Business and Corporate-Level Strategies

Posted: March 27th, 2020

Business and Corporate-Level Strategies

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Business and Corporate-Level Strategies

Starbucks Corporation is an international company that specializes in vending different types of beverages and fast foods. It has been in operation since 1971. Starbucks holds a significant proportion of the global market share when it comes to coffee houses. The company is renowned for producing a wide range of hot and cold beverages, pastries, and other packed foodstuff. Starbucks’ products are also available in grocery stores. Over the last four decades, the company has managed to amass a substantial following due to its strong online presence. Apart from this, each Starbucks establishment has managed to ensure that all its customers receive stellar service.

Business-Level Strategy

Starbucks relies heavily on differentiation approach as its main business-level strategy. The company plans for its customers to receive other services aside from the initial offerings. The firm intends to foster a unique experience that emanates from its first-class coffee as well as the establishment’s ambiance and quality services. The organization has carefully positioned its physical stores in strategic locations to encourage a close connection with the neighborhood and nurture a long-term business setting (Behar, Goldstein, & Schultz, 2014). Its brick-and-mortar stores are located across all the continents, and the numbers have increased in the last decade. The company’s leadership has also planned to further its operations beyond differentiation. The business strategy has its basis on the need to cope with a rapidly evolving middle-class economy. Starbucks’ specific policy is to gain an elevated status in the market, concentrating on the vast history that shaped the company culture including proper working conditions and interpersonal workforce relations (Schultz & Gordon, 2012). In the future, Starbucks will open a chain of high-end luxury reserve stores where clients can experience a diverse array of hot and cold drinks. The organization has also begun experimenting with other unconventional beverages including wine (Behar et al., 2014). Starbucks directs all these efforts towards implementing the differentiation strategy and ensuring that Starbucks maintains a competitive edge.

From the analysis, it is evident that adopting a differentiation strategy is useful for the coffeehouse giant. The company has openly embraced a culture of creativity when it comes to developing new brands of coffee that meet the expectations of different locations and regions. Therefore, differentiation suits Starbucks. For instance, within New York, its express stores’ idea was useful since it cut most costs by using mobile shops around colleges and offices. The inclination towards convenience by the higher percentage of their target market and the concept of the mobile truck deliver the ultimate Starbucks experience. The intention of this business strategy in the long term is to take the existing encounter to newer levels.

Experimentation during these few years will establish business models that will appeal to the most hesitant customer. Regarding success levels, the business-level strategy of differentiation to create a unique experience will ensure that Starbucks will survive and thrive (Behar et al., 2014). Starbucks, as a major supplier of coffee, has to develop product differentiation to stay ahead of its competitors. The tactic has necessitated a rise in the prices of most of its commodities, but increased customer traffic has countered the difference.

Another significant business-level strategy at Starbucks is customer loyalty. They have invested in brand loyalty, which can prove useful in fending off future rivals. Consequently, the franchise has developed various programs that engage the customer and, in the process, transforms them into loyal clientele (Schultz & Gordon, 2012). For example, Starbucks has offered free internet services for frequent clients. Member customers also enjoy a host of benefits specifically designed to foster loyalty. Apart from this, Starbucks also offers other programs that provide free coffee to people joining the members’ club. These methods are useful in ensuring that the company develops loyalty among its consumers. This strategy is beneficial in guaranteeing the retention of existing customers and the realization of new ones. However, the downside is that the approach demands additional promotion and marketing funds, for which the annual budget does not account. It is possible that even in the presence of numerous loyalty programs, increased customer volumes do not necessarily translate into profit margins (Behar et al., 2014). While Starbucks can rely on their differentiation strategy conclusively, they run the risks of dealing with imitation and altering the target segments that affect the organization’s direction.

Corporate-Level Strategies

Starbucks has also adopted several strategies that ensure its success at the corporate level. Since its establishment, the company has deliberately worked on maintaining an excellent reputation and rank within the international scene. Starbucks has set aside the global responsibility department that deals exclusively with social responsibility. In this manner, the corporation becomes actively involved in analyzing the environment and aligning the company with the latest requirements as far as performance is concerned (Schultz & Gordon, 2012). Starbucks has remained genuinely concerned about the ecological status, stakeholders, labor force, and the surrounding community. It hinges its social responsibility on three significant areas: the environment, ethical sourcing, and the community.

Concerning the environment, Starbucks complies with strategies aimed at conserving and replenishing the natural environment. It is easy to perceive Earth as the largest and most significant factor of production. This approach has facilitated the creation of LEED-certified stores that signify their compliance with preserving natural resources and reducing the effect on climatic change. Their strategy is also evident in the methods they use to recycle waste, save energy using technology, and many other initiatives that ensure conservation and stability within the environment (Schultz & Gordon, 2012). The Cup Summit is an excellent example of an action by Starbucks that met several objectives including reducing the carbon footprint, lowering plastic pollution levels, and uniting the community for a mutual cause. The different CSR efforts that Starbucks spearheads may be risky since they are capital and labor intensive – a flaw that is pointless especially since social affairs are outside the objectives. Nonetheless, engaging in CSR activities will have the benefit of more prominent brand recognition. Starbucks can appear on an international platform as a sponsor or an endorser of different events. Having a strong brand recognition will also translate into increased sales and stronger customer loyalty. Customers gain an attachment to the Starbucks brand because of its identification.

Competitive Environment

Starbucks faces significant competition from other established companies including McDonald’s, Tim Hortons, and Dunkin Donuts, all of which have numerous stores within major states. Regardless of the intense rivalry posed by these companies, Starbucks has still managed to maintain its position as the global leader in the provision of coffee products. McDonald’s has managed to sustain its share by improving its customer service. In all its establishments, the employees surpass their regular tasks and mix up the ingredients for the customer (Hitt, Ireland, & Hoskisson, 2013; Behar et al., 2014). This additional service is a deliberate effort to reach the same standards offered by the employees at Starbucks. On their part, Dunkin Donuts has attempted to redefine the meaning of coffee to the drinker as a vital element in their life. Their advertising strategy has its foundation on ensuring that all potential consumers perceive the beverage as a necessity (Thompson, Strickland, & Gamble, 2018). Dunkin Donuts has also expanded their product range to include other beverages such as chai tea and more coffee varieties. When comparing the different competitive strategies of the three major coffee vendors within the United States, it is clear that Starbucks is still the industry leader. They will maintain this position because of the rapid rate of innovation as well as the provision of first-class services.

Market Cycles

Market cycles tend to differentiate the frameworks that organizations apply in response to intense rivalry within their respective settings. Slow cycle time refers to a stable period in which companies can implement competitive strategies. During this period, firms can develop and incorporate strategies without fear of adverse consequences, particularly duplication. Conversely, in fast cycle markets, there is a high rate of imitation in the competitive approach (Thompson et al., 2018). Within a slow-cycle market, Starbucks would have little problem surviving since it can depend on its long-term competitive tactics including offering personalized services and a wide variety of coffee beverages. However, in a fast-cycle market, Starbucks would have a difficult time since most of its competitors can easily replicate the same approaches. McDonald’s and Dunkin Donuts are already replicating the Starbucks’ strategy of offering personalized service hence placing all rivals at the same level. In such an environment, Starbucks would struggle to maintain its position in the global coffee market.

References

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Behar, H., Goldstein, J., & Schultz, H. (2014). It’s not about the coffee: Lessons on putting people first from a life at Starbucks. New York, NY: Portfolio.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Concepts and cases: Competitiveness and globalization (10^th ed.). Mason, OH: South-Western Cengage Learning.

Schultz, H., & Gordon, J. (2012). Onward: How Starbucks fought for its life without losing its soul. Emmaus, PA: Rodale.

Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2018). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases. New York, NY: McGraw-Hill Education.