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Specializing in premier coffee products, Starbucks Corporation was founded in Seattle, Washington in the year 1971. The company has approximately 182,000 employees. Their high quality premium priced coffees, teas, variety of other beverages and fresh food items can be purchased worldwide in 19,.767 stores in 62 countries as well as grocery stores and other specialty markets. Since its inception Starbucks has utilized product differentiation as one of its key strategies. They do this by contrasting their premium product mixes with regular brands, making their locations more attractive and inviting than other coffee shops as well as having an outstanding reputation for excellent customer service.
This combination creates a premium valued brand and a competitive advantage that is costly for competitors to imitate. Another strategy that Starbucks consistently employs is making smart acquisitions and strategic alliances.
Bay Breads, Teavana and Evolution Fresh are a few of the key smart acquisitions made by Starbucks to diversify products. They have expanded internationally by aligning with numerous developed markets in a variety of geographic locations.
With its many strategies, Starbucks has set itself up to be highly successful which has resulted in a substantial competitive advantage. Starbucks is one of the major competitors in the retail and snack store industry. With a market share of 36.7%, they currently lead the industry. Starbucks expects their growth rate to be 3.9% per annum over the next five years. Premium coffee demands are driven by a variety of factors, including, demographics, the public attitude towards health, coffee consumption, average disposable income, and the world pricing of coffee.
When disposable income increases it has a positive consequence on the revenue of the marketplace. As the economy improves, budgets relax which results in an increased consumption of Starbucks premier coffees (Geereddy 2014). Coffee bean crops have a major influence on both the market cost and the margin of profitably for the industry. Higher crops typically create a decrease in coffee bean prices which results in higher profits due to lower market costs. Another factor in profitability is the consumers attitude towards healthier products, therefore Starbucks has created a shift in the industry to include healthier choices on their menu.
The economic status of the world changes constantly, which means that when a recession hits, people take a cheaper course of action. To be part of the mobile computing revolution, Starbucks has taken steps to help customers save money. It has worked with “Apple” to introduce discounted coupons via iPhone apps. Starbucks is also cross selling and co-branding, so customers can further enjoy their favorite products. U.S. consumers are becoming more cognizant of ethics, which means they want to choose brands that follow the societal and eco-friendly norms. This consumer responsiveness can be challenging for Starbucks. The most apparent factors that affect Starbucks are socio-culture, economic, technological, legal, environment and political factors. These reasons can hurt any business within any industry.
The list below will show how Starbucks has handled the issues that could arise.
Starbucks wants to adhere to all the rules and regulations, so they make sure to follow all the sourcing strategies. Ethics and Compliance According to Starbucks, conducting business ethically is vital to survival. Their ethics and compliance support their Mission & Values. They foster a culture that is committed to ethical leadership which helps to protect the company’s reputation and internal culture. This practice allows them to continue to conduct business with high integrity and offers resources to their partners that help everyone involved make ethical decisions during work. They accomplish this by encouraging leaders to initiate ethical business practices. There is also the ability to partner up with the business to guarantee legal risk managing and they inspire partners to voice their questions and concerns.
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