Howard Schultzs strategy in founding Starbucks was a blue ocean strategy because the Italian coffee bar concept was unknown at the time in the American market. Therefore by importing the concept, Howard Schultz created a new segment of the market. Howard Schultzs approach was to create a positioning strategy based on creating associations with quality, service and community. Providing a comfortable, appealing store experience was the unique selling proposition behind the Starbucks brand. This was a brand new concept because no other store at this time was creating an organizational culture based on drinking coffee. This was a big step away from the existing market environment in which coffee was being treated as produce.
Starbucks UK strategic position
Luxury brands are defined as those brands sales of which rise more than proportionally with rise in incomes. The challenges of marketing luxury brands are illustrated by the marketing strategies applied in the case of Starbucks UK (cited in Aaker, 2004). The perceived value of a product is defined by the customers perception of the level of utility to be gained from purchasing that product (cited in Baldwin Curley, 2008). For example, when the customer purchases Starbucks UK coffee, he is perceived to have purchased a status symbol associated with a particular lifestyle (cited in Hill Jones, 2007). This is in contrast with purchasing from one of the smaller coffee chains in which case the purchase is associated with a more functional value. Starbucks UK has a higher perceived value because it has a higher price and thus it creates a special image based on famous associations. All segmentation criteria such as activities, interests, opinions, attitudes and values would differ based on whether the product being marketed is the Starbucks brand or one of its smalls-scale coffee chain competitors. In this case Starbucks UK is the luxury brand.
Porters Generic strategies Model
According to Michael Porters framework for strategy formulation, a business organization has three strategies at its disposal differentiation, cost minimization and niche marketing (cited in Besterfield, 2002). Marketers of luxury products cannot implement the strategy of cost minimization because the perceived value of luxury products comes from premium pricing (cited in Evans, 2007). Therefore they are implementing a mixture of the strategies of differentiation and niche marketing. These are the strategies that can be found in the marketing framework at Starbucks UK operating in the specialty coffee industry. For this reason it can be regarded as a luxury brand. The luxury status of Starbucks UK comes from its positioning strategies which have marketed the brand as a status symbol.
The success of the Starbucks brand in UK was based on the value proposition of creating a unique experience for the customers in drinking specialty-brand coffee (cited in Jannarone, 2009). As a result, the important component of the companys positioning strategy was not just the product but also service and the ambience inside the stores. This was an important source of Starbucks competitive advantage because the company competed not only against small-scale specialty coffee chains but also against independent specialty coffee chains (cited in Jargon, 2009). Therefore it was critical for the management at Starbucks UK to create a unique selling proposition which would attract customers away particularly from the independents which enjoyed the advantage of a highly diversified product range. This diversification would enable the independents to experiment with prices which would create tremendous pressure on Starbucks (cited in Marits, 2004). Therefore it was important for Starbucks UK to differentiate itself based on service and atmospheric attributes which would generate an extra appeal and push price considerations to the back (cited in Jargon, 2009). Based on these characteristics Starbucks can be regarded as a luxury brand.
Bowmans Strategy Clock Model
In order to re-invigorate the Starbucks brand, the management embarked upon the strategy of product and service innovation (cited in Jargon, 2009). This strategic action is related to maintaining a continuous improvement process in terms of product and service innovations in order to meet the changing demands as a result of changing customer demographics (cited in Armstrong, 2005). In order to ensure that the continuous improvement process is strategically aligned, the management implements the benchmarking process (cited in Carpinetti Melo, 2008).
Starbucks UKs new strategic actions are more keyed to differentiating features based on service innovation (cited in Jannarone, 2009). The strategic action of service innovation has been effective because the process has been facilitated with high involvement of the employees which has created high employee morale, something that the management had stressed repeatedly. In this respect, the broadening of in-store product offerings such as coffee-flavoured ice cream, Frappuccino, teas, fresh pastries and other food items, candy, juice drinks, CDs, coffee mugs, and coffee accessories, has already proved to be a great success.
In order to attain the objective above Starbucks has been implementing the strategy of maintaining consistency and quality through product diversification in the form of a greater variety of beverages. This strategic action has been the one for the company to leverage on in building brand awareness as a luxury product. There have been out-of-store sales such as the sale of ground coffee and coffee beans in UK grocery stores. Starbucks has also formed strategic alliances with PepsiCo and Dreyers Grand Ice Cream. Through PepsiCo it has been selling Frappuccino in UK grocery and convenience stores while through Dreyers Ice Cream it has been selling coffee-flavoured ice creams in grocery stores. These are the strategic actions of product differentiation. The strategies of service differentiation have been mentioned. They have been guided by the employees thus enabling them to maintain their quality of service while offering greater differentiation in products and services. As a result the management has set the strategy of compensating for the failed store expansion strategy by offering a greater variety of products and more unique Starbucks experience (cited in Jargon, 2009).
External drivers affecting Starbucks UK
In 2008 Starbucks had 11,000 stores in the US and 217 stores in UK (cited in Jannarone, 2009). Since 2000, the companys sales of ready-to-drink coffee, coffee beans, coffee-flavoured products, pastries, and coffee accessories had grown by more than 20 percent annually to reach 9.4 billion in 2007in UK. Starbucks UKs net earnings had increased from 95 million in 2000 to 672 million in 2007 (cited in Jargon, 2009). However in early 2008 it was announced that several of the new stores that had been opened were underperforming and therefore they would be closed (cited in Jannarone, 2009).
PESTEFL Model
Political The Fairtrade Foundation UK and UK Governments Department for International Development are significantly involved. The collaboration between Starbucks and Fairtrade organizations will have a significant impact on the companys operations in terms of the demand for Fairtrade products. Maintaining positive relations with the local government officials is the critical success factor in the political spectrum.
Economic Starbucks plight in 2008 illustrates the risks and threats inherent in marketing a luxury product. As a result of the recession, the management was forced to announce the closures of 60 stores in the UK. In terms of pricing, coffee products are price inelastic. However in case of large price variations, the level of consumption is affected. There is also the occurrence of cannibalization in the case of the closely located stores.
Socio-cultural Demographic changes have affected the demand patterns. Traditionally the market for coffee consumption had consisted of affluent, older age groups. However the age composition was changing as younger consumers were also taking their coffees from specialty coffee chains. Traditionally the younger segments had been visiting the independent specialty stores. Now they were switching to Starbucks.
Environmental environmental issues are related to the political spectrum in terms of maintaining positive relations with the government agencies. The purchasing of Fairtrade certified coffees is an example. This is an environmental issue in terms of setting minimum price guarantees for the coffee farmers. The coffee is sourced from international locations and therefore Starbucks and other companies in the industry must undertake environmental programs to support the farming communities in the international regions. These environmental issues will affect the procurement of the coffee as the production quality will be maintained.
Technological technological development is related to improving the customer service. In this respect the automated technology is a relevant consideration as it will enable Starbucks employees to enhance their productivity in terms of the number of customers that they can provide service to. The knowledge management system is also a relevant technological consideration as it facilitates the maintaining of product and service innovation in alignment with changing market dynamics.
Educational Because the procurement for coffee manufacturing is conducted internationally, educational programs for the farming communities in the sourcing regions are strategic realities. The educational programs enable the coffee farmers to maintain the high level of quality in growing coffee. Health and education initiatives to improve their living standards will enhance the effectiveness of the coffee manufacturing value chain.
Political
- The Fairtrade Foundation UK and UK Governments Department for International Development
- Government position on local laws, regulations and codes.
- Maintaining good relations with the local government officialsEconomic
- Nature and direction of the economy
- Price elasticity
-Disposable Income within market segments.
- Cannibalization affecting sales
SocioCultural
- Changing age composition of the target market.
- Consumer demographics changing more in favour of the younger segment
- Training and development of the employees to improve customer service.Technological
- Product and service innovation
- Knowledge management
- Improvement of customer service through automationEnvironmental
- Programs dedicated to promoting corporate social responsibility
- High community involvement through charitable organizations and other initiatives such as purchasing Fair Trade certified coffees. Educational
- Educational programs undertaken by the manufacturing companies enhance productivity in the coffee growing regions.
- Health and education initiatives are undertaken to improve the living standards of the farming community Legal
- Wage and hour rules
- Workplace health, safety and security.
- International business.
- Import laws
Legal laws and regulations relating to wage and hour rules, workplace health, safety and security and international business. Because the coffee is sourced from international regions, any changes in import laws will also affect the companys operations.
Porters five forces
Starbucks UK has built up its market leadership position through a high level of industry differentiation which has been facilitated through maintaining high control over the distribution structure. This decreases the threat of new entrants as new entrants will not be able to match its structural strength. Starbucks plight in 2008 illustrates the risks and threats inherent in marketing a luxury product. However luxury brands tend to fare better than mass market products because its demand is catered to a niche segment in which price considerations are not relevant Therefore any income disparities likely to arise from the economic hardship would not affect the luxury brand. The success of luxury brands is dependent on premium quality, exclusivity and rarity. New entrants will not be able to match the brand equity.
There is a high level of competitive rivalry stemming from Dunkin, McDonalds and Nestle. There was also a high level of cannibalization. Luxury brands are not dependent on economic hardships. This was not the case with Starbucks as illustrated from its underperforming stores in 2008. As a result, the management was forced to announce the closures of 60 stores in the UK, 70 of which had been opened in 2006. According to the product life cycle theory of luxury brands, this should not have happened during the economic hardship of 2008 (cited in Jargon, 2009). However Starbucks strategy had backfired from over-expansion and as a result, new outlets were cannibalizing sales away from the existing sales.
As mentioned before, Starbucks maintains high control over its distribution structure world-wide. This objective has been met through creating long-term fixed price contracts with the suppliers. For this reason suppliers do not have that much bargaining power.
There are also substitutes available such as soft drinks, tea and beer. This will be affected by the economic factors as during economic slow-down, buyers might switch to these substitutes.
Buyers have high bargaining power as there are no switching costs. Moreover, buyers can brew their own coffees at home.
Starbucks UKs value
Employees have been involved in the process of differentiation. This has enhanced employee morale. In this manner the management has created human capital which is its main resource strength (cited in Armstrong, 2005). The management has leveraged upon this strength in order to enhance its customer-friendly brand awareness. As a result the competitive capabilities of a growing power of Starbucks name and brand image have been developed.
Resources, competences and competitive advantage Model
Competitors have not been able to copy Starbucks UKs strategy because Starbucks UKs organizational culture is strategically aligned to providing customer satisfaction (cited in Marits, 2004). This alignment has been maintained through a continuing process of differentiation. Therefore it can be said that Starbucks UKs strategy to re-invigorate sales has been a mixture of differentiation and developing sustainable competitive capabilities.
Starbucks UKs new strategy has evolved well as illustrated by the fact that its brand awareness is the highest in the industry (cited in Bank, 1993). Additionally the company has ensured customer satisfaction with greater investment in corporate social responsibility (cited in Marits, 2004). Starbucks strategy of sponsoring programs of corporate responsibility and environmental sustainability has been the critical success factor in this respect. These expenditures have been taken from marketing because they serve to enhance brand awareness (cited in Hill Jones, 2007).
The central element of Starbucks sustainable business development has been the combination of customer relationship management and employee morale (cited in Dess, 2007). This has facilitated the development of core competences which enabled the company to post great success and dramatic growth (cited in Jannarone, 2009). Starbucks is the leading specialty-coffee brand in the UK. Therefore the strategic focus of marketing is on maintaining quality rather than on price. That has been the central strategy in marketing the luxury brand. This necessitates the company to implement tight integration in supply chain management. Maintaining the quality constitutes the first component of Starbucks branding strategy and therefore the basis of its competitive advantage.
The company also controlled distribution to retail outlets throughout the UK. This close integration in the supply chain enabled the company to ensure that the various blends and single-origin coffees that constitute the companys product line were sourced from the
best possible locations (cited in Jargon, 2009). This maximized cost-effectiveness in supply chain and also ensured satisfaction on the part of the channel members (cited in Jargon, 2009). Therefore the distribution structure was one of the most important resources.
Starbucks UKs Value Chain Analysis Model
Support activities
HRM Starbucks invests continuously in staff training in order to provide a high level of personalization in customer service. Trained employees are also qualified to be involved in the decision making process.
Technology developments In order to shorten the time in which each customers order can be processed, the company has automated the process in which the drinks can be mixed. This reduces the waiting line of customers. As a result, the critical success factor is to maintain continuous technology developments for service innovation.
Procurement The coffee is sourced from suppliers in Africa, Central and South America, and Asia-Pacific regions (cited in Marits, 2004). In order to maintain coffee standards, Starbucks works directly with growers in their countries of origin in order to supervise a custom-roasting process as well as the purchasing of green coffee beans (cited in Marits, 2004).
Primary activities
In-bound logistics the automated information system for manufacturing enables the management to maintain close integration with the suppliers so that efficiency in the production process can be maximized.
Operations the company maintains sophisticated systems for manufacturing scheduling and inventory management. As a result Starbucks UK does not outsource any of its operations.
Outbound logistics Starbucks UK has developed a high level of control over distribution planning through vertical integration. It has integrated backwards in opening coffee roasting plants and forward in terms of controlling the distribution of its products (cited in Jargon, 2009).
Marketingsales Starbucks main marketing strategy is personalization of service (www.starbucks.co.uk). As a result, it has relied less on advertising media.
Sustainability of Starbucks UKs strategic position
The challenges of marketing luxury brands are illustrated by the marketing strategies applied in the case of Starbucks, the leading specialty coffee brand in the UK. The strategies in marketing luxury goods illustrate the importance of incorporating the factor of perceived value. Marketers of luxury products cannot implement the strategy of cost minimization because the perceived value of luxury products comes from premium pricing. The luxury status of Starbucks comes from its positioning strategies which have marketed the brand as a status symbol. The success of the Starbucks brand in the UK was based on the value proposition of creating a unique experience for the customers in drinking specialty-brand coffee. Starbucks UKs plight in 2008 illustrates the risks and threats inherent in marketing a luxury product. In order to re-invigorate the Starbucks brand, the management embarked upon the strategy of product and service innovation. The company targets a wide variety of market segments.
The objective has been to enhance the company brand image as a luxury product. This strategy has been the one for the company to leverage on in building brand awareness as a luxury product. The strategies of service differentiation have been mentioned. As a result the management has set the strategy of compensating for the failed store expansion strategy by offering a greater variety of products and more unique Starbucks experience
Starbucks UK strategic position
Luxury brands are defined as those brands sales of which rise more than proportionally with rise in incomes. The challenges of marketing luxury brands are illustrated by the marketing strategies applied in the case of Starbucks UK (cited in Aaker, 2004). The perceived value of a product is defined by the customers perception of the level of utility to be gained from purchasing that product (cited in Baldwin Curley, 2008). For example, when the customer purchases Starbucks UK coffee, he is perceived to have purchased a status symbol associated with a particular lifestyle (cited in Hill Jones, 2007). This is in contrast with purchasing from one of the smaller coffee chains in which case the purchase is associated with a more functional value. Starbucks UK has a higher perceived value because it has a higher price and thus it creates a special image based on famous associations. All segmentation criteria such as activities, interests, opinions, attitudes and values would differ based on whether the product being marketed is the Starbucks brand or one of its smalls-scale coffee chain competitors. In this case Starbucks UK is the luxury brand.
Porters Generic strategies Model
According to Michael Porters framework for strategy formulation, a business organization has three strategies at its disposal differentiation, cost minimization and niche marketing (cited in Besterfield, 2002). Marketers of luxury products cannot implement the strategy of cost minimization because the perceived value of luxury products comes from premium pricing (cited in Evans, 2007). Therefore they are implementing a mixture of the strategies of differentiation and niche marketing. These are the strategies that can be found in the marketing framework at Starbucks UK operating in the specialty coffee industry. For this reason it can be regarded as a luxury brand. The luxury status of Starbucks UK comes from its positioning strategies which have marketed the brand as a status symbol.
The success of the Starbucks brand in UK was based on the value proposition of creating a unique experience for the customers in drinking specialty-brand coffee (cited in Jannarone, 2009). As a result, the important component of the companys positioning strategy was not just the product but also service and the ambience inside the stores. This was an important source of Starbucks competitive advantage because the company competed not only against small-scale specialty coffee chains but also against independent specialty coffee chains (cited in Jargon, 2009). Therefore it was critical for the management at Starbucks UK to create a unique selling proposition which would attract customers away particularly from the independents which enjoyed the advantage of a highly diversified product range. This diversification would enable the independents to experiment with prices which would create tremendous pressure on Starbucks (cited in Marits, 2004). Therefore it was important for Starbucks UK to differentiate itself based on service and atmospheric attributes which would generate an extra appeal and push price considerations to the back (cited in Jargon, 2009). Based on these characteristics Starbucks can be regarded as a luxury brand.
Bowmans Strategy Clock Model
In order to re-invigorate the Starbucks brand, the management embarked upon the strategy of product and service innovation (cited in Jargon, 2009). This strategic action is related to maintaining a continuous improvement process in terms of product and service innovations in order to meet the changing demands as a result of changing customer demographics (cited in Armstrong, 2005). In order to ensure that the continuous improvement process is strategically aligned, the management implements the benchmarking process (cited in Carpinetti Melo, 2008).
Starbucks UKs new strategic actions are more keyed to differentiating features based on service innovation (cited in Jannarone, 2009). The strategic action of service innovation has been effective because the process has been facilitated with high involvement of the employees which has created high employee morale, something that the management had stressed repeatedly. In this respect, the broadening of in-store product offerings such as coffee-flavoured ice cream, Frappuccino, teas, fresh pastries and other food items, candy, juice drinks, CDs, coffee mugs, and coffee accessories, has already proved to be a great success.
In order to attain the objective above Starbucks has been implementing the strategy of maintaining consistency and quality through product diversification in the form of a greater variety of beverages. This strategic action has been the one for the company to leverage on in building brand awareness as a luxury product. There have been out-of-store sales such as the sale of ground coffee and coffee beans in UK grocery stores. Starbucks has also formed strategic alliances with PepsiCo and Dreyers Grand Ice Cream. Through PepsiCo it has been selling Frappuccino in UK grocery and convenience stores while through Dreyers Ice Cream it has been selling coffee-flavoured ice creams in grocery stores. These are the strategic actions of product differentiation. The strategies of service differentiation have been mentioned. They have been guided by the employees thus enabling them to maintain their quality of service while offering greater differentiation in products and services. As a result the management has set the strategy of compensating for the failed store expansion strategy by offering a greater variety of products and more unique Starbucks experience (cited in Jargon, 2009).
External drivers affecting Starbucks UK
In 2008 Starbucks had 11,000 stores in the US and 217 stores in UK (cited in Jannarone, 2009). Since 2000, the companys sales of ready-to-drink coffee, coffee beans, coffee-flavoured products, pastries, and coffee accessories had grown by more than 20 percent annually to reach 9.4 billion in 2007in UK. Starbucks UKs net earnings had increased from 95 million in 2000 to 672 million in 2007 (cited in Jargon, 2009). However in early 2008 it was announced that several of the new stores that had been opened were underperforming and therefore they would be closed (cited in Jannarone, 2009).
PESTEFL Model
Political The Fairtrade Foundation UK and UK Governments Department for International Development are significantly involved. The collaboration between Starbucks and Fairtrade organizations will have a significant impact on the companys operations in terms of the demand for Fairtrade products. Maintaining positive relations with the local government officials is the critical success factor in the political spectrum.
Economic Starbucks plight in 2008 illustrates the risks and threats inherent in marketing a luxury product. As a result of the recession, the management was forced to announce the closures of 60 stores in the UK. In terms of pricing, coffee products are price inelastic. However in case of large price variations, the level of consumption is affected. There is also the occurrence of cannibalization in the case of the closely located stores.
Socio-cultural Demographic changes have affected the demand patterns. Traditionally the market for coffee consumption had consisted of affluent, older age groups. However the age composition was changing as younger consumers were also taking their coffees from specialty coffee chains. Traditionally the younger segments had been visiting the independent specialty stores. Now they were switching to Starbucks.
Environmental environmental issues are related to the political spectrum in terms of maintaining positive relations with the government agencies. The purchasing of Fairtrade certified coffees is an example. This is an environmental issue in terms of setting minimum price guarantees for the coffee farmers. The coffee is sourced from international locations and therefore Starbucks and other companies in the industry must undertake environmental programs to support the farming communities in the international regions. These environmental issues will affect the procurement of the coffee as the production quality will be maintained.
Technological technological development is related to improving the customer service. In this respect the automated technology is a relevant consideration as it will enable Starbucks employees to enhance their productivity in terms of the number of customers that they can provide service to. The knowledge management system is also a relevant technological consideration as it facilitates the maintaining of product and service innovation in alignment with changing market dynamics.
Educational Because the procurement for coffee manufacturing is conducted internationally, educational programs for the farming communities in the sourcing regions are strategic realities. The educational programs enable the coffee farmers to maintain the high level of quality in growing coffee. Health and education initiatives to improve their living standards will enhance the effectiveness of the coffee manufacturing value chain.
Political
- The Fairtrade Foundation UK and UK Governments Department for International Development
- Government position on local laws, regulations and codes.
- Maintaining good relations with the local government officialsEconomic
- Nature and direction of the economy
- Price elasticity
-Disposable Income within market segments.
- Cannibalization affecting sales
SocioCultural
- Changing age composition of the target market.
- Consumer demographics changing more in favour of the younger segment
- Training and development of the employees to improve customer service.Technological
- Product and service innovation
- Knowledge management
- Improvement of customer service through automationEnvironmental
- Programs dedicated to promoting corporate social responsibility
- High community involvement through charitable organizations and other initiatives such as purchasing Fair Trade certified coffees. Educational
- Educational programs undertaken by the manufacturing companies enhance productivity in the coffee growing regions.
- Health and education initiatives are undertaken to improve the living standards of the farming community Legal
- Wage and hour rules
- Workplace health, safety and security.
- International business.
- Import laws
Legal laws and regulations relating to wage and hour rules, workplace health, safety and security and international business. Because the coffee is sourced from international regions, any changes in import laws will also affect the companys operations.
Porters five forces
Starbucks UK has built up its market leadership position through a high level of industry differentiation which has been facilitated through maintaining high control over the distribution structure. This decreases the threat of new entrants as new entrants will not be able to match its structural strength. Starbucks plight in 2008 illustrates the risks and threats inherent in marketing a luxury product. However luxury brands tend to fare better than mass market products because its demand is catered to a niche segment in which price considerations are not relevant Therefore any income disparities likely to arise from the economic hardship would not affect the luxury brand. The success of luxury brands is dependent on premium quality, exclusivity and rarity. New entrants will not be able to match the brand equity.
There is a high level of competitive rivalry stemming from Dunkin, McDonalds and Nestle. There was also a high level of cannibalization. Luxury brands are not dependent on economic hardships. This was not the case with Starbucks as illustrated from its underperforming stores in 2008. As a result, the management was forced to announce the closures of 60 stores in the UK, 70 of which had been opened in 2006. According to the product life cycle theory of luxury brands, this should not have happened during the economic hardship of 2008 (cited in Jargon, 2009). However Starbucks strategy had backfired from over-expansion and as a result, new outlets were cannibalizing sales away from the existing sales.
As mentioned before, Starbucks maintains high control over its distribution structure world-wide. This objective has been met through creating long-term fixed price contracts with the suppliers. For this reason suppliers do not have that much bargaining power.
There are also substitutes available such as soft drinks, tea and beer. This will be affected by the economic factors as during economic slow-down, buyers might switch to these substitutes.
Buyers have high bargaining power as there are no switching costs. Moreover, buyers can brew their own coffees at home.
Starbucks UKs value
Employees have been involved in the process of differentiation. This has enhanced employee morale. In this manner the management has created human capital which is its main resource strength (cited in Armstrong, 2005). The management has leveraged upon this strength in order to enhance its customer-friendly brand awareness. As a result the competitive capabilities of a growing power of Starbucks name and brand image have been developed.
Resources, competences and competitive advantage Model
Competitors have not been able to copy Starbucks UKs strategy because Starbucks UKs organizational culture is strategically aligned to providing customer satisfaction (cited in Marits, 2004). This alignment has been maintained through a continuing process of differentiation. Therefore it can be said that Starbucks UKs strategy to re-invigorate sales has been a mixture of differentiation and developing sustainable competitive capabilities.
Starbucks UKs new strategy has evolved well as illustrated by the fact that its brand awareness is the highest in the industry (cited in Bank, 1993). Additionally the company has ensured customer satisfaction with greater investment in corporate social responsibility (cited in Marits, 2004). Starbucks strategy of sponsoring programs of corporate responsibility and environmental sustainability has been the critical success factor in this respect. These expenditures have been taken from marketing because they serve to enhance brand awareness (cited in Hill Jones, 2007).
The central element of Starbucks sustainable business development has been the combination of customer relationship management and employee morale (cited in Dess, 2007). This has facilitated the development of core competences which enabled the company to post great success and dramatic growth (cited in Jannarone, 2009). Starbucks is the leading specialty-coffee brand in the UK. Therefore the strategic focus of marketing is on maintaining quality rather than on price. That has been the central strategy in marketing the luxury brand. This necessitates the company to implement tight integration in supply chain management. Maintaining the quality constitutes the first component of Starbucks branding strategy and therefore the basis of its competitive advantage.
The company also controlled distribution to retail outlets throughout the UK. This close integration in the supply chain enabled the company to ensure that the various blends and single-origin coffees that constitute the companys product line were sourced from the
best possible locations (cited in Jargon, 2009). This maximized cost-effectiveness in supply chain and also ensured satisfaction on the part of the channel members (cited in Jargon, 2009). Therefore the distribution structure was one of the most important resources.
Starbucks UKs Value Chain Analysis Model
Support activities
HRM Starbucks invests continuously in staff training in order to provide a high level of personalization in customer service. Trained employees are also qualified to be involved in the decision making process.
Technology developments In order to shorten the time in which each customers order can be processed, the company has automated the process in which the drinks can be mixed. This reduces the waiting line of customers. As a result, the critical success factor is to maintain continuous technology developments for service innovation.
Procurement The coffee is sourced from suppliers in Africa, Central and South America, and Asia-Pacific regions (cited in Marits, 2004). In order to maintain coffee standards, Starbucks works directly with growers in their countries of origin in order to supervise a custom-roasting process as well as the purchasing of green coffee beans (cited in Marits, 2004).
Primary activities
In-bound logistics the automated information system for manufacturing enables the management to maintain close integration with the suppliers so that efficiency in the production process can be maximized.
Operations the company maintains sophisticated systems for manufacturing scheduling and inventory management. As a result Starbucks UK does not outsource any of its operations.
Outbound logistics Starbucks UK has developed a high level of control over distribution planning through vertical integration. It has integrated backwards in opening coffee roasting plants and forward in terms of controlling the distribution of its products (cited in Jargon, 2009).
Marketingsales Starbucks main marketing strategy is personalization of service (www.starbucks.co.uk). As a result, it has relied less on advertising media.
Sustainability of Starbucks UKs strategic position
The challenges of marketing luxury brands are illustrated by the marketing strategies applied in the case of Starbucks, the leading specialty coffee brand in the UK. The strategies in marketing luxury goods illustrate the importance of incorporating the factor of perceived value. Marketers of luxury products cannot implement the strategy of cost minimization because the perceived value of luxury products comes from premium pricing. The luxury status of Starbucks comes from its positioning strategies which have marketed the brand as a status symbol. The success of the Starbucks brand in the UK was based on the value proposition of creating a unique experience for the customers in drinking specialty-brand coffee. Starbucks UKs plight in 2008 illustrates the risks and threats inherent in marketing a luxury product. In order to re-invigorate the Starbucks brand, the management embarked upon the strategy of product and service innovation. The company targets a wide variety of market segments.
The objective has been to enhance the company brand image as a luxury product. This strategy has been the one for the company to leverage on in building brand awareness as a luxury product. The strategies of service differentiation have been mentioned. As a result the management has set the strategy of compensating for the failed store expansion strategy by offering a greater variety of products and more unique Starbucks experience
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