History of Foundation Starbucks

Earlier it was named ‘Starbucks Coffee Tea and Spices’ and at that time it use to sell to restaurants and espresso bars. Starbucks a coffee brand was introduced to the people of Seatlle back in 1971. A company with the mission ‘to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time’, today is a global coffee brand spread in 75 markets all over the world. Over the years it has proved itself in terms of quality, standard and public relation.

In 1991,Starbucks Corporation had already made the place in heart of the people in America.Americans now know the best place where at the end of the day they can relax in a friendly luxurious environment without consuming alcohol.

Howard Schultz, CEO of Starbucks Corporation was the reason behind the success of the company.His uttermost focused was on establishing strong brand image of the company. Thus, Starbucks also invested a huge amount in enhancing the image in such a way that it is viewed as an expensive place for the rich lovers of coffee.

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It definitely was not an ordinary coffee shop rather it becomes a status symbol for the people. Also it attracts the non-alcoholic group which want to spend their money, having quality time with friends and family, in a comfortable place. (X COFFEE) Within very less time Starbucks was seen serving the people in different parts of the world including US, Europe , Africa and Asia. It soon became an international coffee chain.

(X COFFEE) (Alan Harrison and Remko van Hoek, 2008) says that ‘‘a supply chain is a network of partners who collectively convert a basic commodity (upstream) into a finished product (downstream) that is valued by end-customers, and who manage returns at each stage’’.

Or in other words (Alan Harrison and Remko van Hoek, 2008) define that supply chain management as the process that involves planning and organisation at each steps, which begins from collection of raw materials from different suppliers to the manufacture of the end product and services. Vertically integrated supply chain the balance (2018) Vertical Integration, Its Pros and Cons with Example https://www.thebalance.com/what-is-vertical-integration-3305807[Accessed 28 May 201 If more than one phase of supply chain is controlled by a firm itself it is called vertical integration. Vertical Integration contributes to the competitive advantage of the company. According to (Hoa Nguyen,2016), global trade along with information technology development are increasing the demands of the customers, thus creating tight competition in foreign markets.The key for survival in such cut throat competition is achieved only when company make sure that it’s supply chain is controlled and co-ordinated in such a way that it satisfies the needs of end customers’.

Starbucks have close supply chain management. The company have a direct involvement at each phase of it’s SCM.They have their own C.A.F.E I.e, Coffee and farmer equity centre, distributors and packagers. Thus shows that it follows Vertically Integrated supply chain. In case of Starbucks, it follows Vertical Integration SCM thus have following competitive advantages.

1.Suppliers-The company does not have to face problems like shortage of raw material, for the reason that they have their own suppliers in their supply chain ve

2.Retail -Give them an advantage since they own the retail stores. Thus, they have a clear idea what to produce and in how much quantity.

3.Price-They can increase or decrease their product price in oder to compete with the other firms.But for other companies it is not possible to reduce their cost. (Hoa Nguyen,2016) Material Management is the procedure of planning, organising and controlling of material within an organization. It starts with the buying of the raw material required for the manufacturing of product and ends when the finished product is dispatched. Linkedin (2014)

Amaded (2019) says that competitive advantage can be defined as the powerful advantage which helps in growth and survival of a company among it’s competitive companies which have similar products in a similar market. Or a company which have a superior quality product or service can be defined as a competitive advantage.  Or in other words competitive advantage can be defined as the advantages which a company have by dominating the market through its cheaper product or by providing the customers the product which has better quality than it’s competetive product thus charger more.  Porter’s generic strategy claims that a competitive advantage can be obtained by a company by adopting the generic strategy .

In case of Starbucks it has could be studied as 3 basic Stratigies which include cost leadership, differentiation and focus adopted the generic strategy of focus. When the focus is on the cost I.e, cost leadership where the product price h Starbucks’ Basic Strategies Competence-Based Strategy According to Porter’s Generic Strategy is the key to competitive advanatage. It has been divided in four groups Cost Leadership, Cost Focus, Differentiation Leadership and Differentiation Focus but if one can broadly understand cost leadership, differentiation and focus it will be enough to understand the competitive advantage strategy of Starbucks.

Cost leadership-from the name itself it is clear that lower the price higher the profits. Company who follows Cost Leadership as a competetive advantage have cheaper products so that they can competeitive with the products with same or little more expensive products. These types of companies also work on economies of scale, the more the production the lower the price of the product thus it’s more competetive. Differentiation- a word that comes from different means a product which is unique and different in the eyes of consumer. Focus-company following focus strategy will only concentrate/focus on the particular target group. Whereas, in case of Starbucks it follow this strategy. Under cost focus it’s target group is the rich people who are ready to pay more for the quality of the product. Differentiation focus is very clear with it’s brand image and status symbol product it offers to it’s target group. Howard Schultz re-joinned the corporation in 2008 after eight years. ‘’In 2008, Chairman, President, and Chief Executive Officer Howard Schultz tapped Gibbons, who was then senior vice president of global manufacturing operations, to run the company's supply chain.’’ Peter D. Gibbons, executive vice president of global supply chain operations said that the problem was with the operational cost. The cost of overall operation whether company owned or outsourced the operation at different stages of supply chain is more than the overall income of the corporation. Gibbion noticed that problem is not supplying the deliveries to retailers on time.

Thus in 2008, Starbucks corporation modified it’s Supply Chain Management in a much smatter way. They wanted to eliminate all the unwanted expenses occurring due the operation which are outsourced. Therefore, they aimed at cost reduction. Thus, They now have 5 company owned coffee plants, in Kent, Washington; Minden, Nevada; and York, Pennsylvania; in Columbia, South Carolina; and in Amsterdam, the Netherlands. The corporation has 24 contract manufacture,9 regional distribution centers(DCs) only 2 of them are owned by the company and 48 central distribution centres (CDCs) out of which only one is owned is the company.Thus mutually decrease the cost of operational management. To avoid that company 3PLs have an international system for logistics.

According to a thesis. Sustainable competitive advantage can be describe as an advantage which company had for a long period of year. It could be related to a product or a service. Starbucks Corporation was growing tremendously, but, its strategy of aggressive expansionism turned out to be the reason for the downfall. However, (acc to annual report of Starbucks 2008) the Starbucks Corporation (in 2008 )after 16 years of successive growth was facing problem and had to shut down few stores and reduce cost.