How Did Starbucks Build Its Sustainable Competitive Advantage? -Business Strategy and The Key Success Factors
An English teacher, Jerry Baldwin, History teacher Zev Siegel, and Writer Gordon Bowker, inspired by a coffee connoisseur & entrepreneur Alfred Peet, opened their first Starbucks store in Seattle on March 31, 1971.
Due to financial difficulties in the mid-1980s, they had to sell their stores to their former manager, Howard Schultz. In the year 1986, Starbucks had only six stores. Howard, then re-imagined and re-invented Starbucks. As of 2018, the company operates stores at 28,218 locations worldwide.
How did Howard Schultz build Starbucks’ sustainable competitive advantage? What are the success factors?
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01 -POSITIONING — TARGETING A NICHE
The first and foremost factor for a sustainable competitive advantage is to position your brand inside a consumer’s mind. The way to enter their mind is
a) Becoming a leader in an existing product/service category (It would need huge investments in money, effort & time, and not a practical option)
b) Becoming first in any new product/service category. In other words, you need to create a new category.
If you plan to create a new category, the conventional wisdom is to look for a niche market.
FINDING A NICHE MARKET -The general rule is to start small. Focus on a particular need, work on it, make your product distinctive and dominate the niche market. Smaller the segment, the easier it is for the entire company to focus and meet the customer's needs, wants, and desires. Once you become a leader in your niche, you could grow your market.