Business Field Study – Starbuck’s Coffee / Business Operation Management
The Starbucks Corporation is known as an American Company that is famous worldwide for its perfect coffee, as well as the outstanding services of the company. The company has received such a reputation due to the special approach to the customers and a thoroughly created supply chain management structure. The headquarters of the Starbuck’s company is located in Seattle, Washington D.C. The Starbucks corporation is known as the biggest coffee house company around the globe.
In particular, it has more than twenty thousand stores in more than sixty countries all over the world. The major locations with more than thirteen thousand of stores are in the United States, and about a thousand of stores in Canada, Japan, China and about half less in the United Kingdom, Korea, Mexico, and other countries in the world.
The major lines of products around the countries are beverages, a great number of coffee types, teas, meat pies, and different other snacks. At the different time of the day, Starbucks has different products to offer. For example, in the evening, the top products are a great number of beers and wines of all kinds. At the same time, the company deserved such a popularity for the reason of entertainment purpose for its customers.
In other words, this is not about the standard place to have a snack but the place where people come for emotions and many different positive feelings. They can not only talk to each other but also listen to the live music, read books, watch movies, have some ice-cream, or buy some other food in the groceries, etc.
Analysis of Processes: Michael Porter’s 5 Forces Model
The influence of the industry rivalry created a fierce competition for the retailers of coffee. As a result, the high esteem of the Starbuck’s company was to address the expansion of its facilities for the last several decades. At the same time, the industry changes also had an impact on the company by means of the competitors such as the Dunkin’ Donuts and McDonald’s. They have a great strategy of expansion for the industry of foods and beverages, as well as the coffee industry as a whole. However, such a rapid enforcement helped the company to transform its weaknesses to the strong rivalry position in the highly competitive environment in the industry of coffee.
Potential for New Entrants
The major bounds on the road to the success of the company lies in its specialization in the coffee industry. Therefore, the possible threat of new entrants was minimized for the whole industry. Besides, there are no particular requirements for the presence of any business in the sphere of coffee. Consequently, in order to run a business, there is no need to invest much money in the coffee shops. Instead, there is great potential for other companies to join the industry of coffee in the next decade. At the same time, any kind of new businesses entries to the industry will not make any difference for the company for the reason that they will not have an impact on the market as a whole.
The aspect of the substitute products has changed in the last decade, and today there are not that many products that could compete on the market of coffee. Instead, the industry competition is merely based on the premium selections of specific sorts of coffee. However, there are still some products that could serve as a substitute for coffee such as soft drinks, for an example, Coca-Cola. Nevertheless, these kinds of substitute do not have any impact on the industry of coffee. Based on the researches of the last decade, there is going to be a decrease in the substitutions of coffee since this trend was prevailing for the last couple of decades. In contrast, coffee gained its market share as compared to the soft drinks. In fact, people do drink coffee despite of the healthy considerations with the inclinations that this kind of drink is not that harmful for people.
Suppliers’ Bargaining Power
As for the suppliers’ bargaining power, the industry of coffee shows that the supply levels of today are much higher than in the last century. In fact, there is a tendency of generating more premium types of coffee in order to compete on the market. However, the position of competitors is hugely emphasized on the level of quality in terms of the bargaining power of suppliers. In addition, the Starbucks has advantages over its competitors in relation to the supply chains and profit margins, which is possible due to the economy of scale and thorough marketing strategy of the company.
Bargaining Power of Buyers
The aspect of the customer base has a great influence on the information concerning the demand, price strategy on the market, cost of supply within the overall coffee industry, and the application of web technologies. The main driver of profit is to gain the customer recognition through supply of high quality products offered on the market. In addition, the bargaining power of buyers has been raising due to the product information availability on the Internet. Hence, the bargaining power of buyers occurred to be more strong in the industry of coffee than it was in the previous decade.
The overall facilities of the company provide a significant advantage over its competitors in the market worldwide. Grounded in the Michael Porter’s Five Forces Model, the of Starbuck’s coffee brand has a relatively strong influence on the industry competition. Besides, the strategic focus of Starbucks is the differentiation of products but not the price changes that are no longer considered viable. In fact, the strong points of the company have a huge potential to protect the business against the threat of the new entrants which comes as a result of the more challenging obstacles of entry. Besides, the bargaining power of both buyers and suppliers has improved for the reason of a higher cooperation of the suppliers as well as the overall information flow that is freely accessible by the customers. The threat of substitutes is still present for the reason of the constant decrease in sales of the soft drinks adjacent to the coffee industry.
Recommendation for Improvements
Due to the above mentioned analysis, there still could be recommendations for the overall improvement of the Starbucks business operations. The chart below illustrates the business processes that are oriented towards the perfect business environment. Although, it is not possible to create such an environment in the real world, it is still possible to rate the application of each division of strategy from zero to ten and try to find the worst chain.
Hence, it would be recommended to improve each specific element at least by one point of the service management in terms of operations, strategy, and information technologies. Please, see the graph below:
Starbucks will be capable to maintain its leadership within the industry of coffee if the business can find a way to be more profitable globally. The ability to fight the pressure in the foreign countries will lead to the adaptation on the markets globally. In order to cope with such a pressure, Starbucks should adopt a transnational strategy, which will enable the company to adapt to the local markets more effectively, as well as locate the secondary activities in optimal locations, as well as attain the economies of scale and increase in profits.
Implementation and Managerial Implications
Starbucks needs to compete on the global level to sustain its leading position in the retail industry of the coffee business. Its present international divisions are far from being as profitable as its domestic division. The domestic success is primarily owed due to Starbuck’s excellent customer service, supply chain management, and brand recognition. Starbucks has not adapted to competition on the foreign markets as successful as it was intended, and this the reason why both the brand recognition and customer service need to be improved in the foreign countries.
Starbucks needs to obtain a transnational strategy for the reason that it will help the company to withstand the pressure and adapt to local markets and keep prices as they are. This strategy will enable Starbucks to gain economies of scale internationally, adapt to specifics of the local markets, allocate activities in most suitable locations, and foster knowledge flow and learning. Starbuck’s knowledge and learning of foreign markets are very important if the business wants to have excellent customer and community service in foreign countries.
In addition to fostering a transnational strategy, Starbucks should strive to enter into joint ventures until the comprehension of foreign markets is as strong as the company owners wish it to be. The establishment of joint ventures with native companies in foreign lands will help Starbucks to adapt locally on a truly high level. The foreign company practice will help Starbucks to better understand the country’s laws and regulations, as well as customs and culture. Such an approach will lead to a better understanding of customers in various markets.
In terms of management, the complete set of the supply chain management includes different teams of people, including the buyers, suppliers, management of personnel, environmental performance and compliance of people. It also matters how well the business addresses issues, such as the price, lead-time, capacity, and finally management of the employees in the company offices. Therefore, what could be improved is the workplace conditions for all categories of people working in the company.
Every single organization in the world needs to consider logistics, as well as supply chain management, including the capacity and demand for the production, quality, the area of services, and the amount of goods. Competition is always going to be present in the market, and companies have to be sure to overcome it. This approach would ensure they are running a business with ease and understanding. International strategies need to be proclaimed for the sake of customers worldwide, and they will safeguard the business from any risk connected to cases of hazards at various local markets.
If companies are responsible for what they do and try to improve their business all the time, it means that they care for consumers and work for their good. People always pay attention to quality and deeply value providers of goods and/or services that are of a high quality. That is the reason why they enjoy high purchasing power in response. Today, there is a high amount of unpredictability and uncertainty in the marketplace, and if companies are performing with the dignity, they will be the top ones with a deep value for quality.
If a company produces a product or offers a service that consists of several parts that are sold to the customer, then supply chain is one of the main aspects of the business. By managing this supply chain, it is possible to illustrate logistics as well as a management practice that directs the flow of services and/or goods to the customer by means of delivering the best quality. Every company that either produces products or offers services on the market has to ensure thorough logistics and supply chain management. Heads of companies all over the world should evaluate the quality of this procedure and constantly improve it to remain afloat in the industry.