Starbucks - Business & Corporate Strategies
- Arend Pryor
- May 16, 2021
- 4 min read
Updated: Jan 3, 2022
In this post we look at the coffee giant Starbucks and the industry where they compete. We review their business and corporate level strategies and the impact COVID has had on their operations.
By: Arend Pryor | Created: 02/05/2021
Details: Sharing content created as part of pursuing my MBA degree
After reviewing the details for this week’s assignment, I found myself desperately in need of caffeine, which led me to choosing the Seattle superstar of pumpkin spiced everything, Starbucks, as my company of choice. In this post, I plan to talk about the industry in which Starbucks competes for share of the market and cover the business and corporate level strategies they pursue as part of the goals of the company. To conclude, I plan to wrap things up by covering any major changes the company has made, such as those related to the current pandemic and how this has affected doing business in this changing environment. So get comfortable, grab yourself a tall vanilla latte with one shot, no whip, or some variation thereof and let’s begin. Based on a review of their fiscal 2020 annual report, and by no surprise to most, Starbucks operates in the industry of specialty coffee (Starbucks Fiscal 2020 Annual Report, 2020). The company currently dominates this industry with a 40% share of the market, while the Seattle chain’s closest competitor Dunkin, formerly known as Dunkin Donuts, sits with a comfortable 26% share of the market with hopes to improve (Brown, 2019).
Despite Starbucks being the younger kid on the block with a total of 49 years in the business, the company continues to retain its dominance of the market with a focus on their continued goal of being, according to Starbucks Fiscal 2020 Annual Report (2020), “one of the most recognized and respected brands in the world” (para. General). This has allowed Starbucks to surpass a 71 year veteran like Dunkin.
According to Jones and George (2020), in order to compete successfully with competitors within their industry, companies must utilize a business-level strategy that clearly outlines the methods that a division or business unit within the company will pursue (p. 217). Determining the most optimal business-level strategy involves conducting a SWOT analysis and subsequently identifying the company’s core competencies. Generally speaking, these are the areas the company does best. The business-level strategy that Starbucks seems to be pursuing is in the differentiation of their brand, products, and services (Starbucks Fiscal 2020 Annual Report, 2020). When you take into account the core competencies of Starbucks, which includes the ability to differentiate their quality line of coffee products combined with a values based approach to customer service (Geereddy et al., n.d.), it makes sense for the company to limit their primary focus to these areas.
The corporate-level strategy of a company dictates the industries and international markets where they plan to compete and why (Jones & George, 2020, p. 217). These corporate-level goals are then used as the basis for managers when creating business-level strategies. The corporate-level strategies that Starbucks seems to be pursuing include a continued focus on the growth of store locations along with increased recognition within the specialty coffee industry. The company looks to accomplish the growth portion of this plan by increasing the number of company-operated and licensed stores globally in existing, developed, and high-growth markets such as China (Jones & George, 2020, p. 217). My assumption as to why the company has implemented this strategy is based on the experience and recognition they continue to obtain within the industry combined with their past performance of continuing to grow in these markets.
Considering the impact this pandemic has had during the last year, it should come as no surprise that “COVID-19” is mentioned over seventy times within the Fiscal 2020 Annual report for Starbucks. Based on the information included in this report, while the pandemic has not caused drastic changes to the company’s corporate or business-level strategies, it has had a drastic financial impact on revenues and growth. As a result of lockdowns at the state and local levels, the majority of their locations experienced closures and limited hours. Upon reopening, retail locations quickly experienced changes to the behaviors and ordering preferences of their customers. The preference of contactless pick-up has led to increased use of the Starbucks mobile app and the “on-the-go” pickup feature (Starbucks Fiscal 2020 Annual Report, 2020).
The Starbucks app, which was implemented five year back, has greatly assisted the company with generating sales and doing so by providing yet another differentiation in product availability and service (Aten, 2020).
Starbucks is the top level contender in the specialty coffee industry and has done so for quite some time. This is due to business level strategies that focus on core competencies and corporate-level strategies concentrated on recognition of brand, product and service as well as global growth. Despite the impact the pandemic has had on the financial side of the business, their sales continue thanks to the differentiation of ordering via mobile app previously made available by the company. The company does a great job at making the experience of ordering coffee a unique and satisfying one, in my opinion and I hope they continue to do so for the foreseeable future.
References
Aten, J. (2020). Starbucks just lost $1.2 billion in sales but still came out ahead because of this
brilliant decision it made 5 years ago. https://www.inc.com/jason-aten/starbucks-lost-1-billion-in-sales-but-25-percent-of-orders-now-come-from-mobile-app.html
Brown, N. (2019). Nearly four of every five US coffee shops are now Starbucks, Dunkin or
Geereddy, N. (n.d.). Strategic analysis of Starbucks corporation. , (), 1-17.
Jones, G. R., & George, J. M. (2020). Contemporary Management (11th ed.).
Starbucks fiscal 2020 annual report (2020).
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