Miller, D. (1992). Contact. Focused Low-Cost. A. The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. On the other hand, a combination of intensive growth strategies influences the approach that Starbucks uses for growth and expansion. 1. a) Cost Leadership Strategy This generic strategy calls for being the low cost producer in an industry for a given level of quality. Supercuts’s website makes clear their longstanding cost leadership strategy by noting, “A Supercut is a haircut that has kept people looking their best, while keeping money in their pockets, since 1975.” I would like to explore the cost advantages that Starbucks enjoys. Glazer, R. (1999). This generic strategy translates to various policies and programs to keep the coffeehouse business differentiated against the competition. Focused cost leadership is the first of two focus strategies. Cost Leadership at Starbucks Coffee Co. Starbucks business strategy can be classified as product differentiation. Starbucks has always maintained its competitive advantage by being the leader in product innovation. Theses generic strategies include the differentiation strategy, the cost leadership strategy, and the focus strategy. A challenge in applying this generic strategy for competitive advantage is that Starbucks must always innovate to maintain its uniqueness and attractiveness among target consumers. To address this issue, Starbucks keeps innovating its product mix and supply chain. Accordingly, the coffee chain giant focuses on the quality of its products and customers pay premium prices for high quality. When we relate this back to Starbucks, it is safe to say that Starbucks enjoys significant economies of scale in comparison to competitors because of how huge Starbucks Coffee company is. It requires the vigorous pursuit of cost minimization techniques such as efficient utilization of scale of production, good purchasing strategy, modern technology and produce quality products. Enter your email address to follow this blog and receive notifications of new posts by email. Competitive Advantage Through Information-Intensive Strategies. Also, frequent introduction of new products or variants thereof contributes to the uniqueness and competitive advantage of the company’s food and beverages. Starbucks cost-leadership position is achieved by gaining advantage over competition through reducing economic costs below that of competition. (1997). The enterprise needs to innovate ahead of other coffeehouse firms to maintain its competitive advantage and growth based on this generic strategy. Starbucks uses market development as its secondary strategy for intensive growth. The coffee is often advertised as costing under a dollar, making Dunkin’ Donuts a low-priced alternative to Starbucks. Starbucks already has presence in more than 78 countries and territories. Risk of cost leadership strategy Too much focus on cost reduction may lower quality. These strategies facilitate business expansion despite the increasing saturation of many coffeehouse markets. A cost-focus strategy is a low-cost, narrowly focused market strategy. Business Level Strategy:Thompson et al (2007) pointed out that all business organizations are using this strategy either deliberately or unintentionally. Starbucks cost-leadership position is achieved by gaining advantage over competition through reducing economic costs below that of competition. Porter, there are three generic strategies that a company can use to achieve competitive advantage: Overall Cost Leadership, Differentiation, and Focus (Dess, McNamara, & Eisner, 2016). While I believe that Starbucks' main strategy is that of product differentiation (which will be addressed in the next post), there are some cost advantages that the company enjoys. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). This difference highlights Starbucks Coffee’s value proposition regarding high quality and uniqueness of products. The focus strategy This strategy involves a company concentrating in a particular market segment and understanding the dynamics of the needs of the customers in those markets. The market competitors of Starbucks includes Dunkin Donuts and McDonalds mccafé and so forth. To reduce unnecessary cost, the company has been expanding its range of products consistently. Under 30. In applying the broad differentiation generic strategy, the enterprise focuses on specialty ingredients and products, such as baked goods that do not have high-fructose corn syrup. Starbucks has an angel on one shoulder and a devil on the other. Accordingly, the coffee chain giant focuses on the quality of its products and customers pay premium prices for high quality. Intensive growth opportunities: An extended classification. Starbucks more specifically exercises a product differentiation strategy more than a cost strategy. Cost Leadership - NOT USED BY STARBUCKS. According to Starbucks (n.d), “a cost leadership business strategy focuses on gaining advantage by reducing its economic costs below all of its competitors. This article may not be reproduced, distributed, or mirrored without written permission from Panmore Institute and its author/s. If a company chooses to embrace a cost strategy route, the main focus is on gaining advantages by reducing its economic costs below all of its competitors. 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