Starbucks sources of competitive Advantage

Sources of Competitive Advantage for Starbucks Coffee

Introduction:-

Starbucks  (SBUX) was founded in 1985. It is a famous coffee brand which operates in 98 countries. The company roasts, markets and sells premium coffee. It operates through both physical stores and online channels. Number of Starbucks stores is highest in the Americas. In USA alone, it has 14,000 retail stores. The company is known worldwide for its premium quality and focus on ethics. It sources its raw materials ethically from suppliers in several countries. The coffee brand has managed a large supply chain.  Starbucks is also known for its focus on  customer service. The company has seen a lot of success under the leadership of Howard Schultz.  It has managed a balanced mix of company owned and licensed retail stores. Number of Starbucks stores across Asia has grown in recent years. China is the company’s second largest market. Starbucks has several important strengths. The company has built some strong sources of competitive advantage. Its global network, premium quality and strong brand image are its major strengths. Financial performance of the company is strong. In 2018, its revenue rose to $24.7 Billions from $22.4 Billion last year. Take a look at the main strengths which are a source of competitive advantage for the company.

Brand Equity:

Starbucks has got a strong brand image which is also a source of sustainable competitive advantage for the brand. It is famous all over the world as an ethical and accountable premium coffee brand. Brand image has played an important role in the profitable growth of Starbucks. Its strong image is also a result of its focus on quality and customer service. The company sources ethically only from the most responsible coffee farmers. It has also managed a large and strong supply chain that it can source quality coffee from. It follows ethical practices in most areas of business including HRM, customer service and supply chain management.  High level customer satisfaction is a sign of strong brand equity. 

Pricing strategy:

Starbucks (??) is a premium coffee brand. Its pricing strategy is also a key strength. It targets the higher end customers. However, most customers are willing to pay the premium prices it charges because of its focus on quality and customer service. There is competition in the industry. However, Starbucks has a large customer base. Its premium quality and variety give it higher bargaining power and it can charge higher prices.

Large product range:

A large product range is also a key strength of Starbucks. It keeps experimenting with flavours to add to its range of coffee products . Apart from coffee, it also sells tea ? and snacks. The large range of flavours brings variety to the table. Every customer can have a fulfilling experience and can find his choice from the large range Starbucks offers. Higher variety has led to higher popularity. This is a distinct feature of Starbucks. A large and differentiated product range is also a source of strong competitive advantage. 

Customer loyalty:

Starbucks also enjoys very high level of customer loyalty. It is a result of its focus on quality and customer service. It has managed every aspect of the Starbucks experience to offer each customer a fulfilling experience. Appetizing coffee choices and a welcoming environment have made it the favourite of millions. Customers keep coming back because the experience is always fresh. High level customer loyalty means higher profitability and revenue.

Customer service:

Customer service is a source of competitive advantage. Most brands came to recognize it late. However, Starbucks had made it  a part of its culture long ago. Right since its foundation, the company has retained exclusive focus on customer service. It is also a driver of customer loyalty. Starbucks does not invest in marketing. In the recent years, it has started spending on advertising. However, its marketing budget is limited. It focuses instead on quality in other aspects of business including products, customer service and supply chain.

HR Management:

Human resources are among the most critical assets of a company. Starbucks invests in them for highest employee satisfaction. It brings performance and productivity. As of 2018, Starbucks employed 291000 people of which 191,000 were in US??. It trains them and provides opportunities of career growth. The focus is on keeping them happy and satisfied so that they can offer the best service to customers. The level of employee engagement at Starbucks is high. Good salaries and a creative work environment help at maximizing employee satisfaction. HR management has become key to faster growth in the 21st century. Starbucks is recognized as an ethical employer. Its HR management and employee engagement strategies are successful at producing the best results. Every brand seeks the best employees. It is because talented employees can help create new sources of competitive advantage.

Leadership:

Leadership is considered an important strength for any brand. From Microsoft to Apple, Google and all the most successful brands in the 21st century, each is successful because of its leadership. Howard Schultz  is considered a visionary leader. His focus is on ethics and creativity. He firmly believes in ethics. His able and smart leadership has helped the company achieve several major milestones. Today, it is a leading global brand of coffee. Credit of the brand’s success goes to the visionary leadership of Schultz .

Supply chain management:

Supply chain management is also a key strength of Starbucks. The brand is focused on quality. It sources only good quality coffee beans. The company selects its farmers carefully. Only those farmers who follow the best practices are selected as suppliers. The coffee brand is also extremely careful about the beans it sources. Arabica beans are found at higher altitudes. Starbucks has managed good relationships with its suppliers. It has created some excellent rewards for its suppliers. There are also some rules related to product quality and labor the suppliers should follow. Supply chain management has helped it manage the costs of raw materials. A strong supply chain is a central support for its business model. To grow its relationships with its suppliers, the company is investing in special training and education programs. A strong supply chain is also a source of sustainable competitive advantage for Starbucks.

 

Global Network:

The large and global store network of Starbucks is also a critical competitive strength. There are 29,324  Starbucks stores open worldwide. This is the largest network of all coffee brands. The highest number of these stores are in US. There are 14,606 Starbucks retail stores in US and 17,454 in the entire Americas. The company has also managed a balanced mix of company owned and licensed retail stores. 52% of the total are company owned and 48% licensed. The company has smartly managed its global presence. After US, China is the largest market of Starbucks. There are 3,521 Starbucks stores in China. Its large retail network is also a source of competitive advantage. Growth of its international network has also strengthened the brand’s advantage over rivals.

Sources:-

Starbucks Annual report 2018