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QAB020C410A Business Organisations and Environments

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Business organisation and environment in global context1
BUSINESS ORGANISATION AND ENVIRONMENT IN GLOBAL CONTEXT: A CASE
STUDY OF STARBUCKS IN CZECH REPUBLIC
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Business organisation and environment in global context2
Contents
Introduction......................................................................................................................................3
Background of Starbucks.................................................................................................................3
Business environment in Czech Republic.......................................................................................4
Analysis of business potential of Starbucks in Czech Republic......................................................8
Porter’s five force analysis..............................................................................................................8
PESTLE analysis...........................................................................................................................10
Conclusion.....................................................................................................................................13
References......................................................................................................................................14
Business organisation and environment in global context3
Introduction
This study aims to evaluate the business prospect of Starbucks in the market of Czech Republic.
The organisation already exists in the capital of the country and in some of its prime locations.
Therefore, this study aims to evaluate the expansion prospect of the company in the said country.
Utilising industry and environmental analytical frameworks the potential of the market for
Starbucks has been analysed.
Background of Starbucks
Starbucks is a US based company of coffee and chain of coffee houses that started with a store in
Seattle, Washington and grew into a multinational chain of coffee houses that operates through
around 21,500 stores in over 64 countries across the globe (Marshal, 2015). The organisation is a
market leader in the United States with 14% share of the hot drink market, while in the global
market the organisation despite its high spread has not reached a leading market position due to
the presence of market giants like nestle (Duggan, 2018). The company has the market value of
around $71.4 billion which might be compared to its nearest competitors like McDonald’s with
$121.7 billion and Dunkin Brands with $5.9 billion to acquire an understanding of its position in
the market (Thomas, 2018).
Despite its strong market position the organisation has been identified as losing market growth in
USA due to market saturation. The company has announced its decision of closing 150 of its
company-operated stores in 2019 that have underperformed in multiple quarters in recent past
which adheres to its recent history of closing 50 stores a year (Wolf, 2018).Bhati and Verma
(2017)identified market saturation as one of the key consequences of exhaustive marketing.
Business organisation and environment in global context4
While it increases the market share it also leads to the treat of becoming irrelevant to the market
after saturation.
Along with its practice of withdrawing from the US market the organisation has also been
observed to venture into the overseas market. Since 2008, with the opening of its first store in
Prague, Czech Republic, Starbucks has been observed to shift its focus to the unsaturated and
largely unexplored coffee market of the Eastern Europe(Starbucks Coffee, no date). With the
initial success of first 18 months in Prague, through its 9 shops in the capital of Czech Republic
and a few more in Poland, Warsaw and Wroclaw, the organisation announced to double the
number of its stores in the region (Konviser.2010). It indicates a change in its business
expansion plan in favour of European countries like Czech Republic. Currently the organisation
operated in the said market through its subsidiary AmRest Coffee (U.S. Securities and Exchange
Commission, no date and Lunakova, 2009). As of 2018 the company has 33 stores in Czech
Republic and has been observed as growing its grasp on the market (STATISTA,no date).
Business environment in Czech Republic
Czech Republic is identified as one of the strongest economies in the European Union with its
2.4% annual growth rate. Its unemployment at 3.3% is identified by the International Monetary
Fund as the lowest in the European Union(International Monetary Fund, 2017).This when
observed in combination with the low government debts marks the high level of living for its
citizens indicating their high purchase ability, making it one of the preferred choices for the
market expansion of multinational corporations like Starbucks. The following table avails an
insight to the GDP per capita, nominal GDP and population growth of the country since 2013 till
2017 and the IMF projection of the same from 2018 till 2023.
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