Strategic Analysis of Starbucks

The assignment provides a comprehensive analysis of Starbucks' business strategy, using PESTLE analysis to examine the external factors affecting the company. Porter's Five Forces model is also applied to assess the competitive rivalry, bargaining power of customers, threat of new entry, and threat of substitution. The analysis concludes with recommendations for Starbucks to improve its business, including increasing employee pay, promoting local community involvement, and slowing down store openings.

BUSINESS
ORGANIZATION AND
ENVIRONMENT REPORT
FOR COMPANY
STARBUCKS AT POLAND

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Background, Organisational Structure, legal form ....................................................................1
Starbucks back ground information in Poland:...........................................................................3
Analysis of business scenario......................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business organizations is basically a group of people who aim to achieve certain goal to
meet their targets or objectives. One of the business organization is Starbucks. Starbucks is
America based of coffee company with worldwide presence founded in Washington in 1971 and
currently operating in more than 75 countries. This report includes background information of
Starbucks, their organization structure which is a mix of different organization structures and
their legal form. This report will also do background analysis of Starbucks through PESTLE
analysis then we will also do Starbucks scenario analysis through Porter's five force model and
explain all five factors in brief.
MAIN BODY
Background, Organisational Structure, legal form
Poland as it is one of the most attractive place in Europe in terms of Foreign direct investment
because of cheap labour, food financial condition, large population, so Starbucks is thinking of
expanding its business in Poland. Therefore, here we will discuss what are the legal forms,
organizational structure that Starbucks need to follow.
Starbucks Corporation is an American coffee-house chain founded in march31,1971 in Seattle,
Washington D.C., U.S. It is headquartered in 2401 Utah Avenue South, Seattle, Washington,
U.S. It was founded by Jerry Baldwin, Zev Seigl and Gordon Bowker(Zavyalova, Pfarrer and
Reger., 2017). It belongs to the beverage industry and is one of the largest and popular coffee
chain in the world. It manufactures and sell coffee and tea.
The Starbucks is a public traded company and is listed on NASDAQ,NASDAQ-100
INDEX, S&P 100 and 500 Indexes. The organization have 277000 plus employees around the
world. It is headed by Kevin Johnson who is a current CEO of the company. Its products include
tea, coffee, baked goods and sandwiches.
The Starbucks corporation have a market capitalisation of $82 billion on 29 November
2018.Its key statistics of the year 2018 are ;Revenue $24.71 billion, Net Income of $4.52 billion,
and sales growth by 10.4% in the year 2018.It has total assets of $24.16 billion and total equity
of $1.18 billion in the fiscal year 2018(September-October).
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The size of the Starbucks Corporation is gigantically large and is currently present in
28,128 locations across the world(Feng., 2016). The Starbucks company opened its first overseas
avenue in Tokyo in 1996 and now its overseas properties account for more than two third of its
physical stores.
The company has expanded significantly over the years and have various subsidiaries
which are Ethos Water, Evolution Fresh, Hear Music, La Boulange Bakery, Seattle Best Coffee,
Teavana, Torrefazoine Italia, Tata Starbucks.
Starbucks Corporation have an organization structure which is mix of different
organization structures and consist of hierarchy system in the functional areas, geographic
division, product departmentalisation and then teams. They have a decentralised system for quick
decision making in the organization and for bringing innovative ideas in to the organization. Its
strength is its strong organisational structure and a solid core management team which has taken
the brand to another level and made them the market leader in the beverage industry.
Starbucks Corporation's ownership structure is such that more than 75% of the company
shares are held by institutions(Talhelm, Zhang and Oishi., 2018). Management holding the
ownership is approximately 2.66%. A large portion of Starbucks ownership is in the hand of
public and a very small percentage of ownership is held by small private company.
Starbucks Corporation is currently operating in different continents having more than 75
international markets having large number of stores in china 3521, U. K. having 988 stores,
Japan with 1286 stores, South Korea with 1231 stores, India having 100 stores alignment with
Tata Global Beverages, Mexico with 708 stores. The average of growing Starbucks in the world
is two stores per day from the last three decades.
Starbucks Corporation has been awarded with the world's most prestigious awards. It has
been named as one of the most Valuable brand for ten consecutive years(2007-2017) by Forbes,
World's most Ethical companies for ten years (2007-2017) by Ethisphere, one of world's most
Admired companies in 2009 and 2017 by Fortunes.
There are many factors that are used by Starbucks to boost its sales like their Mobile
application which offers customers order and pay facility through mobile, this application has
been immensely successful and has attracted most of the customers. Their tie up with apple to
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offer coupons to users who use Starbucks application in their Apple mobile. However, because
of this application many stores are facing long waiting line of customers in a very congested way
as they need to wait up to collect their orders and this factor is driving many customers away. To
solve this factor company has applied a solution to send a text to their customers when their
order is ready. They are also making changes in their menu to attract more customers. They have
added many vegan dishes to their menu which has attracted many customers towards them.
Starbucks is focusing on customer's preferences and making changes in their strategies to expand
their business and customer base which has driven their sales helping them to improve their
brand name.
Starbucks back ground information in Poland:
All the positive and negative factors which influence functions and operations of a company like
employees, customers, supply etc. is called business environment. Business environment of
Poland is very good. Poland has one of the largest market in terms of economic size and
populations. Income level in Poland is highest in their region. The background business
environment information of Starbucks in Poland can be explained as. This analysis will be done
with the help of PESTLE Analysis. It is analysis tool which explain the effects of various factors
on the business and its operations.
11 Economy: Despite of global economic crises Poland has been showing consistent growth
in their economy but still at a lower speed. Starbucks is also facing global economic
recession which is the external driver of the Starbucks. This has lowered the profitability
of Starbucks in Poland. This made the buyers to make a switch to alternative products
which are cheaper than the products of Starbucks. A company is facing the challenges in
the cost of labour and operational costs. With the rise of the global inflation it has
effected the internal environment of the organization as they are feeling a great stress.
There are various economic challenges that the company is facing in Poland like
exchange rates of local currency rates, the local economic environment with in the
different markets of Poland, and the taxation rates within the Poland.11 Cultural Factors: As the economic condition of Poland is at a lower speed, so it has a
huge effect on their culture. As Starbucks can offer their products to its customers at
cheaper rates but it will lead to the sacrifice of the quality of its products(Greer., 2018).
Main challenge a Starbucks is facing regarding culture in Poland as the company is trying
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to increase its customers base, they are attracting the people of lower and middle level
income. Starbucks are not aware of the social and environmental cost in Poland but
should be aware of this trend. They are focusing of the young generation and are
spending less on older generations. Other challenges that Starbucks is facing in Poland is
changing family pattern, change in the consumers' preference as various substitutes are
available, change in the lifestyle of the people, education level in Poland, change in local
market and changing the values and standards of the population.11 Political factor: As Poland is facing unemployment in their country, so as a result
government has allowed 100% foreign direct investment in major industries specially
food industry. Starbucks main political factor is related to the procurements of it raw
materials. It has gained the attentions from politicians of the country and also from the
sourcing countries. This has led the company to adhere the environmental and social
norms of the country. Starbucks agreed to follow the rules and regulations of following
sourcing strategies. This has led to fair trade practices. A company had to follow the laws
and regulations of the countries from where it had been buying the resources from due to
increased political awareness in the country(Zalengera and et.al., 2014). Starbucks has to
follow the Taxation polices and employee-mental laws which have effected and forced
the company to change its internal policies in order to abide the rules government
regarding taxes and employment.11 Technological: Nowadays use of technology is increasing rapidly. Use of mobile is
increasing in people rapidly. So this can be a positive factor for its growth in Poland as it
has already partnership with Apple for bringing discounts to the users who use their
application. They can also provide Wi-Fi facility to users in their outlets as internet is
really important factors for users nowadays they can do internet surfing and have their
coffee(Zalengera and et.al., 2014). This will enhance their experience and give positive
feedback. They can also introduce mobile payment as an option. This will help them to
establish themselves more in Poland, as use of technology is more in Poland.11 Legal: they need to ensure that they follow all the government laws in that country and
do not violate any of them, they need to stay alert about all the rules, regulations and
policies by health authorities. They should also remain aware about other factors like
licensing factor in Poland and trade regulations in Poland.
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11 Environmental: Poland is one of the most clean city in Europe so their people are very
much environment friendly. Many of Starbuscks activities concerned international
advocacy group and activists. Many of their consumers had expressed this issue. So
company should keep this in mind to gain customers trust in Poland. They should also
concentrate on environmental rules and regulation, global warming and other
environmental factors.11 Financial system: Poland is the largest processed food and agriculture industry in
Europe. 7% of Poland's GDP is because of this sector, as a result of this market financial
system of Poland is very good in fact Poland is always at an advantage to supply food for
Europe.
Analysis of business scenario
This analysis will be done by Porter's five force model: Porter's five force model analysis
evaluate all the external factors of an industry's environment which define their competitive
landscape. This analysis model provide information on five forces which are bargaining power of
buyer, competitive rivalry,bargaining power of supplier, threat of new entrant and threat of
substitution. Starbucks operates in a very strong competitive environment of food and beverages.
 Competitive Rivalry: Starbucks has a very strong competitive environment in food and
beverages industry or coffee house industry. There are many factors which has a strong
effect on Starbucks business. First is large number of firms present in the industry is one
of the strongest external factor which intensify the competition in the industry. Each
competitive firm has different strategies and speciality(Dobbs., 2014). The competition
intensify even more when there is moderate variety of firms available. In addition to that
low switching cost strengthen the competition even more. When a consumer shifts from
one provider to another they have the least disadvantage, the only disadvantage faced is
by the provider.
 Bargaining power of Customer: bargaining power of buyers or customer is one of a
very strong force for Starbucks coffee company. Based on the international business
environment influence of customer's whether they are individual or group of customer's,
it affects the business. There are many factors which are the reason of strong bargaining
power of customers or buyers. First factor is because of low switching cost customers
can easily shift from Starbucks to any other brand. Second factor which affects the
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company is availability of high substitutes because of which customers can easily stay
away from Starbucks because of availability of different variety of substitutes like
vending machine coffee. This factor cannot be overlooked that purchasing power of
individuals is very small as compared to company revenue. So it causes a weak influence
of individual buyers on the company. Despite of the weak force of individual buyer the
other two forces have a very strong influence on the business done by the company and
shows the strong bargaining power of customers or buyers.
 Bargaining power of Suppliers: Bargaining power of supplier is a weak force and has a
weak impact on business done by the company. But porters five force model considers it
as an external factor which influence the company or its industry environment(Mathooko
and Ogutu., 2015). There are three factors which has a weak influence on the company
and contribute to power of supplier. First factor is moderate size of individual supplier
which has a moderate effect on the company, however high different variety of suppliers
weakens the power of supplier as they all have different strategies which they use to
compete against each other with different aim such as supplying more material to gain
more revenue such as coffee etc. to Starbucks. This force is further weakened by large
number of suppliers available for Starbucks to supply materials from all around the
world and because of these many suppliers overall supply increases. All these factors
limit the influence of bargaining power of suppliers on the Starbucks company.
 Threat of Substitution: Threat of substitution is one of the strongest force which have
an effect Starbucks company. Number of substitute goods or service available impacts
the business and its external environment. There are many factors which strengthen the
force of threat of substitution(Dobbs., 2014). All these forces can negatively impact the
business. High availability of these products makes it continent and easy for all the
consumers to buy these substitute products instead of Starbucks products like instant
beverages powder, vending machine etc. Another factor is low switching cost towards
these substitutes which are easily available to customers at a very affordable price,
conveniently available at nearest stores at less cost than Starbucks products. All these
factors strengthen the threat of substitution for Starbucks Company.
 Threat of new entrant or new entry: Threat of new entry has a moderate effect on the
Starbucks company. This force refers to all the new entry or new players in the industry.
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There are many factors which contribute to this moderate threat of new entry or new
entrant. Moderate cost of doing business in the industry refers to the cost of setup or
establishing the coffee house and maintaining it. Like cost establishing small coffee-
house is comparatively lower than compared to supply chain. Small coffee-house also
have lower need of supply and supply chain cost. These factors enable small coffee-
house to compete against Starbucks and establish their business. However, cost of
developing brand is costly. And because of this factor threat of new entrant is reduced as
they do not have enough sources to develop brand and mostly development of a brand
requires years of hard work to strengthen the business brand such as Starbucks. Also,
foreign direct investment in Poland brings great opportunities for Starbucks. Foreign
direct investment with other company in Poland proved to be a success for Starbucks
and increased the overall reputation of the organization. So, all these forces show
moderate effect of threat of new entry.
CONCLUSION
From the above study it has been summarized that Starbucks is one of the largest coffee-
house brand with worldwide presence. Then background analysis of Starbucks is done through
PESTLE analysis and at last analysis of different scenario's is done with the help of Porters five
forces model in which all the five forces have been explained i.e. what effect they have on
Starbucks and weather that effect is strong or weak out of which competitive rivalry, bargaining
power of customers, and threat of new substitution has very strong influence on the business of
the company, bargaining power of suppliers has a weak influence on the business of the
company whereas threat of new entry has a moderate influence on the company. Here are some
recommendations for Starbucks to improve their business such as: they should make time for
coffee education by conducting various seminars for both employees and customers, they should
weed out the partners who do not care about the brand regardless of how senior they are, they
should increase the pay of employees who are loyal towards their work and achieve targets,
increase awareness of things that they do to help local communities and at last they should try to
slow down rate of new licensed stores.
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REFERENCES
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Feng, Y., 2016. Are you connected? Evaluating information cascades in online discussion about
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Fitzgerald et.al., 2014. Embracing digital technology: A new strategic imperative. MIT sloan
management review. 55(2). p.1.
Greer, G., 2018. Win in India: An Analysis of Market Entry Strategy Into India’s Food and
Beverage Industry.
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Talhelm, T., Zhang, X. and Oishi, S., 2018. Moving chairs in Starbucks: Observational studies
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Zavyalova, A., Pfarrer, M.D. and Reger, R.K., 2017. Celebrity and infamy? The consequences of
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pp.461-480.
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