Ch. 3 Resources, Capabilities, and Activities

From our introduction to the strategic decision making process in chapter 1, we know that formulating a (flexible) business strategy requires an understanding of the internal and external environment in which a firm operates. This chapter focuses on the internal environment, and teaches about how firms need to be able to exploit their unique (i.e. valuable, rare, inimitable, nonsubstitutable) resources and capabilities in order to set their company apart from others.

Starbucks uses its resources, capabilities, and strong relationships with its suppliers, customers and stakeholders to achieve profitability and customer loyalty. Let's explore a few of these resources:

Starbucks' product offering, including their coffees, teas, beverages, bakery goods, lunch menu items, etc. is achieved in part through Starbucks' capability of forming strategic supplier relationships. One such example is Starbucks' recent (June 3rd)  introduction of bakery goods from the LouBalange Bakery in Seattle to a few of its Seattle stores.

The Starbucks website announces, "Customer favorites will be reimagined in the style of a variety of classic French offerings, such as:

• Classic & Chocolate Croissants – made with real butter, creating flaky, light layers of pastry that melt upon the first taste
• Savory Croissants – made with a variety of toppings and fillings – from tomato and cheese to ham and cheese to spinach and more 
• Loaves – a delectable assortment of seasonal fruit and nut varieties 
• Cookies – from Classic Chocolate Chip to Chewy Chocolate Meringue "

The decision to form supplier/business relationships with companies that supply products that complement the Starbucks Experience and are appealing to customers are one of Starbucks' capabilities that allow it to achieve success with loyal and future customers.

Let's explore a few other resources and capabilities that make up Starbucks' internal environment:

Location: Starbucks continues to expand both domestically and internationally, investing heavily in store locations in countries such as China and Japan  (to be discussed in greater detail when we study globalization). 

Channels of distribution: Starbucks products are founds in universities, malls, airports, stand-alone stores (some with drive-thru), grocery stores, within larger stores (for example, Target), office buildings and online. 

Reputation: Starbucks' website describes the many social causes that it supports and contributes to, maintaining the image of good corporate social citizen. It considers itself a business that helps communities by creating jobs. Starbucks has a general reputation for high-quality coffee, its main product, and a relaxed, comfortable environment in its coffee-shops.

Brand: Both a resource and a result of its capabilities, the Starbucks brand connotes quality. The Starbucks brand is embedded in our consumer culture. The brand is so widely-recognizable that in 2011, the company redesigned its logo, dropping the words "Starbucks Coffee" from the logo without fear of losing its identity.