As we know that functional level strategies are directing at improving the effectiveness of operations, which are manufacturing, marketing, materials management, product development, and customer service. The following functional strategies at Starbucks helped the company to achieve superior financial performance.
• At Starbucks they manufactured company's own premium roasted coffee, along with freshly brewed espresso-style coffee beverages and a variety of pastries, coffee accessories, teas, and other products, in a coffeehouse settings. Some grocery stores sell Starbucks branded ice cream and coffee as well.
• The marketing was enhanced by devoting considerable attention to the design of its stores. This resulted in a relaxed, informal, and comfortable atmosphere, away from home and work.
• The Starbucks material management is evident from the following excerpt taken from Starbucks 10-K 2009, "Starbucks is committed to selling only the finest whole bean coffees and coffee beverages. To ensure compliance with its rigorous coffee standards, Starbucks controls its coffee purchasing, roasting and packaging, and the distribution of coffee used in its operations. The Company purchases green coffee beans from coffee-producing regions around the world and custom roasts them to its exacting standards for its many blends and single origin coffees. (Starbucks)
• They are constantly developing their coffee products. They recently developed "VIA", ready brew instant coffee, and are working on "fresh-pressed" coffee system (Wikipedia)
• Starbucks is said to have one of the best employee hiring and training programs in the restaurant industry. Employees of Starbucks attend mandatory training classes that not only teach them to make a good cup of coffee but also train them on the service-oriented values of the company.
Tangible Resources: Starting in 1991, the company began to create its own in-house team of architects and designers to ensure that each store would convey the right image and character. Stores had to be custom-designed because the company didn't buy real estate and build its own freestanding structures like McDonald's or Wal-Mart did; rather, each space was leased in an existing structure and thus each store differed in size and shape. It's their Product line with hot and cold coffees and alternate options among those options. It's the ambience of the store and now most of the stores offer free Wi-Fi capabilities to its patrons.
Intangible Resources: Undoubtedly the management and the employees with extensive training and experience to wow the guest experience.
Starbucks capabilities are the marriage of its tangible and intangible resources. It is how the employees, and management work together to provide a unique customer service. It's their decision making strategy such as knowing their demographics and rapidly expanding them to capture as many premium locations they could before their competitors and imitators. It's their repeat customers which come back on an average of 20 times per month.
Distinctive competences of Starbucks lay in their specialty products, and innovation in the coffee industry. Their mission says it all, "to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time." (Starbucks). Starbucks is the largest coffeehouse company in the world with 17,009 stores in 50 countries, including over 11,000 in the United States, over 1000 in Canada, and over 700 in the UK.
In late 2006, Starbucks had 12,000 stores in operation, and currently they have 17009 stores. That is a rate of 100 stores per year. This tells us that even though they have competitors like Dunkin Donuts, Macdonald, and their direct coffee competitors, such as Diedrich Coffee, and Einstein/Noah Bagel Corporation do not even come close to what kind of market share, In fiscal 2010, the company's stores (retailer and licensed) generated US$ 10.7 billion in revenue.
By giving franchises, there is a danger of various stores omitting some of the menu to its standards, and instead picking and selecting what products (coffee equipment, music, and books) should be available to the customers. Through keeping every one the stores corporately owned Starbucks is able to manage and monitor all locations and operations and to ensure high employee relationships and good customer care via steady management, good store operation, and good location environments. They want to keep the training and development of the employees to the utmost standards and that's the reason for preferring to own than franchise.
It is apparent by the growth numbers of Starbucks that it has hardly any key competitors, and the rivalry has nowhere near Starbucks's volume of its operations. Starbucks Corporation is the leading coffee retailer, coffee roaster and brand of specialty coffee in the whole world. However smaller competitors, pose possible threats to the company. The major threat is the premium prices but they have a loyal group with an average income of $80,000, and that group is certainly helping Starbucks reach its goal on a day to day basis.
In order for Starbucks to fight against this potential market threat, the company must drive to retain its position and be the first mover. They are already doing it by their innovation and new development techniques in coffee market. Starbucks has to continuously develop fresh products so as to be ahead its competitor's competitive schemes. It is also working on its social responsibility issues by doing charitable benefits to society and community and developing recycle programs. They are very stable currently and have limited threat from its competitors and imitators. They are constantly looking to enhance their portfolio by merging themselves with corporation which will increase their joint ventures, examples such as Dreyer's Grand Ice Cream to supply coffee extract for a new line of coffee ice cream made and distributed by Dreyer's under the Starbucks brand.
Starbucks. 20 November 2009. 31 March 2011 <http://www.wikinvest.com/stock/Starbucks_%28SBUX%29/Filing/10-K/2009/F46735895>.
—. 2011. Starbucks. 31 March 2011 <http://www.starbucks.com/about-us/company-information/mission-statement>.
Wikipedia. "Wikipedia." 31 March 2011. 31 March 2011 <http://en.wikipedia.org/wiki/Starbucks>.