Starbucks Business Report

This business report provides a comprehensive analysis of Starbucks, including its external and internal environment, stakeholder's report, and recommendations for improvement. It covers topics such as PESTLE analysis, Porter's Five Forces analysis, industry life cycle model, and VRIO analysis. The report also discusses Starbucks' competitors and its position in the coffee industry.

STARBUCKS
BUSINESS REPORT

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
INTRODUCTION TO STARBUCKS ...........................................................................................1
EXTERNAL ENVIRONMENT ANALYSIS.................................................................................2
PESTLE Analysis........................................................................................................................2
Porter's Five Force Analysis........................................................................................................4
Industry Life Cycle Model..........................................................................................................5
INTERNAL ENVIRONMENT ANALYSIS .................................................................................6
VRIO Analysis............................................................................................................................6
Value Chain.................................................................................................................................7
Resource, Capabilities and Competencies Framework...............................................................9
RECOMMENDATIONS...............................................................................................................10
PART 2..........................................................................................................................................11
STAKEHOLDER'S REPORT ......................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy is defined as the combination of all the actions which are performed
and decisions taken in order to accomplish the business goals as it helps in securing the
competitive position in market. While entering in business is like gambling without a well
planned strategy. Therefore, business strategy is important in order to increase sales and
revenues and it is the part of business plan (Aiello and Dickinson, 2014). In this report Starbucks
is taken which is a coffee house and incorporated in 1971. The mission of company is to provide
the prime and excellent quality coffee in the world. Starbucks has around 182,000 employees
across 19,767 stores operated in 62 countries. McDonald's, Dunkin' Donuts and Caribou Coffee
are the competitors of Starbucks which they target by offering good quality coffee and drinks.
Moreover, this report is based on the present conditions of Starbucks as it include external and
internal analysis, report of stakeholders and also provide recommendations in order to improve
its performance.
PART 1
INTRODUCTION TO STARBUCKS
Starbucks is an American coffee chain which is situated in Seattle, Washington and deals
in tea, coffee and drinks. Starbucks is the leader in coffee and also become a reputed brand in
worldwide. Additionally, they offer variety of products such as coffee, caffeinated drinks, tea,
pastries and other food related items. Starbucks also deliver its products and services through the
medium of food delivery apps, its own website and mail (Akgün and Yalım, 2015). Moreover, it
also sell its offerings to other restaurants, hotels, airlines at the wholesale price. In addition to
this, it also provide its coffee drinks for sale at different supermarkets and malls. Starbucks now
become a brand as it come a long way to sell its products in a single store to operate its various
stores at global market. In modern world, Starbucks become the innovator in terms of coffee
industry and also has skilled and competent staff which offer good quality service which is
provided to their customers through ambience or the music especially which is chosen by them.
People can come for the casual meeting, chat or catch up and company is also committed for the
environment and also eliminate the use of harmful substances. Company also provide warm
culture or values to their customers in order to sense the belongingness.
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In 2012, the speciality of coffee is accounted for 37% of consumed coffee and nearly
50% of all coffee revenue in US. For this, Starbucks maintain its position in the home country by
dominating the local competitors like Caribou coffee but after analysing the current market
situation it is determined that McDonald's and Dunkin' Donuts targeting the Starbucks in order to
acquire its customers. Its competitors can become threat for company because the coffee stores
are increasing day by day and because of this Starbucks face tough competition at global market.
Caribou Coffee which is founded in 1992, operate 470 stores in 20 states and also at
global market. Company is specialised in coffee, supply brewed coffee and baked goods through
its outlets which are designed like mountain lodges. However, similar to Starbucks, company
also sell its roasted coffee to grocery stores and also has license in order to make single serve K-
cups for home brewing.
By considering McDonald's which is founded in 1948 came in the market with the
concept of McCafe which is a coffee outlet and provide good quality coffee as similar to
Starbucks. For this, they get excellent response from customers and also introduce special coffee
drinks and also sold to different supermarket and restaurants.
On the other hand, Dunkin' Donuts which is founded as the Open Kettle Doughnut shop
in Massachusetts in 1948 considered as Donuts shop has operates its stores in around 30
countries. When company started offering coffee, they did not offer espresso drinks until 2003.
EXTERNAL ENVIRONMENT ANALYSIS
PESTLE Analysis
External environment of every organisation is affected by several factors, to study these
components many tools and techniques are given by researchers out of which one PESTLE
analysis (Alwaleed and et. al., 2019)). This is a framework which studies the macro elements of
company which assist organisation in understanding its marketplace. PESTLE analysis is used to
evaluate market condition of Starbucks and perform industry analysis. Political: This dimension of PESTLE analysis identifies the political factors and
determines there effects. Starbucks has huge opportunity to enter into new markets as
governments are aiming to improve infrastructure which is a favourable factor for the
company. Bureaucratic red tape persist in most economies which causes unnecessary
delays and becomes an obstacle in expansion for Starbucks.
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 Economical: This element concentrates on the economic conditions in which
organisation has its operations (Bewicke 2015). The economic growth of developing
countries is a positive factors which enables Starbucks to earn better profits by increasing
its sales around the world. Unemployment is also declining in countries which increases
the purchasing power of people. This works an advantage for Starbucks as now more
public will attracted towards the brand, increasing the revenue and profits of organisation.
But, constant rise in labour cost in developing countries is a threat to Starbucks as it will
impact the spending of organisation by way of prices of raw material. Social: This aspect talks about the social trends and market conditions influencing the
consumers, their behaviours and ultimately businesses operating in particular social
environment. Growing coffee culture in different societies and segments of population is
a favourable factor for Starbucks. As people are spending good amount of money on
coffee increasing the revenues and benefiting the company. Technological: This factor of PESTLE framework is related with technology and digital
advancement. This is a very strong component in current scenario as people are rapidly
accepting new technologies in their lives and it is becoming part of their day to day
activities (Cogin and Williamson, 2014)(. Starbucks can make use of digital technology
for improving its supply chain efficiency according to new technologies coffee farmers
are using. Home use coffee machines are also introduced in market which is a threat for
Starbucks as availability of substitutes is increasing. Legal: This factor concentrates on the laws and regulations government imposes on the
businesses and industry for smooth function of economy along with business entity.
Starbucks have to follow product safety instructions or regulations government specified,
it will also enhance quality of there coffee and other products they offer. However,
increasing employment regulations are becoming a problem for company to comply with
all the laws of different countries.
 Environmental: This dimension is new in macro environment and it identifies the effects
of environmental conditions on business also, the impacts business activities have on the
atmosphere. Starbucks takes takes good measures to keep the environment safe, company
make their processes eco-friendly ensuring minimal environmental impacts. They offer
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their products in recyclable packaging and can increase this practice for more effective
results.
Porter's Five Force Analysis
This framework is used in order to get information which is concerned with the influence
of the 5 factors on Starbucks and especially on the coffee industry. Starbucks is the well reputed
brand and globally deals in coffee, tea and other food items. This analysis is mentioned as under: Threat of New Entrants: This threat is moderate in nature because entering into new
market and acquiring the market of competitors is quiet tough like Starbucks as for this it
require huge amount of capital and knowledge which help in order to sustain the market
of competitors (Du, 2016). This can also become opportunity for the new entrants
because Starbucks continuously launches new products which helpful for company in
order to gain competitive advantage and also develop a unique reputation at marketplace. Threat of Substitutes: It is high in nature because many substitutes such as tea, juices,
soda, energy drinks and many more are present in market which can become substitute of
coffee. Moreover, the bars which provide non-alcoholic drinks could also become
substitute of Starbucks (Ferraris, Santoro and Dezi, 2017). In addition to this, those
consumers who make their own products at home with household valuable coffee
makers. For this, Starbucks need to market itself because if actions are not taken at an
appropriate time then there are chances to lose the market or the potential customers. Bargaining Power of Suppliers: This power is low especially in the coffee industry
because there are various independent suppliers who operate in the market. Moreover, the
coffee beans and the premium Arabica coffee grown at some places with the standard
inputs can make the switching cost of substitute suppliers are low. Bargaining Power of Buyers: In the coffee industry there are chances of substitutes and
for this, customers have wide variety of choice as they have many options available from
the low to high price and because of this the bargaining power of customers are high
(Gilmore, 2017). This can become threat for Starbucks because they have to reduce the
prices of its offerings which can put negative impact on its profitability.
 Competitive Rivalry: By considering this threat it is high in nature as this industry has
monopolistic competition and Starbucks and its competitors have their significant market
which can create pressure on each other. Moreover, the industry is mature and growth
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rate is low which can become the reason for the intensity of competition in market and
seeks to increase the market shaper to the established firms like Starbucks.
Industry Life Cycle Model
This cycle describes the different stages in which the business operates, progress and
drop-off in the industry. It depicts that the industry comprises in various stages for their
development of products. The progress and duration of this cycle depends on the weeks up to
years and it depends on the popularity of the product. In coffee industry the product become
popular as its life increases. The various models of this cycle are mentioned as under: Introduction Stage: It is the first stage in which the product is introduced by the
company. This stage is similar to the commercialisation as the cost of marketing is high
in this stage for this, company need promotion as it help in spreading awareness of the
product and also persuade consumers to try it (Karthik and Dixit, 2015). In this stage,
profits are comparatively low because of the cost of research and development. The
pricing strategies in this stage is depends on the type, value of product, competing
products and the cost of developing the product. Here, the Starbucks also introduce its
products at low price in order to survive against their competition. This stage put negative
impact on profits because it involve high cost in advertisement. Growth Stage: Sometimes, company increase its spending on the promotions during its
growth stage. At this stage, company starts growing and it become brand which is
recognised by various people. For this, companies are able to earn small profits as their
revenue increases. In the context of Starbucks, they increase their prices of products to
earn small amount of profit. For this, company can reduce its prices of product in order to
attract more and more customers. In addition to this, the number of stores also get
increase in order to sell their products during this stage because organisation tries to
cover more market as possible. Maturity Stage: This stage is considered as the most profitable stage for companies. In
terms of Starbucks it include prices of their products which are at high rates and by this
they also generate huge amount of profit (Laszlo and Zhexembayeva, 2017). The
characteristics of this stage is brand awareness among people, huge distribution of
products in different regions, modification of products and many more.
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 Decline Stage: It is the last stage in which the profits and revenues of the company start
decline and its result is that the company reduces its prices of products and it is the only
reason to earn something. In this stage, Starbucks either stop selling the product or come
up with innovation or new product in order to acquire competitive market place or to
sustain themselves.
INTERNAL ENVIRONMENT ANALYSIS
VRIO Analysis
Resources Valuable Rare Imitable Organised
Coffee Brewing
Resources
Coffee Brewing
Resources
- - -
Technology Technology Technology - -
Employee Benefit
Strategies
Employee Benefit
Strategies
Employee Benefit
Strategies
Employee Benefit
Strategies
-
Human
Resources
Human Resources Human Resources Human Resources Human Resources
Valuable: Coffee Brewing Resources: It is valuable because it help the company to maintain its
image and reputation in the market because every organisation does not have same
resources (Lin, 2019). Moreover, it also help in enhancing the international image in an
effective and efficient manner in order to ensure the easy entry in the market. Technology: This resource is valuable for company because it help in order to increase
and create more and more customer base and for this appropriate research and
development plays an important role and also determine the needs and requirements of
their respective customers in order to fill the difference of market. Employee Benefit Strategies: These strategies are the valuable resource because it help
in order to improve the overall performance of employees and also help in order to retain
their best talent in an organisation. It is also helpful in order to enhance its competitive
edge by making additions in the portfolio of the products.
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 Human Resources: This resource is only responsible as it helpful to develop the
offerings, market and sell its products in the potential market and also promote
themselves in valuable for company.
Rare: Technology: This resource is rare for the company as it help in order to develop the
customer base and also make sure the appropriate supply of the rare resources as it helps
in providing enhanced efficiency and effectiveness. Employee Benefit Strategies: These strategies are rare because it is beneficial for the
employees who are working for the success of company (Martínez-Torres, Rodriguez-
Piñero and Toral, 2015). For this, Starbucks always keep their employees motivated and
inspired with their strategies because it help in order to retain and improving their
performance. Human Resources: It is rare because to find the set of individuals who have same
dedication because it is very difficult. These type of employees are present in Starbucks
as the leaders over there take care of their employees which is useful for them.
Imitable: Employee Benefit Strategies: These strategies which are used by company are imitable
as these are registered under the guidelines of the employee benefit act and adopted by
company in order to enhance the inimitableness in the functions which are adopted by
company. Human Resources: The employees of the Starbucks are imitable due to their talent, skills
and abilities which cannot be imitate by any other entity.
Organised:
 Human Resources: The workforce of Starbucks is appropriately trained and managed
and also use advanced technology in its equipments (Nan and Li, 2017). Moreover, it is
helpful in order to enhance the scope of staff or arranging the people of Starbucks as it
help in developing the better products and services.
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Value Chain
This analysis is a tool which is useful in the strategic management and also help in
examining internal activities of the firm which is divided into two parts primary and support
(Petkus Jr and Criscione, 2017). These activities are mentioned as under:
(Source: Starbucks Value Chain Analysis, 2019)
Primary Activities: Inbound Logistics: The supply chain of the Starbucks is related to its production as it
develop its own unroasted arabica coffee and green beans from their own farms which is
owned by the company. After this, these are transported to the stores where they are
stored, roasted and packaged and after this, these are transported to their logistics centres. Operations: Starbucks operates in more than 75 countries which has around 24,000
stores in the global market. Its some stores are licensed and others are owned and
operated by company.
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Illustration 1: Starbucks Value Chain Analysis, 2019

 Outbound Logistics: In Starbucks, there is no presence of mediators as they sold their
own products through their own licensed stores. Moreover, company come up with the
innovation and speciality in coffee products which are sold at its leading retail stores. Marketing and Sales: Starbucks continuously invest some amount in order to maintain
the quality of their offerings and also maintain the level of customer service instead of
marketing itself (Rivera-Santos, Rufin and Kolk, 2012). Service: Company tries to build the loyalty of the customers by their customer service
and because of this, Starbucks is known for providing excellent customer experience for
those people who visit the stores.
Support Activities: Firm Infrastructure: The infrastructure of the firm include various departments such as
finance, management, sales, legal and many more. Because of these departments,
Starbucks operate its stores throughout the year. Human Resources: The valuable manpower of the Starbucks is the key elements which
help in achieving the success and bring the company to that level which it has reached
today (Rothaermel, 2017). Moreover, company is popular for treating its workforce in the
best way as compared to its competitors. It become beneficial for company in order to
retain their employees which describes that company has managed human resources. Technology Development: Starbucks is one of those companies which are famous for
their effective technology as the company use it in order to improve its functions and also
to connect with their customers. Moreover, the company has the platform in which they
share their experience, suggestions and opinions.
 Procurement: This activity supports the operations of company with its certain actions
and also support the marketing and sales of Starbucks. This is the resource which the
company does not get in order to operate as it include searching for vendors and
negotiating the prices.
Resource, Capabilities and Competencies Framework
Starbucks has many valuable resources which are developed in order to maintain the
quality of product as company use costly equipments which help in saving their time and also
maintain the taste of its products. Products which are sold by the company are the key elements
which help in generating revenues and profits for the company (Sisson and Bowen, 2017). For
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this, company sell the good quality coffee, drinks and green beans across the world and its major
resource is the coffee beans. Hence, company has its private farms and the employees and its
farmers are also considered as the main resource of company.
Starbucks is also able to maintain its brand image by selling its products at premium
quality. For this, company use marketing strategies which is based on the logo and recognition of
stores. It is the capability of company because any other competitor take lot of time to reach at its
level.
The main competencies of Starbucks include the stiff attention of the quality of its
products and also provide good experience to its customers (Wu and Liu, 2014). Company is
currently involved in the advancement of the products as it help in order to attract more
customers and retain the existing ones. For this, company provide variety of products and also
has the largest network of its stores. Lastly, company maintain the good relations with their
suppliers which help in order to retain them for longer period.
RECOMMENDATIONS
By considering the initiative plans of company, they want to expand itself in the Asia,
Pacific region and also working towards its growth and sustainability. Being the leader of the
market in coffee industry, Starbucks has an opportunity in order to influence and impact their
people by conducting corporate social responsibility services (Zhong and Norton, 2018). For
this, company come up with the decision of purchasing of 100% authentic coffee which is more
ethical as it will help in order to gain the trust of people and also develop a brand which is more
sustainable in order to focus on the environment. Moreover, developing partnership with other
companies will help Starbucks in order to expand itself. For this the various recommendations
are provided to company which are mentioned as under:
 By overviewing the Starbucks global strategy, they should transfer the core competencies
and abilities from country to country and also build profit drivers in various countries as
it help in the expansion of company in healthier manner.
 Starbucks has huge opportunity in terms of Tea and Juice products and for this, they need
to build these products along with their coffee products.
 Moreover, the taste of consumer and lifestyle are shift towards the snacks and drinks as
they tailor their menu's and expand in order to provide healthy products in its offerings.
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 The growth strategy of Starbucks is saturated the US market and need to focus on getting
additional penetration into untapped rural markets.
 Another growth sector is its packaging of the coffee products and they should build better
relations with their retailers in order to get premium space and also increases the
efficiency of their distribution channels.
 Moreover, they can develop the concept of online or home delivery in order to retain their
loyal customers.
 Furthermore, the mobile payments become the major elements in the world of digital
payment and for this, Starbucks can sum up with the digital payment firms and enhance
the experience of customers payments.
PART 2
STAKEHOLDER'S REPORT
It is a report which is use in order to assess the potential changes in order to connect them
with appropriate and interested parties. It is regarded with the projects of organisation and also
include internal people and include them in decision making process (Aiello and Dickinson,
2014). It is the type of method which is used in order to examine the influence of external
environment of organisation and its offerings. This analysis is mentioned as under:
Stakeholders Group Internal and External Justification
Employees Internal These individuals are the most important
stakeholders of the company. In terms of
Starbucks, the power of employees are high
because of the culture of organisation and
company need to chose appropriate strategies
which is helpful for employees in order to
satisfy their objectives. Moreover, the interest
of stakeholders is high and reflects that
company should choose a path which
positively impacts its employees (Akgün and
Yalım, 2015).
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Shareholders External They have high power and interest in company
in terms of investment. Like, the economic
downfall in the market influences on the
company in order to gain higher returns form
Starbucks. Thus, to deal with it company need
to effectively function in that manner which
help in order to sustain the difficult situation
and also give excellent returns to their
individuals.
Customers External These are the person who bought products and
services from company and has high interest
and low power. Like, company launch its
goods and services and consider the excellent
contact which does not have the authority in
order to decide the strategies which is made by
company and they put moderate impact on the
company (Alwaleed and et. al., 2019).
Suppliers External It is the group of people who provide raw
materials to the company. Like, if organisation
want to purchase raw materials then they
should make contact with company as many
suppliers are present in the industry and
company has many options to bought their raw
materials as they have low power and interest.
CONCLUSION
From the above discussion, it is concluded that business strategy plays an important role
in order to achieve success and growth in market. This report is based on the case study of
Starbucks who is the leading coffee retailer and has lot of competitors and because of this, they
need to face huge competition in order to sustain the market. For this, company take various
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major step which help the company in order to reach out to their potential customers and to new
market segment of customers and update them in terms of their offerings. Here, the
recommendations are also provided to company in order to improve its performance in next 3
years. Hence, the company need to put emphasis on making people aware and also attract them
in order to provide its services.
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REFERENCES
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Sisson, D.C. and Bowen, S.A., 2017. Reputation management and authenticity: A case study of
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Wu, C.Y. and Liu, Y., 2014. Space design in Starbucks from the perspective of behavioral
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