Starbucks is an American company that was started in Seattle, WA, in 1971. The company is a specialty coffee retailer operating worldwide. Starbucks has many customers who walk into their retail stores on a daily basis for a cup of coffee, but it seems to be more than just the overpriced coffee that attracts customers in Starbucks stores worldwide. Starbucks has strived to provide a conducive environment and responsive and friendly staff to help customers with any service they need (Lemus, von Feigenblatt, Orta, & Rivero, 2015). In essence, people tend to consume Starbucks products because of what the company represents as well as the status symbol attached to it. Starbucks operates internationally having principles and a structure that has contributed to its national and global triumph(Lemus et al., 2015). This company operates in a highly competitive industry; therefore, to maintain a competitive advantage and thrive internationally, the company needs a strategic plan that will enable it to compete with other competitors successfully. Therefore, this paper will begin by analyzing Starbucks’ current situation and then provide a suitable strategy plan that will enable Starbucks to compete successfully internationally.
Starbucks situation analysis
At the moment, Starbucks is among the top companies in the coffee industry. The company is privy to the tight competition and has made adequate preparation to face the competition. A look at qualitative and quantitative analysis will enable us to determine Starbucks’ situation in its existing strategy. Starbucks’ strengths, weaknesses, opportunities, as well as threats analysis, and also strategic issues analysis will aid in breaking down its strategy, providing both negative and positive responses to the company (Lemus et al., 2015). Starbucks has done a lot to facilitate its growth and expansion into the international business; it is currently. The industry competition is overwhelming, but Starbucks uses a high-quality differentiation strategy that enables it to meet the needs of its customer by all means. The company introduced wireless internet as well as Starbucks Digital Network, which allows it to offer an exponential experience to its customers as well as alleviate its sales as compared to its previous performance. Suppose people extend their staying time in Starbucks, they are more attracted to buying more food, drinks, or music from the stores that partner with Starbucks in the Digital Network. Therefore, Starbucks’ sale of music, including other forms of media, has increased through wireless internet introduction. Immediately after introducing wireless increases, Starbucks reported a 4% increase in sales (Lemus et al., 2015). Wireless internet is a main strategic asset for this company, and it will progressively assist Starbucks in the countries it will introduce.
Another strategic asset to Starbucks is its decision to expand to India as its new international market. Essentially, India has an economy that is growing exponentially and among the upper and middle class is where Starbucks will be able to enlighten its citizens to start consuming coffee (Lemus et al., 2015). India has a high inclination for coffee since it has been continuing to be industrialized. Indian citizens have begun to quit tradition and clinch to trendy and new styles. Another prospective country for Starbuck has also been China. Recently, Starbucks settled in China, and it mainly emphasizes the growing possibility that China at the moment. With gradual growth in China, the company will have the potential of taking on McDonald’s as it starts to expand (Gopalakrishna, Victor, & Fleischmann, 2016). Moreover, China is now heading towards being the second-largest coffee market as it leads Canada, the UK, and Japan. Meaning that Starbucks will incur a substantial profit increase as its new target market start to increase. Starbucks has a robust international strategy that enables it to continue attaining its success in the future.
To fully understand the way Starbucks is progressing in the coffee industry, it is essential to consider its numbers. Starbucks decreased by 10% in its stock price in the 2008 economic crisis (Hossain & Islam, 2015). The 2008 and 2009 financial crises significantly declined Starbucks’ stock price. But Starbuck was able to overcome the loss it had incurred and thrived again. Now, Starbucks is more focused on retaining its stock price to be high. Even though the stock price for Starbucks fell in the course of the economic crisis, it was able to maintain its revenue. Starbucks’ profit significantly increased from $7.8 billion to $10.7 billion at the moment. The economic crisis which made several companies fail placed an impediment on Starbucks’ revenue. An organization that is capable of enduring a financial crisis and still manages to remain stronger than it is stock prices was high is an organization that cannot fail quickly. Starbucks has opened more than 29,324 stores globally (Lemus et al., 2015). Starbucks has recognized the significance of expanding its business globally as a way of increasing its target market. The company has also sustained its growth as well as revenue at their challenging times, especially during the economic failure within the primary market. In essence, Starbucks has gone through a lot of challenges, but it has made its way through them and continues to expand and thrive.
Starbucks has many strengths in the coffee industry. The greatest strength is that Starbucks is the current market leader within the coffee industry, with several stores in different geographical areas worldwide. Another strength is that Starbucks has an exponential growth rate, both locally and internationally. Starbucks is currently opening more stores in its international market. The company is also financially strong (Lemus et al., 2015). Now, its stock profit is high. Starbucks has robust brand recognition by its consumers. Its brand is well known for its high-quality products as well as its conducive and friendly environment for consumers. In essence, the company has several strengths that will enable the company to thrive in the future.
Starbucks also has some weaknesses. One of its main weaknesses is the prices of its products. McDonald’s utilizes Starbucks’ high price as leverage against Starbucks in their marketing strategy. Another weakness is that 75% of Starbucks’ profits are acquired from other products apart from coffee products and its other major specialty beverages (Lemus et al., 2015). This signifies that with increasing prices of coffee beans, Starbucks will significantly affect them every time the coffee prices increases. McDonald’s, as well as Dunkin Donuts, concentrate more on food than coffee, thus making them less susceptible to the increasing coffee prices worldwide. Generally, Starbucks’ weaknesses do not overwhelm its strengths.
Opportunities for Starbucks within the coffee industry are the next issue that requires to be assessed. As a company, the international market is the most significant opportunity for Starbucks. In countries experiencing economic growth, they have increasing upper and middle classes that incline to spend more on specialty coffee. These countries are turning out to be more industrialized, growing their tastes to comprise coffee. Brazil is anticipated to be the most significant coffee consumer worldwide; therefore, it provides a big market for Starbucks to enter and thrive. Another developing country in coffee consumption is India, which recently started to accept the specialty coffee industry. Starbucks’ expansion to India gives it great opportunities to succeed and grow financially. Business in India has changed their preference from tea to coffee as the country has started to be economically successful. An agreement was also signed between Starbucks and Tata coffee of India, the 5th largest coffee exporter, to start selling their coffee across the world (Gopalakrishna et al., 2016). This is Starbucks’ big opportunity since it enables them to gain accessibility to more coffee. As coffee prices increase because of the production costs, it will be vital for Starbucks to access large quantities of coffee worldwide. Starbucks has a focus on entering China anticipating expanding its increasing market. Therefore, Starbucks inevitably has great growth potential with the opportunities that they have.
The biggest threat that Starbucks faces is competition from its competitors, such as McDonald’s. McDonald’s is a fast-rising competitor that is opening their McCafe’s in the present franchise stores worldwide and is focused on taking over Europe. This gives McDonald’s a competitive advantage over Starbucks, whereby opening a store in Europe costs an investment of $350,000 while McDonald’s investment is way much less than that. Suppose McDonald’s progresses with opening McCafes throughout Europe as well as other sections of the world due to the minimal start-up cost (Lemus et al., 2015). It could significantly minimize the geographical space advantage that Starbucks has over McDonald’s.
Generally, Starbucks shows to have more opportunities to expand its business and grow than threats. Starbucks also has a unique environment and business atmosphere that its competitors cannot emulate. Therefore, it will be vital for Starbucks to exploit the opportunities that it has in its future endeavors, but it needs to have a proper strategy that will enable it to gain a competitive advantage to succeed. As a matter of fact, Starbucks will always come across threats, but it will outdo them and thrive (Collinson & Narula, 2014). After an in-depth analysis of Starbucks’ situation, it is vivid that Starbucks is a strong company with significant opportunities that guarantee it to be successful in the future. It has a robust quantitative and qualitative strategy. The plan of Starbucks is adequately implemented with the aim of improving its brand. The company is financially stable and strong. Even after encountering a financial crisis that terminated several companies, Starbucks made it through. The Starbucks SWOT analysis shows that it is a company that is strong both internally and externally. It is essential to apprehend Starbucks’ present situation before venturing to determine how it competes internationally. This will help in developing a strategic plan to enable Starbucks to compete even more effectively internationally.
Over recent years, Starbucks has significantly expanded into various international markets. Although Starbucks has made a successful step to expand into foreign markets, many of its stores, as well as sales, are still based in the United States. It has increased the number of stores it has since 2004, though it has continuously remained at just 30% international market. Starbucks stores in the United States are 14,606 and 14,718 in other parts of the world (Lemus et al., 2015). Starbucks should expand its existing global markets to diversify the company’s income avenues. Starbucks has a significant market base in the United States which is more than the international market base. Therefore, the company needs to put more focus on the expansion of its business into other diverse markets in different countries. Starbucks can also consider adding more stores in countries where they are already operating in. This company has more than 50% of its profits emerging from only one market, which is the United States. Due to that, it is hard to recover, suppose this one market starts to underperform. Albeit Starbucks should make investments in additional foreign countries, it still needs to be careful cautious about social norms as well as cultural differences in various countries. Starbucks should significantly depend on the culture stating that products are capable of touching a deeper nerve, prompting association in relation to the identity of the consumer as being a member of a specific community. Regardless of where Starbucks ventures to invest, it still needs to take into consideration the market of the people it intends to sell its products (Aiello & Dickinson, 2014). The most common and preferred non-alcoholic beverage in Britain and other countries is tea, whereas the Mormon people neither take tea nor coffee due to their religious background and cultural heritage. Even though Starbucks has to widen its market scope, it has to take time and invest more in adequate research into different communities or countries it intends to enter. Starbucks also has to balance out its income between many different markets, so that it will not necessarily have to be worried about the collapse of the one market it depends on. Starbucks has strived to make expansions on its market base, but it still requires alleviating its level of foreign investment.
Another strategy that could enable Starbucks to compete effectively internationally and succeed is through diversification of its product base as well as providing more economical prices to its customers. Starbucks is recognized for its good and high-quality light appetizers, coffees as well as teas, but the company does not provide any foodstuff that is of more substance. Trends arrive and pass by from day to day. Starbucks has also accrued a lot of money, though changes could also occur if only it is a high-class trend. In an instance of another financial crisis, the high-quality coffee belonging to Starbucks is something that the majority of people do not consider to be basic as a house (Talpau & Boscor, 2011). In the previous financial crisis that hit Starbucks, its stock was severely beaten, and it has now grown. Starbuck has to consider the probability of another economic crisis occurring. At the moment, the economy has already grown back from the previous crisis, but several people in the United States are jobless and without a source of income. A more significant population of these people were the middle and upper-class employees who would use their extra income on purchasing products from Starbucks. Currently, most people have begun reconsidering their spending habits and prefer cheaper coffee to sustain them throughout the day. Essentially, Starbucks has turned out to be a status symbol to many people, mostly students, but as a priority to some people. Suppose Starbucks provided meals and other food items options; it would enable it to expand its product base and consequentially increase its operational scope (Hossain & Islam, 2015). Starbucks can also operate more specials that illustrate that it is investing in reconstructing the economy. Suppose Starbucks would diversify the products it offers and provide more economical means of buying these products, Starbucks would significantly thrive even through difficult economic periods.
Starbucks should form network relationships with other essential parties. To successfully compete at the international level, it needs to take part in cross-border collaborations and form a partnership with important parties. It needs to be careful with the companies or parties it seeks to partner with when entering a new market base. By joining the global alliances, joint ventures as well as licensing, it can easily expand into different new markets. Starbucks should leverage its alleviating strong brand through various alliances in selling Starbucks coffee as well as developing new products bearing the Starbucks name (Patterson, Scott, & Uncles, 2010). This is because Starbucks’ name is strong, allowing it to have authority and power to leverage during negotiations with other relevant parties during its expansion when entering new markets. This company should use these alliances in assist in creating innovative new products that Starbucks might not have been capable of completing or justifying suppose it was Starbucks to work on it alone. Most importantly, it needs to know exactly what it wants and can benefit from a strategic alliance. It should seek a partner that has common share values or corporate culture, adequate financial and human resources, infrastructure that can be leveraged as well as strategically fit partners. It should also take advantage of its previous experience, availability of uncompromising standards, as well as its corporate alliances so that it can thrive in the international market. Starbucks should also make licensing agreements with certain parties, allowing them to begin making Starbucks products available in local grocery stores, supermarkets, and shops. This will help in distributing and increasing the availability of Starbucks products in various markets (Lloret, 2016). Essentially, Starbucks needs to have appropriate partners in mind for it to form a successful partnership. Moreover, the company should be willing to weigh to determine the good and bad in a probable alliance as well as make a decision on whether the alliance will be beneficial to the company. Starbucks should also consider not partnering with partners that do not have similar corporate mindsets or goals. Cross-border collaboration makes the company more capable of expanding and competing successfully in different markets.
Starbucks needs to expand its world market presence and disperse its source of profit to make sure that it has a stable economy for the company. The extension of Starbucks’ geographical scope will be critical in enabling Starbucks to grow (Lemus et al., 2015). Starbucks in the United States has almost reached its expansion limit, but the rest of the world still has more room for expansion with a lot of opportunities and customers. Starbucks has not yet entered many regions. Suppose it starts to research and explore new parts of the world, Starbucks will enable itself to expand significantly in the future (Hanson, Hitt, Ireland, & Hoskisson, 2016). If Starbucks also diversifies its products and creates new and innovative economic prices, it can grow its operations. More people can check in at Starbucks for lunch, suppose they had an option. Essentially, Starbucks is a good company and has excellent opportunities which if it makes changes to its strategy to exploit these opportunities, it could become the leading international company. While this strategic plan will be helpful in improving Starbucks’ competition at the international level, formulating and applying a theory would be more effective in ensuring the strategy is successful. Therefore, the effective competition theory is recommended to be formed in order to support and ensure that this strategy meets its goal.
Effective Competition Theory
The intended outcome of the strategy
This strategy is intended to make Starbucks expand to different markets and compete effectively against its competitors. This strategy will enable Starbucks to exploit all its opportunities to increase its success both locally and at the international level.
Some key antecedents identified include; forming a relationship with important parties, acquisition, forming an alliance, product, and market diversification. These antecedents can be enhanced or mitigated by factors such as the political climate of the market base, Starbucks leadership, the business environment, and the effectiveness of collaboration with other parties.
In essence, this theory can also be applied to other companies that aim at expanding to various markets globally. This theory applies to other companies because it is open and tends to share a collective mindset in addressing multiple strategic issues and promoting the expansion of the business to the international level in various market bases.
To sum it all up, Starbucks is a strong company that is aimed at always expanding its business operation to different parts of the world. Although being an international company, it still has not expanded to most parts of the world. The business strategy recommended above includes exploiting every available opportunity, product, and market diversification as well as collaborating with partners in order to put Starbucks in a position where it can compete comfortably with other competitors in different markets at the international level. All in all, Starbucks has a bright future, and if it considers this recommended strategy, it will be able to compete effectively in the international market and be more successful.