My Paper
Introduction
A competitive advantage denotes a firm 's ability to achieve market and financial superiority over its competitors (Collier, 2013). To obtain a competitive advantage a company should outperform others in areas such as productivity, quality, price, service, technology, and/or a higher profit. Starbucks coffee company is a prime example of a business who has achieved a widely recognized competitive advantage in their industry. The following research described in this paper was written to give a clear picture of the competitive advantage of Starbucks.
Cost & Price Strategy Traditionally, Starbucks has held on to a very precise pricing strategy. The firm has been perceived by consumers as selling products priced for quality. The target market for the brand is one that will spend the difference for a Starbucks coffee over its discount counterparts, because those individuals are willing to pay for the quality that comes along with the brand name. For in-house products and specialty beverages, Starbucks justifies its steeper pricing by capitalizing on product differentiation and higher quality standards. As a result, the customers who purchase the brand are loyal, returning customers and the price sensitive consumers are weeded out. While the strategy for in-house product pricing may narrow the market for Starbucks, it helps the firm to establish brand equity and customer loyalty (Dawson, 2013). In contrast to the pricing for in-house products, in 2013 the company has implemented a new pricing strategy for their packaged coffee. The company has adopted a more competitive pricing strategy -- lowering the cost by 10% (Zimichi, 2013). Lowering the cost of the packaged products to value prices gives the company a more vast market. Due to the lower prices, Starbucks has now opened up an opportunity to compete with its competition not only by quality, but by pricing as well.
Quality
According to the Starbucks mission statement, the company strives to
A competitive advantage denotes a firm 's ability to achieve market and financial superiority over its competitors (Collier, 2013). To obtain a competitive advantage a company should outperform others in areas such as productivity, quality, price, service, technology, and/or a higher profit. Starbucks coffee company is a prime example of a business who has achieved a widely recognized competitive advantage in their industry. The following research described in this paper was written to give a clear picture of the competitive advantage of Starbucks.
Cost & Price Strategy Traditionally, Starbucks has held on to a very precise pricing strategy. The firm has been perceived by consumers as selling products priced for quality. The target market for the brand is one that will spend the difference for a Starbucks coffee over its discount counterparts, because those individuals are willing to pay for the quality that comes along with the brand name. For in-house products and specialty beverages, Starbucks justifies its steeper pricing by capitalizing on product differentiation and higher quality standards. As a result, the customers who purchase the brand are loyal, returning customers and the price sensitive consumers are weeded out. While the strategy for in-house product pricing may narrow the market for Starbucks, it helps the firm to establish brand equity and customer loyalty (Dawson, 2013). In contrast to the pricing for in-house products, in 2013 the company has implemented a new pricing strategy for their packaged coffee. The company has adopted a more competitive pricing strategy -- lowering the cost by 10% (Zimichi, 2013). Lowering the cost of the packaged products to value prices gives the company a more vast market. Due to the lower prices, Starbucks has now opened up an opportunity to compete with its competition not only by quality, but by pricing as well.
Quality
According to the Starbucks mission statement, the company strives to
References: Batsell, J. (2004, September 20). Starbucks ' goals rely on quality, quantity: [Fourth Edition]. Retrieved from Seatle Times: http://search.proquest.com.marcy.baystate.edu/docview/383120859/1405884DBC72CD48AC5/5?accountid=46662 Business Wire. (2004, October 14). Starbucks Strong Innovation Pipeline Continues to Surprise and Delight; Innovation Apparent Throughout All Areas of Business Including Store Concepts and Retail Products. Retrieved from Business Wire: http://www.businesswire.com/news/home/20041014005727/en/Starbucks-Strong-Innovation-Pipeline-Continues-Surprise-Delight Business Wire. (2006, February 8). Starbucks Strengthens Its Leadership Position and Commitment to Innovation in the Ready-To-Drink Category in the U.S.; Introduction of Starbucks Iced Coffee Brings New Segment to U.S. Ready-To-Drink Category. Retrieved from Business Wire: http://www.businesswire.com/news/home/20060208005858/en/Starbucks-Strengthens-Leadership-Position-Commitment-Innovation-Ready-To-Drink Collier, D. A. (2013). OM4. Mason: South-Western Cengage Learning. Dawson, T. (2013, July 30). How Starbucks Uses Pricing Strategy for Profit Maximization. Retrieved from Price Intelligently: http://blog.priceintelligently.com/blog/bid/184451/How-Starbucks-Uses-Pricing-Strategy-for-Profit-Maximization Lepore, M. (2011, March 25). 15 Facts About Starbucks That Will Blow Your Mind. Retrieved from The Business Insider: http://www.businessinsider.com/15-facts-about-starbucks-that-will-blow-your-mind-2011-3?op=1 Starbucks Corporation. (2013). Retrieved from www.starbucks.com Zhang, Z. (2012, November 3). Study on Competitive Advantages of Starbucks Surfers’ Paradise Coffee Shop. Retrieved from CS Canada Management Science and Engineering: http://cscanada.net/index.php/mse/article/view/j.mse.1913035X20120603.1788/2993 Zimichi, F. (2013, August 26). Starbucks Plans to Beat the Competition with Product Pricing Strategy. Retrieved from Clear ci>Technology to Compete: http://www.clearci.com/blog/bid/178068/%20Starbucks-Plans-to-Beat-the-Competition-with-Product-Pricing-Strategy