Starbucks Coffee Company: Transformation and Renewal - Case Study Analysis

1. Starbucks’ decline was highly attributed to its rapid growth in the early 2000s. The accelerated number of stores being built created a number of problems including the saturation the Starbucks Experience it so highly valued as well as a drop in sales due to competition with existing Starbucks stores in any given area. This same-store sales being taken from one another gave Starbucks the feeling of “cannibalism” from within its own company. The desire to achieve high efficiency and reach financial goals led to the dilution of Starbucks’ ability to maintain its differentiation strategy through its most valuable resource, its reputation. The company lost
Although Starbucks has an extensive line of products and specialty drinks, coffee is coffee. * Threat of New Entrants (low): It would take a substantial amount of financial resources to build and acquire the properties and necessities to enter and successfully compete in the industry. Existing firms have achieved cost and performance advantages and well established. Competitors, including Starbucks, have already learned how to continually lower costs and improve performance. In addition, companies with large market shares have strong brand identities within the industry. A new entrant to the industry can expect multiple impenetrable barriers from existing companies due to the strong competition for market share. * Threat of Substitutes (high): Not only is there a plethora of substitute drinks a person can have (including tea, juices, soft drinks, water and energy drinks), there is also different locations in which a person can spend time and have a drink (pubs and bars). Cheap substitutes also pose a threat, as Starbucks has become a “luxurious necessity” and charge a ridiculous amount for a cup of coffee. Customers also have the ability to brew their own coffee rather than buy it. * Industry Rivalry (high): Starbucks operates in an industry with major competitors like Coffee Bean, Pete’s Coffee and Tea, McDonald’s McCafe, Caribou Coffee, and Dunkin’ Donuts and thousands of small local