Gordon Bowker, Jerry Baldwin and Zev Siegal founded the Starbucks Corporation in Seattle, Washington. The company expanded and greatly diversified when Howard Schultz joined it. Although after being unable to convince the founders on opening an Italian style espresso bar, he left the company and made a new one.
Due to his success, he bought Starbucks from its founders. Later in 20 years, the company experienced great expansions both local and international. Starbucks went public in 1992 and by 2007; it had about 115,000 employees and sales of almost 9.5 billion.
Almost a decade ago there was a handful of options to choose from for having a cup of coffee, but these days there are dozens of ways to have it. The business has grown to be a multi-billion dollar business.
The two biggest players in this market are Starbucks and Dunkin Donuts (DD), between them are more than 31000 locations worldwide. Dunkin Donuts was founded 21 years before Starbucks and offered foods like bagels and egg sandwiches, and that was until Starbucks entered with a torrid growth, pushed DD to introduce products at a much faster rate.
For Example Starbucks was first to add a frozen coffee drink and debit coffee card, and later DD followed.
Both are trying to hit customers wherever they are, and in this race, Starbucks has certainly won as it could be found on every corner and DD is trying to catch up to that. Comparatively, Starbucks owns more than 56% of the outlets in the industry. Starbucks has expanded into 65, and DD went on to 33 countries. The two companies together own 60% of the total coffee market.
These days having coffee involves much more than just drinking a cup, the atmosphere, ambiance, music and other facilities and services also count, to have a competitive advantage on rivals. In this context, Starbucks has been investing more, as it has made partnerships with Apple and Hewlett Packard for providing music download services in its stores.
Both use a more differentiated approach in marketing themselves as both have very distinct brand identities. DD is having an orange and pink logo which can also be seen in the atmosphere inside the outlet and compared with the Starbucks more upscale looking like west coast player.
Furthermore, both have distinctive word of mouth, holistic brand and a more classic advertisement. Both of their approaches have proven to be successful in the long run. In the midst of challenges, both brands show continuous growth and remain relevant.
Both brands are ways away from each other; however, they still share some similarities. Both of them began as regional brands, and both won the hearts of the locals before going country wide and later worldwide. Japan acted as the first international stop for both companies.
Starbucks has successfully made a connection with its customers and made an image in the market. It also has determined staff/employees that are referred to as the brand ambassadors. Starbucks is also socially strong than Dunkin Donuts as it has a much wider spectrum of fans and followers on the popular sites like Facebook and Twitter.
In conclusion; Starbucks is much better and a smarter brand than Dunkin Donuts, who is acting just like a follower. Starbuck should focus on the opportunities that prevail in the market both locally and internationally to make its competitive advantage stronger.
The strategic management specialist, Michael Porter devised three basic generic strategies; the differentiation strategy, cost leadership, and the focus strategy. If these strategies are implemented in the best manner, then they can create a strong and sustainable competitive advantage for the company. In this case, cost leadership and the product differentiation are mutually exclusive; therefore, each can choose only one as their overall business strategy.
The strategy that Starbucks is pursuing is a differentiation strategy to attract customers from its rivals. They pride themselves on the atmosphere that they provide in their outlet which invites the customers to enjoy their stay while having coffee with services like reading, working, chatting or just relaxation. They have installed modern and environmentally friendly equipment to be comfortable and unique………………..
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