A Detailed Overview of the Starbucks Corporation

A Detailed Overview of the Starbucks Corporation A focal company is a firm that manages or rules the supply chain, contacts clients directly, and designs the service or goods offered. Starbucks is an example of a focal company. It is a leading retailer and brand of coffee that sells the finest quality and varieties of coffee and related products to consumers worldwide. Starbucks participates in each supply chain process steps, ranging from the coffee beans used to the coffee cups. Therefore, the corporation is in direct contact with over 300,000 coffee farmers and over a million coffee consumers in its operation. This study explores the various issues and challenges faced by Starbucks and provides strategic recommendations.
Challenges and Recommendations
Market Saturation
Rothaermel (2017) gives a detailed overview of the Starbucks Corporation since its first store was opened in 1971 in Seattle. He explains that, as of 2017, Starbucks had over 25,000 stores in 75 countries with annual revenue of $21 billion. However, despite its success, the corporation's stock market valuation dropped by 75% between 2006 and 2008. This downward spiral forced the then retired CEO, Howard Schultz, to return and initiate a successful turnaround. Rothaermel explained the saturation of the American market as a key issue facing Starbucks. Within one year (2015-2016), the entity had opened an additional 804 stores in the U.S., increasing to 15,607.
With this increase, the comparable-store sales rose by only 4%, which is small compared to the number of stores per locality. Additionally, a saturation of the Starbucks market implied there was no more room to open up new stores. Market saturation led to cannibalism, whereby one store hurts the sales of the other. Therefore, the cost of operating the many stores increased while each store's sales decreased or remained constant. To handle market satura...