total incurred

costs.

(U.S. Securities and Exchange Commission, 1998)

A second characteristic

common in a company pursuing the generic strategy of differentiation is a strong and

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Make Your Nervious Relax--- Starbucks

established capability in basic research and development, with subjective as opposed

to quantitative measurement goals. The primary means by which Starbucks conducted

its research and development in 1987 was through trial and error within company

stores. There was no

established research and development department within the company

. A third

characteristic o

f companies pursuing a generic strategy of differentiation is a long

tradition in the industry of having unique skills or unique products. Starbucks had this

reputation within the distribution segment of the specialty coffee industry. Their

original store was founded in 1971 and they were known for their high-quality

standards and knowledgeable staff. However, widespread retail distribution of

specialty coffee within Starbucks’ stores did not begin until 1987 when Howard

Schultz acquired the company.

All of the characteristics

of the differentiation strategy seem to suggest that

Starbucks originally used a generic strategy of focus. Looking at the characteristics of

a company pursuing the generic strategy of focus, as illustrated by Michael Porter, it

would involve a combination of the characteristics of the differentiation strategy

directed toward a specific consumer segment. In the case of Starbucks, the

demographic composition of their consumer base was narrow in orientation. Their

target consumer

was a wealthy, educated, coffee drinker who preferred quality and

customer service over a discounted price. These are very specific parameters in terms

of customer base when considering the general coffee market. In regard to

incorporating some characteristic differentiation strategies, Starbucks did have a

corporate reputation for quality and creative flair.

It has been established, so far, that the specialty coffee industry in the late 1980s

was attractive: no established firm had a defendable position within the industry. Also,

both a framework for the ideal strategic approach and Starbucks’ strategic approach to

the industry has been identified. With this information in hand, an understanding of

why Starbucks has sustained such high profit margins while at the same time

increasing market share exponentially can be ascertained.

11