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Starbucks & Diversification Stragey and Implementation

Starbucks itself is the perfect example of diversification in action. It's strategy has relied on turning coffee from commodity good to luxury experience product destination. Most recently, this has been amplified by the introduction of Starbucks Reserve, Sirenworks, and new food offerings. Starbucks has consistently diversified itself from its competitors by seeking new ways to make customers feel like they are receiving a luxury experience with the purchase of each cup of coffee. From the way they change their cups colors around the holidays, to the new branding of the pastry offerings following the acquiring of a famous italian bakery, they go above and beyond their competitors, whose strategies for more focused on cost leadership rather than diversification in other ways. As far as implementing corporate strategy goes, Starbucks does this in many ways. Most noticeable are through its Board of directors and its shareholders. This oversight is key to holding a major firm like...
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Starbucks & Vertical Integration

Vertical integration is defined by the number of stages in a product's or service's value chain in which a firm engages. Starbucks, according to former CEO Howard Schultz, is what you would call "vertically integrated to the extreme." In other words, every single aspect of value-added business is managed from within, and Starbucks is constantly attempting to enhance and improve this model of doing business. By managing its economic exchanges through vertical integration, Starbucks has the ability to operate on an incredibly lean supply chain. For example, Starbucks buys and roasts and sells all of its own coffee beans, rather than outsourcing anything in the process. This is an example of a highly vertically integrated process. Rather than buying the coffee already roasted and made, they do it themselves to keep costs low and the process within managed oversight. The following is a link to a video conversation with Howard Schultz as he explains the history of Stra...
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The Prisoner's Dilemma

According to the textbook, "the problem of cooperation can be best understood by analyzing a simple exchange game between two individuals", known as "The Prisoner's Dilemma." Starbucks's biggest competitor is McDonald's, which is contrary to what people may think. Many people assume that their biggest competitors are Dunkin' Donuts or independent coffee shops. The rise of the low cost, fast-food coffee option is actually the most threatening to Starbucks, not simply other coffee shops.  It is simple to explain a prisoner's dilemma situation for Starbucks. For example, the two players are Starbucks and McDonald's. Both must spend millions of dollars advertising their products. In an attempt to cooperate, they could potentially both agree to spend the same amount of money and each take half of the market share. Or, they could agree to spend no money on advertising, and still grow their sales. The dilemma exists, however, in that if one o...
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Starbucks & Flexibility

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Conditions of uncertainty can be misleading when it comes to implementing decision making tools into business strategy. Starbucks has witnessed a profit surge in Europe, the Middle East and Africa despite Brexit, but growth rates have been declining and targets have been missed for the passed four quarters. In order to combat the grim outlook, former Starbucks CEO Howard Schultz recently made a statement regarding Starbucks's future: " Schultz said the next generation of Starbucks stores will be "the Willy Wonka of coffee." It is interesting to note that Starbucks has always defied the odds. No one thought turning a commodity like coffee into a premium priced luxury product would work, and it seems as though investors and consumers alike are hoping this new wave of tasting rooms and reserve roasters will have the same level of success. This kind of innovative flexibility--and how Starbucks adapts to changing competitive advantage--will, if successful, hopeful...
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Differentiation: Starbucks vs. McDonald's

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Despite what many people think, McDonald's is actually seen as the biggest competitor to Starbucks, rather than Dunkin' Donuts. In order to settle the product differentiation debate once and for all, I decided to do a taste test. McDonald's Iced Coffee McDonald's iced coffee is not for the anti-sweet tooth. Its almost disgustingly syrupy. It's taste is good and has hints of chicory, which remind me of a coffee in the french quarter in New Orleans. My biggest issue is that when ordered as "medium iced coffee" it comes choc full of sweetener and cream. I did not like this. Iced coffee should come black or you should be asked if you want the sweetener or cream added. Would rate the product quality 7/10 and the experience a 3/10. Starbucks Iced Coffee Starbucks's iced coffee is simple and plain. It did, however, have that faint Starbucks burnt coffee after taste. All in all, a much better and healthier option than McDonalds. I appreciate that. I ...
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Cost Leadership: Starbucks and The Threat of Substitutes

Substitutes, according to the textbook, "become a threat to a firm when their cost and performance, relative to the firm's current products or services, become more attractive to customers." I recently got tired of waiting int he drive thru line at Starbucks because it added about 12 minutes (on average) to my morning commute. I started to research alternative coffee options. I originally chose Starbucks because of accessibility, ease, and experience. Recently, however, I have valued my time more and realized that 12 minutes a day is hours a year. I was at Kroger browsing the cold brew selection when I noticed that Starbucks makes an iced coffee (same recipe) and bottles and sells it in the drink section. Not only did Starbucks make it easier for me to get my coffee, but they also ruled out the threat of substitutes. This kind of product variation across the board is something that ruled out cost because the quality was the same as it is in the store.
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Imitation, Patents and "Dumb Starbucks"

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Although many think that a firm's patents do well to prevent imitation, there was one instance in which the opposite was the case for Starbucks. Source: KTLA In 2014, a popular TV show titled "Nathan for You" experimented with the imitation laws surrounding one of the world's most recognizable companies. Parody imitations are a loophole, so he created "dumb Starbucks" as a way to show an ailing coffee company how they could boost their sales. Because every single item in store, on the menu, and surrounding thebuilding had the word "dumb" before it, it was considered a parody. It didn't take long after opening for Nathan to attract attention from all over the world. Starbucks quickly shut the entire project down, but it was a prime example of how simple it was for one man to open a store that completely imitated what Starbucks was doing. And if the coffee was just as good, why would anyone choose to go to Starbucks? At least they were ge...
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