Starbucks Business Report: Analysis of External and Internal Environment

This business report focuses on Starbucks and analyzes its external and internal environment. It includes a PESTLE analysis, Porter's Five Forces analysis, and VRIO analysis. The report provides recommendations for improving the company's performance.

Starbucks
Business
Report

Table of Contents
INTRODUCTION...........................................................................................................................3
Part 1 – Starbucks Business Report.................................................................................................3
Introduction.................................................................................................................................3
External environment analysis....................................................................................................4
Internal analysis..........................................................................................................................7
Part 2 – Starbucks’ Stakeholder Report.........................................................................................11
a) Internal & external Stakeholders of Starbucks.....................................................................11
b) Workforce precedence stakeholders group..........................................................................12
c) Power & of Interest Workforce in a stakeholder group.......................................................13
CONCLUSION.............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Business Strategy deals with integration of plans so that there is quick attaining of
objectives and goals. For developing strategy for a company it is necessary that management
team has to make analysis which is helpful in selection of of best strategy. This can be done
effectively so that there is analysis of both external and internal analysis of environment in which
a organisation is functioning (Anwar and Hasnu, 2016). Report is based on case study of
Starbucks that is a coffee chain having presence across world. Main objective of this report is
that there is effect strategy which can be developed for the company and which is based on
evaluation of external and internal environment in a right way.
Present project is divided in two sections. Forts part consists of detailed information
about case study which is inclusive of competitive position. Further it includes explanation of
external and internal analysis which includes discussion on various frameworks such as
PESTLE, Life cycle, Value chain analysis, VRIO analysis & Porter's five force analysis. After
this there us recommendations which are provided to the company which can help in improving
its performance in coming three years.
Part 1 – Starbucks Business Report
Introduction
Starbucks is a multinational coffee chain which is providing its service across various
parts of world. This company is operations and its functions are executed so that they can
provide quality products which can be delivered to their customers in a a more effective manner.
This entity was incorporated in year 1971 and its headquarters are located in Washington, UK.
To maintain a brand name of company they are using various marketing campaigns so that they
can attract more customers. Annual report of Starbucks which was presented in the year 2015
revealed that revenue of this company was approx 16 million dollars.
Starbucks is a brand which is having a strong global image throughout the world but still
they are experiencing a very tough competition (Anwar, 2019). On basis of information which
is provide in given case study it can be seen that major competitors for Starbucks are Caribou
coffee, McDonald, Drinking donuts and many such related brands. All such competitors
influence their present base of customers and they also posses a negative impact on sales of
Starbucks and have a impact on their profitability. Presence of higher competition does not has a

influence on revenue if Starbucks. They are having presence in stock market also as they have
raise funds by offering their shares to public. This has helped them in 4 feneratuion of high
revenue in the market. There is 47.08 returns on equity by Starbucks which is high as compared
to its biggest competitor McDonald which is having return of approximately 32.97% only.
It can also be said that competition in the industry is not relying on this one factors but this is one
measurement which is used for measuring of strength and manpower (Buckley, Burtonand
Mirza, 2016). It is also acknowledged that Starbucks has a working staff of approx 191000
employees and that of McDonald is 420000. this states that McDonald is having larger
workforce as compared to Starbucks. This figure states that staff of McDonald is more in number
as compared to Starbucks. 5 This evaluation states that competitors margin of profit is high in
comparison with Starbucks. 6 It an also be said that there is a need for appropriate marketing
strategy so that that can enhance their sales in the market. This case study clearly states that
coffee industry is having many brands but Starbucks is holding a good position as they have a
effective offering and at same time this brand is having a presence all over world. This is helping
this brand in building a monopoly in their target market of customers. This will help in
development of effective strategies so that company is able top develop in a quick manner.
External environment analysis
External analysis is conducted so that there is analysis of the environment which is
surrounding this brand (Burlton 2015). This is helpful in enhancement of knowledge and their
performance. This is also supporting in development of various growth strategies for Starbucks.
For making a evaluation of external environment in a more effective way there have been three
frameworks which are being used in this report as explained below:
PESTEL Analysis:
With concern to Starbucks each aspect of PESTLE is described below which will help in
developing a understanding of its negative or positive impact:
Political factors: This is related with strict policies as these care changing because of
recent referendum that is Brexit has taken place in UK that is posing a impact on overall policies
that are affecting Starbucks. which can posses a negative impact on profitability of Starbucks. As
they may not procure high quality of raw material which is very essential for supporting in
offering high quality of coffee top their customers.

Economic Factor: This is a factor which is concerned with negative impact on
operations of Starbucks. There are some economic activities such as recession Starbucks may not
execute it this helps in execution of its activities worldwide.
Social factors: Some factors that are related to high opportunity as Starbucks may poses
a influence towards using high quality of coffee which can help them in attracting their customer
(Chen, Eshleman and Soileau, 2016). They posses a influence towards attracting moire
customers so as they are offering combination of coffee & green tea which is rarely found in
their competitive firms. There has been a changing preference of people towards a coffee date or
meeting people on coffee it has lead to changing preferences of customer and increase in sales of
Starbucks because of this changing social behavior of people.
Technological factors: This is related with high opportunities of business as Starbucks
can execute their operations and functions with using various digital media tools. They are also
using Wi-fi facility so that they can help their customers in accessing in a quick manner. This
will have a direct impact on creation of opportunities.
Legal factors: Starbucks has a a legal department which is ensuring that all the activities
are executed within legal parameters. This helps in ensuring that there is no penalties which are
being imposed in this brand.
Environmental factors: Starbucks is using straw which is made of plastic which is
harmful for the external environment. So company must make efforts so that they are able to find
a substitute for this which can help them in making a contribution towards conserving the
environment.
Explanation on Porters Five Forces
Michael E. Porter is one who has introduced a five force model in the company which is
dealing with business operations both at domestic & international level. This was developed in
the year 1980. in present scenario this model is being used so that coffee industry can be utilized.
Competition in the industry : This is dealing with total number of business organization
in the coffee industry (Eatonand Kilby, 2015). This is related with development of high risk for
brands like Starbucks.
Bargaining power of buyers or customers : In the coffee industry switching cost is very
low. This analysis is based on availability of substitutes which is very high. This leads to a

situation that bargaining power of customers is high in case of Starbucks. There has been present
of substitutes such as costa coffee that can be easily replaceable for Starbucks. It is making it
easy for people to switch to other different brands.
Bargaining power of suppliers – In UK, 7 suppliers play a effective role and their
bargaining power is low as there are many suppliers who are willing to offer products to
Starbucks reason behind this is that Starbucks is a established brand and they are offering good
prices to their customers which is making it easy for them to replace their suppliers easily.
Threat of substitutes–Coffee products in the coffee industry is being sold by many
organizations. This can be threat of substitute for Starbucks.
Threat of new entrants – This is also a force which can also posses impact on the coffee
industry. This is small threat only as there is a competitive market and there is a need for
investment for various brands like Costa coffee, Starbucks and others. The new innovation that
are being made in coffee industry are also a big threat as they are providing attractive prices at
high quality can lead to threat for such high brands like Starbucks.
Industrial Life Cycle Model
Industrial Life cycle Model is a process which is related with different stages which are
present in a business. This consist if five stages and those are start-up, Growth, Shake out,
maturity & decline (Higgins, Omer and Phillips, 201). In The coffee cafe industry, it is very
important that the organization can perform in a better way and this can done only if there is
proper planning. Most essential aspect which is required here is that this stage lasts for some
time period:
 Start-up stage: This is the initial stage at this where main objective is to settle business
in market, in Coffee sector it is very important that primary stage is being understood to
sell quality products at reasonable prices. This is one way in which can be adopted by
Starbucks.
 Growth Stage: For objective of growth in market a company has to understand that they
have to coming up with innovative ideas and plans which they have to follow. Coffee
industry has a option that they can adoption of various plans which can allow them to
increase their present base of customers. Starbucks can generate more sales and revenue
with usage of this process.

 Maturity stage- This is stage where company can accomplish their demand of services
or products. At this particular stage Starbucks has a option that they can add a different
flavor which can help them in attracting more customers from the present target market
only. the maturity stage is very important as this is major reason which can help in
earning more profits.
 Decline stage- There are some stages where a organization is willing to adopt innovation
& this can Create some problems for business organizations, it is becoming very crucial
for the coffee industry have to develop and find out ways at the stage of maturity to
increase their performance in market (Hossainand Islam, 2015).
It can be said that in present scenario the market position of Starbucks is at maturity stage as they
have to add most new flavours so that they are bale top attract more customers.
Internal analysis
VRIO
Apply VRIO as a source of competitive advantage.
It is very important fir every business organization that they have to make decision which
are effective and can help in assessment of capabilities of the company, internal capabilities are
very critical as they guide a organization on how they have to work and which are they must
target (Johnson, 2016). If company can work according to the strength then there are higher
cahnes of attainment of goals and objectives. VRIO is a very commonly used analysis measure
to understand what can be the competitive advantage for a particular organization.
Value: VRIO analysis is very helpful in understanding of the value which is related with
organization. In Starbucks have to add value to their resources which is very important for them.
All resources are valuable for Starbucks which help them in their effective function but four
major resource are quality, competent staff, brand image and unique taste. These four are most
valuable resources for this brand.
Rare: Some resources are very rare which are found in Starbucks only this includes
brand image, unique taste and competent staff as, quality is something which is offered by
various rival firms also. Hence, it becomes the responsibility of Starbucks that they have to
preserve their resources which are rare and are available with them.
Imitability: This is related with how difficult and complex it is for any other competitor
or rival brand which is dealing into similar products to have these resources with them. This is

the reason why Starbucks is making attempts to preserve their resources which is difficult to be
copied by other similar organization (Martinez-Simarro, Deveceand Llopis-Albert, 2015). This
resources which cannot be copied is unique taste and brand image. Its process of making coffee
and unique trademarks are being protected by sue of intellectual property rights such as trade
marks act and copy right act.
Organization: All resources which ave to be kept organised by Starbucks but the
resource which ave to be kept organised is the unique taste which is not present in any other
similar coffee brand.
Factors Valuable Rarity Inimitable Organized
Quality ✔
Competent staff ✔ ✔
Brand image ✔ ✔ ✔
Unique Taste ✔ ✔ ✔ ✔
It can be said from the above analysis that unique taste is something which is a strength
for Starbucks . This is a resource which is available with them and can help this brand in
attainment of competitive advantage in the external environment. By making a critical analysis
of strategies adopted by competitors such as costa coffee Starbucks can learn form such brand
and this can help them in further preparation of strategies how to expand their market share.
Primary activities
Inbound logistics: This involves developing of effective supply chain management in
the company. Higher authorities in Starbucks can help in procurement of coffee seeds by
themselves (Oldman and Tomkins, 2018). This will help them in bringing if some unique
product for their customers. This will also lead to enhancement of satisfaction of their
customers.
Operations: Starbucks is able to deliver their services and product in approximately 80
countries throughout this world. These operation's are talking pace with the help of franchise or
providing license. Some of their stores are self operated and some have competent working staff.

This helps them in gaining information of different culture and providing different taste to their
customers.
Outbound logistics: Many companies enhance their sales with help of various online
platforms by offering of products such as Tea & coffee. Product of Starbucks such as three in
one coffee are very easily available in supermarkets such as Tecso, Walmart and many other.
Sales and Marketing: Starbucks uses various channels so that they are able to promote
their coffee and various other products (Phaal, Farrukh and Probert, 2015). This includes various
sources if advertisements such as social media applications
Services: If effective and appropriate services are provided to customer then it is a key of
success for any organisation. In Starbucks the company has a belief that they can provide high
quality services which can help them in meeting their expectations and building of customer
loyalty.
Supportive Activities
Infrastructure: The ambience & design of Starbucks is very attractive and unique which
is used for attracting more customers and increasing of satisfaction of their customers to the time
which they are spending in the outlet.
HRM: The employees are responsible for all the functions which are taking place in the
organisation (Pisano, 2015). In Starbucks, managers are motivating their employees by
providing various services and monetary benefits. They have able to reduce the cost of employee
turnover by increasing the satisfaction level of their customers.
Technology development: Starbucks is able to provide facilities such as Wi-Fi to their
customers which is helping them in having a different experience. This brand also has a online
presence which helps their customers in giving their feedback which is very valuable for
Starbucks.
Procurement: This brand is also developed and their policies and rules so that they can
maintain their quality standards and then provide their services to their target customer.
RESOURCES
Starbucks is using both tangible & intangible resources which is helping it to gain a
competitive advantage as compared to their rival firms (Shirdastian, Laroche. and Richard,
2017). The tangible resources of this company are machines which they are using and intangible

resource are in terms of competence & skill of their staff. Its brand image, employee relationship,
satisfaction level of their customers all are part of intangible resources of this brand.
CAPABILITIES
Brand equity is a major strength possessed by Starbucks. Global presence is very high
which is helping in generation of high revenue and increasing their customer base as compared
to their competitors. The overall supply chain of Starbucks is very strong which is helping them
in offering products which are of high quality and at specified time. Price range offered by
Starbucks is also satisfactory to the segment of customers they are dealing with.
COMPETENCY FRAMEWORK
Competencies are part of attributes, silks and knowledge of a employee who us working
in a organisation. This is a framework which helps managers of Starbucks in analysing the
attitude and behaviour of each employee (Shuen, 2018). This includes below discussed factors:
Leadership development:The HR manager of Starbucks is carrying out various
activities which is helping them in increasing of their overall potential and skills of their
employees. These activities are developing leadership skills of employees and helpi9ng them in
rendering of high quality services to their customers (Strategy, 2017).
High talent: Starbucks is having a very talented working staff who posses experience
which is helping them in meeting up of their customer expectations.
Recruitment & selection: According to recent reports, it can be said that the Human
resource manager in Starbucks is implementing the process of recruitment after analysing the
requirement of their company. They scrutinize their candidates by usage of some online software
and tools so that they are able to hire employees who posses required competence and also they
are able to build up a effective workforce.
Succession planning: It is very important for each organisation that they are able to
analyse and to meet those gaps which is prevailing amongst individuals and teams in a
organisation, company has to develop various modules which can help them in fulfilment of
gaps. Manager of Starbucks is always willing to have those leaders in their organisation who are

energetic & innovation and willing to contribute towards success in the organisation. Succession
planning is helpful in making plans for further business course and functions that have to be
performed in a organisation.
Rewards & recognition: To encourage people the concerned authorities are providing
appreciation to their employees so that they are able to have a satisfied workforce in
organisation. This also helps in preventing employees from switching to their organisation.
Performance management: Company is managing the performance of their employees
by providing them with necessary incentives and matching the performance of their employees
so that they are able to measure the contribution of each employee for achievement of
organisational objectives.
Recommendations:
Starbucks is offering various services in countries and also helping in building a lareg
base of customers. This will help this brand in having a opportunity to grow and develop.
Company will also be able to provide its products at affordable prices. It is recommended that
company must offer products by usage of affordable pricing techniques which can help them in
having a cost advantage as compared to their competitors. They can add various other variants
apart from coffee which can help them in offering more varieties to their customers. This will
lead to expansion of revenue of Starbucks. They can also start using their own raw material by
farming of their coffee brand this will provide dual benefits for this company (Wu, 2017) .
Firstly it will help in having raw material which is according to the quality standards required by
the company. Secondly this will help in reducing of bargaining power of their suppliers. Cost of
suppliers will also be reduced as using own raw material is more cost effective for Starbucks.
There is another recommendation that Starbucks can focus in growth and development
strategies this can be used by making use of matrix such as Ansoff matrix. This matrix can help
them in using appropriate strategy for tools and techniques of this company. SMART objectives
can also be developed by this brand which are as follows:
 To increase their sales by 10% in the coming quarter by usage of various digital media
platforms. Digital media platforms include social media application such as Facebook,
Instagram, twitter, you tube etc.

 Increase in market share by 15% in the coming period of 6 months. This can be achieved
by using various innovative techniques which will help in reduction of cost and
increasing of profit percentage.
From above made recommendations it can be said that there are various new creative
techniques which can be used by Starbucks so that they can increase their present market share
(Yuliansyah, Gurd and Mohamed, 2017).
Part 2 – Starbucks’ Stakeholder Report
a) Internal & external Stakeholders of Starbucks
Stakeholder Group Internal or External Reasons for giving
consideration
Customers External They are precious assets in a
company and they help in
earning of higher profits.
Employees Internal The specific reason behind
success of this company is
that it is helping in
enhancement of productivity
and profitability of the
organisation.
Shareholders Internal They helping the company so
that they can successfully
increase their authorised
share of capital and at same
time their market share can
also be increased.
Government External A regulatory body which is
having the authority to give
company various rights which

are related with execution of
various strategies of
company.
Suppliers External They are supplying raw
materials so that company
can use it in their process
various activities and offering
of coffee which is high in
high quality to their
customers.
b) Workforce precedence stakeholders group
Major stakeholders in Starbucks are helping in increasing their productivity. All the
stakeholders are responsible for smooth functioning if this company. Accordance with the
present case it can be said that higher authorities are responsible for inspiring workforce with
help of monetary and non monetary benefits. This includes various medical benefits, paid
holidays and stock option which is provided to staff members. Training programmes and
personnel development initiatives are conducted which help in enhancement of skills.
Starbucks has around 1,90,000 employees which is supporting so that more quality
products are offered to customers. Role of employee is different as there are various functions
such as roasting, warehousing, checking and monitoring (Torrent-Sellens, 2015). There is
presence of both male & female employees in a organization. There is no discriminatory
practises which can be seen in Starbucks on any basis such a caste, creed, colour. Employees are
given high training and they posses good communication skills. This is helping them in
providing high quality services to their customers.
c) Power & of Interest Workforce in a stakeholder group
The shareholder matrix has basically four quadrants which is reflecting interest and
power of each employee. This matrix with respect to Starbucks is discussed below:

From above mentioned matrix it can be stated that employees posses low power and
interest is high when they are working on their duties and job roles, employees poses no
authority to have a part in overall decisions of company (Taecharungroj, 2017).
Higher authorities are using various communication channels so that they are able to
interact with other members of the company. They are using ways such as messages, emails and
phone calls which is helping them in providing appropriate information to their employees.
Company is using this to effectively carry on their operations and providing high quality of
services.

CONCLUSION
Based on information which is presented in above section it can be said that Starbucks is
a large organization which is having a global presence and management team is maintaining
efforts that they are able to reduce their competition, it is also acknowledged that external
environment has both negative and positive factors which can posses impact on overall
performance of company. Various frameworks can be used for making a analysis on how to
apply such models on a particular organization such VRIO analysis, Porters five force model all
these can help in forming of effective strategies which can further protect a company from
having a competitive advantage in the external environment. Based on above all factors it can be
said that effectiveness of marketing strategy helps in usage of resource sin a more optimum
manner.

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