Starbucks Vs. Douwe Egberts

Starbucks vs. Douwe Egberts

or

Two strategic approaches within the same industry context

Universiteit Maastricht

Faculty of Economics and Business Administration

Maastricht, March 14th 2006

Conze, CE.; Cuijpers, R.; Peinemann, ANB

ID number: i283819; i346748; i265071

Study: International Business; International Business Economics

Course code: 3013BE - Strategic Management

Group number: 4

Subgroup: 2

Tutor name: B. Blumberg

Writing Assignment: Team Report

Index

1. Introduction..................................................................................3

2. Strategic Process: Strategic Change......................................................4

3. Strategic Content: Business Level Strategy.............................................5

4. Strategic Content: Network Level Strategy......................................... ....7

5. Starbucks Performance....................................................................9

6. Comparison Douwe Egberts/ Starbucks strategy....................................10

7. Conclusion.................................................................................11

8. References.................................................................................12

9. Appendix...................................................................................14

Introduction:

"Over second and third cups flow matters of high finance, high state, common gossip, and low comedy. Coffee is a social binder, a warmer of tongues, a soberer of minds, a stimulant of wit, a foiler of sleep if you want it so. From roadside mugs to the classic demi-tasse, it is the perfect democrat" (Quotegarden). With over 400 billion cups consumed annually, coffee ranks second in the list of the world's most popular beverages, right behind water (Wikipedia). Thousands of companies are operating in this billion-dollar industry. Dealing with this fierce competition puts pressure on companies operating in the coffee industry to run their business effectively and efficiently and gain a sustainable competitive advantage by meeting and exceeding customers' expectations.

One of the firms operating in the coffee industry is the United-States-based company Starbucks. It experiences an incredible growth in the last decades. Starbucks is founded in 1971 in Seattle and openes its first location in Seattle's Pike Place Market. Named after the first mate in Herman Melville's Moby Dick, the firm is the world's leading retailer, roaster and brand of specialty coffee with coffeehouses in America, Europe, Middle East, and the Pacific Rim. Worldwide, approximately 35 million customers visit a Starbucks coffeehouse each week (Starbucks b).

Douwe Egberts Coffee Systems is one of the companies competing with Starbucks. The originally Dutch company is one of the most important coffee roasters and a main supplier of accessories and coffee systems for the workplace. The company is blending, roasting and brewing the highest quality coffee. It is founded in 1753 in a town called Joure in the Netherlands. During its first two centuries, Douwe Egberts steadily builds a top position in coffee, tea and tobacco in the Netherlands. Since the 1950s onwards, the firm quickly expands on the international scene. The growth process accelerates after the company joines with the United-States-based Sara Lee Corporation in 1977. Today, Douwe Egberts is the second largest coffee roaster in the world, supplying coffee systems to over 40 countries and having subsidiaries in Europe, the United States, and Australia (Douwe Egberts). On the one hand Douwe Egberts develops and offers a range of unique coffee systems for the out-of-home market and on the other hand the company sells its excellent coffee flavor in supermarkets all over the world.

The problem statement of the paper is "Which strategy does Starbucks use in order to outperform their competitors in the coffee industry?"

First of all, the strategy process Starbucks applied since the foundation of the company in 1971 is described. The way how Starbucks implemented strategic change is discussed. Secondly, the paper deals with characteristics of Starbucks' strategy content throughout the years, namely its business level strategy, and network level strategy. The paper focuses especially on how Starbucks performed in recent years and how the company can improve its performance. Finally, Starbuck's approach to deal with the environment within the coffee industry is compared to the approach of Douwe Egberts.

Strategic Process: Strategic Change

"The manner in which strategies come about" is named strategy process (De Wit and Meyer, page 5). With respect to strategic process it is examined how the strategy of Starbucks is made and especially how the strategy is changed in the course of time.

When Gerald Baldwin, Gordon Bowker und Zev Siegl found Starbucks in 1971, it consists out of only four coffee shops. The business idea is to offer coffee mills and roasted specialty beans instead of regular instant coffee that people in America are used to drink at that time. Starbucks enables the customers to prepare and consume exclusive coffee specialties. None of the owners strived for building an empire. They only found Starbucks because of their love for coffee and tea and their ambition to make the best coffee and tea