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Starbucks – Valuation Case Solution & Answer

Starbucks – Valuation Case Solution

            The bargaining power of supplier is low since, there are numerous supplier which are supplying goods to the industry. Moreover, the suppliers have low power to bargain due to, high availability of similar product suppliers. This lowers their ability to bargain with companies that operate in this industry. Moreover, the industry contributes a big portion in sales for suppliers, which also decreases their power to bargain. Furthermore, the suppliers earn a quantum portion of their profits from the industry, which gives them an edge over suppliers. Afterwards, there is a low threat of forward integrations. The suppliers are happy with their current business and are not willing to expand forward. In a nutshell, it can be concluded that the overall power of suppliers to bargain with industry members is very low due to the discussed factors above.

Opportunities and Risks

            There are several opportunities for the industry and particularly for Starbucks. The major opportunity for the industry is that there is a growing trend in the region to buy food while shopping or hanging out. Furthermore, the youth is now getting more addicted to coffee and the coffee industry already has a wonderful sign and brand name to serve the respective target market. Furthermore, the industry members including Starbucks can diversify their portfolio by entering in to related businesses. Lastly, the players of the industry can also enter into Asian Pacific markets coupled with other potentially profitable regions worldwide.

            On the other hand, the industry also has some risks alongside their potential opportunities. The first threat is the growin and fierce competition in the industry. However, there are several coffee makers which are competing on the basis of price. Another major threat is the imitation since, every innovative idea or practice of differentiation can easily be imitated. It can be said that, as the industry has potential opportunities along with the risks at the same time. (MindTools, SWOT analysis , 2014)

OPERATIONS MANAGEMENT AND SUPPLY RISK:

            The operational efficiency of the industry members especially Starbucks is tremendous. Since, the industry members purchase best quality raw materials and treating it carefully in a healthy and safe environment before serving it its final form. However, the industry members are offering a more for less value proposition. Since, the industry members are charging higher prices for better quality products.

MARKETING MANAGEMENT AND DEMAND RISK:

Product

            Starbucks’ main product is coffee. However, the company also deals in other hot, and cold beverages alongside other food products, on a broader scale, the product of their industry is food. Particularly in Starbuck’s case, the company is offering higher quality products to provide its customers the crème-de-la-crème quality products and serve them in a friendly manner. The business of the industry is said to be a hybrid business (a combination of product and service)

Price

            The pricing strategy of Starbucks is slightly different from other industry players; since the target market of the company is very concentrated, they are targeting young people in particular. Therefore, the pricing of the company is quite high when compared to its competitors. But still, the quality and value of the product is higher than the price.

Place

            There are several places worldwide where the company is serving, but the company’s base, is America. Moreover they have many stores there from where they serve their customers. However, the company usually selects spots, from where it can easily reach its target market……………..

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