Strategic plan for Starbucks
A strategic plan comprises of purpose, long term strategies and goals that a company employs to excel in the market environment. Due to changes in client needs and technology, organizations apply tactics that can help them to overcome threats posed by relevant competitors. This can also be achieved by taking advantage of new opportunities to guarantee an organization, survival for a long time.
Starbucks Coffee Company in 1971 opened its branch in Seattle Washington. The company is famed for coffee retailing and it also serves pastries, snacks as well as cold and hot beverages. Starbucks Coffee Company through its management has considered six major principles including the as the partners, the clients the stores, the coffee, the neighbors and the shareholders.
In the next three years therefore, Starbucks would focus on production of high quality products that will hook clients into its many stores across the globe. The purpose of this paper is to closely analyze the strategic plan for the company in an effort to expand its operations in the next three years.
Starbucks Coffee Company
Every business begins from a humble background and through its vision and mission; it grows into a mega establishment with many branches. In 1971, Starbucks Coffee Company opened its first store in Seattle, Washington. So far, it has opened more than 16,000 stores in 62 countries. Despite intense competition from relevant competitors, there are few companies that employ a business model that can be compared to that of Starbucks Coffee Company, which emphasizes on the quality of its services, products and experience (Wahlen, et al., 2010, p. 77).
Starbucks Coffee Company management through its mission has maintained its products, clients, and stores and changed the lives of its shareholders and the neighborhood. The company can be differentiated from other establishments because of its unique products. Additionally, it differentiates a latte from a cappuccino, which other companies cannot do.
The company never serves clients coffee that has stayed for 30minites and when staffed fully, it can serve up to 220 clients in an hour. Each client also takes 3 to 5 minutes to be attended to at the store. Starbucks Coffee Company also has a mission statement that touches on the lives of the people and the neighborhoods.
Even though it has established itself across the globe, it still values interactions in the neighborhood in its effort to enhance its productivity in the future. Starbucks has also achieved positive results in the past two years because of its expansion in the product line while keeping coffee as its major business.
Starbucks is also engaging in establishing many stores across the globe, to stay in line with its mission. It also aims at ensuring enhanced product diversity and it is trying to be innovative in every action it undertakes by embracing advanced communication and payment technology. The company has also continued to seek new product categories and it includes dairy products, tea, baked foods and cold pressed juices. Additionally, the company is working on ways to create new markets in South America, besides renewing its interest in China.
SWOT Analysis of Starbucks Coffee Company
SWOT analysis according to Lussier (2012), is the determination of internal environment, weaknesses and strengths and a company’s external environmental opportunities as well as threats to the company (p.131). SWOT analysis therefore enables a company to compete with other businesses offering the same products in the market. SWOT analysis to the management keeps the company informed on what is happening on daily operations, in addition to being involved in every activity that the company engages in.
In Starbuck, SWOT analysis is employed to check the weaknesses and strengths of the company as well as threats and opportunities that the company faces. The company has its main strength in its capability to persist in ensuring clients are served the best coffee quality in the world. Customer service is excellent with the most valuable coffee brand.
Starbucks Coffee Company has also succeeded in being the ‘’third place’’, other than work and home based on its attractiveness, convenience and quality products (Walton, 2012). The employees are also friendly and the stores, undoubtedly welcoming. Its coffee brand is also recognizable in all its stores. The company has additionally been able to manage the brand by satisfying client needs throughout the year and in adapting to transformations that match client needs.
The company’s profitability has also been increasing therefore, enabling the company to open many stores in different regions. It has also invested in its suppliers just to ensure constant supply of coffee in its stores in the future. Even so, the company is relatively weak when it comes to its coffee products pricing and it has affected its profits. This can be attributed to hedge funds as well as change in weather conditions among other issues.
It is a fact that has affected the company’s profit and it cannot estimate the price that would help generate maximum profits. The company’s retail prices in some cases are relatively high compared to that of its competitors. Therefore, supporting surrounding communities has forced the company to spend more on its income leading to low profits.
Besides this, over expenditure has prevented the company from achieving its future goals. Negative publicity such as improper treatment and tax evasion also offered to some suppliers has affected future expansion plans of the company. Starbucks has also over the past four decades enabled the company to succeed in creating many stores across the globe.
It has also extended its coffee supply network to ensure it satisfies clients across the globe despite prevailing weather conditions. The company has also managed to expand its brand visibility because of its strong financial standing. Through this, it has additionally managed to introduce new products to its stores.
Starbucks Coffee Company also has an opportunity to create more coffee stores selling wines and beer in an effort to accommodate a large client base. Additionally, it has been able to expand its market operations to growing economies where some of its products were not known. Increase in coffee prices and dairy products have also continued to pose a threat to the company. Even so, new coffee houses have been a major threat to the company because they offer low prices making Starbucks to lose its share in the market.
The company is also finding it quite difficult to expand its operations in developed countries because of coffee products saturated market. Economic and political conditions in global markets may also limit expansion plans for the company (Lussier, 2012, p. 132). These are conditions that can disrupt coffee beans supply in the company’s stores. The company is however defying the threats and is persistently giving back to the society and making environmental contribution conservation.
Areas that Need Change
Every business that operates in a competitive market encounters some challenges that prevent successful operations. Despite being the leader in coffee products production, the company needs to review its strategy. Pricing of its products has been a major challenge for the company based on prevailing weather conditions and coffee prices across the globe.
The pricing strategy of Starbucks Coffee Company depends on quality as opposed to quantity. It also spends a lot of cash in transport and this is included in its pricing strategy. Starbucks should therefore consider settling for attractive price packages to tap more clients and to increase its revenue in a strategic plan. By examining prices of competitors and communicating to all its stores, the company can conquer pricing challenges and maintain its clients.
Rapid Starbucks Coffee Company expansion across the US has also been a challenge based on saturation of coffee companies in US borders. The company had however enjoyed amazing growth of its stores in the country but the trend is changing. Starbucks according to Mueller (2011) closed more than 600 underperforming stores in 2006 to get rid of cannibalization (p.4).
To ensure maximum growth, it would assume that the company management is contemplating on settling for a global plan aimed at expanding its international market and to encourage innovation in existing store. The plan should focus on the need to expand globally other than domestically. It should also aim at investment in developing nations where its products are not popular.
Starbucks should also avoid taking risks in areas where success is not guaranteed. The company seems to allocate a lot of money on activities aimed at benefiting the company as opposed to its clients. It usually gets its coffee beans from Africa, Latin America and Asia and it supplies it to different stores in Europe and in the US (Cooke, 2014). It has also sponsored many social programs including health clinics, boreholes and schools and the benefit coffee growing communities.
Even so, the projects appear to take a lot of the company revenue thus lacking expansion funds. The company should also cut down on its expenditure in these programs and focus more on creating a large client base. The profitability of the company should also determine the amount it should put in, in non-income generating projects.
Starbuck should therefore invest in environmental conservation practices instead of focusing more on community activities. Starbucks should also invest on environmental conservation practices to help sustain the population and enhance future production. The company is also facing intense competition from local establishments specializing in products that do not compete with the company’s distinct products.
Local establishments are additionally offering their products at relatively low prices forcing the company to lose its market share. Starbucks in both circumstances is bound to lose its market share and to sustain its competition; it should focus more on creating more awareness via social media and advertisements. It should also review its coffee brewing instead of diversifying its products as a way of enhancing its taste.
Clients as a result, would consider products with a great taste rather than brand name. Starbucks should also aim at sustaining its economic benefit by creating a strategic plan that incorporates unique practices to outperform its rivals.
This can also be achieved by creating a business model that indicates how the company can differentiate and classify its products and creating an esteemed value for its clients.
Why Strategic Planning
Strategic planning is very important in guaranteeing company continuity especially in its future endeavors. The plan is built on the mission statement for long term objectives of the company. It also influences performance of the company positively as it covers the company’s present position and how it aims at expanding its future operations.
The mission of the company is directed at inspiring the spirit of the people begging from a single client to many clients without forgetting the community. The strategic plan of the company should also focus on current situation of the company for instance, where it would like to be in the coming three years, how it will progress in achieving its goals and objectives and how it can evaluate and monitor its goals.
Product pricing is additionally very crucial because clients are attracted to affordable and quality products. The issue is a real issue for the company and this can be defined by considering its competitors who are selling their products. This has also been contributed by the value of the dollar leading to high production costs.
When a company experiences high production costs, it tends to pass the costs to its clients thus, affecting the price. The company should therefore ensure that its product prices are set to a point where the company is able to generate profits in its operations. Strategic decision will also help in overcoming competition in its pricing as the company sets prices based on its profit making possibility.
Market analysis will additionally enable the company to identify target market in an effort to penetrate the market. According to Abraham (2012), few companies including Coca-Cola and Microsoft can efficiently manage to cover entire population (p.132). Saturation of the company stores in the US is also another reason for concern because its products are well known in the country.
This means that its core competence is dwindling and its marketing strategies are not effective. To counter such as effect, the company should utilize its organizational values to revive its competence. According to Abraham (2012), Thompson, Strickland and Gamble (2004) defined the values of the organization as ‘‘the beliefs, traits and behavioral norms that the company personnel are expected to display in conducting the company’s business and pursuing its strategic vision and strategy’’ (p.81). Companies that maintain their organizational values also get considerable benefits from how the customers perceive them.
The mission for Starbucks Coffee Company touches on stimulating and nurturing human spirit. This does not mean that company’s major goal is to generate huge profits but to also make life better for all humans. In some cases, a company’s success is measured by the number of employment opportunity’s it offers to the community as well as profit percentage it directs to charitable organizations (Abraham, 2012, p. 205).
Therefore, it is not entirely a bad idea for an organization to engage in community development but focusing too much on giving back to the society can lead to the company’s downfall. Even so, Starbucks management should focus on strategizing profit percentage that should be allotted to community development.
The company’s three year strategic plan aims at making the company best across the globe but the pressure from competitors has affected its expansion plans negatively. The benefit of having a strategic plan is that it enables top leadership to think strategically on impending challenges and to create ideal solutions which, in turn enables an organization to achieve an economic advantage.
The company through innovation has endeavored to reach many clients who are not in a position to come its stores by making products that can be blend at home. Because of rapid technology changes, the company should also create a system that enables its clients to make orders and its employees to deliver the products to their homes.
Measuring Success in Strategic Plan
Organizational transformation is no doubt tricky because it poses risk to the status quo of a company. It also increases resistance possibility. Even so achieving success needs change and change can be achieved by employing some measures. According to Jones and George (2007), the top performing companies are those that keep changing and are experienced in doing so (Abraham, 2012, p. 87).
Successful organizations also have ways of goal identification and ways of achieving them. Therefore, Starbucks Coffee Company should consider making changes to help realize success and to regain its connection with its clients. Success should be measured by monitoring benchmarking and trends in the company. Benchmarking for the company would include processes of the company to other stores offering the same products in the market.
The result can be properly achieved through market share and if it is low, the company is then operating below the benchmark thus; the strategic plan should aim at raising the benchmark. The organization can also carry out a comparison of its practices to the ‘’best practices’’ in change management. Having a solid brand equity helps to define success of a strategic plan. For example, Starbucks has a solid reputation in roasted coffee, and it attracts many clients to its stores. Its market share therefore is influenced by its distinct brand.
Another strategy that the company can utilize in measuring success is gap analysis. This is simply the distance between the company’s present situation and desired goals (Saar & Hargrove, 2013, p. 198). Gap analysis therefore aims at clarifying desired business state. The company can also utilize the strategy in its strategic plan to assess how the gap can be closed. Its management can also utilize gap analysis to determine how far it can go in realizing its goals of enhancing its profitability.
The objectives of the company should additionally be matched with strategy therefore, if the plan is aggressive, the goals should also match the aggressiveness.
Starbucks Coffee Company strategic plan should include rapid global expansion, enhancing quality ad cutting down on expenses. Finding innovative and new methods to reach a large client base is the biggest priority for the company. Starbucks since 1971 has been on the lead in sourcing and roasting coffee in all its stores across the globe. Through dedication to excellences and its operating principles, the company is committed to offering a distinctive life experience to all its clients through its products.
It also enjoys having unique client experiences and interacting with communities in ensuring long term growth and achievements. Its vision also inspires its employees besides attracting more clients. The company has invested a lot of revenue to changing the lives of those who cultivate coffee. In an effort to avoid severe competition from other stores such as McDonalds, the company should generate new innovation value to enhance client experience besides investing in online marketing.
The company must also be persistent in carrying out SWOT analysis to help maintain its competitiveness and profitability.
Abraham, S. C. (2012). Strategic Management for Organizations. San Diego, CA: Bridgepoint Education, Inc.
Cooke, J. A. (2014, February 26). From bean to cup: How Starbucks transformed its supply chain. CSCMP’s Supply Chain Quarterly. Retrieved on 26 February 2014 from http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/
Lussier, R. N. (2012). Management fundamentals: Concepts, applications, skill development. Mason, Ohio: South-Western.
Mueller, B. (2011). Dynamics of international advertising: Theoretical and practical perspectives. New York: Peter Lang.
Saar, S. S., & Hargrove, M. J. (2013). Leading with conviction: Mastering the nine critical pillars of integrated leadership. San Francisco, CA: John Wiley & Sons.
Wahlen, J. M., Bradshaw, M., Baginski, S. P., & Stickney, C. P. (2010). Financial reporting, financial statement analysis, and valuation. Mason, Ohio: South-Western.
Walton, A.G. (2012, May 29). Starbucks’ Power over Us Is Bigger Than Coffee: It’s Personal. Forbes. Retrieved on 26 February 2014 from http://www.forbes.com/sites/alicegwalton/2012/05/29/starbucks-hold-on-us-is-bigger-than-coffee-its-psychology/