Business / Starbucks’ Strategy

Starbucks’ Strategy

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Autor:  anton  04 November 2010
Tags:  Starbucks,  Strategy
Words: 990   |   Pages: 4
Views: 1236

1. What are the key elements of Starbucks’ strategy as of 2004?

The key elements of Starbuck’s strategy were as follows:

a. Grow the business by constantly adding more stores around the world: The Company has had tremendous success in opening stores around the world. It has applied its global strategy effectively and has enjoyed increase in sales from global operations.

b. Store design, planning and construction are also part of the strategy. The company began to create its own in house architects and designers to design Starbucks locations. Locations are designed for customers to meet, relax or simply enjoy a peaceful interlude in their day. Each location was designed to signal “best of class” and to reflect the personality of the community and the neighborhood.

c. Product Line: The Company has a vast product line and is constantly engaging in efforts to develop new ideas, new products, and new experiences for their customers.

d. Employee selection and training are also elements of the strategy. Starbucks employed diverse people which reflected the community. Starbucks trained each employee to perform to their best capabilities.

e. Increasing sales by new means of selling: Starbucks indulged in mail order sales. It published a mail order catalog that was distributed 6 times a year. It also has an electronic store on the internet though which Starbucks sells its products.

f. Joint ventures and Licensing: Starbucks entered in to joint ventures with PepsiCo and Dreyer’s Grand Ice Cream. It also has licensed agreements with Marriott Host International, Horizon Airlines, United Airlines, Nordstrom’s, Barnes & Noble book store and Wells Fargo Bank.

2. What grade would you give Howard Schultz for the job he has done as CEO of Starbucks? Be prepared to support your answer based on how well (or not so well) he has performed the five tasks of strategic management discussed in Chapter 2.

I would give Howard Schultz a grade of A for the job he has done as the CEO of Starbucks. He has successfully performed all the 5 tasks of strategic management discussed in Chapter 2.

The strategic vision that Howard Schultz had for Starbucks was "Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow". This statement had all the characteristics of an effective worded statement. It is graphic, directional, focused, flexible, feasible, desirable and easy to communicate.

The objectives set by Mr. Schultz were simply to establish Starbucks as the most recognized and respected brand in the world. To achieve this goal the company has implemented a strategy which focuses on rapid expansion of its retail operations, growth in specialty sales and other operations and selectively pursue opportunities to leverage the Starbucks brand through the introduction of new products and the development of new distribution channels.

Mr. Schultz has successfully implemented this strategy and has had tremendous success in expansion in other countries. The recent expansion in Japan has also been very successful for the company. So far the company’s strategy seems to be working fine and no major adjustments are needed.

3. What was Howard Schultz’s original strategic vision for Starbucks? Is his present strategic vision for Starbucks different from the one he had in the 1980s? How many times has his strategic vision changed? Is his present strategic vision likely to undergo further evolution?

When Starbucks was a private company back in the 80s Mr. Schultz’s vision was for Starbucks to become a national company with values and guiding principles that employees could be proud of. This is not very different from the strategic vision the company has in the present time. The significant difference is the concentration of markets. In the beginning it was the national market that the statement was targeting and the present one is targeting the international market. This statement will likely undergo further evolution. The market environments keep changing, the technology advances and the strategic visions of companies have to change accordingly. As more and more competition arises, technological advances take place, and as markets get saturated, this strategic vision would need some modifications.

4. What is your assessment of Starbucks’ financial performance during fiscal years 1998-2003? Does the company’s performance indicate that Starbuck’s strategy is working well?

Starbuck’s revenues have steadily increased from $730.2 million in 1998 to $2389.6 million in the year 2003. The net income has also steadily increased from $68.4 million to $268.4 million from the year 1998 to the year 2003. This clearly indicates that the strategy implemented by the company is working well.

5. What issues confront the company as of 2004? What should Starbuck’s management be worried about?

One of the biggest challenges that the company is currently facing is the rising costs of health care benefits and dairy prices. Due to this the company has had to raise prices for the first time in four years. Mr. Schultz says that over the next two years the company would have to spend more on the employee health care costs than they would have to for coffee. Starbucks provides health care benefits for all employees working 20 hours a week and above. This is the primary factor that would be a concern to the management of Starbucks.

6. What recommendations would you make to Howard Schultz to sustain the company’s growth and support continued strong financial performance in the years ahead?

I would recommend the continual implementation of the current strategy. The strategy is working and there is no reason to deviate from it. The company has been very successful in expanding its operations in other countries. I would recommend that the company continue to do that. I would also recommend spending extra resources in the development of new products to keep a competitive advantage over other competitions. The competition is only going to rise because the market has not reached saturation yet. In order to stay ahead of the competition, the company needs to keep researching new products, and stay in sync with the ever changing technology.

Sources:

1) http://www.article13.com/A13_ContentList.asp?strAction=GetPublication&PNID=194

2) http://quicktake.morningstar.com/Stock/Income10.asp?Country=USA&Symbol=SBUX&stocktab=finance

3) http://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.html



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