Corporate Strategy – Comparative Analysis: Starbucks and Dunkin’ Donuts

free essayStarbucks and Dunkin’ Donuts are the two most recognized brands in the United States’ coffee chain industry. Although both corporations have similar strategies and product offerings, their corporate strategies have a number of differences. Being comparatively younger than its competitor, Starbucks showed aggressive growth and became the largest company in the industry. Both companies have numerous stores in the United States, although Dunkin’ Donuts has a strong presence in the northeast of the country, while Starbucks is spread all over the territory. Moreover, the two companies have a substantial international presence.

Mission Statements

Starbucks proclaims its mission statement “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” on its official website (Starbucks Corporation, n.d.). Dividing this clause into parts is essential to understand key components of the company’s mission. First, the company “inspires and nurtures the human spirit” not only that of customers, but also of its employees. Starbucks company culture is small but also warm and mutually beneficial at the same time. This experience is further being transferred to the customers, thus developing their loyalty. Second, the mission statement indicated personal and gradual approach with the words “one person, one cup and one neighborhood at a time”. The meaningful impact on every employee and customer is shown through employees’ and customers’ first name usage, as well as warm and cozy design of the cafes. The second part of the mission statement also implies that Starbucks will continually expand the business, adding more places to various neighborhoods.

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The mission statement is properly addressed, however, it is rather simple. In theory, a mission statement should contain the information about company’s strategies, plans and approaches. Therefore, this mission statement needs improvements to show the way the company inspires and nurtures the human spirit (Lawrence, 2015).

The original mission statement or, in other words, the philosophy of Dunkin’ Donuts came from its founder and states the following: “Make and serve the freshest, most delicious coffee and donuts quickly and courteously in modern, well-merchandised stores.” On the official site of the one of the leaders in the retail coffee industry, it is stated in an altered way emphasizing to “increase customer satisfaction and loyalty by providing the fastest and most accurate service, the freshest products, in the friendliest and cleanest environment.” The company also adds,  “We accomplish this through teamwork, communication, honesty, fun and sharing experiences as we all grow together” (Riverside Management Group, n.d.). As it can be mentioned, the Dunkin’ Donuts mission statement is broader and more detailed. The quality of service, products, and cafes are the main concentration points of the company’s mission. In a straight way, the company explains the importance of teamwork and communication, as well as the aim to grow and develop steadily.

Comparing the mission statements of the two competitive companies, one will definitely pay attention to the more artistic and classic way Starbucks positions its mission and the vivid, broad and dynamic way the Dunkin’ Donuts does.

HR Policy

As a business serving the community, Starbucks considers its employees as a vital part of the company who help it grow and thrive. The official website assures that Starbucks provides an employee-friendly work environment. The company supports diversity among its employees and provides them with the comprehensive health benefits. Following its mission statement, the company believes that it is important to have not only well-trained workers, but also find the ones being socially conscious to inspire the company staff and customers. Environmental leadership and ethical sourcing of coffee from farmers at different parts of the world, as well as volunteer involvement add to the Starbucks’ reputation as a “human and nature-friendly” corporation.

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Fundamentally, Starbucks’ baristas are the key element of the customer satisfaction. These employees should have coffee knowledge and product expertise in order to provide high-quality services. As a proof, in 2008, the company closed the majority of its stores and hold a full day training event to check the efficiency of their workers (Noe, Hollenbeck, Gerhart, & Wright, 2010). Moreover, Starbucks wants to have right people in place with exceptional skills, attentiveness and opportunities to evolve the company. The willingness to imply employees’ ideas allows new effective strategies to come directly from the marketplace. For example, one of the most popular Starbucks’ drinks, Frappucino, was invented by a simple employee.

Similarly to Starbucks, Dunkin’ Donuts recruits and trains socially conscious staff mainly through online resources. The company focuses on entry-level employees who look for career mobility. Dunkin’ Donuts suggests its employees at corporate headquarters with a number of benefits including free coffee, donuts, ice cream, on-site fitness centers, electric car charging stations and early release Fridays (Dunkin’ Brands, n.d.). The corporation has less storefronts and is more concentrated on the north-eastern part of the U.S. in comparison to Starbucks. Each location is a franchise; therefore, local business owners run their daily operations in a different way. Without the central mission, homogenous culture and the scale of its main competitor, Dunkin’ Donuts is not able to provide a bold and uniform human resources management system for all employees.

Product or Service Offerings

Being a premier roaster, marketer and retailer of specialty coffee globally, Starbucks suggests roast high-quality coffees, handcrafted coffee, tea, other beverages and different fresh dishes including snacks. Food choices range starts with pastries and end with soups and sandwiches. The company also sells a variety of coffee and tea products under its licensed trademarks through stores, grocery, etc. Starbucks sells its goods and services under the other brands as well. They are called Teavana, Evolution Fresh, La Boulange, Ethos, Tazo,

Seattle’s Best Coffee (Starbucks Corporation, 2015). In addition, the company sells equipment from Bunn, Krupps, and other manufacturers. In the stores, customers may find drinkware and many gifts available for purchase.

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Despite the name of the brand tells customers that the main food product of the Dunkin’ Donuts is donut, it is not the truth. Donuts sales constitute only 8% of the total annual company’s sales. The main product of Dunkin’ Donuts suggests is its drinks, especially the coffee. The fresh and unique snacks as well as about one thousand food items internationally make a hit with people of any age. A variety of sandwiches is presented by Wraps, Glazed Donut sandwiches, and the Oven toasted sandwiches. Cookies, bagels, muffins, doughnuts, and munchkins together with other pastries account for 52 variations of baked goods. In stores, customers may chose both hot and cold beverages, including iced coffee, latte, cold teas, and ice creams.

Although the both companies specialize in coffee production and services, Dunkin’ Donuts started its business in 1940s as a chain of ice cream shops. With the time and a number of mergers and acquisitions, the company had become one of the leading franchisors of quick service restaurants. Dunkin’ Donuts also own the Baskin Robbins brand that serves ice cream and sells a full range of frozen ice cream treats.

Aggressiveness in New Product/Service Research and Development

In the highly competitive market, in order to remain its leadership unchanged, Starbucks should not only rely on its superior large-scale marketing efforts, but also improve its product differentiation. Other competitors, for example, McDonalds or Dunkin’ Donuts, claim to offer the same quality code at a lower price. Therefore, the price war would not be the appropriate tool for developing and maintaining the brand’s position. It is the reason why Starbucks invests in extensive research and development efforts. The novelty of flavors, blends and roast fusions is a powerful advertising tool. The team of over 200 specialists continuously works on the new food and beverages development. This group consists of two main components: Research & Development and Global Quality & Regulatory. They also develop innovative brewing equipment, test the products, and make adjustments to prepare the product to the market. Starbucks is well-known for innovation across the entire consumer experience and its concentration on the long-term development. The company’s System to Accelerate Results (STAR) and its attempts to be on the top of the innovation process are the key components of new products’ success. Starbucks’ Frappuccino Blended Beverages, Starbucks VIA Ready brew and many others are the examples of successful products launch due to the platforms built upon equipment and technology advantages.

As Dunkin’ Donuts states, a new product innovation is critical for the future success of the company. The development of new products broadens the customer base, increase sales and helps to expand franchisees. The state-of-art facility with special labs and demonstration place is located in Canton, Massachusetts. Similarly, the company’s research and development department is headed by the internal culinary team and supported by a number of consumer researches. In 2014, the company developed its six-fold plan aimed at protecting its critical breakfasts and growing afternoon business through innovative products. Almost 70% of Dunkin’ Donuts food products are sold in the first part of the day and the rest 30% in the afternoon, despite all suggestion of the menu are sold at any open hour. In the chain’s central category that is hot coffee, new blends are especially important to attract new customers.

How It Works

Advertising/Marketing/Sales

Starbucks’ expenses on advertising totaled $198.9 million in 2014. The core of the company’s marketing strategy consists of print and media advertising which are aimed to associate the brand with the best quality and experience. The messages this kind of advertising bring to the customers sound as follows: “Beware of Cheater Coffee. It Comes with a Price”, “If Your Coffee Isn’t Perfect, We’ll Make It Over. If It’s Still Not Perfect Make Sure You Are in a Starbucks”, “Starbucks or Nothing. Because Compromise Leaves Really Bad Aftertaste”. Starbucks made a great advantage using social media and viral marketing before its rivals did. In 2009, the company launched a large social media campaign in the United States. They offered customers who bought a drink before certain hours in the morning any pastry as a present. As a result, more than one million customers were attracted through this initiative.

Sales promotion is a regular element of Starbucks’ marketing communication mix. The customer loyalty is continuously improved due to the reward program. Moreover, the integration of sales promotion and corporate social responsibility (CSR) programs significantly add to the company’s success.

Starbucks also focus its marketing efforts on the customer’s in-store experience. Its stores are not only the place to have a good food but also to use internet, listen to music, as well as spend time with friends. Therefore, an in-store atmosphere and comfort are the integral part of the company’s success.

In 2015, Dunkin’ Donuts had a net payable of $11.6 million to various advertising budgets. Likewise, its advertising is implemented mainly through print media. The vivid logo of pink and orange colors is memorable and catchy. Additionally, Dunkin’ Donuts slogans represent one more powerful promotional tool. “Always Dunkin”, “Time to make the Donuts”, “It’s Worth the Trip”, “You’re Dunkin” and “America runs on Dunkin” are the most popular among them.

Moreover, the company uses sponsorship of the professional teams like Liverpool football club for its advertising. The contests including “Create Dunkin’s Next Donut” helped to keep awareness alive in the promotional market. The company always keeps in touch with its loyal customers through social networks and a number of other promotional activities.

International Profile and Expansion

Starbucks operates in 68 countries throughout the world. With its objective to maintain the brand as one of the most recognized globally, the company continues the disciplined expansion. The corporation adds stores in both developed markets (the United States, Europe, Canada), and in developing and high-growing markets (China, India). In its annual report, Starbucks divided its sales into four segments: Americas (the United States, Canada, Latin America) – 69%; China and Asia Pacific region – 13%; EMEA – 6%; and Channel Development – 9% (Starbucks Corporation, 2015).

The company announced its goal to open half of thousand more stores in China this year. Expanding its international operations, Starbucks Corporation plans to enter the China ecommerce market and bring its tea brand to the large Asian market. The company is also rather bullish in India. Nevertheless, it has managed to open only 75 new stores in the country during 2013, 2014, and 2015. Nevertheless, Starbucks seems to be on track to meet its international expansion targets (Trefis Team, 2016). In 2016, the company plans to open first stores in Trinidad and Tobago to develop its presence in Caribbean region.

The international business of Dunkin’ Donuts is primarily conducted via joint ventures and territorial licenses. The company switches to a model with multiple franchisees in some countries including the United Kingdom, China, Mexico, Germany, etc. Sales in Asia and the Middle East added up to 19% of the corporation’s global franchisee-reported sales. Outside its main market, the United States, Dunkin’ Donuts has more than three thousand restaurants in 42 countries worldwide. The company believes that the future expansion will not only add to its sales growth, but will also develop its brand loyalty and menu differentiation (Dunkin’ Brands Group, Inc., 2015).

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Growth by Merger and Acquisition

For Starbucks, acquisitions were the beneficial steps to expand its business and help the businesses with declining sales survive. The purchase of Evolution Fresh in 2011 and LaBoulange bakery brand in 2012 had helped Starbucks to expand its product offerings. One of the biggest recent acquisitions, the Teavana accession for $620 million, proved to be successful locally and in a global scale. Nevertheless, Starbucks is currently cutting back on its aggressive acquisition strategy. The company wants to simplify and sells off underperforming assets. It is connected with the chain’s refocus on its core mission of serving quality beverages and food in modern buildings.

Before it became a public company, Dunkin’ Donuts was owned by three private equity firms: Thomas H. Lee Partners, Bain Capital and the Carlyle Group, which later merged in one global corporation. Being the franchising company, Dunkin’ Donuts does not have any recent mergers or acquisitions.

Conclusion

To summarize, Starbucks has a stronger market position although there is no right or wrong corporate strategies of the both coffee chain companies. Starbucks makes difference by the intimate atmosphere of its stores and genuine service. In contrast, Dunkin’ Donuts pursues low cost strategy resembling fast food stores and orienting more on the middle class. Both companies are active, effective, and responsible in terms of HR policy, research and development, advertising and sales, as well as their national and international expansion.