Starbucks Corporation is known to be the largest coffeehouse organization globally. The company is an American international coffeehouse chain and coffee company having more than 20,891 stores in approximately 62 countries. Its largest store chains are in United States with 13,279, second largest in Canada with 1,324. Moreover, it has 989, 851 and 806 stores chains in Japan, China and United Kingdom respectively.
Expansion of Starbucks without destroying its core business
The primary business of Starbucks is the coffee that is sold in morning hours which is the peak time when drinking coffee is most popular. For many years, Starbucks has struggled attract customers to its stores to consume its products. Beverages including coffee mainly accounts for Starbuck’s overall sales; whereas food items contribute to 19% of its sales as of 2013 (Strom, 2013). Therefore, Starbucks aims to expand its business without affecting its core product i.e., coffee business. Although the company is engaged in the expansion of its business since inception, but more diversification is required to gain competitive advantage. Thus, the company sells coffee and related products i.e., cold and hot beverages, micro-ground instantaneous coffee, whole-bean coffee and full-leaf teas on one side, but diversifies its business portfolio by increasing the range and variety of food items that compliment their coffee. These complementary product includes snacks, pastries, cold and hot sandwiches, food items that are pre-packaged, breakfast options, wraps and nutrition food menu. The company’s evenings locations now offer a variety of wines, beers and appetizers. Some of the products of the company are also specific or seasonal. The coffee and ice cream of Starbucks are offered at grocery stores. Thus as a result of sharing and bundling these activities, the Starbucks Corporation has increased the revenues as it exploits their positive and strong reputation.
Starbucks has diversified its business in the last two years by acquiring three businesses i.e., Teavana, La Boulange Café and Bakers, and Evolution Fresh juices at a cost of $750 million. This diversification lies within the context of the business without affecting its core business. The savory and sweet pastries of La Boulange Café are offered to its customers in pink paper that are sold through the 10,000 stores in US. Besides this, Teavana will start its tearoom operations at Starbucks coffee house with an aim to create a new way of drinking tea that it did for coffee. However, the company has introduced Evolution Fresh juice throughout the country in Stop-and-Shop stores and whole Foods stores. In addition, there is also Lucite levers placed on the store wall that will permit consumers to blend their own favorite juices to go with salads, soups and sandwiches which is specially introduced for health-conscious customers.
Creating value through diversification strategy
The main propose of diversifying product range for Starbucks Corporation is to gain competitive advantage. Thus, the company has diversified its product range by creating strategic alliances with the best selling confectionary, tea and juices companies which has enabled the company to attract a large number of customers as the customers that were previously visiting stores of Teavana, La Boulange Café and Bakers, and Evolution Fresh juices will now visit Starbucks stores as the products of these are complimentary and alternatives to its products. Adoption of this strategy will also benefit to limit its competition with alternative beverage companies. Moreover, the company could now have a wide range of products for all seasons. Furthermore, this diversification has helped the Starbucks Corporation to reduce its cost and expenses of the value chain thereby creating value to the company. However, it is important for the Starbucks to maintain a strong relationship with all these companies as it is a win-win situation for Teavana, La Boulange Café and Bakers, Evolution Fresh juices and Starbucks Corporation. After the success of this extension in product line, the company plans to expand in new markets particularly in major markets of its operations.
Coffee war between Starbucks Corporation, Dunkin Donuts and McDonald
With respect to coffee war with Dunkin Donuts, Starbucks in their annual report has not mentioned Dunkin Donuts as its competitor as the company has left far behind with respect to sales, number of stores and market value. As of 2011, the sales of Starbucks were 10.7 billion as compared to $6 billion of Dunkin Donuts. Moreover, the market value of Starbucks stood at $30 billion whereas $2.4 billion of Dunkin Donuts. Similarly, Starbucks owns more than 17,000 store where as Dunkin Donuts have 9,805 stores (Ovide, 2011).
In contrast, McDonalds seems to be the greatest competitor of Starbucks Corporation as the rivalry between both has tended to be increased with the passage of time. Both the two are expanding its product line in the opposite direction i.e., McDonalds in coffee products and Starbucks in food items, without affecting their core products. According to an article by Jim Probasco (2013) the sales of Starbucks increased by 7% and McDonald’s increased by 0.9% during the last quarter of 2013.
Thus, it could be concluded that Dunkin Donuts is not in a position to compete with Starbucks anymore, however, McDonalds if continued its war could eat Starbucks share in the market.
Ben & Jerry′s Homemade Inc is the producer of frozen yogurt, super-premium ice-cream and sorbet. The company was founded in the year 1978 by Jerry Greenfield and Ben Cohen in Burlington, Vermont. Today, Bens & Jerry’s is known to be a leader in ice-cream manufacturing company where its products are consumed globally (Lager, 2011).
Entering Japanese Market
Japan is an attractive market of ice creams and is the second largest ice cream market globally that has provided Ben & Jerry’s with an opportunity to enter Japanese market and introduce their products to the country. The consumers in Japan enjoy ice creams with attractive packaging which could be a plus point for Bens and Jerry’s. However, in contrast, there are some barriers to entry for Bens and Jerry’s. In Japan Haagen-Dazs will be the biggest competitor who has explored the region 10 years before. Moreover, in Japan, there are at least six large ice cream manufacturers that could affect the entry and survival of Bens & Jerry’s. Moreover, even if the entry is successful, the company would require lots of promotional expenses and efforts to grab and increase its market share in Japan. However, in view to expanding geographically in largest ice cream consumer market, the management team of the company were provided with two alternative approaches for entering Japan i.e., Mr. Yamada and Seven-Eleven. These two approaches are discussed in detail as follows:
Seven-Eleven is one of the biggest and largest convenience chain stores in Japan with more than 7000 stores. The company proposed Bens and Jerry with some positive and influencing factors. As Seven-Eleven is well established in the Japanese market and where the super premium ice cream accounts for approximately 40% of the market. This factor could result in a sudden rise, in the sales of Bens and Jerry’s upon entry in the Japanese market. Moreover, the company’s ice cream could be immediately placed in the compartment at the Seven Eleven’s stores. In addition, Bens and Jerry could take advantage of the up to date logistics system and size as Seven-Eleven directly purchases the products from suppliers that eliminate the need of middlemen. However, there were also some pitfalls in pursuing this alternative method of entry i.e., if Bens and Jerry’s introduces its products through even Eleven, then its products will be placed on the same shelves like other ice cream products do that will not create brand equity that is required to remain successful and achieve a competitive edge. Moreover, a possibility could be that the company cutoff the Bens and Jerry’s in the future if it does not sell effectively.
VRIO analysis of the two available alternatives
Most Appropriate option for Bens and Jerry’s
Lager, F. (2011). Ben & Jerry's: The Inside Scoop: How Two Real Guys Built a Business with a Social Conscience and a Sense of Humor. Crown Publishing Group
Ovide, S. (2011). Face Off! Dunkin’ Donuts vs. Starbucks. Retrieved from http://blogs.wsj.com/deals/2011/07/27/face-off-dunkin-donuts-vs-starbucks/
Probasco, J (2013). Is McDonald's Taking on Starbucks in Coffee Wars?. Retrieved from http://www.benzinga.com/media/cnbc/13/11/4083955/is-mcdonalds-taking-on-starbucks-in-coffee-wars#ixzz2xFmjNybY
Strom, S. (2013). Starbucks Aims to Move Beyond Beans. Retrieved from http://www.nytimes.com/2013/10/09/business/a-juice-and-croissant-with-that-starbucks-latte.html?_r=0