Starbucks Corporation Case Study Assignemnt Papaer (Case Study Sample)

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Starbucks Case Study
Starbuck Corporation started in 1971 in Settle, WA. The company has differentiated itself as a premier roaster, retailer and marketer of specialty coffee around the world. Since going public in 1992, Starbuck has expanded to countries outside US and currently has stores in 62 countries around the globe. There are about 182,000 employees stationed across the 19,767 licensed company stores around the 62 countries. The primary product mix for Starbucks includes roasted and handcrafted premium coffee, tea, and fresh food items.
1.
The diversification strategy adopted by Starbuck is meant to increase its profitability and also gain a competitive advantage over the competitors. Starbucks is the leading global retailer of coffee. However, as a way of diversifying its operations, the company has expanded into the tea, pastry and juice markets. The company acquired the Tazo tea brand and Teavana Holdings in 1999 and 2012 respectively.
The main purpose of obtaining the Teavana Holdings was to establish a brand and transform it into one of the most respected tea brands. Since the acquisition of Teavana tea brand, the made sales amounting to £168.1 million while the operating profits amounted to £32.6 million. The management believed that the sales would soar up by educating consumers on the health benefits of tea and its culture. Starbucks opened a tea bar in Manhattan ultra-wealthy area in 2013, and the company was expected to open a thousand tea bars across United States.
Starbucks’ diversification strategy also saw the acquisition of La Boulange Café and Bakery in 2012 for £100 million. Food items purchases accounted for a third of all purchases in the United States. Starbucks used this to expand its operations into feasible industries where they could increase their profitability (Nithin 7). The company planned to upgrade the quality of food items as well as add lunch items under the La Boulange banner, with most of the food items in the Café and Bakery targeting the local market. The diversification coupled with differentiation if the products have been successful with high turnover and profit margins being reported. The diversification strategy reduced the risk of relying on a single product as was the case in the 2008 downfall situation.
2.
Starbucks VRIO Analysis
Figure 1
VRIO Framework

Valuable

Rare

Difficult to Imitate

Exploited

S or W

Competitive Implications

Human Resource
Management (culture)

YES

YES

YES

YES

S

Sustainable
Advantage

Marketing

YES

YES

YES

YES

S

Sustainable
Advantage

Sales/Retail
Locations (Customer Relations)

YES

NO

YES

YES

S

Sustainable
Advantage

Starbucks core competencies are the ability to leverage their product differentiation strategies by offering a broad range of premium mix of high-quality beverages and snacks. The Starbuck brand focuses on producing the finest quality coffee, tea, juice and snacks and providing their customers with the ‘Starbucks Experience’ (Kathleen 9). The well-maintained stores and supreme customer service has built a high degree customer loyalty.
The other competence is the human resource management where the company has built a strong culture for its employees to take pride in what they do. The corporate culture, employee stock ownership program, above industry standard benefits and a reward program. The culture runs from the executives, managers down to the baristas. The employees are empowered to make decisions without management referral, making them feel part of the company (Kathleen 11).
The marketing approach in Starbucks brand entails an understanding of people’s values and lifestyle as a way of communication. The company’s approach to the experimental factor in its products is a contributing factor to its success. Starbucks spends millions of dollars annually in advertising through billboards, online promotions and free samples even free cab rides (Civi 259).
The other core competence of Starbucks is the strategic location of its stores. The Starbucks stores are located in a prime and strategic locations globally. The locations a high visibility locations with high traffic near strategic settings such as office buildings, university campuses, downtown and suburban retail centers. They also provide free Wi-Fi, great music, and an environment of the community meeting spot. The locations provide customers with a third place besides work and home (Lauren 25).
3.
Starbuck faces stiff competition from the McDonald’s restaurant, Dunkin Donuts, PepsiCo and Costa Coffee in all its product mix. The existing and new competitors design new products or customize their existing products to make them different and more competitive in the markets. Competition against Starbucks products makes the management re-engineer new ideas and ways of making their products remain competitive in the industry (Fynas 254). Through diversification to other sector...