Strategy

Starbucks Business Report

Table of Contents
PART 1............................................................................................................................................3
INTRODUCTION..................................................................................................................3
External Environment analysis...............................................................................................4
Industry analysis.....................................................................................................................4
Opportunity and threat analysis..............................................................................................5
Porters five force model.........................................................................................................6
PESTLE analysis....................................................................................................................7
Internal analysis......................................................................................................................7
SWOT analysis.......................................................................................................................9
Competitive analysis............................................................................................................10
Recommendations................................................................................................................10
PART 2..........................................................................................................................................11
Stakeholder report................................................................................................................11
REFERENCES..............................................................................................................................13

PART 1
INTRODUCTION
Starbucks
Starbucks is an American global chain of coffee shops and roastery reserve. The
company is having chain of their roastery reserve around the world. Starbucks was founded by
Jerry Baldwin, Zev Siegl, and Gordon Bowker in the Pike Place Market which is located at
Washington, United States in the year of 1971. Starbucks is having headquarter in Seattle,
Washington, United States. Being the largest coffee shop within the globe they uses automatic
espresso machine so as to prepare their delicious coffee which is the prominent feature of
Starbucks. The company operates their business in near about 77 countries with overall 30000
coffee shops as of study of year 2020. Major products which are served by Starbucks includes
hot and cold drinks, micro ground instant coffee which is renowned as VIA, espresso, caffe latte,
whole bean coffee, fresh juices, Frappuccino, La Boulange pastries, their seasonal speciality
which is pumpkin spice latte, full and loose leaf teas and at last snacks such as chips and cookies.
Vanilla latte is the best seller of Starbucks. Starbucks is the market leader because of their
innovations; pumpkin spice latte is the seasonal best seller of them. Starbucks is flexible about
meeting needs of their customers as in china it was tough for them to position their tea used
products so they introduced non-dairy products such as coconut milk, soy milk, almond milk so
as to attract more customers. One of the most advantageous and brand oriented strategy used by
Starbucks is that they do not franchise their store as they believe that franchise hampers
company’s value and culture which can diminish brand image of them (Gupta, Nagpal and
Malik, 2018). Starbucks is having so many market competitors, brief of them are as under:
Dunkin’Donuts: The Company was founded in the year of 1950 by William Rosenberg
in Quincy, Massachusetts. This company is giving intense competition to Starbucks, Dunkin’
started their business in selling of Donuts only but in the year 2000 they introduced their
business over selling coffee and named their first coffee store as Destination coffee shop. In
2006 Dunkin’ started cold war within Starbucks from their advertisement campaign named
America Runs on Donuts. This movement helped the company to enhance their sales as in 2018
their sales were $350 million but Starbucks earned $6.3 billion which proves high market
existence of Starbucks (Pramodhana and Sari, 2017).
McDonald’s: The Company is known for fast food seller specially the best seller and
renowned company for burgers. But at the same time in order to survive in the competitive
market McDonald’s entered in coffee space in the year 2009 by their new innovation named
McCafé, this gave tremendous profits to them. They were emphasised on selling premium
coffees to their customer rather than selling basic variants of coffee but at the same time prices
offered by McDonald’s were cheaper as compared to Starbucks. Due to high innovation and

product quality Starbucks remained to the market leader in coffee shops as analysed by report of
National Coffee Drinking Trends in the year 2016.
External Environment analysis
Starbucks essentially deal in coffee and snacks, in 2009 when high economy slump arisen
in global economy so taste and preference was changed due to decline in consumer income and
low economic growth (Clements, 2019). This affected Starbucks to the high extent as people
tend to move towards economic coffee and coffee shops rather than opting for luxury and
expensive one.
As from the above data it is clear that Starbucks is the prominent market share holder in
coffee industry. Starbucks in having 59.2% share of overall market whereas Dunkin’Donuts is
having 14.4% of overall industry. Further McDonald’s which is known as rival of Starbucks is
having only 0.6% of overall coffee market within world.
Industry analysis
In the case of Starbucks the company is at their maturity life stage which makes market
leader to Starbucks in coffee and beverage industry. The company is numerous principles which
are used by them, that are explained as under:
 They believe in high CSR activities which renders positive impacts to society and
environment as well (Kimball, 2016).

 Starbucks is involved in diversity and they understand this as an essential aspect of their
business.
 They deliver the best quality coffee which is of prominent quality to their customers.
 They are always focused on needs of their customer so as to maintain enthusiastic
customer base.
In three year plans on the top Starbucks is planning to expand their market in China so as
to develop agile markets and corporate structure thereon. The company is working with two
major strategies; first one is to align their retail goal in which company is seeking to invest in
worldwide market and to having appropriate number of stores throughout the globe. Second
strategy is about streamlining their business just by discontinuing slow performer such as
Tazo tea and joint venture with Nestle.
Opportunity and threat analysis
Opportunities
 By enhancing market saturating and using cannibalisation marketing strategy is
giving high opportunities to Starbucks so as to grow in international market with a
prominent market image and competitive edge.
 Starbucks is highly focused in enhancing their product offerings and product mix
as their pumpkin spice latte is one of their best seller which is giving them distinct
market edge (Sakal, 2018).
 The company is having their 3 year plan of expanding their retail outlets in some
more countries majorly in China so as to global market leader in coffee industry
and to monetise their brand tremendously.
 Starbucks is using highly efficient automatic espresso machine to make their
coffee which gives them market differentiation due to which high customer
loyalty has emerged in their case.
Threats
 Starbucks in facing intense competition from their giant rivals such as Dunkin’
Donuts, McDonald’s which are giving the company extreme competition even in
their mature stage.
 As coffee is made up of so many raw ingredient, so price volatility is another
threat which is faced by the company which is an uncontrollable aspect.
 As developed countries are having high market saturation which affect the
business in their expansion. This is a barrier for the company which may restrict
them to earn their high revenues.
 Due to economic crises due to pandemic COVID-19, this lead to lowering
personal income of consumer due to which consumer are shifting them to opt for

cheap coffee shops rather than going for expensive and luxury coffees. This may
affect market coverage of Starbucks in negative manner.
Porters five force model
In order to understand intensity of industry Porter’s five force model is used by Starbucks
which is elaborated as under:
Threat of new entrants: This force is moderate as in this context as this industry is
having monopolistic situation so it is not easy for a new company to establish them within this
market. On the other hand new entrant company will have to invest huge amount of capital in
this risky market so this is enough to dishearten a new rival to enter into this market. Due to this
moderate force within Starbucks, the company is able to establish themselves as a market leader
who is best in their quality and consumer satisfaction. This is helping them to receive distinct
market edge so as to have long term sustainability.
Threat of substitute: This threat is high in case of Starbucks due to presence of huge
competitors such as Dunkin’Donuts, McDonald’s etc. These are prominent companies which are
having their own market share in coffee industry. So in order to deal with their substitute
Starbucks is working for diversifying their range of product offerings. Due to this high force
Starbucks is keeping their strategy as competitive strategy so as to deal with their rivals and
along with this they have strategy to introduce innovative products to their consumers.
Bargaining power of buyers: The buyer holds moderate power in context of Starbucks,
as switching cost for consumer is nil so it is very easy for customer to switch their brands.
Starbucks is the market leader and offers huge product mix to their customer so they are adhered
to their brand on the other hand consumer possess low price sensitivity as Starbucks is delivering
excessive premium quality with respect to their product. Due to this moderate power Starbucks,
they are highly focused in enhancing their customer footfall by selling their coffee packets at
retail store in order to capture large audience.
Bargaining power of suppliers: This force is having low impact over Starbucks as
coffee beans are collected from selected region as Starbucks is specific about selection of their
coffee beans and Arabica coffee grown but at the same time company is having low switching
cost so it is easy for them to switch their suppliers. Similarly Starbucks is dealing in vertical
integration due to which power of supplier has lowered. As Starbucks is huge in size and scope
so they adopt fair trade policies within coffee and farmer equity approach which helps their
supply to enhance their trust and build a fair partnership with them (Nguyen, 2016).
Intensity of competitive rivalry: Starbucks is having monopolistic competition in the
market but at the same time pressure is felt by the company due to existence of intense rivals
even with prominent market share. But the main reason of high competitive edge of Starbucks is
that they are having product differentiation and innovation due to which they are having
prominent market share and market monopoly. Starbucks is enjoying their maturity stage so in

order to be a market leader with high sustainability they are innovating their product so as to get
prominent market edge.
PESTLE analysis
Political factors: This factor inculcates government intervention with business. So for
Starbucks this factor is generating opportunities and threat as well. From regional integration
they are have opportunity of growing their business whereas in some developing country
Bureaucratic red tapism in increasing which is a threat for them as it is a barrier for their
expansion.
Economic factors: These factors include economic changes which may impact the
business. So for Starbucks numerous countries are giving opportunities due to high GDP rate
which is giving them opportunity to grow in the global market. On the other hand rising cost of
labour in some developing countries is creating threat for them as it is increasing cost for their
ingredients.
Social factors: These factors are associated with taste and preferences of the population.
For Starbucks as the buying power of consumer is increasing so middle class society is growing
which is enhancing coffee culture throughout the world. On the other hand enhancement in
health consciousness is giving opportunities to company for widening and attracting more
customers (Schoja, 2016).
Technological factors: This factor includes adaptation of emerging technology by the
business so as to stay updated with market trends. So for this Starbucks is having opportunity to
enhance their app services so as to gain more sales from mobile purchases via apps. On the other
hand increasing demand of home use coffee machine is creating threat of substitute for Starbucks
(Kanokworapan, Borirakphusit and Punnakitikasem, 2017).
Legal factors: These factors include legal legislative laws which are affecting the
business. For Starbucks they are enhancing their performance by meeting requirements of GMO
standardisation which is giving them distinct competitive edge in the market. On the other hand
regulations over employment law are very strict and rigid due to which Starbucks had to invest
high over human resources.
Environmental factors: These factors include those ecological changes which may
affect business operations. For Starbucks there practices of business sustainability is ensuring to
impact environment in a minimal manner. Further their CSR practices in supply chain are giving
huge opportunities to Starbucks to enhance their market growth.
Internal analysis
VRIO framework: Starbucks is a globally established coffee shop which is having near
about 30000 shops and the major reason of their growth is Starbucks’s ethical practices which is
emphasised on customer services and product standards and quality. VRIO framework is helpful

for Starbucks so as to compare their resources with their strengths, capabilities and weaknesses
so as to enhance sustainable competitive advantage within their target markets.
Valuable: These are the aspects which are valuable for Starbucks and help them to
enhance their sustainability and market exposure.
 Strong brand image: Starbucks is having high brand image within all the nations
throughout the globe. This is the most valuable aspect for them as this helps them to
enhance their customer base and market reputation. This is helpful for them to enhance
their marketing skills and marketing exposure so as to get high market sustainability
 Product innovation: Starbucks is highly focused on introducing innovation in their
product so as to provide distinct market position. For this reason they are having huge
flock of customer in their stores which gives them high market coverage and customer
recall value (Sork, 2019).
 Customer services: Starbucks is highly focused on customer services for this they are
highly dedicated to assist their customer so as to make them feel valued and satisfied.
Customers are valuable aspect for Starbucks and they are up keeping this aspect in a very
effective manner.
Rarity: A number of rare features are there with Starbucks for that it is known in the
world wide level.
 Supply chain: Starbucks is having efficient supply chain management from which they
are able to render best quality products to their end customer. Starbucks takes GMO
certified raw material so as to retain quality of their product evenly. This is the major
reason from which Starbucks is having distinct market coverage in current competitive
world.
 Store environment: Starbucks keeps a very friendly behaviour at their stores so as to
enhance customer footfall and customer retention. For this they give training to their store
staff of those etiquettes which are to be met when they are dealing with customers.
 Customisation: Starbucks is known for their customisation choices as they give huge
flexibility to their consumer to make their own kind of coffee. On the other hand they are
highly focused in creating new flavours so as to capture more taste buds and enhance
their customer base.
 Quality: The quality of coffee form Starbucks is maintained by them so as to get market
distinctiveness of quality brand. For this Starbucks takes their raw material of coffee
beans within GMO agreement so as to maintain quality of their coffee.
Imitable: Features which are emerged in Starbucks is not imitable by any other company
as these are special feature held by Starbucks.

 Speciality coffee: Starbucks is highly focused on introducing new innovations in
their product. As their Pumpkin spice latte is their best seller and they have monopoly
over this. So this cannot be imitated by some other organisation.
 Convenient drive thru facility: Starbucks gives drive thru facility to their customer
as those customers who are not willing to enjoy the coffee inside the store can collect
their coffee without entering their store. This is enhancing their customer footfall and
revenues. At the same time this facility is provided by some of their competitor such
as McDonald’s so this aspect is imitable by other organisation.
 Coffee machines: Starbucks uses efficient automatic machines for their coffee by
which they are getting efficiency in their coffees and consistency as well. By this
Starbucks is able to establish them as a market leader with high market coverage.
Organised: This includes that the given resources are used by the company in an
appropriate manner.
 Human resource: Employees of Starbucks are given various benefits such as stock
option plan and retirement benefits due to this they have a well manager internal system
that help them to cater their customers in an effective way.
 CSR policies: Many CSR policies are adopted by Starbucks so as to support their
society. For this they are working on waste management so as to minimise their waste
and recycle that to further use.
 Customer loyalty: Starbucks is having high customer loyalty which is organised by them
in a considerable manner. For this their loyal customer are given Starbucks loyalty card
by which gifts and rewards are given to them so as to make them feel valued and
prioritised (Kumar, 2016).
SWOT analysis
Strengths Weaknesses
 High global recognition and brand
identification.
 Highest quality product with high
certification and standards (Dorn,
Messner and Wänke, 2016)
 Prominent CSR policies accompanied
by huge goodwill.
 Customer loyalty programme which
enhances customer footfall and
worthiness (Gray and Huels, 2018).
 Cater to only rich class of people by
their premium ranged products.
 Cannibalization marketing strategy
leads to short term business growth.
 Culture of coffee is not accepted by
every developing country.
 Highly dependence on market of US
for their revenue generation.
Opportunities Threats
 Emerging opportunity to expand
business in china.
 Market expansion in retail business.
 Adoption of new distribution channel in
order to extend of brand.
 Intense competition in retail industry
specific in food and beverage sector.
 Due to fluctuation in currency prices
price volatility is taking place.
 Emerging changes in customer taste

 Prominent place at technological
advanced brand.
and preferences.
 Economic slump due to COVID-19
pandemic breakdown over the world.
Competitive analysis
Starbucks is known in the world for their premium quality coffee and their maintained
standards which is making their customer highly satisfied. But at the same time Starbucks have
deal with local coffee retailers so as to expose in each and every market segment. In Canadian
region A. L. Van Houtte Company is giving intense competition to Starbucks by their strong
manufacturing and distribution system (Mason, Cole and Goza, 2017). The company is selling
30000 coffees cups every day. In order to deal with this competitor Starbucks is giving
innovative coffee to their customer. Similarly Caribou Coffee is their competitor within
European region, the company claims to give free refill their customer and to deal with this
Starbucks is giving customised coffee options to their customers.
Recommendations
 Starbucks is growing towards international segment in a very speedy manner so as to
establish their global presence and enhance customer footfall. So Starbucks is planning to
expand their presence in the markets of China so as to make their existence over Chinese
markets also. So their management should be given freedom to operate and enhance their
product mix so that high performance in target market can be achieved due to which
company will able to get sustainability within global market (Jun, Ma and Lee, 2019).
 Starbucks is required to put their some more focus on customer choices and preferences
and start to deal in all range of classes. For this some basic variants of coffee must be
introduced so as to get fit in buying power of middle class. This will enhance their
customer range due to which they can position them within each segment of the
international market.
 Starbucks is required to diversify their product range, so that to attract customer from
different buying habits. Variety of fresh juices and their fusions or verity of tea can be the
next product of Starbucks so as to unleash the market. This will enhance their market
image and they can expand in the market of organic range. In current era, people are
prone to use those products which are having comparative less harm to their body so this
can be the next move of Starbucks so as to expand their market size and enhance their
customer capture value.
 The major raw material of Starbucks is their raw coffee beans which is having high
fluctuations in prices due to which they are having problem in managing their supply
chain system. So for this Starbucks is required to deal with some hedging agreement so as
to lock their prices within specific quantity of input. This will help them to establish
efficient supply chain system.
 Another growth option for Starbucks is that they can start to enter in retail market to sell
packaged coffee and iced drinkable items so as to unleash an another market segment.

This will help them to enhance their market share. For this they can have tie ups with
giant food retailer such as Tesco, Sainsbury’s etc.
 From research report it is concluded that high ratio of revenue is generated through
mobile application which is a considerable result of current preference of consumer. For
further expansion Starbucks may start to deliver their coffee and other beverages to
home. This will enhance their customer ease and flexibility to get products of Starbucks
without facing any trouble.
 In their next three year plan Starbucks is required to invest their money on advertising
their product as market is having intense competition and in order to deal with this
competition Starbucks is required to position them within each segment of market and
unleash their market expansion option. This may help them to compete with their rivals
in an efficient manner so as to earn more revenue and customer loyalty in order to get
long term sustainability in global market.
PART 2
Stakeholder report
Starbucks is continuously working to enhance their CSR practices so as to get long term
sustainability and satisfaction of their stakeholder. They are having various stakeholders which
are enlisted as below:
 Employees
 Customers
 Suppliers
 Environment
 Investors
 Government
Employees: Starbucks is a company which is highly focused on development of their
employees so as to give them best culture and best policies which can give job satisfaction to
their employees. Starbucks pays their employees above minimum wages provided by
government legislations. In the year of 2014 the company gave scholarship to their employees by
making partnership with Arizona state university so as to boost academic development of their
employee and render them job satisfaction.
Customers: Starbucks keeps their customer on their first priority so in order to maintain
them they keep their product on high quality and equal consistency throughout the world so as to
get business uniformity. Employees of Starbucks are given training as how the customer should
be treated. Customers are treated in a very friendly and polite manner so as to make them feel
valued and enhance consumer footfall.

Suppliers: Suppliers of Starbucks are consists of wholesalers and coffee farmers, their
farmers are willing to expand their earnings by yielding more coffee. In order to satisfy their
suppliers Starbucks is having coffee and farmer equity in which they maintain transparency with
their farmers so as to establish trustworthiness. Starbucks is highly emphasised in protecting
interest of their suppliers and by this their suppliers’ are most than just being satisfied.
Environment: Starbucks has adopted sustainable environmental practices in their business
which helps them to render less harm to ecosystem. They have adopted practices of CAFÉ
programs which led them to get high biodiversity and certification over their coffee farms. In the
current time 90% supply of Starbucks is associated with CAFÉ program which is maintaining
their market position so as to give them long term benefits.
Investors: Starbucks considers their investors as their valuable stakeholders as they are
having high benefits form sound financial performance of Starbucks. With the help of global
expansion and constant customer satisfaction the company is playing well with their profits and
overall revenues. By this their investors are developing their interest over Starbuck which is
making the company high on their sustainability.
Government: Starbucks focuses on implementing government rules and regulations in their
business so as to stay adhered to that in order to avoid any legal litigation. Starbucks pay low
taxes within UK as compared to their financial performance as they are receiving tax exploitation
advantages. So for this stakeholder Starbucks is required to put more efforts so as to meet up to
their expectations.

REFERENCES
Books and journals
Clements, M., 2019. Strategic Audit: Starbucks.
Dorn, M., Messner, C. and Wänke, M., 2016. Partitioning the choice task makes Starbucks
coffee taste better. Journal of Marketing Behavior. 1(3-4). pp.363-384.
Gray, D. and Huels, B., 2018. Are Gift Cards Really Liabilities? A Class Exercise Exploring
Starbucks Corporation. The North American Accounting Studies. 1(1). pp.1-16.
Gupta, P., Nagpal, A. and Malik, D., 2018. Starbucks: global brand in emerging
markets. Emerald Emerging Markets Case Studies.
Jun, Y., Ma, Y. and Lee, H., 2019. Empirical Study of Space Localization Approach on Brand
Attitude: The Case of Starbucks in South Korea. Archives of Design Research, 32(4),
pp.27-36.
Kanokworapan, N., Borirakphusit, S. and Punnakitikasem, P., 2017. Information System in
Operations: Starbucks.
Kimball, D.C., 2016. Corporate social responsibility at starbucks: 2016–2017 issues for
discussion. SAGE Publications: SAGE Business Cases Originals.
Kumar, K., 2016. An Analysis on Brand Loyalty: A Case Study on Starbucks.
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).
Nguyen, H., 2016. Supplier Selection Process in Café Industry: Case: X Coffee vs. Starbucks.
Pramodhana, A. and Sari, P.K., 2017. Analysis Of Location Based Advertising Towards
Purchase Intention. Case Study: Dunkin'Donuts Indonesia. eProceedings of
Management. 4(3).
Sakal, D.V., 2018. COMPANY ANALYSIS OF STARBUCKS CORPORATION.
Schoja, V., 2016. Determining Consumer Behaviour in the Catering Industry: A Case Study Of
Starbucks UK. Anchor Academic Publishing.
Sork, T.J., 2019, June. LUSCIOUS LATTES/BITTER BARISTAS: THE ‘STARBUCKS
INCIDENT’AND ITS IMPLICATIONS FOR PROGRAM PLANNING. In Actes de la
38ème ACÉÉA conférence annuelle (p. 385).