Kassie Miller
10/15/2014
Starbucks vs Competitors
Organizational environment is defined as all elements that exist outside the boundary of the organization and have the potential to affect all or part of the organization (Daft, 2009). One organization that has faced environmental factors which required them to change their current organizational strategy, is the Starbucks Corporation. Starbucks Corporation is considered the top provider of premier coffee products in the world (St. Johns, 2007). Their coffee buyers travel to coffee farms in Latin America, Africa and Asia to select the highest quality Arabica beans (Starbucks Coffee Company, 2011).
Starbucks have been struggling amidst a faltering economy, its own rapid growth (international expansion and growing presence in other countries) and increased competition from rivals, both inside and outside, of the coffee market sector. For many years, Starbucks’ most challenging competition came from other coffee house companies such as Caribou Coffee and Panera Bread and smaller single proprietary establishments. However, recently fast food chains have latched on to the consumer trend in premium coffee products, and are aiming to gain market share in the market for coffee and coffee-products such as espresso and cappuccino, and with substantial financial, marketing and management resources, they could be very successful (Dockett, 2007). The two main rivals to Starbucks right now are undoubtedly McDonald’s and Dunkin’ Donuts. McDonald’s is currently implementing cappuccino and espresso machines in its stores. McDonald’s also offers a new Premium Roast coffee, which it claims, is made from 100% Arabica coffee beans, a high-premium blend that is also used in many of Starbucks’ products. McDonald’s has also increased its customer service by having its employees add the cream and sugar to the coffee for the customer. This additional service is an attempt to equalize itself to the personal service provided by Starbucks (Dockett, 2008). Dunkin’ Donuts is trying to recreate the meaning of coffee to the consumer as being a part of their day. With its advertising campaign labeled “America Runs on Dunkin,” Dunkin’ Donuts is selling the idea that coffee is fuel, rather than a “lifestyle,” as it is marketed to be by Starbucks. It now offers a variety of coffee blends, chai tea, and espresso products (Dockett, 2008). The current impact of the industry rivalry force created by the competition between specialty coffee retailers is very high, especially as contrasted to what it was at the time of Starbucks’ rapid expansion twenty years ago. The growth of the industry has slowed while the number of competitors within the industry has increased (Starbucks Strategic Analysis, 2008). Both of these factors have caused this change from weak to strong industry competitiveness. The economies of scale within the specialty coffee industry have increased as the size of the top players has increased (Larson, 2008). With all of the competition in the coffee industry, Starbucks sets itself apart from all other coffee manufacturers through their ability to brand their products through product differentiation. This is Starbucks single greatest differentiation strength and the main reason why they have been able to maintain a competitive advantage over the coffee industry (Arola, 2008). Their product line includes brewed coffees, Italian-style espresso beverages, cold blended beverages, various food items, and a selection of premium teas. In recent years, the company has expanded its reach into products such as coffee-related accessories and equipment, an entire line of compact discs. They also produce and sell ready-to-drink beverages such as bottled Frappuccino drinks and Starbucks Double shot espresso drinks, along with a line of ice cream flavors. Starbucks have built a very strong brand name, which assist Starbucks
