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According to IBIS World Report the major players in the US coffee and snacks retail market are Starbucks and Dunkin’ Brands at 36.7% and 24.6% market share respectively with other competitors occupying the remaining market share of 38.7%. The industry is at the mature stage of its life cycle, has low barriers to entry and intense competition and rivalry between the players. The regulation and technological change within the industry is medium (IBIS world report) The coffee bean supplier market is made up of mostly a few large suppliers, which would suggest suppliers have significant bargaining power. This power is limited by the sheer size of Starbucks which continues to grow, which mitigates supplier power as achieving such a large contract as with Starbucks is very lucrative. Furthermore, Starbucks has engaged in backward vertical integration, purchasing coffee farms in China and Costa Rica, to ensure their supply of high quality beans at a reasonable price, regardless of the increasing demand of high quality beans and the limited suppliers. In terms of machinery or technological suppliers, suppliers to the restaurant industry enjoy moderate power, as suppliers are few. This applies to suppliers of coffee, latte and espresso machinery as well due to the small number of organizations servicing the industry. Due to their success in differentiating themselves as providers of premium coffee, Starbucks faces little bargaining power from their customers around the globe. However, a lesson from their entry into the Chinese market has been that an organization needs to clearly understand their target consumers and price their products accordingly to avoid demand challenges. As the startup investment required for this industr... ... middle of paper ... ...y due to a water wastage allegation (). Another weakness is their premium pricing, which has competitors with lower prices eroding their market share, especially in times of economic downturn. Pricing has also proved to be a weakness in markets such as China. Opportunities available to Starbucks include growth of its supplier range, expansion to emerging economies, increased diversification of its product offerings and the growth of its retail operations; which are aimed at growing Starbucks’ profitability and market presence. The threats facing Starbucks include trademark infringements and increased competition from local cafes and specialization of other coffeehouse chains, and the saturation of the markets in developed economies, and supply disruptions. Furthermore, the increasing prices of its inputs such as dairy products and coffee beans pose a threat
Whilst this strategy will probable consequence in short word defeats for the Starbuck’s Swedish procedure, these defeats will all be incurred as appealing clients, i.e. in defeats on the supply of coffee beans, rather than in defeats on marketing and publicizing, that are not Starbuck’s core competencies and that will all be capsized costs. Starbucks has the supremacy of not demanding to encounter continuing profit and revenue targets in the Swedish marketplace, in difference alongside the incumbents. As a consequence, if Starbucks is keen to pursue an hostile pricing and entry strategy, it can grasp marketplace allocate from the incumbents, and can next use its experience, bargaining manipulation and brand strength to produce upheld long word marketplace manipulation in the Swedish market.
Foreign policy with foreign nations that host the Starbucks brand. Import and export tax is an expenditure that may and can become costly and profits can be lost. Other companies like McDonalds, Dunkin Donuts, and the Coffee Beanery provide consumers with an ambient environment and some specialty coffee flavors. Proximity may be the only thing required for the consumer to select the services of the rival coffee dispensing businesses.
Nithin Geereddy. 2013. Strategic Analysis of Starbucks Corporation. [ONLINE] Available at:http://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf. [Accessed 18 April 14]
Expanding Products & Offerings: With this intention, the company has ventured off from their traditional shop of coffee, teas, juices, and pastries. Additionally, Starbucks expanded to selling merchandise. Potential market growth can bring new opportunities to the company.
Starbucks is one of the most recognizable and successful coffee brands in the world. Starbucks believes in serving the best coffee possible. Starbucks’ international market that was expanded into China in 2002, still has only a tiny part of the Chinese beverage market (Harrison et al., 2005). The company President, Charles Shultz is ascertaining the possibility of establishing new coffee houses in China.
There have been some distinguished controllable and uncontrollable elements Starbucks has encountered when entering global markets. The strategies of any company’s goals are vital to its success. This is one area Starbucks has excelled in, just as McDonald’s has in recent years. Starbucks has paralleled its branding with the actions found at any Starbucks across the world. They have an excellent company vision, which they stick to, which in turn assists their brand image. Starbucks’ image has been achieved not only through this and their massive global entrance, but through their ability to provide honest quality service.
In addition to being best-known supplier of the finest coffee and promising only the highest quality products, Starbucks emphasizes firm values, provides guidelines to enhance employee self-esteem. This is to ensure continued customer satisfaction. Moreover, diversity has become a priority to providing an inviting environment to all consumers. Starbucks continues to abide by a strict, slow growth policy in which they set out to dominate a market before moving on to expand, thus history has shown this strategy to be successful for Starbucks, making them one the fastest growing companies nationwide.
Coffee is a worldwide cash crop of which demand has exponentially increased over the years. “Coffee is (after oil) the world’s second most important traded commodity” (Cleaver 61). Competing coffee brewing companies wage war on offering the freshest, best tasting coffee the market has to offer. With such stiff competition there must be enough coffee beans deemed to be good enough in quality to supply the increasing demand. Starbucks can be considered one of today’s top competitors if not thee top coffee manufacturer presently in business. This successful company has had a huge impact on the coffee industry as well as the world. They have gone through great length to provide consumers with an excellent product as well as create a legacy that shows how to best go about running a massive corporation while keeping the environment clean and healthy.
The business relationship between Starbucks and Kraft Foods was formed in 1998 when the companies struck a contract deeming Kraft the exclusive provider of Starbucks’ packaged coffee and thus limiting Starbucks’ selling flexibility. The partnership was strong and profitable for twelve years, which resulted in a sales increase from $50 million to $500 million in 2010. Consequently, because of this growth and the popularity spike in coffee pods, Starbucks wanted additional selling flexibility. As a result, in August of 2010, Starbucks offered to buy Kraft out for $750 million, however Kraft refused declaring that the offer was well below fair market value. Despite the refusal, Starbucks dissolved the relationship and the companies engaged in a feuded negotiation they could not settle on their own. Thus in 2013, an arbitrator determined that Starbucks breached its contract and therefore had to pay Kraft $2.75 billion. In the following sections, we further explore the negotiation between Starbucks and Kraft Foods, and make comprehensive recommendations as to how both parties could have performed more satisfactorily (nytimes.com).
With clear core values towards providing quality coffee, the best service, and atmosphere, Starbucks has enjoyed great success since it was founded 30 years ago. The company has being doing very well for last 11 years with 5% or more store sales increase, even with the rest economy still reeling from the post-9/11 recession. However recent research, conducted to Starbucks, have showed some concerns regarding company’s problem meeting customers’ expectations.
This paper will provide an argument for diversification to be presented to board of directors for Starbucks. A strategy for diversification indicating the products and industries for diversification and how synergies may be gained will be provided. The identification and the discussion of the foreign market Starbucks should enter will be presented, along with the strategy it should use to enter the market. Challenges Starbucks may face in the foreign market will be discussed, as well how it might respond strategically to minimize the impact of these challenges.
Seaford, B. C., Culp, R. C., & Brooks, B. W. (2012). Starbucks: Maintaining a clear position. Journal of the International Academy for Case Studies. The DreamCatchers Group, LLC.
An article in the Seattle Post, describes the alliance that Starbucks is making to ensure that a sustainable supply of high quality of coffee is produce in Latin America. "Starbucks President and CEO Orin Smith said the alliance is partly his company's effort to pass on the "high price" of a cup of coffee to farmers." (Lee, 2004). He states that the high price enables them to pay the highest price to the farmers. Though the high prices to suppliers can demonstrate that money get to farmers with being diverted. Starbucks overall goal with this alliance is to buy 60 percent of its coffee under the standards agreed upon by 2007. "The agreement reflects the growing power of the premium coffee market and efforts to exploit it for the benefit of small farmers" (Lee, 2004).
The coffee shop industry is an ever growing field with innumerable advantages for both owners and consumers. With 50% of the American population having at least one cup of coffee each day, and each having an average of 3.1 cups a day, there is no denying the major role of coffee shops. Coffee shops alone account for $12 billion of the $18 billion United States coffee market. While there are still threats that come with coffee shops, the opportunities are endless.
Starbucks has identified high value opportunity in China, India, Brazil and Japan. The large expansion opportunity of twelve billion in China alone is enough to drive Starbucks to expand globally. The organization has planned to double its footprint to 3000 stores in China by 2019 ("Starbucks Details Five-Year Plan to Accelerate Profitable Growth", 2014). Starbucks realizes that eventually there will be a diminishing return on their existing market within the US due to market maturity and there are only two ways to expand through diversification in their offerings and entering new markets. Given the international opportunity for growth and expansive tea market in Asia, the company will enjoy the benefits of the growth opportunity. Management’s decision to continue to grow globally is a driving force that has yielded