Starbucks and Costa Coffee: A Comparative Analysis

This article provides a comparative analysis of Starbucks and Costa Coffee, two popular coffee chains. It discusses their organizational structure, performance, and external environmental factors. The analysis highlights the differences between the two companies and their strategies in the market.

Starbucks and Costa Coffee

Table of Contents
INTRODUCTION...........................................................................................................................1
EXTERNAL ENVIRONMENTAL ANALYSIS............................................................................1
ORGANIZATIONAL STRUCTURE.............................................................................................2
ORGANIZATIONAL PERFORMANCE ......................................................................................5
COMPARISON AND CONCLUSION...........................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Starbucks is the American coffee chain and operates in over 30,000 locations worldwide.
It offers variety of premium products such as premium teas, fine pastries, and other treats. Costa
coffee is a coffee house chain which is subsidiary of Coca Cola Company, it has 3,401 stores
across 31 countries. It provides hot and cold drinks, snacks, pastries and also limited edition of
reusable cups. The reason for selecting these two companies is their USP. The USP of Starbucks
is that it provides premium coffee while USP of Costa Coffee is its customized products without
any additional charges (Lakshminarayanan, Maggio and Best, 2017). Currently Starbucks is
closing its store in UK as its business is incurred a loss of £17.2 million, September 2018.
Workers of Costa Coffee, has made claims against the poor working conditions in its stores
which includes retention of tips, refusal to pay for sickness, working outside the contracted
hours etc. This report covers external business environmental factors affecting both the
companies, representation of organizational structure of both Starbucks and Costa coffee,
comparison between the performance of both the companies which includes both financial and
non-financial performance. Also, the overall comparison between the companies.
EXTERNAL ENVIRONMENTAL ANALYSIS
Pestle analysis is a tool used in identifying key factors that are influencing the business
from outside. The Pestle analysis of the industry is carried out and its impact on both the
companies.
Political factors: The key political impact is the Brexit. This factor will impact all the industries
operating in UK. The Starbucks and Costa Coffee is concerned over sourcing and procurement
of its raw material. So, both the companies are forming norms and strategies to meet their
sourcing needs. Also, it may cause increase in cost of import of material.
Economic factors: It refers to the economic performance of the country. UK's economy is
currently facing the risk of recession (Gopalakrishna, Victor and Fleischmann, 2016). But the
recent trend shows that consumers are not reducing their coffee consumption but are moving
towards low priced alternatives. Starbucks and Costa Coffee both can take trend as an
opportunity along with increasing cost and falling profitability.
Social factors: It refers to change in the culture, behaviour needs, attitude, belief, taste of the
customers. As the customers are moving towards lower priced products and both the companies
are providing the same but with the challenge of maintaining the same quality. Also, the
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increasing trend of green and ethical customers needs to be taken care of. Starbucks have only
focussed on baby boomer generation and spending by these generations is tapping off so
company needs to look for other strategy to face the challenge. This may not be the problem for
Costa Coffee as it has huge customer base with varied generation.
Technological factor: This factors refers to the advancement and innovation in the technology.
This brings an opportunity for the both the companies to improve its mobile apps and increase
the mobile purchases to gain more revenue. The most challenging technology is the emergence
of home based speciality coffee machine which is big threat to Starbucks and Costa Coffee as
their substitutes are easily available.
Legal factors: It includes all the legal rules and regulations that are required to followed to meet
to avoid any legal problems. It includes consumers rights law, labour law, employee protection
act, etc. Starbucks has currently complied with all the rule and regulations and working within
the legal aspects of the country (Goswami, 2018). It is improving its performance by fully
complying with the product safety regulation on ingredients from Genetically Modified
Organisms (GMO). Costa Coffee is facing major problem as its workers are claiming bad
working environment in all the stores of Costa Coffee. The claims include extended working
hours, retention of tips, no pay sick leaves etc.
Environmental factors: It includes all the business activities that negatively impact the
surrounding environment. The government and consumers are putting pressure on organizations
to make its operation environment friendly and take steps for the welfare of the society as a
whole (Ferreira, 2017). These factors can impact the trust of the consumers so both the
companies have to take care of it. Starbucks and Costa Coffee have already implemented
responsible sourcing practices and also introduced products with recyclable packaging.
ORGANIZATIONAL STRUCTURE
Organizational structure in turn is very crucial which in turn determines the flow of
necessary information within several departments of the company.
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Illustration 1: 4 Types of Organizational Structures
Starbucks tends to have a matrix organizational business structure where the structural
design tends to involve the intersection among various different department of the business.
Matrix organizational business structure is one of the effective organizational structure where the
reporting relationship in turn are set up on the grids (Branco and Kobakova, 2019). Employees
tend to have reporting relationship. This in turn provides clear articulation of the goals and
objective of the company. This way it helps in creating functional objectives. There has been
efficient utilization of the limited resources and also helps in high retention of the employees or
expert throughout the life of the project. Matrix organizational structure helps in establishing
trust, improving and coordinating communication and also helps in clarifying decision authority.
This in turn helps Starbucks in accomplishing specific goal of the project by bringing together
various individuals from different product, divisional and functional departments (Voigt, Buliga
and Michl, 2017). Matrix organizational structure helps Starbucks company to effectively share
the information which in turn helps in increase in the knowledge. This organizational structure is
very useful in bringing managers and employees together in order to attain specific
organizational goal and objectives of the Starbucks company. This approach aids improving
capability to effectively utilize the resources, technologies and skills. It also helps in improving
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communication and cooperation across the various functional departments. It also helps in
bringing in flexibility which in turn aids to higher financial decision making. This structure helps
Starbucks to effectively build the capabilities of the employees within the organization. It also
helps in rapidly creating the efficient large scale project which in turn leads to higher operational
growth and sustainability of the Starbucks.
Costa coffee business structure in turn is considered to be one of the most renowned
coffee chain which focuses on providing high value operations through effective supply chain
and operational strategy. Costa coffee tends to follow functional business structure. This
structure tends take into consideration top to down flowchart approach. Top executive comprise
of high ranked executives (Maamoun, 2020). Middle layer comprise of managers which includes
accounting, marketing, engineering and human resource departments who in turn have to report
to the high degree top executives within the company. The last organizational layer comprise of
lower operational team which includes workers, employees, etc. The low level workers are
accountable to middle managers. Functional organizational structure is very easy to understand
and it also helps business to work in a systematic compartmentalized manner. Functional
organizational structure is very useful in vertically structuring various departments of the
company with specific roles to the employees (Lakshminarayanan, Maggio and Best, 2017).
There in turn is considered to be the separate department like accounting, marketing,
engineering, finance, etc. The key advantage of the functional organizational structure is that it
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helps in setting a clear career path within various departmental units. This in turn helps Costa
Coffee to effectively minimize the cost associated with the operations.
ORGANIZATIONAL PERFORMANCE
Organizational performance is referred to as the actual output which in turn eventually
leads to actual output against the organizational goals and objectives (Purkayastha and et.al.,
2019). It helps in effectively utilizing the resources in order to attain organizational goals and
objectives. Organizational performance tends to critically analyze the key main activities which
mainly influences market performance, financial performance and shareholder value
performance.
Starbucks sales has gone up by 5%. The net sales of the Starbucks has rose by 7% to
around $6.75 billion. Starbucks performance has been better when compared with the Costa
coffee because Starbucks tend to offer high variety of drinks which in turn eventually leads to
long term sustainable growth in the future (Dineva, Breitsohl and Garrod, 2017). As per the
operations of the UK, the revenue of the Starbucks has rose by 4.1%. There is in turn considered
to be increasing trend in the total expense of the company when compared with the total revenue
of Starbucks over the particular financial year.
Non financial measures in turn are considered to be effective measure which in turn are not
expressed in monetary terms. The Starbucks has also opened 319 stores in Quarter 2. This in turn
results in higher operational growth and sustainability of the company (Gopalakrishna, Victor
and Fleischmann, 2016). Starbucks tends to have high degree of competitive position because it
tends to provide high degree of quality services to the customers which in turn helps in creating
competitive position. Starbucks also focus on continuous innovation and it also has high degree
of brand reputation and goodwill across the globe. This in turn attracts large number of
customers from across the globe.
The revenue of the Costa Coffee in turn has increased the revenue in the year 2019 to
1.34 billion from 1.29 billion in the fiscal year 2018. On the other hand, Costa coffee non-
financial performance factors includes retention of customers which in turn helps in increasing
the customer share which eventually leads to high degree of sales (Ferreira, 2018). Cost Coffee
also tends to focus on using data in order to increase sales and customer rates. Another non
performance factor associated with the non- financial factor is high degree of customer
experience.
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COMPARISON AND CONCLUSION
STARBUCKS COSTA COFFEE
The Starbucks company tends to focus on
carrying out function through matrix
organizational structure.
The Costa coffee company tends to focus on
carrying out function through functional
organizational structure.
Starbucks tend to offer range of drinks and
food (Starbucks vs Costa Coffee, 2020).
The Costa coffee company tends to have less
variety of drinks but large variety of snacks
when compared with the Starbucks.
Starbucks tend to have 30000 plus shops in
around 78 countries.
Cost coffee tend to have over 3882 stores in
around 32 countries.
Starbucks have high degree of brand reputation
which in turn offers high quality products and
services to the customers (Mason, Cole and
Goza, 2017).
Cost coffee in turn has grown over the years
which in turn results in expansion of the
business across various countries.
The revenue of the Starbucks has rose by 4.1%
in the year 2019.
The revenue of the Costa Coffee in turn has
increased the revenue in the year 2019 to 1.34
billion (Maye, Kirwan and Brunori, 2019).
Starbucks also focus on continuous innovation
and it also has high degree of brand reputation
and goodwill across the globe.
Cost Coffee also tends to focus on using data
in order to increase sales, customer experience
and customer rates.
From the above carried out study it has been concluded that, there are several external
environmental factors such as political, social, economic, legal, technological and environmental
factors which in turn largely influences the functioning and operations of Costa coffee and
Starbucks. This study summarizes that, Starbucks tend to follow matrix organizational structure.
But on the contrary, Costa coffee tends to follow functional organisational structure which in
turn focuses on improving the performance and attaining organizational goals and objective of
the company. This study also summarizes that, Starbucks is considered to be one of the better
performing company when compared with the Costa Coffee. Starbucks tend to have more outlets
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when compared with the Costa coffee which in turn results in high degree of sales, revenue and
profitability for the Starbucks. This study in turn also tend to state that, Starbucks have higher
customer base because of its presence in 78 countries across the globe.
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REFERENCES
Books and Journals
Branco, M. and Kobakova, D., 2019. TuRNING A COMMODITY INTO AN ExPERIENCE:
THE “SWEETEST SPOT” IN THE COFFEE SHOP.
Dineva, D.P., Breitsohl, J.C. and Garrod, B., 2017. Corporate conflict management on social
media brand fan pages. Journal of Marketing Management.33(9-10), pp.679-698.
Ferreira, J., 2017. Café nation? Exploring the growth of the UK café industry. Area.49(1). pp.69-
76.
Ferreira, J., 2018. Fostering sustainable behaviour in retail: Looking beyond the coffee
cup. Social Business.8(1). pp.21-28.
Gopalakrishna, P., Victor, R. and Fleischmann, D., 2016. Starbucks In India. Journal of Case
Studies.34(2). pp.92-101.
Goswami, S., 2018. Onerous Journey of a Retail Coffee Outlet Chain (Café La Coffee, India)-
(CLC) Imprints of an Expansionist Strategy. TSM Business Review.6(1). pp.75-87.
Lakshminarayanan, S., Maggio, E. and Best, S., 2017. Kofi or Coffee-Starbucks Enters the
Indian Market. Journal of Case Studies.35(2). pp.44-55.
Maamoun, A., 2020. Coca-Cola brews a hot acquisition: Costa coffee.
Mason, A., Cole, T. and Goza, N., 2017. STARBUCKS: A CASE STUDY OF EFFECTIVE
MANAGEMENT IN THE COFFEE INDUSTRY. Journal of International Management
Studies.17(1).
Maye, D., Kirwan, J. and Brunori, G., 2019. Ethics and responsibilisation in agri-food
governance: the single-use plastics debate and strategies to introduce reusable coffee cups
in UK retail chains. Agriculture and human values. 36(2). pp.301-312.
Purkayastha, D and et.al., 2019. Can Starbucks Sustain Its High Prices in China?. In China-
Focused Cases (pp. 103-118). Springer, Singapore.
Voigt, K.I., Buliga, O. and Michl, K., 2017. Globalizing Coffee Culture: The Case of Starbucks.
In Business Model Pioneers(pp. 41-53). Springer, Cham.
Online
Starbucks vs Costa Coffee. 2020. [Online]. Available
through:<https://www.writeabout.com/2018/01/starbucks-vs-costa-coffee/>
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