January 10th, 2018
Formulating business strategy – Strategy Evaluation and Selection
On the return of Howard Schultz as the entity’s CEO, Starbucks strategy has been refocused to towards various aspects of its business. These include establishment of better training equipments and products to improve the state of the business and refocused pursuit of store-level operations’ economy (Starbucks Corporation 2009). Additionally, the entity has instituted approaches such as improved communications to re-establish its emotional customer attachment (Starbucks Corporation 2010). Following the dedication to store-level economics, the entity embarked on closure of non-profitable stores (Allison 2009), reducing its store numbers in the U.S. greatly. The overexpansion in the U.S market had been noted as one of the entity’s failures in the Economist (2008) article. Such refocused strategy that places more emphasis on product quality may thus help the entity achieve sustainable growth.
The future strategy selected for Starbucks is product diversification and entry into emerging markets. The case for product diversification is reinforced by two aspects. Firstly, the customer preferences for healthier foods could affect the entity’s sales hence its performance. Secondly, entry of firms such as McDonald’s with high capital base and existence of other competitors such as Dunkin Donuts offering lower cost alternatives (Economist 2008), imply that the entity’s market share is shrinking. With the economic downturns becoming a frequent occurrence in modern days, sustaining a premium price on the entity’s products may not be a feasible strategy. Such a strategy is only possible through incorporation of other value-adding services rather than the coffee quality per se, into the company’s service offerings. Economic downturns also reinforce the need for Starbucks to expand to emerging markets. Such expansion can help the entity mitigate economic shocks that affect a particular country. Go to part 6 here.