By John Dudovskiy
October 4, 2022
Starbucks business strategy is based on the following four pillars:
1. Offering ‘third-place’ experience. Starbucks stores are effectively positioned as a ‘third place’ away from home and work, where people can spend time in a relaxed and comfortable environment with their friends or alone. Customers are even welcome to get their work done in a Starbucks store. All company-owned stores in the US and most company-owned stores abroad offer free wi-fi. “Starbucks stores are meticulously designed to make customers stay longer, buy more, and return for another visit.”
After returning as CEO for the third time in April 2022, Howard Schultz announced his plans for the company. Plans include building drive-through in 90% of new locations and machinery that will allow baristas to handle increasingly complex customer orders more quickly. Some analysts note that while drive through may increase profit martin, at the same time they may compromise the essence of third place experience for customers.
Furthermore, according to Starbucks Chief Marketing Officer Mr. Brady Brewer the Seattle-based coffee chain is also creating digital third place. Mr. Brewer shares his vision the global coffeehouse chain creating a new global digital community on the basis of Web3 in general and NFTs (non-fungible tokens) in particular.
2. Selling coffee of the highest quality. Starbucks business strategy can be classified as product differentiation. Accordingly, the coffee chain giant focuses on the quality of its products and customers pay premium prices for high quality. Excellent customer services as one of the solid sources of Starbucks competitive advantage further increases the attractiveness of the coffee retailer.
The multinational chain of coffeehouses duly recognizes the paramount role of its employees in customer-facing positions to sustain high level of customer service. Accordingly, the company refers to its employees as partners and offers them a wide range of perks and benefits such as Bean Stock equity reward program, health coverage plans and competitive salary. Nevertheless, theworld’s largest coffeehouse chain is opposed to unionization of employees and employee union problems is one of the major challenges that made it necessary for Howard Schultz to return as CEO.
3. International market expansion with the focus on emerging economies is one of the key elements of Starbucks business strategy on long-term perspective. Started with only one coffee shop in Seattle’s 1912 Pike Place in 1971, the company has expended into 84 markets with 17133 company-operated stores and 16700 licensed stores as of October 3, 2021. On average, the global coffeehouse chain has opened two new stores every day since 1987. The company has announced long-term plans to increase its numbers of stores to 55000 by 2030.
4. Integrating technology into various business processes. “Starbucks is adamant when it says that the purpose of new technology is not just to improve its website or to process payments quicker for people who are waiting in line” The coffee chain achieves technology-related value addition via integrating technology into a wide range of business processes and procedures such as new product development, communication of the marketing message, completing sales and monitoring the level of customer satisfaction. The most notable examples for value creation via technological integration by Starbucks include the launch of Mobile Order & Pay feature, which allows customers to buy without getting in line, the launch of voice ordering app and “sending text message notifications to customers in the Seattle area when their mobile orders are ready.”
Starbucks Corporation Report contains the above analysis of Starbucks business strategy. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Starbucks. Moreover, the report contains analyses of Starbucks leadership, organizational structure and organizational culture. The report also comprises discussions of Starbucks marketing strategy, ecosystem and addresses issues of corporate social responsibility.
 Peterson, H. (2015) “5 ways Starbucks entices you to spend more money” Business Insider, Available at: http://www.businessinsider.com/how-starbucks-entices-you-to-spend-more-2015-2
 Brewer, B. (2022) “Starbucks: We’re creating the digital Third Place” Starbucks, Available at: https://stories.starbucks.com/stories/2022/starbucks-creating-the-digital-third-place/
 Fiscal 2021 Annual Report, Starbucks Corporation
 McNamara, T. & Moore-Mangin, A. (2015) E-Content, Available at: http://www.econtentmag.com/Articles/Editorial/Commentary/Starbucks-and-Social-Media-Its-About-More-than-Just-Coffee-103823.htm
 Peterson, H. (2017) “Starbucks is testing a new technology to solve its crisis of long lines and delays” Business Insider, Available at: http://www.businessinsider.com/starbucks-sends-text-messages-to-fix-long-lines-in-stores-2017-3
Which type of business strategy is Starbucks using? ›
What is the pricing strategy that Starbucks uses? Instead of cost-based or competition-based pricing, Starbucks believes in value-based pricing. Starbucks sells a coffee experience rather than just a cup of coffee.How would you describe Starbucks business level strategy? ›
Selling coffee of the highest quality.
Starbucks business strategy can be classified as product differentiation. Accordingly, the coffee chain giant focuses on the quality of its products and customers pay premium prices for high quality.
Product: High-quality products justify the premium pricing. They ensure that the coffee tastes better than its competitors. Their Barista Promise of fixing your drink if you don't like it has attracted the masses. Price: Starbucks sells their coffee at least 25% higher than other brands.Which type of strategy do you see Starbucks employing support your response 5 based on Porter's strategies? ›
Porter's five forces example Starbucks shows that it can use the broad differentiation strategy for competitive advantage. Starbucks is already known for its high quality and unique taste of coffee.What is Starbucks strategy statement? ›
Starbucks highlights its mission as “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” And its vision is to “treat people like family, and they will be loyal and give their all.”What is the appropriate strategic management used by Starbucks to enter the new market? ›
In terms of market entry, Starbucks adopts three main approaches: wholly-owned subsidiaries, joint ventures, and licensing.What is the main reason for Starbucks success? ›
Experimentation and Innovation – Starbucks is a disciplined innovator, and good management of its innovation timeline is one of the primary reasons behind the Company's success in generating consistently high levels of same store sales. Customers can try and taste various coffee brands in the store.What is Starbucks most important competitive advantage? ›
Excellent customer service is one source of Starbucks' competitive advantage. Starbucks' emphasis on ensuring a positive customer experience has allowed it to become one of the leading firms in the coffee industry.
Starbucks tries to motivate employees both intrinsingly and extrensingly. Employees get trained not only in how to make coffee but also in how to treat and deal with costumers. Gaining knowledge and being able to perform their job well is a basic intrinsic motivation.What kinds of strategic questions can I help answer using Porter's five forces analysis? ›
- How many competitors do you have?
- Who are your biggest competitors?
- How does the quality of their products or services compare with yours?
- What distinguishes your company from the competition?
- What will it cost one of your customers to switch to a competitor?
What are the five business level strategies Michael Porter's five generic strategies competitive strategies )? ›
- Cost Leadership Strategy.
- Differentiation Strategy.
- Cost Focus Strategy.
- Differentiation Focus Strategy.
In connection with its Reinvention plan, Starbucks introduced a framework for accelerated earnings growth over the next three years, underpinned by enhanced comparable store sales growth, increased store count growth, continued margin expansion, and disciplined capital allocation.Which positioning strategy should Starbucks use? ›
As has been previously mentioned, the positioning of Starbucks is customer-based, allowing the company to provide the best customer service.What is an example to describe business level strategy? ›
Business level strategies are more focused than corporate level strategies, but not nearly as focused as functional level strategies. If, for example, your corporate level strategy was to increase market share, your business level strategy might be: Broaden exposure. Increase marketing budget.What strategic changes did Starbucks make and why? ›
Big operational changes
Starbucks' new “Siren System” positions ingredients like milk and ice on the counter, instead of below it, so baristas can prepare drinks without bending down. The system also uses ovens that can heat food in batches, rather than individually, to cut down on prep time.
2. Mission Statement. From its website, Starbucks' mission is "to inspire and nurture the human spirit - one person, one cup, and one neighborhood at a time." This statement shows what the company does to keep running the business.What makes Starbucks different from its competitors? ›
How Does Starbucks Differentiate Itself From Competitors? Starbucks differentiates itself by creating a "third home" value proposition. In addition to home and work, the company strives to have a welcoming, warm location for customers to consume their products.What is the business purpose of Starbucks? ›
Our mission to inspire and nurture the human spirit – one person, one cup, and one neighbourhood at a time. Today, with more than 32,000 stores in 80 countries, Starbucks is the premier roaster and retailer of specialty coffee in the world.What is Starbucks strategy that can lead to sustainable competitive advantage? ›
A well-built and run supply chain is the one that makes sure that a customer receives a good cup of quality coffee on time. Starbucks uses a vertically integrated supply chain controlling every step from sourcing the coffee beans to serving the cup of coffee to consumers.What is the unique selling point of Starbucks? ›
Now, Starbucks is one of the most recognizable brands in America. Starbucks became a nationally recognized brand by developing a unique selling proposition that worked. To understand how they did it, think about what Starbucks is known for and what they believe in. The answer is premium coffee beverages.
What is the retention strategy of Starbucks? ›
Starbucks actually utilizes two customer retention strategies in one: it utilizes its customer loyalty program, via its mobile app, to encourage repeat customers. The key that helped the Starbucks app become so successful is its order ahead feature.What are three strategies to motivate employees? ›
To motivate employees, you should: Establish what's expected of them. Help them visualize what success in their role looks like. Explain how their contribution makes a difference to the business.How does Starbucks keep their employees happy? ›
Compensation is an important aspect of employee happiness and at Starbucks, 60% of employees feel they are paid fairly, 79% are satisfied with their benefits, and 73% are satisfied with their stock/equity. 79% of Starbucks employees feel their work environment is positive meaning Starbucks is a happy place to work.What main question does strategic analysis answer? ›
Strategic planning is a long-term task involving continuous and systematic planning and resource investment. The main question that a company should consider when performing a strategic analysis is: How is the market constituted?What are the five forces of strategy? ›
Porter's Five Forces are Threat of new entrants, Bargaining power of buyers, Bargaining power of suppliers, Threat of new substitutes, and Competitive rivalry. This framework helps strategists understand what makes an industry profitable and provides insights needed to make strategic choices.What is strategy in business? ›
Business strategy is the strategic initiatives a company pursues to create value for the organization and its stakeholders and gain a competitive advantage in the market. This strategy is crucial to a company's success and is needed before any goods or services are produced or delivered.What are the 3 generic strategies for competitive advantage? ›
The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus.What are the 4 business strategies? ›
Four generic business-level strategies emerge from these decisions: (1) broad cost leadership , (2) broad differentiation , (3) focused cost leadership , and (4) focused differentiation .What are four 4 generic strategies a business uses to deal with competitive forces How can the firm use information systems to facilitate? ›
There are four generic strategies for dealing with competitive force enable by using IT: low-cost leadership, product differentiation, focus on market niche and strengthen customer and supplier intimacy.Is Starbucks monopolistic competition? ›
Starbucks and McDonald's are two companies that operate in markets with monopolistic competition as there are other firms that offer similar products as each of them.
Does Starbucks use diversification strategy? ›
The diversified portfolio of stores and customer channels such as Mobile Order & Pay will enable Starbucks to further meet its customers whenever and wherever they want.Is Starbucks in a perfectly competitive market? ›
Answer and Explanation: Starbucks belongs to a purely competitive market because it has competitors such as Coffee Bean, Peet's Coffee, and Dunkin Donuts, which sell coffee... See full answer below.What are 3 examples of monopolistic competition? ›
Restaurants, hair salons, household items, and clothing are examples of industries with monopolistic competition.Is Starbucks a monopoly or oligopoly? ›
Starbucks is a famous American multinational chain of coffeehouses, which is also characterized as the largest chain of the coffeehouse. It is considered an oligopoly because it is one of the few firms that...What type of strategic alliance is Starbucks and Target? ›
Non-equity strategic alliance between Starbucks Corporation and Target Corporation Starbucks and Target have a non-equity strategic alliance. These firms have a contractual agreement to pool capabilities and resources together for their mutual benefits.What is the horizontal integration strategy of Starbucks? ›
6.1Current Key Strategies Employed by Starbucks: Horizontal Integration: This strategy is employed by Starbucks to control its competition and reach new customers. It has used this acquisition of Seattle's best, Torrefazione Italia, and Coffee people to accomplish this.