Module 5 Assignment: Competitive Advantage Perspectives - Starbucks Coffee 1. Thoroughly describe Starbucks Coffee views as the reasons for its successes. Provide quantitative and qualitative success factors. There are numerous reasons for the success of Starbucks Coffee, but certain qualities of the organization stick out. However, Starbucks biggest success factor would be its quality coffee, backed behind Starbucks' positive brand image. Additionally, Starbucks offers a wide variety of food items and non-coffee beverages to go alongside a high quality brew that makes it a \"place for everyone\". Moreover, the ambiance and environment created at each Starbucks is extremely welcoming and warm, something that definitely contributes to the chain's success. Also, Starbucks Coffee has already established an identity as being convenient, offering quality coffee and a warm environment with free Wi-Fi to all customers. (Forbes 2012). Qualitative factors are informational trends that support and complement quantitative factors. A qualitative factor that was noted by (Alpha, 2015) is management. Although management is rather an intangible quality to measure, additional historical performance was documented for such claim. Such emerge in grow management for qualitative purposes can be measured by the company's revenue growth of at least 10% every single year (besides 2009) (Alpha, 2015). In the last five years, the book value per share has gone from 2.86 to 4.0, and gross margin has been super-stable at 59%. The most recent earnings report showed quarterly earnings growth of 22% YoY (Alpha, 2015). 2. Does Starbucks Coffee primarily use a low-cost advantage strategy or a differentiation strategy? Provide evidence to support your work. Two main factors identify as competitive strategies; target market and competitive advantage. Competitive strategies are what organizations use as the backbone for competition advantage. The strategy is a long term plan that includes target market which can either be broad or narrow, and competitive advantage, either the low-cost advantage or product differentiation. Low-cost advantage is a pricing strategy in which a company offers a relatively low price to stimulate demand and gain market share (BD, 2017). Starbucks Coffee in comparison to its competitors offers quality coffee beverages along with other refreshments in a price bracket that differs. Such difference leads to Starbucks Coffee to use the strategy of differentiation. Product differentiation is a firms attempt to gain a competitive advantage by increasing the willingness of customers to pay for the products or services they sell (WP, 2013). Starbucks Coffee total market concentrates on a broader segment, as it is defined by coffee drinkers across the world. The wellknown establishment core reason behind its employ of product differentiation strategy derives from its target market. Starbucks tailors to customers' needs by delivering orders based on personal preferences, however detailed each consumer can be. As quality products are the outline for such a fruitful organization, Starbucks differentiates itself by taking the demand and offering a unique supply that satisfies consumers enough to profit at higher prices. The \"lower-end\" price bracket (in comparison to Starbucks Coffee) would include the examples of companies such as Dunkin Donuts, Krispy Kreme, or McDonalds. Listed below is an example including companies that one would consider the use of low-cost advantage strategy. The given suggestion of such concept at use is purely focused on the price bracket in comparison to Starbucks Coffee (Listed below marketed off bracket for additional comparison). Price(s) Companies *Based on traditional cup of coffee Dunkin Donuts Krispy Kreme Small - $1.59; Medium - $1.89; Large - $2.09 X-Large - $2.29 Small - $1.59; Medium - $1.79; Large - $1.89 McDonald's Small - $1.00; Medium - $1.29; Large - $1.49 Starbucks Coffee Tall (Small) - $1.85; Grande (Medium) - $2.10; Venti (Large); $2.45 (3) Sources: fastfoodmenuprices.com (2017). The given example above is to demonstrate the difference as to why competitors gear themselves more towards a low-cost advantage. All three of the leading competitors have profited their name in different ways, by different products. However, it is Starbucks Coffee that focuses on differentiation that shadows the idea that price is everything, and enlightens the idea that quality is worth the price tag. 3. What resources and capabilities does the company have that enable it to achieve the strategy chosen in question 2 (low-cost advantage strategy or differentiation strategy)? Differentiation Strategy - Resources and Capabilities of Starbucks Coffee Globally Recognized Customer Loyalty One of the most recognized brand within the coffee segment. Ranked #64 in Global brand ranking (Interbrand, 2016) Loyalty-based programs such as Starbucks Rewards. Offers complementary $4-5 cards for potential long waits for service. Targets sectors of same based consumers Starbucks Card - Value card program that offers convenience which increases Strategic Locations Positive Brand Image Technologically Forward Company Culture consumer visits. Placement of locations that is highly visible to consumers. Placement of locations that involve constant pedestrian interactions (i.e. - colleges, department stores, malls, office buildings). Strategic locations that offer convenience (i.e. - an entity within an entity - Publix / Target). Community friendly Known for positive in-store atmosphere Focal points on reduction of waste by recycling Starbucks Apps included on Android and Apple devices. Employees offered benefit packages including 401(K), stock options, and retirement. Thorough training for optimal corporate culture 4. What suggestions do you have to improve the firm's business strategy and strategic position? There are many things that Starbucks Coffee can do to improve the overall position of the organization. For one, elongating barista training could be a good improvement. Currently, the typical training time last between 21-25 hours, and does not include a module for MyStarbucksRewards, something that is making up a larger portion of transactions. Similarly, finding better methods of weeding out poorly performing employees, and rewarding those that perform at consistently high level are imperative. Perhaps reasonably higher wages for good employees would increases retention as well. There also be room for improvement with regard to non-coverage time. It would be to the benefit of the organization to install more time for coffee tasting, cleaning, and connecting the employees to the store manager. This would also allow for more frequent assessments of morale and performance (Melody, 2015). Additionally, there has been a lot of attention revolving around the current refill policy. Some find that the current policy makes baristas police customers about their refills. Instead, a new policy should be implemented so that employees aren't required to do this, and may just use the Starbucks card. One could also argue that this would entice more people to sign up for MyStarbucksRewards. Of course, while this sort of growth between the customer and organization should be applauded, more attention should be placed on the rate of newly licensed stores. Starbucks Coffee is obviously an organization that likes to take pride in its performance standards, and how it influences its customers. The current rate of expansion can only maintain or diminish the current standards set by the organization. Perhaps more rigorous measures when it comes to licensing a new store would be to the benefit of all parties. Lastly, there has been added attention centered around the bad aspects of Starbucks Coffee, especially when it comes to their impact on the environment and how they treat their supplying farmers. So it may be in their best interest to improve their public image by changing these criticisms, or showing the world what they do for local communities (Melody, 2015). Work Cited Vanderford, Greg. (2015). Why Starbucks is not overvalued. Alpha. Retrieved from http://seekingalpha.com/article/3513466-starbucks-overvalued Hennessey, Rachel. (2012). Three Reasons Why Starbucks Still Shines, Despite Market Shortcomings. Forbes. Retrieved from https://www.forbes.com/sites/rachelhennessey/2012/08/06/3-reasons-why-starbucks-still-shinesdespite-market-shortcomings/#3b5121d1cd09 Melody. (2015). 10 Ways Starbucks Could Improve. Starbucks - Melody. Retrieved from http://www.starbucksmelody.com/2015/05/12/10-ways-starbucks-could-improve/ Low cost strategy. (n.d.). Business Dictionary. Retrieved March 12, 2017, from http://www.businessdictionary.com/definition/low-cost-strategy.html Chapter 7: Product Differentiation. (2013, March 1). Retrieved from https://kabrown9.wordpress.com/2013/03/01/chapter-7-product-differentiation/