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... each of them to some degree. Anything should be a possibility, as long as the company does not get away from its current perception of quality. As a successful company, you never want to spread yourself too thin, and ruin a good opportunity. The threats that Starbucks has are ones that any normal competitive company would have. One that they could possibly prevent is a decline in company sales due to a change in consumer preferences.
Starbucks has already begun to diversify its products by introducing bottled beverages, competing in the ice cream industry, and placing the product in grocery channels, which helps protect against changing trends in the market place (Tiffen). As long as Starbucks continues to keep its current strategy to provide a premium quality product to the consumer, whether it is coffee, ice cream, Frappuccino, or any other niche it decides to take on, there should be no decline in the growth of this company. Starbucks follows six guiding principles to help measure the appropriateness of their decisions. They are as follows: 1) Provide a great work environment and treat each other with respect and dignity. 2) Embrace diversity as an essential component in the way we do business. 3) Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. 4) Develop enthusiastically satisfied customers all of the time. 5) Contribute positively to our communities and our environment. 6) Recognize that profitability is essential to our future success (Schultz).
These principles are the essence of Starbucks. They have been instilled into every employee, and every employee believes in them. For a company to be such a success in any industry, and to have the ability to grow in the future employees need to have this type of mentality. Shultz makes it very clear as to what the company goals are. Their objective is to offer more than just a great cup of coffee; they want to offer a memorable experience. The company continues to work towards its long-term goal of becoming the most recognized and respected brand of coffee in the world.
It works to achieve these goals through its many lines of businesses. These businesses include retail outlets, grocery channels, mail orders, merchandising, bottled iced coffee beverages, and ice cream (Carrol). In each of these businesses Starbucks maintains similar relationships. Quality is a main factor in all, as the company produces a premium product for the consumer. Specialty sales have also become an important corporate-level strategy for competence. Starbucks has created agreements with retailers, wholesalers, restaurants, and service providers to carry its specialty brand of coffee.
This allows Starbucks to increase its name recognition while at the same time creating revenue for growth. In every partnership entered into they only chose leaders in their field, and companies that had excellent reputations for success and quality, much like the message Starbucks is trying to send to its own consumers. The partners they have aligned themselves with include United Airlines, Barnes & Noble, PepsiCo, and ARAMARK just to name a few (Schultz). It is clear by looking at these partnerships, and the preceding lines of businesses that Starbucks is involved in, that the company is pursuing a related diversification corporate strategy, as everything hinges on the production and sales of its core business, specialty coffee. By looking at SWOT analysis of the coffee industry, this type of business strategy is very effective. By creating a type of work atmosphere with employees wanting the company to succeed, and rewarding the for it, Starbucks has achieved more in the last ten years than most businesses could ever dream of (Starbucks Coffee Company Executive Report).
They are an ever-growing company, but somehow manage to limit their growth as to not spread themselves to thin, and run the risk of over-branding their product. The new ventures they are taking on are both of related substance, and should be pursued aggressively. The Starbucks formula is decisively based in its coffee, its employees, its merchandising, its ownership values, its real-estate approach, its image, and its innovative ness. Starbucks puts a great deal of effort into its quality control system.
They cover every detail from product freshness, to timely delivery, to protection of its roasting formula. They begin with maintaining close relationships with its exporters by working with them directly, and providing them with extensive training to ensure they realize how their company wants things to be done (Ortiz). By creating such a close relationship they build loyalty with the exporters, which can lessen conflict in future transactions. This type of training is not limited to just exporters, but to direct employees of the company as well. Starbucks wants its employees to provide the best service possible, and to be able to provide the customer with any information about coffee it may require. Also, to keep high morale and create motivation, employees were paid a higher wage than most food service companies.
They were also provided with health insurance, disability, and life insurance. As well, all company employees received a stock option plan. This type of reward motivates employees, and creates little turnover though having them wanting the company to succeed in order for them to become profitable (Ortiz). They also carried this type of philosophy over to its real estate agents. These agents are guaranteed a minimum commission for every store bought, and this created a loyalty amongst Starbucks and the real estate network. With a rapidly expanding company this is vital to growth, and motivation of the real estate staff should be made a top priority.
Assurance of overall quality does not stop there. Maintaining a fresh product throughout the stages of the business, from exporters to the final consumer, has been precedence. In every shipment of 250 bags to the company, Starbucks will extract three different samples during the shipment procedure. If at any time it did not meet quality standards, the company reserved the right to reject it and send it back. As well, packaging was innovative developed to ensure freshness. One-way valve technology extended the shelf life of its coffee to 26 weeks (Clarke).
This can turn into large cost savings, as the discarding of coffee decreases. Starbucks also protected against the possibility that someone could replicate their roasting procedures. Roasting was key to the company, because its taste depends entirely on this process. Computerized roasters were put in place to guarantee consistency, however roasting techniques were built into proprietary software to ensure that if a roaster were to work for another company, they would be unable to give away this vital information (Schultz). The organizational structure of Starbucks is very flat in encourages competitive ideas from all levels of the company.
Starbucks places a great deal of effort into seeking the thoughts and opinions of its employees, and they value what they have to say, because they are the ones in direct contact with the companys customers. The head office managers keep in touch with the field people, and have meetings to collect questions and gave answers about any topics, in a type of open forum atmosphere. Starbucks Supply Chain Operations has a very effective structure. It has great transportation rates, a complex bakery distribution model, an accurate forecasting process, and a fully integrated manufacturing and distribution process (Schultz). The company developed these skills because it used benchmarking as a competitive strategy.
It also hired experts, and believed strongly in the concept of integrated supply. They focus on the building of its supply chain operations to eliminate redundancy and maximize efficiency. Starbucks has created such a strong corporate culture and strong work values, that it allows a company like this the ability to successfully engage in product diversification. However, amongst the first things Starbucks needs to do it to concretely define its brand image. This image however, needs to be conveyed to the market in a precise manner, so there is no confusion amid Starbucks customers. This is vital if Starbucks wants to maintain its domestic market share and face the competition challenge decently.
Once this has been created, they can move on to other projects with a smooth transition. The whole bean industry is an area with which Starbucks should look in to. This is an avenue with rather large estimated growth revenues. Over the last decade the whole bean industry has been growing, and Starbucks has yet to take advantage of this untapped market (Talbot).
Adding this line of coffee should not be a difficult one, as Starbucks has top of the line suppliers, and maintains good relationships with them. As well, an important area of expansion for Starbucks is specialty sales. This allows the company to get its name out into the public without having to incur costs of store purchases, employee salaries, and large equipment costs. Typically a Starbucks store can cost the company up to $ 340, 000 to start up. Considering the company wants to generate 20 to 40 stores per month, these costs add up quite significantly (Talbot).
When entering into agreements with these partners, Starbucks must ensure that they will be quality associates. It does not want to run the risk of focusing too much on expansion, and too little on who they are expanding with. Perhaps a little less aggressively Starbucks should enter into the ice cream and bottled beverages market. The partnership with Dreyers is a joint venture, and is an affiliation that allows Starbucks to get its name into the grocery channel, and hit an entirely new customer base. Domestically, the Frappuccino venture should not be followed with a great deal of intensity. Bottled iced coffee beverages have had a tough time in the past cracking into the North American market.
However, the product does look promising overseas, specifically the Pacific Rim where there is already a market for cold coffee beverages. Estimated sales look strong, and this is a product that if paired with the right promotion, could become a great investment for Starbucks. Overall, as long as Starbucks maintains and promotes a strong quality product, without deterring from its corporate-level strategy, it will always have a great number of opportunities ahead. There is a very strong base for this company, which will allow it to pursue desired avenues with aggressiveness and confidence. Bibliography: Starbucks Coffee Company Executive Report. Nov. 23, 2003.
Found At: web Clarke, R. J. and R. Macrae, eds. Coffee. London: Elsevier Applied Science, 1985.
Ortiz, Suite. Harvesting Coffee, Bargaining Wages. Ann Arbor: University of Michigan Press, 1999. Carrol, John, ed. Making Coffee Strong: Alternative Trading in a Conventional World.
Canton, Massachusetts: Equal Exchange, 1994. Schultz, Howard and Dori Jones Yang. Pour Your Heart Into It. How Starbucks Built a Company One Cup at a Time. New York: Hyperion, 1997 Seattle Audubon Society 1999.
Coffee, Birds and Trade Policy: Making the Connection. Found at: web Taney, Geoff and Tony Worsley. The Food System: A Guide. London: Earthscan Publications, Ltd. , 1995.
Talbot, John M. 1997. Where Does Your Coffee Dollar Go? : The Division of Income and Surplus Along the Coffee Commodity Chain. Studies in Comparative International Development, Vol 32 (1): 56 - 91. Huis in 't Veld, Mark.
Coffee: A Speculator's Plaything. EFTA Fair Trade Yearbook 1997. European Fair Trade Association: January 1998. Tiffen, Pauline, and Zadek, Simon, Dealing with and in the Global Economy, Chapter 6 in Mediating Sustainability, Kumari an Press, 1998.
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Research essay sample on Corporate Level Strategy Ice Cream
