Ch. 5 Creating Business Strategies

Ch. 5 introduces M. E. Porter's Strategic Position Model, which describes four generic strategic positions that a business can pursue and around which it can set the stage for long-term strategic decisions and reduce the effects of rivalry. The text describes, "these positions are a function of two sets of choices--economic logic (low-cost leadership versus differentiation) and scope of arenas (broad versus niche market arenas). An integrated strategic position results when a "elements of one position support strong standing in another." 

In comparing the characteristics of these strategies, I noticed that Starbucks stands out as a firm that pursues differentiation as a strategic position over low-cost leadership. Starbucks is able to command premium pricing on its products because of its ability to differentiate itself from other coffee shops and suppliers on the basis of quality of product and store atmosphere.

Starbucks has made innovative moves that has drawn customers to its relaxed environment. For example, as of 2010, Starbucks as offered unlimited free wi-fi in its stores. Starbucks also attracts and maintain customers through customer loyalty programs, in which Starbucks customers receive special offers, and have created two mobile apps that allow customers to rack up "stars" (reward points) and pay for their order using their phone. Through these examples, we can see that Starbucks actively integrates new ways to differentiate its store experience from the competition, allowing it to create appeal to customers and expand as a business.