Response to Lucas Fumagalli : Starbucks Dominance
COLLAPSE
Could Starbucks successfully expand beyond the coffee shop business in a meaningful way without destroying its core business?
Starbucks could expand beyond the coffee shop business without destroying its core business. Despite its premium pricing, the company has successfully sold branded instant coffee. They have succeeded in backward vertical integration, which has been vital in achieving market share. Therefore, it appears as though they would be able to control the coffee shop business and take a piece of the coffee bean production market.
Could the company create value through its diversification strategy?
Starbucks has proven its attempt at diversification through its ventures into other markets, such as teas, pastries, and pressed juices. However, while these markets have been penetrable, they have proven more challenging and volatile to control.
The primary reason is that the customer expectations of a fast-paced Starbucks system and the health and wellness beverage differ. While the threat of failure in this department is possible, the company has still created value in its diversification by expanding its market and appealing to more customers. Suddenly, Starbucks has become more than just a business for the average coffee drinker, but also for anyone interested in a tasty beverage.
Would McDonald’s and Dunkin’ Donuts eat into Starbucks’ business enough to slow the company’s growth rate?
While Starbucks was the leader in the US for coffee and snack products, McDonald’s and Dunkin Donuts have crept their way into the market. McDonald’s has proven value in their affordable and convenient options, while Dunkin Donuts has attracted customers by their long-time market control of donuts.
While McDonald’s and Dunkin Donuts will still be strong competitors in the market, Starbucks will not be affected by their competition due to the strong brand loyalty established through premium positioning, corporate responsibility, and their robust and dependable rewards program. Starbuck has appealed to both the customer and the employee as the company offers great value to part-time employees, offering significant wages and benefits (Lim, 2014).
Jay B. Barney and William S. Hesterly. (2019). Strategic Management and Competitive Advantage, Concepts and Cases, 6th Edition. Pearson Education, Inc., publishing as Prentice Hall. ISBN 978-0-13-474114-7.
Lim, P. (2014, July 25). Dunkin’;, Mickey D’s, or Starbucks? The Surprising Winner of the Coffee War. Money. https://money.com/dunkin-donuts-mcdonalds-starbucks-coffee-wars/