Contents INTRODUCTION...........................................................................................................................1 TASK1.............................................................................................................................................1 P1: Describe the impacts of factor of external environment on Starbucks............................1 TASK2.............................................................................................................................................3 P2: Discuss internal environmental analysis of Starbucks with capabilities..........................3 TASK3.............................................................................................................................................6 P3: Analysis competitive factors for Starbucks based on Porter’s five force model.............6 TASK4.............................................................................................................................................7 P4: Implement theories with providing strategic plan for Starbucks.....................................7 CONCLUSION..............................................................................................................................10 REFEREN CES.............................................................................................................................11
INTRODUCTION Business strategy is refers as long-term plan that is created by business entities in order to reach desired future state and position. It is important to make effective business strategy that contains goals & objectives, type of products and goods needs to build, customer to whom wants to sell and market to serve for profit generation. Starbucks is multinational chain of coffee houses & roaster reserves based on America. The company founded in 1971 with it’s headquartering in Washington, US. It is represented as second wave of coffee culture as the world’s largest coffeehouse chain. This report contains external environmental factor that affects business in significant or sometimes negative ways, further internal analysis is done based on opportunities exploration for business growth and competitive factors that affects business are considered. At the end growth modelandstrategicbusinessplanisprovidedwithinreportfor effectivefunctioningof organisation. TASK1 P1: Describe the impacts of factor of external environment on Starbucks. PESTLE Analysis:-It is the effective method of identifying external factors of elements that affects future growth and sustainability of business organisation in positive or negative ways. It is essential to conduct pestle analysis before adopting step regarding future growth of business. In context of Starbucks influence of these factors are explained as follows: Political:In terms of UK political factor that impacts respective organisation are as laws and regulations made by government of country that affects supply of raw material required for production of Starbucks. Thus in terms of securing business for future respective firm should need to gather a lot of attention from political parties of country. Tax policies and employment laws of United Kingdom are major political factor that affects respective firm. Political stability, tax relaxation fro UK government is also a positive impact of political factor on respective firm that generates sustainable growth opportunities(Ajagbe and et. al., 2016). Economical:The ongoing globalrecession is major externaleconomicdriver for respective organisation and leads to reduce profit of firm. This influence buyer to shift towards cheaperavailablesupplementsandiftheyarenotstoptobuyingcoffeeitwillcreate opportunities for Starbucks. In term of overcome from negative impacts of rising labour cost and 1
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operational cost of business respective company should deal effectively with these cost in order to obtain growth opportunities (Anwar and Hasnu, 2016). Social:Cultural factors such as- changing family patters of UK, changing work patterns, life styles, education level of customers, consumer preferences all are considered under social factor of pestle analysis. Starbucks offers cheaper products but might have to compromise on product quality refers as the major challenge for firm as per socio-cultural factor. Technological:Another significant factor or element that impacts respective business terms of exploring growth opportunities or generating threats are considered elements such as- emergenceoftechnologicalinnovations,agriculturaldevelopment&biotechnological developments of nation. In terms of UK respective organisation uses WIFI capabilitiesinits outletsand uses various platforms and shipping ways based on new technology that shows positive impact of technological factor over Starbucks. This will help in future expansion and growth of respective firm(Cagnin, 2018). Legal:Food and beverage industry of UK is very sensitive in terms health policies so as to secure health of customers and public. Starbucks should focus on effective implementation and follow up of laws and regulation of countries that helps in getting raw material that is essential for effective functioning of production process. It should concentrate on introduction of caffeine production and consumption related policies and laws from health authorities. Other factor included in legal factor of pestle analysis is licensing regulation related to industry, introducing of strict trade & custom duty that leads to successful running of business. Environmental:This is also an essential factor of pestle analysis related to elements such as- environmental rules & regulation of nation, global warming and other issues relating to environment at global level, environmental disasters within country which produce coffee beans etc. Starbucks applied business strategy towards combat climate changes through investing renewable and clean sources of energy for instance conserving water & energy by 25%, adopting climate smart agriculture actions form farmers, reducing waste replanting and undergoing coffee renovation etc. Starbuck promoted store recycling through sue of recycle bags and cups and eliminating over 90,000 kg plastic in order to save the environment from global warming. Thus, it leads to significant impacts over business sustainability and generates huge opportunities for future growth of business(Evans and et. al., 2017). 2
Although above analysisof externalenvironmentfactorsthat impactsbusiness of respective organisation. it is observed that all factor are equally important to address before thinking of any growth option of long term sustainability of firm. In terms of Starbucks pestle analysis of UK reflect positive impacts over business and generates huge opportunities due to better political relations of firm that creates easy supply of raw materials, environmental effective laws that aim as to save nature from global warming, availability of better quality at affordable prices etc. Successful follow up of legal obligation from government, use of better & advanced technology in production, distribution and other activities of firm reflects positive influenceofdifferentcomponentsofexternalenvironmentalanalysisthatcaretswaste opportunities for business growth. TASK2 P2: Discuss internal environmental analysis of Starbucks with capabilities. VRIO Analysis:-It considered as the model or method to analyse internal capabilities and environmentofbusinessorganisationthathasprominentroleinsuccessfuloperation& functioning of firm as well as exploring relevant growth opportunities and minimising impacts of threats and barriers occurs in process(Ghemawat, 2016).There are four major resources that reflects capability of business are narrate as under with respect to Starbucks: RESOURCESVALUABLERAREINIMITABLEORGANISABLECOMPETITIVE ADVANTAGE Brand Image Brand Image--- Temporary Competitive Advantage Product& Service Quality Product& Service Quality Product& Service Quality -- Temporary Competitive Advantage Innovation Capability Innovation Capability Innovation Capability Innovation Capability Sustainable Competitive Advantage Global Presence Global presence Global presence Global presence Global presence Potential Competitive 3
Advantage Valuable resources:These are the resources that hold prestige of firm in their hand that has prominent impact in making awareness business among potential customers, competitors and investors and communicate the reason how they are differ from other competitors. Valuable resources of Starbucks includes strong brand image, store environment of firm, supply chain, special flavour and quality of coffee, customer services etc. (VRIO Analysis of Starbucks Coffee. 2017)these are detailed below: Brand Image:Starbucks has more than 22500 stores globally with huge capacity of serving effective quality of good and products that leads to enhance brand image of business. Thus, brand image or reputation of respective organisation is considered as valuable resource for organisation. Product & Service Quality:Starbucks provide only premium quality of coffee and offer extensive customer services with ethics in order to taking care of the interest of customers and rising firm’s market share and profits.Based on VRIO analysis product and service quality of respective organisation comes under category of valuable resources of firm. Innovation Capability:Respective business uses higher technology in production process of its coffee and roaster products and distribution channel or method of firm is also follow advanced technology that helps in engaging customers more and save their time & efforts. Innovation capacity of firm is also consist as valuable resource for firm based on VRIO analysis of company. Global presence:Due to successful operation of Starbucks in different nations with having more than 22500 stores it creates huge brand awareness internationally that plays significant role in immense success of firm. Global presence of respective brand is also comes under valuable resource of business that reflects effective position of firm within home and other countries. Rare Resources:-These are the resource of business organisations that not only shows prestige of business but also acquired by one of few organisations that grand competitive advantages. RareresourcesofStarbucksincludeproductquality,financialresources,andinnovation capabilities of firms, human resources and employees as well as global presence of business (Habib and Hasan, 2017).These are further explained as follows: 4
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Product & Service Quality:Due to effectiveness of product quality and services offered by respective organisation is rare and not easily available that reflects biggest competitive advantage for firm and helps in rising customer base day by day. Innovation Capabilities:Starbucks constantly invests huge capital in market research and allocation of new and advanced technology in order to maintain existing global image of firm that reflect as rare resource for firm. Global Presence:Starbucks concentrates on constant expansion of business in different countries worldwide in order to fulfil the demands of customers and raise business will automatically results in successful global presence of firm and considered as rare resource of firm. Inimitable Resources:-These are considered as the resources that are not easily acquired and theft by competitors or other players of industry (Johansson and Kask, 2017).In context of Starbucksinimitableresourcesincludestechnologicaladvancement,financial&human resources and international presence of company are discussed below: Innovation Capabilities:Respective organisation spends huge amount on technological innovation that is rare and not easy to acquire due to requirement of huge capital investment and generates benefit for firm based on competitive strong position. Global Presence:Starbucks enjoying huge success in terms of international presence of firm in effective ways leads to impossible to copy by other players within the industry due to high capital investment and application of effective business strategies. Organisable Resources:-These are the resources that are controllable by organisation as well as organised in effective manner (Johnson and et. al., 2017). In context of respective organisation these resources are considered as follows: Global Presence:As per above analysis of VRIO model global reputation of firm is considered as valuable, rare, inimitable and organised resource at the same time. This generates huge competitive advantages & reflects firm’s capability to grab growth opportunities. TASK3 P3: Analysis competitive factors for Starbucks based on Porter’s five force model. Porter’s Five Force Analysis:-It is defined as the method of analysing competition among industry that leads to effective implementation of business strategies required forbuilding 5
stronger position within existing market as well as ensuring future sustainability of business or exploring business in new markets. In context of Starbucks impact of these five factors are explained as under: Competitive Rivalry:Specific coffee and quick service restaurants in industry are intense. The major competitors of respective organisation are Dunkin Donuts, McDonald and much other small coffee soap. Starbucks captured 40% share as a leader within industry. In context of respective organisation competitors are constantly working on specialize, innovative business strategies in order to attract more customers. Low switching cost of consumers leads intense competition within market. Coffee and beverages served by Starbucks are also served by other competitors but few specific & unique products of respective firm helps in building huge brand loyaltyandtrustamongitscustomers(Leischnig,WoelflandIvens,2016).Although, competitive rivalry is high for Starbucks. Threats of New Entrants:Due to number of barrier to enter into food and beverage industry for instance requirement of huge capital investment for making chain stores. Product & brand development and promotion or entering into industry takes a lot of time for business organisations. Thus, threats from new entrants are moderate for Starbucks due to difficulty in making same taste offered by respective organisation. It is moderate because of successful development of customer base by local coffee shops. Bargaining power of Suppliers:Food and beverage industry if broad and covering huge area of industry results in availability of n number of suppliers. Commodity or other raw material needed by Starbucks is easily available at variety of suppliers. It has large numbers of suppliers worldwide that makes paramount for suppliers. Except high Arabica coffee switching cot of supplier is not high for Starbucks. Due to easy availability of coffee beans used to make best coffee by respective company suppliers are not in position to bargain over raw material prices with Starbucks. This shows bargaining power for Starbucks in low within industry (Leonidou and et. al., 2017). Bargainingpowerof Buyers:Anotherimportantforceof competitiveanalysisis bargainingpowerofbuyerswhopurchaseanduseofgoodsandservices.Respective organisation facing huge competition which results in plenty of choices for buyers. Today’s customer is well aware about their choices, if Starbucks raises their prices customer is switch towards lower producer. The environment and atmosphere given by respective firm is unique and 6
taste of its coffee is unique that leads to brand loyalty among customers. There are certain customers who trust only on Starbucks and prefer to purchase its products even when prices are little high. Overall analysis of this force results in high bargaining power of buyers. Threats of Substitutes:The products offered by Starbucks have a lot of substitutes. For instance juice, drink, coffee, make tea at home products have substitutes within market. Food items of it also are substituted on the basis of price fluctuations. There are various substitutes of Starbucks’s drinks and foods products with lower costs and prices that reflect high threat from substitutes. This leads to negative impact over sales of respective organisation affected by risk from availability of substitute products (Lim, Chalmers and Hanlon, 2018). TASK4 P4: Implement theories with providing strategic plan for Starbucks. Ansoff’s Growth Vector Matrix:-This plays significant role in providing growth opportunities for business entities according to the requirement of situation of firm. This matrix provides four major strategies discussed as follows in chosen organisational context: Market Penetration:It is related to increasing customer base and sales with existing products and services within existing market without taking huge investment over development strategies. It is most quick, easy, time & cost saving method of business growth. It can be applied through rising promotion of firm or through little modifications within goods and products. Diversification:This is most beneficial strategy that helps in enhancing profits and market shares of business. It is effective in case of entering into new markets with launching of new or innovative specific goods and products that has prominent benefits for firm in terms of attaining higher prices over effective quality that contributes to profit maximisation. But at the same time it is most risky, time consuming & cost generating growth strategy(Lin and et. al., 2020). Market Development:It is used to enhance market size of business through expanding business within different areas nationally or internationally that leads to future growth of business. It is risky and costly business strategy but help in rising market share and revenues of company.Huge investment is associated with this strategy of business growth for instance requirement of capital for establishing into new industry, conducting research for knowing market patterns, trends, customer behaviours & attitudes etc. that generates cost for firm. 7
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Product Development:It is also a growth strategy for business entities to raise market share as well as customer base of firm and generates revenues. As per product development business strategy new product is made to enhance product portfolio of firm that contributes to rising customer base and increasing sales revenues of firm. This is as risky and time consuming asmarketdevelopmentstrategyconsumesandequallyprofitableasmarketdevelopment (Martinez and Ferreira, 2019). As per above analysis of all strategiesprovided by Ansoff;s growth matrixit is summarised that Starbucks should focus on product development strategy due to its high image, financial stability and huge customer base. This will helps in retaining customers and influencing new customers. Strategic Management Plan ExecutiveSummary:StrategicmanagementplanofStarbucksidbasedonsuccessful application of business strategies for effective operation and growth of business for future sustainability based on secondary data. Business Details Vision & mission:The vision of Starbucks is to “treat people like family & they will be loyal” and mission of respective company is to “inspire and nurture human spirits, one cup& one night board at a time”. This reflects purpose of business in terms of serving society. Business objective:As per implementation of suggested business strategy main objective of Starbucks is to raise profit of firm from 8% within specified time period of one year. Products & services:For successful, achievement of above objective of respective organisation new product of firm will be fast food with better taste and variety of flavours with associate of health & hygiene services(Sanden, 2016). Industry and competitors analysis:Food & beverage sector of United Kingdom is broader in scale with n number of business growth opportunities. Starbucks is already a well brand will help in capturing huge market share within industry. Customer values:In context of Starbucks potential customers of new product will be existing buyers who come for coffee and other drinks as well as new customers or business users who needs good quality of products as per the demand of customers(Vlachos, 2016). Company structure 8
Resources:For effectual application of chosen business strategy Starbucks needs supply for raw materials like vegetables, nutrition’s and other resources required for development of final product. Suppliers:In terms of successful implementation of new product development the suppliers for respective organisation will be sellers of vegetables, equipments like blender, grinder, mixer, backer etc. Financing:In context of respective organisation have huge financial strength and profits will help in successful implementation of above business strategy. It also required some finance from external sources like bank loans, public deposits etc. Financial projection: Riskplan:The high bargaining power of suppliers etc. and use corrective actions to overcome risks creates barriers in execution of plan. CONCLUSION As per above report it is concluded there are variety of components and elements that plays prominent role in evaluating opportunities and threats occurs in business growth and 9 Year20202021202220232024 £m£m£m£m£m Sales2515203035 Expenses Cost of goods sold56789 Depreciation0.50.50.50.50.5 Advertisement1.522.533.5 Rent0.20.20.20.20.2 Salaries and wages1.11.21.31.41.5 Furniture and equipment4 Travel0.10.20.30.40.5 Interest expense33323 Total Expenses15.212.713.514.716.5 Net Income before taxes4.99.210.510.312.6 Income tax expenses0.981.842.12.062.52 Net income after taxes3.927.368.48.2410.08
influence business at boarder level. Internal factors and capabilities of business entities also an important factor to analyse in order to successful application of growth opportunities based on various resources that are valuable, rare, inimitable and organisable for firm. Further growth matrix is also discussed within the report in order to adopt effective business strategy for success of firm. At last competitive forces of respective company are evaluated with availability of strategic management plan for successful application of chosen business strategy. 10
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