Starbucks is a global coffee chain, originating from the U. The business has been pursuing a long-term strategy of diversifying its core offering beyond beverages; this is designed to help differentiate the brand, which is very important considering coffee is almost a commodity.

The latest development is that Starbucks now plans to increase its focus on food. Across the sea in the U. This post will look at the benefits and drawbacks to Starbucks of expanding into the food market. Diversification is just one of four growth strategies of the Ansoff Matrix below , which shows the four ways a firm can increase sales:.

Diversification

Market penetration — is growing sales of existing products in existing markets. For instance, Starbucks have started writing names of customers on coffee cups.

The intention of this is to increase sales as a result of greater customer satisfaction. An example of this would be Starbucks introducing a new premium coffee made with rare and exclusive beans. Market Development — is growing sales by launching existing products into new markets.

Starbucks are a great example of this by having coffee shops all over the world. Diversification — is launching new products into a new market, potentially increasing sales by a significant amount. However, this is the most risky strategy. As mentioned earlier, diversification has the potential to rapidly grow sales.

Particularly for Starbucks, the new food range can become a major source of revenue. Food items also help increase the spend per customer in store, which is important for coffee outlets that are limited by the amount of customers that can be seated.

Therefore this is a more efficient strategy than increasing the amount of consumers visiting Starbucks. Currently peak sales for Starbucks occur in mornings and afternoons for coffee breaks; an emphasis on food encourages consumers to visit their outlets at meal times.

Consequently, it will be easier for Starbucks to manage their capacity and not have to use inconvenient shift patterns.

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Gain a competitive advantage. It goes without saying that the coffee shop market is extremely competitive. And there are no signs of competition becoming less severe: McDonalds have now decided to enter the coffee market to diversify their offering.

To an extent, expanding into the food sector is almost a retaliation from Starbucks, aiming to steal hungry coffee consumers.

Why Food Is Now A Big Part Of Starbucks' Strategy - Starbucks Corporation (NASDAQ:SBUX) | Seeking Alpha

Diversification is the last available strategy to grow sales for Starbucks. The coffee shop market is far too saturated for market penetration strategies to grow sales significantly — the benefits of market penetration are often short term anyway.

Starbucks have an incredibly vast range of drinks, which means that there is very limited opportunity to develop further products.

Lastly, the chain has over 20, outlets in 63 countries, again, limiting the possibility to grow sales through market development.

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The alternative strategies to grow sales are market penetration, market development and product development. The benefits to Starbucks are to grow sales, spread uneven demand and gain a competitive advantage. This strategy is also suitable for Starbucks because they have exhausted the ability to grow sales through the other means. You are commenting using your WordPress. You are commenting using your Twitter account. You are commenting using your Facebook account.

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Diversification is just one of four growth strategies of the Ansoff Matrix below , which shows the four ways a firm can increase sales: Despite the risk, why do Starbucks want to diversify into food? Posted in Diversification , Food and Drink.

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