What are the advantages and disadvantage of Starbucks degree of vertical integration and channel expansion?
Vertical Integration is a kind of company that controls all of the process of production.
Starbucks retains their brand competence by controlling all the process of production by themselves which starts from growing the coffee plant, selecting the coffee nut, roasting the nut, grinding the nut until mixing with ingredients and become a cup of coffee and also have selling coffee by their own shop.
Due to they do every process by their own so profits don’t have to be share with any other partner.
They have core competence in Coffee industry so it tough for other rival to compete with.
They can cut off some unnecessary working process and ordering good make Starbuck easier to proceed.
They have a course in training their staff to be qualified in making good coffee.
It easy for them to reserve their product quality and also easy to learn and keep in touch with customer need in order to improve and satisfy them.
From all of these make customer trust and loyal in their brand.
In doing every process by their own make them lose economy of scale. The price of product will be higher than rivals which make them hold just high class part of the market share which might give an affect to company benefit and management efficiency in the future if the competitors climb to fight in the same market.
When the company is run out of raw materials, this will effect to the customer because the finished product form the process is not enough to satisfy the customer need. They should have deal with the other raw material source to solve this breaking out.
Starbucks expand their Frappucino can market by making a contract with the Pepsi in order to use their distribution channel which will be able to reach the customer satisfaction and also help them to wide spread their brand name to be more well known.
In the same way, they also expand their market by joining with Hotel Industry, Airline Industry such as Mariott, United Airline etc in order to make Starbucks brand name to be more well known which will make them gain a bargain power in doing business than rivals.
Starbucks pay attention in buying contract than giving the franchise which make them easy to