Starbucks is a successful company that has continued to grow over the years. It operates in the coffee and snacks industry. However, it dominates the coffee industry. The company is multinational with many stores in different countries to maximize its revenue. It maximizes on its unique strategies to dominate the market, which potentially holds off the growing list of its competitors.
Firstly, Starbucks concentrates on product innovation. It has consistently used this approach to remain competitive. For example, it launched a Pumpkin spice latte, which is one of its favorites. Consequently, this product innovation increased store visits by more than one hundred and fifty customers in the first two days. As a result, it increased the Quick Service Restaurant (QSR) market share to 6.96 %. Despite the competitors like McDonald’s and Dunkin’ launching a similar product, their market share receded (Team, 2016). Hence, product innovation helps to keep Starbucks ahead of its competitors.
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Moreover, the company capitalizes on changing consumer tastes and preferences. The company’s flexibility gears it to adapt to the different economic trends in the market. For example, it utilized this aspect in China when the consumer taste and preference for the tea-drinking market changed. In this regard, it introduced almond milk in the market. Also, it added other non-dairy products like coconut milk following research by Mintel organization, which showed that many Americans consume non-dairy milk. As a result, the company expects that the demand for dairy milk will reduce. Hence, its consideration and prospection of change in consumer taste and preference help it to make critical competitive moves.
Furthermore, Starbucks follows a differentiation strategy. Differentiation helps a company to distinguish its products from other similar products that its competitors offer. In this way, customers can identify the real product that they want to buy. The strategy is one of the most significant methods that Starbucks employs to remain competitive. For example, it offers premium product mix and supreme customer services (Geereddy, 2013). The differentiation strategy helps to build Starbucks ' reputation, which sets it apart from its competitors.
Additionally, a non 100% franchising method for Starbucks cannot be undermined. Franchising is a popular strategy that many companies use to penetrate different markets. Notably, Starbucks uses aggressive expansion strategies (Thompson, Arsel & Iacobucci, 2004). However, unlike most competitors who fully franchise their products and services, Starbucks believes that its culture and values that make it more competitive (Geereddy, 2013). Following this, it considers operating most of the stores itself to have control over them. For example, when expanding to the international market, the company used joint ventures and company oriented stores. A franchise helps a company to outsource risks to the franchisee which enables a company to stay profitable, hence contribute to its growth.
On the other hand, Starbucks’ strategies and industry aspects form deterrents to entry in the market. One of them is economies of scale due to the large size and number of its distribution channels. It helps the company to enjoy low cost of distribution, which hinders other potential entrants as it would be costly for them. Besides, the coffee industry has progressed in product differentiation, hence creating a customer base (Larson, 2008). Moreover, its continuous proprietary product innovation will deter other firms from entering the market and possibly cause others to exit the market.
In conclusion, Starbucks Corporation has continuously succeeded in the coffee industry. The growth comes from its strategies of product innovation, capitalization on changing consumer tastes and preferences, and differentiation. As a result, the company enjoys economies of scale and form barriers for entry into the market, which holds its growing list of competitors.
References
Geereddy, N. (2013). Strategic analysis of Starbucks Corporation.
Larson, R. C. (2008). Starbucks a Strategic Analysis. Past Decisions and Future Options .
Team, T. (2016, October 13). Retrieved November 25, 2019, from https://www.forbes.com/sites/greatspeculations/2016/10/13/how-is-starbucks-maintaining-its-competitive-edge/#198aba25759c .
Thompson, C., Arsel, Z., & Iacobucci, D. (2004). The Starbucks Brandscape and Consumers’ (Anticorporate) Experiences of Glocalization. Journal of Consumer Research, 31 (3), 631-642. doi:10.1086/425098
