Starbucks can sustain growth by continuing the development of the Starbucks brand image and by increasing its presence in different markets. Starbucks is growing very rapidly and is consistently evaluating new opportunities in its domestic and international retail markets, new specialty sales partners, penetration in the grocery channel and the future potential of its mail order business. As a result, Starbucks should leverage its resources and capabilities and exploit both cost advantages and differentiation advantages in order to achieve its growth objective.
By increasing its cumulative output, Starbucks will be able to reduce cost per unit of output through the efficiencies of the experience curve. Additionally, economies of learning can be realized as repetition reduces costs by decreasing the time required for particular jobs, thus reducing wastes and defects, and improving coordination between jobs. Starbucks specifically built its signature roasting curves through trial and error sessions over time. Utilizing a technically superior process technology and design such as the Starbucks roasting curves that were built into proprietary computer software will also allow Starbucks to minimize costs.
Finally, by extending a nationwide marketing campaign in order to promote brand equity, Starbucks will experience economies of scale within its marketing and advertising activities.
The attraction of differentiation over low cost as a basis for competitive advantage is its potential for sustainability. Starbucks seeks a price premium from differentiation in that at Starbucks it is not just about the coffee, it is about a place, an experience. In analyzing differentiation, Starbucks should look at both the demand-side and the supply-side. For example, on the demand-side Starbucks should evaluate multidimensional scaling to understand customers' perceptions of competing products. Additionally, understanding the role of social and psychological factors allows Starbucks to delve into customers' underlying motivations. Conversely, on the supply-side, Starbucks can use its...