Strategic Alternatives Assessment

Strategic Alternatives Assessment

The purpose of this paper is to examine the strategic environment of Starbucks in order to recommend alternative strategies that the company can use to improve its performance. The paper examines the strengths and weaknesses of the company’s internal strategic environment to determine the most feasible value-enhancing strategic alternatives for the company.

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SWOT Analysis

Strengths

One of the biggest strengths that gives Starbucks an advantage over its competitors is its strong brand image. Starbucks is one of the most recognized coffee brands in the world. The strong brand image gives Starbucks a competitive edge because it makes it easier for the company to build a population of loyal customers. This company also benefits from the extensive global supply that it has developed over the years. The company has a global network of high-quality suppliers that give it access to high-quality products for its customers. Lastly, Starbucks has the advantage of being a highly diversified business. The company has diversified through the development of several subsidiaries. The diversification increases its sources of income.

Weaknesses

Starbucks is weakened by the fact that it has an imitable product. The barriers to entry into the coffee business are relatively low. There are many smaller and large-sized businesses with the capability to provide coffee products whose quality matches that of Starbucks. The low differentiation of the product reduces this company’s competitive advantage. Additionally, Starbucks is relatively expensive compared to its competitors. The lack of a cost advantage causes a lot of customers to look for similar alternatives from other companies.

Opportunities

Starbucks has great opportunities to expand in developing and emerging markets. There is a growing market of people in the developing and emerging economies who want to purchase from popular global brands. The expansion of this company to such markets is likely to be successful. Starbucks also has opportunities for further product differentiation to make its brand stronger. Creating more unique products can help to create a competitive edge over other similar companies.

Threats

High competition from cheaper coffee sellers is the main threat that Starbucks currently faces. The company is relatively expensive, and there are companies with similar quality products that some customers may want to get more value from. This company also faces the risk of losing value due to excess imitation. Its business model is highly imitable, which easily decreases its differentiation and competitive advantage.

Strategic Alternatives

There are several strategic alternatives that Starbucks can explore to improve its internal and external performance. One of the strategic alternatives for the company is to invest in high innovation in the area of product development. One of the main challenges that the company faces is the high imitability of its products. Being highly innovative will help Starbucks to always be leading in the differentiation of products. This strategy can help to increase the company’s differentiation advantage. The company can sell more when it always has unique products that other businesses are yet to imitate. The limitation of this strategy is that it requires very high investments. Being consistently innovative can be challenging and expensive to maintain.

Additionally, Starbucks needs to expand to developing and emerging markets. This strategy helps with the company’s internal and external growth. The expansion will significantly increase the company’s sales revenue and global market share. Additionally, the strategy helps to expand the brand further to new markets and develop new customer relationships that will help make it a stronger global competitor. The main drawback of this strategy is the high risks associated with entering new markets. There may be unexpected macro-environmental risks that affect the company’s performance in new markets. However, comprehensive environmental analysis before expansion can help to minimize this risk.

Starbucks should also consider changing its pricing strategy to attract more customers. This company is facing a big threat from businesses with more attractive prices. Different pricing strategies can help to make Starbucks customers feel like they are getting value for money. For instance, bundled pricing can help to attract more customers. Bundle pricing is a strategy for packaging a set of goods for a lower price than when the goods are bought separately. This kind of pricing can help to promote sales because it helps customers feel like they are getting value for their money (Schindler & Schindler, 2011). The main drawback of this strategy is that it only applies to promotions. This strategy still does not address the consistent sale of expensive coffee products.

Using the Decision Matrix to Identify the Leading Alternative

A decision matrix is a decision-making tool that evaluates and prioritizes decisions based on a list of weighted criteria that help to determine the most important decisions (Salmerona & Smarandacheb, 2010). In a world of limited resources, it is important to evaluate strategic decisions to determine the ones with the most benefit to the company. This evaluation helps to make investment decisions that will have the best impact on the company. The following is a decision analysis of the recommended Starbucks strategic alternatives to determine the leading alternative.

The weighted decision matrix above shows that the leading strategic alternative for Starbucks is investing in innovation. Based on the developed criteria, this strategy will likely have the most benefit to the company. The matrix uses four main criteria, including the expected impact of the strategy on the company, the cost of implementing the strategy, the environmental uncertainty associated with the strategy, and the complexity of implementing the strategy. The impact has the highest weight because the best strategy is that which has the most positive impact on the business’s performance. The cost has the second-highest weight because the strategy has to make financial sense to be effective. The environmental uncertainty has an average rating because these uncertainties can be analyzed and planned for. Lastly, the complexity of the implementation of the strategy project has the lowest rating because, regardless of the complexity, the project will be implemented if its expected result is positive. This matrix can be an effective tool for strategic decision-making. However, the decision-maker needs to consider that the weighted criteria is developed based on personal perception of the impact of the components. There is a possibility that the estimations are not accurate and will impact the effectiveness of the decisions.

Factors That Might Inhibit the Optimal Strategic Alternative

One of the factors that might inhibit the implementation of the strategic alternative is resource allocation. Resource limitation is one of the leading reasons for strategic failure. A lot of strategic alternatives do not achieve success because of the lack of adequate investment in their implementation. A lot of resources are needed for the improvement of organizational innovation. Inadequate allocation of innovation can affect the strategy’s implementation success.

The innovation of the innovation improvement strategy can also fail due to organizational management issues. The management culture can affect the development of an innovation environment. For instance, poor communication and leadership cultures can limit innovation. Poor communication inhibits the sharing of ideas to make an innovative organization (Petrakis, Kostis, & Valsamis, 2015). The solution to such challenges is to establish good leadership to guide the implementation of the strategy. Effective leaders can help to create an innovation culture by enhancing communication, engaging employees, and effectively compensating the actions of the employees.

Elements of Organizational Growth

One factor that can be used to indicate growth is increasing revenue. An organization can achieve growth in terms of the sales that it makes within its currently existing size (Castaño et al., 2016). One of the ways that it can achieve this kind of growth is by developing better customer relationships. Good customer relationships encourage people to purchase more from a brand. Therefore, they can help to increase the sales made by the company.

References

Castaño, M. S., Méndez, M. T., & Galindo, M. Á. (2016). Innovation, internationalization and business-growth expectations among entrepreneurs in the services sector. Journal of Business Research, 69(5), 1690-1695.

Petrakis, P. E., Kostis, P. C., & Valsamis, D. G. (2015). Innovation and competitiveness: Culture as a long-term strategic instrument during the European Great Recession. Journal of Business Research, 68(7), 1436-1438.

Salmerona, J. L., & Smarandacheb, F. (2010). Redesigning Decision Matrix Method with an indeterminacy-based inference process. Multispace and Multistructure. Neutrosophic Transdisciplinarity (100 Collected Papers of Sciences), 4, 151.

Schindler, R. M., & Schindler, R. (2011). Pricing strategies: A marketing approach. Sage.

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Strategic Alternatives Assessment

The purpose of this assignment is to analyze a company’s strengths and weaknesses in order to recommend feasible value-enhancing alternatives.

Consider the publicly traded company your CLC group analyzed in the Environmental and Industry Analysis assignment (Starbucks). In a paper of 1,000-1,200 words, discuss potential growth opportunities and strategies for your selected company and compare the advantages and disadvantages of each opportunity.

1. Conduct a SWOT analysis for your selected company and discuss your findings. What advantages does your company have over its competition? What opportunities exist in the industry from which your
   

   Strategic Alternatives Assessment

   company can benefit? Who is your company’s competition, and what types of risks might they pose? What weak areas could your company improve to compete with its strongest competitors?

2. Identify strategic alternatives that create value for the company. Which ones are focused on internal growth and what do they offer to the company? What are the drawbacks of these strategies? Which ones are focused on external growth and what do they offer the company? What are the drawbacks of these strategies?
3. How would you use a decision matrix to identify the leading alternative? Explain how you determined the values used to distinguish between each option. What about the matrix, if anything, may be limiting in its use value to an analyst or decision maker?
4. What factors might inhibit the success of the optimal strategic alternative identified? How can the issues you identified be addressed and corrected?
5. Growing an organization is not always about increasing the size of the firm. If expansion is not the main focus, what other elements lend themselves to growth of the firm? How might each be achieved?

You will be required to incorporate instructor feedback from this paper into the Assessing and Managing Risk assignment in Topic 7.

Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.