Influencing Organisational Strategy

This document discusses the strategies and factors that have influenced the growth and success of Starbucks Corporation. It explores their business model, customer-centric approach, and financial performance. The document also analyzes the coherence of Starbucks' strategy in relation to its internal and external environment. Additionally, it provides information about the major shareholders and stakeholders of the company.

Running Head: INFLUENCING ORGANISATIONAL STRATEGY
Influencing organizational strategy
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Author Note

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Introduction
In the year 1971, college friends Gordon Bower, Jerry Baldwin and Zev Siegl found
Starbucks in Seattle. Successes of the first store lead to the friends open multiple stores,
gradually distributing and selling coffee in the wholesale businesses. Howard Schultz, in the
year 1987 purchased Starbucks Corporation and served in the company’s operations
department. He took the role of CEO and Chairman. He went on with the official brand name
of Starbucks and proposed not to change it as it had already earned itself recognition.
Starbucks Corporation acquired stellar success under Howard Schultz’s management. In the
year 1993, the company came up with the idea to sell coffee at bookstores so they entered
into a joint venture with Barnes. Starbuck Corporation reached $8.3 million net earnings.
After their huge success in the United States, the company decided to go global and opened
nearly two hundred outlets. Dubai hosted the first Starbuck store in the Middle East region.
Europe provided Starbucks a unique business market and Starbucks launched its primary
store in Zurich, Switzerland. The company suffered huge loss in the year 2002 in the
Japanese market. The loss did not stop the company from investing and expanding
internationally. The economic recession enforced Starbucks Corporation to take down nearly
600 stores in the US. Starbucks changed its business module in the year 2009. The company
came up with the Starbuck card to engage more customers and for the first time launched
stores in Poland, Aruba and East Africa. The company started investing and expanding its
digital network. Currently Starbucks has 28000 stores in nearly 77 countries with a market
cap of $84 billion (Forbes 2019).

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Response to question 1.
Starbucks Corporation, the premier coffee brand has an exceptionally well planned
strategy. A lot of factors have effected Starbucks’ growth and development. When Starbucks
was founded in 1970s, most Americans were not happy with the inferior quality of coffee
available in the market. The American people were interested in authentic natural ground
coffee, and the founders could feel and understand the dire need and opportunity in the
American market. It can be deduced from this particular example that Starbuck founders
could identify the gap in the market and played the opportunities at the right time. There was
no such competitor in the market and the business bloomed. Starbucks Corporation always
looked for opportunities to expand (Snell 2017). The primary and principal strategy of
Starbucks is to serve people. Starbucks describes themselves as the company who are in the
people business and serving coffee.
Porter five force analyses give a better understanding of Starbucks business strategy.
Competition (Strong): Starbucks has a large number of competitors in the market of various
sizes, be it from McDonald or Dunkin Donald to name a few. The competition is increased
because of low switching prices. The kinds of coffee served in Starbucks are also served at
other cafes.
Product Substitution (Strong): There is high availability and affordability of substitutes in the
market (a strong force). The consumers in the market have a variety of options instead of
going for Starbuck products. Substitutes include on the go beverages, instant coffee powders
and vending machines. There is also a low switching price which strengthens product
substitution.

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New Entrant (Moderate): Starbucks has already set the market and is a strong player. The
threat of new entry is moderate. Establishing and developing a market hold so large as
Starbucks requires strong investment and the process is time consuming. Starbucks has
already instilled in its customers a taste for its high quality product. Hence, it is difficult for
new entrants to attract customers (Mason, Cole and Goza 2017).
Bargaining power- Suppliers (Strong): Company to maintain its production of variety of
coffee flavors had to procure assortment from various specialized farmers. This increases the
bargaining power.
Consumer bargaining power (Moderate): The consumer bargaining power is moderate.
Starbucks has generated loyal customers through its loyalty card policy.
Howard Schultz on his visit to Milan, the idea of cafes struck. He noticed how the baristas of
the cafes interacted with the customers on a personal level and served them cheerfully. This
made customers enjoy their time at the café as personal attention brings about loyalty.
Developing personal relationships with the customer is another strategy Starbucks
Corporation worked on. Starbuck started working on building a community, where people
could connect and interact (Corporation 2019). Starbucks targeted customers of all ages. The
employees were trained to have joyfully conversation and to develop personal relationship
with the customers. The employees interacted with them and greeted them with their names.
This improves the ambience and customers frequented the café. Starbucks designed each café
meticulously with the best interest in mind. The idea of the design was to enhance customer
comfort and satisfaction. Starbucks installed wifi services in its stores, the stores slowly grew
to a place where everyone could work and socialize. Loyalty card for customers and the app
increased Starbucks’ consumer base significantly. They launched “My Starbuck Idea” to

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directly engage and exchange ideas with the customers. Their opinions were taken into
consideration and Starbucks’ had 1.3 million social media users and page view showed a high
rise. This strategy really helped Starbucks’ build extensive customer relationship, which
eventually lead to the rise of its customer base. Starbucks also keeps a track on the speed of
service. The company had the engineers design proprietary system which served three kinds
of coffee simultaneously. The employees were trained to use the system efficiently to
improve customer service speed. This strategy directly impacted customer satisfaction
(Drejer 2018). To survive the competition Starbuck always delivers authentic-quality of
coffee. The baristas hired are well trained have considerable knowledge about various kinds
of coffee. Starbucks developed international relationships with countries to source the best
quality coffees from them. These applied strategies make them unique in the coffee industry.
They have acquired long-term contracts which enabled them price protection against
fluctuations. The company invested in operational structure of Narino Supremo beans. This
strategy helped Starbucks acquire the best premium blend of coffee beans and maintain their
competitive edge. Starbucks has set certain guidelines for suppliers, which helps the company
maintain best quality of coffee (Forbes 2019). Franchising route was the most logical and
significant step in the Starbuck’s expanding strategy. They control the complete supply chain
which helped the company maintain its quality.
Response to question 2:
(a) Starbucks’ financial performance:
Starbucks had a steady revenue growth until US was hit with a recession and
Starbucks had to shut down 600 shops which were running in loss in 2008. Profit fell down to
nearly 28%. Starbucks had to shut more 300 stores and left 6700 employees (Businesstoday
2019). The closure helped Starbucks to survive the market crash and eventually the company

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regained its market capture. Starbuck shifted its policy form bureaucracy to its customers.
Starbucks pricing policy and customer first approach helped the company from sinking and
lead to the success of Starbucks in the later years. Starbucks’ revenue is generated from
licensed stores, kiosks, food service op, and CPG- consumer packaged goods. Starbuck
increased its CPG revenue dramatically by the sales of its branded Tazo cups. The location of
these stores adds to customer crowd and increases revenue. Starbuck strategically choose
locations which can pull huge crowd and increase the profit of the stores. Starbucks showed
growth in revenue in 2015 compared to the previous years (Glowik 2017). There was also an
increase in labor cost, occupancy cost and production cost. This indicates positive growth and
performance of the company and can be concluded that sales target has been achieved. There
can be an argument that Starbucks should decrease the cost of products sold by the brand as it
can result in major gross profit and also increase its operating profit. Financial analysis
methods have 3 types: Measure of profitability measure, Asset management ratios and
financial leverage ratios. Starbucks efficient use of its assets maintained a healthy range in
the ratio which indicates strong financial strength. Starbuck showed low turnover rates in two
consecutive years so efficient selling of products is required. Purchasing inventory on
demand has also lead to stagnation of Starbucks low turnover. Debt to asset ratio of Starbuck
is on the high side compared to other companies in the same industry. This shows a high risk
of insufficient cash flow o covering interest and payment of principal. A strict watch will
save Starbucks from any deterioration in the future. There has been increasing debt for short
and long term areas of Starbucks. Considering liquidity ratio comparison to the average of the
industry, it can be said that Starbucks strategy remains healthy and shows strong financial
(short-term) strength. Starbucks is in apposition where the company has the capacity to clear
of debt services.

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(b) Coherence of Starbucks’ strategy in relation to the company’s internal and
external environment.
Starbucks has faced both success and adversity and the company had always stuck to
its strategy of customer business and serving coffee. In this continuous changing business
world, Starbucks maintained its implementation of “Starbucks experience” in each and every
store. Starbucks meticulously designed its all the stores to give its customer ultimate comfort
and satisfaction (Sakal2018). Customer satisfaction is priority. Starbucks slowly introduced
various food items on the menu to cater to all the needs of the customer. The quality of the
coffee served is strictly monitored. The slow roasting process, various flavors, imported
coffee beans maintains the brand’s image. The policy Starbucks has with its coffee bean
suppliers are updated and in accordance to the law of the country. Premium quality beans are
imported and used it all its stores (Dorn, Messnerand and Wänke 2016). Each store of
Starbuck’s is designed keeping the location of the store in mind. Each store has a touch of the
crafts and items popular in that particular place but also maintaining the originality of roots.
Wifi, tranquil music in the stores, cordial baristas and exceptionally well service won
customers over the year (Noe et al. 2017). The employees are properly trained and hold
strong knowledge about various types of coffees. The Starbuck thrives to achieve equal pay
rights for both the gender and has also invested in numerous social events and causes. As the
company expanded fairly in the United States, the brand went global. Consumers and
company are affected largely by these global forces which are non-controllable. Starbucks is
a great performer globally. The success behind Starbucks’ global ventures is about how well
the brand incorporates the countries’ customer preferences. As customer business is their
primary agenda, the stores adapts itself to the local ambience and provides its customers a
third place (place between home and work). This adaptation strategy has been the most
instrumental and significant reason for their growth worldwide (Li 2018). Moving on from

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the fourth place, the brand plans to build a fourth place, a blend of the third place with digital
space. Reserve stores, an idea adopted by Starbucks which only highly rare and exquisite
coffees that are of limited quality. These initiatives helped the brand gather a large customer
base and expand globally by occupying a large chunk of the market share (Isosävi and
Lappalainen 2015).
Response to question 3
The company has five major shareholders namely, Howard Schultz, Mellody L
Hobson (President- Ariel Investments), John Culver (Group President- Global retail) and
Clifford Burrows (Group President- Siren Retail). Howard Schultz owns $33 million direct
shares and $1.7 million indirect shares mainly through trusts (investopedia 2019). Mellody
Hobson owns 246,000 shares directly of the company and 283,146 shares indirectly. He is the
company’s second largest shareholder. The third largest company’s shareholder is John
Culver with a total of 366,402 shares. Fourth largest shareholder of Starbucks is Clifford
Burrows. He holds 248,225 shares of the company as of 16th November, 2018 (investopedia
2019). The brand’s stakeholders are the green apron clad employees and the directors of
single franchise. Unique client stakeholders are common which are the loyal customers or
even the planetary markets (Goodman and Herman 2015). Starbucks has a direct effect of the
community of its stakeholders. Starbucks has provided very many leadership programs for
the youth, and the brands presence provides an effect on such stakeholders. Shareholders
determine the operational performance of Starbucks. Starbucks pays a fair amount of their
attendance on how one of their primary shareholders is affected. The congregation
understands the importance of helping the community. In CSR (Corporate social
responsibility) context, Starbucks takes into account the interests and demand of its
stakeholders as the brand is envisioned to be a society for citizen and not only a profit

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generating organization. The brand includes its stakeholders in all its strategies and success.
Stakeholders play major role in Starbucks success story. The stakeholder in Starbucks
include: Employees (partners and baristas), Consumers, Suppliers (firms and farmers),
Investors and government. Employee as stakeholders demands better working environment,
high wage and job security, and the brand cater to their demands. Starbucks in the year 2014
started providing scholarships to its employees to study in Arizona State University.
Customers are the brand’s most important stakeholder (Campbell and Helleloid 2016). This
group of stakeholders has interest in high quality products and services. Starbucks tries to
fulfill this stakeholders group’s interest (Kang and Namkung 2018). Suppliers, another
important stakeholder of Starbucks consist of coffee farmers and wholesale supply. Suppliers
and Government are predominant stakeholders which lead to the huge success of the brand
globally. The brand hugely invests time and quality in satisfying the concerns and needs of its
stakeholders (Goodman and Herman 2015). In continuing to produce augmented
transparency and maintain its balanced account of achievements, the brand highly engages its
stakeholders. Starbuck operates mostly in the interests of its various stakeholders. The
stakeholders are an important part of the business model of Starbucks (Ehrlich 2018).
Response to question 4.
A SWOT analyses of Starbucks business model will provide a better understanding of
the threats and measures the brand should work on to counter such threats and the develop
more opportunities in the market.

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Strengths
 Brand image strength and valuation
of the company- Strong.
 Polished and effective supply chain
management.
 Large global market capture.
 Loyal customer base is strong.
 High revenue margins
 High quality product and service to
the customers.
 Pioneer in human resource and
knowledge management.
 Highly skilled and motivated
employees
Weakness
 High price of the coffee beans leading
to high cost of service.
 General standards for majority of the
products
 Products can be easily imitated.
 Moderate diversification of items.
 Heavily dependent on its customers
love for coffee.
 Lacks unique market
Opportunities
 Expand supplier network and range of
the suppliers.
 Diversification of source inputs which
will lead to resilient stand against any
risks in the supply chain.
Threats
 Competition from low-cost sellers or
alternatives.
 Imitation

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 Expansion of product and items
served in stores.
 Experiment with various new food
items and provide a plethora of
choices.
 Invested in a specific market.
 Profitability is threatened.
 High cost of raw materials.
 Legal threats, like trademark issues
 Disrupt supply of raw materials.
Table: 1
Source: (Created by Author)
The above SWOT analyses throws light on various threats faced by Starbucks Corporation.
The major threat for Starbucks is that the business industry is not unique and has a wide
number of competitors in the market, nationally as well as internationally. Starbucks is in a
competition against low cost cafes and stores providing the similar experience (Sholihah et
al. 2016). This factor can highly affect Starbucks’ customer base and market share. Imitation
is also a major threat for the coffee brand. Furthermore, independent coffeehouse movement
is subject to the industry environment. These movements are social and cultural in nature and
supports small independent local coffee houses operations. They are opposed to the
expansion of multination chains. Consumer perception is affected by such trends. Legal
threats include trademark policies and lawsuits of different kind generate unnecessary
costing. Trade policies hamper international firms in the local markets (Ehrlich 2018). Cost
of raw materials is high which leads to high pricing of the product served. This leads to the
brand target a small consumer base who can afford to pay a big amount for his or her coffee
(Glowik 2017). If suddenly consumers shifts from coffee to some other product, this will
lead the sinking of the brand as the brand only specializes on in coffee. In the global market,

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Starbucks faces stiff competition from other players in the market and few of the players has
a good hold of the coffee market internationally. Independent movement of coffeehouse is
also a threat to the brand as they support small coffeehouse business and causes problems for
big players in the industry.
To counter the above threats, Starbuck needs to introduce stronger marketing
strategies and develop more international partnerships. The coffee industry produces diverse
challenges and Starbucks to continue its growth needs to aggressively diversify and innovate
within its domain. The brand needs to introduce various food items on the menu to offer a
complete experience to its customers. It can include brunch menus which will definitely draw
more customers. Innovation in the arena of product development will give the brand an edge
over the other players as imitation will be difficult. Starbuck should revise its pricing
strategies to attract more customers. This will eventually cut out the threat of low price
sellers. Starbucks should more effectively work on its marketing and community strategies
and contribute enough to its community. These counter measures will improve business
profits and minimize negative effects of the internal and external factors on Starbucks.
Starbucks has come a long way since its inception. The brand has faced success and
adversity, yet it stood strong and now it is the largest coffee conglomerate in the present day
market. The various strategies adopted by Starbucks in time of crises and expanding were
always with the intension to serve its customers first. This ideology of the Starbucks
corporation made the company the java giant it is today in the competitive market space.

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