Starbucks Competitive Advantage and Competitors: A Critical Evaluation

This report provides a critical evaluation of Starbucks' competitive advantage and how it differs from its competitors. It examines the market position, global presence, quality, and supply chain of Starbucks. The report also includes recommendations for sustaining competitive advantage in the coffee industry.

Starbucks Business
Report

Table of Contents
INTRODUCTION................................................................................................................................3
PART 1..................................................................................................................................................3
Starbucks and their competitors..................................................................................................3
A critical evaluation of the sources of Starbucks competitive advantage and how these differ
from Starbucks competitors........................................................................................................6
Recommendations.......................................................................................................................9
Part 2...................................................................................................................................................11
Starbucks’ Stakeholder Report..................................................................................................11
CONCLUSION..................................................................................................................................12
REFERENCES...................................................................................................................................13

INTRODUCTION
Starbucks is an coffee company which is first organized in America.(Kleinbard, 2016) It is
an American organisation, to serving stores in a very broad chain approx around the world. This is a
worldwide brand was established in 1971 and it was marketed by three local businessman to sell
entire coffee beans in high quality. In 1981, with the name of Starbucks Howard Schultz meeting
with the mercantile establishment then they build a resilient business and spread out precise quality
business of coffee adding the brand name of Starbucks. It was a historical case to announcement
when Starbucks was launching by its three founders namely Jerry Baldwin, Gordon Bowher, Zev
Siegl. In 20th century there are many modification in market and company which assisted to
Starbucks getting more successful.
PART 1
Starbucks and their competitors
Even after existence of a leader of market, the Starbucks confront consuming rivalry as this
organisation in Coffee Cafe speciality that is included that as single of the main competitive
administration. The McDonalds, Caribou Coffee, Dunkin Donuts these are tough competitors of
Starbucks. In Accordant to this given case study, in 2015 this company has advanced return or
equity when comparison to its rival. In Starbucks other and shares securities are traded at NASDAQ
and the outline of business is advised that as one of the return bring forth stocks. To be more
punctilious, return on assets of Starbucks is 47.09 % that is more than its rivalries as McDonalds as
ROE of 32. 98 % and 44.50%.
Other than components of arrived back on possession and interest, Starbucks is confront to
aggravated contest with their challenger especially with McDonalds. Accordant to Starbucks, in
2015 total worker of given organisation are 191000 whereas total faculty of McDonalds includes
420000 worker which is even more than the multiple of Starbucks.
It is crucial to gain dependable benefits for organisation due to survive in an impulsive
commercial enterprise of Coffee Café. The net earnings edge of Starbucks is making known as
14.57% but on the other hand net lucre amount of Dunkin Donuts is 23.55%, and of McDonalds is
17.34%. By these figures and statistics, it has been unsubtle that Starbucks face consuming
contention in the business enterprise. Beside this it express that the explanation behind combative
activity scheme of Starbucks and their aim to prolong and endure in marketplace. (Rydén, 2015)
A strategy of business is the collection of assorted program which are formulated with purpose to
get improvement and growth for achievement and development of business. The main intention of
this written report is to develop strategy of business papers including documents, so that internal

and external situation of Starbucks can be examined. Starbucks is a worldwide coffee series which
purpose to ease group by their merchandise. The recent study is separated into two portion (Easton,
2017). The primary part of this report, will regard elaborate section about the company on with its
competitor point. Internal and external situation of this establishment will also be measure with the
aim to supply applicable portrays so that execution following 3 years of the business can be
reinforced.
2) The external Situation analysis
There are lots of external environment affect as well as monitored the market for analysing
the new opportunities. These external environment can be analyse using PESTLE and it is used to
evaluate the macro environment of the coffee industries (Clinton and Whisnant, 2019). For
example:- Starbucks uses these external analysis in order to produce more coffee including their
business. It also analyse by the five forces and by industry life cycle model. The PESTLE stands for
environmental, social, economical, legal, technological and political and these are described below.
 PESTLE:-
Political factor:- The main important in the coffee industry is the production of coffee
which may attain political importance. The political factor pressure the businesses to trade with
ethics. The increasing in demand of coffee in market reflected the industry to make the more coffee
beans in the industry. The fair trade coffee is also responsible for fair price to the growers. For
example, Starbucks is the leading company who uses trade coffee beans by providing fair price to
producers. The different trade coffee also refers according to the different products which uses by
industry to obtain a good socially response.
Economical factor:- These factor have a much stronger impact on coffee production. As it
depends on the economy of the country as they have difficulties or they have raise the coffee trends.
The economic development of many countries depends on the trade good issues. If the consumers
have high economic state then they are able to spend more money on beverages which leads to the
production of more coffee (Glowik, 2017). so, this will impacted on the coffee industries as their
economic condition increases. This can be a huge impact on coffee producers as they are
responsible for high quality of coffee beans.
Social factor:- This factor largely depends as it includes socially. Now a days, many people
are becoming health consciousness which promote them to not intake of coffee much . There are
lots of factors which becomes competitors of coffee industry which includes healthy drinks. With
change and decrease in their production of coffee, the industries are adapting the use of alternative
which can use to promote the health of consumers. The coffee industries are mainly responsible for
fair trade of coffee. The higher fair trade coffee price affect the production of coffee as farmers can
earn more money with the requirement of more coffee.

Technological factor:- A wide variety of coffees are available in the market and this can be
developed by the use of new machines. With the new technologies, the consumers can developed
different varieties of coffee and this technologies can be adapt by the consumer itself by various
appliances (Gupta, Nagpal and Malik, 2018). The use of new technologies can also bring the
changes in the taste and quality of the coffee. The most important technology can be used by coffee
producers is genetic engineering. With the use of genetic engineering it can help in the improve of
coffee yield, shelf-life and taste of coffee. By using this technique, it help the coffee industry to
produce coffee beans on a large scale and it is also benefited for producers as their profit increases.
Legal factor:- There are lots of legal factors are implement in the transporting, storing and
in making so that their consumption will be safe. As the coffee contains large amount of caffeine, so
there are some laws that are promoting the safe coffee handling so that it doesn't cause any
difficulty for the industry. For example, Starbucks support legal laws while transporting coffee.
Environmental factor:- There are lots of environmental factors are occur in the world.
These factors affect the crop of coffee which leads to the deforestation. It includes the use of good
variety of fertilizers and pesticides which can enhance the crop variety. The environment factors
should encourage the sustainability of farmers so that they can help in the grow of a better crop. The
environmental change should be sufficient that can bring the quality of crop.
 Five forces analysis
Five force analysis is used to identify the competitive environment of company. It involves
the factors which influence the company profitable such as secondary products, new market
entrants, etc. The five forces are described below.
Threat of substitution:- There are lots of substitution are occur in the market which
includes the tea, juices beer, etc. The more production of these substitutes will decrease the profit in
the market and will become the threat (Hutt, 2016). There are different competitors are available in
the market who are offering different products with the relevant places. This threat is getting high
and increasing day by day.
Threats of new competitors: - There are a lot of new participants which are potentially
developed to bring some other fast food chains. Due to their strong brand image they are potential
to develop the attraction towards the customers which decrease the production of coffee. The threat
of new entrant is relatively moderate with the coffee industry.
Rivalry:- There are lots of small coffee producers who give tough fight to the big coffee
producers. There is an intense competition between these producers. The level of this is high in
producing the coffee.
Bargaining influence of consumers:- The buying power among industries is great. The
buyers cannot bargain in the market for their needs of coffee so the organisation is providing their

products at reasonable cost and in a better quality. So they don't need to bargain their necessity.
Bargaining influence of sellers:- The bargaining highly occur between sellers as the
involvement of technologies occur such as different types of machines to producing different types
of coffee and they are bargain over the coffee industry. They cannot full each requirements of
individual as their business also affect from this. The bargain power supply is very high.
 Industry life cycle model
This model refers to the numerous steps which represent the business to operate progress
and decline with in the industries. It is basically consist of five stages which are described below.
 Introduction stage:- In this stage the cost of the product is highly expensive while the profit
is very low. Basically, the progress of market starts from this stage and it includes the low
competitors and high prices (Voigt, Buliga and Michl, 2017). In this stage the demand of the
product is relatively low. It is the initial stage of any industry in which the producers are
produce low quantity of products.
 Growth stage:- It is most important stage at it initiates the profits of the industry. In this, the
growth of sales initiates which enhance the market value. To get more higher growth the
industry focuses on the quality of products such as coffee industries focuses on the quality
and taste of coffee beans. It increase the market value and help in the growing market share.
 Maturity stage:- In this stage the demand of the products increase with increase in the
profit of the industries. In this stage, the competition with among other industries is very
high and this will increase by the satisfaction of customers. As the brand value developed,
the saturation will be developed in this stage.
Decline stage:- There are many factors which influence these. If the industry doesn't produce any
new product then there will be decline in their profit. As this can't enough to attract the people and
doesn't forces them to purchase. Mainly, the coffee industries are lies between the maturity and
decline stage. There are lots of people who are consider their health, the coffee producers must
produce according to the health regards. But if the industries doesn't show any concern about this
then the customers can go for alternates which can be decline of the production in the industry.
A critical evaluation of the sources of Starbucks competitive advantage and how these differ from
Starbucks competitors
Starbucks has been considered as a place where people can relax and can spend quality time
with their friends or alone. The stores of Starbucks are designed in such a way that the customers
are tend to stay longer and return again for another stay. The organisation provide competitive edge
to others by providing best and highest quality of coffee to their customers (Boies, Lvina and
Martens, 2011). Excellent customer services is a key of Starbucks business plan of action. The
market expansion internationally focusses on increasing economies and has been considered as a

long term strategy for Starbucks enterprise. Emergence of new and innovative technology has been
constantly focussed for inventing new products and making wide variety of processes in business.
The task of enhancing sales and evaluating the criticism and feedbacks of the consumers on
daily basis aids in improving and maintaining the brand name and reputation. Though, it has been
observed that the company has large number of potential competitors like Dunkin' Donuts. So
Starbucks has to identify their weaknesses and competitive advantage. VRIO analysis is a type of
analytical technique which has been used for evaluating the availability of resources and also the
strengths, weaknesses and competitive advantage. Such evaluation are based on assumptions of
capabilities and the resources that are prevailing over time (Ghezzi, 2013). The competitive
potential can be determined by four question which comes under VRIO model. Thus, the evaluate
of the VRIO structure of Starbucks have been discussed in the table.
Resources Valuable Rare Imitability Organisation
Brand name Yes Yes No Yes
Global presence Yes Yes Yes Yes
Quality Yes Yes No Yes
Supply chain Yes Yes No Yes
Value
Brand name: The ethnicity and provided quality make the brand name more and more valuable.
Global presence: They have a immense presence globally. Such factor has been considered as an
asset for an enterprise which tries to enhance the sales and share prices.
Quality: Starbucks has been known for its superior quality of coffee which is derived from different
regions of the world around.
Supply chain: The main reason for maintaining the quality of the coffee is due to its effective
supply chain (Campbell, Edgar and Stonehouse, 2011).
Rare
Brand name: Though, all the competitors has to incorporate this element, but Starbucks have been
observed to dominate over other brand name and thus quite challenging for others.
Global presence: There are other chains of coffee companies too, but Starbucks is most accepted
and recognizable.
Quality: The Starbucks is extraordinary with this and huge investments flow into this.
Supply chain: The organisation is above to all here, as competitors have to engage lots of money to
get to their level.

Imitability
Brand name: As observed it is difficult to so but this may occur in upcoming future.
Global presence: As such no competitors of Starbucks can earn such huge global availability. It
would definitely require large amount of time as well as resources to achieve such status.
Quality: Not actually simulate
Supply chain: For now it is hard to do, but in future it may happen.
Organisation
Brand name: Yes indeed, the coffee made in Starbucks has a note worthy image.
Global presence: By altering their menus and making innovation and creativity in the style and
presentation of the items, attract more number of people who like changes and visit Starbucks often.
Quality: The drinks and items are renowned and make the consumers excited enough to enjoy
during holidays.
Supply chain: 99% around coffee is pure and ethical. As highest quality of coffee beans are used.
Value chain analysis is the analytical framework which assist in determining the business
operations and functioning for acquiring the competitive edge in enterprise. The services which are
provided are always high and superior, such practice construct valuable image to the company. The
sales and marketing strategy of the Starbucks are unique and they provide offers and discounts to
their loyal customers. Their high availability of technology and advertisements in social media
represents the quality and name of brand in unique way (Johnson, 2016). The human resource
division of the company plays a vital role in hiring such skilled employees to promote the company
more and make it more successful.
The Starbucks contains physical and non physical resources which provide a sharp and cut
to cut advantage over other companies and market. The services like WiFi availability, high defined
equipments, high skilled and innovative technology and machines. The resources also consists of
well skilled and trained workers and team members for dragging the name of Starbucks to another
heights. On the further side, the resources which are non physical are such assurance of satisfied
consumers, the quality of coffee and maintaining the relationship between the employee as well as
between the customers and the employees. Such practices aids in maintaining the fine services as
well as promoting new products around the globe.
Capabilities
Starbucks posses a number of capabilities in order to attain a respectful position in market
area. It consist of valuable resources and a well maintained infrastructure. It usually generate a total
revenue of 13.3 billion for contributing in its financial position. It has a very strong brand image in
the market. It is constantly increasing the range of their products in order to deal with its
competitors (Grover and Kohli, 2013). Being an extensive global supply chain, Starbucks have

skilled and talented employees that could effectively perform daily activities and tasks. The design
of shops are effective and unique that serves a wide range of coffee including other eatables also. It
is also preparing to launch some unique products and services in order to achieve a competitive
advance in market. It has over 31,000 stores available worldwide and is spread almost in 80
different countries and still planning to spread more in small areas also.
Competencies framework
It is basically a model which determines the excellent performance of an organisation. This
framework is consist of a number of competencies that can be implemented to a large number of
goals within an organisation (Competency frameworks, 2019). Competency framework of
Starbucks is given below.
Enjoyment: The organisation develops a positive and a healthy environment so that all the
workers and staff members could enjoy their work in order to increase the productivity of overall
organisation.
Winning: Leaders and supervisors of the Starbucks should motivate their employees in
order to work with their full potential. Thus, a reward system is need to be introduce in the
organisation so that all the staff members can work with full dedication and have a purpose.
Collaboration: Team members in the organisation should work collaboratively and together.
There must be a common objective of the respective organisation and all the team members should
work effective in order to achieve organisational gaols and objectives (Scholes and et.al., 2014).
Honesty: To achieve success, particular administration must work with honesty. There
should not be any inappropriate activities within the organisation and they should serve their service
users with proper loyalty and honesty. It will help to build a positive brand image among general
population.
Passion: Workers of the Starbucks must perform passionately. Leaders must encourage the
staff members to bring their best at the work place and there must be a passion for learning and
improving their skills.
Recommendations
In order to enhance Starbucks presentation over the following 3 years the recommendations should
be commercial, realistic and justified. You should present your recommendations using SMART
objectives (Specific, measurable, achievable, relevant, time-bound).
Starbucks is convey their services in world wide countries and also they made a applicable
intrusion in the market. But there are lots of alternative points for the growth potency within as it is
market. It will recommended that they should transport in local product combine with inexpensive
value, tastes, lifestyle, market needs (Madden, 2015).

They have to convey their fundamental competencies and abilities including from nation to
country so that they can make up benefit drivers within their international strategies, as they supply
global contraction within an integrated mode. The feature of the Starbucks has greater possibility in
fresh juice and tea for the growth of the company.
It is advisable that, in the product line these products should be supplied like their centre
creation. In the value chain coffee beans are applicable and displacements are happen according to
the price are running in the market. So Starbucks need to extenuate price excitability hazards
through effectuation of effective strategies of protection for example upcoming contracts for
locking within approximation of amount input signal by lowering down of prices. This will
advantage them to negotiate future price up to greater degree (Cadet, 2018).
It has been recommended that maturation strategies of Starbucks must underscore on pricing
within unexploited in rustic market. It can be utilized for this Ansoff matrix strategy from which
they can emphasis on market incursion. Moreover, unify this with cost efficacious unprocessed
substantial. This scheme consists of transaction of firm with assist of innovative tools, proficiency
approaches. It is proposed that, SMART objectives which can offer them with increased methods
should be successful and these are elaborate beneath:
 To modify gross sales of coffee offering through with 15 percent within approaching 1
twelve month by devising litigate of expenditure effectual and qualitative substantial by
omni merchandising transmission.
 To intensify maturation charge of activity through 15% by production of fresh omni
marketing channels for expense of content accompanying with utilization of qualitative
price within next 3 year.
 Market segment strategies of Starbucks should apply a market segment maturation plan of
action for recess market in formed economic system, in specific single- serve, courtesy,
flavoured coffee section. These depict positive process rates and should be employed, if the
administration thought to raise market percentage in implanted markets.
 Product developmental strategies level of business, the company is advised to further
develop prosperous line so that they don't friable attraction in the eyes of customers.
Starbucks also has great prospective in beverages. And the company informed to acquire
those trade good lines with their fundamental products.
Therefore, incorporate trading operations aid firms in forthcoming for creation of their gross
revenue and market stock. By choose for known strategies as well as activeness in an effective
mode will help them to achieve needed termination within the desirable time framework.

Part 2
Starbucks’ Stakeholder Report
a) Starbucks Stakeholders
Starbucks being an international organisation constitute a number of stakeholders both
internally and externally. The Starbucks stakeholders of internal that include mangers, board of
directors, employees and investors. Whereas, external stakeholders include regulators, suppliers,
customers, and investors (Starbucks case study, 2019). Customers who are the external stakeholders
lead the organisation to earn a high amount of revenue. Employees are the crucial part of Starbucks
as they carry out different activities. Suppliers who also are an external stakeholder generally
provides raw materials to the organisation so that all the activities and tasks can be run smoothly.
Shareholders who are also an external stakeholder assist the organisation for raising capital and
funds. Government also come in category of external stakeholder which regulate the organisation
by developing a large number of policies and norms.
b) Priority stakeholders group
Employees can be defined as an individual who works for an organisation whether full time
or part time in order to carry out all the activities and tasks of the organisation. In Starbucks,
employees play a crucial role as they are responsible for serving their service users effectively and
efficiently. Their responsibility is to deliver great value of facilities to their consumers. Employees
or workforce of the respective organisation is majorly responsible for overall productivity and
profitability. Starbucks usually provide reward system for workers so that they evaluate their
performance and to motivate them towards work. Number of services and facilities are bing
provided to the workforce of the Starbucks such as paid leaves, medical services, insurance etc.
Training and development program are conducted to develop skills and abilities of all the
employees. According to the Starbucks, employees are the most valuable resource as they are
responsible for carry out different operations.
Starbucks has almost around 1191000 employees who are majorly involved in providing
support facilities warehousing, storing, transportation and many more. They have number of
employees from different parts of the world. Employees are both male and females and there is no
discrimination regarding caste, religion, culture or financial status. All the workers of Starbucks are
career oriented, skilled and talented as each one of have their qualities. They are highly trained and
have a high level of coordination skills.
c) Interest and power of employees
Matrix of stakeholders basically represents the accumulation of four quadrants which are

responsible for imitating power and attention of each and every stakeholder. Such quadrants include
employees, suppliers, government and shareholders. It can be analysed that employees are the major
aspects of the Starbucks but usually posses less power. However, employees are generally not
included in decision making process of organisation (Khalili and et.al., 2013). They do not have
access to be a part of such process until and unless they are asked for it. In context of
responsibilities employees have higher interest to meet the requirements of organisation. There is a
communication strategy in Starbucks for interacting with their employees. Such communication
methods include notice boards and mails through which knowledge can be improve in order to
perform different operations of the organisation.
CONCLUSION
From the above study, it has been concluded that organisation transfer their internal
operations global through utilization of number of stakeholders. External analysis help to analyse
the impacts of factors of an organisation. Porters analysis has been carried out which help to
understand the power possessed by different elements. Internal analysis is carried out through
tradition of Value chain including the VRIO which elaborate appreciated resources through which a
completive position can be attain in market area. Recommendations were given which help in
enhancing operations of business.

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