Strategic Management of Starbucks

This report discusses the strategic management of Starbucks, including its overview, corporate level strategy, business level strategy, and functional level strategy. It also evaluates the strategic decisions made by Starbucks and provides recommendations for future strategies.

Strategic Management

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
Overview of organisation ............................................................................................................1
Corporate level strategy ..............................................................................................................1
Business level strategy ................................................................................................................3
Functional level strategy .............................................................................................................6
Recommendation ........................................................................................................................7
CONCLUSION ...............................................................................................................................7
SUMMARY ....................................................................................................................................8
REFERENCES................................................................................................................................8

INTRODUCTION
Strategic management refers to the process of planning, organising resources and setting
the procedures, goals and objectives for the company. The manager makes proper strategies and
policies to allocate the resources at right place as well as monitor them whether they are working
in right manner or not in order to achieve the per determine goals of company. To define the
concept of strategic management, the chosen organisation is Starbucks which is multinational
chain of coffee house in whole world. It was established in 1971 by Zev Siegl, Jerry Baldwin and
Gordon Bowker to offers best quality of coffee to the people (Aggarwal and Woolley, 2019).
The report highlights overview of organisation, corporate level strategy and analysis of
strategic decisions. Further, it covers business level strategy and evaluation of its strategic
decisions. At last, it defines functional level strategy and its strategic decisions as well as
recommendation for future strategies with justifications.
MAIN BODY
Overview of organisation
The Starbucks is the world famous coffee house with huge brand value and publicity
among people. It has large number of stores across the world which changes the perception of
people about the food and beverage industry. The company provides quality food and like coffee,
tea and many drinks. The company has around 33,833 stores in more than 70 countries to
provide these services to meet the needs of the customers. It operates at large scale and many
stores carry various items such as tumblers, mugs, coffee presses and scoops to provide variety
to customers (Al Jahwari and Budhwar, 2021). Top management of Starbucks makes innovative
strategies to effectively conduct their business operation at large scale globally in order to
increase loyal customer base, brand value and market share.
Corporate level strategy
Corporate level strategy refers to the multiple plan of business that managers use to
analyse, explain and outline processes for employees so that they can achieve determined goals
of company. It is use by the management of Starbucks to increase the profitability and
productivity of the company. They make most effective strategies and take decisions to achieve
the sales target as well as to expand their business new market in another country. The top level
management of Starbucks take major decisions related to make investment to expand their
1

operations in many countries as well as disinvestment in many stores which were facing heavy
losses. Also, they take decision and make strategies regarding mergers and acquisitions to
expand their business activities to increase market share and customer base. Starbucks use joint
venture and product development corporate level strategy to conduct their business operations in
order to gain competitive advantages over competitors. (What is Starbucks corporate level
strategy? 2022)
Example of strategic decisions at this level Joint venture strategy- Starbucks used a joint venture strategy at its initial level to run its
operation at local market. Further, the managers conduct market research of many
countries to determine potential market for their expansion in order to attract large
number of customer for the maximum profit (Ayedee, Kumar and Shaikh, 2021). By
raising funds from various sources like venture capital and banks, they launch new stores
in various part of the domestic country and in new market in another country. Product development- Top management of Starbucks use another strategy such as the
product development to make their product more attractive or unique and gain
competitive advantage in the market to increase huge customer base and brand value. The
manager of Starbucks makes corporative strategy to retain their loyal customer base as
well as to target new segment by adding more ingredients or variety in their current
beverages products. The management of Starbucks develop their current food and
beverages item by making it finest ingredients and add more variety such as many
flavoured in coffee give them unique name so people come to experience something new.
They make their items different by serving it in attractive container and written the name
of the customer on it which generate the interest among them to buy it to meet their
desire needs (Barletta, 2019). Also, they provide best quality drinks with many additional
ingredients according to the demand of customer which enhances the experience of their
loyal customer base
Analysis and evaluation of strategic decisions
It has been evaluated that, professionals of Starbucks use Ansoff's growth matrix to
identify the growth opportunities as well as areas of development to get competitive advantages.
In Starbucks, the management can use this tool to get benefits from this matrix and chooses the
2

most effective strategy to increase profitability and customer base. Ansoff's growth matrix in
reference to Starbucks is as follows-
Market penetration- It has been evaluated that, this strategy can benefit management of
Starbucks to increase their sales and loyal customer base by changing the opening hours of stores
and use innovative way to serve in less time to retain their existing customers (Chiarini, 2018).
One of the disadvantage of this strategy is it increases the work load and production cost of
company.
Product development- It has been analysed that, this strategy can benefit Starbucks to
add new line of product as well as to introduce unique flavours in existing food and beverages
items to increase sales and profit. Limitations of this strategy is that it required expert knowledge
to implement changes.
Market development- It has been evaluated that, this strategy can benefit top
management of Starbucks by expanding their chain and opening many stores in another market
of domestic country. To provide their food and beverages in order to increase their customer base
and market share. Drawback of this strategy is that it needed huge capital and deep market
research for expansion.
Diversification- It is evaluated that this strategy can benefit Starbucks to explore their
business in many new countries by adding new line of products such as they can provide soft
drinks like mock tails in new market to increase brand value. Limitations of this strategy is that
customer preferences are not same in every country which required deep research (Clarke and
Crocco, 2021).
As per above information, the diversification is most effective strategy for Starbucks to
expand their company store and operations in new market in many countries by adding new line
of product for targeting new segments.
Business level strategy
The business level strategy termed as plan of management to outline the policies,
methods and structure of business for systematic as well as seem less working. The manager
make plan by analysing various external and internal factors as well as by keeping the goal of the
business in mind in order to achieve that in effective manner (Cornwell, 2022). The manager
determines internal factor by using VRIO model as well as analyse external factor by using
PESTEL analysis to identify the impact of these factors on the growth of business. When top
3

management of Starbucks determines all the factors and necessary resources which are essential
for conducting practices of business then they formulate effective business strategy by using
Porter's generic strategies to outline the clear task of every employee. The main aim of business
level strategy is to provide clear plan of actions to the workforce of company in order to gain
competitive advantages by providing and offering better quality as well as valuable products to
customer through making unique and innovative items in the market. Starbucks use product
differentiate and value based pricing strategy to get huge market share as well as customer base.
Example of strategic decision at this level
 Product Differentiate- Professionals of Starbucks use business strategy such as the
product differentiation to make their product different and earn competitive advantage in
the market to get huge profitability and market share. Starbucks makes corporative
strategy to retain their loyal customer base as well as to target new segment to increase
brand value and profitability (Gilinsky, Newton and Eyler, 2018). The management of
Starbucks make their product different by making these items with better quality
ingredients as well as serve it with very innovative method by writing the name of
customers on coffee mugs. Also they provide best quality drinks with many additional
ingredients which enhances the taste and value of products resulting in great experience
of customers. Value based pricing Strategy- The top management of Starbucks make business
strategy to used value based pricing policies to maximize their profit margin. The
manager conduct deep research related with economic and social conditions of the many
countries to fixing the price of their food items. They make effective strategy to
determine their target segment, audience in the target market to attract large number of
customers in order to increase profitability and market share. They offer best quality of
food and coffees which are made by many or better quality of ingredients which leads to
increase in the price of items (Helmold, 2021). The target segment of the Starbucks is
those people who belong to higher income group as well as they give more importance to
the better quality product for which they are ready to pay higher price to satisfied their
expectations. The management make policies in their organisation to make better quality
product and sell them at fixed price to their loyal customer base. In recent world people
4

are more health conscious and prefer healthy food to prevent from diseases to live better
life and give more focus to work.
Analysis and evaluation of strategic decisions
After making and implementing the business strategy the top management evaluate them
to find the area of in which they get benefits and profits as well as the area of their growth and
development. By evaluating their current business strategy, they can find their mistakes and area
for improvement in order to get high profit, customer base and market share (Hitt, Ireland and
Hoskisson, 2019). The management use Porter's generic matrix to evaluate their business
operations, strategy to make improvement in them as well as make another strategy to conduct
their business operations effectively. The manager of Starbucks can use it to identify many
strategies for growth and profitability of company to make sustainable competitive advantages.
The Porter's generic matrix in the context to Starbucks are shown below-
Cost leadership strategy- It has been analysed that, this strategy can benefit Starbucks to
make improvement in their business strategy and to attract large number of customers to gain
huge profit margin by working as lower producer of providing goods and services. Limitations of
this strategy is that it can be challenging to keep perceptions of quality of items.
Differentiation- It has been analysed that, this strategy can benefit Starbucks to make
unique flavour and variety of coffee as well as make their product different form their rivalries in
order to gain competitive advantages. Disadvantage of this strategy is that it needed huge market
research related current customer trends (Kerr, 2021).
Cost focus- It has been evaluated that, this strategy can benefit to get big market share,
maximum profit and loyal customer base of Starbucks by providing their food items and
beverages at affordable price to target niche market. Drawback of this strategy is it declines the
profit margin of the company.
Differentiation focus- It has been evaluated that, this strategy can benefit Starbucks by
offering their product in innovative manner by using unique method of serving. They can use
digital marketing tool to offer their items to large number of customer and make their services
different from competitors to gain huge customer base. Limitation of this strategy is that it can
bound the initial demand of products (Lynch, 2018).
5

As per above discussion, the most effective strategy for Starbucks is cost focus strategy
which can be use the manager by providing their product and services at affordable price to the
all income group people to increase their sale and profitability.
Functional level strategy
The functional level strategy is many functional departments in an organisation like
marketing, finance, human resource, operation and technology to support the policies of
corporate and business level strategy. Main aim of this strategy is to improve overall productivity
and effectiveness of business operations with in these department. The objective is to match
these strategies with the goal and policies of business strategy to achieve the target (Oketta,
2018). The professionals of Starbucks make various strategies for every department in order to
improve performance and productivity of employees. Starbucks use total quality management
and digital marketing strategy to increase productivity and profit margin.
Example of strategic decision at this level
 Total Quality management- The HR manager of Starbucks use total quality
management strategy to examine the performance of the employees and quality of goods
and services in order to offer better quality product to customers. After evaluating the
performance of employees they provide reviews and suggestion to them to make changes
and improvement in their working in order to enhance the quality of product. By using
this strategy, they offer high standard product to customers in order to increase their
experience and retain them for long term (Razak and Pardhasaradhi, 2021). Digital marketing- The marketers of Starbucks use this strategy to promote their food
and beverages items to large number of customers globally. They make effective strategy
for the working of employees to make reliable content for the promotions. The employees
conduct their practices by making research about multiple platforms of social media and
create accurate content to post as well as spread awareness about their business in whole
world (Schühly, 2022).
Analysis and evaluation of strategic decisions
It has evaluated that, Starbucks use resources based theory to determine the performance
of employees in all department in order to gain competitive advantage and achieve business goal.
The resources based theory in the relevance of Starbucks is as follows-
6

Firm resources- It is evaluated that, top management of Starbucks gather all the
necessary resources and categorised into various department such human, finance, machines and
many more. Further, they can evaluate their performance by using total quality management
strategy and make changes to improve the productivity of all department. The drawback of this
strategy it takes huge time to implement changes.
Firm capabilities- At this stage, it is analysed that it is benefit to Starbucks as they have
high skilled employees and advance technology which helps the company to make innovation
and increase their market share.
Competitive advantage- It has been analysed that, Starbucks has competitive advantages
of providing better quality of food and beverages services and they use advance digital marketing
technology to offer their product to increase the experience of customers. It provides advantage
to company to increase their sale and brand value (Trevisan, 2018).
Financial performance- It has been evaluated that, Starbucks operates their business at
large scale and have huge loyal customer base which leads to high profit margin and market
share. With the current functional strategy, the management enable to make innovation in their
business operation which increase the profitability and financial position of company.
Recommendation
It is suggested to the professionals of Starbucks, that they can use many other strategies
to operate their business functions effectively. They can use diversification strategy at corporate
level, cost focus strategy at business level as well as financial strategy at functional level.
Diversification- Starbucks can use this strategy by opening their store in many other
countries as well as by adding more line of products in order to get maximum profit and
customer base.
Cost focus- Starbucks can make changes in their current business strategy by using cost
focus strategy as they can reduce their production cost to offer their products at reasonable price
to order to target new segment (Wales, Covin and Monsen, 2020).
Financial strategy- Starbucks can make effective budget plan to implement new and
advance technology to promote their product or services to attract large number of customer by
collaborating with many marketing agencies.
7

CONCLUSION
As per above presented information, it is concluded that the strategic management is
most important practices of manager to make effective strategy for operations as well as growth
of the company. Further they evaluate these strategies and their result of working as per pre-
determined plan in order to find mistakes, advantages and area if development for future success.
The management strategy includes three level of strategy such as corporate level strategy,
business level strategy and functional level strategy. The top management of the company make
effective strategy to outlines processes, goals, objectives and structure for working in an
organisation. If management fail to make accurate and proper strategy for the business they can
suffer from huge loss as well as it has negative impact on the operations, sales and profitability
of the company. To make effective corporate strategy they can use various business model such
as Ansoff's growth matrix to get proper direction to conduct business activities to gain
competitive advantages as well as make changes in current strategy in order to gain huge
profitability and market share in future. Business level strategy refers to the plan of management
to add values by producing better quality of product and services with coordinate and effective
working and offering to customer to meet their demand to gain huge customer base. For making
better business strategy and evaluating current plan the professionals can use Porter's generic
matrix which helps them to find the area of their growth and failure to make modification for
effortless working. By using this model, they get proper direction about how they can use this
model and make effective plan for the working of their employees to improve quality of their
product. The functional managers can use resources based theory to determine the performance
of their all department in order to improve overall productivity of company.
SUMMARY
Cover in PPT
8

REFERENCES
Books and journal
Aggarwal, I. and Woolley, A. W., 2019. Team creativity, cognition, and cognitive style
diversity. Management Science. 65(4). pp.1586-1599.
Al Jahwari, M. and Budhwar, P., 2021. Exploring influencers of strategic change processes:
evidence from five government businesses in the Omani context. International Studies
of Management & Organization. 51(4). pp.374-397.
Ayedee, N., Kumar, M. and Shaikh, A. A., 2021. Role of Emotional Intelligence and Strategic
Human Resource Management during COVID-19 Pandemic. Academy of Strategic
Management Journal.
Barletta, W. A., 2019. Strategic Management of Research Organizations. CRC Press.
Chiarini, A., 2018. Choosing action plans for strategic manufacturing objectives using AHP:
Analysis of the path and pitfalls encountered–an exploratory case study. Journal of
Manufacturing Technology Management.
Clarke, P. and Crocco, E., 2021. Luxury Brands and Strategic Management Accounting.
In Developing Successful Global Strategies for Marketing Luxury Brands (pp. 157-177).
IGI Global.
Cornwell, D. J., 2022. Strategic Management of Prisons: Structure and Style. In Prisons, Politics
and Practices in England and Wales 1945–2020 (pp. 121-144). Palgrave Macmillan,
Cham.
Gilinsky, A., Newton, S. and Eyler, R., 2018. Are strategic orientations and managerial
characteristics drivers of performance in the US wine industry?. International Journal of
Wine Business Research.
Helmold, M., 2021. Corporate Strategic Management. In Successful Management Strategies and
Tools (pp. 11-31). Springer, Cham.
Hitt, M. A., Ireland, R. D. and Hoskisson, R.E., 2019. Strategic management: Concepts and
cases: Competitiveness and globalization. Cengage Learning.
Kerr, C., 2021. Presenting possibilities, plans, pathways, programmes: NASA’s use of strategic
roadmapping visuals. Technology Analysis & Strategic Management, pp.1-20.
Lynch, R., 2018. Strategic management. Pearson UK.
Oketta, B., 2018. Strategic human resources management practices, leadership style, and
employee empowerment (Doctoral dissertation, Makerere University).
Razak, A. and Pardhasaradhi, S., 2021. Strategic Management Tools: Text & Cases. Readworthy
Publications.
Schühly, A. M., 2022. What Is Strategic Management and Why Do We Need It: Theoretical
Foundations of Strategic Management. In Cultural Influences on the Process of
Strategic Management (pp. 33-135). Springer, Cham.
Trevisan, I., 2018. International strategic management. libreriauniversitaria. it Edizioni.
Wales, W. J., Covin, J. G. and Monsen, E., 2020. Entrepreneurial orientation: The necessity of a
multilevel conceptualization. Strategic Entrepreneurship Journal. 14(4). pp.639-660.
9

Online
What is Starbucks corporate level strategy?. 2022. [Online]. Available through:
<https://www.foodnewsnews.com/starbucks/what-is-starbucks-corporate-level-
strategy/>
10