Wednesday, April 10, 2019

Business Strategy Essay Example for Free

Business Strategy shewIn 2006, Starbucks, the ubiquitous coffee retailer, closed a decade of astounding financial performance. Sales had increase from $697 million to $7.8 billion and net profits from $36 million to $540 million. In 2006, Starbucks was clear uping a return on invested capital of 25.5%, which was impressive by any measure, and the company was forecasted to continue growing earnings and maintain graduate(prenominal) profits through to the end of the decade. How did this come about? Thirty years ago Starbucks was a hit store in Seattles Pike Place Market interchangeing premium roasted coffee. forthwith it is a global roaster and retailer of coffee with more than 12,000 retail stores, some 3,000 of which argon to be order in 40 countries outside the United States. Starbucks Corporation set out on its current business line in the 1980s when the companys director of marketing, Howard Schultz, came back from a trip to Italy enchanted with the Italian coffeehous e experience.Schultz, who later became CEO, persuaded the companys accepters to experiment with the coffeehouse formatand the Starbucks experience was born. Schultzs base insight was that people lacked a third place between home and work where they could have their give birth personal time out, meet with friends, relax, and have a sense of gathering. The business model that evolved out of this was to sell the companys own premium roasted coffee, along with freshly brewed espresso-style coffee beverages, a diversity of pastries, coffee accessories, teas, and other products, in a coffeehouse setting. The company devoted, and continues to devote, considerable attention to the design of its stores, so as to create a relaxed, informal and comfortable atmosphere. Underlying this approach was a belief that Starbucks was marketing far more than coffee it was selling an experience. The premium price that Starbucks charged for its coffee reflected this fact.From the outset, Schultz also concentrate on providing superior client proceeds in stores. Reasoning that motivated employees provide the dress hat customer service, Starbucks executives directed employee hiring and cooking programs that were the surmount in the restaurant industry. Today, all Starbucks employees are required to attend training classes that teach them not only how to make a good cup of coffee, but also the service oriented values of the company. Beyond this, Starbucks provided progressive compensation policies that gave even part-time employees stock option grants and checkup benefits a very innovative approach in an industry where most employees are part time, earn minimum wage and have no benefits.Unlike many restaurant chains, which expanded very rapidly through franchising arrangement once they have established a basic formula that appears to work, Schultz believed that Starbucks needed to own its stores. Although it has experimented with franchising arrangements in some countries, and some situations in the United States such as at airports, the company dormant prefers to own its own stores whenever assertable. This formula met with spectacular success in the United States, where Starbucks went from obscurity to one of the best known brands in the country in a decade. As it grew, Starbucks found that it was generating an enormous volume of ingeminate business. Today the average customer comes into a Starbucks store around 20 times a month. The customers themselves are a fairly well healed group their average income is about $80,000.As the company grew, it started to develop a very sophisticated location strategy. Detailed demographic analysis was used to identify the best locations for Starbucks stores. The company expanded rapidly to capture as many premium locations as possible before imitators. Astounding many observers, Starbucks would even sometimes locate stores on opposite corners of the same restless street so that it could capture traffic goin g different directions down the street.By 1995 with almost 700 stores across the United States, Starbucks began exploring foreign opportunities. First stop was Japan, where Starbucks proved that the basic value pro part could be apply to a different cultural setting (there are now 600 stores in Japan). Next, Starbucks embarked upon a rapid growth strategy in Asia and Europe. By 2001, the magazine Brandchannel named Starbucks one the ten most impactful global brands, a position it has held ever since. But this is only the beginning. In late 2006, with 12,000 stores in operation, the company announced that its long line goal was to have 40,000 stores worldwide. Looking forward, it expects 50% of all new store openings to be outside of the United.i causal agent Discussion Questions1. What functional strategies at Starbucks help the company to achieve superior financial performance? 2. recognize the resources, capabilities and distinctive competencies of Starbucks? 3. How do Starbu cks resources, capabilities and distinctive competencies translate into superior financial performance? 4. Why do you cogitate Starbucks prefers to own its own stores whenever possible? 5. How secure is Starbucks competitive advantage?What are the barriers to imitation here?SourcesStarbucks 10K, confused years C. McLean, Starbucks Set to Invade Coffee-Loving Continent, Seattle Times, October 4, 2000, p. E1 J. Ordonez, Starbucks to Start Major Expansion in Overseas Market, Wall pathway Journal, October 27, 2000, p. B10 S. Homes and D. Bennett, Planet Starbucks, Business Week, September 9, 2002, pp 99110 J. Batsell, A Bean Counters Dream, Seattle Times, March 28th, 2004, scalawag E1 staff Reporter, Boss Talk its a Grande Latte World, Wall Street Journal, December 15, 2003, page B1. States. C. Harris, Starbucks beats estimates, outlines expansion plans, Seattle Post Intelligencer, October 5th, 2006, page C1

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