Starbucks Business Report

This business report provides an analysis of the external and internal environment of Starbucks, including its competitors. It discusses the use of PESTEL analysis and Porter's Five Forces analysis to evaluate the external environment, and the VRIO framework to evaluate the internal environment. The report also includes information on Starbucks' stakeholders and recommendations for improvement.

Starbucks Business Report

Table of Contents
PART 1............................................................................................................................................1
INTRODUCTION......................................................................................................................1
The External Environment .........................................................................................................2
The Internal Environment...........................................................................................................6
Recommendation .......................................................................................................................9
PART 2 .........................................................................................................................................10
Starbucks's internal and external stakeholders .........................................................................10
Priority stakeholder's Group – Employees................................................................................10
Power and interest of Employees stakeholder group................................................................11
CONCLUSION .............................................................................................................................12
REFERENCE.................................................................................................................................14

PART 1
INTRODUCTION
Business report are basically a type of assignment that are produced to have a proper
analysis of various situations and apply a range of theories with the aim of developing and
identifying areas of improvements so that effective suggestions and recommendations can be
made (Mayer, 2018). The assignment is based on the business report of Starbucks and provide an
information about the external and internal environment of Starbucks together with knowledge
about its competitors.
Starbucks is a well known American coffee company and chain of coffee house which
was founded in Seattle, Washington, U.S. In 1971 (Starbucks case study, 2019). The Starbucks is
considered as one of the main representative of “Second wave coffee” that popularized the
artisanal coffee especially the dark roasted coffee across the world. The main products offered by
Starbucks corporation includes hot and cold drinks, microgroove instant coffee known as VIA,
whole-bean coffee, cafe latte, espresso, full and loose leaf teas which also includes the Teavana
tea products. Beside this, evolution of fresh juices, Frappuccino beverages, La Boulange pastries
and other snacks including items like chips and crackers are also made by Starbucks. Apart from
this, over time many stores of Starbucks on the basis of their locality and specific zone some pre
packaged food items, drink-ware like mugs and tumblers, hot and cold sandwiches are also sold
by them. Further, Strbucks-brnad coffee, bottled clod coffee and ice-cream is also like by its
customers and are available and sold by various grocery stores.
In starting phase of its business Starbucks is having a slow growth policy and focusing to
dominate its setting sights in US before entering markets in abroad. But, the a well combination
and balance of high quality products services along with well managed branding policy and a
reputation of being socially responsible organisation attracts a large number of investors and
customers (Gupta, Nagpal and Malik, 2018). As a result by the early 2019, the Starbucks
company is operating through more than 30000 locations around the world. The first location of
Starbucks outside North America opened in Tokyo, Japan in 1966 and has entered markets of
UK in 1998. beside this, Starbucks is having its operations in more than 75 countries of world
which includes US, China, Canada, Japan, South Korea, United kingdom, Mexico, Turkey,
Taiwan, Indonesia and many more.
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Starbucks is having a glorious positions in market of coffee house and is a strong leading
positions in its home or domestic market which is selling more than 50% of total speciality
coffee purchased and sold in cafes of United states. Starbucks has managed to dominate its local
competitors like Peet's coffee and tea, Caribou Coffee, etc. But, from some recent years
Starbucks is facing a tough competitions from McDonal's and Dunkin Donuts as both of them
are offering high quality products like Arabica brews at a lower cost than the beverages of
Starbucks (Kay, 2019). Apart from theses two organisation a cut throat and entrenched
competitions is also faced by Starbucks from other international organisations like Costa coffee,
Wild bean cafe, Caffee Nero, Van Houtee, etc. Thus, an effective business strategy and plans are
needed by Starbucks to face and courter this competition. With the aim of finding loopholes and
area of improvements in its business strategy use of following analysis and framework are made
by Starbucks.
The External Environment
It basically includes or comprises outside factors that have significant amount of
influence and impact over the functions and operations of an organisations (Koh, Singer and
Edmondson, 2019). Thus, it become necessary for Starbucks to have complete knowledge about
its external environment or various macro factors to have efficiency in its operation and to ensure
free and smooth flow of its business operations. Use of PESTEL analysis is made by Starbucks
to have an better understanding about various factors that are present in its external environment.
PESTEL analysis
It is basically a strategic analytical tool that present a most effective way to identify and
evaluate the external issues and their impacts on business strategy. The main factors that are
include in PESTEL analysis are explained below in context of Starbucks:
Political- This factor of external environment reflects information about prevailing
political conditions and stability in a nation and includes factors like tax policy, trade agreements
and posses control over other international transactions (Krishna, 2018). The key political
imperative that has created a concern for Starbucks is associated with its sourcing of its raw
material which has attracted attention of many politicians of West and other countries where
Starbucks operates (PESTLE Analysis of Starbucks, 2019). Thus, effective policies should be
implanted by Starbucks to have fair trade practices that are easily agreed by global corporations.
Beside this, increasing regional integrations among various nations is growing opportunity for
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Starbucks to expand more effectively at global level. But the Bureaucratic red tape which is seen
in most of the developed countries of US, UK and other parts of world has crested a threat for
expansion of Starbucks.
Economical- This factor is mainly associated with economic conditions and growth rate
of a nation and includes various factors like inflation rate, interest rate, deflation, purchasing
power of customers, unemployment rate, etc. In the economical environment of Starbucks, a
high economic growth are seen in developing countries which has reduced the unemployment
rate in many focused countries of Starbucks like in Japan which has created a threat of rising
labour and production cost for Starbucks (Cadet, Rubin and Ball, 2018). Beside this, the current
issue of Brexit has shaken the economy of UK which is concern for Starbucks as it limits its
profit particularity in UK. Thus, the many locations where Starbucks is operation is going
through global economic recession (like UK), but still the consumers are shifting towards a
lower priced alternatives of Coffee which has created an opportunity for Starbucks.
Social- This factor of external environment manly reflects the attitude and behaviour of
society and provide a reflection about the taste and preference of society and consumers. The
society of countries in which Starbucks is operating like Japan, US, China, UK, etc. are showing
a growing culture for Coffee thus, created an opportunity for Starbucks as it has improved its
sale . Apart form this, a growth in middle class is also seen around the world and increasing
health consciousness in individuals is also a good sign for Starbucks as it give a boost for array f
health products of Starbucks.
Technological- This factor is associated with rapid and fast growing technology over
various nations of world which has created a pressure on all business organisation to keep a
phase with current automation and innovation to remain successful in the business market.
Continuous technological improvements and a trend of mobile and huge use of internet is seen in
developing countries like US, Japan, China, etc. Thus, Starbucks should adopt certain business
strategies to reap the benefit of this technology improvement through providing better mobile
apps for having online facilities and ordering of product and should linked services with mobile
companies to earn better profits (Vos, 2018). Beside this, The Starbucks is also having the
opportunity to improve its supply chain efficiency based on new technologies coffee farmers use.
Environmental- This factor of external environment is mainly associated with effects and
impacts created by business operations over ecological factors or natural environment. Recently
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in the targeted market of Starbucks a trend towards business sustainability and a growing support
for environmental friendly products and responsible sourcing of products is seen. Thus,
Starbucks is having an opportunity to ensure minimal environmental impacts through making use
of fuel-efficient equipment, calculation of gas emission done by their company and making use
of bio-degradable material. Beside this, Starbucks also have an opportunity to have emphasis on
corporate social reprehensibility and should also make use of a recyclable packaging.
Legal- This factor is associated with the various legal norms and laws and regulation set
by the government of a nation for protection and safety of their citizens together with the its
employees and customers. The main rules prevailing in the legal market of Starbucks are
associated with product safety and regulations, increasing employment regulations and GMO
regulation outside the US. Thus, Starbucks needs to ensure that it does not run afoul of the laws
and regulations in the countries from which it sources its raw materials as well as the home
markets in the United States (Byrnes, 2019).
Porter's Five force analysis
It is a tool that is used by an organisation to analysis level of competition prevailing in
the its targeted business market. A set of five important factors are included in this analysis that
creates impact on profitability of company and its operations. The five force analysis with
respect to Starbucks is provided below:
Threat of substitution- Starbucks is mainly operation a coffee house thus, its product is
having a large number of substitutes like tea and other large number of coffee house. Thus, a
high level of threats of substitute is faced by Starbucks in business environment.
Threat of new entrants- A risk from a large of number of ready to enter the market
organisation i.e. a risk of new entrant is faced by Starbucks who are having a potential to come
up with new fast food and cafe chains (Grey, 2018). But as the Starbucks is having a good brand
image and well developed in coffee industry thus, it is only having a moderate level of threat
from new entrants.
Threat of competition and rivalry- This account for the greatest threat for Starbucks as it
is facing a high level of competitive rivalry from many well known and established international
organisation like McDonald's, Costa Coffee, Dunkin' Donuts etc. Thus some strategic plans and
actions are needed by Starbucks to counter this threat.
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Bargaining power of buyers- In industry of coffee house the consumers are having a
high a bargaining power as a large number of option are available for them thus, they are having
a choice of making shift to some other brand if they are charged high prices for any product. This
offered a high bargaining power to customers of Starbucks thus, pressure is exerted on Starbucks
to maintain an adequate or low level of prices for its product to retain and maintain its customers.
Bargaining power of suppliers- The level of this force is basically depended on the
number of suppliers of raw material exists in the market (Onel and Fiedler, 2018). In case of
Starbucks it is having a large number of supplier in around 70 countries of world thus, its
supplier are having a high barging power which lead to an expensive supply chain for Starbucks.
Industry life cycle model
This depicts the various stages through which an organisations went while operating its
business within an industry. It basically reflects the journey of a business which includes how it
operate, progress, prospects and slump during its life cycle. The five stage of industry life-cycle
are as follows:
Start-up stage- This stage is featured as the first phase of life-cycle of Starbucks where
organisation is new for the market. Thus, customer demand is also limited as they are not much
aware about the products of organisations. Under this stage Distribution channels are still
underdeveloped, so there are very few product supply and promotional activities.
Growth stage- Under this stage the product and organisation slowly starts attracting
attention and the industry moves on to the growth stage and profits of organisation also starts
rising and improving. At the growth stage, revenue continues to rise and companies start
generating positive cash flows and profits as product revenue and costs break-even (Donner and
Loh, 2019).
Shake-out stage- This stage is basically related with consolidation of an industry. It is the
stage where better option of growth and expansion is searched by an organisation that includes
getting merged with competitors and thus the market share and customer base of successful
organisations tends to increase.
Maturity stage- Under this stage majority of companies are well developed and
established and reflects the saturation point of an organisation or industry. At this stage
companies make efforts to protect themselves and maintain profitability by adopting strategies to
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deter the entry of new competitors into the industry. Strategies are also made to become a
dominant player in the market and to reduce rivalry. This stage is categorised by maximum
revenue, profits, and cash flows as customer demand is fairly high and consistent because
products has became more common and popular and the prices are fairly reasonable compared to
a new products.
Decline stage- It is the last stage of any industry life-cycle where intensity of competition
is declining because of various factors like continuous losses and lack of customer base. The
organisation which seems that now they are not having an opportunity to survive they take an
option of disinvestment while some make attempt to acquire smaller or failing competitors to
become the dominant player (Ziliani, 2019).
The Internal Environment
The internal environment of an organisation includes the strengths and capabilities of an
organisation that makes it able to grab the opportunity and counter and reduce the negative
effects of threats. For having an evaluation about the internal environment and resource of
Starbucks use of following VRIO model is made:
VRIO framework
Use of this framework or tool is made by an organisation to analysis and evaluate its
internal capabilities and resources (Barnett, 2019). Following are the VRIO model of Starbucks
reflection an analysis about the internal strengths and capabilities of Starbucks.
Factors Valuable Rarity Inimitable Organized What is the
result?
Technical
resource
Yes - - - Competitive
advantage
Products Yes Yes - - Competitive
on partial basis
Global
presence
Yes Yes Yes - Competitive
advantage
Human
resource
Yes Yes Yes Yes Highly
Competitive
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advantage
Valuable:
These factors are necessary for an organisation to easily achieve its targets and goals and
provide the internal strength and viability to an organisation to grab the prevailing the
opportunity and reduce the chances of adverse situation. The valuable resources of Starbucks are
as follows: Technical resource- Use of best coffee machines and other efficient technology is made
by Starbucks to have better production of quality coffee and other cappuccino and hot
and soft drinks to attract wider number of customers. Global presence- The Starbucks is a big multinational brand that is operating in through
more than 30000 layouts in the world thus, its global presence is a valuable resource. Products- The wide range and variety of products offered by the organisation is also a
capability and internal strength of Starbucks and is well known for the quality of its
coffee (Belsey, 2018). Human resource- The Starbucks believes that employees are the key for achieving higher
competitiveness and growth in the target market thus, its loyal and committed employees
is also an internal strength.
Rarity:
This basically represent the assets and resource that are rare thus, can be acquired or
yield by only few competitors in the industry. The rarity capabilities of Starbucks are as follows:
 Products- The various items and drinks offered by Starbucks are of superior quality and
are enough to renowned and attract its customer thus, quality of its product is a rarity
resources of Starbucks.
 Global presence- Starbucks is having a well developed and efficient supply chain
network across various county if world which provides a rarity capability to Starbucks. Human resource- Starbucks is having a empowering corporate culture, employee stock
ownership programmes and exceptional employees benefits are also provided to maintain
the integrity of its workforce to keep them motivated for efficient work thus, it is also a
rare strength of Starbucks which can not be acquired by any organisation easily (Lipson,
2019).
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Inimitable:
This aspects of VRIO model basically represent the the capabilities that are expensive
and thus, it is difficult for competitors to copy that strength and make duplicate of that resources.
The Inimitable resources of Starbucks are as follows: Global presence- The Starbucks is having is strategy of offering best products as per the
lactation and market demand and timely innovation and changes are also met to have
better presentation of items in a stylish way to ensure that people at global market like s
to visit and purchase its product. This innovation and stylish outlet and venture of
Starbucks is an Inimitable resources of Starbucks that can not be copied or adopted by
any other competitor easily. Human resource- The Starbucks is having strategy of pampering its employees through
providing industry leading benefits and package to them by means of effective medical
benefits, paid holidays and other benefit plan which makes it employees more loyal and
commendable for their organisation thus, the human resources of Starbucks is an
Inimitable resource that can not be copied for taken away by its competitors.
Organized:
It represent the most effectively organised system and workplace culture of any firm that
facilitates an unique strength for an organisation and makes it better and superior than all other
competitors that exists in the business market (Huesecken, Overesch and Tassius, 2018)(Hay,
2019). The most organised and only sustainable advantage of Starbucks is the quality and
efficiency of their workforce i.e. the Human resource. An skilled and creative employees are
required to maintain the quality and productivity of an organisation thus, timely training and
development is provided to employees to ensure the success and growth of Starbucks.
Value chain and other resources competencies framework
the value chain is bacillary a strategic tool used to analysis the internal firm activities and
aim at recognising which activities and resource are most valuable and which cold be improved
by ordinations to have better competitive advantage. Porter has introduced this value chain
model in 1985 which represent all the internal activities and categories it as primary activities
which directly add value for final products and support activities that are necessary for an
organisation in a indirect way (Kellow, 2018). The primary activity which also represent the
internal strength of Starbucks includes Inbound logistics, Operations, on-bound logistics,
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marketing and sales together with other associated services. These primary activity of Starbucks
are quite efficient and facilitates timely production of products and other food items and drinks.
The support activity of Starbucks includes Firm infrastructure, Human resources management,
procurement and efficient technology. Starbucks is having a beautify and clean and tidy outlet
and stores which is a part of its infrastructure. Apart from this, continuous improvements in
technology and new innovations are also providing better competitive advantage to Starbucks
through supporting its business model and processes.
Recommendation
On the basis of analysis of above internal and external environment of Starbucks
following recommendations can be made for Starbucks for having improvement in its
performance in next 3 years:
 On the basis of technological environment of Starbucks it has been seen that its operating
in a highly dynamic environment where rapid changes are going and new innovations and
advancement are also seen. Thus, it is recommended for Starbucks to adopt and
implement some effective technology to enhance its productivity. Starbucks can earn
more revenue through looking up with various mobile companies and offering free Wi-Fi
facility and other technological improvement in its outlet to attract more customers
(Matsuoka, 2018). Beside this, use of efficient technology to produce coffee and other
food items will lead an improvement in its production capacity by at least 15% in
coming 2 years and by almost 20% in next 3 years if continuous improvement is made in
its technology. Beside this, technology improvement is also useful in meeting its social
responsibility and fulfilling the demands and required criteria of environmental factors
through making use of a more fuel-efficient equipment with the aim of reducing the
emission of hazardous gases in atmosphere. Beside this use of more of the bio degradable
material for recycling and eco- friendly material and technology for packing purpose is
also recommanded for Starbucks as it will lade to a better brand image and facilitate an
enhancement in its productivity.
 Beside this, considerable changes in the pricing strategy of Starbucks are also
recommended and it is suggested that it should adopt a competition based pricing strategy
so that a larger section of customers can be attract (Upadhyay, 2019). As it has been seen
that in economic environment of Starbucks a recession is seen in countries like
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UK(because if Brexit) thus, offering coffee and other products at lower price will attract
customers of these nation and will improve the customer share and profitability by 15%
in coming years.
 Further, an more effective marketing and promotional strategy is also recommended for
Starbucks as it will lead to enhancement in its market share and also provide a more
effective and better global presence to Starbucks thus also yield better competitive
strength to counter and handle the high level of competition from MacDonald, Costa
coffee and other big brands. Effective marketing will provide a unique and exclusive
element to its product and created better awareness about the coffee and other products
offered by Starbucks at global level thus will lead to an enhancement in its market share
by around 20% in coming 3 years.
PART 2
Starbucks stakeholder report
Starbucks's internal and external stakeholders
Stakeholder Group Internal and External Justification
Customers External They helps organisation to earn
high revenues.
Employees Internal They are helping to operate
business effectively.
Government External They are regulatory bodies which
holds power in affair of business
organisation.
Shareholders Internal Capital raise by shareholders.
Suppliers External It helps in continuous operations
by selling the raw material and
finished goods.
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Priority stakeholder's Group – Employees
From the above Starbucks's Stakeholder Group, employees are the stakeholder of
Starbucks who are consider as priority stakeholders. Such employees are having special quality
and characteristics who accept changes and challenges in their organization and perform well.
According to given case study employees are those stakeholder who understand the needs of
employees and make efforts to satisfy organisation as well as customers (Mayer, 2018). They
helps to increase the productivity and profitability by delivering special coffee according to
customer taste. Such business organisation believes in pampering its employees in business
activities that helps in leading the company effectively. It offers business industry to lead
benefits by giving good salary packages to both full and part time employees. Moreover,
organization gives perks to employees such as medical services, paid holidays, paid vacations,
allowances, stock option plan and others which attracts employees and they work more
efficaciously. All benefits are provided to staff who are working at there in order to retain them
as well as it provides training and development which helps to deal with difficulties effectively.
In this organisation, there are approximately 191000 employees who are engaged in supporting
facilities, manufacturing, distributing, roasting and store development process which helps to
increase the organisational productivity. There are male and female both employees who
understand customer's requirement and serve them better quality of coffee as they wants.
Stakeholders are important in any organisation which helps to operate business
successfully. This helps to maintain the business activities with the support of employees.
Moreover, Government and suppliers are external shareholders who helps to run such
organisation. Such as different policies are formulated by organisation which are important to
follow and run their business effectively (Gupta, Nagpal and Malik, 2018). The management of
such organization focus on all rules and regulation that helps to increase the organisational
productivity.
Power and interest of Employees stakeholder group
A stakeholder matrix consider as combination of four quadrants that states power and
interest of all stakeholders which they possess within organisation. This helps to maintain all
functions properly and increase the organisation productivity. The matrix of stakeholders for
Starbucks organisation is given below:
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From this matrix, it has been analysed that employees, shareholders, suppliers and
government are key shareholders of Starbucks who are helping in operating business effectively.
Employees out of them are prior stakeholders who holds low power and high interest in business
operations and other activities (Kay, 2019). But this is also true, they do not have power to make
business decision which states low power. The management of Starbucks is using effective
communication strategy that helps to communicate easily by using different methods which
helps to enhance the business activities and operations effectively.
CONCLUSION
From the above assignment it can be concluded that business strategy of an organisation
include a deep analysis about its internal and external factors to adopt and implement best
strategy for better performance and growth of a company through identifying and filling the gap
in performance. Use of PESTEL analysis ensure a deep knowledge about external factors that
includes political, social and many other aspects of macro environment. Use of five force
analysis is made to evaluate the potential risk of new entrants, bragging power of consumers, etc.
Beside this, use industry life-cycle is also made by an organisation to understand the various
phase of business cycle in a prevailing industry. Further, use of VRIO model and value chain is
made to have a better understand about internal operations and strength of an organisation.
Along with this, it can also be summarised that ever organisation is having a larger number of
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stakeholder out of which some are external and some are internal like the employees and
shareholders of the organisation.
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REFERENCE
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Ziliani, C., 2019. GETTING LOYALTY RIGHT: BARILLA AND STARBUCKS. Loyalty
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Online:
PESTLE Analysis of Starbucks. 2019. [Online]. Available through:
<https://www.managementstudyguide.com/pestle-analysis-of-starbucks.htm>
Starbucks case study. 2019. [Online]. Available through:
<https://online.vitalsource.com/#/books/9781305856271/cfi/648!/4/4@0.00:0.00>
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