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Starbucks Case

Starbucks Case

  1. Can Starbucks expand beyond the coffee business in a meaningful way without destroying its core

coffee retailing business?

  1. Can Starbucks create value through its diversification strategy? Will management be able to create
    valuable, rare, and imperfectly imitiable economies of scope through its expansion into juice, tea, pastry,
    and new distribution channels or will the expansion be the downfall of Starbucks as it was in 2008?
  2. Do competitors represent a significant threat to Starbucks competitive advantage through their

additions of customized, higher quality coffees to their menus?

  1. Should Alex Poole sell his Grandma�s Starbucks stock or keep it in her portfolio?


The Strategy that Starbucks has chosen to base its expansion and future operation on is
one that portrays an organization that is well positioned to expand beyond its core coffee
retailing business. As it is, the fall in 2007, and the success in the turnaround strategy employed
then resulted in a flagging coffee industry turning around. It is possible for Starbucks to achieve
the same by diversifying into retailing business (Patterson, Scott and Uncles, 2010).
The ‘third place strategy’ supported by the blue print for profitable growth, that is aimed
at creating long-term shareholder value point to a company that has chosen a diversification
strategy that is designed to create value. Starbucks has realized that the it need to view its
market globally. Despite the American market being responsible for its main profits, the future
was overseas. In Europe and Asia, markets that were growing astronomically the new products
offering had already a strong presence there. In both markets, the Juices, Tea and Pastry market
segments could be combined with the unique Starbucks experience to create a revolutionary
strategy that would position Starbucks for success (Lee, Madanoglu and Jae-Youn Ko, 2013).
Despite the fear of having a 2008 repeat scenario, the current strategy is actually responsible for
creation of rare, valuable, imperfectly imitable economies on the new products under Starbucks
As presently operational, Competitors represents a threat to Starbucks competitive
advantage since the experience that it brings seeks to clearly demarcate the customer that
Starbucks wants to focus on – premium consumer. For this market, Starbucks has a competitive
advantage since it has already have the coffee customers who will be used to do launch

advertising. Starbucks understands the strength of word-of-mouth marketing. A lot of its current
position is down to this strategy (Seaford, Culp and Brooks, 2012).
With the strategy adopted by Starbucks for the future, Alex Poole is better off keeping the
stock in her Grandma’s portfolio.



Patterson, P. G., Scott, J., & Uncles, M. D. (2010). How the local competition defeated a global
brand: The case of starbucks.Australasian Marketing Journal, 18(1), 41-47.
Lee, K., Madanoglu, M., & Jae-Youn Ko. (2013). Developing a competitive international service
strategy: A case of international joint venture in the global service industry. The Journal
of Services Marketing, 27(3), 245-255.
Seaford, B. C., Culp, R. C., & Brooks, B. W. (2012). STARBUCKS: MAINTAINING A CLEAR
POSITION. (). Arden: Jordan Whitney Enterprises, Inc.

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