Starbucks: External and Internal Environment Analysis

This article provides an analysis of the external and internal environment of Starbucks, including a SWOT analysis. It discusses the company's market positioning, global brand recognition, and strengths, as well as the impact of political, economic, social, technological, legal, and environmental factors on its operations. The article also highlights the importance of understanding the external business environment and making strategic decisions accordingly.

STRATEGY
1 | P a g e

2 | P a g e

Table of Contents
1. INTRODUCTION.......................................................................................................................4
1.1 About the company................................................................................................................4
1.2 Starbucks experience.............................................................................................................4
2. EXTERNAL ENVIRONMENT ANALYSIS.............................................................................5
3. INTERNAL ENVIRONMENT ANALYSIS..............................................................................8
3.1 SWOT ANALYSIS...............................................................................................................8
4. Recommendations......................................................................................................................12
4.1. Revenue Projection.............................................................................................................12
4.2. Expenses and Cash Flow Projection...................................................................................13
4.3. Relative valuation...............................................................................................................13
REFERENCES..............................................................................................................................14
3 | P a g e

1. INTRODUCTION
1.1 About the company
Starbucks Corporation is an American espresso group and a chain of coffee shops. It was
established at Seattle, Washington in 1971. As of 2018, the organization manages 28,218 areas
across the world. The Starbucks ranges various beverages such as hot and cold, bean espresso,
micro ground retail espresso, coffee, milk coffee, Teavana tea infused tea, Evolution Fresh press,
Frappuccino food and drink, La Boulange cakes and bites includes items, for example chips and
wafers; some offers (counting the annual autumn version of Pumpkin Spice Latte) are found
regularly or in evidence on the store's ground (Schultz, 2012). Numerous shops sell prepackaged
food products, various items and cold sandwiches and alcoholic products including cups and
glasses; select the "Starbucks Nights" ranges that offer beer, wine and canapés. Likewise,
Starbucks espresso, frozen yogurt and packaged cold drinks are sold on the markets (Wu, 2017).
The first North American area of Starbucks in North America was opened in Tokyo, Japan in
1996, while the Philippines became the second largest market in 1997. Starbucks joined
advertising in the United Kingdom in 1998 with the supply of $ 83 million of the 56-export,
based in the United Kingdom at the time. Seattle coffee company, renaming all stores like
Starbucks. In February 2016, Starbucks announced that it will go to Italy, their 24th market in
Europe, the cafeteria is there too. The primary branch in Milan will open in October 2018.
In September 2014, it was discovered that Starbucks would acquire the 60.5% stake in Starbuck
Coffee Japan which is not effective, at a cost of $ 913.5 million, and in July 2017 Starbucks
acquired half a Chinese capital bet resident on long-term joint efforts that satisfy Uni-President
Enterprises Corporation (UPEC) and President Chain Store Corporation (PCSC).
1.2 Starbucks experience
Starbucks' "awakening and vital support of the human soul" requires a unique espresso service
and committed customer engagement. As Schultz, a Starbucks organizer and longtime
administrator, he clarified: "We are not in the category of espresso coffee that serves people, we
are in the category of people who serve coffee". Key to the Starbucks approach is Schultz's
"Starbucks Experience" idea, which aimed to create a "third place" in a place other than home
4 | P a g e

and work where people could socialize while appreciate the common experience for drinking
excellent espresso (Geereddy, 2013). The Starbucks experience combines some elements1:
1. High quality espresso coffee beans and careful prediction and management of a series of
exercises that resulted in their conversion into the most appropriate espresso coffee.
2. The staff at the Starbucks counter - the bartenders - takes a focused role in providing the
Starbucks experience. Their job is not just to melt and serve espresso, as well as to attract
customers to the Starbucks coffee shop feel. Employees should be brought in and energetic
communicators regarding Starbucks standards and estimates, which he sees as colleagues.
3. Network relationships and company name. Schultz on Starbucks has rethought work in public
circles: Every branch has its own network and company takes responsibility to have feasible
competitors.
2. EXTERNAL ENVIRONMENT ANALYSIS
External environment refers to the factors which are outside the business organisation and
are not within the control of the company or the management but have a massive impact and
influence on the operations and performance of the business. The management of Starbucks Ltd.
needs to understand the importance of external business environment of an organisation and its
potential to influence the business operations (Ho, 2014). The external environment analysis of
Starbucks and the coffee industry is being done with the help of using PESTLE Analysis.
PESTLE Analysis of Starbucks and Café Coffee Industry:
PESTLE Analysis is a tool which is used by the management to analyse the impact of factors
which are present in business environment of an organisation such as political factors, social
factors etcetera and have an influence on the business operations (Abbott, 2015). It is being used
by the management of Starbucks to identify any potential threats or opportunities which might
exist in the external environment with respect to Café Coffee industry for the company. Here is a
PESTLE analysis:
Political Factors: Political factors which affect the business operations of an organisation
include political stability, instability, government intervention and control, monitoring etcetera.
5 | P a g e

Political instability or stability in a business territory helps in determining the smooth execution
of the business activities and influences the managerial decision-making. Policies of
liberalisation has helped the business organisations to expand to other countries and promote
international trade. These factors has influenced a major trend in the coffee industry as well and
it has been observed that over the past few years, every major café coffee house chain has
expanded to other countries internationally. This political factor has also affected the decision of
the management of Starbucks to expand to more countries internationally and investments are
being made into developing countries which is a huge opportunity (Sroufe, 2018). However, as a
result of Brexit, café coffee industry in the UK has been forced to source locally from domestic
suppliers which has also impacted the operations and cost of production for Starbucks in UK
region and this might be a possible threat for the company with respect to its external political
environment.
Economic Factors:Economic factors which affect the operations and decision-making
process of the management of any organisation include level of income, tax rates, import-export
taxes, production level etcetera. Over the past few years, it has been observed that there has been
a significant rise in the level of income of people in developing and developed countries which
has encouraged people to spend more on personal expenses and have a high standard of living.
This has been a huge opportunity for the speciality café coffee industry and the management of
Starbucks as well because the number of potential customers and the ambit of target customers
has increased a lot as a result of rise in disposable income of people. People now prefer to have
meals more frequently outside and can afford to have coffee from premium chains such as
Starbucks. Starbucks is a premium specialty coffee chain and the products which are being
offered by the company are usually high priced and a rise in disposable income of people is a
huge opportunity being present for the managers of Starbucks as more people can now afford its
products.
Social Factors:Social factors refer to the trends and consumption behaviours of individuals
and masses. Factors which are included in social external environment for any business
organisation are taste and preference of the customer, needs and demands etcetera. One of the
most important social factor which has influenced the speciality café coffee industry and
primarily Starbucks is the growing coffee trend in many countries all over the world. It has
6 | P a g e

presented a huge opportunity for these business organisations to increase their revenue and
generate maximum profits. Along with growing coffee trend, trend of visiting the café and
actively engaging in a social life has also been a great opportunity for the café coffee industry.
Starbucks is one of the first café coffee chain to implement measures in its store environment
which can accommodate more people and attract more customers. It has helped and been a great
opportunity for company to increase its brand loyalty and favourability (Lake and Drake, 2014).
However, one of the most important trend which presents a threat or an issue of concern for the
specialty café coffee industry and the management of Starbucks is the rising consumer awareness
with respect to health concerns and problems. Consumers these days are becoming more aware
about their personal health which has increased the demand for healthy diet supplements and
nutritional products are being demanded by the consumers. This might prevent a lot of people
from consuming and buying the products which are being offered by big specialty café coffee
house chains such as Starbucks. The management of the company needs to formulate strategy to
address this issue and offer a wide range of products which can cater to the needs of people who
are concerned about their personal health. This might also prove to be an opportunity for the
management of Starbucks if the company makes significant changes to take early lead in this
healthy and nutrition sector and capture a huge market share.
Technological Factors: It can be argued that this decade has witnessed one of the biggest
waves of technological changes and innovations which have disrupted the operations and
changes the dynamics of every industry. Technological factor and increasing communication
systems has also impacted the operation of the café coffee industry. The management of the
Starbucks needs to take full leverage of this opportunity and implement the latest technological
changes in its operation to improve the business profitability and productivity. Technology has
opened up a new sales platform for almost every industry which is online sales and customers
can now effectively place their orders for coffee and other products using online websites and
delivery applications. This is a huge opportunity for Starbucks and the company has already
taken some early lead by implementing mobile payment, free wi-fi etcetera.
Legal Factors: With rapid pace of internationalisation and globalisation, every company has
started to promote its trade operations beyond the national boundaries. Legal factors present a
threat and a challenge for the specialty café coffee industry and the management of Starbucks.
7 | P a g e

Since the products which are being offered by these companies have a direct impact on the health
of the customer, many legal guidelines with respect to quality and safety of food needs to be
followed by these coffee houses. Moreover, the operations of Starbucks are spread over many
countries all over the world which makes it difficult for the company to get the legal
complications right since every country has its own set of rules and regulations which needs to
be followed. Hence, legal factors pose a threat for the industry as a whole and Starbucks as well.
Environmental Factors: This factor related to external environment of a business
organisation has come upfront in the last few years with rising concerns about ecological balance
and environmental protection and has put the onus on companies like Starbucks to reduce the
amount of carbon footprints and emission of green house gases as a result of its operations. It
presents a threat as well as an opportunity for the industry and has forced the managers to take
measures or make decisions which can help in reducing the carbon footprints and improving the
sustainability standing (Azriuddin and et. al, 2020). The management of Starbucks also needs to
adopt policies which can help in improving the sustainability standing and the goodwill of the
company which can help in increased sales in future and brand loyalty.
Each company, whether large or small, is influenced by internal authoritative factors and a
few external variables. The organization has no control over external conditions. The creation of
advertising systems should include consideration of natural factors so as to provide an accurate
picture of market patterns and conditions and an understanding of the position of the
organization. Engaging in the natural corners is like walking down a road where ineffective
promotion and lost earnings can affect the well-being of the corporate brand at the end over
there.
Ecological arrangements are seen as an important external factor influencing a company's
approach. Green living is a company’s commitment to directions, laws just like other strategic
systems that care about natural issues. The natural approach affects organizations despite the fact
that the law requires societies to change their approach and equipment to meet those guidelines
which can cost a lot of money. groups.
8 | P a g e

Exercises related to activity influence nature; Be that as it may, land also affects
organizations and market conditions. Businesses have now realized that natural approaches need
to be developed to achieve business goals. It is a green plan where the pledges direct their actions
in such a way that, therefore, there is a significant negative impact on the situation nearby or
around the world. In order to land, enterprises need to come up with plans and methods in their
actions and exercises that need to be organized additionally, including for the overall situation.
3. INTERNAL ENVIRONMENT ANALYSIS
3.1 SWOT ANALYSIS
Strengths
Solid market positioning and global brand recognition: Starbucks has an almost global
geography and accounts for 39.8% of total business in the United States and has operations in
over 62 countries. In addition, Starbucks is the most viewed brand in the coffee shop clip and is
ranked 60th among the most famous brands in the world in 2018. In addition, the board of
directors relies on expanding the business paradigm worldwide by opening stores wisely in new
and existing markets, rebuilding existing stores. , adding innovation, controlling costs and
developing powerful objects and building a brand (Gürel and Tat, 2017). In financial 2018,
Starbucks hopes to expand worldwide by introducing 2,300 new net areas. The group will open
approximately 12,000 new stores around 2021 from a financial perspective, bringing the current
store to 37,000. Group withdrawal improvement goals include developing 3-5% comps that
produce a high improvement in single digit revenue and an EPS improvement of at least 12%.
Best featured products: Such products have their own product segment and have separate identity
in the market. Price is not their burden as their main focus is on best quality and experience to
their customers.
Locality information and awareness of its stores: Company managed to open its branches at most
highlighted area in terms of better attention of customers in the world. They target high-traffic,
high-traffic, and high-sensitivity areas near a range of conditions. This allowed them to be in
good physical shape and some way to gain access to the key markets and tap customers to
believe the factor. Their stores are attractive externally and have a “cool” feature attached to it
9 | P a g e

that is intended to reflect the wonderful character of the place they serve and are ecologically
gracious (Phadermrod, Crowder and Wills, 2019). They offer free wireless internet, amazing
music, incredible help, and warm weather and create a network meeting atmosphere, which will
shape a larger piece of "Starbucks Experience". The company's main goal is to make its stores
"third place" as well as home and work.
Human Resource Management: Starbucks is known for its highly knowledgeable staff. Freshers
must undergo a 24-hour preparation process and maximum periods of professional training to be
effective. Producers are the organization’s main resources and have tremendous benefits such as
investment opportunities, retirement accounts, a bleak culture and school education costs and
rental credits.
Use of technology and mobile implementations: Starbucks holds a leading position in computer,
card, unpredictable and multitasking capabilities. Sales organizations are seeing a change in
customer buying behavior from block chain stores to web shopping. Customers consume more
food / food from home and use cell phones for most online transfers. Starbucks has ensured a key
position in using its portable and IT facilities, reliability and Internet business standards to
benefit from these schemes and generate multiple revenue streams.
Customer Loyalty: Starbucks has a faction that continues to position itself among customers
and it also ran unsustainable quality-based campaigns to promote engagement with Starbucks
Rewards and Starbucks Card campaigns. The forward currency model in the second currency of
the last quarter of 2018 also increased, with the participation improving by 14% year on year to
15.1 million individuals.. Customers in the United States use the chain's flexible application to
request and beverage payments. They also complement the rewards program. To date, MSR is
one of Starbucks' most important key achievers for its operations.
Weakness
Expensive Products: While Starbucks differentiates its products with high quality and in
combination with the “Starbucks Experience” as a whole, amidst cash sleep, customers will
move to competitive items at lower costs and not paying base price. These higher costs could
also represent a weakness for the urge to create countries.
10 | P a g e

Self-cannibalization through congestion: aggressive development and high immersion due to
market congestion pushing one store to divert customers from another, thus reducing the focus
on the long-term development of Starbucks. This is especially the case in the United States,
where Starbucks operates 13,930 stores.
Too much dependence on the United States advertises: Starbucks extracts a very large
percentage of their total revenue (70%) from the United States, moreover, this makes it sensitive
to the potential of the economy and development of the United States.
Being responsible for reaching some global markets to achieve the improvement is focused on:
broader CAP advertising is currently one of the two biggest profit engines that drive Starbucks
product worldwide World, along with North American business. In particular, both Chinese and
Japanese MBUs contribute significantly to both net income and net CAP and China in particular
is a critical market for development (Abdel-Basset, Mohamed and Smarandache, 2018).
Starbucks decisions could be adversely affected by a reduction in the performance of at least one
of these large MBUs worldwide. America's espresso culture contradicts the culture of several
countries: Starbucks espresso culture may not be understood in some countries as part of its
global development system, such as Australia.
Opportunity
Venturing into emerging markets: the fast pace immersion of U.S. advertising makes its
universal approach much useful in market. China should be the fundamental engine in the future.
Starbucks has the strategy to expand its business there through opening 700 new branches
between 2018 and 2022, expanding the business idea to 7,000 areas in 240 urban communities.
Considering the development of a class of white-collar workers in China, just as they adopt the
habits of drinking western espresso instead of tea, revenues are expected to continue to expand
with high twilight rates in the United States. Inevitable years (revenue improvement in the third
quarter of 2019 was 56% year-on-year).
Connections with Alibaba: on 1 August 2018, Starbucks and Alibaba announced to the group "to
change the partnership expressed with China". At the center of the organization is the selection
of Ele.me, the food carrier at the request of Alibaba with 3,000,000 passengers registered in the
transport and which lasted 9.5 billion dollars, to manage the transport operations to starting in
11 | P a g e

September in Beijing and Shanghai. Plans are underway to expand transportation to over 1,998
Starbucks stores in 29 urban areas before the starting of 2019 program of the year. Worryingly,
Alibaba Group will bring Element on the board and the Tmall and Taobao- shopping centers
line, Hema grocery stores, where the "Starbucks delivery kitchens" will be located, committed to
satisfying the demand for transport and the administration of Alipay's IT allowances. As a result,
the move opens Starbucks to 500 million or more dynamic offer calls.
Threats
Extended Competition: With the market fully buoyed, Starbucks faces increasing pressure
compared to its competitors such as Dunkin Brands, McDonalds, Costa Coffee, Pete's Coffee,
and mother and espresso pop stores. Another increasingly famous model is the reputation of
espresso roses, for example Caveman Coffee, Onnit and Black Rifle Coffee. These groups are
immediately for customers who are close to developing an Internet-based life and promoting
non-standard channels, such as webcasts. Organizations, for example, Caveman Coffee are
jumping over blocks and cement and improving their customer base through their connections
with people, for example Joe Rogan. They can produce quality espresso and ship directly to the
customer while creating a whole brand around their espresso including clothing, glasses, cups
and home mixes like French and Aeropress (Geereddy, 2013). There are times when a retail
business has to be over and this is now turning into an espresso department.
Don't understand the expansion into new markets: many countries have similarly found interest
in espresso to the United States, some for much more. This makes part of the areas created
deeper and more profitable that prevent change in espresso coffee culture. Countries, for
example, value a culture of espresso use in terms of espresso, administration and natural culture.
Since Starbucks did not get the chance to adapt fully to these new standards and features, it is
possible that they might be able to comply with a bad attitude according to remote buyers. This
side effect can bring major disadvantages to universal benefits that could limit the same
opportunity of going further into these external business sectors (Sakal, 2018). Another threat
particularly pertinent to China is the advanced exchange war between it and the United States to
fight against exchange rates, limiting external enterprises and avoiding the legitimate privileges
of proprietary entities in the distance.
12 | P a g e

4. Recommendations
All objectives should be SMART, for example clear, measurable, achievable, realistic and
timely.
Special: be precise about your results.
Measure: increase your goals.
Performance - Are you making too much effort?
Reality: do you have resources to achieve the goal (men, money, tools, materials, minutes)?
Timed: indicates when you will reach the goal
4.1. Revenue Projection
The revenue for the company was increased for each cookie independently and independently for
the stores that are controlled by the agency and the authorized sources within each category. The
projection was based on two variables: the number of new stores opened and the change in
revenue per shop. The number of new store openings is expected for every 50% of the year, and
were made following an observed history scheme or consideration of the agency's own
certifications. The change in revenue per shop was expected by following an observed pattern or
by taking a standard number of reports where there was no model (Bjerke and Renger, 2017).
The revenue per 50% of the year was determined by increasing the expected number of stores
and the expected revenue for each source in given duration.
4.2. Expenses and Cash Flow Projection
Expense and revenue data’s are projected, which include contract expenses including residence
expenses, other labor expenses, depreciation, general and regulatory expenses and depreciation
and CFS depreciation. The projections were made following a surveillance pattern or taking the
usual normal numbers. The labor costs at the source should have been the labor costs of each
workstation and in this projection two cases were established, separate from the development
problems. In the case of the Foundation, the operating costs of all the shops follow the growing
harmful model and, in the case of Upside, this model is in contrast with the conventional rules.
CAPEX was expected to be CAPEX for all changes in organizational workstations and two cases
13 | P a g e

were identified as labor cost problems at source. In the Basic case, CAPEX for all recently
opened workstations continues to expand, while in the case of Upside, it returns to normal. The
definition underlying the definition of these cost problems is, as will be revealed later, due to the
negative impact of the cost per serving if the expansion and cost model of each source continues.
4.3. Relative valuation
In the group of friends for Starbucks assessment, five groups were selected, McDonalds (MCD),
Dunkin' Brands (DNKN), Chipotle Mexican Grill (CMG), Darden Restaurants (DRI) and Yum!
Trademarks (YUM). Six benchmark results were used in the study, revenue, EBITDA and P / E
ratio. For each of the three products, their characteristics were calculated for fiscal year 2017 and
the values for the past year. For each friendly group, the fair debt estimate for labor lease and
base price contracts was included, while the cash and cash groups, short-term profitability,
available-for-purchase assets, long-dated shares went up take time and equity from advertising
capitalization to estimate the estimate. As a result of calculating at least the 25th percentile, the
median, 75th percentile and maximum for all different assessments, Starbucks revenue, EBITDA
and EPS were used to estimate a large business to evaluate for Starbucks. Adoption of non-
operating bonds and utilities resulted in a range of valuation. By separating these goals with
several propositions, a reasonable quality framework for action was determined for each.
14 | P a g e

REFERENCES
Books and Journal
Abbott, R.J., 2015. Pestle Analysis for Students.
Abdel-Basset, M., Mohamed, M. and Smarandache, F., 2018. An extension of neutrosophic
AHP–SWOT analysis for strategic planning and decision-making. Symmetry. 10(4).
p.116.
Azriuddin, M., Kee, D.M.H., Hafizzudin, M., Fitri, M., Zakwan, M.A., AlSanousi, D., Kelpia, A.
and Kurniawan, O., 2020. Becoming an International Brand: A Case Study of
Starbucks. Journal of the community development in Asia. 3(1). pp.33-43.
Bjerke, M.B. and Renger, R., 2017. Being smart about writing SMART objectives. Evaluation
and program planning. 61. pp.125-127.
Geereddy, N., 2013. Strategic analysis of Starbucks corporation. Harward [Електронний
ресурс].–Режим доступу: http://scholar. harvard.
edu/files/nithingeereddy/files/starbucks_ case_analysis. pdf.
Gürel, E. and Tat, M., 2017. SWOT analysis: a theoretical review. Journal of International Social
Research. 10(51).
Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European
academic research. 2(5). pp.6478-6492.
Lake, P. and Drake, R., 2014. Strategy. In Information Systems Management in the Big Data
Era (pp. 19-52). Springer, Cham.
Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-performance analysis based
SWOT analysis. International Journal of Information Management. 44. pp.194-203.
Sakal, D.V., 2018. COMPANY ANALYSIS OF STARBUCKS CORPORATION.
Schultz, H., 2012. Pour your heart into it: How Starbucks built a company one cup at a time.
Hachette UK.
Sroufe, R.P., 2018. Index', Integrated Management (pp. 391-406). Emerald Publishing Limited.
Wu, H.C., 2017. What drives experiential loyalty? A case study of Starbucks coffee chain in
Taiwan. British Food Journal.
15 | P a g e