SaMa

Starbucks mostly wants to own its own stores for best experience and it has done that successfully in US. Although drinking coffee in bar was not famous when Starbucks was started in 1970's. Howard Schultz inspired from this idea in Italy, started serving brewed coffee in US. He was an American Businessman and understood the economics, work, and local cultures of US, so was likely aware of the risks and opportunities of the time. He made Starbucks a success story in US and now we can find Starbucks stores in almost all the major and even small US cities.  But replicating same success would not that be easy. It would need lot of capital, cultural experiences, macro and micro economic indicators, and specifically language and accent. Some of these things can be replicated using the local hires, but creating a success at the level Starbucks would want to would not be easy without local partnerships and alliances. Starbucks heavily relied on license model for half of its stores and als...

Starbucks acquired many companies over the years. Let’s look at these acquisitions strategies employed by Starbucks.  Teavana • Type of business: Tea and Accessories • Acquisition price: $620 million • Date purchased: December 31, 2012 Starbucks acquired Teavana as Product Extension Merger and started offering loose leaf tea and tea related products in its stores and online. Although this acquisition gave Starbucks 379 new locations, but Starbucks closed them all instead.  La Boulange • Type of business: Bakery Chain • Acquisition price: Reported $100 million • Date purchased: June 4, 2012 This is mix of Vertical Integration and Product Extension acquisition. Since Starbucks started selling bakery products in its stores as Product Diversification strategy, it was sourcing these bakery products from La Boulange. Later Starbucks decided to acquire La Boulange to vertically integrate its operations and kept 400 locations came with this acquisition. Later Starbucks dec...

Starbucks has strategic alliances with many companies to expand into different markets, segments, and improve brand value. Most of its alliances are Nonequity Alliances. It has alliances with consumer product companies such as  Kraft Food, PepsiCo, and Nestle. They help Starbucks in different packaged and take-home products. From these alliances Starbucks gets the Economies of Scale, which would be harder to achieve if it would be doing these operations in its own. Apart from that, Starbucks has alliances with Target Stores, United Airlines, and Barnes & Noble for offering Starbucks brand coffee in the stores and on airplane. This helps Starbucks to be perceived as high-end brand. It has alliances with under the Seattle Coffee Co. with Subway, Burger King, and AMC to offer low cost coffee and compete with McDonalds & Dunkin without affecting the its main top of line expensive Starbucks brand. Starbucks has some international alliances to capture the markets such as it has a...

  Diversification add value to organization and investors but implementing diversification strategies require communication between managers of different functions, and with investors. An organization might pursue a strategy to implement in-house development of functions to achieve Economies of Scale only if that same resource is difficult to copy by outside investors and is cheaper to acquire. In case an organization decides to go for the production itself, it would need financial and human resources to achieve the goals. Before any investor would invest, they might want to make sure that company and its managers are working towards maximizing shareholder value. Since investors does not interfere with organizations day-to-day activities, they some sort of tools and process for keep getting updates on progress of operations. Monitoring and Bonding are such two tools or processes. Monitoring helps investors keep an eye on management decisions and progress, whereas Bondings a...

Starbucks uses "related diversification" strategy as it offers food items which goes along well with coffee and other beverages. Even within beverages Starbucks has diversified its menu in hot and cold category, coffee and non-coffee drinks, healthy fruit-based drinks and calories heavy crème-based drinks and included tea and sparkling water options to its menu. Starbucks also offers food options for breakfast, lunch, bakery, snacks and sweets, and yogurt and custards. These food items compliment or supplement the customer experience. For e.g. my favorite is beagle with blank-coffee and my wife loves chocolate cake with Cappuccino. Now imagine if Starbucks would just be selling coffee, then it would be just any other coffee place without any clear competitive advantage. Food business is now significant part (20%) of the Starbucks.  Starbucks also realized the Economies of Scope. It has valuable, rare, and costly-to-imitate resources and capabilities and used these capabilitie...