Starbucks: Tech-Driven Competitive Advantage & Porter's Five Forces - Essay Sample

In my industry analyses, I will focus on Starbuck Company, which is a coffee selling company that has invested more in technology to access a wide range of customers. The analyses will focus on how the Company has gained a competitive advantage as a result of innovating in new technology such as the internet and mobile technology. I shall also focus on how the Company has addressed Porter's Five Forces for it to remain in the global market. The analyses will give recommendations on how better the Company can innovate more on its information system and the future direction of the Company.

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Competitive Position of the Company using Porter’s Five Model Analyses

Starbuck Company has successfully acquired a competitive advantage among its competitor due to proper management and using technology to its benefit. The Company has grown in management effectiveness in addressing the impacts of the five forces within the global coffee industry and the coffeehouse industry environment. It has utilized the external factor such as those which were outlined in the porter's five forces of analyses. These are the analyses that were put forward by Michael E. Porter that evaluate the environment of the industry through relevant external factors that define the competitive landscape (Dobbs, 2014). The analysis model gives information to the strategic management for them to address the five forces which are, competitive rivalry, the bargaining power of the supplier, the bargaining power of customers, the threat of having a substitution, and the threat of new entry.

In this external analyses case, Starbucks has made use of the porter's five forces by operating in an environment that involves has strong competition with other competitive coffee house industry. There is sufficient strength in the SWOT analyses of the Company that shows how it counters the forces of its competitor. The following porter's Five Forces analyses highlight some of the most notable factors in which the Company uses to ensure that it gains competitive advantage while fulfilling its mission and vision statements.

Competitive Rivalry

Starbucks company has been facing a strong force of competitive rivalry in the foodservice and the entire coffeehouse industry. Competitive rivalry force in the Five Forces analyses pertains to influencing the competitor with each other and the industry environment. In this case, Starbucks coffee Company has strong force when it comes to a large number of firms. A large number of firms is an external factor that enables the Company to intensify its competitive rivalry. The population of Starbuck's competitor is moderate, which is varied in terms of specialty and strategy. Its competition is strengthened because of low switching costs that are usually disadvantageous to consumers when shifting from one consumer to the other. This component of the Five Forces analyses reveals that competition is the top priority challenge of the Company.

Buyer Bargaining Power Forces Analyses

The buyer bargaining force of the Starbuck Company is the one that has a strong force. In Porter's Five analyses, this model pertains to influencing an individual or group of customers on the international business environment. In Starbuck Corporation, low switching costs and high substitutes contribute to the strong force, while the small size of the individual buyer has a weak force. The buyer bargaining force is one of the most significant forces that affect the Company.

Supplier’s Bargaining Power Force Analyses

Starbucks Company has a weak force bargaining power of the suppliers. Porter's Five Forces analyses model considers this force as the influence by which suppliers have on the Company together with its industry environment (Michael, 2016). A wide variety of suppliers and plentiful overall supply contributes to the weak force, while the size of moderate individual suppliers has a moderate force. The moderate size of the different suppliers in the Starbuck company is the external factor that imposes a moderate force. What weakens the bargaining power of the Company is the wide variety of customers.

Threats of Substitution in Starbucks analyses

Starbucks Corporation has a strong force to the threat of substitution. The Five Forces model analyses pertain to the impact of the substitute goods on the business and its environment. Availability substitutes, low switching costs, and high affordability of substitute products contribute to the strong force in the Company. This analysis shows that substitutes have a high impact potential to affect Starbucks Coffee's business negatively.

The threat of New Entrants Force analyses

The Company faces a moderate force to the threat of new entry. In Porter's Five analyses, this force refers to the impact that is brought to the Company and its environment when we have a new player in the industry. Both the moderate cost of doing the business and moderate supply chain cost have moderate forces, while the high price of brand development has a weak force. This force analysis shows that the threat of substitution in the Company is significant but one which is a limited issue in the Company.

Primary Strategy of Starbucks in the Use of Digital, Internet and Mobile Technology

Starbucks Company has not been left behind in initiating lucrative technologies that will enable it to survive in the world of adverse changes in technology. The Company has turned to technology to brew up a more personal connection with its customers. When one visits some of its outlets, they would be surprised to find coffee beans grinding, espresso shots being pulled, and various customers talking to baristas while their coffee order is hand-crafted. Microsoft has to help Starbucks in creating a seamless customer experience in its stores by coming up with advanced technologies, ranging from cloud computing to blockchain. In the digital platform, Starbuck has been using reinforcement learning technology, which is a system learning machine that learns to make complex decisions in an unpredictable environment based on customer feedback.

In terms of mobile technology, Starbucks has developed an app where customers can receive tailor-made order suggestions that are generated via a reinforcement learning platform built and hosted in Microsoft Azure. The app has helped the Company to have more than 16 million active Starbucks members on the platform. The Company can also receive thoughtful recommendations from the app for food and drinks based on the local store inventory. Customers through the app can get personalized recommendations via its mobile app, especially the items they frequently order. Reinforcement learning allows the app to know each customer better, and since the proposals are driven by a machine, the main goal is personal interaction.

The Company has come up with innovative technology where it uses the blockchain to share coffee’s journey with customers (Robert, 2017). This is through tracing the route that the coffee makes from farm to cup and to connect with a customer who consumes it together with a farmer that grows it. One of the innovations that have also help to achieve this motive is to develop a mobile application that has information to the customers about where their packaged coffee comes from, where it was grown, and ways in which the Company is doing to support farmers in those locations.

Strategic Grid Position Before and After These Technologies Initiative

The Company investing in the new technology resulted in an increase in the wide range of customers where the number through the help of mobile technology changed from ten million to about sixteen million new subscribers. The Company, through the innovation, was able to get the feedback of customers regarding the goods and services they were offering.

Factory New technology is heavy dependence on the cost-effective Strategic The new technology is essential for the strategic plan of the Company

Support The impact of technology change on both operational and strategy is low Turnaround Firms in this category receive considerable support, but they are not dependent on new changes

Recommendations about Future Direction of the Company

I would advise the management of the Company to invest more in new technology change, which could attract more customers and enable the Company to gain a competitive advantage. For the Company to gain a competitive advantage, it must first define its strategy by formulating a different set of activities that aims to create a unique and valuable position in the market. The Company should also invest more in the information system that enables it to interact with customers whenever they are. This is achieved by coming up with lucrative technologies that will allow the firm to access more customers.

Conclusion

The information system technology is one of the essential innovations that various companies are adopting to help them survive in a competing environment. Starbucks Company has not been left behind in coming up with multiple technologies that will enable it to gain a competitive advantage among its competitors. How the Company is addressing Porter’s Five Forces will determine whether it will be able to exist in the future. Starbucks Company has proven to be capable of winning a lot of customers in the industry through measures it has put in place that deals with issues addressed in Porter’s five models. All these new changes the Company has employed its impact will be determined by how well the Company will be able to position itself in the future.

References

Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: A set of industry analysis templates. Competitiveness Review, 24(1), 32-45 http://panmore.com/starbucks-coffee-five-forces-analysis-porters-model

Michael Hoban, (2016) “What Can We Learn From Starbucks’ Supply Chain Management?” blur Blog, blur Group, https://www.maistro.com/procurement/what-can-we-learn-starbucks-supply-chain-management/

Robert Hackett, (2017) “How This Startup Plans to Use Blockchain to Revolutionize the Coffee Supply Chain,” Fortune, October 24, 2017, https://fortune.com/2017/10/24/blockchain-coffee-bext360/