Ansoff Matrix in Starbucks (Starbucks’ Growth Strategy)
This article investigates the use of Ansoff Matrix in Starbucks. It looks at how Starbucks has made use of market penetration, market development, product development, and diversification strategies over the years to strengthen its market positions around the world.
Market penetration strategies of Starbucks
Market penetration strategy encourages companies to sell their existing products to their existing markets. Starbucks, the world’s largest coffeehouse chain, has implemented this strategy in various ways. For instance, offering products that customers love such as coffee, tea, cappuccino, and espresso, building personal relationships with customers, and offering sales promotions (e.g. a free Frappuccino) have been very useful.
Starbucks also writes customers’ names on the cup to bring about some personal touch in the transaction. However, Kale (2019) reports that mistakes by baristas in spelling customers’ names cause customer resentment. It should also be mentioned that as coffee market is saturated in the USA and some other markets, Starbucks cannot grow significantly with market penetration strategy alone.
Market development strategies of Starbucks
In line with the principles of Ansoff Matrix, Starbucks explored new markets with its current products. Surely, exploring new markets both in terms of geography (new locations) and demography (new customers) has been a key to its global success. It reached out to 80 countries so far with over 32,000 stores (Starbucks, 2021).
However, not all market development strategies are successful. For instance, Starbucks failed in Australia. It went to the country in 2000 and made some early success. However, Starbucks as an American coffee brand could not much convince the Australian coffee lovers. Consequently, it had to close down over 70% of its poor performing stores in 2008 leaving only a small number of stores throughout the entire continent (Turner, 2018).
Product development strategies of Starbucks
Product development is the next strategy to be analysed in the Ansoff Matrix in Starbucks. Surely, it is a very useful growth strategy, though it is costly. It urges organisations to grow their portfolio by presenting new products/services for the current market.
Starbucks develops new products regularly. For instance, in early 2021, it announced the arrival of new items such as Honey Almondmilk Cold Brew, Pistachio Latte, Kale and Portabella Mushroom Sous Vide Egg Bites, and Earth Cake Pop (Starbucks, 2021). However, a number of its new products such as Chantico, Mazagran, and Sorbetto failed badly in the past.
Diversification strategies of Starbucks
Ansoff model makes it clear that diversification is the riskiest strategy. Surely, selling new products to new markets is challenging. However, the risk did not refrain Starbucks from pursuing it. For instance, its businesses such as Hear Music and Joe Magazine are examples of its diversified effort; however, both of them failed to make any name and fame in the market.
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Last update: 05 March 2021
Kale, S. (2019) Starbucks: asking for customers’ names builds resentment, not connection, available at: https://www.theguardian.com/business/shortcuts/2019/sep/02/starbucks-asking-for-customers-names-builds-resentment-not-connection (accessed 04 March 2021)
Starbucks (2021) About us, available at: https://www.starbucks.co.uk/about-us (accessed 04 March 2021)
Turner, A. (2018) Why there are almost no Starbucks in Australia, available at: https://www.cnbc.com/2018/07/20/starbucks-australia-coffee-failure.html (accessed 01 Marc 2021)
Author: M Rahman
M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.