Can Starbucks Create Value Through Its Diversification Strategy?

1. Can Starbucks create value through its diversification strategy? Will management be able to create valuable, rare, and imperfectly imitable economies of scope through its expansion into juice, tea, pastry, and new distribution channels or will the expansion be the downfall of Starbucks as it was in 2008? 2. Does Starbucks have a core competency in establishing differentiated, premium products in “previously commoditized” markets or is this merely an “invented competency?” 3. Do competitors represent a significant threat to Starbucks competitive advantage through their additions of customized, higher quality coffees to their menus? 4. Should Alex Poole sell his Grandma’s Starbucks stock or keep it in her portfolio?

Starbucks is the leading coffeehouse chain in the world. One can consider coffee as the main product of the company. However, Starbucks is a company that is well known for its diversifying strategies. The company has been implementing a corporate diversifying strategy that is allowing the company to introduce new products in the business. It has been seen that Starbucks has introduced many new products for its customers; like juice, tea, pastry and other different beverages. In addition, the diversifying strategy of Starbucks is helping the company to market these new products in a proper and effective way. Hence, it can be said that the diversification strategy of Starbucks will create value for the company.

As per the above discussion, it can be said that the diversification strategy of Starbucks helps the company to introduce new products juice, tea, pastry and new distribution channels. In the year of 2008, the business of Starbucks failed to generate the expected revenue and profit for the organization. However, this time, the diversifying strategy of the company is more effective than before as the company is introducing attractive products. These products create value; they are rare and hard to imitate (Hill, Jones & Schilling, 2014).

It is not easy for a company to introduce new premium quality of products in a previously commoditized market. This process demands major core competencies that differentiate the company with the other companies. In the case of Starbucks, the company has some major core competencies.