Competitive Strategy and Application of Strategy Models

This report explores the business strategies used by Starbucks and the application of strategy models. It discusses the competitive advantages gained by Starbucks and the models and theories used to define their business strategies.

Competitive strategy And
application of strategy
models

Executive summery
This report has concluded study of Starbucks which is an American multinational
corporation explaining their business strategies like – Globalization, culture adoption corporative
strategies etc. This report also has concluded models and tool to define business strategies.
Porter's Five forces helps to identify the strategies that used by Starbucks and also explain some
new strategies that can be used by the Starbucks.

Table of Content
Executive summery..........................................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
Business strategies used by company to take competitive advantages........................................4
Business strategy models and theories.........................................................................................6
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
A Business strategy is a long term plan of an organization to achieve set objectives and
goals for the business success. Strategies are made by leaders and managers of the company
within the decision marking process and without having proper strategies in business firm cannot
achieve success, and they can not take competitive advantages.
This report will cover case study of Starbucks corporation which is an American
multinational corporation. They are selling products such as Coffee Smoothies, tea and baked
goods and sandwich additionally (Abdel-Basset, Mohamed and Smarandache., 2018). Starbucks
is the largest Coffee-house chain who have more than 3100 locations in all over the world.
This report will explain the business strategy used by the Starbucks and how it is helping
them to achieve success within their business. It will also include theories and models of
business strategy to understand more effectively.
MAIN BODY
Business strategies used by company to take competitive advantages
A business strategy refers to the actions and decisions that company takes to reach their
business goals and objectives, so they can take competitive advantages within the market where
they are operating their business (Abdel-Basset, Mohamed and Smarandache., 2018). It helps to
define that what companies should do, so they can reach to their set business goals which can
help guide the decision-making process for the hiring and resource allocation. A business
strategy is a set of competitive moves and actions that a business uses to attract customers,
compete successfully, strengthening performance, and achieve organisational goals. It outlines
how business should be carried out to reach the desired ends.
Starbucks is top leading coffee selling company who are famous for their coffee culture
and taste. They are selling their product on the international market using the various strategies
and innovation in there product that helps to attract customers. This company is making
strategies and their goals is to own more than 12500 stores in all over the United states till the
end of 2015. This company not only focusing on the US market, but they are also looking to
expand their business in Chain, and they are expecting to open 1500 stores till the end of 2015
and till the end of 2012 they have already increased their stores in China around 700. To expand
their business in the countries they adopt the taste and culture of the countries local places. In
Chinese country also they have adopted the local taste like in china they are providing different

flavour to the Chinese people like Red bean Frappuccins. This strategy helps them to be
successful in the chines market and in year 2008 they incensed their profit around 886000 and it
shows that how effective their strategy is in this market.
Main strategy of the Starbucks is to expand their business as fast they can so in year
2013 they enter the market like India and Vietnam. Leaders and managers of the Starbucks are
effective, and they do market research before entering in the country (Ervural And et.al., 2018).
They enter the Vietnam market because they were knowing that This market is the second largest
Coffee bean producer and first is Brazil they create good relationship with the local farmers in
the Vietnam market and communicate with them to grow a high quality Coffee bean which is
known as Arabic Coffee bean. On the other side Indian where they use the partnership strategy to
enter the market. They take entry in this country through partnership with some of the largest
group in the India TATA group to expand their business rapidly, and they also get success in this
market.
Expansion of the Starbucks within the European countries was mixed, and they little
success with these markets but it has been also encounter another different set of the coffee
culture. People are more connected with the European coffee culture so Starbucks expand their
stores ad create some addition space for their customers so they can attract customers. This
strategy they were also using in the Asian country because their also people take time to adopt
the Starbucks.
Starbucks is one of the most profitable business strategy is opening their business near
the airports or within the airport (Holotiuk and Beimborn., 2017.). Most of the people who stay
at the airports prefer to drink coffee, and they get the Starbucks as option. This strategy also
helps them to get success in their business, and they were able to show their presence in the
market where they are operating their business.
Starbucks marketing team play this roles by analysing the markets and understanding the
needs of the customers. The corporate level strategies of the company for formulated by top
management of the Starbucks like diversification and Investment. Top management of this firm
decide where company will invest their money, and they look for the all the investment made by
the company. Functional level strategy- Starbucks have skills full team who are working in
various department for the Starbucks r. Company have marketing team who are skilful and
experts in the marketing and having brief knowledge of the markets. Marketers of the Starbucks

identify the needs and demand of the customers and inform to the production department of the
company where they develop product and satisfy the needs and of their customers.
Business strategy models and theories
There are some models available that can helps to identify the business strategies used by
the Starbucks and also provide information about how their business to take competitive
advantages in the market.
Porter's five forces of Starbucks
Threat of new entreats
The threat of new entreats within the industry where Starbucks is operating their
business is moderate. It means that the barriers are not very higher for the other business and
investment is also very low (Loredana., 2017). Local business can also compete with the brand
like Starbucks but Starbucks has gain large market shares based on the infrastructure, and they
provide the best quality and premium taste in their coffee. Their main target are rich people so
new or existing coffee business within the local area does not affect the Starbucks highly.
Bargaining power of customers
A bargaining power of the customers in the case of Starbucks is low as compare to the
other brands within the Coffee business. This is because Starbucks provide quality in the
product that easily satisfy the needs and demand of the customers. Their main targets are high
class people who can easily pay for the coffee. Taste in the Starbucks coffee is totally different
from the other that helps to create differences in their product and way of presenting their coffee
is also unique. This enables them to sell their product in higher practices.
Threat of substitute product
The number of substitute product for the Starbucks organization is very high. From
juices to tea and alcoholic as well as non-alcoholic drinks, there are various substitutes available
in the market where they are operating their business (Martins., 2020). There are pubs and
restaurants that provide both good ambience and quality products. Another threat for the
Starbucks is that most of the substitute home made product are available within the market so
customers prefer to make coffee at their homes instead of going t the coffee stores.
Bargaining power supplier
Supplier bargaining power on the Starbucks is low because company has selected
suppliers and company themselves select the suppliers on the basis of quality and quality

provided by them. Starbucks is top leading company within the beverage industry, so they are
having many options to choose and suppliers have to decrease the prices of Raw material
because Starbucks take raw material in bulk, and they are having huge reputation in all over the
market. This creates force on the suppliers to provide raw materiel to the Starbucks in the low
prices, so they can create good relationship with them and earn probability.
Competitive rivalry
Competition with the food and beverage industry is very high and mostly who sell coffee
and similar beverages to their customers. The main cause that moderates the competition for
Starbucks is their market share (Phadermrod, Crowder and Wills., 2019). It has the highest
market share followed by Dunkin and McCafe. However, the premium quality and product based
differentiation that Starbucks uses also give it some edge over its competitors and most of the
customers are loyal to this company but still competition is very high. Local brands attract the
both customers if they are rich or belong to the normal family but Starbucks only target to the
high class people and it makes harder for them to take competitive advantages.
SWOT Analysis of Marks & spacer
SWOT analysis is the business strategy tool that is used to identify companies strength,
weakness, opportunities and threats of their business. BY identifying strength and weakness it is
easy for them to overcome and create opportunities for their business. Starbucks can also use this
strategy to take competitive advantages and by converting their threats and weakness into the
opportunities and strength.
Strength
 Clear Brand image- Starbucks is selling premium products to their customers so their
main target are rich people. Their brand image within the beverage sector is very high
because of the taste provided by them (Sia, Soh and Weill., 2016). It is totally different
from the normal coffee taste.
 Strong financial performance- Starbucks has strong financial performance in their whole
business with the annual revenue of the 2019 was around 26.5 billion dollar and profit
was around 11.7 billion dollar.
 Company is rapidly incensing their business and expand their stores all around the
world . From the 1998 to 2019 they can expand their number of location from 1800 to
3100.

Weakness
 High prices- prices of the product available on the Starbucks are very high and its not
affordable for the people who belong to the middle class family. The prices of the
products are more costlier than the outlets like McDonald's and other competitors of the
company.
 Limited products- Starbucks own limited product in their business, they are not having
products that are unique or something. Other outlets like McDonald's and Dunkin provide
varieties and options within their products
Opportunities
 Varieties in products- Starbucks is having good reputation within the markets where they
are operating and Starbucks is famous among the young generation where they come for
chilling with friends (Soltanizadeh and et.al., 2016). Starbucks can as create
Opportunities for themselves by adding new product in their list, customers will easily
accept their new products because of high reputation.
 Improvement in supply chain- Improvement within the supply chain management of the
company can create good opportunities for the Starbucks to take competitive advantages.
company can take expert advice or collaborate with the supply chain providers to
improve their supply chain scalability.
Threat Competition – Competition within the retailer industry is very high and new competitors
within the industry is increasing (Yuan and et.al., 2020). Many coffee houses provide
products at an low-cost . This can threaten the future’s stability of Starbucks which offers
higher prices.
 Economic threat – Coronavirus created threat ion the business all over the world
including Starbucks. People are not coming out of their homes and it affect the
profitability of their business.
 Local culture – Most of the country people like to follow their culture and it affect the
Starbucks a lot. Europasian countries people do not want to change their coffee culture,
so they dio not adopt Starbucks culture.

CONCLUSION
As per the report has been covered case study of Starbucks explaining their business
strategies like – Market expansion strategy , culture adoption and corporative strategies etc. This
report also has been concluded models and tool to define business strategies. Porter's five forces
matrix helps to identify the strategies that used by Starbucks and also explain some new
strategies that can be used by the Starbucks to reduce threat force. In the end of report has been
analysis Swot analysis that is useful tool to find out companies strength and weakness so
Starbucks can covert it into the opportunities.

REFERENCES
Books and journals
Abdel-Basset, M., Mohamed, M. and Smarandache, F., 2018. An extension of neutrosophic
AHP–SWOT analysis for strategic planning and decision-making. Symmetry.10(4). p.116.
Cleberg, C., 2019. Strategic Success: The Ansoff Matrix vs. The Balanced Scorecard.
Ervural, B. C. And et.al., 2018. An ANP and fuzzy TOPSIS-based SWOT analysis for Turkey’s
energy planning. Renewable and Sustainable Energy Reviews.82. pp.1538-1550.
Holotiuk, F. and Beimborn, D., 2017. Critical success factors of digital business strategy.
Loredana, E. M., 2017. The use of Ansoff matrix in the field of business. Annals-Economy
Series.2. pp.141-149.
Martins, A. M. A. R. D. L., 2020. Scenarios and Ansoff Matrix(Doctoral dissertation).
Phadermrod, B., Crowder, R. M. and Wills, G. B., 2019. Importance-performance analysis based
SWOT analysis. International Journal of Information Management.44. pp.194-203.
Sia, S. K., Soh, C. and Weill, P., 2016. How DBS Bank Pursued a Digital Business
Strategy. MIS Quarterly Executive.15(2).
Soltanizadeh, S. and et.al., 2016. Business strategy, enterprise risk management and
organizational performance. Management Research Review.
Yuan, Y. and et.al., 2020. Business strategy and corporate social responsibility. Journal of
Business Ethics.162(2). pp.359-377.