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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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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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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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