Theories of competitive advantage
A company is deemed to have a competitive advantage when it acquires and utilizes attributes that give it an edge over the competitors in the market. Therefore, every company constantly seeks to develop a competitive advantage through its strategic management goals (Kryscynski, Coff, & Campbell, 2021). A company’s strategic goals must be aligned with the realities on the ground and the expected changes in the market. The strategic management goals must be anchored by the attributes that will help a company become competitively advantageous. Without such anchors, then the management goals will quickly become obsolete. Every company has to constantly adjust the processes it takes to achieve its goals to ensure they reach the goals indicated within the suitable timeframe and get ahead of competitors (Saeidi et al., 2019). The constant changes in achieving strategic goals are usually aimed at ensuring that a company utilizes its competitive advantage and adjusts to the policies that competitors are implementing. Therefore, one cannot understand strategic management without understanding the concept of competitive advantage.
The Market-Based View theory of competitive advantage
The market-based view theory indicates that the external environment of a company is usually what dictates the competitive advantage that a company can have. The theory indicates that a firm constantly tries to respond to the external environment. For a company to be successful, the theory indicates that it has to be compared with other players in the industry and not necessarily on how it performs individually. Issues such as profitability are determined by how other players are doing in the industry. Therefore, the theory helps one look at the achievement of a company based on other players in the industry and not based on its merits. Porter’s five forces model is one of the theories that help expound on the market-based view theory since it helps one analyze the external environment. For a company to gain a competitive advantage, it must be aligned with the structure developed in the industry (Quaye & Mensah, 2019). Therefore, the competitive advantage will be minor differences within the firms in the industry. Therefore, the structure of an industry is essential in helping inform a company’s management on how to develop their company. The behavior of a company is significantly influenced by how other industry players behave and how the market responds to such measures. Therefore, the theory helps one focus on the issues that will affect the market and align the company’s strategic goals with the issues that will be responding to the market needs while aligning oneself to the industry’s structure.
Relevance to management
The market-based view theory helps management understand the external environment of a business. Porter’s five forces model is a critical indicator of how one can analyze the external environment (Lestari et al., 2020). For example, competitors and customers are critical in helping one decide on the products they should introduce into a market. Without proper market analysis, the management cannot set strategic goals to benefit a company. Strategic goals have to be aligned with the needs of the market. When the market does not respond well to a product, any other competitive advantage the company might have can quickly be rendered useless. Therefore, every management must ensure that it focuses on the external environment. The theory also helps a company understand how issues are run within an industry. One has to understand aspects such as the technology needed in different activities and how to get the right technology. Therefore, the market-based view theory is critical in helping the management understand the external environment of a business. Once the external environment is understood, it will be easier to develop goals and get the resources to respond adequately to the external environment.
The Resource-Based View Theory
The resource-based view theory focuses on the internal environment of a business. The internal environment is seen as the main driver for competitive advantage. The theory indicates that a company must utilize its resources well to enjoy any form of competitive advantage (Varadarajan, 2020). Every resource within an organization must be deployed correctly to show its effectiveness and give the company an excellent competitive advantage. The resource-based view argues that resources in a company are assets tied to the company for a specific period. For example, employees can be an asset to a company. However, one has to organize the employees properly and place them where they are most competent for the organization to realize its employee potential. There are three categories of resources; they can be physical, monetary, and human. For example, an organization can have high profitability, giving them a competitive monetary advantage. The company can quickly lower its prices to a level where it is making losses and undercutting the competition. In doing so, it will quickly eliminate competitors who do not have the monetary resource. The theory, therefore, advocates for every organization to be constantly stock-taking to ensure they can know the resources that can help them gain a competitive advantage in the market.
Relevance to management
The resource-based theory helps the management understand the importance of the internal resources that they might have. Internal resources can be critical in helping an organization become better. For example, there can be talented employees who can develop critical technologies that will bring significant changes in the market (Varadarajan, 2020). The theory helps the company’s management focus on such individuals, ensuring they are placed in areas where they can be most effective. The theory is critical in helping the management understand what assets are considered within an organization. Further, the theory helps management understand how to utilize the resources that they might have. The resources within the company must be adequately utilized for the organization to take advantage of any other competitive advantage from the external environment (Zameer, Wang, & Yasmeen, 2020). For example, when a company does not have the right employees to help develop the right technologies, it can be challenging for the management to realize the goal of constantly renewing its technology and staying ahead of the competition. Therefore, the theory helps management in focusing on the internal environment and understand the potential of the internal environment.
The Knowledge-Based View
The theory helps one focus on one part of a company’s resources. The theory argues that knowledge is the most important resource that a company can have (Shan et al., 2019). Without knowledge, it can be challenging for any other aspect of a company to give it a competitive advantage. The theory is anchored on modern technology, which means that every product being developed has to be done with the right technology. Technology is constantly evolving. Therefore, there is a need for the company to know about how different aspects of technology are evolving. Knowledge is usually seen as the only asset that increases with its use as opposed to any other asset which decreases as it is used (Wagner & Hollenbeck, 2020). When a company has the knowledge and protects it, it becomes a critical asset. For example, when a company develops a new drug, it can patent and sell it for a long time in the market without competition. Therefore, knowledge will give the pharmaceutical company a competitive advantage since it will operate as a monopoly. Every company must have innovative knowledge to ensure it constantly has the edge over its competition. Innovation must be nurtured within the organization to e that it increases over time. Therefore, the theory helps one in focusing on knowledge development and management.
Relevance to management
The knowledge-based view helps one focus on an area usually not considered critical. The management must know that knowledge is significant in helping a company gain a competitive advantage, especially in an information age where technology constantly evolves (Shan et al., 2019). The theory helps management go into an area where it focuses more on developing knowledge and the capabilities of individual employees. The research of a company is enhanced through such a theory. Every company has to ensure that it is constantly working towards ensuring that it is giving its customers the right products with the right technology (Azeem et al., 2021). Also, a company has to be ahead of the competition. Knowledge is usually the main factor that helps a company remain ahead of the competition and gain a significant market share. Having innovative knowledge which helps an organization remain ahead of the competition usually means that an organization has invested in research, especially for manufacturing companies. Further, knowledge helps in advancing new methods of dealing with customers. Therefore, the knowledge-based view is critical in helping management understand the right approach to gaining knowledge.
How can the theories inform Starbucks Corp’s senior management in developing a competitive advantage?
The three theories can be critical in helping any organization become better and remain ahead of its competitors. One of the leading theories that the company can use is the market-based theory. The theory helps the company focus on the external environment. A company like Starbucks must be alive to the external environment to survive in the industry. The company has been one of the market leaders, but it can easily be replaced when it stops responding to the market’s needs. There is competition from companies such as Mcdonald’s, Costa Coffee, and Dunkin Donuts, which also have a significant market share (Arsawan et al., 2022). Therefore, Starbucks has to be constantly aware of what the competition is doing. Further, one has to use porter’s five forces model to understand the external environment. For example, an aspect such as entry to the market for any individual is easily assessed since one can easily set up coffee shops. One has to know the customers and the preferences that they prefer to use at different times. Customers are constantly changing, and Starbucks has to ensure that it is working towards ensuring they have the correct information on customers’ preferences. Therefore, the market-based view will be critical, especially for Starbucks Corps, which operates in a highly competitive environment.
The resource-based theory will be critical in helping Starbucks understand the resources it might have that can help it get a competitive advantage. The company is known worldwide, which can be a significant asset. Further, the company can easily enjoy economies of scale since it buys coffee in bulk. Such resources can be made into assets for the company and be made to help the company make products that are cheaper compared to the local market. Further, the company can quickly start developing technology that will help it better roast the coffee and save on other resources. The knowledge-based view is critical in helping the company get into research and understand how to serve customers better and minimize their costs while maximizing their profits. Knowledge is critical in helping an employee deal with different situations that might come up within the organization. Customer service is essential for service companies such as Starbucks, which means that employees must have the proper knowledge of how to treat customers and how to respond to their needs of the customers. Therefore, the three theories will be critical when added to the Starbuck strategic management goals development plan.
Firm’s strategy and strategic position
Starbucks corporation is a company that has brought in measures that are aimed at ensuring they develop a workforce that is happy and wants to work for the company. The employees are referred to as partners. Over sixty percent of Starbucks employees feel that they are being paid well. Seventy-nine percent of the employees are satisfied with their wages, while seventy-four percent are satisfied with their stocks in the company (López-Robles et al., 2019). Eighty percent of Starbucks employees are happy working for the company. Therefore, Starbucks can be categorized as a happy workplace, especially compared to other companies in the industry. Starbucks has established itself as one of the best places that one can work. In doing so, the company has ensured that it attracts the best employees in the industry. Further, the employees at Starbucks are well-motivated. The company’s nature is that it is a service industry where customers constantly interact with the company employees. Therefore, the company has ensured that it makes the employees happy. Happy employees result in happy clients. Happy clients ensure that the company has many return customers. In every company sector, most employees are dedicated to their work. The company’s resources have been targeted toward ensuring that the company has employees who are satisfied and happy to be working for the company. Focusing on people has ensured the company remains a market leader, especially in competitive markets.
Starbucks focuses on employees.
Starbucks corporation has significantly focused on improving its services by ensuring they have motivated and happy employees working for the company. Therefore, one of the areas that the company has focused on is the need to pay an employee based on their contribution to the company (Bertels & Desplaces, 2021). There are performance-related payments that form the bulk of the salary an employee gets. Such payments mean employees are motivated to work more hours since there will be more pay. The company has further emphasized the quality of service that the employees give. The employees have adequate training to understand how to talk to customers and engage them on different issues. Training employees is critical, especially at the restaurant level, since every restaurant might have different needs and cultures. Therefore, the company has ensured competent, motivated, and happy employees.
Starbucks has ensured that it brings equality among its employees. The company has ensured that employees are seen to be equal. The company has ensured they have the same uniform from the managers to the lowest level employees in a restaurant (López-Robles et al., 2019). In doing so, it becomes hard for any person to know who the manager is. Such a step reduces any bias that the customers might have. Employees also feel that the management is considering them since even managers are supposed to undertake some of the other employees’ duties. Another critical step in making employees feel equal in the organization is the calling of employees partners instead of workers or employees. Therefore, the company says that it is in partnership with the employees to help customers get the best possible experience. Such titles can motivate an employee to work better. The company has ensured that funds are available to make employees happy, and the employees usually reciprocate by ensuring they serve the customer well. The company has gotten loyal employees who have been critical in helping market the company. The employees help the company get return customers, who have been the bulk of the customers. Further, the company is constantly getting new customers due to the services offered by the employees. When the employees are well-motivated socially, financially, and mentally, they become better and more valuable to the company. Teamwork is developed within the organization, and every partner works to ensure they achieve shared success.
For employees to continue offering services happily, the company has to help them solve some of their worries. One of the main worries is usually welfare issues, especially an aspect such as healthcare (Bertels & Desplaces, 2021). The company has different levels of health coverage, which ensures the employees when working there. There are benefits such as medical coverage and dental and vision plans. There are also other levels, such as health care and dependent care reimbursement accounts. There is also life insurance for employees. In terms of an accident while working, the employee has been insured against disability and any other accident through the accident cover. The health of the employee is adequately considered in the company. Regarding financial welfare, the company has one of the best 401(k) retirement plans in America. There is a generous match for the employee’s contribution toward their retirement package (Li, 2022). Further, employees have an opportunity to buy discounted company stock which is reserved for employees. The stocks are a critical addition for the employees since it ensures that employees own the organization. Consequently, employees will be more motivated to work for the company since they will share in its profitability even when they leave. Further, the feeling of ownership motivates employees to get more customers for the company since they become shareholders and want to serve the customer just as they would do in their restaurant. Further, when employees have stocks, they are more motivated on how they can develop the company since they feel they have a right to develop a company they own.
There are perks that employees of Starbucks are entitled to. The perks are designed to ensure that the employees are motivated and can access the services that they offer at a discounted price (Musonera, 2021). Employees are entitled to the main perk is a coffee and tea mark out. The company has indicated that employees receive a free pound of coffee or box of tea per week. Therefore, the employee can become one of the primary consumers of the products. When an employee is consuming the products they are selling for free, customers are encouraged to buy them. There are in-store discounts for employees when they purchase beverages, merchandise, and food. The employee can make purchases in another Starbucks, not necessarily where they work. There is a thirty percent discount for employees when they purchase products from Starbucks (Gao, Zhao, & Chen, 2021). Such a discount means that an individual will always prefer going to Starbucks as opposed to any other competitor. The employees are, therefore, considered even when they are not at work. The company has also ensured that employees get access to the Spotify premium subscription, which enables them to listen to music, create a radio station, and listen to the Starbucks in-store playlist. Therefore, such minor details go a long way in ensuring employees are happy and contented. When the employees are happy, the customers become happier since the execution of services is enhanced.
Starbucks and the customer
Another critical group of people that Starbucks has focused on is the customers. The baristas have been well-trained to give each customer a personalized experience (Nemmaniwar, 2022). For example, when one walks in, they are asked their name and the barista is always smiling. The company has provided free Wi-Fi and customers have a place to sit without being bothered even before they make any orders. The free Wi-Fi usually invites customers to stay longer. Starbucks has coined the phrase “third place” about their restaurants, meaning it can be considered a place between home and work. When needs a break from both home and work, they can come to Starbucks and have coffee. Further, the restaurants have ensured that they have the right music that will be appealing to the general population within a locality. The music played helps in making the customers feel at home. The familiar music makes it easy for every customer to relate to the environment (Johnson, et al., 2020). Such steps are taken to ensure that every customer gets personalized services. Further, the customer experience is significantly enhanced by such attention to detail. The attention to detail is replicated in all the company’s restaurants, which means that customers in different parts of the world can get personalized experiences. Therefore, the customer experience at Starbucks can be considered world-class.
Starbucks believes that it should have control over the customer experience that it gives. To ensure that it is consistent in the delivery of services, the company has adopted a model which does not include franchising (Fuertes et al., 2020). There are more than thirty-three thousand restaurants that the company runs without any franchise. Therefore, the company has ensured that the services offered are the same. The treatment of customers in one Starbuck restaurant in America is the same as in Europe. Such uniformity has ensured that the company has an unparalleled execution of the command (Grant, 2021). The feeling in one Starbucks is the same in another continent. Therefore, the company has ensured loyal customers can get into a Starbucks restaurant and get the same services anywhere in the world. Such a business strategy has ensured that the company can control the customer since they can control their experiences. The company has ensured personalized services are also offered online (Lombardi, Chidiac, & Record, 2021). Customers can get recommendations based on their previous experiences online. Therefore, the company has ensured that customers do not constantly have to repeat the orders that they made previously. The algorithm has been set in such a way that it ensures one gets the recommendations they prefer and makes ordering easier. The company has ensured that in every place where it offers services, it gives personalized services ad ensures customers are happy.
In conclusion, the Starbucks brand has ensured that it focuses on the people rather than service provision. The company has ensured that it addresses the needs of the people more than it addresses the issues pertaining to the selling of coffee. However, the company has also focused on providing quality products. The company has understood that for the customer to be happy, there is a process that has to be undertaken by different stakeholders. One of the main stakeholders is usually the employees, especially in a service industry like the one Starbucks is operating in. Therefore, the company has ensured that it utilizes all its resources and gained a tremendous competitive advantage, ensuring it remains a market leader in different markets.
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