This case study analysis focuses on the identification and examination of the forces in the competitive environment surrounding Starbucks and the company's ability in relation to the coffee industry. It discusses the core competencies of Starbucks and the alternatives and opportunities for growing its retail operations.
Mary M. Crossan; Ariff Kachra
Harvard Business Review (98M006-PDF-ENG)
June 18, 1998
Case questions answered:
Case study questions answered in the first solution:
- Section I: Situation Analysis. Write a summary of the situation of the market Starbucks is operating in at the time of the case. The purpose of the Situation Analysis is to frame the environment in which Starbucks is operating and planning to grow. In order to assist in this section, a copy of a well-respected tool entitled the 5Cs. This is a format you can use as a general reference in order to develop a picture of Starbucks’ opportunities and challenges.
- Section II: Starbucks Position. Describe Starbucks’ apparent position in the market. Describe the primary values that Starbucks brings to its target audience(s). Highlight critical features and attributes that make the Starbucks brand “real” and believable in the eyes of consumers.
- Section III: Options. In your analysis of the Market and Starbucks position, develop 3 options you believe Starbucks should consider as they move to expand and grow the business. Cite and briefly explain one primary reward that might be achieved for each option and one primary risk that might cause the option to fail.
- Section IV: Proposal. Develop a set of Guidelines for Starbucks management to follow in making decisions to adopt options and expand the business while staying true to the delivery of market expectations. This section should be reasonably specific as to the things and values Starbucks would want to include in any expansion of its brand, including internal growth and external opportunities (e.g., Frappuccino).
Case study questions answered in the second solution:
- What is your assessment of the impact of each of the five competitive forces on the retail coffee-house industry?
- Based on your assessment of these forces, how attractive is this industry? Explain your answer.
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Starbucks Case Answers
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Problem Statement – Starbucks Case Study
The problem statement, in this case, is trying to figure out where to take Starbucks from here.
Situational Analysis – The Starbucks Company
The market size and growth are consistently expanding, which means consumers are not worried about spending their money on quality drinks. Consumers’ perception of coffee has changed as the lifestyle behind coffee has changed.
If Starbucks tackles the international market, it would only benefit the company as it could be ahead of competitors and have the first mover’s advantage. Making sure they maintain their brand locally and internationally will increase consumers’ brand loyalty as well as their cash flow.
PESTEL Analysis
Political/Legal
Starbucks should keep in mind the taxation policy. Some countries impose high taxation on farmers, for example. Any sort of fluctuation in taxes on supplies will be apparent in products and will affect consumers.
The company should also keep in mind trade regulations. Some countries like Argentina and Saudi Arabia have stricter laws when it comes to trade. The company needs to make sure, when it goes globally, that it keeps its mission, vision, and product intact while respecting the culture.
Economic
Starbucks needs to keep in mind certain aspects, such as the inflation rate, growth in average income, and the growth of the economy.
There are certain risks that come with going internationally. For example, if the economy stops growing as opposed to what the company predicts, then that could affect the business majorly. Consumers will not spend on the company’s products, and it will leave the company with a dent in its profitability.
Porter’s Five Forces: Competitive Rivalry
Starbucks has shown tremendous growth and strength in its brand. However, competitors are able to affect their success. The company’s US competitors are Green Mountain, Brothers, Coffee People, Diedrich, and other products such as juice, soft drinks, and non-coffee-related drinks.
As shown in Exhibit 1, the company seems to be the lead in the industry compared to U.S. and Canadian companies.
The company should keep in mind the consumers in order to beat any incoming competitor, whether it is a coffee drink, place, or a non-coffee drink. The mind of the market is based on consumers’ needs and wants, and based on that, the company should cater to the consumer.
At the same time, they should keep in mind their vision, mission, and environment while catering to their consumer.
Starbucks Position
Starbucks positions itself in the market as a…
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