Starbucks Business Report

This business report provides an in-depth analysis of Starbucks Corporation, including its competitive position, external and internal environment analysis, and recommendations for improvement. It also includes a stakeholder report, analyzing internal and external stakeholders, prioritizing stakeholder groups, and recommending appropriate communication strategies. The report offers valuable insights into the coffee industry and Starbucks' performance.

Starbucks Business Report

Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1 - Starbucks Business Report .............................................................................................3
An Introduction...........................................................................................................................3
External Environment analysis...................................................................................................4
PESTLE Analysis...................................................................................................................4
Porter's Five Force Analysis...................................................................................................6
Industry Life cycle model.......................................................................................................6
Internal Environment analysis.....................................................................................................7
VRIO Analysis.......................................................................................................................7
Value Chain Analysis.............................................................................................................9
Recommendations.....................................................................................................................11
PART 2 - Starbucks’ Stakeholder Report......................................................................................12
a) Internal and external Stakeholders for Starbucks.................................................................12
b) Priority Starbucks’ Stakeholder Group.................................................................................13
c) Critically analysis of power and interest of chosen stakeholder group and appropriate
communications strategy that Starbucks should adopt.............................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Business report refers as the type of document that contains information about a specific
issue or circumstance that helps management in decision making process. It might presents the
actual solution to resolve a problem or it might record the information of past which is utilised
toward future planning of business (Abdel-Basset, Mohamed and Smarandache, 2018). This
report is based on Starbucks Corporation which is one of the leading coffee house chain that
offers smoothies, baked goods, coffee beverages, tea and sandwiches to customers. It was
established in 1971 and its headquarters is situated in Washington, United States. This report
includes 2 parts that are, Starbuck's business report and stakeholders report. The first part
contains introduction about organisation and its competitive position along with internal and
external environmental analysis and recommendations to improve performance of company over
next 3 years. The second part of project covers list of internal and external stakeholders for
Starbucks, selection of priority stakeholder group and its interest and influence are analyse by
using Mendelow’s matrix. At last, appropriate communication strategy is recommend for
company and conclusion based on entire report is provided.
PART 1 - Starbucks Business Report
An Introduction
Starbucks is one of the well known American coffee firm that provides variety of
beverages to its customers. The company was founded around 48 years ago in year 1971 and is
headquartered in Washington, U.S. It serves cold and hot drinks, caffe latte, loose leaf teas,
espresso, micro ground instant coffee, whole bean coffee etc. The firm has its stores at around
28,200 locations. Because of its effective marketing campaigns, Starbucks is considered as
market leader (Arrigo, 2018). The company was founded by Jerry Baldwin, Gordon Bowher and
Zev Siegl and earned revenues of 16 billion dollars in year 2015. The Specialty Coffee Café
sector is one of the most competitive industry and Starbucks faces high competition in market.
Its major rivals includes Dunkin Donuts, Caribou Coffee, McDonalds, Cafe Coffee Day, Barista
Coffee etc.
As per the given case study, Starbucks has high return on equity in comparison of its
rivals. ROE of company is 47.08% which is more in comparison to its rival company such as the
ROE of Dunkin Donuts is 45.49% and McDonald's is 32.97%. The company seeks to create

close connection with its customers and workforce are encouraged to assist them in taking
decisions regarding espresso machines, beans, grind and instruct on home brewing. The firm is
facing high competition from McDonald as it also offers quality coffee beverages (McCafe) to
customers similar to Starbucks. According to case study, Starbucks employed 191000 in 2015
while in McDonald, there were 420000 employees which is more than double from Starbucks.
Earning a reliable amount of profits is very necessary for Starbucks in order to grow and sustain
for long term in highly competitive Specialty Coffee Café sector. The net profit margin of firm is
14.57% , Dunkin Donuts is 23.55% and Mc Donald is 17.34%. These figures clearly depicts that
an intense competition is facing by Starbucks in the coffee industry. In order to sustain in market
for long term, aggressive marketing strategies are follow by company (Epstein, 2018).
After assessing the case study and the data provided in it regarding Starbucks and its
rivals, it can be said that the company is leading the coffee market. It enjoys monopoly in market
of being the only chain of coffee which operates all around the world with around 28,200
locations. The strategies of company are emphasizing on needs and preferences of customers,
physical store locations and menu options expansion.
External Environment analysis
External environment involves all the outside forces that influence the activities and
operations of business. The extrinsic environment of coffee industry as well as Starbucks is
assessed in order to determine the impact of forces on operations of company (Erhardt, Martin-
Rios and Chan, 2019).
PESTLE Analysis
PESTLE Analysis is a tool that helps in analysing the factors that influence the
performance of organisation. This framework includes six factors which are mentioned below:
Political factor: Starbucks is operating in coffee cafe industry and its main operations
includes production of coffee. For this, coffee beans are required by company as the main raw
material. In procuring coffee beans, company is facing issues because of export policies and
interest rates. For getting high quality coffee beans, company has to pay high prices which leads
to decline in its profit margins and impacts its productivity (Fozer and et. al., 2017).
Economic factor: The economic condition of country, inflation rate, recession etc. are
the factors that impacts operations of company operating in coffee cafe industry. The economic

recession facing by global economy impacts the operations of Starbucks in adverse way. Being a
global leader of coffee, the rising cost of labour in developing nations influence the operations in
negative way as it increases the spending of company for ingredients (Starbucks Coffee PESTEL
Analysis, 2017). Firm source its coffee beans from other nations due to which it has to bear high
tax rates.
Social factor: This factor is associated with needs and preferences of customers, their
living standards, beliefs, attitudes, behaviours etc. In Specialty Coffee Café sector, social factor
pose both negative and positive impact on Starbucks. In current era, the life quality of people is
increasing continuously and they prefer to spend more on having quality coffee. This provides an
opportunity for company of earning high revenues (Iritani and et. al., 2015). However, people are
also becoming more aware towards their health and prefers to have healthy and calories less
beverages which has adverse influence on Starbucks operations. Offering organic coffee and tea
provides an opportunity to company of ensuring sustainable growth.
Technology factor: Innovations and technological advancements are the factors which
are associated with this aspect. In Specialty Coffee Café sector, the organisation like Starbucks
use high end technology for preparing quality coffee for customers. It also provides Wi-fi
facilities to people who visit its stores which positively impacts its operations and improves its
profitability as it results in satisfied customers.
Legal factor: It involves laws and regulations made by government that has to be follow
by organisations operating in Specialty Coffee Café industry. Starbucks has its legal
professionals who handles all the legal affairs of company. As the company is operating at global
level and the laws and regulations of each country are different, the legal team of company
ensures compliance with all the laws. However, non compliance with these laws may creates
issue for Starbucks in running its operations (Islam and Mamun, 2017).
Environmental factor: It involves factors like climate change, environmental conditions
etc. As people are more concerned towards environment, organisations in Specialty Coffee Café
industry requires to follow environmental regulations. Starbucks engaged in such practices and
processes that do not harm the environment and has responsible sourcing policies that impacts
positively on operations of company.

Porter's Five Force Analysis
Porter's framework involves five forces that helps organisations in understanding the
competitiveness of industry. Analysis of these forces helps company in understanding their
impact and formulating appropriate strategies (Jones and Comfort, 2018). In context of
Speciality Coffee Café sector and Starbucks, these forces are mentioned below:
Bargaining power of buyers: In Specialty Coffee industry, many competitors of
Starbucks are offering coffee with high quality at similar prices which enables them to switch to
another brand. This creates a situation of Monopoly for buyers so, their bargaining power is high.
This creates threat for Starbucks of lowering its prices in the upcoming years in order to
maintain sustainability in market.
Bargaining power of suppliers: In Specialty Coffee Café sector, there are many suppliers
available in market from whom the Starbucks can purchase coffee beans. Availability of
numerous suppliers makes their bargaining power low as company have the option to switch to
another supplier for procuring coffee beans. This provides an opportunity to firm of developing
their own supply chain in upcoming years (Kitamura, Matsushima and Sato, 2017).
Competitive rivalry in industry: As the coffee cafe industry is developing very rapidly,
there are number of competitors available in market such as McDonald's, Dunkin Donuts etc.
who gives tough competition to Starbucks. So, the rivalry in Specialty Coffee Café sector is
high for company that may create threat for it in future.
Threat of substitute product: Threat for substitution is high for Starbucks as there are
many rivals operating in Specialty Coffee Café sector. The products of company includes tea,
food items and coffee. These beverages have some substitutes like juice, drinks etc. which can
be substituted with less switching cost. This makes the substitution threat high for Starbucks.
Threat of new entrants: In Specialty Coffee Café sector, Starbucks is one of the leading
coffee chain which makes it difficult for new entrant to enter and sustain in market as it requires
high investment and other resources to compete with Starbucks. So, the threat of new entrant is
moderate for Starbucks in coffee cafe industry (London, 2019).
Industry Life cycle model
Industry life cycle demonstrates the different phases where businesses perform its
operations, develop, prospect and slump in an industry. The life cycle of Specialty Coffee Café

sector is longer as it is the most reliable sector. It includes four stages which are mentioned
below:
Introduction stage: This is the phase in which the business of organisations operating in
Specialty Coffee Café sector is introduced as an start up and their main focus is on maximising
their revenues. They sell their products at low prices with the intent of attaining sustainability in
market due to which they may face heavy losses sometimes. Starbucks also introduced its
products at low prices in order to ensure its survival in competitive market for longer term.
Growth stage: This is the stage in which organisations starts to grow and their brand
names becomes popular in market. Firms starts to earn some amount of profits in market as their
people are started to like their product. In order to improve the profit ratios, Starbucks slightly
increased the prices of its coffee (Marques and et. al., 2019).
Maturity stage: In this phase, companies keep the prices of their products high so that
high profits and revenues can be earned. In Specialty Coffee Café sector, this phase is the most
profitable one and Starbucks is currently at this stage of life cycle where it earns high profits
and leads the market.
Decline stage: In the life cycle of industry, this is the final stage where revenues of firm
are started to decline. At this stage, firm decrease the prices of its products and offers discounts
on products in order to attract customers and improve revenues. As the profits starts to decline,
company have the option of introducing new product or remove the product from product line.
Internal Environment analysis
Internal environment consist of factors that are present within firm and impacts its
operations. These includes employees, management, organisational culture etc. and these factors
are controllable. The internal environment of Starbucks is analysed in order to determine their
impact on firm's operations (Mason, Cole and Goza, 2017).
VRIO Analysis
Factors Valuable Rarity Inimitable Organized
Technology ✔

High quality
coffee
✔ ✔
Strong global
presence
✔ ✔ ✔
Skilled Employees ✔ ✔ ✔ ✔
Valuable: Technology: Company use high end technological machines for producing coffee so that
customers can be provided with coffee with unique taste. This helps in providing value
for money to customers and they can enjoy the taste of great coffee for which they pay.
This resource of Starbucks is valuable as it helps in generating adequate profits. High Quality Coffee: Starbucks use high quality coffee beans for producing coffee that
creates value for it. The company is popular for its unique coffee taste which assists in
gaining attention of large group of customers (Nan and Li, 2017). Strong global presence: The company is operating its stores in many countries which
enables it to serve its products to more number of people. This capability helps Starbucks
in capturing large market share. Its presence at different locations improves its value.
 Skilled employees: Human resource of Starbucks is skilled, competent and knowledgable
that helps company in bringing innovation in its products that improves its revenues and
creates value for it.
Rarity: High Quality Coffee: In Starbucks, the coffee is produced with high quality beans and
coffee equipments which helps in preparing coffee with unique taste. This makes its
coffee products rare. Strong global presence: In Specialty Coffee Café sector, there are very few organisations
who are operating at global level. The global presence of Starbucks makes its this
capability rare (Nguyen and Rugman, 2015). Skilled employees: The company has highly professional and trained chefs who prepare
unique coffee to serve customers. The company also provide specialised training to its

employees which helps in developing their skills which makes its workforce rare to find
by other competitors.
Inimitable: Strong global presence: The company offers its products in many countries and its stores
are located at different locations which helps in making its unique identity among
customers which is difficult to imitate by rivals. Skilled employees: The skills and competencies possess by employees of Starbucks are
unique and are cannot be imitable (Obeng and et. al., 2016).
Organized:
 Skilled employees: Human resource are the crucial part of organisation that creates value
for it. The employees of Starbucks are the source of value creation for it which are
valuable, rare, can not be imitable and organised in proper way that helps in providing
competitive advantage to company.
Value Chain Analysis
The value chain was introduced and described by Michael Porter in the year 1985. a
value chain analysis is defined as a series of activities and tasks which have aim of creating and
adding value to the product or article in different steps involved in the production process. The
journey of Starbucks was started in the year 1971 for becoming one of the most recognised brand
of the world. The mission of Starbucks is to inspire and nurture the individual spirit – one
person, one cup and one neighbourhood at a time (Perera, 2017).

(Source: Value Chain Analysis, 2019)
Starbucks Primary activities
Starbucks Inbound logistics – After analysing the needs of role of CEO naming Howard
Schultz, there was restructuring of Starbucks inbound logistics. This restructuring included
simplification of supply chain management and the creation of global and single logistics system.
This company brings unroasted Arabica coffee beans from Latin America, Africa and Asia to
Europe and US in containers through sea. This coffee chain buys green coffee beans from
multiple coffee producing areas and regions across the world and custom roasts them (Rastogi
and Trivedi, 2016). The delivery is done in six different regional distribution centres. Coffees are
roasted and packaged and these are taken to dozens of central distribution centres across the
globe. Central distribution centres receives coffees from regional distribution centre and the
central distribution centre receives deliveries from vendors. The products include a wide range of
products from napkins to coffee machines.
Starbucks Operations - This company operates across 75 countries in the world and there
are two store formats - Licensed stores - Starbucks is having around 12,374 licensed stores. This represents
around 49% of the total number of stores. The revenue from licensed stores accounts for
10% of the total revenue earned by the company (Sholihah and et. al., 2016).
Illustration 1: Value chain analysis, 2019

 Company operated stores – These stores are essential for business as they enable
management for observing shifts in tastes and preference of consumers. These collect
data and information about the market tendencies directly. There are around 12,711 stores
of the company and this accounts for 51% of the total number of stores (Sisson and
Bowen, 2017). This company has divided the operating segment into five categories and
following table shows the revenue share from each and every segment -
Segment Share in revenue in 2015 Share of revenue in 2016
Europe, Middle East and
Africa
9.00% 6.00%
America 72.00% 68.00%
China 8.00% 15.00%
Channel development 10.00% 10.00%
Different sectors 4.00% 4.00%
Starbucks Outbound logistics – Consumers can buy Starbucks products from company-
operated and licensed stores. Starbucks uses online sales channel for wide range of products like
packaged coffee, tea, drink related equipments, etc. This company do not has resellers or
wholesalers and this is the main value adding source for Starbucks. This organisation roasts it's
products in house and sells on it's own company operated and licensed stores.
Starbucks marketing and sales – Starbucks does not invest much in marketing of the
company. This company uses word of mouth cost effective form of marketing and this depends
upon high quality of products as well as high customer service (Zhang and et. al., 2016).
Starbucks service - The core source of Starbucks competitive advantage is superior
customer service and this adds an enormous value for the brand image. Regular customers can
get their regular coffee free of charge at the discretion of baristas and these acts enhance the
service perception.
Recommendations
Based on the above mentioned internal and external analysis, it can be said that there are
various factors that impacts on operations and activities of company in both positive and

negative manner. These factors influence directly on performance and productivity of Starbucks.
In order to improve the performance of company over next three years, it is recommended that it
should innovate its products and services on continuous basis so that it enables to satisfy
changing needs and preferences of customers in proper manner. Apart from this, it also helps
company in gaining competitive advantage in market over rivals and ensuring sustainability for
long term. Moreover, Starbucks should focus on providing employees with proper training and
development sessions so that their skills can be updated and they are enable to deal with the
challenges that may arise in future. Training programme helps employees in performing the roles
and responsibilities in an effective and efficient manner and attaining goals and objectives of
company.
In addition to this, managers of company should analyse internal and external
environment of business in proper way so that all those factors that impacts on operations and
activities of Starbucks can be determined. This assessment helps managers in process of decision
making and formulation of appropriate strategies that aids in minimising the adverse impact of
those factors. Apart from this, company should focus on providing healthy beverages to
customers and should include organic tea and coffee option in its menu as people are now
becoming more concerned towards their health and avoid to have beverages that contains high
amount of carbohydrates and sugars. So, including healthy options in menu provides an
opportunity to Starbucks to attract more number of customers towards firm and earn high profits
in market. This also supports business entity in maintaining sustainability in market for longer
term by satisfying changing needs of customers. Along with this, manager of company should
ensure that all the laws and regulations are followed in proper manner so that operations and
activities of company can be run effectively. They must ensure that they are following such
operational processes that do not harm environment in any way. It supports them in enhancing
brand image in market and ensuring long term sustainability.
PART 2 - Starbucks’ Stakeholder Report
a) Internal and external Stakeholders for Starbucks
Stakeholder Group Internal or External Justification for including them on your list
Customers External They are the key part of business on which its
success rely.

Employees Internal Employees plays crucial role in attaining
objectives of company.
Suppliers External They are the main part as they provide raw
material (Coffee beans) to Starbucks for
preparing coffee.
Management Internal They plays vital role in managing all the activities
of company so that productivity can be improved.
Government External Key stakeholder that helps in running business
operations smoothly and successfully.
b) Priority Starbucks’ Stakeholder Group
The Starbucks coffee company's stakeholder management approaches depend upon
various programs for CSR. This company needs to account for interests and demands
stakeholders as the company's aim is to earn profit and provide help to citizen of society. The
Starbucks' shareholder priority group is customers. These are the most important Stakeholders of
the company. These have high interest towards operations of this company and products and
services like beverage and coffee related. This is the world's most famous speciality coffee house
chain. This organisation includes customers as the major stakeholder by extending the culture of
Starbucks to customers as it's cafes (Kaplan, 2018). For instance, this company focuses on
managing friendly and warm relations at workplace and with customers. This includes baristas
interacts with customers. The Starbucks coffee's corporate social responsibility efforts fulfil
interest of customers. Customers of the Starbucks are the most essential asset that are required
for building strong brand image and reputation.
c) Critically analysis of power and interest of chosen stakeholder group and appropriate
communications strategy that Starbucks should adopt
Mendelow’s matrix:
Power and interest of customers – The customers of Starbucks have power over
managing the business profits and money earned directly or indirectly. When customers get
products and services according to their needs, the sales will automatically increase. On the other
hand, if products offered by the company are not up to the mark, then customers will not buy

them and gradually sales will decline (Abdel-Basset, Mohamed and Smarandache, 2018). Thus,
it is the responsibility of management of Starbucks to provide customers coffee and beverages to
customers that are tasty and nutritious. This will help in increasing profits earned by the
company.
Communication strategy – This company is leading the way in mobile experience. By
using this, the customer can view content from a smartphone. Email communications are
optimised for the mobile experience.
(Source: Mendelow’s matrix, 2019)
As per the Mendelow matrix, the stakeholders in grid A are ones who are having low
level of interest in operations of the company. These individuals need minimum efforts by the
company. For Starbucks, it's Set First Ltd. UK. Grid B includes individuals with a high level of
interest but a low level of power over the company. These do not have ability to influence
strategy of an organisation. For Starbucks this grid contains Workers of this company. Grid C
includes stakeholders which have high degree of power to influence strategy and low level of
interests in organisational activities. This grid consists of government (Mendelow’s matrix of
Starbucks, 2019). Grid D represents stakeholders with high interest in activities of the company
and high degree of power in influencing operations. Local community comes under this
Illustration 2: Mendelow’s matrix

category. This matrix is helpful for the company to know who are the stakeholders which are
important for the company.
CONCLUSION
As per the above mentioned report, it has been concluded that it is very necessary for
organisations to analyse internal and external business environment factors carefully so that
their impact on operations and activities of company can be analysed in proper manner and
appropriate strategies can be formulated that helps in leading the firm towards growth and
success. Porter's five force analysis helps firm in determining competitiveness within industry
and industry life cycle depicts the phases where business perform its operations. VRIO analysis
helps in determining resources and capabilities of organisation that provides it competitive
advantage in market.

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Online
Starbucks Coffee PESTEL Analysis, 2017. [Online]. Available through:
<http://panmore.com/starbucks-coffee-pestel-pestle-analysis-recommendations>
Mendelow’s matrix of Starbucks, 2019. [Online]. Available through:
<https://www.youtube.com/watch?v=Vm7yfq0bGAU>