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Submitted by pinkaew on November 21, 2005
Category: Business
Words: 692 | Pages: 3
Views: 435
Popularity Rank: 18,576
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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.
Advantage
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 dont 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.
Disadvantage
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.
Channel expansion
Advantage
Starbucks expand their Frappucino can market by making a contract with the Pepsi in order to use their distribution...
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