Starbucks Business Report

This report provides a detailed analysis of Starbucks, including external and internal analysis, competitive position, and recommendations for growth. It covers topics such as PESTLE analysis, Porter's Five Forces, and VRIO analysis.

Starbucks Business
Report

Table of Contents
INTRODUCTION...........................................................................................................................3
Part 1 – Starbucks Business Report.................................................................................................3
Introduction..........................................................................................................................3
External analysis:.................................................................................................................4
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
The development or amalgamation of plans and strategies in order to accomplish goals
and objectives of a business entity define as business strategy. For creating effective strategies
and policies, it is quite essential for the top management team of an organization to conduct an
effective analysis which assist them in maintaining growth at the competitive marketplace. It can
be done with the help of both internal as well as external analysis of the surrounding. In the
present report, Starbucks is chosen as the base organization so that the whole report will be
conducted in an effective manner. It is an organization which provides different sort of coffee
products across the whole wide world. In addition to this, they also offer various food items to
their customers. The main aim of present report is to create a systematic written document for
business organization so that they can identify both internal as well as external environment in an
appropriate way.
It is a report which includes two main sections where the first part provide detail
information and understanding about the case study along with its competitive position.
Furthermore, it is a written report which shows a detailed analysis of both external and internal
analysis which consist of various approaches along with tools like VRIO, Porter’s five force,
PESTLE, value chain analysis, Industry life cycle framework along with competency model. In
addition to this, appropriate suggestions are given to the business organization which help them
in enhancing their performance in 4 years. In the second section, Starbucks stakeholders report
are going to be discussed.
Part 1 – Starbucks Business Report
Introduction
Starbucks is a multinational coffee chain which provide services to their customers across
the world. It was incorporated in the year 1971 and the headquarter of the company is established
in Washington, United States. It has been identified that the company having global presence
which define as it is the fastest leading coffee company in the market. The annual report of the
company shows that the total revenue in the year 2015 is around 17 billion dollars. To maintain
the brand image at the market, higher authority of the company adopt various marketing tactics.

Furthermore, Starbucks faces tough competition while doing business operations at international
level from its competitors. With the aid of examining given case study it can easily be identified
that major competitors are McDonald’s, Caribou Café, Dunking Donuts & so on. All these
rivalry firms reduces the overall profitability and sales of the company in a negative manner. In
context of Starbucks, it has been identified that company is enough capable to beat the level of
competition and gain the profitability in an effective manner. Along with this, it has been
identified that company offers their share at the marketplace which helps them in order to
enhance their revenue.
With the help of given case study, it has also been identified that Starbucks having almost
190000 staff members whereas McDonald’s have approximately 421000 workforce. Therefore, it
can easily be said that workers of McDonald’s is double than Starbucks. The given case study
shows that Coffee sector is highly competitive and intense. It has also been identified that in the
present competitive marketplace, Starbucks holds positive market position by offering high
quality service and coffee to them. For maintaining strong position and gaining success at the
marketplace, it is required by the management team to conduct external as well as internal
environment analysis. With the help of this, managers can modify and develop effective
strategies and policies so that they can grow at the competitive marketplace.
External analysis:
It refers to an analysis generally done by the company in order to examine their external
environment which highly influence the overall performance of the organization. In the present
context of Starbucks, external analysis assist them in creating growth policies which increase
their profitability and sales. Below mentioned are some of the frameworks used by management
team of Starbucks for examining their external environment.
PESTLE Analysis
It is a tool used by top management teams for identifying as well as monitoring the
external elements. It includes different elements which are political, legal, environmental, social,
economical as well as technical. All these elements are going to be explained in a detailed
manner as follows:

Political: It has been said that strict strategies and policies influence the overall
performance and profitability of Starbucks in a negative manner. It has been said that the
company produces coffee beans which refers to the USP and assist them in order to provide high
quality products and services to their customers. This as a result help Starbucks in order to
compete with their competitors.
Economic: In the context of the economic system of the country, it has been United
States face recession which negatively influences the functionality, activities and the operations
of Starbucks. Furthermore, it has been concluded that company is not being able to expand their
business functions across the international marketplace because of recession.
Social factors: The individuals of United States have high living standards which
positively influences the overall sales of Starbucks. Company offers high quality coffee ti their
customers and people attracted towards it and as a result it increases the profit margin of the
company. According to the current situation, people become more health conscious and for this
Starbucks introduce herbal green coffee which grab attention of customers . With the help of new
segmentation, company will be able to grab opportunities in near future.
Technological: With the help of adaptation of advanced technology, it has been said that
Starbucks can easily perform its operational functions across the world. Along with this, Digital
technology help in reaching large number of people in the whole wide world within limited time
period. Furthermore, Starbucks provide free Wi-Fi to their customers which assist them to spend
their time in a positive manner while having a coffee.
Legal : The top management team of Starbucks hires legal team in order to handles
different activities which is related with the legislations and various legal aspects and make sure
that all the functions are conducted as per the legal requirements. This will assist manager of
Starbucks free from various types of obligations as well as penalties which decreases the
profitability along with the goodwill of the organization.
Environmental: According to the current environment, customers in the present world
prefer paper straw of plastic straw whereas in reference to Starbucks they provide plastic straw
which negatively influences the mind of customers. Plastic straw creates pollution to the
surrounding which reduces the overall brand image of the company in a negative manner.

Therefore, by introducing paper straw company can positively contributes to the long term
sustainability at the marketplace.
Porter Five Forces: It is a framework which includes five factors help in identifying the market
position of the company in an effective manner. The model is going to be discussed in detail
manner as follows:
Bargaining power of purchaser: In the present context, the bargaining power of
customers are high as there are large number of organizations produces similar goods and
services within low price. If customers found high quality products in low or affordable price
then they can easily switch the company. Therefore, in order to retain their customers for a
longer period of time Starbucks provide high quality coffee and various offers to the customers
which create positive image in customers mind.
Bargaining power of suppliers: It has been identified that there are very limited suppliers
who provide high quality raw materials, therefore bargaining power of the suppliers are high in
context of Starbucks. It has also been said that company do not have any sort of option in order
to change their suppliers, they have to pay the amount asked by them for purchasing raw
materials . This as a result, increases the cost of Starbucks and decrease the profitability of the
company.
Competitive rivalry: The primary competitors of Starbucks includes McDonald's, Costa
Coffee, Dunkin Donuts which highly affects the overall market share of the business
organisation. This as a result shows that the competition among the industry is high. Therefore,
in order to maintain the level of competition it is required by the management team of Starbucks
to develop effective strategy as well as adopt new technologies in order to produce unique
services.
Threat of substitutes: In context of Starbucks, it has been identified that threat of
substitute for the company is quite high as there are large number of rivalry firms deals within
similar products and services. Hence, in order to retain their customers as well as for grabbing
the attention of new customers, it is essential for the management team of Starbucks to offer their
goods and services in affordable price.

Threat of new entrants: For entering into the industry, it has been said that an individual
needs huge amount of funds and in case of coffee industry threat of new entrants is low. In
reference to Starbucks, it is said that company having strong global presence and have huge
market share, therefore Starbucks do not have any kind of negative impact from new entries.
Industry Life Cycle Framework
It refers to a framework which includes various phases assist an organization in order to
provide guidance to their staff members about how organisational functions and activities need
to implement in an appropriate way. In the context of Coffee sector, it is examined that it is a
kind of industry consist of four main stages going to be discussed as follows:
Introduction stage: It refers to the initial stage where business organisation emphasize
on increasing profitability of the company in a well defined way. For this, it is required by the
higher authorities to offer coffee to their customers in affordable price. This as a result help them
in attracting more and more people towards the business organisation.
Growth phase: At the second stage, business entities focuses to gain small profit margin
with the help of effective strategies and policies. In the context of Starbucks, top authority of the
company need to create and adopt effective marketing strategies.
Maturity phase: In the third phase of this framework, organisation fulfil their growth
stage and develop stable place at the competitive marketplace. In relation to Starbucks, they start
charging premium price for the service offered by them to their consumers. This assist business
entity in order to improve the profitability and enhance the market share.
Decline Phase: It is the last stage in which profitability of the business organization
reduces and have only two options which includes exit or to create attractive marketing
strategies in order to grab the attention of customers. Along with this, at this stage company is
required to offer low price for maintaining sustainability at the competitive marketplace. In the
present context of Starbucks, higher authorities uses different types of strategies for attracting
ample number of people towards the company.
Internal analysis

Every business entity needs to conduct internal analysis so that they can effectively
identify their strength as well as weaknesses, their aim is to enhance the performance of
company within the competitive marketplace. The business entity adopt such tools in order to
examine the environment with competencies and current resources.
VRIO Analysis
It define as a business tool which assist an organization in order to examine their internal
resources and capabilities of a business entity. It refers to a technique which identifies the skills,
capabilities, valuable resources and competencies of a business entity which assist them in order
to raise level of competition at the marketplace. All the four factors are going to be discussed as
follows:
VRIO ANALYSIS
Factors Valuable Rarity Inimitable Organized
Environment ✔
Unique coffee ✔ ✔
Strong global
Presence
✔ ✔ ✔
Human resource ✔ ✔ ✔ ✔
Value:
 Positive environment: It has been identified that the location of Starbucks outlet are
mainly Porsche areas as well as in those market area in which users willingness are high.
Along with this, they provide positive ambience to their customers as a result they feel
satisfied. It assists Starbucks to grab the attention of ample number of individuals which
increases the profitability of the company.

 Unique coffee: Starbucks use imported beans in order to make high quality coffee which
makes the taste unique, special and different. The uniqueness of the coffee attracts large
number of customers which makes it one of the most valuable element of Starbucks.
 Strong global presence: Company have almost 32,000 physical stores across the whole
wide world and serves around thousands individuals per day. As a result, world wide
presence of the company increases.
 Human resource: Starbucks having highly skilled and talented staff members which
supports the organization in order to become one of the fastest leading industry.
Rarity:
 Unique coffee: Starbucks is an organization provide various types of coffee which are
innovative. They prepare high quality coffee made by trained chefs as well as of coffee
machines.
 Strong global presence: It is an organization having its physical outlets in every areas
and provide high quality as well as unique coffee which is quite rare at the marketplace.
 Human resource: It is an organization provides training and development session to their
staff members in order to fulfil their aim of serving rare and unique coffee tastes made by
the employees.
Imitable:
 Strong global presence: Starbucks having strong world wide presence as it provide
services in almost 81 countries. It creates coffee with imported beans which makes the
coffee taste unique and can not be copied by other organizations in order to create
competition.
 Human resource: The organization have skilled and talented employees and gain
training sessions from expert and professionals. Their unique skills and capabilities can
not be imitable by others.
Organized:

 Human resource: Knowledge and experience of employees are unique which assist them
in accomplishing organizational goals and objectives in an appropriate manner and gain
competitive place.
Management team of Starbucks use Value chain analysis model with a motive for creating
opportunities and increasing value to the company at the competitive marketplace. The model is
going to be discussed in detail as follows:
Primary Activities
Inbound Logistics: It includes development of supply chain in an effective manner for
the business entity. Managers of an organization tries to manufacture and grow the coffee bean in
an effective manner by their own. This as a result help them in order to produce special coffee
taste for the consumers which leads towards the development of positive relationship with the
end users.
Operations: Starbuck currently operates its business functions in around 81 countries
across the world. In order to expand its business operations, management team of the company
adopt Franchisee options in order to raise their global presence. This will assist the organisation
in order to grab insight about various cultures and unique taste of customers.
Outbound logistics: In the present competitive environment, business entities use social
media as well as online marketing tools in order to create awareness about products among
customers and increase sales of the company. In reference to Starbucks, it has been analysed that
company provides 3 in 1 coffee at the Supermarkets like Walmart, Tesco & so on.
Marketing and Sales: For creating more awareness about its coffee, top management
team along with marketing team decides to uses different methods of communication channels
like Facebook, YouTube, Instagram and many more. With the assistance of this, company will
be able to create awareness about the products in an effective manner which leads towards the
enhancement of consumers base.
Services: It refers to the most important reason behind growth, success as well as
development of the business entity as it provides satisfaction to the customers. In the present
context of Starbucks, company offer high quality service to the users which increases the

customer base.
Supportive Operations and Activities:
Infrastructure: The physical ambience or surrounding of the Starbucks outlet is quite
unique as well as attractive which help in grabbing the attention of people who wants to enjoy
their coffee with a positive and soothing ambience.
HRM: With the help of skilled and talented human resource, company will be able to
gain success at the competitive marketplace. In the present context of Starbucks, Human
Resource manager motivate their employees by providing them monetary advantages. Along
with this, by satisfying their needs and requirements, management team of the company reduces
overall labour turnover.
Technology development: Starbucks offer free Wi-Fi along with music services to their
customers at their outlets. Furthermore, they also use different types of online communication
platforms in order to create awareness among the customers as well as for solving their problems
in a faster way.
Procurement: The top management team of Starbucks create rules, strategies as well as
standards that every staff member are required to perform their task in an ethical manner.
RESOURCES
Starbucks have effective tangible and intangible resources to give competition to their
competitors in market. There tangible resources include coffee machine, refrigerator and
working staff etc. Intangible resources include effective service, quality of items provided by
company’s employees and their image in the market. Starbucks consumer satisfaction, goodwill
and relationship with staff members all this are tangible resources of the company.
CAPABILITIES
Starbucks major strength is their strong brand image in the market. They rapidly generate
revenue and create customer base worldwide because of their brand loyalty. With this they give
high competition in the competitive market and maintain their position. Starbucks maintain good
relation with their staff members because they provide best quality to the customer and maintain

good relation with customers. Starbucks offer variety of coffee and pastry at different price range
to the customers. Company is capable to develop their good image in the market because of their
proper and effective service.
COMPETENCY FRAMEWORK
Competency framework is used by the supervisors to analyse or identify the behaviour
and style of the staff members working within the organization. competency framework deals
with various level of performance and activities related with expected behaviour of employees.
The competencies of the workforce include skills, knowledge and attributes.
Leadership development - To develop or build leadership skills, management skills, conflicts
resolving skills in the employees, manager of Starbucks organize some tasks and activities for
the staff members. With this manager increase the level of performance of employees and also
enhance their skills and knowledge.
High talent - Company have effective and talented work force which provide high quality
service to the customers. Talented staff members help in achieving company objectives and
goals effectively and within the available time frame.
Recruitment and Selection – The higher authorities of the company analyze the requirement
of human resource in the company and after this they implement recruitment and selection
process according to the company standards. Manger of Starbucks use online platform to recruit
and select talented candidate for the company.
Performance Management – Starbucks HR manager examine and analyze the abilities and
performance of the staff members as per the set standards of the company. With this company is
able to find out the strengths and weaknesses of the employees and manage them according to
their performance in the company.
Succession planning - Succession planning is the ongoing process of identifying future
leaders in an organization and developing them so they are ready to move into leadership role.
Company also do succession planning to maintain and manage the gap between the individuals
and team members. Starbucks focus on succession planning in order to develop effective leader
and maintain good relation among employees.

(Source: Competency Framework, 2019
Reward and Recognition - Starbucks managers provide monetary and non-monetary benefits to
their employees in order to appreciate and encourage them for their hard work. With this
company is able to maintain positive and comfortable working environment for the employees.
This also help in boosting the moral and confidence of the employees.
Recommendations:
Starbucks present across the world and their managers always try to expand the business
in the market by reaching to maximum population which leads to increase its customer base.
The company need to change their pricing strategies and make them comfortable and affordable
for all class of people. Company can gain more profit by providing their licence to other vendors
and entrepreneurs. Company can also make some changes in their menu like they can also offer

Tea, juice, soup and many more to their customers. They can provide healthy and safe drinks
because now a day’s customers are more conscious about their health. All this attracts more
customers and help in generating high profit. With this, company is able to cut down the cost and
gain more profit, the company can also procure coffee beans by their own as it attracts more
customer towards its special coffee. This will also attract corporate peoples as this people like to
consume healthy drinks at the time of meeting or formal session. They can also add some natural
drinks made with fruits in their list, this will help in providing verities of drinks to the consumers
at one place.
Company can also focus on their marketing activities because this attracts more customers with
in short time frame. Starbucks use Ansoff Matrix in order to impale the market. Ansoff matrix is
the marketing strategic tool which is used Starbucks higher authorities and supervisors in order
to expand and develop the business in the competitive market. By using this matrix managers
develop some SMART objectives which is mention below –
 In order to increase the sale by 15%, the company focus on their marketing activities and
on optimum utilization of resources.
 The company analyse or examine the market trends and customer preferences in order to
increase by rate 12% in 5 months.
Starbucks time to time check the views on their coffee as well as drinks through different
communication channels such as YouTube, LinkedIn, Instagram and many more. This build
strong brand image in the market and bring desirable outcomes in available period of time.
Part 2 – Starbucks’ Stakeholder Report
A) Internal as well as external Stakeholders of company
Stakeholders Groups Internal or External Reasons for the
consideration
Consumer External Consumers are the most
important collaborator of the
company. Only because of
consumers company earn

higher profits.
Staff Members Internal The most important assets of
the company are their
workforce. They provide high
quality service to customers
and increase the productivity
and profitability of the
company.
Shareholders Internal They help in increasing
capital and market share of
the company
Government External By taking permission from
the government of the
countries, company is able to
expand their business.
Supplier External Suppliers provide high
quality of raw material with
which company is able to
offer unique and good quality
product to consumers.
B) Manpower precedence stakeholders’ group
Working Staff is the main collaborator or stakeholder of the company. As per the case
study given, it is mentioned that higher level of authorities motivates working staff through
monetary and non-monetary benefits. They also provide add on services to employees such as
Insurance service, paid Holidays, medical services and so on. Starbucks provide these benefits to
employees with the motive to increase productivity and retain employees for longer time period.
Company have more than 15000 employees which help them in maintaining company’s brand

image in the market.
C) Interest and power of subordinates’ stakeholder group
The matrix involves four factors which directly or indirectly affect the interest and power of staff
members. The matrix is discussed below –
By examine the matrix, it has been stated that the staff members show higher interest in
company’s tasks but they have no such power or authority in company. They do not have right to
participate in decision making process of Starbucks.
CONCLUSION
With the assistance of above mentioned analysis, it has been concluded that it is quite
easy for understanding Starbucks global presence and their customer base in an effective manner.
Also, it is said that external environment have its positive as well as negative impact on the
efficiency and effectiveness of the organization. In addition to this, with the aid of PESTLE
analysis, it has been determined that Technological factors assist Starbucks in a positive manner.
On the other hand, by doing VRIO analysis it can easily be understood that manpower is
considered as the most valuable element for the business organization. At last, it has been

recommended to the management team of Starbucks that they must adopt effective marketing
tools in order to create awareness among the peoples. This as a result assist them in enhancing
their overall profitability and sales at the competitive marketplace.
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