Internal and External Issues
Starbucks’ generic strategy, based on Michael Porter’s model, is responsible for its significant emphasis on specialty coffee products. As such, the company’s intensive growth strategies should be aligned with the generic strategy in order to maximize performance. The company has focused on expanding its market reach, not only in the United States, but also around the world.
The focus on expanding business in the United States has, however, led to cannibalization. The company has faced serious issues, as adding new locations no longer serves to boost sales. The increase in the number of stores in the United States impacts the company negatively. The stores are too close to each other and the company needs to slow its United States growth. Each store has nearly four other locations within a one mile radius, hurting the company in terms of sales.
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The company is also currently innovating new beverages. Although this is a smart move, it may drive more switching among existing customers instead of increasing incremental sales. Therefore, the company needs to address the issues in order to enhance revenue sustainability.
Generally, Starbucks relies heavily on the United States market. As such, any adverse economic conditions in the United States could negatively impact on the company. Thus, the company needs to aggressively diversify its markets so that a change in a particular market does not affect the company in a significant way. Most of the assets and operations of Starbucks are stationed in the United States. Having a significant amount of investment in a single economy could influence the performance of a company significantly in the event of changes in economic conditions.
The company is increasingly growing, and the company should consider investing in the global supply chain. Large scale and widespread operations requires a robust supply chain that ensures efficiency. The expansion of operations should go hand in hand with development of the supply chain.
The company needs to integrate technology into various business processes in order to enhance the experience of customers. The company needs new and efficient business support technology. The primary purpose of the new technology is to improve the company’s website. Additionally, the new technology will help in processing payments quicker so that people wait for a significantly shorter time. It is important to realize that Starbucks can achieve technology related value addition through integration of technology into a wide range of business processes and procedures, especially advertising, product development, customer satisfaction monitoring, and sales completion.
Trademark and copyright infringements are some of the issues the company is facing. The coffee giant has had to file suits against competitors who mimicked some of its products, particularly the Frappuccino cups. Although the company prevailed in a copyright and trademark infringement lawsuit, such infringements could have a negative impact on the company’s sales. The company filed a suit against a line of bongs that mimicked Starbucks’ Frappuccino cups. The glass vessels featured a mouthpiece that resembles the company’s signature green straws, along with a logo looking like the Starbucks siren. The competitors willfully intended to create an association with the Starbucks’ marks in order to capitalize upon their success and popularity. Such issues could impact the growth of the company, both in the short term and long term.
Competitors
Generally, competition is catching up with Starbucks at home and abroad. Costa Coffee, McDonalds McCafe, Dunkin Donuts, Café Coffee Day, and Peet’s. Costa Coffee is the world’s second largest coffee house after Starbucks. It is the largest coffee house in the UK. The company has expanded to over 3000 stores in over 30 countries. It operates over 2000 restaurants in the UK alone. Costa Coffee is Starbucks’ great competitor, as it exclusively deals and promotes its coffee internationally. As such, it represents a significant competitor of Starbucks.
McDonalds McCafe is another competitor for Starbucks that is strongly coming up. It is gaining a considerable market share, meaning that it is a threat to the growth of Starbucks. McDonalds McCafe has the backing of the huge number of McDonald stores across the world. This competitor not only specializes in coffee, but also food and other beverages. As such, the company is a major competitor of Starbucks.
Dunkin Donuts is a donut company, as well as a coffee house. It is based in Massachusetts, United States. The company has grown to become one of the largest baked food and coffee chain in the world. Currently, Dunkin Donut operates in more than 35 countries, with over 11,500 stores around the world. The company is a huge competitor of Starbucks.
Café Coffee Day is another global firm that competes with Starbucks. It is the largest Arabica beans producer and exporter in Asia. The firm is currently a world brand competing for a share of the global market alongside Starbucks. The company is known for vertically cutting down on costs through owning coffee plantations and making furniture for its outlets.
Future Outlook
There are currently many coffee shops in the United States and around the world. although the coffee market could be viewed as saturated, the popularity of coffee is showing no sign of falling. It is important to realize that Starbucks has growth potential not only in the United States, but also around the world. Starbucks has a dividend appeal, brand strength, and emerging market potential. Additionally, the company offers long term capital gain potential for investors.
Starbucks aims at growing its digital relationships. The company is set to unveil a series of campaigns designed to build personalized digital relationships with customers. The relationships will create new revenue opportunities for the company. The company also seeks to expand its operations in China. The company has experienced success in the Chinese market due to their commitment to deliver unique moments of connections with customers every day.
Tools for Measuring Success
As a way of measuring its success, Starbucks pays close attention to employee accomplishments and social media metrics. Starbucks has made their priority to know about each employee, their families, and personal goals. Additionally, the company has made it a point to assist employees achieve such significant goals. By gauging employee accomplishments, Starbucks can measure its success.
Marketing plays a critical role in the success of Starbucks. As such, the success of marketing efforts determines the success of the company. Starbucks uses marketing metrics to keep the marketing program on track by effectively measuring where they were and where they are now. Social media metrics are used to measure brand success.
