Can please have someone look at my paper to make sure that the format is correct.

Thank you in advance.

 

 

 

Introduction

 

 

This case analysis will discuss the historical background, the obstacles, and the strategic concepts that were adopted which were instrumental in the successful franchise that is known today, as Starbucks.  This discussion will involve a historical depiction, the internal and external strategic movement, and the core concepts that has contributed to the franchise's overall success. Additionally, an analysis of strategic concepts that anchored the franchise from its beginning included product line enhancement, forward movement in the industry, and development of focal strategies to secure a competitive edge. Furthermore, the discussion of strategic vision and mission, determination of objectives, strategic formulation, strategy execution, and performance evaluation will be analyzed in order to portray the strategic operations of this successful franchise (Gamble, Peteraf, Thompson, 14). 

A company's blueprint is essential to ensuring the needs of the consumers are met. "While the company's strategy sets forth an approach to offering superior value, a company's business model is management's blueprint for delivering a valuable product or service to consumers in a matter that will yield an attractive profit."  The company's strategic movement with acquisition of new emerging business ventures and partnerships in order to meet economic climate, as well as the needs and desires of its consumers will be discussed.

 

 

Background

One of the leading international coffee franchises, Starbucks, was founded by English teacher Jerry Baldwin, history teacher Zev Ziegel, and writer, Gordon Bowker in 1971, as an opportunity to offer "top-quality, fresh roasted, whole bean coffee" to its customers. In 1981, the founders decided to branch out and take an external risk by offering Howard Schultz, Vice President and general manager of US operation for a Swedish maker of stylish kitchen equipment and coffee makers, an opportunity join the Starbucks team as Operating official of Marketing and Overseer of retail stores (2010, C-336).

New ideas and innovative marketing strategies were enthusiastically encouraged by Schultz, however he faced a great deal of resistance from the original founders. Despite the discouragement, Schultz continued his plights to convince the original founders to expand the product line from its original concept of "simply coffee." Not only did Schultz's ideas bring a consumer risk to the product line, but his ideas were presented during a time in which the company was facing financial risk with another acquisition. Although, both concepts presented opportunities for risk for the company, both concepts also presented opportunities for expansion. As a result of consistent debate, Schultz was able to overcome the reservations of the original founders, and the stragegy to test the expansion of beverages was approved. The operations proved to be a successful venture, increasing the average daily customer rate by 250 on the first day. Within two months, the store was serving an average of 800 customers a day (2010, C-338).

Despite the conflicts between the operations teams as they strategized to move forward for growth, the essential core concepts to promote its strategy were being built at this time. Products were being enhanced to attract and please customers, strategic operations were being built to position the company in the industry, and new acquisition ventures were being strategized in order to position the company in the industry. These core concepts increased the development and deployment of resources in order to build valuable competitive capabilities (Gamble, Peteraf, Thompson, 2). 

   Most successful businesses must endure transition in the internal strategy within management and leadership, this was also true with the Starbucks franchise. After the original owners decided to sell their portion of the franchise, Schultz found himself in the position of CEO and President of the franchise. As leadership transitioned, the incorporation of key strategic concepts continued to transition and enhance the operations of the franchise (2010, C-339).                                   

     Analysis

As most businesses venture to adopt concepts for business growth, the Starbucks franchise also adopted change with Schultz's innovative ideas.  "A company's strategy spells out why the company matters in the marketplace by defining the approach to creating superior value for customers and how capabilities and resources will be employed to deliver the desired value to customers" (Gamble, Peteraf, Thompson, 2). These were the concepts that Schultz adopted as he entered his position as CEO of Starbucks, where he immediately faced issues of low morale and communication among employees, and other issues such as inexperienced leadership in management positions (2010, C-340). These issues interfaced directly with strategic management, and Schultz understood that immediate changes needed to be adopted that aligned with the vision that he set forth for the growing enterprise (2010, C-340). 

   In addition to the changes that he implemented that will manage the internal operations of the franchise, and promote effective employee to supervisor relations, Schultz understood the need to execute his vision and business strategy, by executing the process in which the franchise would grow and plant stores, both nationally and internationally. Schultz also learned quickly the importance of implementing those with experience in the broad industry, in order to streamline management's knowledge, skills, and ability to promote operational effectiveness (2010, C-340). This strategy will also apart of Schultz's vision as he provided opportunities in leadership and management by "evaluating and analyzing the external environment and the company's internal situation and performance"( Gamble, Peteraf, Thompson, 14). These key strategic forces of movement have proven to be essential to the success of the productivity of the Starbucks franchise (2010, C-340). 

 

 

Business Expansion

   According to Peteraf, Gamble, and Thompson, the heart and soul of any strategy is in the actions and moves in the marketplace are taking to gain a competitive edge over rivals.   Schultz also implemented this type of of movement in order to expand Starbucks stores and brand the company, both domestically and internationally. In 1992 and 1993, Starbucks developed a three year geographic expansion strategy to target areas that not only had favorable demographic profile but could also be serviced and support by the company's infrastructure.   The strategy focused on an expansion plan by selecting a large city to serve as a "hub"; teams of professional were located in hub cities to support the goal of opening 20 or more stores in the hub in the first two years (2010, C-346). This major expansion movement supported Schultz's vision to support the "Starbucks everywhere" strategy. This strategy not only provided additional opportunities to satisfy its customers across regions, but this strategy also cut down on delivery and management costs, shortened customer lines at individual stores and increased for traffic for all the stores in an area (2010, C-346). According to Gamble, Peteraf and Thompson, a low-cost provider strategy is how a company is set apart from rivals and winning a sustainable competitive advantage (Gamble, Peteraf, Thompson, 5). Favorable profit was proven in a comparison of revenues in 2002, 1995, and 1990. In 2002, new stores generate an average of $1.2 million in first-year revenues, compared with $700,000 in 1995 and only $427,000 in 1990. The productivity was known to be due the growing popularity of the expansion of product offerings, but was even more known to be an impact of its strategy to blanket metropolitan areas with stores surrounding major metropolitan hubs (2010,C-346).  Favorable productivity within this strategy is also a direct result of healthy real estate investments, and the knowledge behind the location in which each store was planted, and in turn productive relationships were built amongst the franchise's entrepreneurial neighbors. "The company was regarded as having the best real estate team in the coffee bar industry and a sophisticated system for identifying not only the most attractive individual city blocks, but also the exact store location that was best; it also worked hard at building good relationships with local real estate representatives in areas where it was opening multiple store locations" (2010, C-346). 

   As the business strategy of the enterprise began to expand and emerge, the corporation began to look at more opportunities to solidify business operations through licensure mechanisms.  "Regardless of whether a company's strategy changes gradually or swiftly, the important point is that the task of crafting strategy is not a one time but is always a work in progress." (Gamble, Peteraf, Thompson, 7).  In 1995, Starbucks began entering into licensing agreements for store locations where it did not have the ability to locate its own outlets. One of the most earliest partnership that resulted in a licensing agreement was with Marriott Host International to operate Starbucks retail stores in airports (2010, C-346).  Another licensing agreement enabled Starbucks to partner with Aramark in order to expand operations on university campuses and other locations operated by Aramark (2010, C-346). The evidence that the foundation of its business strategy lies in the theory of the sustainable competitive edge is apparent. The implementation of this theory has allowed Starbucks to attract sufficiently large numbers of buyers who have a lasting preference for its products and services over those offered by appeal and overcome the company's advantage.   These two partnerships instilled the foundation for the company's venture into licensing agreements, both domestically and internationally. Licensing agreements and arrangements became the preferred methods of operations, as it permitted tighter controls over the operations of licenses (2010, C-346). Licensing agreements also retained a common management streamline, as all licensed stores were mandated under the same detailed and operating procedures. The company's expansion into licensing agreements strategized the need to streamline management processes across the organization, "...managers of every company must be willing and ready to modify the strategy in response to the unexpected moves of competitors, shifting buyer needs and preferences, emerging market opportunities, new ideas for improving the strategy..." (Gamble, Peteraf, Thompson, 7). The concept of licensing enforced these concepts across the organization and mandated that all managers and employees who worked in these stores received the same training given to managers and employees in company-operated Starbucks stores (2010, C-346). 

   Business expansion was not only evident in the company's structure domestically, but international expansion was also engaged and is credited to the company's overarching success. In markets outside of the United States, Starbucks implemented a "two-pronged" store expansion. This strategy not only enabled internal operation of stores, but it also supported other partnerships with other reputable and local companies to expand stores in international regions. Starbucks utilized a local partner/licensee to help it recruit talented individuals, set up supplier relationships, locate adequate real estate, and cater to local market conditions, in most countries (2010, C-346). In order to promote successful international expansion, Starbucks relied on partners/licensees that had proven proven experience in retail and restaurant operations, demonstrated values and a "corporate culture" that was similar to Starbucks (2010, C-346). Commitment to customer service, demonstration of strength and management and financial skills were characteristics that Starbucks sought to develop international partnerships. As opportunities arose for Starbucks to create these international partnerships, they continued to use the domestic resources to expand in the international marketplace. "In those foreign countries where business risks were deemed relatively high, most, if not all Starbucks stores were licensed rather than company-owned and operated" (2010, C-347). As a result of effective strategic planning, Starbucks was able to successfully operate and maintain international endeavors. As of September 2009, Starbucks had company-operated and licensed stores in 50 countries. As the company' strategy continued to expand both domestically and internationally, the business concepts that were developed and enhanced continued to set the company apart and established its sustaining competitive advantage. Starbucks continued to "gain a competitive advantage over rival through it efforts to offer the highest quality coffee-based beverages, creates an emotional attachment with customers, expand its global presence, expand the product line, and ensure consistency in store operations" (Gamble, Peteraf, Thompson, 7). In its continued strategic planning in support of expansion, Starbucks added 317 new company-owned locations in the United States and another 357 new company-owned stores internationally in the fiscal year of 2014. Starbucks added 101 licensed store locations in the United States and 648 licensed stores internationally in 2014. Whether the expansion was planned for a domestic region or international regional, the commitment to corporate responsibility remained universal, the consumer experience at each location was critical, and the expansion of product lines and services, and the acquisition of quality products in order to attract consumers was essential to their marketing profile and business structure (Gamble, Peteraf, and Thompson, 7).

   The implementation of external joint ventures were also critical the overall success of the enterprise. In the mid-1990s, Schultz made it his mission to expand product line offerings into a wider distribution and marketing channels. "The strategy was to make Starbucks products more accessible to both existing and new customers where they worked, traveled, shopped, and dined and to find and promote new occasions for enjoying Starbucks products (2010, C-348). The first initiative involved the establishment of an in house specialty sales group to being marketing products to restaurants, airlines, hotels, universities, hospitals, business offices, country clubs and select retailers. This expansion was followed in 1994 when Pepsico and Starbucks entered into a new joint venture to create coffee-related products in bottles or can for mass distribution through Pepsi channels, which resulted in the product of the Frappuccino ready to drink beverages, which debuted in the marketplace in 1997 (2010-C-348). In regards to international expansion, in 2008, the corporation partnered with Suntory to begin selling chilled ready to drink Doubleshot drinks in Japan (2010, C-349). In the spring of 2008, Starbucks partnered with Apple's iTunes and began to offered a "Pick of the Week," music card at its 7,000 stores in the United States that allowed customers to download each week's music selection at iTunes (2010, C-349). In 1998, Starbucks licensed Kraft Foods to market and distribute Starbucks whole bean and grocery and mass-merchandise channels across the United States. (2010, C-349). In 1999, Starbucks purchased Tazo Tea for $8.1 million Starbucks introduced hot and iced Tazo teas drinks in retail stores, and expanded its agreement with Kraft to market and distribute Tazo teas worldwide. In 2003, Seattle's Best Coffee was acquired by Starbucks, and in May 2008, there were more than 540 Seattle's Best cafes in the United States. In 2005, the corporation acquired Ethos Water for $8 million in cash, and the acquisition was made to expand the line of beverages i Starbucks stores in the United States. In 2009, the corporation continued to expand its product line with the Starbucks VIA ready Brew, packets of roasted coffee in an instant form. In 2009, the company's overall retail sales mis in 2009 was 76 percent beverages, 19 percent food items, and 3 percent coffee-making equipment and other merchandise, and 3 percent whole bean coffees (2010, C-351). The product mix in each stored varied, and was dependent on the size of the storm. International stores continued its expansion and the corporation executed strategic processes in its operations by providing product lines based on popularity among that specific region (2010, C-351).

 

 

                Conclusion

 

 

As displayed in the background, and analysis of the discussion, the importance of the distinctive strategy and competitive approach has been illustrated and proven as a successful blueprint of this organization.   The company's strategic movement with acquisition of new emerging business ventures and partnerships, domestic strategic movements, international ventures, and licensure opportunities has been the foundation of the successful enterprise.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

 

 

 

Gamble, J., Peteraf, M. & Thompson, A. (2015). Essentials of Strategic Management: The Quest For Competitive Advantage, Fifth Edition. New York, NY, Mc-Graw Hill Education.

 

 

Shah A., & Thompson A. (2010). Starbucks' Strategy and Internal Initiatives to Return to Profitable Growth. Case No. 23. The University of Alabama and Frostberg State University.