Starbucks Strategic Management Analysis

This assignment delves into the strategic management practices of Starbucks Corporation. It begins with a macro-environmental analysis using PESTLE to understand the external forces shaping the industry. The internal analysis explores Starbucks' strengths, weaknesses, opportunities, and threats (SWOT) to identify key areas for improvement. The report examines competitor strategies and recommends tactics for Starbucks to maintain its market position, such as adjusting pricing and expanding product offerings.

Strategic
Management

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Executive summary
Strategic management plays a vital role in the company because these strategies help the
company to achieve the goals and objectives of the company. The report is based on the strategic
management of the Starbucks who is operating the business across the world. The company is
able to achieve the growth due to the formation and implementation of a strategy.

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Contents
Executive summary.........................................................................................................................1
Introduction......................................................................................................................................4
Macro environment analysis............................................................................................................5
Political factors............................................................................................................................5
Economic factors.........................................................................................................................5
Socio-cultural factors...................................................................................................................5
Technological factors...................................................................................................................6
Environmental factors..................................................................................................................6
Legal factors................................................................................................................................6
Competitive analysis........................................................................................................................7
Internal analysis...............................................................................................................................8
VRIO analysis..............................................................................................................................8
Starbucks VRIO analysis.............................................................................................................8
SWOT analysis................................................................................................................................9
Strengths....................................................................................................................................10
Weaknesses................................................................................................................................10
Opportunities.............................................................................................................................11
Threats.......................................................................................................................................11
Recommendation...........................................................................................................................12

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Conclusion.....................................................................................................................................13
References......................................................................................................................................14

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Introduction
The strategic management includes the formation of the objective and analyzing the competitive
environment and the internal operations of the company. The strategic management of an
organization is done by the top management of the company (Management Study Guide, 2018).
The strategic management of an organization includes the analysis, decision, and action.
Starbucks has been selected for the analysis of the strategic management. The company offers
the appealing, rich and flavored coffee and the biggest coffeehouse chains across the world. This
report is going to throw light on how strategic management is implemented within Starbucks.
Starbucks Corporation is an American coffee corporation and coffeehouse chain. The company
was established in Seattle, Washington in 1971. Today the company is having the operations
across the world (Starbucks, 2018).

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Macro environment analysis
PESTLE analysis is a framework that is used by the organizations to scan the organization’s
external macro environment. The major external factors create the impact on the decision-
making of the company (Rothaermel, 2015). PESTLE analysis on Starbucks is discussed below:
-
(Source: Rothaermel, 2015)
Political factors
The political factors include the regulations and laws that are required to be followed. Starbucks
has to face political factors at the time of sourcing the raw materials from the other countries.
The company has to follow all the laws and regulations to purchase the raw material. Increased
political awareness in the developing countries is generating the problems for Starbucks
(Smithson, 2017).

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Economic factors
Starbucks is getting affected due to the on-going global economic recession. The profitability of
the Starbucks gets affected due to the recession. The maximum number of buyers of a company
is shifting towards the cheaper alternatives which are a loss for the company. Apart from this, the
company has to deal with the increase in the operational and labor cost. Due to the inflationary
environment and the decrease in the profitability company might face stress.
Socio-cultural factors
The company believes in delivering the quality products to its customers due to this the company
has to keep the high prices of the products. This is a fact that the company can provide low-
priced products but then the customers probably have to sacrifice with the quality. This is one of
the challenges which are faced by the company. The ethical chic and green customers are
concern about the social and the environmental charges of the brands. Starbucks needs to be
awake of this trend (PESTLE Analysis, 2015). The changes in the customer buying pattern and
preference are one of the determinants that vary from person to person.
Technological factors
The company is able to make use of the advanced technology in their business operations. The
company is enjoying the advantage of the developing mobile wave. Starbucks is having a
partnership with Apple to bring the app created money off coupons that help in riding the mobile
wave effortlessly. The company is proving the Wi-Fi capabilities and mobile payments facilities
in its outlets (Morais, et.al, 2014).

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Environmental factors
The activities of the Starbucks are a concern with the activists and world-wide advocacy groups.
Along with this, the customers have communicated the disputes faced by them. The company
should keep in mind to continue holding the consumer's trust. The company should take care of
the environment related rules and regulations.
Legal factors
It is the obligation of the Starbucks not to break up any laws and code of practice in the operating
countries and in countries from where they purchase of raw resources. The company needs to be
alert about the launching of the caffeine production along with this Starbucks need to consider
the policies and regulations formed by the health authorities. The company is looking for the
expansion of the business so at the time of expansion company should consider that they are able
to fulfill all the legal obligations related to the licensing in the industry (Smithson, 2017).
Competitive analysis
The competitive analysis is required to be conducted for each and every company. This is the
way through which the Starbucks can identify the competitors and evaluate the strengths and
weakness of the competitors (Madsen and Walker, 2015). The competitive analysis is important
for the company as this is the only way through which the company can make strategies to deal
with the competitors. The company is having 2 main competitors that include Dunkin Donuts
and McDonald’s. Dunkin Donuts started the journey with the donuts and later they started
providing cost-effective premium coffee. Currently, the company is serving its products to 32
countries and to American consumers. Overall, the company is the best choice for the customers

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who are price-conscious. Most of the Dunkin Donuts coffee clients are those who are not happy
with the Starbucks services and prices of products (White, 2018).
McDonald’s is another competitor of Starbucks which is clear from the revenue and the market
share of a company. In the year 2015, the McDonald’s revenue was more than $26 billion which
is more than Dunkin Donuts and Starbucks. The company started gaining the popularity in the
market when they introduced iced and flavored coffee (White, 2018). Both the companies are
giving strong competition to the Starbucks despite having the specialty in different products.
McDonald’s is well-known for burgers and fast- food and the company is leading in the fast-food
industry. Dunkin is having the specialty in donuts and it is known as the donuts chain. Starbucks
is known as the greatest coffee chain across the world.
Internal analysis
The internal company analysis is related to the assessment of the company's recent position from
the collective viewpoints of operations, promotion, and funding for strategic use (Hollensen,
2015). The internal analysis includes the evaluation of the resource and capabilities of the
company.
VRIO analysis
VRIO analysis is an analytical technique that is used by the company for the assessment of the
competitive advantage and resources. VRIO stands for the value, rareness, imitability, and
organization (Grant, 2016).

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Starbucks VRIO analysis
Strong global presence- Starbucks is having the strong global presence and company is
expanding the business. The company made use of the proper resources to gain the
presence in the market more than the other competitors. The company is capable enough
to maintain the global presence in the market and this is the reason company is having
more than 5,500 coffee houses in across 50 countries (Starbucks and Dunkin Donuts,
2018).
Speciality coffees- Starbucks offers the unique and quality beverages to its customers
which are different from the products that are offered by the competitors of the company.
The other companies are also making the use of this capability of making coffee. The
company is taking advantage of their capabilities and making changes in their menu.
Upscale and Cozy Atmosphere- The atmosphere of the company’s location attracts the
customers and makes them feel relaxed. The ambiance of the company encourages the
customers to bring their laptops for a while. The other competitors can copy the business
model and renovate their stores. The company can effectively utilize their capabilities in
creating the friendly atmosphere for the customers.
VRIO Framework
Resources Or
Capability
Valuable Rare Inimitable
And Non-
Substitutable
Organized To
Exploit
Impact On
Competitive
Advantage
Strong
Global
Yes Yes Yes Yes Realized
Sustainable

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Presence Competitive
Advantage
Specialty
Coffees
Yes No No Yes Realized
Competitive
Parity
Upscale And
Cozy
Atmosphere
Yes Yes No Yes Realized
Temporary
Competitive
Advantage
SWOT analysis
SWOT analysis is an acronym for strengths, weakness, opportunities, and threats. This is the
structured framework which is used by the company to evaluate the four elements of
organizations (Rothaermel, 2015). SWOT analysis of the Starbucks helps the company to work
for removing weakness and accepting the opportunity for a company.
(Source: Rothaermel, 2015)

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Strengths
Global Brand Recognition and strong market position- Starbucks is having the
geographical presence across the globe and maintain a 36.7% market share in the US
along with this the company makes use of the operations in 60 countries. In the year
2013, the company was on 91st position in the best global brands and the company is one
of the most recognized brands in the coffeehouse segment. The company is maintaining
its position in the market from past few years by providing delight customer experience
and by forming a relationship with suppliers (Geereddy, 2018).
High quality- The products offered by the company have quality as they understand the
quality of products from the customer’s perspectives.
Human resource management- Starbucks is well-known for its high knowledge base
employees. This is one of the main assets of the company and this is the reason the
company provides the benefits to the employees which include the stock option,
retirement accounts, and a healthy culture.
Weaknesses
Expensive products- Starbucks does the differentiation in their products with the high
quality but with a quality, the company keeps the high prices of the products which might
be one of the weaknesses of the company in the developing countries.
Overdependence in US market- the company is having 8078 stores in the US market
which helps the company in generating the huge percentage of their total revenue. This
makes the company oversensitive to the company for US growth and economy
(Geereddy, 2018).

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Opportunities
Expansion into emerging markets- Company is having the vast opportunities of
business in many countries like India; recently the company opens its outlets in India
with the joint venture mode of entry.
Expanding products- Starbucks is having the opportunity to expand their products mix
by venturing into the fresh juice and tea products with a smart acquisitions strategy. This
helps the company in enhancing the market share and revenue (Geereddy, 2018).
Threats
Increased competition- Starbucks faces the threat of the competitors at a mature stage of
business. The competitors of the company include Dunkin Brands, McDonald’s, Costa
coffee and many others.
Price volatility in coffee market- Company might face the threat of the fluctuations or
rise in the price of the quality coffee beans which can’t be controlled by the company.

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Recommendation
The company is analysis the situations and considering those situation Starbucks is making
strategies and implementing those strategies in the business (Wheelen and Hunger, 2017). It is
recommended to the company to make the strategies to deal with the competitors. The
competitors of the company are looking to acquire the market of the Starbucks so the company
should make use try to decrease the prices of the products with the similar quality. It is
recommended to the company to expand the variety of the products.

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Conclusion
Strategic management is essential for each and every company to accomplish the objective of the
company. The report shows the strategic management of Starbucks in which there is involvement
of the macro environmental analysis along with the internal analysis (Hill, Jones, and Schilling,
2014). Furthermore, there is SWOT analysis of Starbucks with the help of which the company
can make the strategy to remove weakness and to grab opportunities.

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References
Geereddy, N., 2018, Strategic Analysis Of Starbucks Corporation, viewed on 8th January 2018,
https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated
approach. Cengage Learning.
Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education.
Madsen, T.L. and Walker, G., 2015. Modern competitive strategy. McGraw Hill.
Management Study Guide, 2018, Strategic Management - Meaning and Important Concepts,
viewed on 8th January 2018, http://www.managementstudyguide.com/strategy-definition.htm
Morais, U.P., Pena, J., Shacket, K., Sintilus, L., Ruiz, R., Rivera, Y. and Mujtaba, B.G., 2014.
Managing diverse employees at Starbucks: Focusing on ethics and inclusion. International
Journal of Learning and Development, 4(3), pp.35-50.
PESTLE Analysis, 2015, PESTLE Analysis of Starbucks, viewed on 8th January 2018,
http://pestleanalysis.com/pestle-analysis-of-starbucks/
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Smithson, N., 2017, Starbucks Coffee PESTEL/PESTLE Analysis & Recommendations, viewed
on 8th January 2018, http://panmore.com/starbucks-coffee-pestel-pestle-analysis-
recommendations

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Starbucks and Dunkin Donuts, 2018, VRIO Analysis, viewed on 8th January 2018,
https://sites.google.com/site/starbucksanddunkindonuts/business-strategy/vrio-analysis
Starbucks, 2018, Company information, viewed on 8th January 2018,
http://www.starbucks.com/about-us/company-information
Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. pearson.
White, W., 2018, Starbucks Competitors: The Big Three, viewed on 8th January 2018,
http://inevitablesteps.com/company-analysis/starbucks-competitors/