Starbucks Maintaining a Clear Position Case Solution

1. Introduction

This case study presents a detailed strategic analysis of Starbucks Maintaining a Clear Position. The case analysis covers key managerial and strategic issues that Starbucks Maintaining a Clear Position is currently facing due to challenging internal and external environments. The case solution first conducts the strategic analysis by applying the relevant strategic management tools and frameworks, and then presents strategic recommendations based on overall analysis (Hamilton and Webster, 2018).

The case offers a holistic view of Starbucks Maintaining a Clear Position business environment. Case findings are relevant for all key stakeholders of Starbucks Maintaining a Clear Position. Reader should first read the case on Starbucks Maintaining a Clear Position, and then read the analysis.

2. External environmental analysis of Starbucks Maintaining a Clear Position

The external business environment comprises political, economic, social, technological, legal and environmental factors that influence the strategic positioning of Starbucks Maintaining a Clear Position (Khalid and Rahman, 2019).

Here are key external environment characteristics:

External environmental forces are dynamic and uncontrollable

External environment can directly influence the Starbucks Maintaining a Clear Position strategic positioning

External environment requires continuous monitoring to timely identify the potential threats and opportunities (Shtal et al. 2018).

2.1. PESTLE analysis of Starbucks Maintaining a Clear Position

2.1.1. Political

The Starbucks Maintaining a Clear Position must carefully examine the potential impact of global political unrest on its business operations

The Starbucks Maintaining a Clear Position should actively monitor, and respond to the changes to legislation

The Starbucks Maintaining a Clear Position should analyze how taxation policies can influence its profitability in different countries where the company is currently present (Khalid and Rahman, 2019).

2.1.2. Economic

Rising GDP and growing consumer spending can help Starbucks Maintaining a Clear Position in business expansion

Increasing interest rates can increase the debt cost for Starbucks Maintaining a Clear Position.

Reducing inflation can decrease the production cost of Starbucks Maintaining a Clear Position and increase profitability by driving up the sales revenue (Begley et al. 2005).

2.1.3. Social

The aging population can affect the Starbucks Maintaining a Clear Position brand positioning, as Starbucks Maintaining a Clear Position currently targets young people.

Growing preferences for luxury items, and improving lifestyles can create more demand for Starbucks Maintaining a Clear Position premium-priced products (Perera, 2017).

2.1.4. Technological

Government is granting more technology incentives to fuel the innovation. It can help Starbucks Maintaining a Clear Position achieve its innovation objectives.

Emerging automation trends require Starbucks Maintaining a Clear Position to revisit its business model, and enhance process efficiency.

Improving technological infrastructure can enable Starbucks Maintaining a Clear Position to resolve its supply chain inefficiencies (Shtal et al. 2018).

2.1.5. Environmental

The stringent environmental regulations require Starbucks Maintaining a Clear Position to ensure strict compliance with environmental standards.

Consumers’ growing environmental consciousness provides an opportunity to Starbucks Maintaining a Clear Position to launch more green, environment-friendly products.

Starbucks Maintaining a Clear Position should incorporate environmental thinking in its strategic decision-making process to position itself as a socially responsible organization (Moser, 2015).

2.1.6. Legal

The Starbucks Maintaining a Clear Position should take strict measures to avoid discrimination at the workplace.

The Starbucks Maintaining a Clear Position must abide by the consumer data privacy laws to avoid reputation-damaging lawsuits

The Starbucks Maintaining a Clear Position must also ensure strict implementation of workplace safety standards to comply with the health and safety regulations (Khalid and Rahman, 2019).

2.2. Porter five forces of Starbucks Maintaining a Clear Position

2.2.1. Bargaining power of suppliers

The growing number of suppliers is weakening their bargaining power against Starbucks Maintaining a Clear Position (Dobbs, 2014).

Starbucks Maintaining a Clear Position has a wide supplier network, which strengthens its negotiation ability.

Low product differentiation further reduces the supplier bargaining power, as Starbucks Maintaining a Clear Position can easily switch to suppliers that offer better terms and conditions (Dobbs, 2014).

Overall, the bargaining power of suppliers for Starbucks Maintaining a Clear Position is low.

2.2.2. Bargaining power of buyers

There are a small number of buyers that buy in large quantities. It enhances their bargaining power against Starbucks Maintaining a Clear Position (Cho et al. 2019).

Buyers are price insensitive, and cannot easily switch to other companies due to economic and psychological switching costs. It reduces their bargaining power against Starbucks Maintaining a Clear Position.

High product differentiation further discourages the buyers from switching to competitors (Dobbs, 2014).

Overall, the bargaining power of buyers is moderate-to-low for Starbucks Maintaining a Clear Position.

2.2.3. Threat of new entrants

High entry barriers make it difficult for new entrants to enter in the market

The high initial capital expenditure also erects an entry barrier for new firms

Starbucks Maintaining a Clear Position has a loyal customer base, which further reduces the risk of customers switching to new entrants (Grundy, 2006).

Overall, threat of new entrants for Starbucks Maintaining a Clear Position is low.

2.2.4. Threat of substitutes

The emerging innovative technologies are increasing the threat of substitutes for Starbucks Maintaining a Clear Position

Growing threat of substitutes is compelling Starbucks Maintaining a Clear Position to continuously improve product quality (Bruijl and Gerard, 2018).

Changing consumer demographics and their growing tech-savvy nature is further increasing the substitute threat for Starbucks Maintaining a Clear Position

However, the brand loyalty increases the psychological switching costs, which somehow reduces the substitute threat (Dobbs, 2014).

Overall, the substitute threat for Starbucks Maintaining a Clear Position is moderate to high.

2.2.5. Industry rivalry

The competition among existing market players is intense

The market is mature, and is approaching saturation point, which further intensifies the industry rivalry

However, high-quality differences and brand loyalty deters the customers from switching to competitors (Dobbs, 2014).

Overall, the industry rivalry is moderate to high, which makes the business environment challenging for Starbucks Maintaining a Clear Position.

3. Company level analysis of Starbucks Maintaining a Clear Position

Up till now, the case study presented a holistic environmental and industry-level analysis. This section now presents the Starbucks Maintaining a Clear Position level analysis by applying relevant tools and frameworks.

3.1. SWOT of Starbucks Maintaining a Clear Position

SWOT is a strategic management framework that helps Starbucks Maintaining a Clear Position in understanding its core strengths and weaknesses. Framework also identifies opportunities and threats that reside in Starbucks Maintaining a Clear Position’s external business environment (Helms and Nixon, 2010).

3.1.1. Strengths

The Starbucks Maintaining a Clear Position holds a market leadership position, and has highest market share.

The Starbucks Maintaining a Clear Position has high customer loyalty, which makes it difficult for competitors to attract its customers.

The Starbucks Maintaining a Clear Position has strong financial health, which allows the company to spend heavily on R&D, and fuel the innovation (Sarsby, 2016).

The Starbucks Maintaining a Clear Position has successfully positioned itself as a responsible corporate citizen.

The Starbucks Maintaining a Clear Position has a wide supplier and distribution network, which helps in the business expansion (Valentin, 2001).

3.1.2. Weaknesses

The Starbucks Maintaining a Clear Position currently has a high employee turnover rate.

The Starbucks Maintaining a Clear Position is facing supply chain inefficiencies, which are lowering the organizational productivity (Madsen, 2016).

The Starbucks Maintaining a Clear Position is unable to quickly resolve the customer complaints, which causes customer dissatisfaction (Helms and Nixon, 2010).

The hierarchal structure of Starbucks Maintaining a Clear Position causes resistance to change.

3.1.3. Opportunities

Starbucks Maintaining a Clear Position can invest on emerging automation and artificial intelligence technologies to improve the process efficiency

Starbucks Maintaining a Clear Position can accelerate the green product development, and invest on green marketing efforts to capture the attention of environment-conscious customers (Solaiman et al. 2015).

Starbucks Maintaining a Clear Position can invest on an online influence marketing strategy to expand the reach to a young population

Starbucks Maintaining a Clear Position can find strategic partners around the globe to achieve its expansion objectives (Sarsby, 2016).

3.1.4. Threats

The growing industry competition among existing players and thinning profit margins has become a major threat for Starbucks Maintaining a Clear Position

Global political unrest can negatively affect the Starbucks Maintaining a Clear Position performance at the international stage

The expanding grey market and the influx of replica goods can negatively affect the Starbucks Maintaining a Clear Position revenue (Davidson et al. 2019).

Aging population can threaten the Starbucks Maintaining a Clear Position survival that, primarily focuses on young customers

After presenting the SWOT analysis, the next framework analyzing the Starbucks Maintaining a Clear Position’s marketing mix strategies.

3.2. Marketing mix of Starbucks Maintaining a Clear Position

3.2.1. Product

Starbucks Maintaining a Clear Position offers a wide product variety that meets the needs of diverse customers

Starbucks Maintaining a Clear Position has consistently maintained high product quality to justify premium prices

Starbucks Maintaining a Clear Position invests heavily on the quality improvement and management to meet the customers’ product quality expectations (Singh, 2012).

Starbucks Maintaining a Clear Position invests on innovative marketing and communication strategies to set a clear product positioning, and communicate how its products are different from competitors.

Starbucks Maintaining a Clear Position offers warranties and after-sale services that enhances the overall customer experience (Ferrell et al. 2021).

3.2.2. Price

Starbucks Maintaining a Clear Position adopts a premium pricing strategy, which is aligned with the company’s premium brand image.

Starbucks Maintaining a Clear Position avoids offering price discounts to maintain brand exclusivity (Baines et al. 2017).

Starbucks Maintaining a Clear Position does not charge any hidden prices, and has integrated transparency in its pricing model

Starbucks Maintaining a Clear Position also offers value-added elements, and adopts a bundle pricing strategy to boost the sales (Giri et al. 2020).

Starbucks Maintaining a Clear Position offers credit payment options for the customer convenience.

Key factors that Starbucks Maintaining a Clear Position considers while setting the prices include- brand image, customers’ expectations and purchase capacity, and on-going competition.

3.2.3. Place

Starbucks Maintaining a Clear Position adopts a selective distribution strategy to reach the target market

The Starbucks Maintaining a Clear Position chooses distributors who are located in urban areas, and can preserve the premium brand image

Currently, Starbucks Maintaining a Clear Position has a distribution network that is spread in more than 50 countries

Starbucks Maintaining a Clear Position has adopted Omni-channel strategy, and sells its products through multiple online and offline channels, including- official outlets, authorized distributors, the company website and mobile application (Palmatier et al. 2016).

Well-integrated Omni-channel strategy offers a seamless experience to the Starbucks Maintaining a Clear Position customers.

3.2.4. Promotion

Starbucks Maintaining a Clear Position avoids offering promotional discounts to preserve the brand exclusivity.

Starbucks Maintaining a Clear Position invests heavily on the celebrity endorsement strategies to promote the brand among the target market.

Starbucks Maintaining a Clear Position also have a strong social media presence, and specifically focuses on the online influencer marketing strategy to create brand awareness (Varadarajan et al. 2010).

Starbucks Maintaining a Clear Position uses both- online and offline marketing and communication channels to promote the brand.

Starbucks Maintaining a Clear Position’s promotional strategy is well-aligned with other marketing mix components to develop a clear brand positioning (Palmatier et al. 2016).

3.3. VRIO of Starbucks Maintaining a Clear Position

3.3.1. Valuable

The Starbucks Maintaining a Clear Position has a wide distribution network that is spread across the globe.

The Starbucks Maintaining a Clear Position has extensive research and development capabilities that fuel the innovation process.

The Starbucks Maintaining a Clear Position offers a seamless customer experience through a well-integrated marketing mix.

The Starbucks Maintaining a Clear Position has strong financial health, and free cash flow that it can invest on innovative projects.

The Starbucks Maintaining a Clear Position has a strong presence over social media that drives the customer engagement, and increases the company’s reach to the target market.

The Starbucks Maintaining a Clear Position has successfully attracted and retained highly skilled staff that drives the overall organizational productivity, and helps the company in achieving its innovation objectives (Cardeal and Antonio, 2012).

3.3.2. Rare

Starbucks Maintaining a Clear Position has built strong relationships with suppliers that enable the company to achieve production objectives even when there is a material shortage in the market

Starbucks Maintaining a Clear Position has access to the rare and hard-to-reach raw material that is used to produce top-quality products (Cardeal and Antonio, 2012).

Starbucks Maintaining a Clear Position has successfully developed a strong brand reputation that keeps customers hooked with the brand

Starbucks Maintaining a Clear Position shares a strong emotional connection with its customers, which increases the psychological switching costs for them (Hernández and Garcia, 2018).

Starbucks Maintaining a Clear Position has developed its image as an environment-friendly, sustainable, and responsible brand that takes care of all stakeholders.

3.3.3. Inimitable

Starbucks Maintaining a Clear Position has developed an in-depth knowledge of customers’ intrinsic motivational needs, and has developed its brand image in a way that shares close relatedness with customers’ desired self-image (Liu et al. 2012).

Starbucks Maintaining a Clear Position has secured exclusive agreements with the suppliers to get access to unique raw materials. The exclusive agreement makes this resource inimitable for Starbucks Maintaining a Clear Position

Starbucks Maintaining a Clear Position has strong transformational and charismatic top leadership that has always successfully led the organization through a crisis (Nusari et al. 2018).

Starbucks Maintaining a Clear Position has developed a robust organizational culture that promotes cohesion, and strengthens the employees’ affective commitment with the organization.

3.3.4. Organized

Starbucks Maintaining a Clear Position has secured the access to human capital (skills and expertise) that is needed to exploit the above-mentioned resources.

Starbucks Maintaining a Clear Position has a well-developed technical infrastructure that supports the business operations, and fuels the innovation process.

Starbucks Maintaining a Clear Position has built extensive expertise, and gained years of experience that helps the company in leveraging its core strengths to exploit the available opportunities.

Starbucks Maintaining a Clear Position has built strategic partnerships that help the company in pooling the resources together to gain a strong competitive edge over rivals (Cardeal and Antonio, 2012).

3.4. BCG of Starbucks Maintaining a Clear Position

3.4.1. Stars

The core products of the Starbucks Maintaining a Clear Position fall in the star category. Starbucks Maintaining a Clear Position has secured market leadership in these categories

Starbucks Maintaining a Clear Position’s market share in these product categories is growing due to high market growth potential

Starbucks Maintaining a Clear Position should pay specific attention to these product categories, and should try to preserve the market share

The intensifying competition imposes a threat to the Starbucks Maintaining a Clear Position’s market leadership in the ‘Star’ category

Overall, Starbucks Maintaining a Clear Position should increase investment on the star category to maintain leadership in the growing market (Mohajan, 2017).

3.4.2. Cash cows

Starbucks Maintaining a Clear Position has several product categories in which the firm has attained the market leadership position.

However, the market growth in these product categories has become slowed with time, as the market has become mature.

Starbucks Maintaining a Clear Position should ‘milk’ these product categories as they are an important source of cash flow.

However, Starbucks Maintaining a Clear Position should avoid increasing investment due to slowed market growth, and should bring innovation to keep adding new features.

Overall, Starbucks Maintaining a Clear Position should aim to maintain the current market position, but avoid increasing the investment due to slow market growth (Kader and Hossain, 2020).

3.4.3. Question marks

Starbucks Maintaining a Clear Position has some product categories that are in a growing market segment. Despite high market growth, Starbucks Maintaining a Clear Position is unable to increase the market share in these segments.

The products under this category have the potential to become stars, as they operate in a high-growth market.

But, extensive investment is needed to understand the reasons behind the low market share, and it can affect the cash flow of Starbucks Maintaining a Clear Position.

Therefore, Starbucks Maintaining a Clear Position needs to evaluate if it is feasible to increase the investment to drive the market share, or it is wise to divest from this market segment (Mohajan, 2017).

3.4.4. Dogs

Starbucks Maintaining a Clear Position has one product that operates in a market with low growth potential

Starbucks Maintaining a Clear Position has only a marginal share in this market.

As growth in this market is stagnant, and market share is also marginal, Starbucks Maintaining a Clear Position may consider divesting from this market segment.

It will be unwise to invest in this segment, as this product has turned into ‘dog’, which means the product is aged and waning.

Here, two options are available to Starbucks Maintaining a Clear Position:

o First, Starbucks Maintaining a Clear Position may entirely refresh the dying product.

o Alternatively, Starbucks Maintaining a Clear Position may divest this product from the portfolio.

Considering the current business environment, and competitive dynamics, Starbucks Maintaining a Clear Position is recommended to get rid of this product by taking divestment decisions (Torquati et al. 2018).

3.5. Ansoff matrix of Starbucks Maintaining a Clear Position

Starbucks Maintaining a Clear Position aims to expand its business operations to strengthen the competitive positioning in the market. Ansoff matrix here can help Starbucks Maintaining a Clear Position in taking the right business expansion decision.

Four business expansion strategies available to Starbucks Maintaining a Clear Position are- market penetration, market expansion, product development, and diversification (Loredana, 2016).

Choosing the right expansion strategy is important for Starbucks Maintaining a Clear Position to achieve its expansion objectives.

3.5.1. Market penetration

Starbucks Maintaining a Clear Position can penetrate into existing markets by expanding the market reach. This strategy is recommended when the market has high growth potential.

Starbucks Maintaining a Clear Position can expand the market reach by increasing the customer loyalty, and encouraging them to increase the spending.

Starbucks Maintaining a Clear Position can use the influencer marketing strategy as a tool to create e-WOM. It will create brand awareness, spread the brand message, and enable Starbucks Maintaining a Clear Position to penetrate deeper into the market.

Some other ways through which Starbucks Maintaining a Clear Position can penetrate into the market is- to increase the marketing and promotional budget, making price adjustments, and improving the product quality to gain a larger share from the existing market (Shaw, 2012).

3.5.2. Market development

Starbucks Maintaining a Clear Position can find new geographic markets to launch its existing products

Another way to pursue this expansion strategy is through celebrity endorsements. Celebrities can help Starbucks Maintaining a Clear Position in finding new customers for existing products

Starbucks Maintaining a Clear Position can also consider adding new product dimensions, or revising the packaging to reach new consumer markets.

Another way to pursue this expansion strategy is by exploring new distribution channels. Starbucks Maintaining a Clear Position can strengthen its presence on e-commerce, and open multiple online sales channels to reach new customer markets (Hussain et al. 2013).

Starbucks Maintaining a Clear Position can also charge two different prices to expand the reach from high-end to middle-class customers.

3.5.3. Product development

Starbucks Maintaining a Clear Position can expand its business operations by pursuing a product development strategy.

Instead of adopting a reactive attitude by coping with the competitors, Starbucks Maintaining a Clear Position must proactively behave while launching new products. Some possible proactive product development strategies are discussed below.

To pursue a proactive product development strategy, Starbucks Maintaining a Clear Position may increase investment on research and development activities to bring the product innovation.

Starbucks Maintaining a Clear Position may also invest on the market research to identify and respond to the unmet customer needs (Katsikeas et al. 2016).

Starbucks Maintaining a Clear Position may consider strategic alliance and partnership options to launch new products. It will enable the company to pool the resources and capabilities together, and share risks while launching new products.

Acquisition of smaller firms can also enable Starbucks Maintaining a Clear Position to successfully launch new products in the comparatively shorter time span.

3.5.4. Diversification

Starbucks Maintaining a Clear Position can adopt the diversification strategy to reach new markets through new products.

Starbucks Maintaining a Clear Position can pursue either a related or unrelated diversification strategy.

The related diversification strategy requires Starbucks Maintaining a Clear Position to enter in similar markets. But, unrelated diversification requires Starbucks Maintaining a Clear Position to find entirely new markets (Dhir and Dhir, 2015).

Unrelated diversification is riskier, and can affect the brand image. So, Starbucks Maintaining a Clear Position should pursue a related diversification strategy.

By pursuing related diversification, Starbucks Maintaining a Clear Position can horizontally and vertically add new product lines

Through successful diversification, Starbucks Maintaining a Clear Position can increase its profitability, and generate more revenue from the new products and new market segments (Loredana, 2016).

4. Conclusion

The in-depth strategic analysis of Starbucks Maintaining a Clear Position reveals some interesting insights. Starbucks Maintaining a Clear Position currently holds strong competitive positioning. However, the challenging business environment and intensifying competition require Starbucks Maintaining a Clear Position to adopt a proactive behavior. Starbucks Maintaining a Clear Position needs to continuously assess its external and internal business environment to timely identify the potential threats and opportunities. Here, the application of relevant strategic management tools and frameworks can help Starbucks Maintaining a Clear Position in making wise business decisions. The key to success in a such challenging and complex business environment is- to proactively respond to the external environment by leveraging core strengths, and overcoming the weaknesses.