Strategy for Starbucks: Case Study Analysis

This report provides a detailed analysis of the business strategy of Starbucks, including internal and external environment analysis. It discusses the competitive position of the company and various methods and models used for strategy formation. The report also includes a stakeholder analysis and recommendations for the company.

Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
Introduction to case study.......................................................................................................4
External environment analysis...............................................................................................5
Internal analysis......................................................................................................................7
Part 2 – Starbucks’ Stakeholder Report.........................................................................................11
Internal & external Stakeholders of Starbucks.....................................................................11
Human resources procedure stakeholders’ group.................................................................13
Interest & power of subordinate’s stakeholder:....................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES:.............................................................................................................................15

INTRODUCTION
Business strategy can be said to be an integration of various plans in a business in order to
attain all the set goals as well as objectives of a business.in order to develop a strategy
management of a company is required to make a particular management team in order to analyse
the best strategy fit for their company. There needs to be done internal as well as external
analysis in order to make sure that strategies are formulated effectively to support functioning
and operations of a business organisation. In the following report a case study on Starbucks is
discussed. Starbucks is an American chain which deals in which deals in coffeehouse and
roastery reserves. Its headquarters is situated in Seattle, Washington. It is one of the largest
coffeehouses in world. Starbucks have brought major second wave of coffee culture in world.
The First ever Starbucks was opened in Seattle, Washington on March 31 in the year 1971. In the
following report major steps for strategies formation such as internal as well as external analysis
of environment is done in this report (Chen, Eshleman and Soileau, 2016).
The following report is basically divided into two parts. In the first part a detailed
information is provided about the case study which also consists of competitive position of the
company. After which it consists of various methods and models use in order to identify external
as well as internal resources affecting Starbucks and strategy formation for the company. Various
frameworks used for this are PESTLE analysis, VRIO analysis, Life Cycle of products, Value
Chain analysis and Porter’s five force analysis. After this discussion are also made on
recommendations for company in order to provide recommendations for company. Stakeholder
analysis of company is also done in this report.
Competency framework for company can also be discussed. There are a number of
factors included in it such as leadership development, high talent, recruitment and selection,
succession planning, rewards and recognition and performance management. Company takes in
various efforts to increase overall performance and skills of their employees. This helps company
to gain competitive advantage in market. The experience and skills of employees in Starbucks
helps them to serve their customers with best quality of service. It is also been seen that Human
and Resource development team of Starbucks is implementing various processes for recruitment
and selection which helps company in a quiring employees who are talented and experienced. It
is also important for every organisation to look into various matters in order to fill the gap arising
in individual as well as team efforts which are different from their planned goals. Managers of

Starbucks are willingly contributing towards raising such leaders who help employees in their
personal success along with success of the organisation. Rewards are provided to employees on a
regular basis in order to help them with motivation (Eaton and Kilby, 2015). Recognition is also
a great way company is using to motivate their employees throughout the world. Company have
also applied an optimum performance management plan in order to judge performance of each
employee and take various decisions regarding its enhancement whenever required by the
organisation.
Part 1 – Starbucks Business Report
Introduction to case study
Starbucks is a multinational coffee chain which helps consumers in providing a number of
different types of coffee throughout the world. All the operations of production as Willis
functions are executed by company itself to make sure that quality products and services are
delivered by it to its customers in order to fulfil their needs and wants. The company came into
existence in 1971 it headquarters is situated in Seattle, Washington. In order to maintain the
brand image of company Starbucks uses various marketing campaigns in order to attract more
and more customers. While analysing annual report of Starbucks it has been revealed that
revenue for company is around $16 million (Higgins, Omer and Phillips, 2015).
Starbucks have a great global existence throughout the world. However, they are facing a
lot of competition from a number of various others coffee joints. From the information given in
the following case study it has been seen that major competitors of Starbucks are caribou coffee,
drinking doughnuts, McDonald’s and such other brands. All these brands have a great impact on
profitability for Starbucks. Presence of a number of competitions however have not influence
revenue for the company but definitely increased its profits. Starbucks also have its presence in
stock market as the raise the funds required by offering shares of company to general public yes.
This has helped company in generating higher revenue from the market. Has been seen that
47.08% returns on equity of Starbucks is even higher than McDonald’s which is its biggest
competitor and approximately have 32.97% of returns on equity only.
However the competition in the industry does not rely only on the one factor but this is a great
factor for measuring strength and manpower of company. It is seen that Starbucks employ
approximately 191,000 employees which is less than that of McDonald’s 420,000 employees.
Shows that McDonald’s have a larger workforce when compare to Starbucks still its profits are

not as high as Starbucks. Also, the outlets of McDonald’s Is greater in number when compared to
that of Starbucks. The valuation between McDonald’s and Starbucks also state that profit margin
of Starbucks and McDonald’s have a great difference between them. In which profit margin of
Starbucks is way higher than that of McDonald’s (Hossain and Islam, 2015). This report also
explains the need for a good marketing strategy for company to stay in market and hold a good
brand image.
This case studies clearly state that although coffee industry have a number of good brands but
Starbucks have maintained a good position and brand image in this industry. Starbucks is
showing its brand presence throughout the world biofuel best quality products and services to its
consumers for optimal customer satisfaction. This will also help from the developing effective
strategies so that the top management can decide on what are the steps to be taken in future. It is
essential to analyses all the factors before creating a strategy. All those factors will be described
in this report.
External environment analysis
It is important to analyse the external environment of an organisation as they have a great impact
on business and its operation. This also helps in enhancement and growth in performance of the
company. This also helps company to develop various growth strategies. In order to make
evaluation of external environment of a company there are a number of frameworks which can
be followed some of those frameworks are mentioned below:
PESTLE ANALYSIS:
Political factors: These are mostly related to the strict policies and laws which are applied by a
government in a given nation. For now the introduction of Brexit in United Kingdom is posing as
the most impactful political policy affecting Starbucks. It may have a great impact on
profitability of company as well. This is affecting as company can now want to procure its raw
materials from somewhere else and have to compromise on its qualities (Johnson, 2016).
Economic factor: The changes in economic model in a country such as economic growth,
foreign exchange rate, interest-rate and so on are included in this factor. Economic activities such
as recession may be a factor which have negative impact on Starbucks leading to problems in
executing its work efficiently.
Social factor: This factor can be beneficial for Starbucks as the changing needs and wants of
customers and also they are changing perception is included in social factor. The values and

beliefs that a society follow is also included in this factor. Have been saying that customers are
changing their preference towards coffee dates and meeting new people over coffee. Many
corporate sectors have also introduced a new culture in which meetings are held in coffee shops.
Starbucks is a perfect place for this. There for this change in social norms is proving to be
beneficial for Starbucks (Martinez-Simarro, Devece and Llopis-Albert, 2015).
Technological factor: this relates to all the technological advancement taking around us the
world. For Starbucks is it a positive influence as to using various digital media tools company
can effectively market their products and services. Starbucks is also providing with Wi-Fi facility
in their outlets. This is helping customers with conveniently doing their work in coffee shop as
well. There are a number of other opportunities which can be gained by Starbucks help of
technological factors
Environmental factor: While operating in a business environment it is necessary for firms to
take care of the surrounding as well. Nature is an important part for every organisation and any
company must not have it while working. Starbucks is using straws which are made up of plastic
which is harmful for the environment. So company must take efforts to substitute it with some
other kind of straw which will help in conserving environment.
Legal factors: There are a number of legal requirements which I needed to be fulfilled by an
organisation working in market. Starbucks have created a different department for legal issues
which ensures that all the activities of company are taken care of and executed in the legal
parameters. This shows that company do not need to face any penalties or legal proceedings
against them.
INDUSTRIAL LIFE CYCLE:
Industrial life-cycle model is a process through which all the different stages which a
company goes through throughout its life is mentioned. There are basically five stages included
in this which are start-ups, growth, shakeout, maturity and decline. When taking the case of
coffee industry it is very important that organisation does a proper planning before setting up a
business. It is important that each stage of company last for a longer period. The essential aspects
of all the stages are mentioned below:
Startup stage: start-up stage is an initial stage for every organisation where are the major
objective of an organisation is to settle in the market (Phaal, Farrukh and Probert, 2015). It is

important for companies to sell quality products at reasonable prices to build their place in the
market. This was one we adopted by Starbucks to make their space in the coffee industry.
Growth stage: Company needs to come up with more and more innovative ideas and plans in
order to grow in the market. For coffee industry they have adopted various plans which will
allow them to increase the base of customers this now have. Starbucks are generated more sales
and revenues by using a number of plants to grow and expand its reach in market.
Maturity stage: In this stage company accomplishes their demand for services and products.
Here Starbucks have various options to add to different flavours in its products and services in
order to attract more and more customers. It is important for a business to focus on its offering at
this stage.
Decline stage: There are stages in this organisation are trying to adopt some innovations and this
can create problems for a business organisation. It is very crucial for coffee industry to develop a
number of innovations and find out ways in the maturity stage itself to increase the performance
in the market so that they do not need to face the decline stage.
Thus, it can be stated that when taking the present scenario of Starbucks company is now
at its majority stage as they are putting all their efforts towards making new flavors and attracting
more and more customers towards them.
Internal analysis
VRIO
This is important for every organisation to make sure that they have a good knowledge
about their capabilities, effectiveness as well as resources which are best for them. It proves that
there are a number of resources present in a company some of which are very important for
company while others lack behind. When a company works according to their strength there is a
greater chance for them to achieve all their goals and objectives within a given time period.
VRIO analysis is a commonly used framework in order to understand all the competitive
advantage that various resources provide to an organisation (Pisano, 2015).
Value: this analysis is helpful in understanding the value which every resource brings to an
organisation. When talking about Starbucks it is important to add value to all their resources for
the company. Every resource has a different value for company which helps in effectively
functioning of all its operations. Major resources which carry value for Starbucks our quality,
competent staff, unique taste and brand image. All these four are considered to be the most

important resources for Starbucks. It is necessary for Starbucks to make sure that they are
effectuively developing all those resources tahta re valuable for the business.
Rare: Rare is sources include those resources which are difficult to find in every organisation.
The rear resources for Starbucks are the brand image which it has created, it’s competent staff
and the quality it provides. It is now the responsibility for Starbucks to maintain these resources
efficiently and preserve them. Rare resources often bring competitive advantage for a business.
Businesses need to make sure that they are maintaining the rareness of Starbucks.
Imitability: This is something which describes that how difficult will it be for competitors to
copy any resource from a company. This is related to complexity of copying a resource of rival
brand which deals in similar products or services. There are many competitors of Starbucks who
want to copy its resources due to which Starbucks is trying really hard to preserve its taste and
brand image. While making coffee Starbucks has gained trademarks through which they can
preserve their unique taste and also legal proceedings can be taken against any company who
tries to copy Starbucks (Shirdastian, Laroche and Richard 2017). Starbucks makes sure that none
of their products and services can be imitated by businesses. With the help of various resources
that cannot be copied by competitors only business develop such products and services,
Organisation: This includes all the resources of the organisation which are needed to be kept in
an organised manner. However when considering for Starbucks the unique taste of coffee it
provides is different from any other coffee provided in the market. This makes it important for
company to organize the process of making coffee. All the resources in business are required to
be organised well.Business can run smoothly without any barriers once all the resources are
organised well.
Factors Valuable Rarity Inimitable Organized
Quality ✔
Competent staff ✔ ✔
Brand image ✔ ✔ ✔
Unique Taste ✔ ✔ ✔ ✔

The above analysis describes how unique test is the major strength for Starbucks. There
are a number of resources which are important for companies but unit test of company provide
its competitive advantage over all its competitors. Starbucks can also study deeply the strategies
which are adopted by its competitors such as Costa coffee. It is important for Starbucks to learn
from such brands in order to apply some of those effective strategy to its company which will
help in its expansion and growth.
PRIMARY ACTIVITIES
Inbound logistics: Inbound logistics is including development of an effective supply chain
management program by the company. The top level executives in Starbucks help in
procurement of coffee seeds themselves. This helps them in bringing unit test and unique quality
for customers.
Operations: Starbucks is now successfully delivering its product and services in approximately
80 countries throughout the world. All these operations takes place through various franchisee or
license provided to people who run this stores. There are also a number of stores for Starbucks
which are self-operated and have well qualified and competent working staff. This also helps
company to gain information about different cultures and provide people with different taste
according to their culture (Shuen, 2018).
Outbound logistics: A number of companies have successfully enhanced their sales with the
help of using online platforms and offering their products online. Starbucks is also using its
outlet, various online websites, as well as supermarkets such as Tesco and Walmart’s where its
products are available.
Sales and marketing: Various channels of sales for company. Starbucks uses various channels in
order to promote their coffee and the other products provided in its outlets. These advertisement
methods helps Starbucks to attract more customers towards them.
Services: Providing appropriate as well as effective services to the customers is the key success
for any organisation. Starbucks believe that by providing high-quality services to their customers
and meeting all their needs they can build customer loyalty and increase the profitability for
organisation.
SUPPORTIVE ACTIVITIES:
Infrastructure: The ambience and the structure of all the outlets of Starbucks are very attractive
and uniquely designed. This helps in attracting more and more customers also increasing

customer satisfaction. Company spends a lot in its interior and make sure that they keep on
changing it.
Human resource management: All the employs of Starbucks are important for maintaining the
peace in healthy environment in its coffee shops (Yuliansyah, Rammal. and Rose, 2016). The
managers at Starbucks take extra effort to keep their employs motivated and also provide them
with a number of benefits including monetary benefits. This helps in decreasing employee
turnover rate and maintaining peace in the outlets.
Technological development: Starbucks provide Wi-Fi facility to its customers. They have a
number of different online websites which helps them to prove their presence in the market.
Customer feedback is also gained through this websites. In this way Starbucks is using
technological development for its benefit.
Procurement: And have developed a number of policies and rules in order to maintain the
quality and standards of services which are provided to the target customer.
RESOURCES:
There are a number of tangible as well as intangible resources present with Starbucks which
helps the company in gaining competitive advantage over their rival firms.Tangible resources
for company include all the machinery is used for production of coffee and the intangible
resources includes competency and scale of its workers as well as intellectual property of the
company. The brand image, employee relationship with customer, and customer satisfaction
level is also intangible resource for Starbucks.
CAPABILITIES:
Brand image and banking team is one of the major strength which is possessed by Starbucks.
Global presence of company is very high which helps company in generation of high revenues
and also increasing its customer base throughout the world. This applies you know Starbucks is a
strong point for the company which helps it in offering products to the customers in good quality
as well as in specified time. The price in which the products are offered by Starbucks are also
affordable for customers (Strategy, 2017).
Recommendations:
Starbucks is that company which holds frog position in a market where it currently
expanding its business functions in various markets especially in China. There are number of
opportunities in front of company which it can use for increasing its market share and enhancing

the customer ways in a market where from can get maximum profitability. There are some
recommendations which are essential for a management of company to adopt for increasing the
sustainability in market as well as growth perspective. The first thing which is recommended to
companies that their pricing policies, it should adopt easy pricing policies where every individual
can get the chance of using company's product and services for satisfying their needs and wants.
Furthermore, it is also suggested to company that they can add or modify some new features to
their products which are related to health and taste, dish products are green herbal coffee tea and
organic juices which will help company in increasing the market share as well as customers. This
will help increasing company the customers who are more conscious about their health and other
safety issues related to their organs so it is recommended that company can use organic drinks
for health drinks which can boost immunity of people. This will also help for increasing the
performance and profitability of organisation in a marketplace.
Company can also focus on marketing activities which will at them in increasing the
awareness about the product and services among the potential customers where top level
management can adopt Ansoff matrix representation of market and set a smart objective for
developing the management team of the company.
 For increasing the sales of company by 25%, it has to focus on developing market
strategies and proper utilisation of available resources which help in development of
organisation in effective manner.
 To increase the profitability ratio of company by 20% within next 8 month, for this
management need to examine the trends which are going in market and identify the
requirements and preference of customers.
It is also analysing that Starbucks have to use various communication channels which will
helpful in creating awareness about the offerings. This includes YouTube, Facebook, Instagram,
LinkedIn and many more. This will helpful in developing the market position of the company
and increase the customer within a specified time period.
Part 2 – Starbucks’ Stakeholder Report
Internal & external Stakeholders of Starbucks
Stakeholder Internal/ External Factors for consideration

Users External Customers are the main focus
of the business form as the
help organisation in earning
profit for remaining in
competitive market as well as
growth of the business.
Staff members Internal Staff member also actors in
main stakeholder of a farm as
they help organisation in
working on its function as
well as maintaining the
quality of the product and
services for customer.
Shareholders Internal Shareholders are the investor
of the firm to contribute in
organisation by giving money
for capital formation in a
market (Taecharungroj,
2017).
Legal authorities or
government
External Government is also a major
stakeholder of organisation as
it helps organisation in
functioning at international
marketplaces and save the
form from legal liabilities
which can act as a negative
impact on firm.
Suppliers External supplier advance provides
high quality material to
organisation for producing a
good quality pizzas and other

fast food items for
satisfaction of customer’s
needs.
Human resources procedure stakeholders’ group
It can be seen from above mentioned study that staff members are the most essential and
important stakeholders of Starbucks. This is because higher authorities of Starbucks motivate
their employee by giving them number of monetary and non-monetary benefits to the
organisation. They also provide additional benefits to the employee’s insurance medical facilities
paid holidays and many more (Torrent-Sellens, 2015). According to the current scenario of
Starbucks, manager provide number of opportunities to it applies really can increase their skills
and abilities while working on job. There are more than 20,000 employees working in Starbucks
are specifically trained for particular jobs in organisation where organisation can get success in
the market. The ratio of male and female staff members in an organisation is equal this is also
show that Starbucks is working towards decreasing the cultural difference and maintaining
women empowerment in society. Starbucks takes interest in developing and training their human
resources. With the help of such facilities provided by Starbucks businesses successfully attract
customers as well as employees. Human resource department can also retain employees and save
costs of hiring new employees.
Interest & power of subordinate’s stakeholder:
There is a matrix which consists of some factors which shoes the influence of powers and
interest of employees in organisation (Wu, 2017). Matrix is used for Starbucks where the
discussions are

By investigative the entire matrix, it can effortlessly be unspoken that staff memberships
shows high level of attention in the functionality and doings of the commercial administration.
But on the other hand, they do not possess enough control as well as authority within the
workplace where they can take decision accordingly. As employees of Starbucks do not have
right to take part in the decision-making process of the company (Yuliansyah, Gurd and
Mohamed, 2017). Also, in order to interact with the staff members, management team of the
company use various sort of communication methods which includes video conferencing,
messages emails, phone call and many more.
CONCLUSION
It can be concluded from above mentioned report, for retaining sustainability in market it
is essential for organization to understand the functions related to two internal and external
environments. identification of internal factors like strength weakness opportunities and threats
of organization will lead to success as it helps organization in making effective policy and
strategy with combining two external factors like political and social. Pestel analysis will help
organization in identification of technological factors which have positive impact on forms
production as it can use it in identification of new and innovative product which can attract
customers at large number. Analysis like drive framework and many other also help organization
in setting the targets and objectives which are valuable for firm. At the end of this report,

reference is also given to the organization team that they must adopt diverse marketing plans so
that they can make awareness about the products and services among the customers at market.

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