Starbucks was established in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker in Seattle, Washington (Sacks, 2014). It is a US-based coffee house chain. As compared to competitors, the company focuses extensively on the quality of coffee by procuring high-quality coffee beans directly from farmers. The company also boasts of the unique customer experience it offers called the Starbucks experience. The company went international in 1996 when it opened its first outlet outside of the United States in Tokyo, Japan. Since then, the company has expanded across the globe and has more than 30,000 outlets now. More than half of these are operated directly by Starbucks while the rest are licensed or franchised. In 2018, the company earned revenue of $24.71 billion and had more than 291,000 employees (Starbucks, 2019).
Following are the four dimensions of the Ansoff Matrix for Starbucks:
Market Penetration
Starbucks continues to penetrate its existing markets by increasing the sales of its existing products. Starbucks ensures that the company continues to offer the same quality and customer experience at all of its outlets across the globe to retain its customer base. Over the years, it has also acquired several smaller competitors in certain markets to gain greater market share. It promotes users to drink more coffee by creating ease and comfort for them. The launch of the Starbucks app is one such example where customers can place an order from anywhere and have their coffee ready when they arrive at Starbucks. They don’t have to wait in queues and can simply pay and take their cup. They can also pay through their app. The company has also started selling its processed coffee beans at selected retailers to increase its sales. The company also offers customized services to customers, such as allowing them to get their names written on their coffee. In each of these cases, the intention is to promote sales in the existing market.
Market Development
Market development is carried out by Starbucks by launching its existing products in new markets. Starbucks does this by opening new outlets or allowing third parties to open Starbucks outlets under a license or franchise agreement in the United States and other geographical markets. These include China, India, Brazil, Pakistan, and various other nations. The company also offers different coffee cup sizes in these markets to match the consumption patterns of the local customers. At the start, Starbucks also offers free samples to get started and develop repute in the market. The coffee chain started its first international market development in 1996 and has continued it aggressively. A large chunk of the revenue the company makes comes from the international markets outside of the United States (Madan, 2014). Recent surveys show that the United States market is approaching saturation and Starbucks has to rely extensively on market development to further grow and increase sales.
Product Development
Starbucks regularly launches new products in its existing markets as a part of its product development strategy. Starbucks does this for all of the items on its menu. For example, it launches new flavored pies, cookies, sandwiches, and also premium flavors of coffee regularly. It launches seasonal treats as well such as pumpkin pie in the fall. Whenever it launches a new product, free samples are floated for a few days before the product goes on sale to help customers get acquainted with the product. Based on consumer feedback, it may adjust flavors to suit consumer requirements. The company also improves existing products by offering more flavors. The majority of the new products the company launches are released gradually across all of the markets the company serves.
Diversification
Starbucks already has hold over the complete supply chain of its products from farmers to consumers and has little room for vertical integration. However, it can work on horizontal diversification. Starbucks has plans in place to launch a new food range to diversify through new products in new markets. The meals will be served at Starbucks as a part of the coffee house regular menu. This will attract consumers to visit Starbucks for breakfast, lunch, and dinner. However, this is a risky strategy as Starbucks lacks experience in this field and it will be a new venture for it.
References
Madan, N., 2014. Starbucks Strategic Analysis. [Online] Available at: https://www.slideshare.net/NavneetMadan/starbucks-strategic-analysis-41569622 [Accessed 24 Dec. 2019].
Sacks, D., 2014. The Multimillion Dollar Quest To Brew The Perfect Cup Of Coffee. [Online] Available at: https://www.fastcompany.com/3033306/the-multimillion-dollar-quest-to-brew-the-perfect-cup-of-coffee [Accessed 24 Dec. 2019].
Starbucks, 2019. Annual Report 2018. [Online] Available at: https://s22.q4cdn.com/869488222/files/doc_financials/annual/2018/2018-Annual-Report.pdf [Accessed 24 Dec. 2019].