Discuss and conclude the most likely specific generic competitive strategy that Starbucks is employing.

Question

Discuss and conclude the most likely specific generic competitive strategy that Starbucks is employing.

Answer

The generic competitive strategies available for firms were conceptualised by Porter (Rugman, 1996). In Porter’s model, the strategies available for firms are dependent on firms’ strategic target and on the source of their strategic advantage. The strategic target could either be industrywide or a particular segment, whereas the strategic advantage could be derived from the firm’s cost advantage (e.g. lower cost of production, distribution… etc.) or from a unique value provided to customers. Starbucks positions itself as a seller of premium coffee and other beverages, which is evidently incompatible with the cost leadership strategy (Geereddy, 2014). If one considers Starbucks’ prices and compare them to that of other coffee houses, it is apparent that Starbucks beverages are sold at a much higher price. This could lead to the interim conclusion that Starbucks targets only those customers who are willing to pay a premium for high-quality coffee and other beverages. In order to make sure that customers are willing to pay higher prices, it is a must that the organisation provides extra features to warrant the price premium (Hill and Jones, 2011). Starbucks also sells an experience with the products that is the key factor that sets the organisation apart from other coffee companies. In sum, the most likely generic competitive strategy Starbucks employ is the broad differentiation strategy. This is because Starbucks targets a wide range of customer segments, however, to be able to charge higher prices and differentiate itself from other coffee houses, Starbucks offers customers a unique coffee house and product experience.

References

Geereddy, N. (2014) Strategic analysis of Starbucks corporation. Available at: http://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf (Accessed: 20 October 2016). Hill, C. W. and Jones, G. R. (2011) Essentials of strategic management. Boston, MA, United States: CENGAGE Learning Custom Publishing. Rugman, A. M. (1996) The theory of multinational enterprises: The selected scientific papers of Alan M. Rugman,. Cheltenham, UK: Elgar, Edward Publishing.