Strategic Management: Starbucks.
From the case study available at the following URL http://www.mhhe.com/business/management/thompson/11e/case/starbucks.html we explore Strategic Management of Starbucks and the changes that took place within this company. In order to under the company even better let’s explore the following questions:
1. Starbucks as noted in the case study under the leadership of Howards Shultz underwent major growth and expansion that contributed to development of resources, capabilities, and distinctive competencies. The resources that Starbucks has are tremendous: the company already operates about 1500 stores in North America, had sales of $967 million in 1997 and net profits of $57 million. The company has enough resources for expansion, for innovation and changes. It is the largest company with the next closest competitor having only about 300 stores.
The company constantly innovates and works on its image, making the company more than just a coffee shop—but rather an interesting experience. It is for this reason the founder of Starbucks did everything possible to create that image, even if it meant going to Italy and copying some of the ideas and recepies. The core competence is represented by different recepies and pleasant service.
- Starbucks’ resources, capabilities and distinctive competencies translate into superior financial performance via a sound business model. The company always expands and penetrates new areas and new markets. The company constantly works on improving its brand image and brand equity as well as nourishing its core competencies. If the company has a sound brand name and provides a good product—there is always a demand for it. Since Starbucks expanded across North America like wildfire, there is no wonder that it managed to gain popularity and thus increase its revenues in the area.
3. Starbucks’s competitive advantage is secure and the more the company expands the more secure it is to become. While the barriers to imitation at first appear to be very low (i.e. one just has to sell good coffee in a convenient place) in reality it turns into a set of other barriers. For instance, the competition on the market is very strong with the places where people tend to shop and drink coffee having dozens of restaurants offering similar services. It is the experience, the atmosphere, the taste of coffee and the smiles of the waiters that give Starbucks that competitive edge. Certainly, these small details are rather hard to imitate especially if we speak about some large competitor. Small, privately-owned cafes can be controlled much better and there one can assure dynamic response to market needs. In large companies, the customers appear to be treated like customer, i.e. people who exchange money for food and drinks. In Starbucks, on the other hand, customers are viewed more as ‘guests’ or ‘visitors’ that need to be impressed, entertained and respected. If Starbucks’ competitors manage to alter their corporate cultures and work practices, then certainly they can imitate Starbucks’ effectiveness.
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