N110 International Business

Introduction

Starbucks is an American based international coffee chain corporation. The company was founded in the year 1971and is headquartered in Washington, DC. It was established by three men for selling whole beans. Later, they planned to build a company and expanded the business with the Starbucks name. The main products of Starbucks are latte, fresh juices, full-leaf tea, hot and cold beverages, snacks, pastries and more ("Starbucks Coffee Company", 2021). Starbucks main objective is to deliver high-quality coffee to its customer base and at the same time promote product innovation, long-term service quality and retail expansion. The report aims at examining qualitative and quantitative data of Starbucks based on annual report of the company. The report also includes data from its social media for evaluating the current financial/innovation of the company. The report further includes recommendations on how the company can be more innovative and grow in terms of competitive advantage.

Discussion

Qualitative sources

As per the annual report of Starbucks, its main objective is to become the most respected and recognized coffee brand globally. In order to achieve this, company is making an effort to expand its retail operations globally through addition of more outlets in both developed as well as existing market segmentations like China, United States. Starbucks has also strategically operating to optimize the mixture of licensed as well as company operated stores all around the globe (Fiscal Annual Report 2022). It also offered their customer base new product with more varieties, new categories, various channels and also alternative shop formats. The Starbucks Worldwide Social Impact approach, as well as its commitments towards sustainably procuring high-quality coffee, potentially improving the communities where it operate, as well as being an employer of choice, all contribute to this objective.

In 2020, the company received one award and in 2021 it received four for its best service delivery. Starbucks was also awarded as “Best places to Seattle” in 2021. Also, it won best company award for women, work-life balance and employee satisfaction in 2020 (Fiscal Annual Report 2022).

Quantitative sources

To expand the business globally, Starbucks has been striving to drive beverage, process, equipment and technological innovation into its business model. The main innovation is its store design. It has incorporated innovation in the form of digitalization using artificial intelligence and big data for driving business towards success (Fiscal Annual Report 2022). Through implementing “Digital flywheel program” it has incorporated four factors namely: personalization, rewards, order and payment. 

Due to digitalization, the revenue of the company increased 24% to $29.1 billion in fiscal year 2021 in comparison to $23.5 billion in 2020 (Starbucks revenue worldwide Statista, 2022). In fiscal 2021, consolidated operating income climbed to $4.9 billion, up from $1.6 billion in fiscal 2020 (Fiscal Annual Report 2022). As per the report, Starbucks has grown at an accelerating rate in recent years, more than tripling its number of locations in the last decade. In 2021, there were more than 33 thousand Starbucks locations around the world.

Social media

Starbucks is well aware of the social media and it is making best use of it to communicate with its customers. Its social media statistics is as follows:

Facebook: It has around 37.2 million Facebook fans on the page. Starbucks acquired 710,000 new Facebook followers, comparing to 53,500 for the typical North American Restaurant & Cafe Page. It posts stories, ideas, comments, suggestions, feedback on its Facebook page to connect with customers (Facebook 2022).

Twitter: It has approximately 11.9 million followers on Twitter. Starbucks interacts with its followers on a regular basis, responding to their questions and re-tweeting what others have to say about the company (Taecharungroj 2017).

YouTube: Starbucks has 153 million subscribers on YouTube. Starbucks employs both marketing and instructional videos to deliver information and build relationships with their followers and viewers.

Instagram: It has around 16 million fans on the page. It interacts here through pictures and videos (Novak and Richmond 2019).

Findings

From the above data, it is found that despite of the COVID-19; Starbucks has strategically implemented its operations and succeed in building excellent reputation for delivering high quality products and services to its customers. Despite pandemic, through innovation and digitalization, it has succeeded in gaining its customer loyalty and also made them stay with the business for longer time.  This is reflected in the revenue data of the company where other companies were facing losses due to closures and lockdowns, Starbucks has tripled its revenue. During fiscal year 2021, income from company-operated outlets has accounted for 85% of total net revenue (Azriuddin et al., 2020). Its retail purpose is to be the largest retailer and manufacturer of coffee and tea in every one of its market segments through providing the highest-quality coffee, tea, and similar items, as well as complementary foodstuffs, and offering every client with a personalized Starbucks Experience.

It has succeeded in achieving its mission by opening more number of stores all over the globe. Through its quality products, innovation, personalized service and strong social media presence has enabled the company to become the more recognized brands on a global scale.

Recommendations

Following are some of the recommendations that Starbucks can implement to be more innovative and gain competitive edge:

• Starbucks is performing well in the market but it is faced with aggressive competition by new players and many small retailers which offer substitute of the products. For remaining in the market, it must expand its market and product line and try to enter new product segment through addition of new cuisines in the menu ("Ways Starbucks Could Improve.", 2021).
• Starbucks has an image of premium coffee brand in the market. It must make changes to its pricing model. For example: it must add items of low cost that can target middle-income people. If the company wants to expand, it must cut its prices specifically in developing nations like India, this would assist the company in gaining more customers.
• Starbuck’s most of the stores are self-owned. It must focus on franchising for fulfilling its objective to expand on a global basis at faster rate (Taecharungroj 2017). Franchising will help the business to enter market or nations that are unexplored.

Conclusion

The above analysis concludes that Starbucks is a leading corporation in selling beverages and in spite of huge competition of other challenges; it has been able to succeed in the market through innovation and its effective strategies. The main element that has made the brand globally recognized is its quality and customer service. These are the major factors that differentiate the brand from its rivals and have enabled the brand in gaining more customers, market segment and competitive edge over its rivals.

References

Azriuddin, M., Kee, D. M. H., Hafizzudin, M., Fitri, M., Zakwan, M. A., AlSanousi, D., ... and Kurniawan, O. (2020). Becoming an international brand: A case study of Starbucks. Journal of the Community Development in Asia (JCDA), 3(1), 33-43.

Facebook.com. 2022. . [online] Available at: <https://www.facebook.com/pages/category/Coffee-shop/Starbucks-109694319089322/> [Accessed 17 February 2022].

Fiscal 2020 Annual Report S22.q4cdn.com. 2022. [online] Available at: <https://s22.q4cdn.com/869488222/files/doc_financials/2020/ar/2020-Starbucks-Annual-Report.pdf> [Accessed 17 February 2022].

Honack, R., & Waikar, S. (2017). Growing big while staying small: Starbucks harvests international growth. Kellogg School of Management Cases, 23-36.

Novak, A.N. and Richmond, J.C., 2019. E-Racing together: How Starbucks reshaped and deflected racial conversations on social media. Public Relations Review, 45(3), p.101773.

Starbucks.com. 2022. About Us: Starbucks Coffee Company. [online] Available at: <https://www.starbucks.com/about-us/> [Accessed 17 February 2022].

StarbucksMelody.com. 2022. 10 Ways Starbucks Could Improve.. [online] Available at: <http://www.starbucksmelody.com/2015/05/12/10-ways-starbucks-could-improve/> [Accessed 17 February 2022].

Statista. 2022. Starbucks revenue worldwide 2019 | Statista. [online] Available at: <https://www.statista.com/statistics/266466/net-revenue-of-the-starbucks-corporation-worldwide/#:~:text=Starbucks> [Accessed 17 February 2022].

Taecharungroj, V., 2017. Starbucks’ marketing communications strategy on Twitter. Journal of Marketing Communications, 23(6), pp.552-571.

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