Strategic Report: Starbucks vs Costa Coffee

This strategic report compares Starbucks and Costa Coffee on various factors such as PEST analysis, Porter's five forces model, SWOT analysis, and VRIO analysis. It also discusses their differences and similarities in terms of brand image, financial resources, and more.

Strategic report

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
External business environment........................................................................................................1
PEST analysis..............................................................................................................................1
Porters five forces model............................................................................................................2
Internal business environment.........................................................................................................4
SWOT analysis ...........................................................................................................................4
VRIO analysis.............................................................................................................................6
Examine triple bottom line..........................................................................................................8
Difference among the Starbucks and coasts coffee company: .................................................10
CONCLUSION .............................................................................................................................11
REFERENCES.............................................................................................................................12

INTRODUCTION
Strategic management is refers to the ongoing process of planning, monitoring, analysis and
assessment of the essential aspects or necessities that a company need to accomplish its goals
and objectives. This is described as the formulation and implementation of the major goals and
take initiatives to achieve them effectively that provides the positive outcomes to the
organisation. Business operates in the dynamic and complex, whenever there is any change in the
business environment, a company need to assess their strategies for the sustainability and
success(Makadok, Burton, and Barney, 2018). In addition to this, the success of the company is
also depends on the internal environment along with the external. As they have influenced the
performance of the organisation in many terms. Strategic management is divides in to various
approaches, A perspective approach of strategic management outlines that how strategies should
be developed. While descriptive approach focuses on the how strategies should be put into the
action or practices.
This report is based on the two companies that is Starbucks and costa coffee. In which
Starbucks is an American based multinational chain of coffee-house and roaster reserves with the
the headquartered in Seattle, Washington. While on the other hand, costa coffee is multinational
British coffee house chain with the headquartered in Dunstable England. This report is consist of
the PEST analysis, porters five model analysis along with the comparison on the basis of SWOT
and VRIO framework analysis. Further more it includes, social responsibilities and strategic
development goals of the both company(Ansoff, and. et. Al 2018).
MAIN BODY
External business environment
PEST analysis
PEST analysis is refers to the framework which is used as a tool to analyse the external or macro
environment in which company operated. This has asses the various major factor that has
influence the operations of the company in order to become the more competitive at the market
place. Factors in the pest analysis has discussed below in context to Starbucks and costa coffee:
Political factor: This facto is described as the rules and decisions made b the government, this
includes political stability or instability in the overseas market, foreign trade policy, tax policy,
labour law etc. UK has the great political which is a great strength of the country and will also be
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advantage for the Starbucks and costa coffee, along with this Brexit has created the uncertainties
and political debates, this has will be threat for the Starbucks and costa coffee, as this has
increased the trades rates and has created the trading problems.
Economical factor: this is refers to the product, services and money. This has the significant
impact on how an organisation does a business and also how profitable it is. It will includes
economic growth, interest rates, exchange rates, inflation, consumers confidence and disposable
income of the customers and business(Moutinho, and Vargas-Sanchez, eds., 2018). UK has the
great political stability along with this, it has been the popular destination of the foreign direct
investment. Many business tycoons and organisation around word has invested in the variety of
the industry in the UK. This factor serve as the advantage to the Starbucks and costa coffee, in
addition to this, there is fluctuation in the borrowing and lending interest rates that could hamper
the operation of the both companies.
Social factor: This has includes friends, family, collogues and social circle that has influenced
the individual attitude, opinion and living style. Which has the impact on the sales and revenue
of the company. UK has the big consumer market, in which there is a lot of opportunities for the
company to carter for the needs of the different races and religions that help the both the
companies to increase it sales. Along with this people are become more aware and conscious
about health, they look forward for the healthy drinks and foods, that mat have the negative
impact on the sales of the company.
Technological factor: This is refers to the all externally generated changes in the technology and
process that a company use in its operations. The UK is one of the most advanced company in
the world, where London if the hub of both financial and technological institutions, this will
serve as the advantage to the both Starbucks and costa coffee. They implement the advanced
technology in their processes in order to attract the consumers and to provide the high quality of
services (Dzwigol, 2020). But along with this, it changes rapidly by which technology becomes
obsolete fast and needs an huge investment and cost in the implementation of the new
technology at the certain period of period that will increase the cost of the both companies.
Porters five forces model
Porters five force model is an framework that is used as the tool to analyse the competition of
the business in the particular industry. It has been draws from the industrial organisation
economics which will used to drive the five forces that determine the company's competitive
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power or intensity and also the attractiveness of the industry in terms of the profitability.
Elements of this factors are discussed below in relation to the Starbucks and costa coffee:
Bargaining power of buyers: This is refers to the ability of the consumer to drive the prices
lower or their level of power over the prices (Okumus, and. et. al., 2019). This factor is affected
by the how many buyers or customers a company has, how significant each customer id or how
many customers are loyal to the company. In addition to this, it has been also effected by the
number of suppliers in the particular industry that a customers has. In the food and beverages
industry the bargaining power of the buyers is high as, as this is consist of the many competitors
of the Starbucks and costa coffee. In which there is threat for the both companies, as consumers
can be switch to another.
Bargaining power of suppliers: this factor has addressed that how easily an suppliers can drive
up the cost of the inputs that a companies want in the manufacturing process. It is affected by the
number of suppliers that company has for it key inputs of the product and services, how unique
the inputs are and how much cost it needs to the company to switch to the another supplier. The
fewer supplier in the industry the more company will depend on the supplier, but in the food and
beverages industry here the bargaining power of the supplier is low, as there is an lots of
suppliers from which company buy their inputs or raw material. Here Starbucks and costa coffee
can drive the prices lower this will results in the decrease in cost.
Rivalry among the existing competitors: this is refers to the number of the competitors in the
industry and their ability to undercut the company. If there is rivalry among the existing
companies is intense then it will result in drive down prices along with the overall profitability of
the industry(Carayannis, 2018). Food and beverage industry is a very competitive, but for the
brand like Starbucks and costa coffee this threat is moderate as they have maintain their brand
name across the world because which they have made the great positioning of its brand and
consist of the loyal customer base.
Threat of substitutes: it is described as the goods and services that can used in place of the
company's product and services which pose a threat for the business. Companies that produces
goods and services which does not have the close substitutes are having more power to increase
it s prices and lock them in favourable terms. And on the other side, if the substitutes are
available then the customers will have more options to buy and with this company's power can
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be weakened. In food and beverages industry there is threat of substitute is high, as in this
Starbucks and costa coffee can be replaced with the number of substitutes.
Threat of new entrants: the company is also effected by the force of new entries in to market
and threat of new entrants in food and beverages company is high(Agwu, 2018). As in this less
time and cost needed for a competitor to enter into the market and be an effective competitors.
This put pressure on the existing company to lower pricing strategy, reducing cost and providing
new proposition to the customers in order to attract them and to retain for the longer period of
time.
Internal business environment
SWOT analysis
SWOT analysis refers to the strategic planning techniques that used by the organisation
to analyse its strength, weakness, opportunity and threats which has influenced the company's
performance. The primary objectives of this analysis is to provide support to the organisation in
to aware about the all factors that are to be involved in the decision making of the business.
Theses factor factors are differ from company to company, some of the differences on the basis
of swot analysis is discussed below in relation to the Starbucks and costa coffee:
Basis Starbucks Costa coffee
Strength Starbucks has the strong brand image
across the world along with the 2400
outlets presences in the 70 countries.
This is having an strong financial
performance which has resulted in to
occupying the number one place in the
coffee and beverages industry. The
company has valued at the more then
$4 Billion, that is an key strength of
the Starbucks coffee company
(Holloway, 2018) (Barbosa,
Castañeda-Ayarza, and Ferreira,
2020).
This is largest coffee chain in UK and
second largest chain in the world,
along with this this is also having
widespread operations along with
3401 stores in across 31 countries.
Costa coffee has occupied the
premium image in front of the
customers across the world.
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Weakness Starbucks has the high prices that
increases it profitability but decreases
the affordability of its product. And
the company is heavily dependent
upon its main and key input that us
coffee beans, hence its prices is also
dependent upon the prices of the
coffee beans. Starbucks has offered the
goods that can be imitable easily by
the other business.
In costa coffee company, there is lack
I the marketing and advertisement that
results in the decrease in sales. Along
with this, it has been offered the higher
prices in comparison to its competitors
by which consumer can switch to the
other brand with the lower price. Costa
coffee clearly has the high
concentration in its home ground that
is UK.
Opportunity Starbucks has the opportunity to
expand its business in the developing
markets. And can also adopt the
approach of business diversification
this can reduce its dependence on its
current industries. Starbucks can also
go for the partnership with other firms
which will help in to increase its
market share.
Costa coffes has various future
opportunities, that includes the
expansion of the business in other
countries. This can also go for the
strategic alliances and can deliver its
own coffee to the other restaurants. In
addition to this, company can use pull
strategies that is used as the innovative
means to attract the potential
customers (Afanasieva, and. et. al.,
2020).
Threat This corporation has compete with the
wide variety of firms in the
international market. In which
company has the threat with the low
cost coffee products or sellers. Along
with this there is threat of imitation in
the coffee house business. Many firms
try to copy the taste, look and feel of
Starbucks products.
Costa coffee can face the threat from
its competitors that can hamper the
performance and profitability of the
company. Along with there is direct
competition of the substitute good that
is tea. UK itself has the huge
consumption of the tea vs coffee. As
costa is offering the higher prices to
the consumer, this ca be threat for the
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company as consumer can switch to
the brand with the lower prices.
VRIO analysis
VRIO is an business analysis framework that is used to evaluate the company's resources and
competitive advantage (Tonelli, and Cristoni, 2018). Which makes the company stand different
from the competitors. This is fall into the internal analysis of the company, and evaluating just
about all the resources and capabilities of the firm that provides the competitive advantages that
provide support in to increase the productivity and profitability.
VRIO analysis of Starbucks coffee company
Basis Valuable Rare Imitable Organised
Employees Yes No No No
Brand image Yes Yes No No
Financial
Resources
Yes Yes Yes No
Technology Yes Yes Yes Yes
VRIO analysis of costa coffee company
Basis Valuable Rare Imitable Organised
Brand image Yes No No No
Human resources Yes Yes No No
Products and
services.
Yes Yes Yes No
Financial
Resources
Yes Yes Yes Yes
Difference between Starbucks coffee and costa coffee on the basis of VRIO analysis
Basis Starbucks coffee Costa coffee
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Valuable This is refers to the resources that
adds the valuable by enabling a firm
to exploit the opportunities by
defending the threats available at the
market place. For this company its
also resources are valuable, as they
played the vital role in the success of
the company. Every resources
available in the company has
contributed in the achievement of the
goals. For this company valuable
resources are brand image,
employees, financial resources and
technology (Koseoglu, Law, and
Dogan, 2018).
For the costa coffee, its valuable
resources are brand image, human
resources, product and services and
financial resources. That has been
contributed equally in the
achievement of the goals and
objectives that provides the longer
sustainability and success to the
company.
Rare Resources that are acquired by the
some companies are considered as
rare. For Starbucks its rare resources
are its brand image, financial
resources and technology.
For the costa coffee, its rare resources
are human resources, product and
services and financial resources. Thus
this an company with the strong
brand recognition at the market place.
Imitable This is refers to the those resources
that can be easily imitable by the
other firms. Every company with the
basic resources that are needed to
accomplish the goals. And that can
be imitable by the others, for this
company, financial resources and
technology are the one which can
imitate by the others easily.
Costa coffee has its product and
services and financial resources that
are imitable and easy to copy by the
other firms.
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Organised The resources are to be organised in
a way that provides the positive
outcomes. Here in the Starbucks
company, technology is organised
that provide support in to offer the
best quality of products and services.
Here financial resources are the one
which are organised in well mannered
Because of which company is able to
expand its business internationally
effectively and successfully build its
strong brand image(Nazarova,
Shevchuk, Plotnichenko, and
Surzhenko, 2019).
Examine triple bottom line
Triple bottom line model, believes that company should commit focusing on the social
and environmental concerns along with the profit maximization of the company. This model
describes that there should be three bottom line rather then one, and they should be profit, people
and the planet(O'Brien, Parent, Ferkins, . and Gowthorp, 2019). This approach look forward to
gauge a corporation level of commitment to corporate social responsibility along with its impact
on the environment over the time.
Basis Starbucks Costa coffee
Profit Starbucks is already and
multinational coffee house chain
company that serves 70 countries
across the world. This company has
earned the $26.50 billion of revenue
per year along with the $4.07 billion
of operating income. This company
is making the high profit with its
hard work by making its brand most
stronger and expanding it
internationally.
Costa coffee is an second largest
coffee house chain in the world. And
largest in the united kingdom, it has
earned the £1.168 billion of revenu8e
per year, along with the £153 million
of net income. This have worked in
the 31 countries across the world to
make profit maximization.
People The company has worked and
provide employment to the 346,000
This company has provided the
employment to the 346,000 number
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of people, and provide support to
them in the enhancement of their life
style.
of people. This has been shown that it
has contributed in the economy of the
country by providing the employment
to people at the different places.
Planet Starbucks use the recycled cups
along with the straws, so that it can
also contribute in the safety of
environment. Along with this
Starbucks pay premium to the
growers that allow them to use
traditional method of farming that
helps in to preserve the tropical
forest.
This company takes care in the way
they sources the coffee beans, as well
as others key ingredients includes
crops and animal.
Strategic development goals
The strategic development goals or the sustainable development goals are the goals that
are made by the companies for achieving it globally. These goals are the collection of 17
interlinked global goals that are designed to achieve the better performance and a sustainable
growth for the company. The strategic development goals helps in identifying the nature of the
market, planning for the goals and implementing the actions and decisions to achieve the desired
goals of the company. However stakeholder mapping refers to a way or a process of finding out
the different key stakeholders relating to the project(Novikov, 2018). The process of stakeholder
mapping involves the identifying all the individuals who have the interest in the company 's
project outcome. As the stakeholders mapping allows the stakeholders to understands the values,
operations and decisions for the organisation. The comparison between Starbucks and Costa
coffee relating to the stakeholder mapping is as follows:
Basis Starbucks Costa coffee
Entity Starbucks is a famous brand that is
associated with the high quality
products which deals in coffee,
Costa coffee is a famous brand
which is known for its luxury,
excellence and perfection in
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juice,smoothie,hot chocolate etc. different flavours of coffee.
Price The prices of the products and
services in comparison to Costa
coffee are not much higher as the
company focuses on serving the more
quality to the customers.
The prices of the products of Costa
coffee is slightly higher.
Ethical practices The company focuses on having the
fair trade and concept of green coffee
in the market to the customers. As the
company is having the ethical
practices of having standards of
business code that vis booklet to
guide the partners and company 's
expectation, the different policy and
advocacy for healthy food products.
The company is generally using the
method of word of mouth of people
amongst the masses as a promotion
in the market. The ethical practices
of costa coffee is to provide the
different opportunities for the
people to embark on the self
improvement and personality
development in the company.
Targetting According to the stakeholder' s
mapping the target customers of
Starbucks are mostly the young
adults, middle age person who are
desiring for nice place to relax, chat
and enjoy. The company is targetting
the customers of psycho graphic
behaviour customers who are coffee
lovers and atmosphere lovers.
According to the stakeholder' s
mapping the target customers of the
Costa coffee are the customers who
are upper middle class and of
privileged class. The company is
targetting the customers of the age
demographics of
youngsters,professionals, families
and the mature customers.
Stakeholder 's
motivation and
purpose
The company 's stakeholders
maintain the profits for the company
and focuses on increasing the
customer satisfaction towards the
company.
The company 's stakeholders
maintains and focuses on providing
the the good and luxury experience
and maintain the profit levels for the
company.
Diversity Starbucks is having the wide Costa coffee though operates
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expansion of its markets in different
countries.
globally but its presence and market
expansion is found in relatively
countries only.
Difference among the Starbucks and coasts coffee company:
Basis Starbucks Costa coffee
CSR initiative They have been taken the initiatives
for the environment and for the
growers, by proving them premium
for the coffee beans that helps in to
save the tropical forest
They have work for the people by
providing them employment
opportunity in a large number
Competitiveness They are competitive in terms of their
quality of products and services
They are have the competitiveness
in their prices and brand recognition
across the world (Pasch, 2019).
CONCLUSION
From the above analysis it has been concluded that strategic management refers to the
ongoing process of planning, monitoring and assessment of the essential aspects that are needed
by the company for the accomplishment of the desired goals and objectives. Business operates in
the dynamic environment which has to be assess regularly to formulate the strategies for the
operations, for this company use various methods and tool such as pest and poster's five force
model to evaluate the external environment the company. In addition this for the internal analysis
swot and VRIO framework is used. Moreover, strategic development gaol has been also asses
along with the corporate social responsibilities of the company.
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