This paper will provide an argument for diversification to be presented to board of directors for Starbucks. A strategy for diversification indicating the products and industries for diversification and how synergies may be gained will be provided. The identification and the discussion of the foreign market Starbucks should enter will be presented, along with the strategy it should use to enter the market. Challenges Starbucks may face in the foreign market will be discussed, as well how it might respond strategically to minimize the impact of these challenges.
Also, this paper will encompass a scenario when it would not make sense for Starbucks to diversify or expand into a foreign market and how the company will create a business environment conducive to ethical behavior will be assessed.
Argument for Diversification
According to Investopedia website, “a technique that reduces risk by allocating investments among various financial instruments, industries and other categories is known as diversification. Diversification is the most important component of reaching long-term financial goals while minimizing risk” (“Investopedia”, 2011). “Fundamentally, this strategy is about creating new products with new product life cycles and making existing ones obsolete” (Olsen, n.d.). With diversification, Starbucks would be able to enter new markets with new products. By having a diversification strategy enforced, this will create a path for effective growth for the business. As with any company considering new products in new markets, there are risks associated with it and Starbucks would need to be prepared to respond accordingly.
With diversification, Starbucks will have the opportunity to increase its growth. Also, this strategy will permit the company to add related or either unrelated products to its existing business. This will be the opportunity the company needs in order to expand its products, by offering new items to its customers. If Starbucks is considering to diversify, it’s essential to adopt a strategy that is fitting for the company.
Strategy for Diversification
In order to execute this strategy for diversification, Starbucks consider to manage a merger or an acquisition. The diversification strategy can be either related or unrelated to its original business of the company. The diversification strategy for Starbucks should be to incorporate and introduce fresh, seasonal fruit and delicate chocolates to its product line. The pairing of fruit complements coffee, as well as chocolate. The majority of consumers that consumes Starbucks are generally in the morning, besides offering sweet, high calorie-filled pastries, the option of providing a fresh fruit selection to customers should be considered.
Diversification should be to create value for Starbucks if implemented in its business strategy.
The foreign market Starbucks should enter would be Iceland. Iceland currently does not have a Starbucks coffee...