Sunday, June 12, 2016

Starbucks' Transition from a Blue Ocean to a Red Ocean


              As I was reading “Blue Ocean Strategy” I tried to think about companies that I thought met the criteria of a blue ocean industry.  Starbucks immediately popped into my head with the way they have revolutionized the coffee industry.  Not only have they changed the coffee game in terms of offerings, they have created a coffee culture that many other coffeehouses have tried to imitate.  They have cultivated a community around their stores.  While a lot of people do go to Starbucks for the coffee, many people go for the experience.  Starbucks was able to create an environment in which communities gather around a cup of coffee. You often hear stories about customers who know the baristas on a first name basis.  Starbucks fosters a sense of belonging for customers and it is clear they value the customer experience.  With the pace of life today, it’s nice to know there’s a space where time slows down and conversation and personal interaction is fostered. 

                As Starbucks grew in popularity, other coffee chains popped up in an attempt to capture some of the market share.  As the luxury coffee market changed from a blue ocean, to a red ocean, Starbucks employed many strategies to set itself apart, yet again, from the rest of the competition.  Starbucks is constantly attracting more customers by adding new products to their drinks menus.  As other restaurants, such as Panera, have entered the market Starbucks has had to evolve.  They have increased their offerings to include more baked goods, lunch and breakfast options. 

                Howard Schultz, Starbucks’ CEO, has also made huge strides in improving employee benefits.  Starbucks offers competitive health and retirement benefits to both part and full time employees.  They also offer full college tuition through Arizona State University online.  As social and environmental responsibility is becoming more important to consumers it is essential for companies to be transparent.  Starbucks publishes an annual responsibility report and is very public about the benefits to their employees and sustainable practices.  Schultz recognized that if you treat your employees well, they are more apt to stay with an organization long-term.  This reduces costs associated with turnover and bodes well for the company as the employees become more experienced and vested.  When employees are invested in their organization, they work harder and care more about the job they do.  This contributes to Starbucks’ positive image and further separates it from its competition.

Starbucks is also very intent on utilizing ethically, sustainably grown coffee.  Consumers who are environmentally conscious seek out organizations that source responsibly.  Starbucks has tapped into that market.  They follow the Coffee and Farmer Equity Practice (C.A.F.E.) standards that focus on quality, economic accountability and transparency, social responsibility and environmental leadership. (Starbucks Corporation, 2016)  They also encourage recycling in their stores and are working to bring their locations to LEED certified standards.    

                Most recently Starbucks has been able to stay ahead of the game by utilizing loyalty rewards programs as well as mobile pay through their app.  This type of disruptive strategy has continued to separate Starbucks from its competitors.  Additionally, Starbucks has become a symbol of American culture, and has expanded its reach outside of the U.S.  Schultz has been outspoken about the importance of maintaining the traditions of the various countries in which they operate.  This ties into the value they place on the communities in which the stores are located and the overall experience.  Starbucks has done a good job of navigating the transition from a blue ocean to a red ocean and continues to change to remain the leader of the coffeehouse experience.  



 "Responsibly Grown and Fair Trade Coffee." Starbucks Coffee Company. 2016 Starbucks Corporation, n.d. Web. 12 June 2016. http://www.starbucks.com/responsibility/sourcing/coffee>.           

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