Commoditization of Starbucks: How to Prevent Commoditization (Article Sample)

THE COMMODITIZATION OF STARBUCKS
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The Commoditization of Starbucks
Introduction
Starbucks is one of the major coffee products provider in the United States. However, the company has been subjected to various challenges on account of the environment within which it operates. Contrary to Quicksey (2012) argument that, “Starbucks continues to thrive in US beverage market”, most consumers have resolved to move to coffee products providers such as McDonalds whose products are relatively low priced as compared to Starbucks’. Despite their relocation due to high pricing at Starbucks, the Company still has the opportunity to control the consumer buying power using the best possible model that will grant it competitive advantages over its rivals. This can be done through offering cheap and more affordable alternatives to the consumers.
Challenges
Using the 5 forces analytical tool, the major challenge facing Starbucks is the threat of substitution. According to his findings on the corporate challenges facing beverage companies, Bansal (2002) deduced that, “Most consumers would prefers using readily available beverages that are considerably cheaper to coffee. These consumers may also decide to grab fast foods such as snack foods and burgers as opposed to pastries and muffins sold within most coffee stores.” This forces companies such as Starbucks to work on a pricing strategy that would help in retaining and maintaining of consumer loyalty. Under the social-cultural aspect of the PEST tool of analysis this substitution is as a result of cultural norms of individual communities.
New entries in the coffee industry in the US market possess one of the major threats to Starbucks. Large firms that are well funded with minimal or no capital cost anomalies thrive more as compared to this firm. Such companies include Burger Kind and McDonalds who major in coffee products as Starbucks (Bansal 2002.p 129).
According to Quicksey (2012), “US beverage market continuous to exhibit competitiveness among most companies allied to the beverage industry. This competitive rivalry possess one of the major challenges to Starbucks.” Coffee chains such as Gloria Jeans Coffee and San Francisco Coffee have exerted a lot of competitive pressure on Starbucks. Other smaller and privately owned coffee houses that continuously provide coffee products at low prices have also stiffened competitiveness upon this firm. As mentioned earlier, secondary coffee companies such as McDonalds and Burger King have also presented competitive rivalry to Starbucks in the beverage market.
The buyers bargaining power that was not there in the past greatly impacts on the profitability at Starbucks (Clancy 2001.p 34). This is as a result of entry of premium coffee providers such as McDonalds who allow customers to bargain for their low priced commodities. In return, Starbucks is forced to do the same in order to maintain and retain its customer loyalty.
Competitive Advantage
Starbucks possesses a vital competitive advantage over most retailers through mobile technology. This has been a major game changer in Starbucks economic elevation as compared to most retailers in the United States (Mooney 2007. p 112). The company recently disclosed its mobile order and pay technology. This new technology enables its coffee consumers to make orders prior to their pick up schedule at the Starbucks store which is in accordance with Mitchell, and Coles (2003) findings on how to obtain competitive advantage that indicated the vitality of improved and innovative technology in doing the same. This program was launched in Starbucks’ 150 locations and is soon meant to extend to over 600 stores. The Mobile Order and Pay has granted Starbucks a greater competitive advantage over its rivals such as Home Depot.
How to Prevent Commoditization
It is not too late for Starbucks to prevent commoditization. The company should shift its focus from commodity perspective to necessity. This can be achievable through critical analysis of consumer demands. This methodology is highly supported by Van Halen, Vezzoli, and Wimmer (2005). The presence of Mobile Order and Pay services will greatly help in the realization of this success. The company should focus on the necessity of coffee and not its commoditization for full catering of consumer needs and can be necessitated through low pricing of its coffee products.
Starbucks should also ensure that it obtains higher pricing scope. This can be achievable through increased quality of products that would speak for themselves in terms of pricing. The company will therefore not directly engage in pricing competition as quality products are expected to exhibit high pricing (MacDonald2007.p 810. These two ways of commoditization prevention are geared towards the achievement of the best customer experiences and profitability within Starbucks.
Strategies
McDonalds is a real competitive threat to Starbucks as seen in the section on challenges facing the company. Starbucks must improvise on competitive strategies against this major rival. In accordance with Clancy’ (2001) directives on “How to save America’s dying products,” the firm should renew its brand name through advertising and promotion through effectuated education of the public and awareness creation on the reasons that make the company the best coffee products provider over other rivals. The leadership at Starbucks must strive to allocate more funds to advertising than to market to promote the brand name among consumers.
The company should also work on product differentiation (Mitchell, and Coles, 2003. p 17-19). The low pricing at McDonalds should not make the management as Starbucks to initiate a price war but should focus on innovative procedures for new brands and flavors. The company can as well produce a novel on their products as an advert tool that indicates its product differentiation.
The firm should focus on coffee only. According to the findings on the importance of innovations and monetization of company products Esty and Winston (2009) concluded that, “...