Starbucks Business Report: Internal and External Analysis for Growth

This business report provides an analysis of the internal and external environment of Starbucks, including PESTLE analysis and Porter's Five Forces. It explores the factors influencing Starbucks' business operations and performance, such as political, economic, social, technological, legal, and environmental factors. The report also examines the competitive landscape and provides recommendations for strategies to achieve growth.

Starbucks Business
Report

Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1- Business report of Starbucks............................................................................................3
EXTRNAL ENVIRONMENT OF STARBUCKS .........................................................................5
PESTLE analysis of Starbucks....................................................................................................5
Porter's Five Forces......................................................................................................................7
PART 2..........................................................................................................................................12
a) Star buck's internal and external Stakeholders......................................................................12
b) Propriety Stake holder's--------------------------- Group Employees.......................................13
c) Power and interest of employees stakeholder group.............................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Business strategy is the plan or combination of all decision making activities which helps
to run a business successfully. This is important for business organisation to make planning and
perform their business effectively. Strategy is the backbone of any business which state the
roadmap in order to achieve business goals. Effective strategies are needed to provide an
opportunity for growth of business organisation. This report covers two different types of
analysis such as internal and external which helps to define the business condition which is
running in environment and how to overcome the problems for increasing profits (Aronczyk,
2013). Internal analysis covers those factor which states strength, weakness, opportunity and
threats which helps to make a profitable business. External analysis covers those factor which
can impact on business and how it can be monitor for managing business. This report is about
Starbucks business report who have faced many problems at the time of running business of
coffee. This is famous for their coffee which help develop their business and make higher profits.
This report is categorised in to two parts the first part covers internal and external
environmental analysis which helps to understand how a business is dealing with changing
environment and how it can satisfied customers. Then report covers recommendation about
strategies which is used by management to improve their performance in upcoming 3 years. This
will helps to understand how a organisation has taken the opportunity by controlling threats and
increased business performance. The second part of report is about Stakeholder report in context
to Starbucks that helps to gives information about changing in environment.
PART 1- Business report of Starbucks
Introduction
Starbucks is one of large entity that operates its functions in various locations worldwide.
The enterprise works with objective to deliver quality commodities addition to services to the
current as well as potential customers. It is a leading American coffee company together with
coffee house chain which was established in 1971 at posh city of Washington, United States. It
has wide size of manpower, turnover, product portfolio and market share. The company is well
recognised as market leader in coffee industry because of adherence along with acceptance of
suitable marketing campaigns. In 2015, it was ascertained that the annual revenue of the

Starbucks was around $ 16 billion (Starbucks. 2019). To launch the successful entity, major
contribution were made by Gordon Bowker, Jerry Baldwin along with Zev Seigl.
When the entity was in path for become marker leader, fierce competition was faced
through Starbucks at market place. Major reason behind it was that the entity executes its
workings in Speciality Coffee Cafe Sector which that high competition level as compared to
other industries as various big entities were already performing within it. As per the case study,
big organisations like McDonald's, Caribou Coffee, Dunkin Donuts and many more. In 2015,
Starbucks achieved highest return as compared to its rivals in the coffee industry. The entity also
contributes its shares as well as securities to public so to access funding along with business
expansion (Buckley and Ghauri, 2015). The securities as well as shares of the company are listed
in NASDAQ along with considered as major revenue generating stocks as compared to other top
and big companies having listed stocks. In context to turn on equity of the entity, it is around
47.08% which is more higher than the leading rivals such as McDonald's that has return on
equity of only 32.97%. Other than equity and return, Starbucks also faces immense competition
in respect to strength and number of manpower too. As per the information which was analysed
from case study, it has been ascertained that the totality of manpower that are performing
operations at different locations of Starbucks are more than 191000. At same time, number of
manpower that are working at McDonald's at international level are approximately 420000. from
the analyses it has been depicted that the number and strength of employees of McDonald's are
just double than Starbucks. The management team of Starbucks have duty for achieving growth
addition to attaining favourable competitiveness within market through emphasising towards
earning reliable revenues (Bae, Rowley and Sohn, 2012). With this, the entity will effectively
deal with dynamic and uncertain circumstances. The net profits margin that are earned by
Starbucks are approximately 14.57% and on other hand, companies like Dunkin Donuts as well
as McDonald's have net profit margin that is noticed is 23.55% as well as 17% respectively.
From the determination of statistical data in context to Starbucks, it is analyses that it is intense
in nature as the margin of profitability of the key rivals that are Dunkin Donuts along with
McDonald's are quite high. The executives of Starbucks needs to emphasis towards adopting
effective and aggressive marketing strategies that will benefit in sustaining and surviving within
contending market for longer duration (Campbell and Helleloid, 2016).

As per the overall case study analysis it is determined that fierce competition exists in the
market and management team of Starbucks has framed various strategies that helped in
becoming market leader within the Speciality Coffee industry. In the international market,
overall number of shops and stores are around 21100 by the name of Starbucks in various
nations. Starbucks locations generally serves whole bean coffee, caffe latte, hot as well as cold
drinks, full along with loose leaf tees that involves Teavana tea commodities, frappuccino
beverages, evolution fresh juices and variants of snacks (Chaffey, Hemphill and Edmundson-
Bird, 2019). The company attained this position by implementing effective strategies which
contributed towards procedures for gaining huge quantity of revenues. All these are identified
through properly analysing emerging rends and conditions by the organisational administrators.
For achieving amended future growth, company emphasis on concept of integration that involves
strategy formation through analysing internal along with external environment. With this,
various opportunities are identified and properly used in completing business practices as per
circumstances present within business environment.
EXTRNAL ENVIRONMENT OF STARBUCKS
External environment is a group of factors which are outside from the company but have
potential impacts on the business and operations of organisation. All these factors and conditions
can widely divided into two broad categories Micro and Macro. Several tools and techniques are
introduced by researchers for analysing the external environment of organisation. These enables
company to analyse and evaluate all the components thoroughly for having better operations
(Forsgren and Johanson, 2014).
PESTLE analysis of Starbucks
Starbucks is leading coffee house chain in the world having more than 22,000 stores
around the globe. PESTLE analysis is one framework which is used to analyse and evaluate all
the external factors which are influencing Starbucks operations. This model is divided into six
broad macro factors which holds huge impacts on company's business activities and
performance. Political- This factor concentrates on all the impacts government have over the industry
in which company is having its operations and performing there business activities.
Starbucks has great opportunity to enter new markets and expand their operations. This is

due to increasing interest of political parties in improving infrastructure of their countries.
This opens door for organisations like Starbucks to grow and increase their operational
area. Only negative component is bureaucratic red tape, which is present in most
economies which causes delay and becomes an obstacle for Starbucks. Economical- Next component of PESTLE analysis determines those elements which has
impacts on the economic conditions in which entity is operating. Countries are
developing and their growing economies works in positive manner for Starbucks.
Purchasing power of people in developing economy is increasing regularly which is why
people are spending more on luxury goods. This works in favour of Starbucks and
increases there revenue and ultimately their earnings (Habib and Hasan, 2017). One
negative impact of economy which is affecting Starbucks is increasing labour cost. Due
to which raw materials price are increasing and therefore, production costs is also
increasing. Social- This dimension of PESTLE analysis focuses on the preferences and tastes of
people and customers of company. The manner in which public behave, values they
follow, their tastes and current market trend has huge impacts on businesses and their
actions (HelmArial;sans-serifs and Whitesell, 2013). Coffee culture is growing in
different economies and societies which is a favourable factor for Starbucks. Day by day
coffee is becoming need of people and which is works for organisations like Starbucks.
They earn better profits, sales graph of company is rising and company's performance is
increasing. Technological- This factor of PESTLE analysis determines the effects related with
technology and digital advancement. Technology is changing regularly providing ease to
people, becoming part of day to day life of people. Therefore, it is a very strong
component. Starbucks also make use of digital technology for its operation, they have
provided Wi-Fi services to customers visiting their stores. Also, using digital technology
to serve their customers and reaching to maximum number of customers (Hopkins, 2014). Legal- This element is similar with political components, here more specific rules and
regulations are looked upon which are imposed by government on different business
industries. These laws and regulations are implemented by government for smooth
functioning of businesses in their economy and balancing the economic management.

Starbucks is operating in several locations therefore, company has be very careful with all
the laws of different regions. Increasing employment regulations is becoming a problem
for company, complying with them is a huge issue which is faced by Starbucks
management (Johnson, 2016).
 Environmental- This is a new element amongst external environment factors which came
into existence very recently. After increasing awareness in people about the scarcity of
resources. Now people are more concerned about the environment and focuses on those
goods which are eco-friendly. Starbucks takes good measures too keep the environment
in which they are working safe and make sure minimal environmental impacts of their
operations.
Porter's Five Forces
This is another tool which is used by organisation to study their external environment. In
this framework five influencing factors are analysed to get information about their impacts on the
industry. Starbucks is well reputed brand around the globe dealing in several segments and
facing different forces. Threat of new entrant- This threat is moderate for Starbucks, as the company is huge in
size working in several location. Therefore, new small coffee houses do not possesses
any threat on Starbucks. It is very easy to enter the food and beverage industry as it
involves very less cost (Karthik and Dixit, 2015). But developing brand image involves
lot of cost and money which is very difficult for small business to spend and therefore,
they cannot compete with Starbucks. Threat of substitutes- This force has high impact on Starbucks, many competitors
already exist in market. They are making substitutes of Starbucks products in lower cost
which is affecting the business of company. As switching costs is very low for customer
and therefore, they can easily choose other brand over Starbucks. Company has premium
pricing policy targeting elite class families, upper class sections of society and higher
middle class individuals. This is true that the quality of those products are not same as
Starbucks and people who prefer quality goods will stick with the brand (Kearns, 2012). Bargaining power of suppliers- Next force is suppliers impacts on decisions of Starbucks
for there operations and performance. Suppliers of Starbucks have low power over
organisation as there are several suppliers present in market especially in coffee industry.

Starbucks do not depend on just one supplier for acquiring raw material and other
supplies. Therefore, this force has very low impact on the company. Bargaining power of customers- In coffee industry n number of companies and coffee
houses are present in market. Also, switching costs for customers is also very low which
is why bargaining power of buyers is high. These two elements are making the buyers
strong and strengthening them over company. This force has huge impacts on Starbucks.
Company has to make their strategies and plans accordingly in order to retain existing
buyers and attract new consumers towards the brand (Matt, Hess and Benlian, 2015).
 Competitive Rivalry- This threat is also high in nature for Starbucks, as coffee industry is
full of competitors. Several companies and coffee houses and chains are present in
market, which are competing with one another on different basis. Starbucks has premium
pricing policy and facing strong competition in coffee industry. Starbucks stay above its
competitors by developing strong strategies and making differentiating by serving
speciality products to customers. This is one factors by which they are keeping
themselves above others and giving huge competition to other and its competitors.
Industry life cycle model
It is one of framework which describes distinct phases where organisation operate,
develops, prospect along with slack in the industry. In context to speciality coffee industry, life
cycle is generally long in nature as the industry falls within reliable sector. Distinct stages
through which an Starbucks goes through are the followings:
Startup stage: Herein, an entity begins workings as start-up in an industry. In this stage,
consumer demands are generally limited because of unfamiliarity with new commodities and
performance. The objective of a new entity at this stage are to increase customer base and
revenues. In order to sustain at this time period, Starbucks managers focused on offering coffee
commodities at lower prices or rates (Pride, Hughes and Kapoor, 2014).
Growth stage: In this, products attracts bigger market segment and moves towards
achieving growth and enhancing profits. At this stage, administrators of Starbucks implements
suitable strategies for achieving aspects of growth.
Stakeout stage: In general, shake-out means consolidation of industry. Various
companies are naturally eliminated due to inability to grown and are generating cash flows in

negative manner. In context to Starbucks, it achieved revenue growth, positive cash flows which
helps in remaining in the industry and workings towards further stages.
Maturity stage: In this phase, entities are well established and reaches to point of
saturation. In present era, Starbucks is at maturity stage of life cycle in which they charge high
rates through which they earns more profits.
Decline stage: It is considered as last stage in life cycle of sector. In declining industry,
competitive intensity depends on few factors that are exit barrier height, decline speed and fixed
cost level. When an entity reaches to decline stage there profits begins declining. To overcome
the stage results, Starbucks managers begins to charge less rates for the commodities and offer
huge discounts for sustain in market (Sabherwal and Becerra-Fernandez, 2013).
Internal environment analysis
This analysis states that every organisation should focus on internal analysis which helps
to states which factor can give advantages and which one not. In other words, internal analysis is
a framework which is done by management in order to know their strength and weakness and
also get help to increase profitability. The management of Starbucks are getting internal analysis
by using available resources and competencies which are as defined:
VRIO Analysis:
This refers as a tool which are using by business industry to define the highly valuable
resources in order to attain the business goals effectively. Business are running in competitive
environment which is require appropriate strategy that helps to maintain the profitability by
taking competitive advantages. This framework states which resources are valuable, rare,
inimitable and organized due to which Starbucks is growing continuously. Management of
respective company are using VRIO analysis to analyse their inte++rnal capabilities which is
defined below:
Component Valuable Rare Inimitable Organised
Especial coffee Yes No No No
Powerful global
existence
Yes Yes No No
Skilled
employees
Yes Yes Yes No

Attractive
structure
Yes Yes Yes Yes
Valuable –
Especial coffee – The coffee which is provided by Starbucks is valuable in nature as
coffee bean which are confined and hard to find for other that helps to gain the customer trust as
they maintain the quality of coffee.
Powerful global presence – Starbucks is presented at all places by operating its business
at wider level. This states that global presence of such organisation is valuable because it serve
its product all over world which help to get good faith of its customers.
Skilled employees – Employees are manpower of any organisation which helps to
operate and run a business. In Starbucks, employees are skilled and competitive who uses
resources optimally in order effective operation and making products that states it is valuable.
Attractive structure – Structure of Starbucks is recognisable which can be understand
by all customers easily that states it is valuable which helps to provide quality of coffee (Sanders
and Wood, 2019).
Rare -
Powerful global existence – Global presence of Starbucks is rare as it maintain the
quality of products by high production cost which is not possible to do same for every one that
helps to take competitive advantages.
Skilled employees – Starbucks is having skilled and competent employees who has
adopted new technology and climate change easily in order to provide same and better taste
which is difficult for other get similar skills which helps to maintain the competition in business.
Attractive structure – Starbucks is having attractive structure as it design its interior
same at all places with green paint which helps to understand easily by customers. This is rare
for others to maintain this.
Inimitable -
Skilled employees – Employees who are working in Starbucks are inimitable because it
every employees having different skills and characteristics which helps in operation. So this is
opportunity for Starbucks to get advantages of their inimitable employees in competitive
business environment.

Attractive structure – This is inimitable in context to Starbucks because it has unique
structure which is easily recognisable and attracts customer to get high quality of coffee. Other
organisation is required huge investment to get such type of attractive structure which is not easy
for organisation.
Organised -
Attractive structure – This refers as Starbucks is having good and attractive structure
which is organisable and maintainable helps to gain the competitive advantages by managing all
operation This creates an opportunity for Starbucks to get overall function and maintain the
higher performance
This source provides an opportunity to Starbucks to utilise all resources properly and get
the competitive advantages Skilled employees helps to carry the operation day by day which
processes to sustainable growth of organisation (Spender, 2014).
Value chain
This is effective and attractive framework which helps to maintain the link between
primary and supportive activities by focusing on them and helps to gain the competitive
advantages. The Value chain in context to Starbucks is mentioned below:
Integration: The link between marketing and technology is not ascertained which is
difficult for organisation.
Objectives: To improve and increase Starbucks objectives by using innovative skills.
Application: By using Omni channel such organisation have utilise properly power of
technology and marketing activities (Sisson and Bowen, 2017).
Monitoring: With the help of Quarterly analysis it helps to increase the effectiveness
which processes to maximum growth of organisation.
Recommendation: +
From the above discussion it has been recommended that organisation is using effective
strategy by integrating SMART framework or objectives which helps to get the profitability.
Ansoff Matrix, Value chain and VRIO analysis helps Starbucks to perform their business by
evaluating past year profits which helps to increase them properly. This includes market
penetration, product development, market development and diversification which improve
business by using market development.
SMART OBJECTIVE

 To ameliorate marketplace development rate by 15% by accepting new market channels
for spending information about the utilisation of new qualitative monetary value effective
material within next 8 months of time frame.
 To maximise the gross sales of the coffee offering by 12% within the next 6 months
period of time by using effective cost and quality material or ingredients within target
market through marketing channels.
All the plan of actions consists the utilisation of Kona Beans that assist to survive and
maintain the quality along with the accessibility in cost effective nature. Also, marketing tools
like social media, Instagram, Facebook etc. that will be utilise for spreading information. The
benefit related with the use of omni marketing tool is that offers an option to the consumer in
order to get the direct accession over the trade good on official website of the company by in
term of images of the goods and products. It is beneficial more than multi channel marketing or
promotion of the goods and services and enhance the experiences of the customers in favourable
term too. In context of the current and recent plan of action of the firm, offers an option in easier
distribution of the data about the utilization of Kona beans for providing coffee which is
manufacture by the company by using better quality material. It is offered by the company at
affordable prices with effective quality. Also, the promotion which is do by the administration of
the firm by clicking images of the products, will also provide instant accession over the official
website of the company for its buy. So the incorporated operation must assist the company in
upcoming time to develop their gross sales as well as its market share. In addition to all the
ascertained actions and plan of actions in efficient manner assist in getting the actual outcomes
as stated in objectives within stipulated time frame.
PART 2
a) Starbuck's internal and external Stakeholders
Stakeholder Group Internal and External Justification for including them
Customers External They are major factors of earning
high profitability.
Employees Internal As they are operational hand of
the organisation.

Government External They are legislative authorities
and bodies which have the power
in the affairs of the company.
Stakeholders Internal They assist in increasing the
capital of the company.
Suppliers External These shareholders assist in on
going operations of the
organisation.
b) Prioprity Stakeholder's Group Employees
As preceding Starbuck's shareholder group, employees are the stakeholders which are
chosen as the major shareholders. The main reason of choosing workers is the concentrates of
this firm. As per to the case study of this organisation, employees are the most crucial
shareholder of this firm which has been precedency in context of improving and maximising
productiveness. As per the case study of the Starbucks, this firm considers in pampering its
workforce. The respective company, in current era, provides an sector directing advantages
package salaries to its both part time to full time workers. Benefits of the employees of the
organisation consists insurance, medical services, vacations, paid holidays, stock option plan and
other. This company also provide discount of it goods to their workers along with forthcoming
career counselling.
All these advantages offered to the workforce of Starbucks with the objective of retaining
all the employees. Training and development sessions are conducted by the management of the
company which help the employees in making improvement in their skills and knowledge and
grow in the rival sector. All these advantages are offered with the aim alleviate them so that they
can continue to work with the respective firm. This company conceives that their operations are
totally based on the skilled and qualified workforce and they are most valuable and important
resources due to which they are advised as their major shareholder and their present key
concentrates of attraction. There are estimated 191000 workers of Starbucks which are occupied
in support facilities, warehousing, manufacturing, distribution, store improvement and roasting
etc. Workforce of the organisation are obtained from all over the world but local employees is
more prioritised. The organisation consist both male and female employees and there is no in

context of culture, caste, religion, age, gender, race etc. All the employees include different
characteristics like effective abstraction skill, highly trained and work oriented etc.
c) Power and interest of employees stakeholder group
A stakeholder matrix is the aggregation of four area which states the power and
involvement of all shareholders which they posses in the company. The stakeholder matrix in
context of Starbucks, is developed beneath:
From the above matrix, it has been analysed that workforce which are main in the
respective company, keeps low power but high interest in the operations and other concerns of
the business. Workers are running hand of this firm because they are showed their involvement
in each and every activity of affair of the company. But cause of no ownership, they create
impact or power of the workers is low which curtails them to devise determinations. Abstraction
plan of action is the plan that is utilising which Starbucks will communicate with their
workforce. This firm should accept the communication plan of action of instant electronic mails
by which they can convey their orders and other notices to their workers and with the motive of
elaborate this strategy, the management of the respective firm can devise response to the email
compulsory (Yoffie and Cusumano, 2015).

CONCLUSION
From the above report it can be concluded that there are many strategies which is sued by
business organisation to expand their business and get high competitive advantages. VRIO
analysis is used to know the what resources are valuable, rare, inimitable and organised in order
to sustain in business environment. Value chain is used to improve the objectives and integrate
the business activities properly. PESTLE analysis is used to get what factor has affected business
and maintain business efficiently. Stakeholder analysis states that who are stakeholder of
organisation and how they are contribution to overcome the problems. By using industry life
cycle analysis organisation is having the maturity place where it get maximum profits. And last
recommendation is provided to use effective strategy by focusing marketing and quality
resources.

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Online
Starbucks. 2019. [Online]. Available through: <https://www.starbucks.com/>
Starbucks case study. 2019. [Online]. Available through:
<https://online.vitalsource.com/#/books/9781305856271/cfi/648!/4/4@0.00:0.00>