STRATEGY ANALYSIS AND EVALUATION Essay Example | Topics and Well Written Essays - 2250 words

STRATEGY ANALYSIS AND EVALUATION - Essay Example A company can gain a competitive advantage by optimizing the coordination of the value chain to create value for services and products, which are more than what it would cost to perform value activities. Thus, a company could create additional value without necessarily having to increase costs or amount of producing these products or services. The customers then pay for the added value. Starbuck’s strategy will also be analyzed and evaluated using Porter’s generic strategy, which involve focus, differentiation, and cost leadership. Cost leadership involves pursuing reduction of costs through a firm control of overheads, sacrificing R&D, and avoiding less profitable and marginal customers. Differentiation involves coming up with a unique product in the market that could be customer service, dealer networks, and brand image. Focus involves targeting a specific group, segment, or geographic market of a product line. Starbucks today would seem to be pursuing differentiation as a generic strategy, although when it started out, its generic strategy was more the strategy of focus emphasizing more on differentiation in a specific segment of the target consumer. In this case, Porter’s generic model will analyze and evaluate the strategies that Starbucks uses in gaining a competitive advantage while Porter’s generic strategies will examine how they utilize these competitive advantages. Analysis and Evaluation of Starbuck’s Using Generic Strategy Model On top of an established strategy based on competence, which is a major contributor to the success enjoyed by Starbuck’s, the company utilizes other strategies so as to maintain a competitive advantage over its main competitors (Thompson & Arsel, 2009: p238). According to Porter, a company has at its disposal three basic strategies that it can use as leverage in its industry. These include focus, differentiation, and cost leadership. Cost leadership is a strategy that aims to produc e low cost products that are of high quality while also reducing the firm’s operational costs. However, Starbucks does not utilize this strategy since its products are high cost. A company can also use the strategy of differentiation that entails the creation of services and products that are unique. The firm’s clients then perceive these services or products as unique and an addition of value, which allows the company to charge premium prices on the services and products. Meanwhile, the focus generic strategy involves specific sections or segments of consumers and can be combined with the cost leadership or differentiation strategies (Thompson & Arsel, 2009: p239). Starbucks pursues the focus on generic strategy within their specific target client segment with added emphasis in and the combination of differentiation generic strategy. Starbucks utilizes the generic strategy of focus with a target base of consumers that is composed of educated and wealthy drinkers of co ffee that are willing to part with more money for quality customer service and products (Smith, 2011: p505). Starbucks aims at a specific and narrow portion of the coffee industry’s consumers. Therefore, Starbucks’ strategy lays focus on the segment with its services and products being especially designed to meet the wants and needs of this segment of consumer. In terms of integrating the differentiation strategy with that of focus, the firm’s brand is presented with various characteristics that are diverse. Other