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Starbucks Corporation: An Extensive Analysis
Muhammad Almuhanna
Andre Johnson-Payne
Jessica Pope
Natalie Schiefer
Jordan Sprague
Management 429 – Dr. Yu Liu
April 16, 2012
Table of Contents
Brief Introduction & Key Issues
External Analysis
Internal Analysis
Analysis of Business Level Strategy
Analysis of Corporate Level Strategy
Brief Introduction & Key Issues
External Analysis
Internal Analysis
Analysis of Business Level Strategy
Since the formation of Starbucks Corporation, the company has always profited from
their gourmet beverage and confection offerings. The strategies pertaining to how the company
will establish market share and obtain profits are determined by their business level strategy.
After careful consideration and evaluation, it has been determined that Starbucks Corporation
uses the differentiation generic business strategy to deliver to their primary markets. The
company offers gourmet products that have a perceived value with customers as being
exceptional in flavor and quality, thus allowing premium market pricing.
In order to formulate a differentiated business level strategy that will permit the company
to excel, Starbucks Corporation must evaluate the customer needs, customer groups, and the
distinctive competencies of the company. First, the company must evaluate customer needs, or
what need is to be satisfied. In the case of Starbucks Corporation, the company must satisfy the
customer need for high quality snack and beverage products that offer some sort of additional
perceived value. This is the main way that Starbucks differentiates them from other firms
competing in the coffee and specialty products industry. The coffee and tea brands as well as the
other beverage options that are available to customers are all of utmost quality, which offers an
edge above several competitors.
Next, Starbucks Corporation decided the best way to segment their market, and chose to
recognize differences between customer groups. A heavily segmented market structure permits
Starbucks Corporation to make a diverse range of products that meet the needs of all customers
or most customer groups. The firm offers homemade coffee, tea and fruit smoothie beverages,
gourmet juices and canned drinks, and a display case packed with gourmet confections. In
addition, drinks can be concocted with a variety of milk options and be either hot, on ice, or
frozen. The stigma that Starbucks only offers coffee drinks has completely disappeared, and
they truly have products that satisfy every niche market.
Lastly, Starbucks Corporation must decide how customers are to be satisfied by
effectively matching their needs with the company’s distinctive competencies. In order to
successfully operate under a differentiation business level strategy, Starbucks Corporation must
match consumer’s expectations when purchasing a high quality product with a costly price tag to
their everyday operations and offerings. Along with providing gourmet customized beverage
and food offerings, Starbucks also meets customer needs by providing an upscale environment
for morning coffee or an after work business conversation. This environment has been modeled
by other coffee and specialty products industry firms that operate under a similar business level
strategy, such as Caribou Coffee or Panera Bread. However, these ‘perks’ are not offered by the
cost leaders of this industry, such as McDonalds, 7-Eleven, or even Dunkin’ Donuts. Their drive
towards differentiation helps Starbucks respond to the competitive dynamics posed by cost
leadership firms within the industry.
Overall, Starbucks Corporation has effectively differentiated themselves from their
competitors in a manner that has established substantial brand loyalty and satisfies customers in a
way that others do not. This level of differentiation would not be possible without all functions
of the firm working together to achieve a common goal: to offer customers premium products
while obtaining profit. It is easily seen that the individual functions of Starbucks work together
to support the business level strategy. Quite possibly the most visible, customer service is of
utmost importance to the company, and the company employs a knowledgable and friendly staff
that upholds this reputation. The organizational culture exemplifies this, and establishes a
behavior control within the firm. Not only are the staff extremely friendly, they are always
willing to make a beverage recommendation or re-make a beverage if it is not up to quality
standards or customer expectations. This exudes exceptional customer service, but it also is an
established output control for quality within the organization’s structure.
In addition to customer service, the Starbucks’ Marketing & Sales function supports the
company’s differentiation business level strategy. First, the function has excelled by creating a
high level of brand recognition through a logo that is recognized worldwide. In addition, the
function effectively highlights the quality of the offered products through sophisticated
advertisements that attract a large customer base. The marketing plans of the company highlight
the gourmet ingredients that go into each and every product. In addition to marketing the quality
products, the Marketing & Sales department highlights the company’s dedication to social
responsibility and corporate citizenship. The company’s website advertises their commitment to
ethical sourcing and community service initiatives, such as Project RED and the HandsOn
Network. With these aspects being well known, customers do not feel quite as much of a pinch
when paying more for a cup of coffee; they feel as though the extra dollar emits much intrinsic
Analysis of Corporate Level Strategy
Conclusions and Recommendations