Running head: STARBUCKS RETAIL COMPANY 1
STARBUCKS RETAIL COMPANY 5
Analysis of Starbucks Retail Company
Starbucks Retail Company is a retail company that purchases and roasts whole bean coffee. The company produces the most excellent coffee as well as providing connections with the customers it serves, which gives it a competitive advantage. This paper is going to provide an analysis of Starbucks Retail Company in terms of business model, competitive forces, and other challenges, competitive strategies, the evolution of the business model, and the best IT-supported proposal.
The business model of Starbucks Retail Company
The company brand name is StarbucksCompany. The company has about 191,000 employees operating in different capacities in different stores. According to popularity Starbucks Retail Company is at position five worldwide based on the ratings done online by Google survey and fortune. The company has 22,000 stores in 66 countries. The company operates within the local coffee and snacks store industry. The company has stores and shops where it purchases and roasts whole bean coffee. Some of the company stores also roll beer and wine options.
The company is a product business entity where it mainly focuses on the roasted coffee targeting customers in 66 countries. The only services it offers are after-sell services to customers, which are aimed at creating customer loyalty. Other services are just aimed at attracting more customers. But there is no service which is offered to the customers for business purposes because its main focus is the product which is roasted coffee.
The company offers roasted and brewed coffee to its customers and has a market share in over 66 countries, which enables the state to obtain enough revenue that is essential for product and process development that gives the outcome of the company a competitive advantage. The company is at the peak of the market as compared to other companies in the same industry.
The company earns revenue by selling roasted and brewed coffee to customers and get money in return. The company uses promotional strategies to ensure that it increases its market share and be able to serve more customer base. Promotions offered include getting an opportunity to celebrate with a birthday treat when ordering ahead and paying by the phone. You can get a chance of being gifted with one free. Different brands of the product have different prices. The brands include whole bean, cold brew, verismo pods, and VIA instant. They are all priced differently to attract more market segments to maximize profit through increased revenue.
The company has unique features that help it to get more revenues as compared to its customers, and this allows the company to position it in a higher position in the market. The company uses an online platform that enables users to make payments online, which is convenient to customers who are busy as they get an opportunity of getting the product of the company at the comfort of their home. The company also has an elaborate plan where shares are bought and sold, and shareholding act as one way of the company generating capital responsible for the expansion of the business and financing other business operations. Having an adequate base of financial sources is what has enabled the company to succeed.
The company also performs market segmentation as a way of ensuring that it reaches out to more customers. It benefits from this strategy through differentiating products to suit different market segments, and those differentiated products are priced differently. Market segmentation is a better strategy for the company that has enough capital to cover a significant market share to maximize profit.
Other methods used by the company to ensure that it controls the market is through continuous advertisement and promotions. The options selected as an advertisement method include the use of social media platforms such as Twitter and Facebook, where promotional activities are shared, and this increases awareness to the public, which ensures that the company expands its market share.
On operational, the company has more stores distributed in more than 66 countries. By opening multiple stores in different countries enables the company to spread the risks associated with the operations, which are a positive strategy for the company. Different states have different capabilities in terms of the skills of the employees. Therefore, by operating in different countries, it enables the company to benefit from dynamic ability creating by working in different countries.
Starbucks Retail Company uses a cloud computing model as a way of ensuring that data is stored safely. Most of the activities of the company are carried out online and knowing that there is a lot of cybercrime incidence in online business operations. Customers who pay online for the products they receive from the company are the reasons as to why the company decided to implement the use of cloud computing to ensure that data is not lost. It can be retrieved in case there are complaints to be handled concerning the payments.
Competitive forces for the company and challenges that need to be taken care
The company’s profitability and position in the market can easily be determined using Porter’s five competitive forces, which include the existence of substitute products, potential entry of new entrants into the market, bargaining power of the buyer, bargaining power of the supplier, and presence of competitors. When the company analyses correctly, these five forces and use proper strategies, then it is capable of commanding the market and gain a competitive advantage.
The bargaining power of suppliers who are supplying the company with coffee is not high as compared to the capabilities of the company. The company used the strategies of getting raw materials from more than one supplier, which forces the suppliers to compete among themselves by providing raw materials of high quality at a fordable price to get the loyalty of the company for continuous business. This strategy has enabled the company to have powers over the suppliers by preventing monopoly powers of the suppliers, which gives the suppliers capabilities of dictating the price. When the company has skills, then it is in a position to negotiate for a low cost, which enables it to maximize profit as a result of reduced raw material price and increased revenue as a result of increased sales due to the usage of high-quality raw materials (Porter, 2008).
The bargaining power of the buyers is high because of the existence of competing products in the market. Customers have the final say on whether to buy the products from the company or not. Because of the presence of competing companies in the market, the company needs to consider customers’ needs and preferences before designing product and process development as a way of gaining a competitive advantage. For the company to fully maximize the profit, it needs to come up with a pricing policy that is around market equilibrium where the price is equated at the demand level of the customers so that they don’t switch to alternative products of the competitors of the company in the market.
There is the potential entry of new entrants into the market because the market is not regulated in a manner that eliminates new entrants from the market. This scenario of restrictions only exists where the government authorities governing the industry give monopoly powers to one company to operate within the market, which is not the case for this case. The business also does need high capital to start because one can just start with one shop or store and operates freely. Monopoly can even exist where other companies are locked out due to high initial capital, and the last reason why copyright does not exist in this market is that it does not require unique technology that cannot be managed by other competing firms which makes it easier for other actors to copy the technology and uses it in operation hence competing with the existing firm.
On the part of the existence of competitors in the market that competes with Starbucks Retail Company, there is evidence that, indeed, other companies are dealing with the same products and share the same market with the company. Such companies include Anodyne Coffee Roasters, Tandem Coffee Roasters, La Colombe, Stumptown, and Intelligentsia. Having more competitors in the market means that for the company to command a more significant market share as a way of maximizing its profit, it needs to have better strategies that will enable it to be more attractive to customers as compared to other competitors. One way of acquiring this competitive advantage over the competitors is by performing a useful market intelligence survey to understands the preferences and needs of the customers so that products are processed in a way that is attractive to customers. Another strategy is for the company to analyze and understand the pricing policy of the competing companies and price its product slightly lower than the competitor’s price. To maximize profit while pricing lower is by the company implementing a low-cost strategy where it emphasizes the efficiency of production, which minimizes wastages, and the energy will enable the company to make a profit even if the prices are lower.
Another way of having a competitive advantage over the competitors is for the company to perform market penetration where it targets new markets which are not currently being covered and these new markets will enable the company to increase its market share and have a competitive advantage over the competitors by receiving more profits than the competitors that will allow it to expand its production and be able to produce the products that meet the market demand through improved technology. Technology is a better option for improved efficiency in production, which is beneficial to the company. But for the companies to use modern technology effectively, it has adequate capital to finance and implement new technology.
There is the existence of substitute goods in the market that competes with the products of Starbucks Retail Company. The products are both roasted and brewed coffee that is being produced by the competitors of Starbucks Retail Company such as Anodyne Coffee Roasters, Tandem Coffee Roasters, La Colombe, Stumptown, and Intelligentsia. The existence of similar products in the market creates high competition, and for Starbucks Retail Company to continue having a competitive advantage in the market, it needs to start producing at least differentiated products through product development and process. When similar alternative products are in the market, then any slight decision that goes against the wish of the customers leads to a reduction in the demand for the outcomes of the company.
The other way in which the company can ensure that its products remain competitive in the market is by the company providing better customer relations and services where it allows the customers to give feedback after using the products from the company. Feedback helps the company to upgrade its service s and be able to produce products that meet the needs of the customers. When the needs of the customers are satisfied, then they are in a position to increase the demand for such products helping the company to meet its primary objective of profit maximization.
Challenges facing the operations of the company
The potential problems that are likely to affect the operation of the company include cyber scams. The company is expected to meet that challenge in the near feature because it is currently using an online program as a platform for the customers to make orders and make payments. Although online payment is a convenient and faster method, it has a high risk of data-stealing by hackers through the internet. When individuals pay via the internet, information is stored in the network, and such data is confident such as credit card information and bank account information, which, when it leaks to the public it can cause more harm where victims can lose their money to the hackers.
When the company allows hackers to get confidential information from the customers and uses it to fraud them, then the company risks losing the loyalty of customers, and this act of information-stealing gives the company a bad reputation as no one like information that is private to be shared to the public.
The next challenge is the difficulty of managing diversity in the person being hired by the company. Because the company is a multinational company, it employs employees from a different country to help the company runs effectively. People from different countries have different cultures and beliefs, which brings differences in how they manage and operate under certain circumstances. Therefore, when the management does not come up with a better way of managing diversity properly, then it can a source of conflict within the company leading frictions between employees, which affects the operation of the company negatively.
Differences in regulation which keeps on changing in different countries also may affect and influence the operation of the company. The company needs to understand all the rules governing the industries in different countries that it needs to operate in. It also needs to be flexible in its structure so that any changes in the regulation do not lead to the collapse of the business. Still, instead, the company needs to be able to adapt to the changes swiftly, and this why flexibility is necessary.
Raw materials for the company are agricultural-based, which is fresh coffee. Coffee depends on the climatic conditions such as availability of rainfall and warmth at an individual level. In the current climatic conditions are changing, and it is difficult for the forecasting team to predict with one hundred percent (100%). Therefore, the company needs to have alternative options of coming up with ways of controlling the procurement of raw materials by coming with technology that will ensure that the coffee always experiences the required weather condition.
There is also a challenge of increased competition in the oversee countries where the locals will prefer the local brands assuming as one of their own. Sometimes I am challenging to enter into the new market that has already had suppliers and try to penetrate those markets. Penetrating is hard because the existing supplier in the market has a greater understanding of the customers in the market and is likely to produce the products that meet their demand. Therefore, the company needs to come up with ways that will ensure that it also understands the need of the customers in the new market so that it even start producing products that meet the preferences of the customers.
Another challenge is the regulation by the state that any company was operating in the foreign land to incorporate a higher percentage of the locals in the operations and sourcing of the raw materials. Companies cannot be allowed to run, but when it needs to meet this regulation, there is a threat of leaving competent workers foreign countries that can ensure the efficiency of operating leading high cost of operation. This regulation will automatically lead to the high pricing of the products to meet the cost of production used. The effect will be a reduction in the demand for the outcome of the company, as no customer is willing to pay more for products when alternative products are available.
Technological changes that the company needs to keep pace with is costly. There is no way the company can resist changes in technology as this resistance can render the products and services of the company obsolete. But implementing and running the new technology in operation is expensive, which needs the company to identify the way of acquiring enough capital that at any time can be used to install new technology so that the company remains competitive in the market.
Competitive strategies that can help the company in solving the challenges
The challenge of cybercrime
On the problem of cybercrime, the company needs to come up with network penetration test that will help the information and Technology (IT) team to monitor the network and analyzes potential attack on the system of the company. The penetration test will ensure that company management is aware of the potential risk on the web, and the necessary action is taken before it happens, which saves the reputation of the company. The company portal should allow users to use usernames and passwords which can not be easily predicted by the hackers in logging in to the company portal. The use of usernames and passwords will help in denying unauthorized access to information on the network (Rustad, 2001).
Another way of ensuring the safety of online transactions is by the management team to implement encryptions of the message being transferred by the internet. When words are encrypted, it makes it hard for hackers to access and manipulate such information. When the company ensures that information about customers is safe, then the reputation of the company is boosted, and customers will be willing to transact with the company without fear.
Diversity of employees hired
For the company to successfully get the best from employees, it needs to analyze and understands the strength of employees in terms of experience, capabilities, and skills. After following, the company then needs to use employees in ways that allow them to produce maximum results. The management also needs to accept differences in employees they are dealing with them. It is, therefore, essential for the administration to be flexible in the management style so as obtain the best from the employees. We have employees who must be closely supervised for them to perform well. For this kind of employee, close monitoring leadership style can work, while for those who can work without close supervision, a democratic leadership style can work. It is, therefore, essential for the management to accept the diversity of employees and manage them differently to get the best out of them (Liu, 2003).
When creating teamwork, the management should ensure that in one group employees with different background and skills are grouped so that they can share a lot and understands the importance of each other in achieving the objective of the company. Working as a team it makes individual feel equal and essential in the achievement of the aim of the company. By grouping them in organizations, it improves the relationship within employees. It makes them connected to each other hence reducing conflict between them, which is the negative effect of employee diversity if not appropriately managed.
Different regulation in different countries regulating the similar industry
The company needs to have legal advisors in different countries they wish to operate so that they are made familiar with the legal requirement before the establishment of the business. It is very costly for the company to establish itself before ensuring that it meets all the legal requirements. The legal team with other experts needs to be updated so that they can be in a position to predict future changes in the legal requirements so that the company is in place to plan itself so that the changes do not affect its operation. The company should avoid shortcuts and ensure that it follows the requirement of the state even if it is costly because it risks being closed when any of the regulations are not supported, such as tax obligations and other statutory provisions (Joskow, 1996).
Another way for the company to ensure that it does not have a conflict with the authorities in the new market is for the management team to perform regulatory research to understand all the legal requirements and financial requirements associated with them so that the cost can be compared with the market opportunity available.
Increased competition in foreign countries
Increased competition is a threat to the success of the company, and it is therefore essential for the company to come with better strategies that will enable it to have a competitive advantage in the market over its competitors. The first strategy is for the company to implement the use of a low-cost plan where the company uses new technology and upgrades its processes so that wastages are minimized to increase production efficiency, which lowers the production cost of the products being manufactured by the company. When the cost of production is lower than the competitors, then the company is in a position to price its products more economical than its competitors and still be in a place to make a profit.
Another way of overcoming increased competition is for the company to increase its advertisement and promotional activities using different social media platforms such as Whatsapp, Twitter, LinkedIn, and other broadcasting media. When announcements are successful and potential customers made aware of the benefits of the products being offered by the company, then the company is in a position to increase its market share as compared to the other competitors.
The next strategy is for the company to perform process upgrades, which will enable it to complete product development through product differentiation so that its product looks slightly different and attractive to consumers, unlike competitors’ products. Product differential is essential as it can allow the product to segment the entire market and come up with different market segments, which will then enable the company to produce a product to specific parts because different sectors have different preferences.
Product diversification is another strategy that the company can use to overcome competition in the market. When the game is too high, and it is difficult for the company to differentiate its product, then it decides to diversify the products it’s producing by coming up with more than one product line. When the company is providing to the market more than one product line, it is easy to spread risk because the profit of another product can cover the loss of one product, and this will enable the company to have a competitive advantage over its competitors.
The change in technology is another challenge, and the company needs to identify ways of ensuring that it cop up with changes in technology failure of which can lead to the collapse of the company. To successfully implement the new technology for the benefit of the company, the management team needs to be updated s that any new technology in the industry is implemented first so that the company becomes one among the first implementers so that it can benefit before the technology spread to other competitors. But for the company to be among the early implementers, it needs to have a strong research team that will be updated and provides a recommendation to the management about the change in technology. The company needs to structure its management structure in a way that allows it to be flexible, which is essential in accommodating changes in technology. Another requirement is for the management to set aside financial resources that will enable the team to finance the required changes at any time because you cannot predict technological change. Hence, keeping money apart for the implementation of any change is necessary.
Business model evolution
This section describes changes in the business model that is useful for the competitiveness of the company in the market. The article will cover changes that can be made on the products and services being offered in the market, process upgrade, how the company can perform product diversification, and how the company can enter into the new market.
Products and services being offered by the company need to be customer-driven products where its features reflect the expectations and preferences of the customers. This can be done by adding more features into the product by adding some ingredients so that the products become of more use than they were initially processed. Another way is ensuring that customer relationship with the company is the best so that customers get the opportunity of using the products which have the required qualities. After tasting the products, then retention of such customers is more natural, and customer loyalty to the company is the main success factor of the business. Another way is by the company to differentiate the product of similar content by branding and to package them differently so that they can be able to target different market segmentation as it will give opportunities for customers to get products of their choice in terms of branding and packaging.
Another way is sorting the products and grading them into different groups to match them with different economic classes in the market. Products can be classified in terms of quality features such as chemical and nutritional composition, color, size, and attractiveness of the packaging material. When merchandise is graded differently, it will allow the company to cover different segments in the market as everybody will have a chance of using the company products, which are priced individually depending on the grading quality.
Improving internal processes of the company in the production sector
One way of ensuring that the company evolves and gain a competitive advantage in the market is by improving internal processes through process upgrade. Process upgrades can be done through using modern technology in the roasting of coffee to minimize wastages of raw materials through increased efficiency. When proper technique is used and health precautions observed in the processing stage, then the company is in a position providing quality roasted coffee the market as compared to the ones produced by the competitors.
Another way of upgrading the processing of the produced product is for the company to hire qualified and experienced personnel to be in charge of the production process. Having experienced and skilled employees is a significant boost as they are familiar with production techniques, and chances of them making mistakes that can lead to loss are minimal. Employees should be assigned in areas where they have the necessary skills, and by placing employees in proper position improves their efficiency as well as production.
The company need also to have a monitoring and evaluation team to ensure that all the required procedures are followed for the production of quality products. The team must perform a continuous assessment of production processes to ensure that the production exercise is up to date, and no step is being omitted. In case of any deviation to the initially planned method, an explanation is to be given so that it is assessed if it will lead to improvement. If not, then corrective measures are to be put in place to ensure that production follows the laid down procedures.
Production of new related products
The company need also to start producing new similar products through providing different product lines in the market, which will allow the company to serve different segments of the market. For the company to start producing a separate range of the product, it needs to ensure that it has the required technology, capital, and personnel to implement successfully and manage the production of new products. Producing new products adds the product lines of the company in the market, and it will help in providing new market share to the company.
The benefit of product diversification which producing more than one product line to supply in the market is that help the company increases its sells by targeting a full scope of customers and by increasing the sales of the product the company is in position to increases its profit which is the main objective of any business company.
Entering a new market through market segmentation
When the market performs market segmentation where it groups marketing depending on the preferences and needs of the customers as well as the financial status of the customers, then the company is in the position of producing a variety of products targeting different categories of the customers at one time. Therefore, market segmentation is necessary as it allows the company to focus on producing goods that meet the requirement of various types of customers at the same time. The advantage of market segmentation is that when the needs of the customers are met, the market share of the company is increased, which increases the revenue as well as the profit (Datta, 1996).
Entering the new market where that company has not operated before is also one way of increasing the market share of the company but for the company to benefit from increased market share it needs to perform market survey which will enable it to understand all the requirements and need of the customers in the new market before deciding to produce and supply product in the new market.
Another strategy of entering into the new market thriving is for the company management to analyze the competitors in the new market to understand the qualities of the products they are supplying to the market, the pricing policy is used, and the market share they are controlling in that market. By understanding the actions of the competitors, it gives the company management team an opportunity of providing goods and services that are better than the competitors to attract customers from the competitors. Lowering the price in the new market while starting is also a better strategy because the new company does not currently have customers, so by reducing the amount the company will be in a position to attract customers who are price sensitive.
Starting a new business model
The company can as well decide to begin producing new products and services that were not being offered before. This strategy helps the company to diversify its production and in case of failure of the core products of the business the company will still be in a position to sell other products and this helps the company from collapsing in case of a decline in demand of one product as a result of different challenges faced by the company.
For the company to successfully start a new business model, it needs to research thoroughly on the challenges and opportunities of the products it wants to start producing. It is also essential to research on the needs of the customers so that the new products are assessed to determine if they meet the demand and specification of the potential customers. After the research, there is a need for the management of the company to decide whether or not it has the necessary financial and human resources needed for the implementation and management of the change as well as assessing the availability of the technology that can help the company produce the new product with high efficiency.
Technology that can help the company evolve its business model
For the company to achieve the object of ensuring that its business model is the best, it needs technology to facilitate activities to be performed. The technology that is best suited for this evolution is the establishment of a unified system by the company where all the functions are integrated in a single order where customers can get information about the different products being offered in the market. They can as well give feedback, which can help the management in coming up with products in consideration of the input of the customers.
The system will help the company to reach more customers within the shortest time with minimal financial resources as customers can just log into the operation of the company and get the information they need concerning the company. When the new product lines are developed, it is easier for customers to be aware as it will be shared into the system. The system will also allow customers to subscribe to the notification concerning new products and services being offered by the company. An interactive process between the company and the customers will enable the company to win the loyalty of customers as the customer’s decisions are taken into consideration before action is made.
When the unified system is implemented correctly, then the company will save the cost as transaction costs used for traveling, and advertisement will be reduced because, by the use of the system, the customers will be interacting with the company just through the unified system. It will enable the company to achieve the objective of implementing a low-cost strategy to be competitive in the market as compared to its competitors.
Another benefit of the technology is that it will reduce chances of corruption and fraud cases especially by the finance department personnel as no cash will be given to financing department by the customers because the system will allow customers to pay online and by finance personnel not holding the cash the temptation of taking money that is meant for the business is minimal because hard money is tempting as compared to soft money which is paid through online method.
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