Starbucks Differentiation Strategy

 

Strategic position is a position taken by an organization to gain competitive advantages at present and in the future, which includes the devising of the right goals of the organization, developing optimal strategies based on the goals and the present environment, and putting these strategies into practice to realize the goals (Porter, 2001). According to Porter’s generic strategy, an organization’s strategic position is given by its choice of competitive advantage, cost leadership or differentiation, and its choice of competitive scope, narrow or broad (Porter, 1985).

According to this generic strategy model, Starbucks obviously positions itself in differentiation strategy in UK. As a coffee maker, Starbucks differ itself from others through the quality of its products and its consistently superior consumer experience. Starbucks has strong research and development capabilities to ensure high level of product quality. Moreover it focuses on product innovation. For example, Starbucks has differentiated its product lines to include teas, sodas, ice creams, foods, etc in UK. As to its targeted market, Starbucks has a very broad scope.

 

Starbucks, the biggest coffee retailer in the world, grows from a small, regional business into the undisputable leader in the specialty coffee industry. It arrives in the UK in 1998 with the acquisition of Seattle Coffee Company in the UK as its starting point. As soon as it expanded, many native coffee stores were driven out of business and other big rivals were forced to quicken their growth to beat this new invader. From then on, Starbucks remained the market leader leaving others far behind until recently some coffee giants such as Costa are catching up.

 

Organizations can take four different strategic positions. Cost leadership refers to being a low cost producer for a given level of quality by targeting a broad market. Differentiation refers to the offering of unique attributes that are valued by customers. It is also a strategy targeting broad market. Cost focus means adopting cost leadership strategy in a narrow target and differentiation focus means adopting differentiation strategy in a narrow target. [pic] Source: Porter, 1985, Competitive Advantage.

 

When Starbucks first appeared in UK, people thought it cool because of the unique decoration, the special environment, and the warm welcomes. Second, it is widely known that the coffees in Starbuck are little pricey. In UK, the price ranges from 1.5 to 3.50, while the average coffee price is 4. 3 (Euro cheapo, 2009). From the above two approaches, the specific strategic position Starbucks takes can described as differentiation in high quality and innovative products and unique service but with relatively high prices in large market scope.

It’s good to know as an example of flexibility, that On March 20, 2020, due to the COVID-19 pandemic, Starbucks decided to close all the cafe-only stores in the United States for two weeks. During that time, only drive-thru- and delivery-only were to function. According to the company representatives, all workers were to be paid for the next 30 days whether they went to work or stayed home.