Introduction This paper will provide an argument for diversification to be presented to board of directors for Starbucks. A strategy for diversification indicating the products and industries for diversification and how synergies may be gained will be provided. The identification and the discussion of the foreign market Starbucks should enter will be presented, along with the strategy it should use to enter the market. Challenges Starbucks may face in the foreign market will be discussed, as well how it might respond strategically to minimize the impact of these challenges. Also, this paper will encompass a scenario when it would not make sense for Starbucks to diversify or expand into a foreign market and how the company will create a business environment conducive to ethical behavior will be assessed. Argument for Diversification According to Investopedia website, “a technique that reduces risk by allocating investments among various financial instruments, industries and other categories is known as diversification. Diversification is the most important component of reaching long-term financial goals while minimizing risk” (“Investopedia”, 2011). “Fundamentally, this strategy is about creating new products with new product life cycles and making existing ones obsolete” (Olsen, n.d.). With diversification, Starbucks would be able to enter new markets with new products. By having a diversification strategy enforced, this will create a path for effective growth for the business. As with any company considering new products in new markets, there are risks associated with it and Starbucks would need to be prepared to respond accordingly. With diversification, Starbucks will have the opportunity to increase its growth. Also, this s... ... middle of paper ... ...t was delivered. A business environment conducive to ethical behavior for Starbucks was assessed. Works Cited “Investopedia”. (2011). The importance of diversification. Retrieved from http://www.investopedia.com/articles/02/111502.asp Olsen, E. (n.d.). Strategic planning: Diversification. Strategic planning kit for dummies, 2nd edition. Retrieved from http://www.dummies.com/how-to/content/strategic-planning-diversification.html “Starbucks”. (2013). Starbucks coffee international. Retrieved from http://www.starbucks.com/business/international-stores Thompson, A.A., Strickland, A.J., & Gamble, J. E. (2010). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York: McGraw-Hill-Irwin
Thompson, A. A, Jr., & Strickland, A. J. III (2003). Strategic management: Concepts and cases (13th ed.). New York: Irwin/McGraw.
This makes company to have a lower share of profits. But at the same time it allows Starbucks to have its business at different markets (Catora&Graham, 2007, p.596).
Thompson Jr, A.A. and Strickland III, A.J. 2003, Strategic Management: Concepts and Cases, 13th edn., McGraw-Hill Higher Education, NY.
Thompson, Arthur A., & Strickland, Alonzo J. 2003. Strategic management: concepts and cases. New York: McGraw-Hill/Irwin.
Diversification: Pursuing diversification on strategy to acquisitions concerning the purchasing, production, and marketing and distribution system.
In recent years there was a time that Starbucks saw the opportunity to go global and jumped on it. As far as this article goes, when looking at company weaknesses there is nothing that is of a serious concern for the business. If you look at Starbucks today you would see a much different perspective. The corporation started off using a benchmarking strategy trying to mimic what was done within other leading competitors. (Now Starbucks is the benchmark!) The company continues to work towards its long-term goal of becoming the most recognized and respected brand of coffee in the world. In one article I read, a spokesperson from Starbucks said they hoped to be the Q-Tip of the coffee business.
In diversification an organization tries to grow its market share by introducing new offerings in new markets. It is the most risky strategy because both product and market development is required and it may be out of the core competencies of the business firm and there lies the challenge and the statement “With high risks come great rewards”.
This strategic capitalises on weaknesses since will decrease the cost of coffee beans/beverages but also Starbucks operating cost which they regularly ship across the world to various stores. Starbucks can capitalise on this weakness to improve their brand options. It adds value in the inbound logistics activities, operations and procurements. Starbucks should consider this option since it will decrease their operating cost and therefore will reduce the prices on their menu. The attractiveness is the exact same as mentioned in option 1.
The ad never mentions the price of the products, the place where Starbucks stores are usually located or the promotions to attract consumers. The existence of competition pushs marketers to make changes and be more creative (Jobber, 2013, p742). It is necessary for a business to survive with competitive advantage (Dibb& Simkin& Pride& Ferrell, 2012, p57). Michael Porter (quoted in Kotler& Wong& Saunders& Armstrong, 2005, p504) came up with three competitive strategies. Maybe Starbucks just applies two of the three strategies. One of the competitive strategies that Starbucks coffee applies is differentiation. Differentiation is the approach that the business uses to make its own products or services attractive, distinctive and different from its rivals (Dibb& Simkin& Pride& Ferrell, 2012, p57). Starbucks is a very creative company, because as the advertisement shows, an artisan roast is roasting coffee beans very carefully. The speaker says consumers’ favourite beverage signature espresso roast is developed uniquely by Starbucks. In fact Starbucks also creatively develops some other popular coffee like Frappuccino and Cappuccino. The other competitive strategy is focus. Focus means that a business targets at a certain group of market segments instead of facing the whole market (Kotler& Wong& Saunders& Armstrong, 2005,
Koehn, N.F., Besharov, M.A., & Miller, K. (2008). Starbucks Coffee Company in the 21st Century. [Case study]. Boston, MA: Harvard Business School Publishing.
Starbucks should consider increasing presence in the international segment in order to grow as much as possible in that market. Recently, the company has allowed for the franchising of Seattle’s Best Coffee overseas and by catering more to this type of market they can continue to grow internationally. Because Starbucks focuses on employees, the company should allow management teams the liberty to modify store format, present local product mix and price points to the needs, lifestyles and tastes of each individual market/community.
Starbucks has large goals to grow even more internationally. Currently, Starbucks has approximately 21,000 different locations in 65 countries (Starbucks, n.d.). When a company is international such as Starbucks, there is a concern risk over the reporting of financial statements. Auditors must audit the financial statements to ensure they are followed by IFRS. According to Starbucks Going Global Fast, “Yet cup by cup, Starbucks really is caffeinating the world, its green-and-white emblem beckoning to consumers on three continents. In 1999, Starbucks Corp, had 281 stores abroad. Today, it has about 7,000-and it’s still in the early stages of a plan to colonize the globe.” Although Starbucks is already a global company, Starbucks wishes to expand internationally and bring beverages that are offered abroad to the United States. It reduces the audit risk to see that Starbucks maintains their business successfully over the years. However, it also intensifies the material misstatement
Starbucks has identified high value opportunity in China, India, Brazil and Japan. The large expansion opportunity of twelve billion in China alone is enough to drive Starbucks to expand globally. The organization has planned to double its footprint to 3000 stores in China by 2019 ("Starbucks Details Five-Year Plan to Accelerate Profitable Growth", 2014). Starbucks realizes that eventually there will be a diminishing return on their existing market within the US due to market maturity and there are only two ways to expand through diversification in their offerings and entering new markets. Given the international opportunity for growth and expansive tea market in Asia, the company will enjoy the benefits of the growth opportunity. Management’s decision to continue to grow globally is a driving force that has yielded
This video provides an overview of product diversification. It explains that there are two types of diversification, which are related diversification and unrelated diversification. In addition, the video informs that diversification often involves merger and acquisition activities. Furthermore, it stresses the importance of keeping diversifications balanced, as in some instances, companies that do not take advantage of diversification, can miss out on some benefits, and/or could experience negative effects. However, on the other hand, the opposite could also occur, because some companies that over-diversify, extend themselves too far and can experience detrimental and disadvantageous effects as well. The key is staying
One of the main problems that Starbucks is facing at the present time is the ability to maintain national competitive advantage (Monash South Africa, 2014). Due to their local demand conditions, Starbucks tries to satisfy all customers by trying “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Starbucks Corporation, 2014). Local demand conditons consist of a company trying satisfy needs of their closest customers and expanding their competitive advantage by upgrading their strategic management policies (Monash South Africa, 2014).