STG701: Strategy and Decision-Making - Starbucks Case Study

This case study analyzes Starbucks Corporation, examining its business strategy, financial performance, and competitive advantages. The analysis delves into the 'Starbucks Experience,' a key element of the company's strategy, focusing on providing a third-place experience for customers and offering high-quality coffee. It assesses Starbucks' financial growth, diversification strategies, and coherence with its internal and external environments. The study further explores stakeholder interests, differentiation advantages, and the sustainability of Starbucks' competitive edge. Additionally, it identifies threats faced by the company and proposes recommendations for maintaining outstanding performance, including adapting to market changes and focusing on core competencies. The assignment is based solely on the provided case study information.

RUNNING HEAD: STARBUCKS 0
2020
Starbuck Corporation
Student’s Details-

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Question 1
Starbucks strategy can be seen from the ‘Starbucks Experience’ which explains the third-place
experience that the company provides to its customers. Moreover, business strategy is regarded
as the set of activities that the company undertakes in order to earn sustainable competitive
advantage over the competitors. Similarly, Starbuck’s strategy is based on several elements in
which the company provides the shared experience to the customers where customers can come
and engage socially. Further, the company’s strategy also consists of the facilitation of high-
quality coffee through the careful management of chain for which the customers are ready to get
at the premium prices. Also, employees have a major role in the facilitation of the ‘Starbucks
Experience’ so that employees can make the engagements with the customers through providing
a good ambience. For this, the company has focused upon the human resource practices through
taking care of needs of company’s relationship with the employees. Also, the design and layout
of the stores of the company was based on the broadening of the Starbucks experience through
the unique designs of the stores.
Question 2 (a)
In terms of financial performance, Starbuck’s strategy was to make the growth in revenue and
earnings. The company has made prediction for the net revenue growth in terms of earning per
share of 12 percent or more than that in the coming year. The company aims to get the higher
revenue through focusing on the large competitors and attempts to sell higher quality coffee for
getting a substantial market share in the international markets. Also, the company was getting the
market share in the American segments due to the increase in the operating cash flows in this
country. The company has focused on improving the financial performance through increasing
the efficiency. For this, the company has been adopting for the diversification strategy.
Moreover, diversification is made by entering into the new product lines and also offering those
to newer market segment. The company has therefore widened the scope of food products and
beverages which can be helpful for the company to get market share and earn profits.

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Question 2 (B)
Starbucks has made the strategy in making the due adherence with the internal and external
environment in which the company operates. With coherency with the internal environment, the
company has made defined core competency of the company which is the high-quality products
and the service that the company provides to the customers through the maintenance of store
environment. The strategy of the company is to make the customers satisfied which fits the
internal environment of the company. Also, the company’s strengths, weakness, opportunity and
threats can be the ways to make a competitive advantage and can affect the strategy of the
company. Besides, strategy for Starbucks is to expand the business internationally through the
diversification strategy which fits to the international environment. Moreover, the company’s
expansions in Asia Pacific and China can get affected due to the political and legal uncertainties.
Also, the company faces challenges in adapting the various culture which is the social factor of
the external environment. Also, the changes into the economic factors are an important part of
the external environment in which the company operates. This can affect the strategy of the
company.
Question 3
Yes, Starbucks operates the interests of the shareholders and also the stakeholders. The company
undertakes several initiatives for protecting the interests of the shareholders through creating
values towards them and also bringing transparency which can lead to the higher profits for the
company. With the application of the stakeholder’s theory, this can be determined that it is
important for the organization to serve the needs of the stakeholders which are employees,
customers, suppliers, investors and the government. The company operates the interests of the
stakeholders through the maintenance of good relations with them. The company ensure their
duty towards the customers through the facilitation of the quality products which are coffee and
related beverages. The company provides the quality of the store experience to the customers and
also provides the warm and friendly environment with the customers and providing services for
the facilitation of tailored needs of the customers. The company protects the interests of the
investors through the getting dominance in the coffee industry and making global expansion
which can lead to the higher performance of the company and thereby protects the interests of
investors.

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Besides, Starbucks makes the approaches for protecting rights and the interests of the employees
within the company. Moreover, the company has an effective organizational culture which lead
to the quality of service delivered to the customers. The company brings the loyalty and trusts
within the employees which certainly helps in the maintaining of relationships with the
employees. Further, another stakeholder which is considered by the company is suppliers. The
company has initiated a supplier diversity program for protecting the interests of the suppliers.
This is to ensure the regular delivery of the materials which are required for the generating of
more revenues. The company thereby builds the diverse network of suppliers efficiently with the
minorities and women. This facilitates the strong relationships with the suppliers and ensures the
timely facilitation of the supplies which are required by the company. Further, the company duly
protects the interests of the government by making adherence with the regulations and guidelines
of the government. Government as part of the stakeholder group of the company has to be taken
care of through the tax invasions and also the company has global presence which makes the
company more coordinated towards the improved performance of the company.
Question 4
Starbucks is a leading coffee producer of the market which aims at making an established brand
name in the coffee industry. The company strives to make the differentiation through broadening
the scope of the products by offering food, books, videos and the books. For the competitive
advantage, the company has used the diversification strategy in which the company has made the
made the business expansion in US market by the expanding the coffee menu products through
coming with the new range of coffee drinks such as Cascara latte, Nitro Cold Brew and the Black
and White mocha beverages. Also, the company introduced new formats at the coffee outlets
which prove to be the differentiation advantage over the competitors through the use of the ultra-
premium coffees. The company has made the international expansion through the use of the
diversification strategy which certainly plays a major role in the differentiation and the earning
of the competitive advantage over the competitors in the coffee industry. The company’s services
which is to be provided to the customers and the established brand name proves to be a
distinctive ability of the company that adds to the competitive advantage.
Yes, it is a sustainable competitive advantage as the company has made use of their brand name
through the use of the ultra-premium coffees which are proved to be distinctive competitive

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advantage over the competitors. Moreover, the Starbucks strategy also includes the use of the
technology for the improved Starbucks Experience. The company has made use of social media
for connecting with the customers. The company’s unique services such as Starbucks loyalty
card and also ‘My Starbucks Rewards’ which is the loyalty program of the company which aims
at providing rewards and cumulative purchases. This is the initiative of the company for the
building up of loyal customer base which can build long term relationship through the connected
customer experiences. This long-term relationships with the customers protect the customer’s
tendency to switch to other brands. This certainly provides the sustainable competitive advantage
over the competitors. Besides, the company’s well-trained staff and the employees that provide
positive customer experiences and often provide the personalized service which are competitive
advantage for the company.
Question 5
There are several threats faced by the company in the execution of the strategy. In the
international expansion, the company faces threats in terms of protection of intellectual property
and also faces the threats of political and the regulatory uncertainties. Also, Starbucks faces the
threats in terms of heavy reliance on the foreign partners and also changing culture of the foreign
countries which creates the difficulty in the adapting the differences of the taste and the
employment practices. The diversification strategy of the company was also at risk as the
widening the range of the food and beverage products, there were issues whether the company
has the ability to get the success in these areas as well. Also, threats were also faced by the
company in terms of loss of Starbucks Experience and Starbuck identity when the company
entered in other products which are tea, instant coffee and the hot food.
Apart from this, Starbucks faces intense competition from the rival firms such as McDonalds and
Costa Coffee. This can be the major threats of the company which is being faced as this can have
a direct impact on the profits of the company. Also, threats are faced by the company due to the
price fluctuations in the global coffee market. Moreover, the higher prices of the quality bean
fluctuate on which the company does not have control. Further, there is an increased market
saturation of the developed countries. Because of this, there is an increased threat which are
faced by the company as the company makes most of the earnings from these markets. Also, due
to the changing economic conditions and the economic crisis, the company faces the threat of the

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making the sufficient revenue as this brought down the developed country to the developing
country. Further, the most common threat faced by the company in international expansion is the
changing lifestyle, needs and preferences of the customers. When the consumers shift to the
healthy products, there is risk of erosion of coffee culture which represents the threat for
Starbucks for the future.
Question 6
Starbucks is undoubtedly a well-recognized company which maintain their goodwill and
reputation through the quality of coffee and the customer service it provides to make the
customers happy and satisfied. There are certain things that the company can do to maintain the
outstanding performance. The company should transfer the core capability from country to
country. Also, the company should more focus upon the Tea and Fresh Juice as they should be
built with the same core coffee product of the company. Starbucks must focus upon the emerging
markets as they are the base of making revenue and should remain relevant to the customers
through the tailored store format and the understanding of changing lifestyle of the people in
these markets. The company should focus on the adequate supply of coffee beans for avoiding
the significant negative impact of fluctuations of prices.
The company should make use of growth strategy for the expansion of the business. Also, the
company should be aware of different market factors and must have knowledge and
understanding of the forces which can affect the industry as whole. Also, the company should
make efforts for the earning of sustained competitive advantage as this can help the company to
get the desired revenues and attain a leading position into the marketplace. The company should
also emphasize upon the earning of the differentiation advantage which is the best way company
can earn competitive advantage over the competitors. Lastly, the company should make
engagements with the customers and make attempts to build a loyal base of the customers.