Milestone Two, you will submit a discussion of the operationalization of a business opportunity (Section II), specifically the business product, service, or other idea from your business plan in the

MBA 560 Milestone Two

Strengths, Weaknesses and Core Competencies

Carmen Hendrickson

01/26/2019

Perhaps the most important strength of Starbucks would be its brand image, since the customers are aware of it around the world (Simon, 2009). While Starbucks has very strong base in the western world, the consumers in other parts of the world, especially Asia have noticed the high quality coffee being offered in Starbucks shops. This is likely to be a huge benefit for the alcoholic brewhouses, since the consumers are aware of the high quality products already available in the shop and would likely try out the newly introduced product too.

Another strength is the extensive global supply chain. Starbucks has worked hard over the decades to establish supply chain for its products to guarantee the quality for the consumers. Therefore, it is no surprise that the company has managed to build up one of the best supply chains in the industry (Hsieh, et al., 2019). This is likely to benefit the brewhouses, since the existing suppliers can already deliver many of the ingredients for the products. At the same time, there would be certain products, where Starbucks needs to find new suppliers around the world fully satisfying their demands.

A major strength for the company is its moderate diversification through subsidiaries. This allows the company to hold control and profits of the most lucrative shops, while at the same time, innovating with the help of the subsidiaries (Lemus, et al., 2015). The subsidiaries often generate great ideas, which can then be integrated throughout the chain. For the brewhouses, this could prove challenging, since the subsidiaries are likely to have differing positions about such substantial changes in the business model.

The company has been performing well financially. This is despite the fact that the share price of SBUX has not risen significantly over the past few years. Strong investment and awaiting the results of the investment can be blamed for this (Banco, Kobakova, 2018). However, it can be claimed that the company shares are likely to be sold at higher prices in the future, and there may even be additional offering for the company in the future. This is likely to generate substantial money for the new investments including the brewhouses.

Last but not least, the company has extremely supportive customers. It has managed to acquire the customer loyalty throughout the decades because of the high quality of its products as well as services (Typaldos, 2016). As a result, the brewhouses are highly likely to significantly benefit from this customer loyalty, as more individuals would be willing to taste the new product. Customer loyalty also means that the company would be able to generate the feedback at a very rapid pace, thereby improving the product as necessary.

Despite all the above-mentioned strengths, Starbucks operates at very high price points. If the consumers wish to drink coffee, it is possible to do so in significantly cheaper locations. This means that Starbucks always needs to provide the benefit to the consumers (Banco, Kobakova, 2018). Only this way is it possible for the company to keep up with these price points. The problem would be similar for the brewhouses, as it would need to generate certain benefit on top of the products being offered.

The company also has generalized standards for most of the products. While this should be considered as a strength from the marketing perspective, Starbucks always needs to have ways of integrating new products into these standards. This includes the alcoholic brewhouses. Therefore, the company is likely to have to spend substantially more for the integration of brewhouses into the system due to these generalized standards.

Starbucks has long been suffering from the problem of imitability. Due to its benefit, the company has very high price points and constantly faces cheaper alternatives for any of the products it introduces. As a market leader, it sometimes has to spend considerably more for the innovations than it takes the competitors to simply introduce to the market in case of its success (Lemus, et al., 2015). Alcoholic brewhouses would likely run into the same problem, since the competitors would attempt to copy it.

Starbucks has traditionally suffered in terms of marketing. There is no groundbreaking marketing campaign that the company has generated such as their competitors, who often use catch slogans or have mascots push the product; this passive approach is because word of mouth and brand loyalty is the preferred choice of marketing. Starbucks favors to provide consumers with high quality products and reputation, with less brand focuses to generate sales they rely heavily on the customers spreading the word. Due to today’s demand for being engaged and short attention span the company would have to start some type of a marketing campaign at some point for the alcoholic brewhouses. This would help the company generate initial interest.

The company has traditional struggled with the operating expenses. In fact, it regularly exceeds 80% of the revenues. This means that Starbucks needs to be ready for further increase in the operating expenses. This is because the brewhouses would be slow to fully integrate in Starbucks environment. As a result, its operating expenses would be relatively higher than the rest of the chain. Additionally, it would struggle to generate high revenues immediately, thereby further pushing the share of expenses from the revenues.

The greatest opportunity for Starbucks as well as other famous western brands would be the ability to enter the developing markets. Starbucks is well known in these countries (Typaldos, 2016). In fact, the company has opened its branches in many of them with the aim of generating foundation for the global expansion. With regards to the alcoholic brewhouses, the problem is the fact that many of the developing nations have different cultural views regarding alcohol. As a result, it is highly likely that the brewhouses will meet regulatory problems in many of these nations at home and abroad.

While Starbucks offers great value in the coffee business, it has been attempting to diversify its product range. Bakeries would be a great example of this (Gavin, 2013). This is likely to prove an excellent opportunity for the company, since the customers are going to spend additional money for the products they need with their coffee. Alcoholic brewhouses would also be an excellent way to further diversify the product range.

Partnerships with other firms have long been used by the companies around the world to not only expand, but also diversify the risk (Hsieh, et al., 2019). As many of the Starbucks products have reached the maturity stage, the company is likely to be looking to diversify the products and partnerships would be the best way to do this. The same can be claimed with regards to the brewhouses, as Starbucks could partner up with another firm to generate a great new product.

Digital marketing provides traditional firms with new opportunities (Banco, Kobakova, 2018). New generations tend to have more interest with digital marketing meaning that the company can use the trend to generate higher revenues. AI and other types of digital marketing opportunities can be used by Starbucks in many ways. Alcoholic brewhouses also provide an opportunity for this. The reviews and feedbacks from online personalities for the alcoholic brewhouses could spark interest for relatively low sums of money.

Other than digital marketing, the company has a chance to use the mobile technologies to improve the customer service. Starbucks has already promoted ordering coffee online and picking it up at the store. This has enabled attracting another segment of the consumers. However, there is much more that can be done regarding the mobile technologies. New ways of distributing products are coming up at all times. For the brewhouses, this is unlikely to have significant effect, but it needs to be taken into account, in case a good product for the product distribution becomes available.

The biggest threat faced by Starbucks is the low-cost chains (Manzo, 2015). Similar to the many other products, low-cost chains tend to slowly catch up with the quality of the coffee. As a result, Starbucks has to concentrate on other services being offered at its stores in order to generate substantial revenues. If the low-cost chains will be able to provide the added value, Starbucks is likely to lose the customers. Alcoholic brewhouses would be a benefit for the company and it would take a while before the low-cost chains are able to integrate it in their operations.

Similarly, the low-cost chains or even the single shops could easily imitate Starbucks products and services (Lemus, et al., 2015). While the logo is copyrighted, the culture and added value provided in Starbucks is not. The company may spend millions in the research to improve the environment for the customers, which can be easily copied by the competitors. If successful, alcoholic brewhouses would also be likely to be imitated by the other low-cost chains.

Independent coffeehouse movements are becoming significantly more popular these days becasuse of the ability for them to market their offers online to particular groups of customers. This may be a huge threat for giants such as Starbucks that are not able to react to customer feedback as efficiently (Lemus, et al., 2015). As a result, the company may need to consider an alternative strategy for the alcoholic brewhouses, where most of the ingredients are expensive in order to defer the independent coffeehouse movements from copying its idea.

The changing customer trends could also become a huge factor for Starbucks (Woldoff, et al., 2013). The millennial generation tends to be significantly different from the previous ones. Starbucks, while popular among millennials could find itself struggling, if it does not constantly follow the available customer trends. To do so regarding the alcoholic brewhouses, the company would need to rapidly update its offers or face an increased threat.

Finally, the international trade and regulations could be a huge problem for Starbucks. China and the US appear to be engaged in a trade war resulting in the decline of trade between the two countries (Koch, 2019). Additionally, the alcohol is already heavily regulated in most of the countries. Therefore, alcoholic brewhouses could give additional reason for the governments against the US to attack Starbucks possibly destroying its brand image in the country.

The above given SWOT analysis showed that the company has very high price points and as a result, its ethics and branding are affected. This is because it needs to justify the high price points. Environmental push has been one way for Starbucks to justify them. This includes the company strongly urging for change in the way the environment is handled. It has also introduced various green products (Banco, Kobakova, 2018). This way, the company aims to raise its brand image and convince the customers that the company is ethical.

Starbucks became well-known because of its ability to produce high quality coffee. Since its early years, the company has not given up on producing high quality coffee and as a result, has grown incredibly fast. As a result, high quality products have become one of its core competencies (Bishop, Bishop, 2013). It is vital for the business to keep the high quality of the products, since it is highly dependent on the return customers. These return customers are only likely to come back, if they wish to receive the same experience they had during their previous visit.

It is not only the coffee that is high quality in Starbucks. General environment that is pleasing for the customers is a guarantor for their return. Starbucks essentially offers the experience and not just the coffee (Koch, 2019). This type of experience should be the main motivating factor for the alcoholic brewhouses too. This would mean that the company would generate the product integrating well with the already existing environment.

Starbucks, unlike many other retail giants, has not bullied its suppliers into cheaper prices. The reason is its high price points (Perriam, 2013). As a result, many of the suppliers have excellent relationship and Starbucks has greatly benefited in terms of price modifications and market volatility. Similar relationship would be necessary for the new suppliers generating products for the alcoholic brewhouses. This way, it would be possible for Starbucks to think of the long-term future of the model.

Starbucks has worked very hard to guarantee it has a very strong brand image. The company has been trying to avoid any types of problems regarding the brand image and it includes the way any type of emergency situation is handled by the company. The staff are well trained to guarantee that they are unable to damage the brand image. It is a core competency, since it helps keep the price points very high. With the brand image, Starbucks aims to generate the global growth that is necessary for success in every country (Hsieh, et al., 2019). Alcoholic brewhouses would there need to be introduced so as not to damage the brand image of the company. They should be viewed as an excellent service, rather than a way for Starbucks to attract additional revenues.

With global trade increasing every year, as well as the number of tourists rising across the globe, it makes sense for Starbucks and other well-known brands to increase their availability across the world (Simon, 2009). Starbucks has recently invested heavily in Japan and this was seen as a positive move. Hence, people from around the world would be able to find Starbucks in every city they visit (Koch, 2019). Furthermore, availability of Starbucks diversifies the macroeconomic risks carried by the chain. For alcoholic brewhouses, it would be questionable whether to immediately integrate them in every destination. However, over a certain period, they would be likely to appear around the world.

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