Starbucks and Costa Coffee: A Comparative Analysis

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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