Discuss the types of growth strategies that Starbucks has used.

Starbucks has used following types of growth strategies:

CONCENTRATION Starbucks went globally, opening hundreds of thousands of stores round the world. It targeted its customers demographically.

Starbucks used horizontal Integration when it bought its competitor Tazo, LLC. to market a selection of premium tea products.

• Related Diversification Food items Coffee Beans Coffee flavored ice-cream Ready to drink beverages Coffee related accessories and equipment

• UNRELATED DIVERSIFICATION Starbucks launched pre-paid cards. It launched hear music café. A Magazine called Joe was also launched with Time. It has co-branded website with Yahoo. It made partnerships and joint ventures with Kellogg and Pepsi.

Evaluate the growth Strategies Starbucks is using. What do you think it will take for these strategies to be successful?

Its broad strategy is to grow into a global empire.
Starbucks long term goal is 15,000 stores in US and 30,000 stores globally. For 2006, the company’s goal is to open 1,800 new stores globally and reach $7.6 billion in revenues. Goals for the next 3 to 5 years include: Increasing total revenue by 20 % Earn per share growth between 20 to 25%

Starbucks has gone globally; opening hundreds of stores in 37 countries keeping customers of all ages in focus and is planning to grow even more.

To Expand more Starbucks also sells Food items Coffee beans Coffee flavored ice-cream Ready to drink beverages Coffee related accessories and equipment Starbucks has started a pre-paid card service and has also opened a hear music café. It is also expanding its business through joint ventures.

It will take: Time. Effort. Resources.

As they are now moving into the markets of Russia and India, it’s important to do Industry Analysis first, that are: 3. 4. 5. 6. 7. Threats of new entrants. Threat of substitutes. Bargaining power of buyers. Bargaining power of suppliers. Current rivalry. They also have to respect the culture and the heritage of the countries they go in.

What competitive advantage(s) do you think Starbucks has? What will it have to do to maintain that (those) competitive advantage(s)?
Starbucks has the following Competitive Advantages:
Customer responsive culture and aura inside Inside aura invokes the warm feeling of community. Competitive advantage over classic brands.

Valued Employees
Employees are highly valued Starbucks It has lowest level of employee attrition

Finest Coffee
Starbucks has started a Café life that never existed.

Strong Brand Management Starbucks has been very powerful in brand management.

Wide Geographic Coverage Starbucks covers a wide geographical area.

Quality Control The company’s growth is governed by whether the quality is maintained.

Steps to maintain Competitive Advantage Starbucks should be aware of the new entrants coming into the Industry. As Starbucks is expanding globally, it has to make sure whether customers there are not switching to other drinks. Cost is according to what customers can afford and are willing to pay. Farmers should be sufficiently paid, so they don’t switch their supplies to competitors Needs to keep check on competitors actions

The strategy that will give Starbucks a competitive advantage is Differentiation,

Do you think Starbucks brand can become too saturated – that is extended to too many different products? Why or why not?

Starbucks brand cannot become too saturated by extending to different products.

The reasons Starbucks has extended to too many products: The growing number of stores seemed a threat to Brand Image. The Competitors has prices lower as compared to Starbucks .

In order to remain competitive, innovative and attractive brand, Starbucks is introducing many new products to broaden its appeal.

CEO has stated: “All company growth is governed by whether the quality can be maintained. It there is any uncertainty about the quality, a new strategy won’t fly in, no matter how good it might seem, that is to say they wouldn’t compromise with the quality in extending the range of products.”

Do a brief SWOT Analysis of Starbucks?
Joint Ventures. Quality Control. Customer responsive culture and aura inside Starbucks. Finest Coffee. Wide Geographic Coverage. Strong Brand Management. Product diversification. Established logo, developed brand, copyrights, trademarks, website and patents.

Company operated retail stores, International stores. High visibility locations to attract customers. Valued and motivated employees, good work environment. Good relationships with suppliers. Industry market leader. Globalized. Widespread and consistent. Knowledge based. Strong Board. Strong financial foundation.

Size. Lack of internal focus (too much focus on expansion). Cross functional management. Product pricing (Products are expensive as compared to its competitors).

Expansion into retail operations. Technological advances. New distribution channels (There would be new ways in delivering the products). New products. Distribution agreements. Brand extension. Emerging international markets. Continued domestic expansion/domination of segment.

Competition (restaurants, street carts, supermarkets, other coffee shops, other caffeine based products). US market saturation. Coffee price volatility in developing countries. Negative publicity from poorly treated farmers in supplying countries. Consumer trends toward more healthy ways and away from caffeine. Fragile state of worldwide production of specialty coffees. Corporate behemoth image. Cultural and Political issues in foreign countries.


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