Sustained Competitive Advantage of Starbucks

Updated on October 30, 2013
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Starbucks Inc.

Starbucks needs no formal introduction as it is the largest coffee company in the whole world. When you think of premium coffee, the brand "Starbucks" comes to mind inevitably. It was first founded in 1971 by 3 aspiring entrepreneurs and coffee lovers and thousands of stores has sprung up across the world since then.

In April 2010, Schultz announced that Starbucks has seen considerable progress in returning to profitability and growth. Net revenues increased 8.6% in the second quarter of 2010 compared to the same quarter in 2009. What has contributed to Starbucks's sustained competitive advantage and success over the past few decades?

A Connected Customer Experience

Starbucks seeks to provide a connected customer experience to build and maintain a long term relationship. More than just offering fine coffee, the coffee giant provides the “Starbucks Experience” which makes customers feel at home, forming a strong emotional attachment. Starbucks stores are designed with great ambiance in mind in accessible locations. Schultz believes that employees are the key to building a positive customer experience. A host of benefits such as health care, stock option plans, stock purchase plans, training and recognition has been implemented. Starbucks was ranked 7th in Fortune’s annual list of “100 Best Companies to Work For” in 2008.

Starbucks Rewards Card

Starbucks also introduced the Starbucks Rewards Card that provides a host of benefits. This entices customers returning to make purchases, building loyalty. Starbucks also launched the Starbucks Customer Experience Survey which allowed customers to share their thoughts about their experience at Starbucks. This is evident that Starbucks is committed to establishing long term relationships with the customer.

Mastrena Espresso Machine

Source

The Finest Coffee Beans

Starbucks’ uses the finest beans its coffee. Company personnel often travel frequently in search of suppliers that meet its standards. In addition, Starbucks also purchased Certified Organic coffee and Fair Trade certified coffee. In 2009, 14 million pounds of certified organic coffee was purchased. Coffee is also brewed with Mastrena, a sophisticated Swiss-made espresso machine. When you visit a Starbucks cafe overseas, you will be greeted with that familiar taste no matter where you are.

Porter's Generic Strategies

According to Michael Porter, three general types of strategies can be used to achieve a sustained competitive advantage. They are cost leadership, differentiation and focus.

Porter describes the strategy of differentiation as the delivery of quality products or services that are perceived to be unique and valued by consumers. Product differentiation is the core of Starbuck’s strategy to gain a sustained competitive advantage. Starbucks offers such differentiation through an excellent customer experience and quality coffee The “Starbucks Experience” is achieved through its well-designed stores with good ambiance and well trained staff. According to a study conducted by Daily Mail, Starbucks stores provided a more welcoming décor with friendlier baristas compared to independent coffee houses.

The differentiation strategy of being a premium and unique coffee drinking provider has allowed Starbucks to achieve a sustained competitive advantage.

Do you think Starbucks' competitive advantage will last?

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      • informationshelte profile image

        informationshelte 

        4 years ago

        The unprecedented global success of Starbucks can only compared with the expansion of McDonald's and its domination of the fast food market. It shows that the business of serving coffee and other related beverages is a die-hard business even in times of economic recession. On top of that, the profit margin in the business of serving coffee is quite high, so it's no surprise that Starbucks remained profitable during 2009 and 2010.

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