A Resource Based Analysis of Starbucks Essay Example For Students

A Resource Based Analysis of Starbucks Essay A Resource Based Analysis of Starbucks The current economic situation has required that organizations rethink the way that they do business. With people losing jobs and salaries being cut, people are spending money on essentials and opting less and less to spend on the extras. Groceries, rent, housing, transportation, education are of value while grooming, meals out, movies and cups of coffee or considered frivolous expenses. One organization that banks on Americans need to feed their self focused desires is Starbucks Coffee. Starbucks. Starbuck’s leadership, well aware of the effect that the crisis could have on the company, outlined a plan that included â€Å"increased store and operating efficiencies, additional cost reductions and long-term growth† (Starbucks, 2010). As we look well at the assets, skills, capabilities, and intangibles of the company we will develop a better understanding of whether or not their current management and planning approaches are indeed strategic. Starbucks aims to â€Å"inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time†. The company’s strategy seems to have this in mind as they move forward in the spirit of innovation and community responsibility. This paper will attempt to look at the organization from a resource based point of view in an attempt to determine whether the practices have served to profit their company through these difficult economic times. In order to understand the strategies of the company it is important to understand its history. According to the Starbucks website, the first Starbucks store opened in 1971 and was located in Seattle’s Pike Place Market. Starbucks stores offered a choice of regular or decaffeinated coffee beverages, a special coffee of the day, and a broad selection of Italian-style espresso drinks. In addition, customers could choose from a wide selection of fresh-roasted whole-bean coffees (which could be ground on the premises and carried home in unique containers), a selection of fresh pastries and other food items, sodas, juices, teas, and coffee-related hardware and equipment. During those early days the companys retail sales mix was roughly 61 percent coffee beverages, 15 percent whole-bean coffees, 16 percent food items, and 8 percent coffee-related products and equipment. The product mix in each store varied, depending on the size and location of each outlet. Larger stores carried a greater variety of whole coffee beans, gourmet food items, teas, coffee mugs, coffee grinders, coffee-making equipment, filters, storage containers, and other accessories. Smaller stores and kiosks typically sold a full line of coffee beverages, a limited selection of whole-bean coffees, and a few hardware items. In order for Starbucks leadership to discover and devise a plan for successful change that would help them to weather the storm of a financial downturn, it was imperative to identify with what has significance to stakeholders, both internal and external. According to than article from PR Newswire, â€Å"creating organizations that are invigorating and meaningful for employees, customers, and other stakeholders offers the only viable formula for long-term business success in the 21stcentury† (â€Å"Today’s Most Successful†, 2007). Starbucks understood the need to become a responsive organization, meaning that they understood the need to understand the needs of stakeholders. Starbucks’ moved to open smaller stores and kiosks and their move to offer their products at other retailers, was evidence that a feedback system was in place. Starbucks engaged in Total Quality Management which is defined as â€Å"an integrative approach to management that supports the attainment of customer satisfaction through a wide variety of tools and techniques that result in high-quality goods and services† (Organizational Change, 2007, p. 10). The expectations of stakeholders became a part of Starbucks’ core belief system and as a result the needs of their stakeholders became interwoven with the goals of the company. A resource based view of the company requires that we start by looking at what the core competencies of the company are. The Pearce ; Robinson text defines core competence as â€Å"a capability or skill that a firm emphasizes and excels in doing while in pursuit of its overall mission† (p. 171). At the core of what makes Starbucks a leader in the coffee world is their uncanny knack in creating an experience and not just a great cup of coffee. It is not merely coffee that sets Starbucks apart from their competition, but it is the experience. Starbucks has cornered the market on three key strategies. The first is they have perfected the ability to give consumers a glimpse into foreign cultures by offering coffees from countries such as Kenya, Ethiopia, Columbia, Senegal, and Peru, Starbucks offers the consumer a unique chance to experience places that they may never venture to visit. Starbucks’ Black Apron Exclusive (BAE) blends feature â€Å"exceptional gourmet coffees sourced from the best coffee growing regions of the world† (Starbucks, 2010). Secondly, consumers get a feeling that they are connoisseurs of coffee and not merely customers. By having coffee roasted on site by baristas the consumer feels that he is more knowledgeable about coffee than his non-Starbucks drinking counterpart. In a nation where everyone is striving to outdo the next guy, this is a strategy that works. Lastly, Starbucks has been unswerving in providing a variety of coffee drinks. The Dulce de Leche and Dulce de Leche Frappuccino are perfect examples of this. Starbucks launches a pair of confections called Dulce de Leche Latte and Dulce de Leche Frappuccino. A 16-oz. Grande latte has a robust 440 calories (about the same as two packages of M;M’s) and costs about $4. 50 in New York City—or about three times as much as McDonald’s most expensive premium coffee. Starbucks Corp. describes its latest concoctions, which took 18 months to perfect, this way: â€Å"Topped with whipped cream and a dusting of toffee sprinkles, Starbucks’ version of this traditional delicacy is a luxurious tasty treat. † (app. -2) Starbucks has consistently given consumers something new and exciting to look forward to in the world of coffee. These three core competencies are what have become the basis for long term competitive advantage for the company. These three have become the Starbucks distinctives. The next step is to look at Starbucks tangible assets, intangible assets and organizational capabilities (p. 171). The leadership o f Starbucks has been wise in their decision to travel the world to find exclusive coffee beans and then purchase exclusive rights to many of those crops. Movie Character Analysis - Central Station EssayAccording to a case study on Starbucks by Earnings figures from the Hoover’s Company website show that even though Starbucks suffered losses during the economic crisis, their net earnings are still within an acceptable range. Income Statement (in thousands)| | 2000| 1999| 1998| 1997| 1996| Net Revenue | $2,177,614| $1,686,828| $1,308,702| $975,389| $697,872| Net Earnings| $94,564| $101,692| $68,372| $55,211| $42,128| Compiled with information from the Hoover Company Site It seems clear that Starbuck’s strategy to provide new and innovative products and to act as a responsible part of the global community have been instrumental in the company being able to weather the current financial storm. Their success is especially of note because of the company’s strict policy against television commercials and their limited billboard presence. Starbucks coffee is expensive, comparatively speaking. The Starbucks enthusiast, however, is willing to pay the cost for a better quality more exotic bean. Starbucks steers clear of the more popular advertising gimmicks like television ads and coupons. The Starbucks enthusiast has served the company well because of their loyalty and their own Starbucks evangelism. Starbucks has achieved unconventional success in an unconventional way. They stand by their high quality coffee, they offer great customer service and they take the risk of expanding into new markets when the opportunity presents itself. Their reputation is firm and because they will not succumb to cheaper beans or less effective roasting methods their competitors are left to compete with each other. Howard Schultz, Starbucks chairman, started the year 2009 by reminding internal stakeholders of his commitment to upholding the company’s core values and principles. His speech at their annual shareholders meeting clearly expressed his desire to maintain customer loyalty through continued innovation and rewards, improve and strive for excellence in their operations, and to aggressively cut costs. â€Å"The entire retail sector is operating in a very tough economic environment. While Starbucks has not been immune to the decline in consumer confidence, we are fortunate to have a world-class brand and a loyal customer base,† said Schultz. In this environment it is critical to put our feet in the shoes of our customers. † Schultz commented further, â€Å"We generate strong cash flow, have solid liquidity and are executing rigorous cost-containment initiatives to improve our bottom line. Starbucks will continue to take actions to improve our U. S. business and take ad vantage of targeted growth opportunities in high potential markets. Integral to this are our efforts to elevate the Starbucks Experience and staying true to our core values. This focus will help us emerge stronger, more efficient and better able to deliver value to our shareholders over the long term† (Starbucks, 2010). It is an indisputable fact that Starbucks is everywhere whether in the form of a local coffee shop or on the shelves of some retailer. Even when people are moving into a new area of this country they do not neglect to look for the little green circle that signifies that their favorite neighbor is around. Starbuck’s remains â€Å"the worlds #1 specialty coffee retailer†, having more than 16,000 coffee shops in 40 countries. Starbucks is the owner of Seattles Best Coffee and Torrefazione Italia coffee brands. The Starbucks name is marketed in grocery stores across the nation and the name Starbucks brands many food and beverage products. â€Å"What was once a simple chain of coffeehouses has become a force of nature in the retail business† (Starbucks Corporation, 2010). Starbucks even offers ice cream – made by Nestle’s Dryers. Though slowed by the economic downturn, Starbucks still excels in the industry. When Shultz returned to the helm of Starbucks in 2008 he continued his move toward continuing innovation and a larger global market. To state an old cliche – â€Å"wake up and smell the coffee†, Starbucks is here to stay. References Adamy, J. (2008, December 5). Corporate News: Starbucks moves to cut costs, retain customers. The Wall Street Journal, p. B3. Cage, M. (2010, January 15). Why Starbucks wins ; what local businesses can learn from them . Retrieved from http://www. entrepreneurslife. com/thoughts/entry/why-starbucks-wins-what-local-businesses-can-learn-from-them/ James, A. (2008, September 30). Starbucks newest item is hot, chocolaty. Seattle Post Intelligencer, p. F1. KASSABIAN, A. (2009, June/July). Would you like some world music with your latte? Starbucks, Putumayo, and distributed tourism. Cambridge Journals, 1(2), 209-223 . Lockyer, S. (2009, March). Starbucks’ instant coffee launch invites skepticism from analysts. Nation’s Restaurant News, pp. 9-10. from ABI/INFORM Global. (Document ID: 1663851811) Pearce, J. , ; Robinson, R. (2009). 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