Question

Case：Starbucks

1、Use VRIO model to do the internal analysis;

2、If you were the top management of Starbucks, how to attain sustainable competetive advantage.

Answer 1

1. VRIO is a business analysis framework that forms part of the firm's larger strategic scheme. There are four criteria of the model: Value, Rarity, Imitability, and Organization. (Barney, 1991)

VRIO for Starbucks:

I. Valuable:

Strong brand image – Yes, Starbucks has a strong brand image and it contributes to the value.

Quality and flavors of coffee – Yes, a valuable offering to the customer.

Customer service – Yes, Starbucks' customer service complements the offerings.

Store environment – Yes, Starbucks' store environment helps retain customers.

Supply chain – Yes, Starbucks' supply chain helps procure high-quality raw materials.

Global presence – Yes, the global presence of Starbucks gives the firm a competitive advantage and helps in the global brand image.

II. Rare:

Strong brand image – Starbucks' brand image is challenging for competitors.

Special flavors and quality of coffee – Yes, Starbucks invest in the quality and special coffee flavors.

Customer service – It can be achieved by other competitors but require investing in staff training.

Store environment – It can be achieved by other competitors but requires investing in store beautification.

Supply chain – Difficult to achieve for competitors as it requires both investment and strategy.

Global presence – Also difficult to achieve for competitors as it requires major investments.

III. Inimitable:

Strong brand image – Difficult to imitate by competitors, requires heavy focus upon customer service, product innovation, supply chain integration.

Special flavors and quality of coffee – Difficult to imitate by competitors because of the prices and procedure.

Customer service – Somewhat difficult to imitate by competitors.

Store environment – Somewhat difficult to imitate by competitors.

Supply chain – Difficult to imitate by competitors but possible in the long term.

Global presence – Difficult to imitate by competitors because of investment.

IV. Organized:

Strong brand image – Yes

Special flavors and quality of coffee – Yes

Customer service – Yes

Store environment – Yes

Supply chain – Yes, Starbucks sources exceptional quality coffee beans.

Global presence – Yes, the reason it makes a high return.

2. As top management of Starbucks, I would make the following improvements/changes for competitive advantage:

1. Increase International Expansion

2. Rewards Program-creating more elaborated reward programs considering frequent customers.

3. Renting out meeting space

4. Continually Improving the Coffee for more trending flavors

5. Relationship with customers

6. Be more green by becoming environment friendly