STRATEGIC MANAGEMENT PLAN Analysis

As Compliance for

Strategic Management in Tourism and Hospitality

(TMBME2)

Submitted by:

Roxanne Joy S. Ayuban

Submitted to:

Prof. John Renald Dael

May 03, 2021

 starbucks STRATEGIC management PLAN ANALYSIS

Starbucks is an American company that is the largest coffeehouse chain in the

world. Its headquarters are in Seattle, Washington. Starbucks was founded by Jerry

Baldwin, Gordon Bowker, and Zev Siegl, opening its first store in 1971 near the historic

Pike Place Market in Seattle. They were inspired to sell high-quality coffee beans and

equipment by coffee roasting entrepreneur Alfred Peet after he taught them his style

of roasting beans. The company took the name of the chief mate in the book Moby-

Dick: Starbuck, after considering “Cargo House” and “Pequod”. From just a narrow

storefront, Starbucks offered some of the world’s finest fresh-roasted whole bean

coffees with stores in more than 75 markets and the premier roaster and retailer of

specialty coffee in the world.

Their Mission is to “To inspire and nurture the human spirit-one person, one cup

and one neighborhood at a time” and their Vision is “To establish Starbucks as the

premier purveyor of the finest coffee in the world while maintaining our

uncompromising principles while we grow”.

Introduction

To succeed or simply to survive, companies need a new philosophy. To win in

today’s marketplace, companies must be customer-centered, they must deliver

superior value to their target customers” (Kotler et al., 2008). The purpose of this

analysis is to sort out the competitors and what makes the Starbucks a number 1

coffee including the strategies that they must consider and improve.

In recent years competitive rivalries have become increasingly higher. In the

case of Starbucks, newer entrants from companies such as McDonalds or Pete’s

Coffee has resulted in tougher trading conditions, initially hurting the stock price of

Starbucks. Increasing independent coffee chains and choice from consumers will

maintain a high-competitive rivalry.

Changes in consumer tastes and preferences can adversely affect Starbucks’

sales. Consumer may shift to specialty coffee products offered by its competitors. The

high rate at which consumers are becoming health-conscious in their consumption

patterns may affect the firm’s future operations. Therefore, to align itself with these

changes, it is critical for Starbucks management team to conduct a competitive

analysis to see the market performance.

One of Starbucks major competitors in ad campaign was McDonald’s line of

“McCafe” coffee drinks, McDonald was known to spend more money on media, such

as television, radio, print, billboards, and interactive web ads. Starbucks had never lost

coffee drinkers to McDonald’s line of McCafe, McDonald’s sells its own version of

Frappuccino, and competes with Starbucks with breakfast oatmeal, fruit salads, and

smoothies.
 Starbucks strategic plan creates advertisements with a unique content, the

backgrounds are supposed to resemble a coffee sack, with large and bold headlines

promoting the brands qualities. The ad’s which Starbucks had placed in newspapers

explain how Starbucks chooses only the best 3 percent of beans for their coffee. The

ads also emphasize how they roast the beans until they pop twice to ensure quality

taste. Starbucks had also maintained it’s mobile strategy through a mobile campaign

which allows consumers to chose their ideal summer beverage and Starbucks had run

mobile banners ads through music site. Starbucks had also run a rich media ad

campaign on IPAD sites on VH1 and MTV, campaign is designated to drive interaction

with Apple users. This campaign is known as the “Starbucks, VH1, and MTV Celtra

for tablet-optimized rich media”, they were the first media brands to create touch

optimized browser experience. The objectives of this ad campaign on MTV and Vh1

IPAD sites was to maintain brand awareness and seek out purchase behavior.

Through these, they gain maximum exposure to result in gain in revenue, build

awareness to guarantee subsequent purchase of product and the media plan will

generate interest by connecting to the public.

Another strategy applied by Starbucks against its competitors is

concentrating its outlets at one point. According to the reports that were obtained in

2005, Starbucks had a net profit of $494.5 million, Kellogg $980.4 million, General

Mills $1240 million, and Folgers $2546 million (Avlonitis 113).

There are still other competitors in the market, but Starbucks uses a strategy

of quality and diversification to remove the upcoming competitors. The major products

of this company are breakfast such as coffee and cereals. The company used this

strategy, as a way of placing itself at a more competitive edge that its competitors’

place. The product uniqueness of the two main products is ranged as medium. The
nutritional value of coffee is categorized as low while that of cereal is high. The taste

of Starbucks coffee is ranged as high, while that of cereals is medium compared to

that of competitors (Grant 98).

The pricing of Starbucks coffee is relatively low compared to that of some

competitors, as a way of making it hard for other competitors to survive in the market.

The company lowers this price intentionally, as their competing strategy. However, the

price of cereals compensated for coffee, as it is medium price (Grant 102). Starbucks

insist that quality of their products comes first. Through provision of quality products

to the customers, customers have built brand loyalty.

The company has made extra efforts in ensuring its products reach the intended

customers at the right place and condition. Starbucks have ventured in more than fifty

countries with so many outlets. The company has even introduced online selling of its

products whereby, the customers can purchase the products anywhere, anytime. This

has created much convenience for those customers, who are always busy (Avlonitis

174). They also have a tendency of reaching the customers by concentrating their

outlets at one point.

Starbucks promote its both nationally and internationally levels. They have used

various media services to reach the customers through placing adverts for their quality

products. Severally, they hold promotion for their products, where people are given

chances to taste their coffee, as an effort of building brand loyalty to the customers.
Conclusion

Effective strategy development is one of the ways through which a firm can

attain coherence between its internal abilities, resources, skills, and the external

factors affecting the firm’s operations (Srinvasan, 2005). It is undeniable that

Starbucks has a competitive advantage when it comes to quality, especially when

compared to other generic coffee commodity. Starbucks has historically been a master

of strategic decisions, ensuring it on the whole maintained position as the number 1

coffee brand in the world. Whilst new challenges, such as McDonalds or indy coffee

are arising and new demands, such as environmental concerns are growing,

Starbucks is well positioned to adapt to the market changes by successfully balancing

the trade-offs between effectiveness and efficiently.

In the process of offering its products and services to customers, Starbucks

greatly emphasizes on good business practices and ethics. In 2011, Starbucks was

ranked as one of the most worlds’ most ethical company (Environmental Leader,

2011). Considering the intense competition in the specialty coffee market, Starbucks

has developed a strong competence with regard to product innovation. Although

currently there are no formidable competitors for Starbucks leadership in both

international and domestic markets, it should not take it for granted for good.

Tomorrow’s destiny of Starbucks should depend on its strategic capability to preserve

and sustain its strengths, offset weaknesses, avoid threats and capitalize on

opportunities. If Starbucks would correctly identify and deal with the issues under

current and near future circumstances, it could remain excited about further growth

and continues to be prosperous.

Reference List

Avlonitis, George. Product and services management. New York: SAGE, 2006.

Environmental Leader: Ford, Starbucks, among most ethical companies. Web.

Grant, Robert. Contemporary strategy analysis. New York: Wiley-Blackwell, 2010.

Kotter, J. & Schlesinger, L. 2008, ‘Choosing strategies for change’, Harvard

Business Review, vol. 2, pp. 130-150.

Srinvasan, L. 2005, Strategic management, the Indian context, PHI Learning PVT,
London.