Question

What is there about Starbucks’ strategy that can lead to sustainable competitive advantage? Please provide any external references please. Thank you!

Answer 1

Sustainable competitive advantage refers to the important aspect of business that allows an organization to outperform to gain advantage over the competitors. This can be gained by offering greater value to the customers compared to its competitors. The main goal is to be on top of the competitors by focusing on value proposition and other important decisions.

Broad differentiation strategy is used to appeal broad range of customers. This strategy implement premium pricing and helps in increasing customer loyalty. The advantage of broad differentiation strategy is that it helps in creating value for the brand and product uniqueness. The disadvantages of broad differentiation strategy are the products will be costly, requires lots of research work and might affect the profits because of the competitors. Example - Starbucks.

The segmenting variables used by Starbuck are geographic, demographic, psychographics and behavioral segmentations. Starbuck has opened stores in urban and sub-urban areas so that it can reach to different geographic areas. Starbuck does not target all customers and its price is kept keeping in mind few customers. Customers are also motivated to come to the store, listen to trendy music, satisfy their cultural interest, etc. which is nothing but psychographic segmentation. Also, the store offers variety of coffee and also come up with loyalty programs where one can use Starbucks card. This is behavioral segmentation which will help Starbucks to identify rewards loyal customers. Thus Starbucks use all segmenting variables. This help starbuck to sustain is competitive advantage.

Starbuck has been engaged in sustainable farming with the goal of ethically sourcing its coffee beans by engaging with suppliers and local communities. The organizational culture at Starbucks is to create a great work environment by treating each other with respect and dignity. It is committed to keeping the environment safe. They also train their employees properly so that they will have good knowledge of the products they offer. They also focus in providing great customer experience.