Starbucks Corporation success in the coffee business has arguably been the most successful coffee chain in the past few decades. The company has been able to continue to attract customers even though they are not positioned as the lowest cost provider of coffee. Starbucks has been able to aggressively expand the business by attracting investors as well as selling their coffees for premium prices and increasing their profitability.
The rapid growth of Starbucks has become a testament to the success of the expansion strategy that was developed back in 1992 and 1993 when Starbucks developed a three year expansion strategy (Shah, Hawk, & Thompson, 2010). This strategy focused on areas that had the demographic targets that they wanted as well as the infrastructure to support and service their locations. For each region of expansion, a large city is selected to act as a central hub which was staffed with teams that would branch out expansion stores from that hub within the first two years (Shah, Hawk, & Thompson, 2010). This strategy of blanketing a metropolitan area with a “Starbucks everywhere” approach helps to streamline the logistics and management of supporting these stores as well as reducing lines in each of the stores and increasing traffic in all locations.
The graph on the next page represents the rapid expansion Starbucks has experienced over the last two decades. From an IPO company with one hundred and sixty-five stores in 1992 to a major corporation at the end of 2013 with nearly twenty thousand stores worldwide (Starbucks Corporation, 2013). Starbucks growth was significant during the years of 2000 thru 2008 where the company on average was opening one thousand six-hundred and fifty stores per ye...
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• Less concentrated suppliers • Competitive industry, but with smaller local rivals • Consumers are not price-sensitive
• Large number of potential supplier to replace existing ones • Several large rivals, but relatively smaller than Starbucks • High degree of product differentiation dilutes buyer power
Threat of substitute products:
• Low threat for substitutes
•High degree of differentiation offers less attraction to other products
• Brand image and recognition are an important factor
This market assessment shows that entry into the market is relatively easy for a company that is well capitalized. In addition on going threats continue from competitors like McDonald’s, Dunkin Donuts and Burger King. The threat of substitution in the beverage is huge and includes soda, fruit juices, smoothies, water, beer and other alcoholic drinks.
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