Strategic Leadership

Session 1-4
CASE- STARBUCKS
Company Past Performance:
Profit margin of Starbucks have increased slightly due to increase in prices, but the rotation has
decreased gradually over the years. This shows that the internal factors are not contributing to
incremental ROCE.
Limitations:
Short supply of Arabica beans
Retail locations in A-class cities have been exhausted
Competitors like Second Cup are growing fast
How to grow further is the biggest question right now?
Vale chain analysis is one of the important parameter to determine maximum value addition
activity for a company. It helps to decide which stage of value addition has more revenue
generation for an organization and based on that we can decide our channel partners to finally
deliver our products to customers such as the example of ‘Pajama and Palazzo’ where Pajama had
a comparatively very less price than of Palazzo but with the available piece of cloth the wise
decision will be to make Palazzo and sell it to earn more revenue.

In-Bound Outbound
Farming Roasting Sales/marketing
Logistics Logistics

 It is also very important for an organization to be very clear that where it should be seen in
the value chain where it should not. As in this case we saw that Starbucks had Five Shields
to not to be seen by the farmers directly as the value addition in the whole supply chain to
Starbucks is extremely high in comparison to what farmers were making.

 Large business organizations are more vulnerable against small organizations, if played on
low price strategy such as the low price war between of Tide of P&G (about 7% market
share) and Surf(about 70% market share) of Unilever, in this case Unilever had to suffer
more because of low price entry of Tide. However, in such situation one counter strategy
might be that Unilever should attack P&G on price in some other territory or country.

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 Strategic Leadership
Session 5-8

 A business cannot be at No 1 or No 2 position in the market without any ‘Sustainable

Differentiation’ it has against its competitors. Therefore it is important to keep in mind that
the more the process or services are standardized more easy it is to copy and if the process
and services are the part of culture an organization carries then more difficult it is to copy
by competitors.
 In some jobs we need to keep employee turnover high such as in this case since frontline
employees ‘known Barista here’ have to do same job everyday they used to get bored
(which also happens in the airline industry, we very often notice that air hostesses ‘smile
and gestures’ looks very artificial) and because of that the energy and enthusiasm Barista
need to carry goes down, which has direct effect on customer relationship and service hence
Starbucks used to hire students during their vacation to work for few months.

Corporate Strategy 5 Elements: -

1. Arenas- Where will we be active? (market, product and customer)
2. Differentiators- How will we win? (Price, styling, reliability)
3. Vehicles- How will we get there? (Internal development, JV, strategic alliance)
4. Staging- What will be our speed and sequence of move? (Speed of expansion and
initiatives)
5. Economic logic- How will returns to be obtained? (Economics of scale)

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Strategic Leadership