The Previous Management Policy of Starbucks

The Previous Management Policy of Starbucks

Just in forty years’ time from the beginning to now, Starbucks has made remarkable achievements. During the periods, Starbucks had been exploring and improving better management policies, which aims at its perfection, but it encountered setbacks as well.

There are three main parts of Starbuck’s previous management policy. Firstly, Starbucks took the joint venture and franchise way in China originally. In Beijing and other Chinese local market, Starbucks entered the initial stage by accounting for no authorized shares to adopt purely business model. Taking China’s special market conditions into account, it may face high environmental uncertainty and market responsiveness of local issues. Thus, the franchise policy implemented in the early stage did absorb, maximize foreign capital and expand their territory. However, from franchise modes, Starbucks could only gain a small amount of bonus from its operating revenue. Owing to China’s immature laws of franchise, it’s easy to breed a variety of issues, which was not good for the development of Starbucks.

Secondly, Starbucks mainly adopted the differentiation strategy previously. The three founders were inspired by entrepreneur Alfred Pet to sell high-quality coffee beans and equipment. Gallaugher indicates, the store did not offer fresh brewed coffee by the cup, but tasting samples were sometimes available. The store was an immediate success, with sales exceeding expectations, partly because of interest stirred by the favorable article in Seattle Times. And Starbucks would open the number of branches on the basis of the population of the region. Depending on various consumer groups and consumer taste, the company would set different prices. By doing so, Starbucks attracted those white collars who had high brand loyalty and low price-sensitivity. They gained high profit above average level. But customer’s purchasing power was limited, consumer flows was vulnerable. And the gap of cost between Starbucks and its rivals was massive.