Starbucks
Introduction
Starbucks is a multinational coffee company that is based in Seattle. The company was established in 1986 and ever since achieved great success in the market (Mangold, 2011). Currently, it is ranked first amongst the largest coffeehouses in the world. Starbucks has a reputation for producing high-quality products and services that are based on consumer needs and wants. Its international expansion has also given it an edge over business operating solely in their home markets or a few international markets. Indeed the corporation has established a strong global presence. However, the recent years have seen the company experience different challenges that have impacted its ability to survive the industry. The main issues affecting the company include competition, complacency, and unsustainable growth strategies (Gamble & Thompson, 2011).
This paper examines industry trends and internal organizational factors impacting the Starbucks. The main strategic issues affecting the company will be discussed before offering recommendations on the way forward.
Background
Starbucks operates in the coffee shop and restaurants industries. The company has since its establishment committed to the provision of quality products. Its main competitor includes Caribou Coffee Company, Dunkin’ Brands, Costa Coffee, and Nestle S.A. among others. It also works in close association with its clienteles to determine their distinct needs and preferences. It then produces products that are based on the same (Mangold, 2011). The management at the company is also keen to maintain a healthy working environment and relationship with employees. In essence, individuals working for the company are treated as partners. With this being the case, the management ensures high levels of motivation among its people, hence quality goods and services. The business also invests in research and development to improve on its products. Starbucks offers a broad range of products including, among others, Evolution Fresh juices, pastries, Frappuccino beverages, whole-bean coffee, cold and hot sandwiches, and micro-ground instant coffee (Simmons, 2012).
Clearly, the restaurants industry is characterized by intense competition. More companies have been attracted to the industry considering its continued attractiveness. Starbucks always ensures it is offering better quality to attract as well as retain many consumers. Nevertheless, the recent years have seen it loose some of its loyal consumers to the competition. The threat of new entrants is moderate. Individuals find it easy to enter the industry (Gamble & Thompson, 2011). On the contrary, it is challenging for an individual to establish an important and well-established firm that can match the success enjoyed by Starbucks. Despite this being a small threat, Starbucks must always ensure it has an edge over new entrants. Supplier power is high. Coffee is scarce resource demanded by many companies across the globe. Additionally, there is only a limited number of farmers that engage in coffee farming. This gives suppliers an edge. Starbucks has ensured good relationships with its suppliers to guarantee future supplies. The threat of substitutes is high. Essentially, there are many alternatives to what is offered by Starbucks. Consumer power is also considerably high. This can be attributed to the number of businesses serving consumers. Equally, switching costs are low. Clientscan switch from one seller to another with ease (Mangold, 2011).
Consumer need and wants keep on changing (Mangold, 2011). As a result, companies in the industry try to adapt to the changes to maintain their edge. For instance, Starbucks invest in research and development to develop new ideas on how to improve the quality of its products to maintain high levels of satisfaction among its target consumers. Consumer awareness is also high. Individuals understand what type of products they are interested in as well as the value they seek. Traditionally, companies capitalized on thelack of awareness among their customers to provide any product or service. On the other hand, individuals were forced to consume the same as they did not have any option (Gamble & Thompson, 2011). With increased internet use and globalization, consumers are now well-informed about the products available in their market and their respective values. Customer seeks products that are deemed of greater value and meet their needs. This is one of the factors that make it hard for businesses to survive the industry. In essence, they must always ensure they improve on consumer value failure to which they risk losing their edge. Equally, theywork closely with their target consumers to determine their needs, hence their ability to meet or exceed consumers’ expectations (Enz, 2012).
Analysis
As evident in the case study, Starbucks has been facing challenges in the market that make it hard for it to achieve its goals and objectives. For one, the firm faces stiff competition from both direct and indirect competitors (Mangold, 2011). Starbucks has lost some of its loyal consumers to the competition. Its sales and revenue have also been deteriorating as a consequence of increased competition. The company cannot afford the luxury of being outmatched by its competition. It stands not only to lose its market share but also suffer poor financial performances. Starbucks is considered the top performer in the industry. This implies that it is the primary target for competition. Notably, competitors are working hard to take its position in the industry. It is through the development of strong competitive strategies that the business can sustain its development (Gamble & Thompson, 2011). Companies such as McDonald’s, Coca-Cola, and Costa Coffee have been investing in innovation and creativity to enhance the quality of their products and ensure better value for their customers. Over the years, Starbucks has differentiated itself through quality products. However, its success resulted in complacency. This explains why competitors have managed to attract its loyal consumers. It is imperative for the business to address this issue failure to which achieving sustainable development will become a problem (Carbaugh, 2015).
Reduced profitability is also a challenge to Starbucks. An increased number of competitors has partly caused this. Equally, the growth strategies employed by the businesses have also impacted its financial health. For instance, the former Chief Executive Officer (C.E.O) emphasized the need for the company to open many stores across the globe (Gamble & Thompson, 2011). Eventually, this strategy proves unsustainable. Principally, the business ended spending a lot opening stores that did not meet expectations. In the end, the organization has to close some of its stores and retrench some of its employees to boost its profits. With lowearnings, it is hard for the business to invest in activities aimed at improving its edge. This also affects its market share (Gamble & Thompson, 2011). Competitors can easily use this to their advantage and in the process, worsen the situation. Additionally, with declining sales and profits, the company is likely to encounter challenges when trying to raise capital from the public for expansion purposes as potential investors are attracted to strong financial performers. The company cannot also fail to address the issue as it impacts its capability to fund internal processes and make its employees happy. Dissatisfied employees are less likely to engage in activities integral to the survival of their firm (Carbaugh, 2015).
Starbucks has also failed to achieve a strategic fit. Strategic fit articulates the extent to which a firm is matching is capabilities and resources with the opportunities in the external environment. Usually, the matching takes place through strategy. Therefore, it is vital that a business has real resources and capabilities to execute as well as support the same strategy. Starbucks has for many years achieved a strategic fit. Its management examined the market and external environment trends before developing strategies on how to adapt or compete (Gamble & Thompson, 2011). It utilized its resources and capabilities in the right manner and, in the process outperformed its competitors. Currently, the company is struggling to achieve the same objective. The fact that its competitors are catching up with it means that it is not utilizing available opportunities as expected. If anything, it is the opponents that seem to have mastered the art of ensuring a strategic fit (Paladino, 2013). For instance, McDonald’s realized the increased demand for coffee and coffee products and started a brand to offer similar products. This is why it is considered a major competitor to Starbucks. In general, Starbucks has what it takes to improve its competitiveness. It only needs to match its resources and capabilities with the many opportunities available in the market (Gamble & Thompson, 2011).
Starbucks has also been losing it regarding creativity. Evidently, the business differentiates itself through the production of quality products and services. It also ensures great designs regarding its stores and shops. The attractiveness of its business premises has lured many consumers from the competition. However, the company should consider increasing innovation. Competitors will stand at nothing to take its position. Many companies have the tendency to create comfort zones or relax whenever they make a breakthrough (Gamble & Thompson, 2011). Most of them are of the assumption that the competition may not employ similar practices to improve their performances. Starbucks seems to have made the same mistake. Its great ability to innovate has given it an edge. Nevertheless, it does not appear to be doing more to sustain the competitiveness. Clearly, the contemporary business environment keeps on changing (Carbaugh, 2015). A company must keep with the changes if it is to survive the market. For example, the restaurants’ industry has been impacted by advancements in technology. Strategies are only deemed reliable if they help a firm to deal with such changes. This also implies that a business cannot rely on the same tactics over and again, a mistake Starbucks has made over the last few years. The current leadership has committed their efforts to addressing this problem. Nevertheless, they are yet to return the business to its previous position (Mangold, 2011).
Marketing is also an issue for the company. Traditionally, Starbucks relied on the word of mouth to spread the word on its products and services. The strategy worked when the level of competition in the industry was little. Nonetheless, with the current intense competition, the restaurant can no longer rely on the same strategy to achieve its marketing goals. For instance, the company was forced to increase its spending in marketing in 2009 to counter tactics employed by its competitors such as McDonald’s (Gamble & Thompson, 2011). Businesses rely on marketing to create awareness of their existence and products to their target consumers. Inability to market products means that a company will not attract customers and hence report weak sales or losses. This is also an issue that can lead to a company exiting the market. Marketing through the word of mouth works best when a corporation is operating in theless competitive market. Equally, it is best suited for businesses enjoying high brand awareness. Starbucks has achieved strong brand awareness. Even so, the organization operates in a competitive environment, hence must rely on other advertising strategies to realize its marketing goals and objectives (Carbaugh, 2015).
Starbucks has also been experiencing challenges relating to its pricing strategy. The company offershigh-quality products targeted at middle and high-income earners. A premium pricing strategy is used to reflect on the quality of goods rendered to consumers. This is both an advantage as well as a threat (Gamble & Thompson, 2011). With premium prices, consumers associate products offered by the business with better quality. As such, they are willing to consume them as opposed to alternatives provided by the competition. On the contrary, this is a weakness, as competitors are producing alternatives that are priced lower, hence their ability to attract many customers. For example, McDonald’s applies the same to enhance the competitiveness of its coffee-related products. Starbucks must reconsider its pricing strategy to avoid losing many consumers. Investing in research will enable it to achieve this goal with ease. All it needs to determine the value demanded by consumers and the price they are willing to pay to access the same. Competitive pricing strategies are of the essence. However, the company must be keen enough not to compromise on quality in the process of revising its prices (Carbaugh, 2015).
Recommendations
Starbucks is in a position to deal with the challenges and return to high profitability. The company must ensure it researches the market to determine changes and trends and develop strategies that will make sure it adapts accordingly. For instance, it must understand the strategies employed by competitors and develop better activities to maintain its edge. Investment in R&D is also an uncompromising imperative (Simmons, 2012). The company has lost its competitiveness as a result of complacency or low creativity. It needs to increase its creativity and innovation to improve the quality of its products. This is also essential if it enhances the designs of its stores and shops. Well-designed stores have acted as a differentiating factor. Starbucks must continue to improve the same to give its target consumers to consume its products and not what is offered by the competition (Paladino, 2013).
There is also the need for the company to invest more in marketing. The word of mouth strategy is very significant. However, the firm needs to engage in other marketing strategies to attract and retain consumers. It needs to embrace the use of modern technologies such as the internet to create awareness. The internet provides it with an opportunity to market its products as well as interact with target consumers to determine their views, ideas, and concerns regarding its performances. The restaurant can then use information gathered from consumers to enhance its position. Other traditional marketing strategies such as the use of print, visual, and audio media should also be used to achieve even better results (Paladino, 2013). Public relations is also one way the restaurant can increase brand awareness as well as its reputation. It needs to engage the public on various topics of interest. In the process, it can also address some of the issues raised by consumers. Consumers derive pleasure for a company caring about their wellbeing. Usually, they reciprocate such kindness through loyalty. Starbucks needs to take advantage of this to improve its image and ability to attract and retain consumers(Mangold, 2011).
There are many opportunities in the industry that the business can take advantage of to achieve higher performances. The management at the company must examine the business environment and its resources and capabilities. Unique resources should be used to pursue different opportunities available in the market. The management must ensure the company does not waste resources on activities that will not guarantee its competitiveness (Gamble & Thompson, 2011). For instance, it needs to avoid further expansion in the market when what is should be doing it to improve the quality of its products. There is no point in further growth when the company has failed to meet the needs of its current consumers. It must first address their issues before embarking on the road to further expansion. This will go a long way in improving its profits, ensuring customer loyalty, and outsmarting competitors. Starbucks also needs to consider offering products that are priced competitively. Competitors are applying low pricing strategies to attract consumers. Some of their products are deemed to be of the same quality as what is provided by Starbucks. As such, the company cannot afford to rely on high prices to guarantee quality (Carbaugh, 2015).
Conclusion
Starbucks has achieved great success in the market. The company has made a reputation for delivering high products and services that are based on consumer needs and preferences. Nevertheless, it has been losing its edge as a consequence of different issues and challenges. Competition, changes in consumer needs, marketing practices, and reduced creativity are some of the problems the firm must address it is to sustain its position. Many competitors have entered the industry making it hard for Starbucks to attract and retain consumers. The company has been forced to improve its resources and capabilities to avoid losing more customers. Changes in consumers’ needs and preferences are also a problem. The company must adapt to these changes to address its customers’ needs as expected. It is essential for Starbucks to capitalize on market researches as well as investment in R&D to return to profitability. The company also needs to reconsider its pricing strategies to deliver value and attract more customers. Ultimately, the company must work on achieving a strategic fit. Clearly, it has resources and capabilities integral to its survival in the market. However, relying on the wrong market growth strategies makes it hard for it to achieve its marketing goals and objectives. Matching internal resources and capabilities with external opportunities is of the essence.

References
Carbaugh, R. (2015). Contemporary Economics: An Applications Approach. London: Routledge.
Enz, C. A. (2012). Hospitality Strategic Management: Concepts and cases. Hoboken, NJ: John Wiley & Sons.
Gamble, J. E., & Thompson, A. A. (2011). Essentials of strategic management: the quest for competitive advantage. New York, NY: McGraw-Hill Irwin. Retrieved from https://www.homeworkmarket.com/sites/default/files/q4/02/06/starbucksstrategytoreturntoprofitablegrowth.c2010.18e23.pdf
Mangold, C. (2011). The Starbucks Company. Success Strategy And Expansion Problems. Munchen: GRIN Verlag.
Paladino, B. ( 2013). Five key principles of corporate performance management. Hoboken, NJ: Wiley.
Simmons, J. (2012). The Starbucks story: how the brand changed the world. Tarrytown, NY: Marshall Cavendish.

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