Starbucks Business Report: External and Internal Analysis

This report provides a detailed analysis of Starbucks' external and internal environment, including PESTLE analysis, Porter's Five Forces, and VRIO analysis. It discusses the company's competitive position, market share, and strategies for future growth. The report also includes recommendations for improving performance and efficiency.

Starbucks Business
Report

Table of Contents
INTRODUCTION...........................................................................................................................3
Part 1 – Starbucks Business Report.................................................................................................3
Introduction.................................................................................................................................3
External analysis:........................................................................................................................4
Part 2 – Starbucks’ Stakeholder Report.........................................................................................13
a) Internal as well as external Stakeholders of company.........................................................13
b) Manpower precedence stakeholders group...........................................................................14
c) Interest and power of subordinates stakeholder group.........................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
The assimilation of plans as well as strategies for attaining organizational goals and
objectives is refer as business strategy. In order to develop effective strategy for an organization,
it is significant for higher authorities to conduct appropriate analysis which will contribute
towards the growth of a company in an effective manner. This process can take place with the
assistance of external and internal analysis of an environment. The company which is chosen for
this present report is Starbucks. It is a global chain of coffee and offers different types of coffee
on its outlet. With this, it also offer food items for the customers (Byrnes, 2019). The main
objective of this report is to build an effective document for the organization in order to evaluate
external and the internal environment factors in a defined manner.
The present report consist of two sections. The initial part of the current report will give
complete knowledge of case study and about its competitive place. In addition to this, the report
presents a detailed description of external as well as internal analysis which involves different
approaches and tools such as VRIO analysis, PESTLE analysis, Industry life cycle model,
competency framework, Porter’s five force and value chain analysis as well. Later, the
recommendations is given for the respective organization which will help in increase its
performance as well as efficiency in upcoming 4 years.
Part 1 – Starbucks Business Report
Introduction
Starbucks is an international chain of coffee that offers its service globally. The company
operational activities is implemented in a defined manner which in turn provides quality
products and services to customers appropriately. The company was established in Year
1971 and its head office located in Washington, United states. The worldwide presence of
Starbucks is so high which shows that it is one of the biggest coffee industry as well as
market leader in these industry. The management team effectively works on to maintain its
brand name high and for this they use different marketing tactics which attracts large
audiences and help to retain them for longer time frame (Cachia, 2017). The Yearly report
of company states the revenue of more than 17 billion dollars in year 2015.
In addition to this, the company have global reach but still facing tough competition with
its rivals or by existing companies. By analyzing the case study it has been stated that major

rivals of company are Caribou Café, McDonald’s, Dunking Donuts and many more. Theses
competitors negatively affect the sales and profitability of Starbucks and also decline the level of
its customer base. The company have the ability to compete with its rivals and has gain higher
revenue as well as returns comparison to other competitors. The company also offers shares in
market so that they can increase their funds which leads to market expansion. It also aid
Starbucks to build high position and generate revenue in market. The return in equity of
company is around 48.01% which is comparatively high in comparison to its major competitor
McDonald’s who’s Return on Equity is approximately 33%.
It is also stated that competition in these industry is does not depend on Return on equity
as it also rely on its strength as well as manpower. It has been analyzed that the workforce of
Starbucks is around 190000 and the workforce of McDonald’s is approximately 421000. The
figures easily shows that the employees of McDonald’s is comparatively double than of
Starbucks (Cian, 2018). By analyzing this, it is important for higher management of company to
increase its size of workforce which help them to earn higher profits in the future or in the
upcoming years. If we are talking about the profit margin of Starbucks, it has been sated that the
profit margin of company is near 14.56% whereas the profit margin of McDonald’s and Dunkin
Donuts is 17.33% & 23.56% respectively. It has shown that rivals profit margin was high as
compare to Starbucks. Herein, it is important for Starbucks to develop effective marketing
strategy in order to enhance sustainability rapidly within the marketplace. The case study states
that Coffee Industry is highly dense and competitive. In addition to this, in this high competition
the Starbucks still holds market position in these industry by offering quality services and special
taste to its customers. The company strong worldwide presence helps company to remain
competitive at marketplace. It also attains Starbucks to enhance its revenue and acquire
monopoly within the market. In order to attain high success the company need to conduct
external and internal environment analysis. This will attain them to develop appropriate strategy
and achieve growth rapidly in the market.
External analysis:
This analysis is basically conducted by the organisation to analyse surrounding
atmosphere which affects the performance of company (Donner and Loh, 2019). With this, it
help entities to enhance their knowledge on the working performance and also improves it.
External analysis also aid Starbucks in developing growth strategies which leads to enhance in

profit level. In order to do evaluation of external analysis, the company uses three frameworks
which is Porter Five Forces, Industry Life cycle model and PESTLE analysis. This three
frameworks are discussed below with relation to Starbucks:
PESTLE Analysis
A tool which is used to identify & monitors external factors which affect an association
performance is termed as PESTLE analysis. It consist of elements such as political, social, legal,
economical, technical & environmental as well. This factors are mentioned below with relation
to Starbucks. In addition to this, an effect of these factors that is either negative or positive is also
discuss which are as follows:
Political: The strict policies & Interest rates impacts negatively on Starbucks
productivity as well as profitability. The company is not procure and produce beans which is the
USP of the entity and helps company to deliver high quality taste of coffee to its customer.
Furthermore, it attains Starbucks to compete with rivals and maintain its market position.
Economic: Recession in the United States affects negatively on the operations as well as
activities of Starbucks (Gurski, 2014). The company would not able to to expand its operations
globally due to the recession.
Social factors: The people of US has high standard of living which affect positively on
the sales of Starbucks. The people attract towards the high quality of coffee which enhance their
profit level. In addition to this, the company can offer green herbal coffee to customers which
might attracts large population of United States. By the assistance of this new segment, the
company can surely develop high business opportunities in the upcoming years.
Technological: Due to adaptation of new technology, Starbucks can develop its
operational activities worldwide. By the assistance of Digital technology, the company can reach
to large audiences and everywhere in the world. This will enhance their market share which in
turn increases profitability. In addition to this, Starbucks offers free Wi-Fi services to its
customers which help them to easily access internet and spent their time well while consuming
coffee. This will help Starbucks to attain objectives within three years (Harold, 2015).
Legal : The higher authorities of Starbucks hires a legal team which handles all the
activities related to the legislations and ensure that operations took place as per legal parameters.
With the help of this, Starbucks make it free from al the obligations and legal penalties which
reduces the cost of company and increase its revenue.

Environmental: As per the current scenario of environment, people prefer to use paper
straw whereas Starbucks serves plastic straw to its customers which negatively affect their
mindset and also causing environment. Starbucks can introduce paper straw and contributes
towards the sustainable environment. This helps company in attaining long term sustainability in
the coming years.
Porter Five Forces:
This tool is used by entities to identify competitive position in the industry in which it
deals. With reference to Starbucks, this framework is used by higher authorities of the company
which are as follows:
Bargaining power of buyers: Herein, the power of customers is high because there are
lot of competitors who produces as well as offers same services in market. It simply shows that if
customer found any quality lacks then it will shift to another company (Helm, 2017). In order to
maintain positive influence of buyers, it is necessary for company to serve high quality coffee as
well as food to its customers. In addition to this, it will also build positive image in the mind of
customer which leads to positive word of mouth in the market.
Bargaining power of suppliers: There are limited number of suppliers which provide
good quality of raw materials to Starbucks which directly means that there is high bargaining
power of suppliers. As company have no possible option to change their suppliers as they want
quality of raw materials is remains high. Furthermore, they agreed with the demand of suppliers
in order to receive raw materials. This raises the coat of the company sometimes which in turn
declines profit level.
Competitive rivalry: The major competitors of Starbucks are Costa Coffee, McDonald's,
Dunkin Donuts affects highly on the market share as well as sales of company. This show that
competitive rivalry is high in these industry and also for Starbucks. In order to remain
competitive, it is necessary for management team of Starbucks to adopt effective marketing
strategy and adopt new technologies to attract large customers (Honack and Waikar, 2017).
Threat of substitutes: The competition in these industry is broad as the impact of these
factor is also high for Starbucks. It is necessary for Starbucks to serve its products at minimal
and affordable price. This assist them to engage customers for long time frame. With this, it also
attracts new customers in the market.

Threat of new entrants: In order to enter in these industry, an individual requires high
amount and also need to perform a lot of legal activities in an effective manner. In context to
Starbucks, the company have low threat of new entrants. In addition to this, Starbucks have high
global existence in market as well as high market share. Therefore, the company did not affect
negatively by new entrants.
Industry Life Cycle Framework
This tool consist of different stages which helps an organisation to guide their employees
about how business operations work and how activities is executed in a proper manner. With
reference to Coffee Industry, it has been analysed that this type of industry includes four staages
of life cycle which is as follows:
Introduction phase: This is the first stage of industry life cycle. Herein, the entity is
focuses on raising profit in a defined manner (Jo and Kim, 2017). For this, In order to increase
sustainability the upper level of authorities should offer coffee at minimal price to its customers.
This will attract more people and the customer base of company increases.
Growth phase: At this stage, the organisations emphasise to earn smaller profits by the
assistance of effective plans as well as strategies. In relation to Starbucks, the management team
of company should develop and use marketing strategies. This will lead company to achieve
growth in a small span of time.
Maturity phase: At this point, the companies crosses its growth stage and creates a
stable position in the market. In context to Starbucks, the company can charge premium price
from customers for the service they offer. This helps company to enhance profitability level and
gain more market share.
Decline Phase: This is the last stage of Industry Life cycle. Herein, the profit of
companies declines and they have two options whether to exit from industry or to develop
appropriate marketing strategies to reach more customers and gains profit. The organizations
also offers less price in order to remain stable in market (Kang and Namkung, 2018). In addition
to this, the associations also offers discount to customers in order to enhance sales and attract
more customers. With reference to Starbucks, the upper level authorities can also uses this
strategies in order to attract large number of customers and increase their profits within the
market.
Internal analysis

Internal analysis is conduct by the organisations to analyse its weaknesses as well as
strength with an aim to improve its performance within the market. The companies use this
framework to identify its surrounding with the present resources & competencies.
VRIO Analysis
It is a business tool which help companies in evaluating their capabilities as well as
resources. This technique determines the valuable resources as well as competencies of a
company which helps them to increase market competition (Karthik and Dixit, 2015). This
analysis consist of four elements such as valuable, rareness, Imitability, organisation as well.
These factors are described below with relation to company which is as follows:
VRIO ANALYSIS
Factors Valuable Rarity Inimitable Organized
cosy
surroundings
✔
Especial coffee ✔ ✔
High worldwide
Presence
✔ ✔ ✔
Manpower ✔ ✔ ✔ ✔
Value:
 Cosy Surroundings: The outlets location of Starbucks is situated on the Porsche areas or
in those areas where customer willingness is high. Starbucks give effective ambience to
customers which make them feel positive as well as satisfied. This helps Starbucks to
gain eyes of large number of people which leads to earning of high profits.
 Especial coffee: The beans which is used in making coffee are imported and makes the
taste of coffee different and special (Koh, Singer and Edmondson, 2019). Its Especial
coffee taste attracts people to consume it and makes it a valuable resource of Starbucks.
 High worldwide presence: Starbucks have around 32,000 outlets across the world which
shows its high presence and global reach. The company serves more than thousands of
people everyday. Its global reach increases its market share as well as profitability.

 Manpower: The company have skilled as well as talented workforce that supports
Starbucks to be the leading entity in these industry. This increases its level of
productivity and the performance.
Rarity:
 Especial coffee: Starbucks offers different taste of coffee to customers. Th coffee is made
by trained chefs and with special coffee machines which develops rare and special taste
in Coffee.
 High worldwide presence: Starbucks is a company which has cafe in all areas and serve
unique taste which is rare in the market.
 Manpower: The company gives proper training to the employees with an aim serve rare
taste of coffee which is made by staff members.
Imitable:
 High worldwide presence: Starbucks give its services in more than 81 countries. It
develops a different taste which cannot be easily imitate by other people or competitors.
 Manpower: The company has talented staff which is trained through professional
training conduct by company. The unique skills is not easy to imitate by others.
Organized:
 Manpower: The skills of their staff members attains company to gain high profits which
leads to gain competitive position at marketplace (Luntungan, Pangemanan and
Rumokoy, 2019).
The company uses Value chain analysis with an aim to develop opportunities as well as enhance
value of Starbucks in the market. Below is the detail description of this analysis which are as
follows:
Primary Activities
Inbound Logistics: It consist of creation of supply chain management effectively for an
organisation. The management team of the company tries to produce coffee beans at their own.
This assist them to develop unique taste for customers and maintains strong relationship with its
customers. This also helps company to enhance the value of internal logistics of Starbucks.
Operations: The company is presently operated in around 81 countries. The company
adopt the option of Franchisee in order to increase its presence. Some of its outlet is working as a

franchisee and some is operated by their own. By the assistance of this, the company is able to
gain insight about different cultures as well as taste of customers.
Outbound logistics: Nowadays, companies adopts online marketing or social media
tools to enhance sales and to aware more customers. The companies offer packaged tea as well
as coffee through online as well as offline modes (Martins, Rindova and Greenbaum, 2015). In
context to Starbucks, it offers 3 in 1 coffee in Supermarkets such as Tesco, Walmart and many
more.
Marketing & Sales: In order to increase awareness and to promote its coffee, the higher
authorities or marketing team of company uses various modes of communication such as
YouTube, LinkedIn, Whatsapp etc. By the help of this, Starbucks increase its awareness
effectively which in turn increases its customer base.
Services: The main reason behind success of any entity or an organisation is its high
quality service which it give to customers and satisfy them. With reference to Starbucks, the
company offer quality as well as fast service to its customers which leads to increase in the
number of loyal customers.
Supportive Operations & Activities:
Infrastructure: The ambience of outlets of Starbucks is unique & attractive which
attracts people to enjoy its coffee with a soothing ambience.
HRM: The company can gain success due to its talented and effective manpower. In
relation to Starbucks, the HR manager encourage workforce through monetary benefits. The
company is able to decline its rate of labour turnover by satisfying their basic needs.
Technology development: It offers Wi-Fi services on all the outlets for its customers. It
also uses online communication platforms to aware customers and solve their queries rapidly.
Procurement: The higher authorities of Starbucks developed rules and standards so that
ethical practices can be followed by every staff member of the company (Mason, Cole and Goza,
2017).
RESOURCES
The company consist of tangible and the intangible resources which aid them to be
competitive at marketplace. Tangible resources includes equipments and coffee machines as well
whereas Intangible resources involves its high quality service which is given by its employees

appropriately. In addition to this, company goodwill, customer satisfaction and employee
relationship are also the tangible resources of company.
CAPABILITIES
Starbucks main strength is its brand equity. The company worldwide reach is so high due to
which it raises revenue as well as customer base. This also helps company to fight with their
rivals and remain in the leading position (Mason, 2017). In addition to this, it offers snacks and
various types of coffee to customers. Starbucks focuses in maintaining good relations with the
staff members who gives rapid and quality service to their customers. The company also offers
different price range and well as types of coffee to customers in different ways.
COMPETENCY FRAMEWORK
These model is used by higher authorities to identify the nature as well as attitude of
manpower working in the organisation. The competencies of these employees are their
knowledge, attributes and skills as well.
Leadership development: The HR of Starbucks organize activities for its employees
with an aim to build leadership skills, management skills, problem solving skills etc. by the
assistance of this activities the company is able to increases their skills as well as knowledge.
High talent: The company have experienced, skilful an talented employees which gives
high quality of services to customers. This manpower of comp-any also helps to attain
organisational objectives in a stipulated time period.

(Source: Competency Framework, 2019)
Recruitment and selection: The HR manager of company identifies and analyse the
need of company and then execute selection process as per the standards decided by company.
The manager uses online tools to select best candidate for the company.
Performance management: The management team of Starbucks monitors the
effectiveness and performance of employees with the set standards. With this, they are also able
to graph out the contribution of each employee in achieving objectives.
Succession planning: In all the organisations there is always a gap between an employee
or the team. In order to fulfil this gaps companies conduct activities and replace its employees
with more energetic and quality leader (Paik, Kwon and Chen, 2017).
Rewards and recognition: The managers of Starbucks gives monetary benefits as well
as give appreciation to the members of company of their efforts and hared work. This attains
them to maintain positive environment in the organisation. In addition to this, it build high
morale and confidence in the employees of Starbucks.
Recommendations:
The company have worldwide presence and recently starts its operations in china. Instead
of this, the managers have a good chance to expand its market and reach to maximum population
Il
lustration 1: Competency Framework

which leads to increase its customer base. The company should change its price range as it offers
its services in affordable prices also so that every class of people enjoy its services. In addition to
this, it has gain more profit by providing license to other vendors as well as entrepreneurs. It is
also suggested for the company that it can add new offerings in its menu such as tea, green
coffee, juices and many more. As now a days people are more conscious towards their health and
prefer to consume healthy drinks (Purkayastha, 2019). This will help them to raise profits and the
customer base also. With this, in order to cut down the cost and gain more profit, the company
can procure coffee beans by self as it attracts more customer towards its special coffee. It also
add healthy drinks or the flavoured drinks which is made of fruits in its menu. This will help
company to give various choices to customer at a single place. This will also attract corporate
peoples as this people like to consume healthy drinks at the time of meeting or formal session
( Shiau, 2016).
The company can also emphasise of marketing activities as it helps the to aware large
number of people within short time frame. The higher authorities uses Ansoff Matrix in order to
penetrate market. This tool also includes various techniques as well as tools. Herein, the SMART
objectives is developed which is mentioned below:
 In order to increase sales by the rate of 16%, the company can emphasise more on
marketing activities as well as on utilisation of resources effectively
 In order to increase by the rate of 15% in 6 months, the company can analyse market
trends, customer preferences and then give offering to customers.
In addition to this, Starbucks can also aware about it new coffee as well as drinks through
different communication channels such as YouTube, LinkedIn and many more. This will builds
its market position high and brings out effective outcome in short time period.
Part 2 – Starbucks’ Stakeholder Report
a) Internal as well as external Stakeholders of company
Stakeholder Group Internal or External Reasons for the
consideration
Customers External The customer is the only
reason for a company to earn
profits and remains in the

market.
Employees Internal An organisation key of
success, they are the people
who maintain productivity
and give quality service to
customers.
Shareholders Internal (Sari and Hunar,
2018)
They contribute on the
activities of a company which
increases market share &
capital.
Government External In order to start new business
or to expand business in other
countries, the government
permission is required.
Suppliers External They provided high quality
raw materials due to which
company offers unique taste
to its customers.
b) Manpower precedence stakeholders group
Employees are the major stakeholders of Starbucks. As per the case study given, it is
mentioned that upper level of authorities encourage workforce through monetary benefits. They
also give additional services to employees such as Insurance service, paid Holidays, medical
services and so on. Starbucks give this benefits to workforce with an aim to increase productivity
and retain employees for longer time period (Rivenburgh, 2014).
The company have around 2,00,00 workforce which helps them to be the leading
company in these industry. In addition to this, the company have female and the male employees
which belongs from different culture and society.
c) Interest and power of subordinates stakeholder group
This matrix includes four elements which directly affect on the interest as well as power
of employees. The matrix in relation to company is described below:

By analysing the matrix, it has been stated that the employees shoes higher interest in
companies activity whereas they have no such power or authority in company. They do not have
right to participate in decision making process of Starbucks (SAHU, 2016).
The company uses different ways of communication such as Emails, Messages, video
conference as so on to interact with employees properly.
CONCLUSION
From the above study it has been analyzed that it is easily understood that Starbucks has
global reach and its customer base is so large. It has also been concluded that there is negative
and positive affect of external environment on the performance as well as effectiveness of a
company. By the assistance of PESTLE framework, the factor which impacts positively on the
functions of Starbucks is Technological factors. In addition to this, VRIO analysis identifies that
manpower is the most valuable resource of the company. At the end, it is suggested that
Starbucks should use marketing tools as well as strategies to aware more number of peoples and
to use there resources optimally which leads to decline in cost and raises in the profit level of
company.

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