Starbucks

StarDucks is a company that has achieved ^r-o-.vth in many different ways, When Howard Schuttz. Starbucks' CEQ until 2000. came to ttie company in 19B2. lie recognized an unfilled niche for coles serving gourmet coffee directly to customers. This became Starbucks' oiarket-pcnelratiun straiegy. and helped the company attain a loyal customer Dase in Seaffle.The market-development strategy matted the next phase in Starbucks' growth: It applied (re some successful Formula tfiat had worked wonders in Seattle, first to other cites In the Pacific Mortliwcsl. (hen itirotigfieut North America, and finally. across Itic globe. Once the company established itself as a presence in thousands o< cities internationally, Starbucks sought tu increase Ihe number of purchases by listing customers with a product-development strategy that lad to new >n-store merchandise. including cgmpilg-CDs. a Startmictas Due!2o Visa card ffia! aJtotvs customers to teceive potnis ioivard Startup ptricfwses whenever I hey use il. and high-speed '.virctcss Internet access at thousands of Starbucks' HotSpots" Ihrough a deal with T-Mobite. Finally. Starbucks pursued diversification into grocery store aisles with Frappuccino" bottled ■ drinks. Starbucks brand ice cream, and lite purchase of tea retailer Tazo- Tea.7"

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\ low mi gin Musjcale use these three major intensive growth strategies to increase its idles? Musical« could try to encourage its current customers (o buy more. I'his could work If its customers could he shown the benefits of using more compact disks for recording music or for data storage. Musicafe could try to attract competitors' customers. This could work IT Musjcale noticed major weaknesses in competitors' products tir marketing programs. Finally, Musicafe could try to con vi nee non users of compact disks to start using Oietn. This amid wmk iI (here are Slill enough people Who are [lot able to or do not know how io bum a compact disk.

How can \1usk-ale use a market-development strategy? First, it might try to identify' potential user groups in the current sales areas. If Musicals has been selling compact disks only to consumer markets, it might go after office and factor)' markets. Second, it alight seek additional distribution channels in iis present locations, if ii has been selling its disks only through stereo equipment dealers, it might add mass-merchandising channels.

DEVELC1!' L|G M A.R< L TIMG STRATEGIES AND ^LANS CHAPTER 2 Jit

Third, the company might consider selling in new locntiuiis in its home country or abroad if Musical sold only in the United Stales, it could consider en taring the European market.

Management should also consider new-product possibilit ies. Musicale could develop new features, such ¡is additional data storage capabilities or greater durability, it could offer the; CD at two or more quality levels, or it could research an alternative technology such ns digital audio tripe.

By examining these intensive growth strategies. management may discover several ways to grow Still, that growth may not be enough, In that ease, management must also look for integralive growth opportunities.

INTEGRATIVE GROWTH A business* sales and profits maybe increased through hackward, forward, or horizontal Integration within its industry, For example, ding company giant Merck lias gone beyond just developing and selling ethical pharmaceuticals. It purchased Medco, a mail-order pharmaceutical distributor in 1S)9S, formed a joint venture with DuFOnt to establish more basic research, and another joint venture with Johnson & Johnson to bring some of its ethical products into (he over-the-couLiter market.

Media companies have long reaped the benefits of Integrative growth, Here is how one business writer explains the potential that N&C 5011Id reap from its merger with Vivendi tJnivers.il Entertainment to become NEC Universal. Admittedly a far-fetched example, it gets across the possibilities inherent in this growth strategy^"

[Whenl the bit movie Stvrhfccim [produced by Universal Pictures) comes to television, it would air 0n BravO (owned by NBC) or USA Network (owned hy Universal]> followed by the inevitable bid to make the movie into ei TV scries thy Universal Television Croup). with the pilot being picked up by MBC, which passes osi the show, but it's then revived in ttig."Brilliant But Canceled' series on cable channel Trio (owned by Universal) where its cult stains leads to a Spanish version shown 011 Idem undo (owned hyNUC) and the creation ofa popular amusement-park attraction at Universal Studios.

How might Musicale achieve integrative growth? The corupanv might acquire one or mon> "f "is suppliers (such as plastic material producers) to gain more control or generate more profit (backward integration). It might acquire some wholesalers or retailers, especially if they are highly profitable (forward integration), finally, Musi cade might acquire one or more competitors, provided that the government does not bar this move (horizontal integration), 1 Jowevflh these new sources may still not deliver the desired sales volume, in that case, the company must consider diversification.

"■■■■■:.■ ! I Diversification growth makes sensfc when good opportuni ty can tie found outside the present businesses. A good opportunity is one in which the industry is highly attractive and the company has lite ri^ht mix &f business strengths to be successful. For example, from its origins as an animated film producer, Walt Disney Company has moved into licensing characters for merchandised goods, entering the broadcast industry with its own Disney Channel a swell as ABC anil ESPN acquisitions, and developed theme parks and vacation and resort properties;

Several types of diversification are possible. First, the company eouLd seek new products thai have technological or marketing svnergies with existing product lilies, evell though the new products themselves may appeal to a different group of customers (con-cetmic strategy), li might start a hiser disk raanufecLuriugoperation because it knows how to manufacture compact disks. Second, ihe company might search for new products that could appeal to current customers even though tile new products are technologically unrelated to its current product line (horizontal strategy!. Musicale might produce compact disk cases, even though producing them requires different manufacturing process. Finally, the company might seek new businesses that have no relationship to its current technology, products, or markets {conglomerate strategy). Musicale might want to consider such new businesses as making application software or personal orgaiilj'.cr-S-

DOVVN5IZING AND DIVESTING OLDER BUSINESSES Companies must not only develop pew businesses; thev must also carefully prime, harvest, nr divest tired old businesses in Cider to release needed resources and reduce costs. Weak businesses require a disproportionate amount of managerial attention. Managers should focus on grou th opportunities, and not fritter away energy and resources trying 10 salvage hemorrhaging businesses. Heinz

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