Starbucks is the largest coffeehouse chain in the world, way ahead of competitors like Dunkin’ Donuts and McCafé. A great deal of Starbucks’ expansion is due to its use of innovative strategies in order to attract and keep the loyalty of customers.
Therefore, you may wonder what Starbucks’ competitive advantages are that put them so far ahead of their nearest rivals. If you’d like to find out, keep reading!
Starbucks Competitive Advantage
Starbucks’ competitive advantage is based on its strategy of product differentiation, which makes the brand stand out from its rivals. Such strategies include the concept of the Third Place environment, quality products, constant innovation with new menu items, and the use of technology to connect with customers. As well, Starbucks connects directly with growers and suppliers to maintain quality control.
If you have more questions about how Starbucks is different from its competition, what its competitive strategy is, and more, read on to find the answers below!
1. The Starbucks Experience
Former CEO Howard Schultz had a vision of Starbucks stores as a Third Place where people could meet, relax, work, or study in comfortable, welcoming surroundings.
Customers love the concept of the Starbucks experience, which includes the ambiance as well as the coffee and the food, supported by the policy that you don’t have to purchase anything from the cafe in order to sit and enjoy the atmosphere.
The Third Place policy therefore sets Starbucks apart from other major coffee chains such as Dunkin’ Donuts and McCafé, which have more of a fast-food atmosphere and are not over-focused on creating a full aesthetic experience.
2. Starbucks Offers Quality Products
Starbucks coffee and drinks have always been premium products, and customers are generally willing to pay higher prices for quality.
Starbucks only uses the highest quality Arabica coffee beans. Also, the equipment used to brew coffee is of the best quality, such as the Swiss-made Mastrena espresso machines and the Clover single brew used in Starbucks stores.
In fact, Howard Schultz loved the taste of Clover-brewed coffee so much that Starbucks acquired the parent company for the brand and now makes its own Clover coffee brewing machines.
In addition to the high-quality coffee, all the products, including tea, chocolate drinks, fruit juices, and food items at Starbucks, use high-quality and ethically sourced ingredients.
3. Starbucks Stores Are Strategically Located
Starbucks stores are strategically located in neighborhoods as well as high-traffic areas like downtown centers, shopping malls, and busy streets.
The choice of location for a Starbucks store helps to ensure that the stores will always be busy at any time during the day. However, at times Starbucks will also set aside this trend and pick less busy or upscale locations.
Starbucks has also opened stores in lower-income neighborhoods, where they may not see as much traffic, in order to help efforts to revitalize local communities.
4. Starbucks Has Embraced Innovation
Starbucks has constantly innovated its menu of coffees, drinks, and food. Drinks like the Frappuccino, Pumpkin Spice Latte, cold brews, Refreshers, and more offer customers new tastes all the time.
New drinks and food items are introduced every season, and the drinks that become popular usually gain a space on the permanent menu.
Starbucks also responds to changing customer preferences by adding new items to the menu, like plant-based, dairy-free, and gluten-free food and drinks.
For example, they have added non-dairy milk like soymilk, almond milk, oat milk, and coconut milk as alternatives to cow’s milk, available in almost all Starbucks drinks.
5. Starbucks Uses Technology To Connect With Customers
Starbucks has used new internet technology to connect with customers in a very direct way.
For example, the Starbucks Rewards loyalty program, which customers can join online or by downloading the Starbucks mobile app, has over 11 million members.
Rewards members can order ahead using their accounts, which cuts down on waiting times in line at the store or the drive-thru.
Additionally, the Starbucks app and Rewards program are very effective in communicating with customers and announcing new promotions and products.
6. Starbucks Has a Direct Connection To Growers and Suppliers
Starbucks has direct and long-term connections with the people who grow the coffee, tea, and cocoa used in its stores as well as with other suppliers.
By choosing a more hands-on approach to gaining supply, Starbucks gains a competitive advantage because it can avoid fluctuations in the supply of its basic ingredients like coffee, tea, and cocoa.
7. The Starbucks Global Supply Chain Is Vertically Integrated
The Starbucks global supply chain is vertically integrated, which means that it has direct control of every stage in moving coffee beans from the farm to the store.
In other words, there are no middlemen or third parties involved, from the farms where the coffee is grown, to transportation on ships to roasting facilities in the US and Europe, to distribution in stores worldwide.
Overall, this method makes the whole company supply chain much more efficient and lets Starbucks maintain quality control for all its products.
8. Starbucks Invests in Its Employees
By treating its employees well and giving them good wages, and benefits, Starbucks lays the groundwork for success. In fact, Starbucks spends more on healthcare for employees than on coffee beans, but it’s an investment that pays off, which lowers attrition rates.
Starbucks also spends a lot of money and effort on training staff when they initially join the company, as well as throughout their careers, giving the company a skilled and committed workforce.
Additionally, Starbucks employees get stock options as part of their pay package, giving them an actual stake in the company.
9. Starbucks Does Not Have Any Franchises
Unlike its major rivals, Dunkin’ Donuts and McDonald’s, Starbucks does not have any franchise stores.
Howard Schultz saw franchises as middlemen who would obstruct a direct connection between Starbucks and its customers.
Therefore, while Starbucks does have some licensed stores, it doesn’t have franchise stores, allowing the company to maintain quality and a uniform customer experience in all its stores.
What Is Starbucks’ Generic Strategy?
There are three kinds of generic strategies used by companies to gain a competitive advantage: cost leadership, product differentiation, and focus, Starbucks’ competitive strategy has been product differentiation to set itself apart from the competition.
To succeed, a strategy of product differentiation must use innovation to deliver premium products to customers, who will come to identify the brand with said products.
This concept also requires a highly effective marketing strategy to communicate with customers about their products and why they’re better than other brands.
Starbucks has used this strategy with great success, as it’s come to be associated with premium products and a welcoming space where customers can sit in comfort to drink their coffee, study, work, or meet with friends.
Additionally, Starbucks’ competitive advantage is based on other factors such as innovation, the use of technology across all operations, and corporate social and environmental responsibility.
How Is Starbucks Different From Its Competitors?
One thing that’s unique about Starbucks’ competitive strategy is that it doesn’t always follow conventional wisdom.
For example, instead of focusing on the bottom line to the exclusion of all else, Starbucks lives up to its commitment to social and environmental responsibility.
In other words, Starbucks follows ethical and sustainable sourcing practices, which may lead to higher prices. As well the company follows through on commitments to invest in employees and local communities.
However, in order to better understand what makes Starbucks different from its competitors, it’s important to look at the company’s strategies in further detail, such as the following:
To learn more, you can also see our posts on the most popular Starbucks drinks, Starbucks’ biggest competitors, and why Starbucks coffee tastes burnt.
