Introduction
Starbucks is known for its high-quality coffee and excellent service. The company has become a household name and industry legend. This case study examines Starbucks’ success and relevance to corporate management. According to the report, Starbucks’ branding, customer experience, and product innovation have helped them stand out in a crowded market. The study also examines how Starbucks expanded into new markets and added products. This case study teaches managers and business leaders about competitive advantage and how to retain it. Ultimately, every firm pursuing long-term growth and profitability may learn from Starbucks.
Theories of Competitive Advantage
Five Factors Analysis by Porter
Porter’s Five Forces is a typical framework for examining an industry’s competitive factors. Gao, Wang and Zhang (n.d) assert that Porter’s Five Forces comprises the threat of new entrants, supplier negotiating power, customer bargaining power, the danger of alternative goods, and the intensity of competitive rivalry. According to the framework, the larger the strength of these pressures, the lower the industry’s profitability. Starbucks sees very little competition from new entrants due to the high investment necessary to join the coffee sector. Moreover, suppliers need more negotiation leverage because of Starbucks’ scale and buying strength (Zhang and Xue, 2022). However, customers’ negotiating power is great since they have several coffee supplier choices to pick from. Consumers may buy coffee from other businesses or supermarkets or make it at home, creating a substantial threat from replacement items. Numerous major coffee sector players include McDonald’s, Dunkin’ Donuts, and Costa Coffee; thus, competition is fierce. Although being a valuable paradigm for understanding industrial competitiveness, Porter’s Five Forces have certain drawbacks. The deleterious effects of internal factors on the final product, the company’s resources, and its capabilities are mitigated as Hamadamin and Atan (2019) state. The framework assumes that all businesses in a particular industry employ the same strategy, which is only sometimes the case.
Resource-Based Vision
The Resource-Based Vision (RBV) theory says a company’s fundamental competitive advantages are its resources and skills. In other words, a company’s ability to create value depends on its distinct resources and competencies, which are difficult to replicate or replace (Lee and Yew, 2022). Starbucks’ assets and skills include brand awareness, a strong supply chain, and the ability to provide a unique customer experience. Starbucks has a devoted following of customers prepared to pay a premium for its goods due to its dedication to quality and consistency. According to Fischer and Roy (2019), Starbucks’ strong supply network allows them to get excellent coffee beans and other components. Starbucks is recognized for its distinct customer experience, excellent rooms, free Wi-Fi, and helpful personnel. The RBV model is a helpful framework for understanding the roots of a company’s competitive advantage; nevertheless, it does have a few drawbacks (Lee and Falahat, 2019). For instance, it does not consider external variables like shifts in the market or competition. In addition, the idea operates on the presumption that the resources and competencies of a firm are difficult to replicate or replace, which is only sometimes the case.
Dynamic Capabilities
According to the Dynamic Capabilities idea, the ability to innovate and respond to changing market conditions is crucial for businesses to keep their competitive advantage. The extent to which a corporation may improve its operations and grow despite its current limitations. Starbucks has proved its inventiveness and adaptability to changing market circumstances. Starbucks currently provides a wide range of gourmet meals in addition to coffee, such as tea and pastries (Mohammed, 2022). Starbucks once solely sold coffee. In addition, the firm has invested in mobile ordering and payment technologies to enhance the overall quality of the consumer experience.
Moreover, Starbucks’ leadership in sustainable practices has enabled it to differentiate itself from rivals. The Dynamic Capabilities model offers a helpful view of an organization’s innovative and adaptable capabilities; nevertheless, it has certain limits (Lee and Falahat, 2019). For instance, the theory needs to provide a comprehensible framework for evaluating the factors that contribute to the market advantage enjoyed by a particular organization, as Foguesatto, Martins and Balestrin (2022) state. In addition, it gives the impression that creative thinking and adaptability are always in one’s favour, which is not always the case in all circumstances. For example, innovation often calls for a significant commitment of time and money, but more is needed to provide a profit for that capital.
Theories Relevance on Starbucks Corporation
The management team at Starbucks Corporation will use all three of the abovementioned theories of competitive advantage. The corporation will analyze the competitive forces in the coffee sector with the help of Porter’s Five Forces and then adjust its strategy following the findings. For example, given the high level of competition in the coffee sector, Starbucks will need to increase its marketing and advertising budget (Gao, Wang and Zhang (n.d). The business must also prioritize developing a singular customer experience to stand out in the competitive coffee supply industry. Second, from a resource-based viewpoint, Starbucks is significant because its resources and capabilities are the foundation of its competitive advantage. The success of Starbucks may be attributed to the difficulty imitating brand awareness, supply chain, and unique consumer experience that the company provides (Fischer and Roy, 2019). Starbucks will be able to preserve its market leadership position in the long run if it continues to invest in the tools mentioned above and resources.
According to Saidi et al. (2019), Starbucks is key to the framework because its growth and flexibility to changing market circumstances were critical to the company’s ascension to the top of its sector. Both of these elements have been critical to the success of the Dynamic Capabilities framework. Starbucks’ capacity to retain a competitive edge and stay ahead of the competition is directly tied to the company’s development into new product categories, innovation in online order and payment systems, and dedication to sustainability (Fischer and Roy, 2019). These elements have aided the company’s development into new product areas. Starbucks may preserve its top position in the coffee business if it continues to spend extensively on research and development.
Discuss how such theories could inform Starbucks’ senior management in their quest to gain sustainable competitive advantage.
Starbucks, the most popular coffee company in the world, has climbed to the top of its industry by combining innovative business strategies, excellent brand recognition, and a never-ending quest for excellence. This has allowed Starbucks to become the industry leader. Starbucks’ top management must always seek out creative ways to separate Starbucks from its rivals and establish a durable competitive advantage in order for the firm to stay at the forefront of its industry and retain a competitive edge. Starbucks will only be able to preserve its leadership position in the business. Starbucks must do this to keep its competitive edge over its rivals. Three theoretical frameworks, namely Porter’s Five Forces, the Resource-Based Perspective, and Dynamic Capabilities, are available to serve as potential guides for senior management at Starbucks as they seek to achieve a sustainable advantage in the market.
The framework known as Porter’s Five Forces may be used to analyze the competitive factors that define industries and have an effect on the potential for profit. The intensity of competitive rivalry is one of the five factors, along with the threat of new entrants, the negotiating strength of suppliers, the bargaining power of customers, and the danger of alternative goods (Hamadaminand Atan, 2019). The upper management of Starbucks may utilize Porter’s Five Forces to determine the parts of the business that are most susceptible to the influence of competitors and then design plans to mitigate the effects of those weaknesses. For example, Starbucks has solid brand recognition and a sizable following of devoted consumers, but the possibility of competition from newcomers poses a risk to the company’s overall market share. According to Zhang and Xue (2022), if Starbucks invested in cutting-edge technology and creative product development, it might avoid this danger while staying competitive. Moreover, Starbucks’ suppliers’ negotiating power may have an influence not just on the company’s supply chain but also on its profitability. Starbucks may be able to offset the negotiating power of its suppliers if it maintains excellent connections with them and diversifies its supply chain.
RBV conceptual framework that highlights an organization’s internal resources and skills as a possible source of competitive advantage. The model depicts that a company’s resources and abilities must be precious, uncommon, one-of-a-kind, and irreplaceable to acquire and retain a competitive edge in the marketplace, as Foguesatto, Martins and Balestrin (2022) explains. Starbucks’ senior management might use the RBV to identify the company’s strengths and devise strategies to capitalize on those qualities to gain a competitive edge. For example, Starbucks’ broad supply chain and tight ties with coffee makers may be used to maintain a consistent supply of high-quality coffee beans, making it a significant resource. This would allow Starbucks to capitalize on its competitive edge. Leveraging Starbucks’s partnerships with coffee-producing firms might be one way to achieve this goal. It is possible that Starbucks’ human resources strategy, which promotes staff training and development, contributes to the company’s high levels of customer happiness (Saedi et al., 2019). Starbucks is expected to be able to sustain its position as a market competitor if it continues to invest in the resources mentioned above and its competencies.
According to Lee and Yew (2022), the Dynamic Capabilities model is a conceptual framework that highlights a company’s ability to react to changing market circumstances and capitalize on new possibilities. A corporation must be able to monitor market developments, grasp opportunities as they emerge, and rearrange the resources and capabilities at its disposal to build a sustained competitive advantage and satisfy the goals of the Dynamic Capabilities framework (Arsawan et al., 2022). Starbucks’ upper management might use Dynamic Capabilities to identify areas where the corporation may pivot its business model and capitalize on new trends. The application might be used to accomplish this goal. For instance, Starbucks might use its massive retail network to provide other products and services, such as meal delivery or a subscription service. This would need to take advantage of the retail network that the corporation has established. According to Lee and Falahat (2019), if Starbucks gathers information about its consumers and utilizes that data to construct a profile for each client, the corporation may adjust its marketing techniques to give customers who purchase their products a more personalized experience. There is a fair probability that Starbucks can keep its market relevance and effectiveness for a long time if the corporation is ready to explore the possibilities of adaptation and innovation aggressively.
Conclusion
In conclusion, a company’s competitive advantage is crucial to business strategy, and several theories will be used to examine it. Porter’s Five Forces, Resource-Based Perspective, and Dynamic Capabilities guide Starbucks’ business management. Starbucks can sustain its worldwide coffee market leadership and capitalize on possibilities if it properly understands and incorporates these principles into its business strategy. Suppose Starbucks applied these frameworks to identify vulnerabilities, optimize strengths, and adjust to changing market conditions. In that case, it might sustain its industry leadership, grow and innovate, and adapt to new market conditions.
Reference List
Arsawan, I.W.E., Koval, V., Rajiani, I., Rustiarini, N.W., Supartha, W.G. and Suryantini, N.P.S., 2022. Leveraging knowledge sharing and innovation culture into SMEs sustainable competitive advantage. International Journal of Productivity and Performance Management, 71(2), pp.405-428.
Fischer, D. and Roy, K., 2019. Market entry in India: The curious case of Starbucks. Rutgers Business Review, 4(2).
Foguesatto, C.R., Martins, B.V. and Balestrin, A., 2022. How social media and dynamic capabilities impact innovation performance?. In ISPIM Conference Proceedings (pp. 1-9). The International Society for Professional Innovation Management (ISPIM).
Gao, J., Li, X., Wang, Z. and Zhang, H., The Financial Statement Analysis of Starbucks.
Hamadamin, H.H. and Atan, T., 2019. The impact of strategic human resource management practices on competitive advantage sustainability: The mediation of human capital development and employee commitment. Sustainability, 11(20), p.5782.
Lee, C.S. and Yew, L.Y., 2022. Enhancing Customer Satisfaction through Open Innovation Communities: A Comparison of Knowledge Management Approaches. Knowledge Management & E-Learning, 14(1), pp.81-102.
Lee, Y.Y. and Falahat, M., 2019. The impact of digitalization and resources on gaining competitive advantage in international markets: Mediating role of marketing, innovation and learning capabilities. Technology Innovation Management Review, 9(11).
Mohammed, M., 2022. Exploration of Dynamic Capabilities Needed for Digital Transformation and Business Model Innovation in the Swedish Automobile Industry.
Saeidi, P., Saeidi, S.P., Sofian, S., Saeidi, S.P., Nilashi, M. and Mardani, A., 2019. The impact of enterprise risk management on competitive advantage by moderating role of information technology. Computer standards & interfaces, 63, pp.67-82.
Zhang, L. and Xue, B., 2022. Strategic Analysis of Starbucks. Financial Engineering and Risk Management, 5(7), pp.106-113.
write