JWI555 Organizational Change and Culture
Professor Leo Giglio
March 15, 2015
Trends and Change: Starbucks 2
Trends and Change: Starbucks
Trends and change go hand in hand. Trends are impactful scenarios that we need to be aware of while change often times take place; positioning an organization as a trendsetter. This paper explains how Starbuck’s major trends will bring about change in the next ten years.
Starbucks runs coffeeshops, and therefore is beholden to a number of different trends. First is the rise of economies elsewhere around the world, in particular the BRIC countries. The second trend is climate change. The third trend is the rapid pace of technological change, in particular mobile and the post-mobile
Internet of things. A fourth trend is maturation of the domestic market, and a fifth trend for Starbucks is ongoing attempts by competitors to win back market share that they have lost to Starbucks in recent years.
The first trend is the emergence of developing world economies. While many major economies are in a state of slow growth, or no growth at all, many emerging market economies are growing quickly. There are a lot of companies that rightly see this as a tremendous opportunity and Starbucks is one of them. The company has been active in the Chinese market for several years already, and its
CEO has gone on record touting China as the future of the company. The company has tailored its offerings to meet the needs of this large and rapidlygrowing market, making it one of the most successful foreign companies in China today (Burkitt, 2012).
Trends and Change: Starbucks 3
Furthermore, India is another market that has a large population and that has seen rapid economic growth. India has some coffee culture in the south, but in the north it is a tea-drinking country, much like China is. Starbucks nevertheless has ambitious plans to pursue more growth in India, a market it just entered recently
(Shukla and Balasubramanyam, 2012).
The implication of these two trends is that Starbucks must divert a substantial amount of resources, both capital and human resources, to building out its presence in these massive markets as quickly as possible, in order to gain advantage over competitors, many of which have the same ideas about exploiting these opportunities. While this may leave fewer resources for the domestic market, the company feels that this is a reasonable trade-off.
The second major trend is climate change. This affects businesses in a lot of ways, but the threat to Starbucks is existential in nature, because of the harm climate change is doing to coffee crops around the world (Carrington, 2014).
Initially the challenge for Starbucks will be to access supply, which it can do by outbidding rivals, many of whom compete on low cost strategies. Starbucks, on the other hand, has superior pricing power over its customers, and is therefore in a better position to pass higher input costs onto its customers. In addition, the company can funnel some its capital into exploration of coffee strains that are able to better withstand the new climate reality. Most of the world's coffee today comes from two strains that originated in Ethiopia two millennia ago (Carrington, 2014).
There are hundreds of unexplored strains in Ethiopia, and it is hoped that some can
Trends and Change: Starbucks 4 be crossbred with Arabica to produce a hardier plant that still delivers great-tasting coffee. But the effort will be expensive. This is an area where Starbucks should plan to outmaneuver its competitors – it might even be able to patent such a powerful new coffee strain, which would really give it a competitive advantage.
The third trend is the rapid pace of technological change. This trend has resulted in a generation of completely wired consumers, and they are only going to become more wired. This creates some interesting marketing opportunities. While
Starbucks has some mobile marketing,