Creating a Competitive Advantage for Starbucks Company
The SWOT analysis of Starbucks showed that the company has become worldwide famous due to the unique methods of promotion and extreme focus on the clients’ needs that leads to the increasing number of customers. Since its foundation in 1971, Starbucks has stuck to the concept of the third place between home and work, where people can relax and drink a cup of coffee (Martin Roll, 2021). When speaking about establishing a competitive advantage for a particular company, it is necessary to mention that there exist three major strategies for doing it. The first one regards becoming the lowest-cost producer, so it is called cost leadership. The second one is differentiation, when a company differentiates its products or services from those of its competitors by using various methods and strategies. Finally, the third strategy concerns the company’s particular focus on a narrow segment of the market (CFI, n.d.). These strategies may be used either together or separately, but the strengths and weaknesses of a particular brand should be taken into account in order to choose the most appropriate variant.
Before building a competitive advantage for Starbucks company, it is necessary to analyze the strengths and opportunities the company currently possesses. Since Starbucks prioritizes its clients and their comfort, customers’ love and loyalty are the main reason for its popularity, it seems logical to suppose that the main competitive advantage for the company is clients’ support. Moreover, Starbucks’s clientele is currently expanding because of the company’s participation in the international market. The main strategy Starbucks uses for establishing competitive advantages is differentiating because its marketing policy targets primarily demonstrating its uniqueness through the development of innovative products (Kader, 2020). Starbucks was among the first companies that not just suggested to its customers a variety of coffee types but adapted to the clients’ changing preferences through creating seasonal variants of coffee. It demonstrates the company’s flexibility and desire to fulfill customers’ needs that are not static but may change over time. Not all companies stick to this principle and just suggest a strict variety of drink or food options that customers may dislike over time.
Another Starbucks strength that may be developed into a competitive advantage is the fact that the company does not engage third parties for its supply chain operation. Starbucks has its own vertical integration chain that helps it manage the supply chain and ethically get the major part of Arabica beans for its coffee (Kader, 2020). Since the company itself builds relations with brokers and growers, it has the opportunity to control its expense, get stable revenues, and, thus, feel more secure in the market that is currently highly competitive.
Threats for Starbucks Company
It is clear from the SWOT analysis that even such giants as Starbucks possess weaknesses and may face threats in the market. The first and the most important weakness that may make the company lose to its competitors concerns its high prices on coffee. However, this weakness may be turned into an advantage through using adequate marketing and promotion strategies. The company may show that its coffee is made from high-quality products, and it is better to pay a little more for its rich taste than to pay less and get a low-quality drink.
Another threat that is more disturbing is substitutes or imitators, since some companies may develop the same products as Starbucks does but for a lower price. For instance, in China, Starbucks is less popular than the local coffee brand that was established in 2017 after Starbucks entered the Chinese market (Martin Roll, 2021). In order to minimize the risk of local imitations, Starbucks company should better study the market of the country it is going to enter to understand the peculiarities, often related to culture and traditions. The main advantage of the national brands compared to Starbucks lies in the fact that the former know the customers’ needs and preferences that are unfamiliar to Starbucks. For instance, in the case of entering the Chinese market, the reason for the company’s becoming less successful than the local ones is connected to the Chinese mentality. People there prefer tea more than coffee, and marketing specialist in Starbucks should have thought about it and, maybe, suggested some exclusive tea options in China.
Taking into account everything mentioned above, it is possible to conclude that the main competitive advantages Starbucks company currently possesses regard its reputation and customers’ loyalty. That is why it is important for the brand to save these strengths and boost them through suggesting its high-quality products to its customers in order to fulfill their needs, both conscious and unconscious. A vertical integration chain as another competitive advantage contributes to preserving the high quality of the supplies as well as to the mutually beneficial relationships with the growers and a more stable position in the market. The threats Starbucks faces, especially imitation by local brands in different countries, may be minimized through studying local markets the company plans to enter and developing different strategies for every market to attract customers. These measures will make Starbucks’ reputation even more solid and trustworthy and attract a new loyal clientele.
References
CFI (n.d.). Competitive advantage. Corporate Finance Institute. Web.
Kader, N. (2020). Internal analysis of Starbucks’ competitive advantage. LinkedIn. Web.
Martin Roll (2021). The secret to Starbucks’ brand success. Martin Roll Business & Brand Leadership. Web.