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Welcome to my blog for MGMT 7160. I will be posting content about Starbucks in relation to global strategic management and current events. Follow along to learn more!

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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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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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