Starbucks Business Report: External and Internal Analysis

This report analyzes the external and internal environment of Starbucks, including PESTLE analysis, Porter's Five Forces, and VRIO analysis. It provides insights into the competition, market trends, and the company's resources and capabilities. Recommendations are given to enhance performance and profitability.

Starbucks Business
Report

Table of Contents
INTRODUCTION...........................................................................................................................3
Part 1 – Starbucks Business Report.................................................................................................3
Introduction.................................................................................................................................3
External analysis:........................................................................................................................4
Part 2 – Starbucks’ Stakeholder Report.........................................................................................13
a) Internal as well as external Stakeholders of company.........................................................13
b) Manpower precedence stakeholders group...........................................................................14
c) Interest and power of subordinates stakeholder group.........................................................14

CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Business strategy refers to the combination of all the decisions as well as performance of
activities in order to accomplish organizational goals and objectives in an effective manner.
Before, creating any kind if business strategy it is required by the management team to identify
the market trends and situations. This can be done by the higher authorities by adopting internal
as well as external market analysis. In this report, Starbucks is the organization which is the base
company on which the whole report is conducted. It is a business entity mainly deals in different
sort of coffee along with some food items which is offered by them to their consumers (Jo and
Kim, 2017). Main reason behind developing this report is to identify the environment and its
influence on the business functions. This report includes two parts, in which first part is going to
provide complete knowledge about the competition available at the marketplace. By using
various types of approaches like PESTLE, VRIO Industry life cycle model, value chain analysis,
competency framework as well as Porter’s five force model both internal and external
environment can be analysed by the management team in an effective manner. Furthermore,
recommendations are given to the higher authorities which enhance the performance and
profitability.
Part 1 – Starbucks Business Report
Introduction
Starbucks is a coffee brand, usually serve coffee across the whole wide world. The
organizational operational functionality is executed in a well defined way which as a return
produces high quality goods and services to their customers appropriately. Starbucks was
founded in the year 1971 and the main branch of the company is located in Washington, US. It
has been analysed that the global image of the company is so strong which makes it one of the
biggest and fastest coffee leader within the sector. Higher authority of the company works in
such manner that they will be able to enhance their brand name at the competitive marketplace
with the aid of using various types of marketing tactics (Kang and Namkung, 2018). According
to the annual report of Starbucks, it has been identified that the overall revenue of the company is
around 17 billion dollars in the year 2015.

It has also been identified that while operating business functions at the marketplace,
company faces tough competition with the existing organizations which affect the overall
performance in a negative manner. With the help of examining the given case study, it has been
identified that Starbucks have high level of competition at the marketplace where rivalry
companies are Costa Coffee, Caribou Café, Dunking Donuts, McDonald’s & so on. Theses are
the business organizations which negatively influence the profit margin as well as sales of the
company and reduce customer base. Apart from this, it has been said that Starbucks have the
capabilities to beat the competition and enhance the overall profitability and revenue of the
company. Furthermore, return in equity of business entity is almost 48.01% which is quite high
as compared to the rival organizations McDonald’s who have ROE is around 33%.
According to the given case study, it has been identified that Coffee Industry is one of the
most competitive as well as intense industry. Furthermore, at the present high competition
marketplace, it has been identified that Starbucks maintain strong position at the competitive
marketplace with the help of offering high quality products and services. Along with this, with
the help of strong brand image of the company, management team will be able to attract large
number of customers towards the business organization (Shiau, 2016). For attaining success and
growth at the competitive marketplace, managers need to conduct effective market analysis so
that they can modify their strategies and policies according to the changing environment.
External analysis:
It refers to an analysis conducted by an organisation in order to examine the environment
which influences the overall performance of the business entity. This will help them in order to
improve the functioning as well as performance of the company by modifying strategies and
policies as per the requirements of market. For doing external analysis, Starbucks adopt three
main frameworks which are PESTLE analysis, Porter Five Forces and Industry Life cycle. All
these models are going to be discussed in detail manner as follows:
PESTLE Analysis
It refers to a tool mainly adopted by the management team of the company in order to
examine the external factors which influences the performance of business organisation in both
positive as well as negative manner. It includes element which are legal, technological, political,

economical, social, & environmental. In the present context of Starbucks, all these elements are
going to be discussed as follows which have both positive and negative influence on the
performance of organization.
Political: It has been analysed that strict policies as well as interest rates highly influence
the profitability and productivity of Starbucks in a negative manner. Starbucks, produces and
uses high quality imported beans in order to produce Coffee which is the USP of company and
aid them in delivering high quality goods and services. This, as a result help in beating the level
of competition at the competitive marketplace and maintain sustainability at the marketplace
(Mota and et. al, 2020).
Economic: Due to recession in US, business operations of Starbucks affect in a negative
manner which reduces the performance of the company. As a result, business organisation will
not be able expand their functions at new marketplace. Therefore, economic factor is considered
as an uncontrollable factor which highly influence the overall performance of the company in a
negative manner.
Social factors: Individual living within US have high standard which impact the overall
sales of Starbucks in a negative manner. It has also been analysed that people are highly attracted
towards high quality coffee which raises the profit margin of the company in a positive manner.
As people in today’s world are more health conscious, company decides to launch herbal coffee
which grab the attention of customers. With the help of this segment, business organization can
expand their functions in an appropriate manner.
Technological: With the help of technological development, management team of
Starbucks can operate its business functions across the world. It has been identified that digital
technology help in creating awareness and attracting customers towards the company which as a
result leads towards the enhancement of profitability. Furthermore, if talking about technology
management team of Starbucks provide free Wi-Fi to their customers which assist them in
accessing internet easily while enjoying their coffee (Cardoni, Kiseleva and Lombardi, 2020).
Legal : A legal team is going to be hired by the top management authorities of Starbucks
so that all the activities related with legal policies and procedures can be handled by them. This
will help Starbucks in order to conduct their functions in an ethical and legal manner which

avoid any kind of issues and penalties. This leads towards the enhancement of revenue and sales
of the company.
Environmental: According to the present market situation, individual prefer paper straw
rather than plastic as it affects the overall environment in a negative manner. Therefore, in order
to grab the attention of customers and retain them for a longer period of time management team
launch paper straw and maintain the sustainability at competitive marketplace for long duration .
Porter Five Forces:
This framework is mainly adopted by the management team to examine the competitive
position of the company at the marketplace. In context of Starbucks, top management team of the
company use this model which are going to be discussed as follows.
Bargaining power of buyers: In the present Coffee industry, it has been said that
bargaining Power of buyers are high as there are lot of rival organisations at the marketplace. It
is said that, if customer get high quality products within low cost from rival firms they can easily
switch the brand (Virtanen and Fifield, 2020). Therefore, it has been concluded that management
team of the company needs to provide high quality products and services and various offers in
order to retain their customers for longer duration.
Bargaining power of suppliers: In Coffee industry, number of raw material suppliers are
very limited which increases their bargaining power. As Starbucks do not have any kind of
option to change their suppliers, they have to pay cost according to their requirements. As a
result, it increases the overall cost of the company and reduces profit margins.
Competitive rivalry: The primary rivalry firms for Starbucks are McDonald's. Costa
Coffee, Dunkin Donuts and so on which influences the overall market share in a negative
manner. Therefore, it can be concluded that Starbucks have high level of competition within the
marketplace. For this management team need to adopt effective marketing strategies in order to
remain competitive at the market and grab attention of large number of customers.
Threat of substitutes: As the level of competition is high, threat of substitutes are also
high which reduces the profitability of Starbucks in an adverse way. So to influence large
number of people towards the company, management team of Starbucks should provide high

quality products within affordable price. This will help organization in order to enhance their
performance and effectiveness at the marketplace (Tardieu and et. al 2020).
Threat of new entrants: For introducing a new business venture within Coffee sector, an
individual needs huge amount of funds so that they can effectively conduct all the functions in an
appropriate manner. In reference to Starbucks, company have strong global presence at the
market which reduces the changes of negative impact of new entrants on the company.
Industry Life Cycle Framework
It refers to a tool which includes various stages which will help a business entity by
providing them guidance that how operations has worked and how functionality has been
implemented in an effective manner (Tardieu and et. al, 2020). Stages of the framework are
going to be discussed as follows.
Introduction stage: It refers to the basic or first stage where main focus is on increasing
the profitability of the company. For this, higher authority of Starbucks need to provide coffee at
affordable prices to their customers. This as a result assist them in attracting large number of
customers towards the organization.
Growth stage: Second stage of the framework focuses on earning profits with the help of
modifications in their plans and policies. In the present context of Starbucks, top management of
the company need to create effective policies so that they can attain growth and success within
limited time period.
Maturity phase: This stage comes after the growth stage which creates stability at the
marketplace. In reference to Starbucks, managers of the business organisation charge high cost
against the services offered by them to their consumers. As a result, it will assist in improvising
the profit margin of the company.
Decline Phase: At the last stage of this framework, it has been analysed that the
profitability of the company reduces and managers need to adopt one option from exist or to
modify marketing strategies in order to enhance the functioning. In this, company start offering
services at low cost so that they can remain sustain at the competitive marketplace (Bozorgzadeh
and et. al 2020). In the present context of Starbucks, top authorities of the organization uses

different strategies so that they can grab attention of large number of customers and enhance the
profitability at competitive marketplace.
Internal analysis
VRIO Analysis
It define as a tool with the help of which organisations can effectively examine their
internal resources and capabilities. This model is going to be discussed in context of Starbucks
are as follows:
VRIO ANALYSIS
Factors Valuable Rarity Inimitable Organized
Environment ✔
Especial coffee ✔ ✔
Brand Image ✔ ✔ ✔
Staff members ✔ ✔ ✔ ✔
Value:
 Environment: Stores of Starbucks mainly established in the Porsche areas where
customers are willing to buy high quality products and services. Starbucks provide
soothing environment to their customers which leads towards the satisfaction of
requirements. As a result it will aid in attracting large number of customers towards the
company.
 Especial coffee: Coffee beans used to make coffee are imported which makes the taste
unique and special. Also they provide different types of coffee to their customers which
helps them in grabbing attention of customers (Ghotge and et. al 2020).

 Brand Image: Starbucks mainly have almost 32,000 physical stores around the world
where more than 1000 people experience the services of company. The global presence
of Starbucks help them in order to maintain the sustainability of company at the
competitive market.
 Staff members: Starbucks have highly talented and skilled workforce which helps them
in becoming one of the fastest leading company. With the help of staff members,
company will be able to enhance their efficiency and performance at the marketplace.
Rarity:
 Especial coffee: Starbucks provide various kind of Coffee to their customers which is
mainly made by trained chefs and professionals. Along with this, they have highly
advanced technology which makes the Coffee taste better.
 Brand Image: Starbucks have cafe in various countries & serve high quality taste to their
consumers which increases their brand image at the competitive marketplace (Dinçer and
Pınarbaşı, 2020).
 Staff members: Starbucks provide training and development session to their employees
so that they can serve high quality and different types of coffee to their customers.
Imitable:
 Brand Image: Starbucks have strong global presence as they serve in around 81
countries and expand their business functions in an effective manner. They provide high
quality products and services to their users which can not be imitate by people or other
rivalry firms.
 Staff members: Professionals and expert in the industry provide training to the staff
members of Starbucks which increases their skills and capabilities. This will help them in
producing high quality goods and services.
Organized:
 Staff members: The knowledge and skills of employees help Starbucks in order to gain

profitability at the competitive marketplace by serving high quality products and services
(Zorpas, 2020).
The respective company makes use of value chain analysis in order to improvise its value
at marketplace. This can be effectively done by developing knowledge over the available
opportunities for the company. Detailed description of this analysis is explained as below:
Primary Activities
 Inbound Logistics: This main deal in the development of appropriate SCM for
Starbucks. In this main focus of the company is on producing satisfactory coffee beans at
their own level. This simply provides support to Starbucks in offering high quality of
coffee to its customers that ultimately supports in developing positive relationship with
them. It also provides value to internal logistics of company (Ma, 2020).
 Operations: Starbucks is already having its business in approx 81 nations. In
order to maximise the global presence the company has mainly opted franchising method
that provides support in handling operational activities in better manner. Increasing
operations at international scale supports Starbucks in reaching more number of
customers.
 Outbound logistics: In order to enhance awareness of the customers, the
respective manager of the company makes use of social media tools and other onlinbe
marketing medium. Also, it has been seen that products of Starbucks specially coffee are
offered at online and offline both forms of medium.
 Marketing & Sales: Marketing head of Starbucks promotes its coffee through
various social media mediums such as Whatsapp, YouTube, Instagram, Facebook,
LinkedIn and other sites. All of them directly provide opportunity to this company to
approach maximum number of customers which further results in enhancement of sales
performance of company.
 Services: Staff of Starbucks ensures to offer higher quality services to its
customers with the motive of satisfying them at extensive level. High quality services
also influences customers in feeling closer to the company and also converts them into

loyal customers who will make purchase from the same company and results in
enhancement in its sales as well as profitability (Knowlton, 2020).
Supportive Operations & Activities:
 Infrastructure: Outlet of Starbucks owns great ambience which is unique in its
own manner. The soothing interior of this company makes customers enjoy their visit at
the Starbucks.
 HRM: Human resource department of Starbucks ensures to provide monetary
benefits to its workforce and conduct few training sessions for them so that they could
develop themselves effectively and execute their assigned work in rightful manner.
 Technology development: Management team of Starbucks makes use of advance
technology for effective execution of the work. Here, they ensure to have WIFI services
for its staff as well as customers (Berejiklian, 2020).
RESOURCES
For maintaining the competitiveness at the marketplace it is essential for the management
team to maintain their tangible as well as intangible resources in an effective manner. In
reference to tangible elements it consist of machinery and equipments for coffee making and on
the other hand Intangible resources includes the quality of service offered by the company to
their customers. Along with this, goodwill of the company, satisfaction level of customers as
well as employee relationship comes under the tangible resources of a business entity.
CAPABILITIES
Main strength of Starbucks is its brand equity. Reach of the company is so high across the
whole wide world that it increases the revenue at the marketplace and strengthen their customer
base. This will assist business entity in order to fight with the rival firms and maintain their
position at marketplace. Apart from this, Starbucks offer different types of coffee as well as
snacks to their customers by examining their requirements. Along with this, they mainly
emphasize on creating strong and positive relationship with their employees so that the quality of
goods can be increased and customers remain satisfied and loyal (Bai, Cordeiro and Sarkis,

2020).
COMPETENCY FRAMEWORK
It refers to the model mainly adopted by the top management team of the company in
order to examine the behaviour, attitude as well as nature of the staff members working within
the business organization. Employees competencies are their skills, capabilities, attributes and
knowledge.
Leadership development: The Human Resource manager of Starbucks conduct different
sort of activities for their staff members with the aim of creating problem solving, time
management, leadership skills, as well as effective decision making skills with the help of which
they can enhance their knowledge and skills in an appropriate manner.
High talent: Starbucks having highly talented, experienced as well as skilful employees
who help them in producing high quality goods and services in order to satisfy the needs and
wants of consumer. Also they assist in attaining organizational goals and objectives in an
effective manner and within given time frame (Bai, Cordeiro and Sarkis, 2020).

(Source: Competency Framework, 2019)
Recruitment & selection: The Human Resource of the company examine as well as
identify the requirements of business organisation and then implement the process of selection
process according to the set standards of Starbucks. In the present context, manager adopt online
tools in order to select best and most suitable candidate.
Performance management: Human resource management team of Starbucks evaluate
and monitors the performance of their staff members against a set standard. With the help of this,
they can effectively draw the contribution of their staff members for the attainment of
organizational goals and objectives (Kang and Namkung, 2018).
Succession planning: In each and every business organisation it has been said that there
is a difference between team and in a employee. For reducing the gap, various types of activities
are going to be conducted by the management team and replace the staff members with more
energetic leader.
Rewards as well as recognition: Human resource managers of Starbucks provides both
I
llustration 1: Competency Framework

monetary benefits and appreciation to the employees of company against their contribution and
hard work. This help them in order to maintain positive working environment within the
workplace.
Recommendations:
Starbucks have strong presence across the whole wide world and currently expand their
business functions at the competitive marketplace of China. Apart from this, there are various
opportunities for the company which enhance their customer base as well as profitability of the
company at the marketplace. Some of the most essential recommendation which need to be
considered by the management team of the company in order to maintain the sustainability at
market. One of the most essential suggestions is that company needs to reduce their price and
provide affordable pricing services so that every person can enjoy the offerings. Furthermore, it
has also been recommended to the management team of the company to modify or add new
features to their offerings such as green herbal coffee, tea, juices and so on. According to the
current environment, it has been analysed that people become more health conscious therefore it
is suggested to launch health drinks (Shiau, 2016). This as a result assist them in order to
enhance their performance and profitability of the company at marketplace.
Apart from this, company can focuses on their marketing activities with the help of which
they can create awareness about the products and services among people. Top management team
of the company adopt Ansoff Matrix for penetrate the market. Therefore, SMART objectives for
this are going to be developed by the management team of the company are as follows:
 For enhancing the sales by 16%, company focuses on their marketing strategies and
utilisation of available resources in an effective manner.
 To raise the profitability of the company by 15% within next 6 months, managers need to
examine current trends, requirements and preferences of the customers.
Apart from this, it has also been analysed that Starbucks use various communication channels
in order to create awareness about the offerings. It includes Facebook, YouTube, Instagram,
LinkedIn & so on. This as a result develop strong market position of the company and increase
their customer base within short period of time (Mota and et. al, 2020).

Part 2 – Starbucks’ Stakeholder Report
a) Internal & external Stakeholders of Starbucks
Stakeholder Internal/ External Factors for consideration
Users External Consumers are the main
reason for a business entity as
they help them in earning
profit as well as to remain
them at the competitive
marketplace.
Staff members Internal Key Elements of an
organization are their
employees who provide high
quality products and services
to the customers.
Shareholders Internal They are the one provide
contribution to the
organisation in order to raise
their capital along with
market share.
Legal authorities or
government
External For expanding business
functions at international
marketplace, authority and
permission from government
is required.
Suppliers External They are the one who provide
high quality materials to the
organisation so that they can

produce high quality Coffee
and satisfy the needs of
customers. .
b) Human resources procedure stakeholders group
Staff members are one of the most essential and crucial stakeholders for Starbucks.
According to the given case study, it has been identified that higher authorities of the business
organisation motivate their employees by providing them monetary benefits. Furthermore. They
also provide additional benefits to the staff members which includes Insurance service, medical
facility, paid Holidays, vacations and many more. In the present context of Starbucks, managers
provide various advantages to the staff members with the aim of enhancing productivity as well
as retaining existing employees for a longer period of time (Cardoni, Kiseleva and Lombardi,
2020)). It has also been identified that currently Starbucks have almost 2,00,00 employees which
assist them in order to gain success at the market place. Furthermore, it has been identified that
Starbucks have both male and female staff members who belongs to different cultures and
society.
c) Interest & power of subordinates stakeholder
It refers to a matrix which consist of four main factors which highly influence the power
and interest of the staff members working within the organization. In reference to Starbucks, the
matrix are going to be discussed in detail manner as follows:

By examining the whole matrix, it can easily be understood that staff members shows
high level of interest in the functionality and activities of the business organisation. But on the
other hand, they do not have enough power as well as authority within the workplace. As
employees of Starbucks do not have right to take part in the decision making process of the
company (Virtanen and Fifield, 2020). 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
From the above mentioned report, it can easily be understood that in order to maintain
long term sustainability at the competitive marketplace, it is essential for the management team
to identify their internal as well as external environment. With the help of above stated report, it
has been concluded that Starbucks is an organization with strong brand image and customer
base. Both internal as well as external environment influences the performance of business entity
in both positive and negative manner. PESTLE analyses help in identifying the technological
factor provide positive impact on the profitability of Starbucks. Whereas, VRIO framework
analyze that the most valuable element for the company is their staff members as they help them

in attaining their organizational objectives and targets. At the end of this report, recommendation
is also given to the management team that they must adopt different marketing strategies so that
they can create awareness about the products and services among the customers at marketplace.
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