Starbucks

The present case is about the Starbucks Corporation and its strategy towards the current
and future prospects of its coffee business. Starbucks is a provider of high-end coffee
products and more importantly, a relaxed experience. In the said case all the points related
to company’s current business model and future strategy is discussed. The higher
management of Starbucks has adopted some strategies and the CEO of the company is
concerned about whether the strategies would work or not properly?

Starbucks faces the question of how to leverage its core competencies against various
opportunities for growth, including the continued expansion of its retail operations, and
leverage the brand into other products without disturbing its brand image. Starbucks current
strategic direction would allow it to sustain growth by continuing the development of the
Starbucks brand image and by increasing its presence in different markets.

Starbucks is growing very rapidly and consistently evaluating new opportunities in its
domestic and international retail markets, new specialty partners, penetration in the grocery
channel and the future potential of its mail order business. How the company should react
to all of these opportunities is one of the CEO’s key concern.

In the present case, various elements of external and internal environment for Starbucks is
discussed in brief. The main strength of Starbucks is its strong financial performance which
has resulted in the company occupying the number one spot among coffee and beverage
retailers in the world. The intangible strengths of Starbucks include its top of the mind recall
among consumers and by virtue of its brand, which symbolizes excellence, and quality at
an affordable rate, the company enjoys a dominant position in the market for coffee and
beverages. The company is heavily dependent on its main and key input, which is the coffee
beans and hence, is acutely dependent on the price of coffee beans as a determinant of its
profitability. This means that Starbucks is overly price sensitive to the fluctuations in the
price of coffee beans and hence, must diversify its product range to reduce the risk
associated with such dependence. The company faces threats from the rising prices of
coffee beans and is subject to supply chain risks related to fluctuations in the prices of this
key input. The industry environment also presents the opportunity to strengthen the
company’s presence and market share through partnerships or alliances with other firms.
For instance, alliance with major retailers improves distribution and market share of the
company’s consumer goods, such as ready-to-drink coffee.

The company faces intense competition from local coffeehouses and specialty stores that
give the company a run for its money as far as niche consumer segments are concerned.
In other words, the company faces a tough challenge from local stores that are patronized
by a loyal clientele, which is not enamored of big brands. The industry environment of
Starbucks Coffee Company involves diverse challenges, especially because of the
company’s moderate diversification. The coffeehouse chain business faces issues such as
competition and imitation, the threat of competition involving low-cost sellers, and
independent coffeehouse movements.