Analysis of Strategy for Starbucks Café-Australia

This document provides an analysis of strategy for Starbucks Café-Australia. It includes PESTEL analysis, Porter’s 5 forces model, key resources, capabilities and core competencies, strengths and weaknesses of Starbucks, and value chain analysis. The document also discusses the business environment and strategic management of Starbucks. The subject is Business Environment and Strategic Management, and the course code is not mentioned. The document type is not mentioned, but it seems to be an essay or a research paper. The assignment type is not mentioned. The college/university is not mentioned.

Running Head: ANALYSIS OF STRATEGY 0
starbucks café-australia
Business Environment and Strategic Management
Student name
8/7/2019

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Contents
Journal-Post 1:............................................................................................................................2
PESTEL Analysis:.....................................................................................................................2
Journal Post 2:............................................................................................................................4
Porter’s 5 forces model:.............................................................................................................4
Journal-Post 3:............................................................................................................................5
Key Resources, Capabilities and Core Competencies:..............................................................5
Strengths and Weakness of Starbucks Company:......................................................................6
Journal Post 4:............................................................................................................................7
Strategy for running the businesses successfully and for being competitive for rivals is as
follows:.......................................................................................................................................7
Value Chain Analysis:................................................................................................................7
Conclusion:................................................................................................................................8
Bibliography...............................................................................................................................9
Appendix:.................................................................................................................................11

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Journal-Post 1:
Starbucks is the famous coffee company in the world and it is also largest in terms of
its sales as well as share in the market. It was founded in the year 1971 by Mr. Schulz and its
ownership is private. It is a big organization which is made up of a large number of
shareholders that’s why it is operated by managers. It has a mission ‘to inspire the spirit of
humanity’ and it is done by serving one person one coffee and one neighbourhood at a time.
It adds customization in the product so that it can easily satisfy the needs and wants of them
(Forbes, 2016).
Its vision is that it does not treat its employee mere a source to do work but as a
partner through which business runs successfully. It treats its workers with respect as well as
dignity while for dealers in an ethical way. It follows the ethics principle, for adopting the
right behaviour (Lemus, 2015).
Its goods are flowing through the help of direct selling, specialty retailers as well as
through by promotion by word- of mouth. Industry in which this operates is retail coffee and
snacks store industry. In its product line coffee, tea, beverages, and packed food included. It
provides a good environment so that people can enjoy coffee with newspaper, music and
giving them access to free Wi-Fi.
PESTEL Analysis:
It is used to measure macro-environmental factors which will impact on the economy
as well as industry.
Political:
It is influenced by the attitude of government as well as on trade relationships which
are created in the countries as it will impact on procuring the raw material and labour. Here,
domino theory is applied because it is possible that one country impacts on other
neighbouring countries of the economy. In Australia, government is supportive as, here
political conditions are stable, which helps the Starbucks to set up business (David, 2014).
Economic:

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In economy of the country GDP, 32% comes from fast- food sector which also
includes the coffee industry in it. Thus, it is productive for Starbucks. However, it charges tax
rate 30% from businesses which may affect the operations but, not much effect is seen in the
case of large enterprises so, it is appropriate for Starbucks (Samper, 2017).
Social:
It impacts both positively as well as negatively. As a negative, it is made up of
caffeine which is not good for health and may cause sleep disorders as well as migraine
problem to the people.
As a positive, it strong the metabolism system of the body and which in turn helps to
maintain shape by removing fat. Culture also influence on this as in the East region mostly
people enjoy tea rather than coffee. It is because of the belief that it is consumed only on
special occasions so here prices can be charged high by assuming it as premium products. It
is suitable to Australia, because here, coffee culture followed (M.Grant, 2013).
Technological:
It is by this manufacturing of coffee is made efficient and also helps in developing
variations in the original product. It also supports the small manufactures so that they can
compete with bigger brands existing. But, it also serves as a threat as because coffee
machines are sold at less price and this lead to making of coffee at their homes by buyers and
by this buyer cut. Country’s environment is good which supports the innovations done and
spends amount for its investment that made Starbucks successful (Loftfield, 2016)
Environmental:
The industry is totally dependent on the crop of coffee and that one is totally reliant
on agriculture and in this uncertainty is there that it will be produced or not in the farm as it is
dependent on weather. Opportunity is that coffee is the need of some people as their day,
cannot get started by this. The threat is that most consumption happens in the winters so to
keep their body warm. Starbucks sustainable practices support the environment of country
(Ferreira, 2016).
Legal:

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In respect to safety in its product, serves as a benefit to Starbucks Company as it
keeps in mind the process through which product is manufactured and not on the final
product. It has to fulfil all the regulations which are exist in country, otherwise Starbucks
may face problem in standing up in any economy (Ferreira, 2016).
Journal Post 2:
Porter’s 5 forces model:
It is a useful tool for analysing the competition which is in industry. This model is
founded by Michael E Porter. It helps to analyse the position of the firm as compared to its
competitors.
Threats of New Entrants:
It is moderate in the case of Starbucks as because in this industry, it captures the huge
market share but, there are possibilities that newcomers join due to the fact that investment
required to start such business is not much high (Duke, 2017). So, newer ones can grasp only
the local market if they try hard and there are chances that customers shift if they offer
products at a low price so the threat is there but not as much because it has gained huge
reputation in the market and builds loyal buyers. Competition is increased when McDonald's
enter the market.
The Threat of Substitutes:
It happens due to the reason that when prices go up of particular commodity then
people start looking for alternatives just to satisfy their unfulfilled needs. And due to this,
many enterprises came to take advantage of the situation. This risk is moderate. It can also
become high, as a result of services of restaurants and well as its product coffee, which can
be made at home that’s why, some people don’t feel the need to go for and waste their
money. However, it has been made moderated by the company’s efforts by giving good
quality of services to them (David, 2014).
Bargaining Power of Buyers:
It is categorized as moderate to low. It is for the reason that there purchase done in
smaller quantity and by this, automatically buyers cannot ask for the same. Also, it targets
only those people who are willing to pay the high price and not compromising on the quality

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of a product. But, it cannot charge much cost because they are chances to switch. Therefore,
it can be concluded that the power of the consumer is low (Loftfield, 2016).
Bargaining Power of Suppliers:
It can vary from low to moderate. It selects such suppliers who are ethical so that they
do not cause any harm to its reputation. It makes uplink with the farmers so that shortage not
happens and avoids the mediators which carry on this process. It runs the initiative to educate
the farmers well so that they can also earn a profit. Thus, its supply chain is better in a way to
reduce the bargaining done by its dealers (Thompson, 2013).
Competitive Rivalry:
It is in between moderate to high. It is landed in the monopolistic market in which,
firms are selling a similar type of products with some variations done in price, quality and in
colour. So, here there is always fight happens to gain the maximum market share. In this,
Starbucks has the highest share, followed by Dunkin and McCafe. It is a bigger industry,
which gives various opportunities to newer ones (M.Grant, 2013).
Conclusion: It can be concluded that, it is a bigger brand in the coffee industry and it
is having an ability to manage the threads effectively. The threat of new entrants, substitutes
as well as competitive rivalry is moderate in the case of Starbucks. Here, bargaining power of
both suppliers as well as buyers is in moderate form.
Journal-Post 3:
Key Resources, Capabilities and Core Competencies:
Starbucks puts efforts so to enhance the knowledge base of workers so that they can
serve customers in a good way. In the knowledge part, factors which are given consideration
are knowledge of the product, expertise as well as service offering. It follows the atomic
theory by giving the subordinates the appropriate authority to work so that they can also learn
skills which are required in performing the task (Omalaja, 2011). While recruiting people, it
checks their communication skills and ability to work in a team.
It fulfils all the obligations which come up in the way of ethics, society and in the
environment. It also gives water to millions of people so that each one has access to water
and it is required just because it is the necessity of life. It provides 30 varieties in a single

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primary product. It adopts a new technology that is Starbucks Roast in which coffee
produced is unique as well as dark (Forbes, 2016).
It also enhances the process of brewing with the help of equipment and has done the
agreement of partnership with Green Mountain Coffee. It is by this it became one of the
companies, who serves fast service. However, the fact is that people are not able to connect
themselves into the logo and mostly don’t understand its meaning. It adopts attribution theory
while building a bond of relationship with customers (Eden, 2010).
It does not only sell coffee but also provide a variety of products like food items as
well as beverages. Starbucks take it as an opportunity so to fulfil the needs of consumers
well.
It is a valuable brand than competitors. It is rare due to the fact only a few companies
have its same reputation. In order to do this, it invests its time, money, technology as well as
its experience. It made up its presence in social media and particularly on Facebook and on
Twitter. It tends to satisfy the local demands of people from where it is situated (Ros16).
Strengths and Weakness of Starbucks Company:
Strengths:
 It is a popular brand which has earned a huge reputation in the market and it has been
because of quality products and they are sustainable according to surroundings in
which it exists.
 Extensive Supply Chain which thereby helps in selling goods effectively.
 Its goal is to become the third place for the buyers: As the first place is home, second
is office and the third is in which people can relax (Sholihah, 2016).
 Diversification in subsidiaries has become possible because it retains some profit after
giving the shareholder’s proportion
Weakness:
 Charging high prices: It is because, by this, it cannot target the low group population.
 Set the same level of standards for diverse products but it should not be done as every
product is some sort of different to another one.

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 Imitation done in products: It is because in the market there are many substitutes
available (Eden, 2010).
 Adequate working conditions: It is required just to stop the labour turnover ratio and
to increase the trust of employees.
Journal Post 4:
Strategy for running the businesses successfully and for being competitive for rivals is
as follows:
Starbucks is unique that’s why it charges premium prices. It has started its business
model with only coffee made products but, according to changes done in the environment,
Starbucks adapts its model so to offer a wide variety of goods (Taecharungroj, 2016).
It assures the quality of products to consumers. Its strategy focuses on production
concept more and less on marketing because, it believes only in word-of-mouth promotion
rather than paying for the promotion. In terms of technology, it is a leader as well as a
follower.
It adopts game theory as well as field theory, for fighting the completion in order to
achieve a desirable outcome.
Value Chain Analysis:
It is a framework for showcasing the activities which are run in the organization It is
categorized into primary and secondary activities. Primary activities of Starbucks are raw
materials, storage, maintaining an inventory system, distribution system. In secondary,
infrastructure is required so to give support to all the above defined. In regards to production,
it does outsourcing so that to cut cost which is coming and to gain the knowledge of
proficiency persons so that work is performed in the best way (Zamora, 2016).
In relation to the strategy of the organisation, focus on attracting the talented people
to apply for a job and it can happen only when it provides good compensation and treat them
in a good way just to maintain dignity as well as trust (Dudovskiy, 2017).
It utilizes external sources for the recruitment so that to flow new blood in the
organization. It gives the advantage to employees that they can earn the enterprise ‘bean

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stock’ that it actually, the stock option plan for the workers. Hence, it comes in the list of top
companies to work for.
In respect to financial, it generates huge profit but continuously seeing the
possibilities to reduce cost. It is not in relation to sacrificing on quality. It also adopts new
technology for its products such as the use of K-cups. It checks the progress of its stores and
if a store is continuously making a loss then, Starbucks closes its subsidiaries so to not to
waste unnecessary funds on it and put efforts on the profitable ones (Zamora, 2016).
Conclusion:
In conclusion, it can be concluded that Starbucks has capture the largest market share and it is
being popular in the eyes of customers because of its products. In future, it has to put effort so
to utilise its marketing activities, as coffee industry is very wide and it gives chances to new
joiners to grasp the opportunity.

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Bibliography
David, F. R. (2014). Strategic Management: Concepts and Cases, Global Edition. Pearson
Education.
Dudovskiy, J. (2017). Starbucks Value Chain Analysis: Technology Development as the
Greatest Source of Value Creation. Retrieved from Research Methedology:
https://research-methodology.net/starbucks-value-chain-analysis/
Duke, D. (2017). Porter’s Five Forces and the Coffee Industry. Management Teaching
Review, 3(3), 241-251.
Eden, C. (2010). COMPETENCES, DISTINCTIVECOMPETENCES, ANDCORE
COMPETENCES. Identifying, Building, and Linking CompetencesResearch
in Competence-Based Management, 5, 3-33.
Ferreira, J. (2016). Caf'e nation? Exploring the growth of the UK caf'e. Royal Geographical
Society, 49(1), 69-76.
Forbes. (2016). Starbucks Is Maintaining Its Competitive Edge. Retrieved from Forbes:
https://www.forbes.com/sites/greatspeculations/2016/10/13/how-is-starbucks-
maintaining-its-competitive-edge/#7d84159e759c
Lemus, E. (2015). Starbucks Corporation: Leading Innovation in the 21st Century. Journal of
Alternative Perspectives in the Social Sciences, 7(1), 23-38.
Loftfield, E. (2016). Coffee Drinking Is Widespread in the United States, but Usual Intake
Varies by Key Demographic and Lifestyle Factors. The Journal of Nutrition,
146(9), 1732-1768.
M.Grant, R. (2013). Contemporary Strategic Management: An Australasian Perspective.
John Wiley and Sons Australia.
Omalaja, M. (2011). Strategic Management Theory: Concepts, Analysis and Critiques in
Relation to Corporate Competitive Advantage from the Resource‐based
Philosophy. Economic Analysis, 44(1-2), 59-77.
Samper, L. F. (2017). Towards a Balanced Sustainability Vision for the Coffee Industry.
Resources, 6(2), 1-28.
Sholihah, P. I. (2016). he Strategy of Starbucks and it's Effectiveness on its Operations in
China, a SWOT Analysis. Asian Journal of Business and Management, 4(5),
189-193.
Stastia. (2019). Revenue of Starbucks worldwide from 2003 to 2018 (in billion U.S. dollars).
Retrieved from Statista: https://www.statista.com/statistics/266466/net-

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revenue-of-the-starbucks-corporation-worldwide/
Taecharungroj, V. (2016). Starbucks’ marketing communications strategy on. Journal of
Marketing Communications, 23(6), 552-571.
Thompson, A. A. (2013). Crafting and Executing Strategy: The Quest for Competitive
Advantage : Concepts and Cases. McGraw-Hill.
Zamora, E. A. (2016). Value Chain Analysis: A Brief Review. Asian Journal of Innovation
and Policy, 5(2), 116-128.

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Appendix:
Figure 1: Value chain analysis:
Source: (Dudovskiy, 2017)

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Figure 2: Starbucks revenue data:
Source: (Stastia, 2019)
Figure 3: Market share chart:

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Source: (Forbes, 2016)