Starbucks Strategic Analysis & Recommendations

This assignment examines Starbucks' effectiveness in achieving its objectives and goals. It analyzes the company's strategies, identifies areas for improvement, and recommends suitable options for continued growth. The report delves into Starbucks' financial performance, highlighting its strengths and weaknesses. It suggests a merger and acquisition strategy as a means to increase market share and cost savings.

Strategic Management

EXECUTIVE SUMMARY
Starbucks is a big chain which is providing best quality of coffee globally since 1972. It
has successfully placed itself in the market as a premium seller of coffee products. As it has
acquired a good image in the market it is continuously moving towards growth by opening its
stores in different parts of the world. It does not concentrate only on coffee products but with the
increase in its demand, the company has come up with more diversification in its products like
opening of restaurants and increased variety in drinks. Major issues which are faced by it are of
high price of its products, availability of other close substitutes. In order to overcome those
problems company adopted different strategies like adding up variety to its present products and
working on cost control system. This company has strong leadership quality which helps them in
getting solutions to various issues that are encounter by it specially at the time of 2008 -2009.
strategy of aligning products with market demand was used to overcome the financial meltdown.
Management of the given company is effective enough in doing good leadership as the concept
of doing healthy debates and exchange of constructive ideas is followed with the employees
considering that more productive suggestions can be gathered through this process. Discussed
company is doing well and leading towards expansion still there is a need of change in its present
strategies so that it can better respond to the problems which it faces while dealing with the
customers of different segments. Since 2014, it has started promoting mobile payments and this
strategy made Starbucks more technology friendly. The reward mobile payment method
increased the total sales and also raised its brand value to a great extent. An effective strategy is
formulated by the given company in which total revenue will be increased along with a rise in
popularity of brand. New stores will be opened in China and India which is a part of its strategy
in place of expanding its internation market share. It is the decision taken by its founders and will
be executed with an assistance of proper market investigation. A good cost will incur in same
and hence management needs to do proper budgeting so that desired goals can be accomplished.
Through this report effective strategies will be suggested to company which will help it in
earning higher profits in future.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
1.0 Synopsis of Starbucks case........................................................................................................1
2.0 Major issues of Starbucks Case:................................................................................................1
3.0 Appropriate strategic management theories...............................................................................1
3.1 Corporate level strategy........................................................................................................2
4.0 Mergers and acquisition strategy:..............................................................................................3
5.0 International strategies...............................................................................................................3
6.0 Different options available with Starbucks to overcome major issues......................................4
7.0 Recommendation and conclusion..............................................................................................5
REFERENCES................................................................................................................................6

1.0 Synopsis of Starbucks case
Strategic management is the process through which organisation’s goals and objectives
are set by the higher authorities in order to achieve set targets effectually and sustain in the long
run. It is done on the grounds of available resources and present conditions of internal and
external environment of business (Strategic Management & Strategic Planning, 2017). To excel
or face the competition effectively, various strategies play a crucial role and help enterprise in
achieving its dream (Dezsö and Ross, 2012). Starbucks, which is one of the biggest brands was
found in Seattle in 1971 that is selected in the present report. Initially, it used to deal only in
brewed coffee but later after getting a positive response from the market, it started producing
more variety of products. The following report is prepared in order to identify the major issues
faced by company. It is done so that change in present strategies can be done which will help in
formulating the forward plan for Starbucks.
2.0 Major issues of Starbucks Case:
Starbucks experience a good sale in market due to its brand name and product
differentiation. Apart from this various issues are also faced by the same company due to the
other firm dealing in same industry. Many stores were closing down which reached to 900 stores
due to the crises developed against this brand and secondly the prices were considered very high
which also created an issue for Starbucks. Various competitors are present in this industry which
divide the total share of this company. Apart from this, other major problem with this firm is of
uncertainty in the success of strategies which are formulated by it in order to achieve competitive
advantage (Helfat and Winter, 2011). As Starbucks is not achieving the same results as expected
by it shows that their present code of conduct is ineffective or it needs modification so that
desired results can be achieved. In order to evaluate the present strategies of company, Porter’s
five forces model can be utilised.
3.0 Appropriate strategic management theories
It is essential for Starbucks is to developing strategies in order to maintain their market share and
profitability in the market. These strategies can be categorizing in corporate level and business
level.
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3.1 Corporate level strategy
It includes those strategies which help the given organisation in achieving the competitive
advantage. It has acquired a good market by adopting to diversified product to its main menu.
Use of mobile phones for ordering has also increased the total sales f company.
Figure 1Corporate level strategy
(Hitt, Ireland and Hoskisson 2017:176)
Low level of diversification: Starbuck is a single business company which generate more than 90
percent of their revenue from its core business which is coffee chain.
Moderate level of diversification: In their single business such as coffee chain and rest of their
revenue from its different groups such as Hear Music and other ventures.
Very high level of diversification: Starbucks major focused on its core business they don’t have
any other sources of income.
3.1 Business level strategy
This types of strategy related with the to develop the overall pan of a company in order to gain
competitive advantage. There are variety of strategies can be designed in an effective manner:
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Monitor product strategies: In this approach Starbucks required to develop their strategies which
helps to provide competitive gain. For instance, they can increase the effectiveness of quality
management leads to increase customer satisfaction level.
4.0 Mergers and acquisition strategy:
Merger is refer with the consolidation of two companies and form a new business with a new
name. It is a part of international strategies where two more corporations can joint together
which helps to gain competitive advantage. On the other hand, acquisition related with the
acquiring a small business by a large enterprise due to its attractiveness. It is an effective strategy
through which two different entities join hands together and continue to work in the market.
Starbucks required that to identify different and small business which are related with its industry
and acquire them in order to generate sales in the existing market.
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Figure 2Reason for Merger and Acquisition
(Hitt, Ireland and Hoskisson 2017:176)
There are following benefits of merger and acquisition in the context of Starbucks:
Increase market power: With the help of acquisition a frim can increase its presence in new
market which create an ideal image and shows its power. In the case, Starbucks one of the
leading frim in coffee chain and increase their market share in an effective manner.
Reducing entry barriers: There are various emerging market such as Indonesia, Malaysia, where
it is difficult for a Starbucks to enter in such market. But, with the help of merger and acquisition
they can easily sale its product and use such opportunities in an effective manner.
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5.0 International strategies
Coffee chain and restaurant business one of the most attractive industry which increase number
of competitors in the market. It having negative impact on market share and profitability of
Starbucks and its future growth. International strategy one of the most suitable tool which helps
to sustain in the market and provide a long term success for the cited firm.
Figure 3International strategy
(Hitt, Ireland and Hoskisson 2017:176)
Identify international opportunities: Starbucks required to determine new market which can
provide long term success. India and China one of the emerging market which case be used by
the cited company.
Explore resources and capabilities: At this stage Starbuck need to evaluate its resources and
capabilities before entering a new market. cited unit having enough resource which help to enter
a new market.
Use of core competencies: Starbucks having unique products range which can provide
competitive advantage and help to explore international market effectively.
Strategic competitive outcomes: With the helps to international strategy performance of the
company can improved and established them become a global leader in the coffee chain.
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5.1 Discussion of Benefits of International Strategies
Figure 4Benefits of International strategies
(Hitt, Ireland and Hoskisson 2017:176)
Extended product life cycle: International strategy provide a platform to the cited firm which
increase its life cycle of their products which is crucial in the long run. If a company having PLC
is too short, it will increase their cost and they can lose their market.
Gain easier access of raw materials: There are various companies such as India and China who
produce coffee beans which can be easily available for the company and reducing the bargaining
power of suppliers.
6.0 Different options available with Starbucks to overcome major issues
Different strategy which are recommended to company is:
 Market penetration – As the given company has strong competitive advantage it can
help Starbucks in growing rapidly in the market. It should cover more market by opening
its stores so that brand value can be increased supported with rise in customers.
 Product development – It should work more on increasing the product variety as the
young generation which gets fascinated when provided with something unique or trendy
(Leiponen and Helfat, 2010).
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 Market segmentation – It is advisable to the given company to work on develop
strategies for niche surroundings like providing flavoured coffee segments which will
help in growing positive results.
Product positioning strategy – By launching innovative items like serving coffee in fancy cups,
using attractive catering facilities etc. will further attract more customers. Apart from this
company can also increase its revenue and market value by providing the products at other
premium stores from where customers can get to know about them and can further earn revenue
(Makri, Hitt and Lane, 2010).
Retrenchment strategy – By discontinuing the unprofitable products company can concentrate
more on variety which is giving good results to customers.
There are different issues which can be encounter while implementing these strategies as
employers may resist to change. Whenever any new mode of conduct is introduce in the
company it brings difficulty in adoption as effective training is required so that according the
objectives and goals can be achieved.
7.0 Recommendation and conclusion
From the above report, it can be summarised that Starbucks is doing effective business
and earning good revenue. Its strategies are efficient enough of giving desired results to the
management. By making change in the present code of conduct cited company can achieve
higher profits as the present scheme proved to be less effective. Given above is the details of how
it can choose the best suitable option for itself to continue in the industry. After analysing all the
available strategies it is suggested to company that it should go for merger and acquisition as this
way much cost can be saved and also total market share of Starbucks can be improved.
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REFERENCES
Books and journals
Dezsö, C. L. and Ross, D. G., 2012. Does female representation in top management improve
firm performance? A panel data investigation. Strategic Management Journal. 33(9).
pp.1072-1089.
Helfat, C. E. and Winter, S. G., 2011. Untangling dynamic and operational capabilities: Strategy
for the (N) ever‐changing world. Strategic management journal. 32(11). pp.1243-1250.
Hitt, M. A., Ireland, R. D. and Hoskisson, R. E., 2012. Strategic management cases:
competitiveness and globalization. Cengage Learning.
Hodgkinson, G. P. and Healey, M. P., 2011. Psychological foundations of dynamic capabilities:
reflexion and reflection in strategic management. Strategic Management Journal. 32(13).
pp.1500-1516.
Leiponen, A. and Helfat, C. E., 2010. Innovation objectives, knowledge sources, and the benefits
of breadth. Strategic Management Journal. 31(2). pp.224-236.
Makri, M., Hitt, M. A. and Lane, P. J., 2010. Complementary technologies, knowledge
relatedness, and invention outcomes in high technology mergers and acquisitions.
Strategic Management Journal. 31(6). pp.602-628.
Online
Strategic Management & Strategic Planning. 2017. [Online]. Available
through.<https://www.strategicmanagementinsight.com/topics/strategic-management-
planning.html>. [Accessed on 8th September 2017].
Freier. A., 2016. Starbucks reaps benefit of mobile and ups mobile marketing strategy. [Online]
Available through <http://www.mobyaffiliates.com/blog/starbucks-reaps-benefit-of-
mobile-and-ups-mobile-marketing-strategy/> . [Accessed on 8th September 2017]
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