Starbucks Coffee has been faced with a number of challenges in recent years. The company has faced intense competition from McDonald's, Dunkin' Donuts and from a number of imitators in international markets. This has resulted in the company's margins being squeezed in the domestic market (Jargon, 2009) and threatens the company's strong growth trajectory in emerging markets. Starbucks' strategy should focus the company on stabilizing its competitive position as a differentiated player in the domestic market and continuing on a pattern of strong growth in key international markets. The objectives of the strategy should be focused primarily on the financial objectives that appeal to shareholders -- improving profits, growing revenues and increasing both market share and margins. Each of these should come with a specific target figure that represents an improvement over the current position of the company.
Functional Tactics
The Starbucks plan will require a number of functional tactics in order to ensure that the plan is executed. The first element of the plan is the restoration of the company's domestic market position. It has dumbed down its product and service offering to the point where many actually view Starbucks as simply another fast food chain, one that legitimately competes against the Dunkin Donuts and McDonalds of the world. This is an image Starbucks must shed, if it is to restore its premium pricing and the profit margins that flow from that. The company therefore needs to focus on its brand with a strong advertising campaign that truly emphasizes what Starbucks offers that is superior to the budget brands, both in terms of product and in terms of the in-store experience.
Starbucks should support this with new product development. Its food needs to be better -- right now it is mostly expensive sugary things. The company also needs to emphasize its coffee more -- most of its coffee now is of unknown provenance. For example, "Pike Place Roast" is a fairly generic name for most consumers, who are unaware of the meaning of the name. It sounds like any other no-name roast that every coffee company has. Starbucks either needs a better name for its flagship or to sell the name better. Its products should be innovative, to keep the company ahead of the competition. This requires tracking trends around the world, especially in hot spots like Asia, Australia and America's big cities.
A function tactic for international expansion is to build partnerships in more countries. Starbucks typically expands overseas by finding a local partner to help build the business, and at times market entry is made more difficult by the lack of a suitable partner. As Starbucks expands around the world, it will need partners with regional expertise, not just national. In addition, the company needs to ensure that financing is available to help it expand overseas. It should not have constraints -- it must be able to capture opportunities as they arise.
Action Items
There are dozens if not hundreds of action items. The focus here will be on the domestic strategy. In the domestic market, Starbucks needs to undertake the following action items with respect to its advertising campaign -- research the market to find out consumer sentiment about the company's brands vs. those of the competition; build ads that focus on what the consumers want; test the ads; launch a new campaign strategy. Once customer surveys indicate that Starbucks is beginning to once again enjoy a high profile among consumers, the prices can be increased as well.
The company also needs to increase the budget of the department responsible for new product innovation. Starbucks needs to bring together a team consisting of top managerial talent from around the world. These international managers can compare ideas about the trends in coffee to keep Starbucks at the front of the curve with respect to new product innovation. The company will also test market product ideas at specific stores in order to gain feedback about the new possibilities.
For the international strategy, the action items would include...
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