Starbucks Coffee Company’s generic strategy (based on Michael Porter’s model) is responsible for its emphasis on specialty coffee products. On the other hand, a combination of intensive growth strategies influences the approach that Starbucks uses for growth and expansion. These intensive strategies for growth are also directly related to the company’s generic strategy. Intensive growth strategies must be aligned with the generic strategy to maximize firm performance and potential success. In Starbucks Coffee’s case, such alignment is observable in the firm’s continuing emphasis on penetrating markets with its specialty products, while offering these products to customers from various segments. Thus, Starbucks successfully aligns and follows its generic strategy and intensive growth strategies.
Starbucks Coffee’s generic strategy, based on Porter’s model, allows the firm to compete based on specialty products. Starbucks also uses its intensive growth strategies to support expansion, although its focus is on market penetration.
Starbucks Coffee’s Generic Strategy (Porter’s Model)
Starbucks Coffee uses the broad differentiation generic strategy. In this generic strategy, the goal is to make the company different from other competitors. It is such difference that makes Starbucks stand out. The company’s emphasis on specialty coffee easily differentiates Starbucks cafés from many other establishments that offer coffee. However, the application of the broad differentiation generic strategy also extends to other areas of the business. For instance, Starbucks uses its sustainable and responsible sourcing policy to differentiate its products from competitors. This generic strategy is also manifested in the company’s culture. While competitors like McDonald’s and Dunkin Donuts emphasize low cost, Starbucks Coffee emphasizes a warm friendly ambiance that people enjoy.
An implication of the broad differentiation generic strategy is that Starbucks Coffee must continue innovating to ensure differentiation in the long term. This generic strategy could lose its strength when competitors also find ways to stand out. To address this issue, Starbucks keeps innovating its product mix and supply chain. In applying the broad differentiation generic strategy, Starbucks focuses on specialty ingredients and products, such as baked goods that do not have high-fructose corn syrup. Starbucks also innovates its supply chain to satisfy its generic strategy through a continuing search for the most sustainable and finest ingredients. Thus, based on this generic strategy, Starbucks Coffee’s strategic objective is to innovate products and its supply chain.
Starbucks Coffee’s Intensive Strategies (Intensive Growth Strategies)
Market Penetration. Starbucks Coffee’s main intensive growth strategy is market penetration. This intensive strategy supports the firm’s growth by maximizing revenues from existing markets. Starbucks already has presence in 65 countries around the world. To maximize revenues and growth in these current markets, the company applies the market penetration intensive strategy by opening more company-owned stores. Starbucks also applies this intensive strategy for growth through licensing for merchandise and franchising in some countries, such as the Dominican Republic.
Market Development. Starbucks Coffee uses market development as its secondary intensive growth strategy. This intensive strategy supports the company’s growth by generating revenues in new markets or market segments. For example, Starbucks Coffee plans to enter more countries. These countries are mostly in Africa and the Middle East. In this intensive strategy, Starbucks grows by expanding its global reach.
Product Development. Starbucks Coffee also uses product development as a secondary intensive growth strategy. This intensive strategy involves creating new products to gain more revenues. Starbucks continues innovating its product mix. For example, after the firm acquired The Coffee Connection, it started offering Frappuccino at Starbucks cafés. The company also introduced sodas in 2014. Through such new products, Starbucks grows through this intensive strategy.
Strategic Analysis and Recommendation for Starbucks Coffee
Starbucks Coffee’s broad differentiation generic strategy ensures that the firm maintains competitive advantage through specialty products and ingredients. This generic strategy translates to various policies and programs to keep the firm differentiated. A challenge in applying this generic strategy is that Starbucks must always innovate. Starbucks needs to keep improving and innovating ahead of competitors to maintain its growth based on this generic strategy.
Starbucks Coffee’s intensive growth strategies are aligned to the firm’s generic strategy. Because it stands out based on differentiation, Starbucks can penetrate markets and compete with other firms in these markets. However, the business lacks significant presence in Africa and the Middle East. Thus, Starbucks can use its intensive growth strategy of market development to grow in these regions. Also, the intensive growth strategy of product development can be used to offer products that suit the distinct cultural preferences of consumers in Africa and the Middle East.
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