d. As a result, Starbucks is forced to adopt a high product differentiation strategy. Product differentiation defined by branding a product and marketing it effectively to target audience. This strategy differentiates company from the competition, making its product unique, targeting quality, service, and price conscious customer.Starbucks' distinct branding strategy involves creating a coffeehouse as a place inspiring customers to socialize. As they managed to set up design teams to constantly innovate and create better product and store designs (Appendix D). However, expansion is also beginning to conflict with brand image. The danger with an extensive product mix is a weaker brand image. Strong competition is always a threat to the company's target market and thus even with a branding strategy, coffee is an easy substitute if other companies get serious with their own promotion. Starbucks cannot exclude from others their ability to walk into any store, study its layout, atmosphere, and product range, and copy the coffee bar concept. Thus the highest value-added element of the Starbucks formula is not excludable. It is also hard to charge a premium for coffee if customers can pay less for the same amount of caffeine and comfort just down the street. Similarly, to compete on costs Starbucks needs a flexible workforce with low wages and every danger of staff being poorly motivated, it is hard for such firms to cultivate customer-friendliness. As a result, Starbucks' has long emphasized human-resource policies (Appendix E). So in order to distinguish themselves from other coffee makers, Starbucks must continue to transmit a strong corporate identity with their customers. After all, customers that come to their retail stores are the primary source of Stabucks’s revenue. Starbucks is brand name sensitive, and is seeking to develop partnerships with companies who share their same commitment to quality. Kraft is a partner to Starbuck...
