Strategic Analysis of Starbucks: Overview, External Analysis, Internal Analysis

This report provides a strategic analysis of Starbucks, including an overview of the company, external analysis, and internal analysis. It covers topics such as competitors, PESTEL analysis, Porter's five forces analysis, and industry life cycle. The report also discusses the company's resources, capabilities, and core competencies.

Strategy

Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
Overview of Starbucks and its competitors.................................................................................1
External analysis..........................................................................................................................2
Internal analysis...........................................................................................................................5
Recommendations........................................................................................................................9
PART 2..........................................................................................................................................10
Stakeholder report......................................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management is a process of administrating, planning, controlling and operating business
actions and operation with the assist of efficacious plans policies or plan of actions.
Administration of plan of actions is essential and continuing, determining, analysing and
evaluation of all that is needed for an enterprise to attain its goals and objectives. Modifications
in the business atmosphere demand organisation to appropriately evaluate their strategies and
tactics for success and growth (Le Grand, 2018). By using efficacious strategic techniques, the
administration of enterprise analyse the influence of business environmental components over
the business in several term. This written document is supported to Starbucks which is an
American multinational coffee chain and operating its business in different nations of the world
with the help of it coffee products. The report will cover information about internal analysis,
external analysis and stakeholder report of respective firm in appropriate manner.
PART 1
Overview of Starbucks and its competitors
Starbucks is an international company which was incorporated in 1971 by Jerry Baldwin,
Zev Siegl and Gordon Bowker. The firm operate its business globally in estimated 77 nation’s
approx 30,000 locations cross wise the world through its outlets. The organisation provide
employment to 291,000 individuals and they make contribution in running the business activities
and operation with the help of its different products like Coffee beverage, smoothes, tea, baked
goods and sandwiches. The vision of this firm is offering quality products and to be a worldwide
global brand and attract different organisation that would like to share partnership. Starbucks is a
retail company, roaster and brand specialism coffee in the world has been struggling as of
stumbling economy, its own rapid growth and increment competition from cheaper competitors.
The mission of the firm is to influence and nurture the human being-one person, one cup and
one neighbourhood at a time. The motive of this business is to offer quality and finest coffee
item so that it can effectively able to fulfil the needs of its customers and retain them till long
time frame (Corbett, 2019). To attain set vision and mission, the administration of the firm
design some principle like hold diversity as an essential component, heating and delivering of
coffee at its best and provide a effective workplace in form of healthy and safe so that people can
execute their work and responsibilities in appropriate manner. There are several competitors in
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market which generate competition for respective company in term of manufacturing similar
commodities. Costa Coffee, Caffe Nero, Mc Cafe, Dunkin Donuts, KFC, Cafe Ritszza, Cafe
Coffee Day, Coffee Republic and Dilmah Tea etc. are some main rivals of Starbucks which
create rivalry in coffee business sector by providing diverse substitute commodities as respective
venture. By utilising plan of actions like making appropriate human connect and providing better
quality goods to target audiences it deal with the complexities of rivalry in adequate way.
External analysis
It is a process of analysing the impact of external components of business environment that
influence the business of an organisation in positive and negative way (Burgelman, 2020). To
determine the impact of external environmental, the management of Starbucks can implement
PESTEL analysis, Porter’s five forces analysis and industry life cycle model. The explanation of
these tools in reference to Starbucks is as under:
PESTEL Analysis- It is a strategic tool that is utilised by company as business strategy to
analyse the impact of external environmental factors on business of Starbucks. The brief
explanation of this framework is as below:
Political- this factor consider different elements like trade regulation, foreign exchange,
instability and instability of politics, government interference, corruption and many more. The
main political component that impacts Starbucks is about sourcing the raw material and this has
collected a lot of get attention for politicians in the west and from those countries who resourcing
raw material. Due to it, the company wants to stay to social and atmospheric customs. The
company also positively affect by free trade which offer the opportunities to operate business in
diverse nation.
Economical- This factor include diverse factors like exchange rate, tax rate, currency
rate, economic development, unemployment and any more. Brexit is the component that
influences the business of the firm as due to this, situation of inflation arise in the world and this
component dented the profits of Starbucks. It induced customers to shift to cheap alternatives to
international economic recession.
Social- In consist different aspects like culture, value, beliefs and demographical aspects
etc. Starbucks can offer cheap products but it might have to sacrifice the quality. This is the
major social culture challenge that the start up faces (Jervis, 2019). It will enlarge customer base
to include the customers from the lower and the middle income class.
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Technological- It consist different components such as artificial intelligence, research
and management, technological innovation, advance technology and many others. In Starbucks,
the firm utilise effective marketing channels such as social media to generate awareness about
the commodities and services of the organisation (Baylis, Wirtz and Gray, 2018). The company
also provide WiFi facility, to its consumers which assist in adding value to the brand and
retaining target audiences till long term time frame.
Environmental- It include climate, weather, environmental law, carbon foot prints and
many more. In Starbucks, the management of the company appropriately follow all the laws and
legislation of environmental so that the business did not impact in unfavourable form. The
company recycling material notify of cups to provide coffee. Along with this, the green house
emission comes from the electricity in stores and from coffee roasting so that they can save
energy by utilising efficacious lighting in diverse outlets.
Legal- This factor consist diverse laws and regulations that are formulated and developed
by government for appropriate business operations of the venture for a specific business industry
so that firm can operate their business in effective manner without affecting employees and
business environment negatively. The respective company follow effective law of health &
safety law so that they can provide a healthy and safety law so that people can effectively
perform their roles and responsibilities in effective manner.
Porter’s Five Forces Analysis- This framework is framed by Michael Porter to analyse the
rivalry regarding a specific business industry and how it influence the fir in term of creating high
or low level competition. The explanation of this competitive analysis is as beneath:
Threats of new entrants- To operate and establish a business coffee industry, the level of
this threat is moderate because to set up a business in this sector, the company require more fund.
Apart from this, the company also need to consider different laws and legislation like quality,
employment, environmental, hygiene and business etc. that is essential to involve in business
activities and operation when company operate its business as a huge chin of store (Cecchin,
Lane and Ray, 2018). Customers engagement is another factor that create barriers cause of
believe and trust.
Bargaining power of suppliers- There are number of providers in international market
that are provide needed raw material and commodities to manufacture products to Starbucks.
Due to which the force of bargaining power of suppliers less affect the business of this firm.
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Expectations for altitude Arabica coffee that is traded at a premium, rests o the coffee beans
required by Starbucks are available in easy manner. Therefore, the suppliers are in no position to
negotiate with this company or attempt to influence its monetary value.
Bargaining power of buyers-Starbucks is facing strong competition that states a large
quantity of choice for consumers. In current era, individual are well familiar with their needs and
choices so if respective organisation and other firms devise modification in their prices in term of
maximisation then purchasers will simply switch to another brand. So this component of
bargaining power is high and impacts the business of firm (Escobar, 2018). The company offer
unique tastes which help in improving brand loyalty but certain people is less sensitive towards
cost that will continue to purchase from this venture even if its raises its cost and value of
products.
Threats of substitutes- This force is also highly affect the company as all the goods that
are offered by Starbucks have their similar products in marketplace. There are several ventures
that also offer coffee, beverages, tea, juice, drinks and many more at affordable prices which
create competition for the business of respective firm.
Rivalry among existing competitors- These force is highly affect the business of
Starbucks and create high competition due to number of rivals in market like KFC, McDonald,
Dunkin Donuts, Coffee cafe day and many other small and local coffeehouses which provide
effective quality coffee at affordable prices. Many of coffee and beverage being provided by
Starbucks are also served by competitors and there are few commodities that are rare and unique
to this enterprise. So the competition is high for respective business venture.
Industry Life Cycle- It is a procedure that includes four phase in which business operate,
develop, prospect and slump in a business industry. The explanation of this analysis is as under:
Introduction- It is the first phase of this cycle in which the management of a company start
creating awareness about the products and services that are offered by the firm (Lane and
Maxfield, 2018). In Starbucks, in this phase, the administration uses different promotional and
advertisement tools so that they can attract individual regarding taking advantages of coffee
products.
Growth- In this stage, the growth and success starts due to sales of commodities, In
Starbucks, in this phase, increment occurs in sales, customer base and market share etc. monetary
value can stay at its high level at this time if demand for product also high.
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Maturity- In this phase, the market reached the maximum size where business
development is likely zero and negative. Company like Starbucks that are effective in policy and
sales numbers can survive and totally leading the market (Encarnation, 2019). This phase of
industry life cycle attributes high brand awareness, effective distribution and lower activities to
stay rival and new good modified to generate brand distinctiveness.
Decline- It is the last stage of this framework within sales of the company decline to very
low cause of new commodities has immerged, rules and laws modifies, issues with supply of raw
material and high extent of rivalry. When modifications are generates in customers’ needs and
they demand new coffee items they move to other brand and the decrement arise in the business
of the venture.
Internal analysis
Internal environment: The existing resources, capability as well as core competencies help in
building up the internal environment of an entity. It is the roles and responsibilities of manager to
remain updated in terms to explore its competitive power and remain desirable enough to create
long term competitive advantage amongst other rivalries exist in particular geographical market
(Bharadwaj and et. al., 2013). Framework that helps to define the capability of the Starbucks
entity is described below:
VRIO Framework
VRIO framework comprises of deep analysis of resources on the basis of which
Starbucks company can generate long term sustainable competitive advantage. The company
needs to constantly focus on their strength and remain determined in terms to built unique
strategy to compel the behavior of customer and gain competitive advantage within global
market (Shuen, 2018). Basically application of VRIO Framework revolves around analysis of
both strength as well as weaknesses of firm which is measured on continuous basis within
competitive market.
Competencies Value Rare Inimitable Organization
Global presence Yes Yes Yes Yes
Internal ambiance
and atmosphere
Yes Yes No No
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Specialty in making
coffees
Yes No No Yes
Promotional
activities
Yes No Yes No
Pre and post sales
services
Yes Yes No Yes
Valuable: Starbucks as one of the leading companies that make and distribute food and
beverages due to which it has maintained global presence both in developed and emerging
economy in order to expand its market share. Internal environment of Starbucks are uniformly
designed in all regions where similar type of training is provide to the diverse employees so that
they does not comprise on the basis of preparation method and serving style (Azevedo and
Budish, 2019). Expertise in preparing different variants in coffee satisfy the requirement of
different consumer helps the company to remain valuable, for which it even design appealing
promotional strategies (Mithas, Tafti and Mitchell, 2013). Thus, being one of the largest
companies it equally focuses in the pre as well as post sales services to reduce the chances of
dissonance.
Rare: Starbucks deals in the international market due to which only few companies get
privilege to gain and maintain global presence. Immense attention is given to maintain the
internal atmosphere so that visitor feels lively, relaxing and can comfortably spend their time.
The internal staff usually asks for the feedback of the customer so that company can always
move ahead by fulfilling the scope of improvement.
Inimitable: Resources or capability which cannot be created by other rivalries of the
Starbucks including its large global attendance as huge operation investment is required to build
such strong presence. By effectively utilising the advantage of economies of scale company after
a long course have successfully maintained the unique position. The promotional activities of
company which include use of both digital and traditional media appeal the interest of the
customer and act as a stimulus based on which favorable responses are made.
Organization: The internal manager of company basically focuses on coming up by
number of options in their menu on the basis of changing taste and preferences of customer
leading to specialty in making the coffee (VRIO Analysis, 2019). Along with that the global
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presence and involvement in building pre and post sales services leads to long term sustainable
development.
Value chain analysis
It refers to the framework under which business identifies diverse activities and creates
values in terms to gain long term competitive advantage successfully. It involves the critical
analysis of different activities based on which additional sources are generated to gain
competitive advantage. The description of Starbucks company on the basis of its primary and
secondary activities are listed below:
Primary activities Distinctive
competences
Supporting activities Competitive
advantages
Inbound logistic Efficient supply chain Procurement Decreased cost
Operations Production and
operations methods
Technological
advancement
Enriched efficiency
Outbound logistics Desirable delivery of
product
Human resource
management
Improved Brand
equity
Marketing & sales Promotional activities Organizational
infrastructure
Better quality product
Services Pre as well as post
sales services
Primary activities
Inbound logistic: Within inbound logistics the firm is required to share a significant
relationship with the supplier so that they can access the material required to prepare the
commodities within the required time. It refers to the adequate flow of material due to which
company need not to compromise in terms to fulfill the demand of wide customers. The manager
of company focuses to appoint desirable coffee producer from the countries like Asia and
America that produces standard quality of product which are then packed and transported to the
distribution centers.
Operation: The company basically operates in more than 60 countries which comprises
of America, Europe, Africa as well as Asian market. Diverse retail stores that are internationally
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located help company to generate immense amount of revenue and continuously expand the
share of licensed stores (Oestreicher-Singer and Zalmanson, 2013).
Outbound Logistic: Most of the products of Starbucks are sold out from their retail stores
which are effectively delivered to customer on the basis of their requirement. Also the company
comprises of specific intermediate due to which it manages to share significant relationship with
them so that they can reach out to each and every needs of the customer.
Marketing and sales: Aggressive promotion techniques of an organization have taken
Starbucks into the new direction where they remain more passionate in terms to launch the
product on the basis of desirable changes. This generates the curiosity amongst potential
customer in terms to visit the store and explore different categories of food and beverages.
Services: The company has never compromise in terms of the quality due to which it has
distinguished its market for which it simply set premium prices. Efforts are taken to maintain the
favorable responses of customer both during the time of purchases as well as after delivering of
services. This helps to generate positive word of mouth publicity.
Secondary activities
Infrastructure: It comprises of different department like marketing, finance as well as
management which all co-ordinates with one another in order to carry out the functioning of an
organization and maintain systematic infrastructure (Iacob, Quartel and Jonkers, 2012).
Coordination and cooperation amongst inter department lead in the development of desirable
infrastructure.
Human Resource Management: The main reason of the success of company is the
commitment of workforce so the Human Resource Department exclusively designed benefit as
well as incentive policies for the convenience of workforce. Adequate training and development
session are provided to constantly update the knowledge and provide desirable work culture
where employees can efficiently work for long tenure.
Technology development: Starbucks has remained well known company that has always
used innovative technology in order to maintain consistent taste as well as quality to connect the
preferences of customer.
Procurement: Agents of Starbucks company procure raw material from different
countries where they find suprement quality of the products like finest coffee beans are mainly
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ordered from Latin America or Africa. They maintain desirable relationship with the suppliers so
that they get finest raw material all over the globe.
Resources, capabilities and competencies framework
This Framework basically designed to focus on the internal environment of the firm in
order to boost up the performance of Starbucks. Description of these elements is determined
below:
Resources: Resources are both in tangible or intangible form which include cash counter,
computer system, coffee machine, production equipment, furniture, goodwill and skill of the
employees working within Starbucks. It too includes the human resources that comprises of
employees who participate in the internal functioning as well as distributor and supplier that act
as a intermediate to accommodate wide requirement successfully.
Capabilities: It reflects the strength as well as ability of the company in order to acquire
particular position within the market. Starbucks has consistently maintained its position and
addressed significant amount of change successfully (STARBUCKS RESOURCES AND
CAPABILITIES, 2019). Availability of the wide products has appeal the interest of customers
with different preferences.
Competencies: The resources as well as capability of the entity help in building the core
competencies that help organization in possibly setting unique image. In general the company
offer premium services still customers less likely to switch for other rivalries.
Recommendations
On the basis of above displayed information there are certain recommendations made for
Starbucks by which in can continuously maintain long growth as well as development. To
constantly maintain the interest of customer base smart objective is devised that leads to the
possibility to gain core competencies over other rivalries. Some of the suggestion is displayed
below:
 Starbucks can more focus on the digital technology based on which they can design the
campaigns and should place online order as well. Usage of social media and other platform
will help to generate immense amount of traffic leading to increase in conversion rate. Based
on this technique profit should be increased by 15% within 8 months.
 Focus needs to be given to launch the desirable product or carry out sales promotion on the
basis of which internal staff should maximize the customer base by 10% within upcoming 6
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months. Existence of this process will help the company to generate additional revenue and
constantly capitalized wide market successfully.
PART 2
Stakeholder report
Stakeholders is the group of persons or individuals who have an interest in the performance
of an enterprise and how it uses its resources, including employees, customers and shareholders.
Stakeholder is the person or organization who has vested interest in the activities and decision
making of a business (Blakeman, 2018). Stakeholder only have interest in the business, they do
not own that business. They refer to different segment in the society who have direct impact on
business decision making process and can directly impact the marketing performance of
business. There are two types of stakeholders internal and external stakeholders. Internal
stakeholders involve employees, managers and shareholders whereas, external stakeholders
include suppliers, government, and customers. To point out the internal and external stakeholders
of the company Starbucks manager analyze the stakeholders which is discussed below –
In order to perform corporate social responsibility activities in effective and proper manner
Starbucks need to concern this with stakeholder groups. The main stakeholders of Starbucks are
employees, customers, government and environment
Employees - The most important assets of a company are their workforce or employees.
They provide high quality service to customers and increase the productivity and profitability of
the company. Starbucks employees play an important role in company’s CSR activities. As
stakeholder workforce request good working environment, job safety and security, and desirable
wages. Starbucks give minimum wages to employees in some cities, for this company need to
improve their performance in addressing employees as stakeholders. Company can also upgrade
their corporate social responsibility activities by addressing some problems of employees.
Customers – Customers are the most important stakeholders of the company. Only because
of customers company earn higher profits. Customers are the top most stakeholder of Starbucks.
Customers of Starbucks want good quality service and products like coffee and other beverages
(Li and et. a.l., 2018). Starbucks always take care of this stakeholder group they provide friendly
and comfortable environment and high-quality coffee to their customers.
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Suppliers – Starbucks suppliers include wholesale supply firm and coffee farmers. The
major interest of this stakeholder group recompense and effective demand from Starbucks.
Farmers main motive is to increase coffee yield in order to generate more revenue (Bharadwaj
and et. al., 2013). Starbucks perform various corporate social responsibility program in the
interest of this stakeholder group. In order to increase the supply chain company, adopt supply
chain diversity program. They also have a special program for their farmers Coffee and Farmer
Equity(CAFE) program to prove that they paid fair wages to farmers.
Investors – Starbucks considers their investors as a stakeholder, companies’ investors have
interests in high financial performance of the company. Rapid growth of Starbucks shows high
financial performance in marketplace. In 2007 Starbucks suffered loss but now the company is
on growth path with this they are able to satisfy interest of this stakeholder group.
Government – Starbucks should address the interest of government as stakeholders,
considering the strong image and global presence of the company. Starbucks follow all the rules
and regulations of government. Starbucks was criticized in Europe for tax bypassing. In order to
exploit tax advantages company, use a network of locations in different European countries.
Company improve their corporate social responsibility in address to this stakeholder group.
In address to the interests of most of its stakeholdersStarbucks has high corporate social
responsibility performance (Mithas, Tafti and Mitchell, 2013). Starbucks satisfy their most of the
stakeholders like customers, suppliers, investors and employees. But still company need to
improve their corporate social responsibility to more satisfy their shareholders.
CONCLUSION
This has been summarised from the preceding define data and information that business plan
of actions are effective for the improvement of a venture. There are several strategic tools and
techniques that are utilised and implement by management of company to monitor the impact of
internal and external business environment over the business activities and operations of
enterprises. Different strategic tools like PESTEL, Porter’s Five Forces analysis and industry life
cycle help in offering information about macro environmental factor’s impact over business,
competition and status of commodities in market. In internal analysis, VRIO, Value Chain and
competencies framework assist in monitoring the impact of intrinsic atmospheric factors over
business. Stakeholder analysis also helps in providing information about the main stakeholder of
the firm and determining the contribution in development and success of the company.
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REFERENCES
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Shuen, A., 2018. Web 2.0: A Strategy Guide: Business thinking and strategies behind successful
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Blakeman, R., 2018. Integrated marketing communication: creative strategy from idea to
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Online
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https://pestleanalysis.com/pestle-analysis-of-starbucks/ >.
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https://www.porteranalysis.com/porter-five-forces-analysis-of-starbucks/>.
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https://notesmatic.com/2019/03/starbucks-resources-and-capabilities/>
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<https://sites.google.com/site/starbucksanddunkindonuts/business-strategy/vrio-analysis>
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