The aim of business strategy is to make guidelines for functioning of a business organisation (Bamford & West, 2012). Strategic thinking helps a firm to grow in the competitive business scenario. Starbucks is a well-established brand name and the company has been able to grow in the global markets through strategic thinking.
Corporate level strategies are the strategies made by a business organisation with an intent to position itself in a specific manner to achieving long term goals (Ferrel, 2012). Corporate level strategy underlines setting up of vision, mission and business goals which are implemented throughout the organisation (Henry, 2011). Growth, diversification, stability and retrenchment strategies are the major corporate level strategies adopted by firms.
The corporate level strategy of Starbucks has been developed around its mission statement which seeks to help nurture human spirit through its selected coffee (Starbucks, 2018). This mission statement of Starbucks aims to create an image of a quality conscious company (Starbucks, 2018). The corporate level strategy of Starbucks can be assessed based on major theoretical concepts of corporate strategy viz growth, diversification and stability strategy.
Growth strategy focuses on increase of sales and revenue (Ferrel, 2012). This can be done by either increasing the market share or by taking over venders and suppliers. Diversification strategy aims to attain new markets and customers through diversification of the product Offred (Henry, 2011). On the other hand, focus of stability strategy is to maintain the existing customer base.
Starbucks’ corporate strategy is based on acquisition of more customers markets through quality focus (Starbucks, 2018). Since, its foundation in 1971, the company has grown to become a multinational company with millions of customers throughout the globe. The company has shown 12% growth rate in the last five years by successfully selling their brewed coffee product (Starbucks, 2018). This shows the remarkable way the firm has been able to increase its customer base globally through the use of growth strategy.
In strategic management theory there are two types of growth strategies. Substantive and limited growth strategies (Hill & Jones, 2012). Under limited growth strategy firms use same product or the same market to grow further. On the other hand, in substantive growth strategy the firm uses vertical and horizontal integration with similar firms and venders to grow further (Ungson & Wong, 2012). Major growth strategy followed by Starbucks is limited growth strategy.
Limited growth strategy has three sub strategies. These are market penetration, product development and market development (Sminia, 2014). In Market penetration, a firm enters a new market with same product. On the other hand, in poduct development the firm brings in a new product in the existing markets. In Market development, the firm tries to develop new market segments for its existing products (Ferrel, 2012). Starbucks has used market penetration sub strategies to grow in the global markets as it has concentrated majorly on its coffee product.
By focuses on its ace product, Starbucks has been able to create a niche for itself in the global markets (Starbucks, 2018). By using this strategy Starbucks has concentrated on a single product; that is, its coffee brand and has extensively marketed it in existing and new markets to create awareness, recall and purchase behaviour (Ferrel, 2012). Market penetration strategy has also helped Starbucks in uniquely positions itself as a well-known brewed coffee selling brand (Starbucks, 2018). Due to this strategy the firm has concentrated on its main product. This has helped the firm in outwitting its competitors.
This strategy has also helped the firm in utilising external environmental factors like social trends and economic fluctuations to its advantage. The firm has been able to establish suitable prices and political necessities for the its sales because of its focus on a single product. (Starbucks, 2018)
This strategy has also helped the firm to use its strengths such as, a very strong brand name to its advantage. Through its focus on a single product, the firm and its brand name have become synonymous with coffee (Ferrel, 2012). Therefore, the firm has acted strategically and used market penetration growth strategy to become a popular brand name by fitting in correctly with its external and internal environment.
Starbucks is a huge corporation and has an immense market presence and brand name globally (Starbucks, 2018). Mostly the firm has been using market penetration to enter new markets and acquire new customers. Following are recommendations for use of new strategies
The firm can also use product development as a strategy. This strategy aims to add new similar products to the existing product line (Ferrel, 2012). Through the firm sells other beverages and snack items along with coffee but it is not known for all these products. The firm should develop new products in snack and fast-food segment to acquire more customers (Ferrel, 2012). There are customers who do not drink coffee for health reasons. The firm can come up with other beverages and food items for these people. The firm can take up active marketing to spread awareness for these other products. This will help the firm in fitting in a better way in the external environment as this will address the social factors like health-conscious people (Ferrel, 2012). Additionally, it will help the firm to use its internal strengths better in a way to channelize the opportunities of the food and beverages industry in a better way (Ferrel, 2012).This strategy will also help the firm in getting a second unique positioning of a fast food and beverages brand in addition to a brewed coffee brand.
The firm can also use substantive growth strategy to further increase market share and improve its revenue shares. Under this strategy a firm tries to increase its market share through vertical or horizontal integration (Ferrel, 2012). Vernicle integration is when a firm acquires a dealer, a vender or a supplier firm. Through this method a firm can reduce supply side costs (Bamford & West, 2012).
Through vertical integration Starbucks can acquire coffee plantations in south America or Sri-lank to provide coffee at a cheaper rate to the emerging markets. This will help it in penetrating the emerging markets at lower cost than its competitors (Ferrel, 2012). Hence, this will help the firm in fitting better within the external and internal environment through reduction in price to suit customers in emerging markets. This will also help the firm in positioning itself uniquely as a middle-income group coffee provider in the emerging markets which will help the firm in getting more customers.
Another substantive growth strategy is horizontal integration where a firm acquires similar firms to increase its customer base (Bamford & West, 2012). Starbucks can acquire small local coffee houses in the emerging markets. This will help the firm in making a foothold in local markets and acquiring loyal customers of these small firms. Additionally, horizontal integration strategy will help Starbucks in integrating in a better way with social, economic and political environment of the emerging markets, as people in these economies may like to visit a coffee shop they have visited for years.
Therefore, through product development and substantive growth strategy, Starbucks can grow faster and further in the global markets
Conclusion
An understanding of business and corporate level strategies helps a firm like Starbucks in evaluating the kind of strategy it needs to survive and grow in the business world. An in-depth assessment of business strategy can also guide a firm in evaluation of current strategies and implementation process of new strategies. Therefore, to grow further an assessment of strategy is needed for Starbucks.
References
Bamford, C. E. & West, P. G., 2012. Strategic Management : value creation, sustaínability, and performance. New York: Cengage Learning.
Ferrel, O., 2012. Marketing Strategy. New York: Cengage Learning.
Henry, A., 2011. Understanding Strategic Management. Oxford: Oxford University Press.
Hill, C. & Jones, G., 2012. Strategic Management: An Integrated Approach. New York: Cengage Learning.
Sminia, H., 2014. The Strategic Manager. New York: Routledge.
Starbucks, 2018. About Us. [Online] Available at: https://www.starbucks.com [Accessed 11 September 2018].
Ungson, G. R. & Wong, Y.-Y., 2012. Global Strategic Management. Mew York: M.E. Sharpe.
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