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Example research essay topic: Starbucks International Challenging Part 1 - 1,903 words

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Starbucks International: Challenging Competition Starbucks, one of the most famous corporations operating not only in the United States but also globally began as a small company who provided coffee to fine restaurants and espresso bars. It has since, over the last twenty-one years, become the largest retail coffee company in the world. Starbucks has seen its company grow from having a mere 17 stores in 1987 to having currently 5, 688 locations globally. This amazing expansion can be attributed to Howard Schultz, who bought the Starbucks name fifteen years ago.

However the success of the company can be particularly attributed to the well-developed strategies and their timely and correct application to dealing with many challenges the competitive company has today. This paper will be focused on one particular challenge that Starbucks faces today being competitive in todays market. To the unsophisticated reviewer the company appears to be rather successful. However there is a great deal behind all of that.

We will briefly examine the history of the company in order to obtain an insight on the success of Starbucks. A large reason Starbucks has done so well for almost two decades can be attributed to changes of the coffee image among consumers. The recent popularity of specialty coffee is due to four new consumer trends: 1) the adoption of a healthier lifestyle, which led people to replace alcohol with coffee; 2) coffee bars had become a place where people could meet, and talk; 3) people developed a liking of affordable luxuries, and specialty coffee became the beverage to drink; and 4) consumers had become more aware about coffee, as its popularity quickly spread throughout North America. From 1990 - 1998 retail sales of specialty coffee has seen an increase of 18. 5 % (Huis int Veld).

Because of coffees newfound popularity, Starbucks quickly began to take advantage of new ventures. It has pursued such projects as a direct mail program, which helped increase sales and transaction sizes, as well as introduce its customers with a wider range of products. At those times the company has faced a challenge of how to become popular, and not miss the part of the global market that was just in the development stage. The company decided to tap into the international market in a big way, and has found that to be quite successful as well. Currently it is pursuing ventures in the ice cream market, the bottled iced coffee beverages market, and perhaps the biggest one, the grocery market (Tiffen). The numerous numbers of strengths within this organization explain why Starbucks coffee has done so well in competing in this industry.

It all centers on the strengths of the young and energetic qualities of the chairman, and chief global strategist, Howard Schultz (Starbucks Coffee Company Executive Report). The leader of this company has been deemed creative, inspiring, and exceptionally demanding, as well as competitive, ambitious, and a creator of high standards. These qualities are essential to a strategic company, which wants to grow to its full potential. Another strength of Starbucks is its ability to maintain close relationships with its exporters by working directly with them, and providing superior training.

It demands that these exporters are flexible, and easy to work with (Clarke). Customer service and consistency are expected, and by setting these standards and enforcing them, these demands are always met. Starbucks has in turn been able to create a high demand from its suppliers to do business with them, simply because the company purchases more high quality coffee than anyone else does in the world (Schultz). With this high demand, suppliers are very willing to do what it takes to work with Starbucks, and they realize that anything less than superior work will not be tolerated.

Starbucks high quality control has also been the strength of the company. To ensure a top quality product, the company extracts three different samples of coffee from every shipment of 250 bags at different stages of the shipment. At every stage of this process, Starbucks reserves the rights to reject the coffee if it is not meeting with its quality standards (Schultz). In addition, another way the company ensures quality is by hiring employees who are well trained and knowledgeable of the company operations. Having educated employees is essential because consumers themselves are becoming increasingly knowledgeable with the coffee industry. The treatment of Starbucks employees has been well documented as well, due to the high benefits and wages as compared to other food service companies.

This type of handling of employees welfare can create a great deal of motivation to work, and in turn create an efficiently run business. However, there is no possibility for anything to be always good. As most organizations have weaknesses, the Starbucks is not an exception out of this. Several parts of the Starbucks Company are growth sensitive and therefore not very competitive. This can pose as a large problem in an organization trying to take advantage of a rapidly expanding market.

Areas such as quality of employment can become difficult. With each expanding business unit, Starbucks has to provide each employee with training and knowledge about coffee (Ortiz). When there are large batches of employees that need to be trained, this can become time consuming and expensive. Finding enough good people that could reproduce the values, culture and services would become a continuous challenge.

Another area that can prove sensitive to rapid growth is the support of Starbucks four business units: the retail store units, the specialty sales and wholesale channels, the mail order business, and the grocery channel (Carrol). Supporting all four of these in an integrated, successful, efficient, and cost-effective method is a challenge. Innovation is a key factor in trying to prevent a rise in supply costs within these business units. Currently, a key concern is the marketing of the companys brand equity. Starbucks is unsure as to how to market its products and what direction to take in order to continue its dominance in the coffee industry (Schultz). A possible reason for this is the companys inability to concretely define its brand image.

There have been many opportunities that Starbucks has successfully taken advantage of in the past, and will hope to take advantage of in the future for obtaining such an important competitive edge. Just recently, Starbucks has introduced espresso carts to its lines of business (Talbot). Through the use of these carts it allows the company to take advantage of earlier untouched markets such as train stations, street corners, and malls, to name a few. Starbucks also has three new business ventures underway.

They include Dreyers Ice Cream, bottled Frappuccino with PepsiCo, and the penetration into the grocery channel (Seattle Audubon Society). Each one of these provides its own opportunities for growth for the company. With an estimated $ 40 million in retail for 1997, Dreyers Ice Cream would open Starbucks to a new customer base, with the ability to create a reputation within the grocery industry (Schultz). Starbucks also believed that with its bottle Frappuccino it could possibly be one of Starbucks biggest ventures. Pepsi estimated the opportunity to be worth $ 1 billion. It is thought that the international market would best suit this product, especially in countries with an already defined cold coffee beverage market, like the Pacific Rim where total sales are estimated to reach $ 150 million in 2000 ().

As for the grocery market, it is felt that in order to be a major player in coffee for home, Starbucks needs to be available in supermarkets across the country. Grocery stores were responsible for 81 percent of specialty coffee sales. Convenience is a large factor to consumers when buying coffee and Starbucks cannot continue to allow supermarkets the ability to capture 70 to 80 percent of the home coffee business (Starbucks Coffee Company Executive Report). Even more areas for opportunity avail in the introduction of Starbucks coffee to the higher echelon restaurants, and day-part chains.

This would involve partnerships with other firms, and would allow Starbucks to create even more brand awareness without having to incur high costs. When looking at the whole bean retail sales, it is actually estimated to have more growth between 1994 - 1998 than ground specialty coffee. This may be an avenue that Starbucks will want to pursue. It is also forecasted that by 1999, whole bean will be able to contribute $ 4. 5 million in net contribution earnings to Starbucks. This contribution is higher than the predicted $ 3 million estimate that Ice Cream has (Ortiz). Starbucks in addition has to be aware of some possible threats that may arise.

Weather is always a factor in any type of farming industry. In some situations, it can put companies out of business. For example, in 1975 the Brazilian frost drove the price of coffee up, and U. S. coffee consumption declined 18. 5 percent (Taney).

There are also a number of other environmental factors that need to be taken into account. These can include health of the coffee trees, harvesting practices, disease and infection caused by insects, and the social, political, regulatory and economic environments of the coffee-producing countries. Another threat that could pose as a problem to Starbucks is a change in consumer preferences. Right now, the specialty coffee industry is riding a wave of popularity for their products, but it is only a consumer trend, and trends do not always last forever. This may be something Starbucks will be forced to think about in the near future. Additionally, Starbucks will always have the threat of competition in the specialty coffee market.

Specialty coffee does not only compete with basic coffee, but it also competes with similar beverage products such as tea, juice, soft drinks, and alcohol. The largest competitor for Starbucks is the Second Cup franchise (Schultz). This company is very growth-oriented, and does so via acquisitions. Second Cup is growing, and shows no signs of slowing down.

When evaluating Starbucks strengths versus weaknesses and opportunities versus threats, it is quite apparent that the company is in a strong competitive position. There are strengths at all levels of the business, from top management, to low-level employees, to company suppliers, and even consumer loyalty (Talbot). They have created a business that people perceive as being professionally run, with strong values, and great work ethic. To consumers, the name Starbucks means quality, and in the specialty coffee industry there is no substitute for it. When looking at company weaknesses, there is nothing that is of serious concern for the business.

Issues like how to market the Starbucks name is a problem that most organizations are facing today. Once a marketing strategy has been defined, and an image has been created Starbucks will then be able to move on to become the preferred consumer brand. There are also many parts of the organization that could be affected by its growth. These areas include the supply channels used by Starbucks to receive their specialty coffee, and their employment strategies. Quality is the concern for both of these areas. It is becoming increasingly hard for suppliers to both meet the quality standards that Starbucks demands, and still produce a timely, and quality product.

Perhaps a way to relieve some of this pressure, and dependency on the suppliers is for Starbucks to grow its own high-quality coffee. Starbucks has many viable opportunities available for them, and should pursue...


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