A Critical Assessment of Global Environment of Starbucks

16 February 2019

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Contents
Overview of the company and the industry...........................................................................................2
External analysis....................................................................................................................................2
PESTLE Analysis..............................................................................................................................2
Porters Five Forces Framework.........................................................................................................5
Opportunities and Threats..................................................................................................................7
Recommendations.................................................................................................................................8
Conclusion.............................................................................................................................................9
References...........................................................................................................................................10

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Overview of the company and the industry
The company Starbucks Corporation is the premier roaster, retailer and marketer of coffee in
the world. In addition, the company is also engaged in tea selling and has a range of licensed
stores, grocery and foodservice accounts (Starbucks Corporation, 2018). The company had
started as an American coffee company and coffeehouse chain, which was founded in Seattle
in the year 1971. Back then the company would operate through a single store at Seattle’s
Pike Place Market, as a roaster and retailer of whole bean and ground coffee, tea and spices.
Currently, the company operates through approximately 28,000 stores in about 76 countries
(Starbucks Corporation, 2019). The company is engaged in offering more than 30 blends and
single-origin premium coffees. Some of the most popular handcrafted beverages that are
offered by the company are the cold brewed coffee range of coffees, Frappuccino blended
beverages, Starbucks Refreshers beverages, Evolution Fresh cold pressed juices and others.
As per the recent consolidated financial statements as on September 30, 2018, the company
earned a whopping net revenue of $ 24719.5 million.
External analysis
The external analysis of an organisation refers to the evaluation of the macro environment or
the external factors of the company which directly affects the operations and growth of the
company. A number of tools and techniques have been devised to examine the external
factors. A glimpse of the external analysis of the environment of Starbucks, through a range
of tools is provided as follows:
PESTLE Analysis
Political

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Political factors refer to the impact of the government policies of a region on the operations
of the entity. It is significant to note that the regional integration is a current trend adopted by
the multinational companies, including the Starbucks in order to expand the business beyond
America. As the company is operating in around 76 countries, it is required to balance its
operations as per the different policies of the government of different country. Recently the
company was in news because of its plan to hire about 10000 refugees in their company in
the coming five years, which was opposed to the President Trump's executive orders banning
all refugees from entering the US (Taylor, 2017). Being the major player in the industry, over
the years, the company has been in news for a number of reasons. Some of them are also on
the lines of the violation of wage rate and hours laws. The company has also failed to settle
the two pending lawsuits in the case of improper pays to employees. The company was
punished for the same and was additionally required to pay $18 million in instalments as the
settlement fees for the said lawsuit (Dorn, Messner, and Wänke, 2016).
Economical
Economic factors such as exchange rates, level of inflation, gross domestic product,
unemployment levels, interest rates, credit availability deeply influence the business
operations of an enterprise. As the company Starbucks is majorly engaged in the importing
and exporting operations in the different countries, it is required to abide by the import export
laws and incidental statutes. The company was recently in news because of its tie up with the
internet commerce giant “Alibaba” in China. However, the slowest real gross domestic
product of China over the last two decades has raised questions on the vitality of the said
partnership and the growth prospects of the company Starbucks in China (Retail Insight,
2019). As per the industry price curve, it is found that the consumption of coffee commodity
decreases while the prices of coffee increase (Rastogi, and Trivedi, 2016). The demand is