Starbucks

Competitive position

The competitive position is the foundation of strategy. It is also a plan to expand companies’ positive economic profits. Three questions need to be considered when companies are looking for competitive position:

1. WHAT customer needs to be satisfied? It is the companies’ value proposition: quality versus economy.

2. WHO are the customers to be satisfied? It is the companies’ target markets.

3. HOW these customers will be satisfied? It is the core competencies relating to efficiency and development. Companies can obtain the result through combinations of resources.

There are three generic strategies: cost leadership, differentiation, and market segmentation. The cost leadership is establishing a cost structure that allows offering goods and services at lower prices than competitors. The differentiation is creating a product distinct from competitors’ products in ways important to customers. The market segmentation is the way that customers can be grouped based on important differences in needs or preferences; it is often based on geography, type of customer, demographics, and product usage.

For Starbucks’ current generic strategy, differentiation seems to fit it. Starbucks always concentrates on the operational changes that enhance product quality. It buys coffee farm to control sourcing and develop new coffee bean. Starbucks strives to increase value of products on as many dimensions as possible. Its products appeal to discerning customers, and require innovation in product development. The company’s diversified product: Starbucks Ice Cream that creates join ventures with Dreyer's, and bottled Frappucino drinks with PepsiCo, etc.

The business model that Starbucks is using is the standard retail busine...

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...yees should have a name card that customer can see their names. Employees should remind their customers to leave comments before they leave. Customers can rate the employees based on their performances. Each week, the managers of the stores should evaluate their employees based on the list that customers leave. Top rating employees should receive bonus; low rating employees will be punish or fire.

Even though the quality of Starbucks coffee is great, but the price is too expensive. How many people can actually tell and know the quality of coffee after they taste different brands of coffee? And how many people do care and want to drink high quality coffee? Are there more price sensitive customers or more quality sensitive customers? The cost leadership will rarely be a bad strategy when there are huge needs in the market, and strong competitions in the industry.