Strategic Management Case Study: Analyzing Starbucks' Business Ops

This case study provides a comprehensive analysis of Starbucks' strategic management, tracing its history and growth to its current multi-million dollar status. It includes a SWOT analysis, Competitive Profile Analysis, and BCG matrix to evaluate Starbucks' market positioning. The report identifies key issues such as supply chain management, product differentiation, and the impact of rapid expansion on product quality and brand image. It also addresses challenges arising from changing consumer lifestyles and increasing competition. The analysis explores Starbucks' strengths, weaknesses, opportunities, and threats, offering insights into how the company can sustain long-term success and improve its strategic operations, particularly in areas like marketing, supply chain, and product innovation. Desklib offers this case study as part of its collection of solved assignments and study resources for students.

Starbucks Strategic Management
Name of the Student:
Name of the University:
Author Note:

Executive Summary
The purpose of this report is to analyze the current business operation of Starbucks, following
a brief study of his history and growth. The report will include a SWOT analysis,
Competitive Profile Analysis and BCG matrix for a better understanding of Starbucks’
positioning in the market today. Other factors like identifying key issues and current
performance of Starbucks will also be analyzed in the report.

Table of Contents
Introduction................................................................................................................................4
Discussion..................................................................................................................................5
Swot analysis of starbucks.....................................................................................................5
Strength..................................................................................................................................5
Some of the main Issues that Starbucks need to address:....................................................10
Competitive profile matrix of Starbucks..............................................................................11
Porter Five Forces Analysis.................................................................................................11
BCG Marketing Mix Starbucks...........................................................................................13
Current Situation of the Firm:..............................................................................................15
Conclusion................................................................................................................................17
Recommendations....................................................................................................................18
Appendices...............................................................................................................................20

Introduction
The case study deals with the operational management of starbucks and its history of
establishing itself in over fifty countries as the multi-million dollar coffee shop. The study is
important to analyze the core strengths and short-comings of Starbucks during its initial years
and the strategic management by which Starbucks was able to overcome most of their
problems. Starbucks’ growth and expansion lead to many positive and negative outcomes,
however the report also makes it explicit how Starbucks regained it business after suffering
blows during its collaboration with Kraft. Areas of concern regarding the operation of
Starbucks, for instance the inadequate supply of raw materials and other resources needed for
the smooth functioning of its outlets, inadequate training session of its employees, lack of
product differentiation, huge incurrence of loss in a number of outlets that failed to sale its
products in adequate quantity, steady decline in the popularity of Starbucks whole bean
coffee sales. The case study indicates here a poor supply chain management. For the case
study, sufficient amount of information has been retained about Starbucks popularity and
fame within the coffee lovers, however the case study will explore in depth the causes of
starbucks’ failure after expanding its business comprising of a number of countries.
The report will address the issues of poor supply chain management, negative
outcomes of product similarity, lack of technological advancement in starbucks stores, failure
to study market demands, neglecting the quality of products as a consequence of over-
expansion of outlets beyond the limited resource capacity of Starbucks. A comprehensive
study would be carried out assessing the strengths, weakness, opportunities, threats of
Starbucks that would be helpful in understanding the best possible ways Starbucks can
sustain in the market in long-run. The areas will therefore highlight the negative aspects
taking spontaneous business expansion without prior consideration.

Discussion
Swot analysis of starbucks
Strength
Brand Recognition of Starbucks: according to the case study, starbucks have created a
massive appeal with the taste of its coffee and has restored America’s faith in coffee again.
As a result, Starbucks have expanded its geographical presence creating a strong brand image
in the market. Starbucks has equated its brand image with rich taste of coffee and aristocracy,
strengthening its competitive edge.
Location and Availability: owing to its market presence, starbucks has huge advantage
compared to any other coffee stores in the world. The case study stated that it has 27,339
stores pan world creating a distinct niche in market.
Aesthetic Pleasance: starbucks offers “the third place” to the customers, a leisurely place
somewhere between going to work and returning home. Starbucks’ music CDs gained huge
popularity amongst the audience leading to a sale of 32 million copies as stated in the case
study. It has the potential of staying the market due to the strong sense of aesthetic
satisfaction and leisure that it provides its customers with.
Weakness
Expensiveness: starbucks have to deal with its extravagantly priced coffee, as the case study
indicates, a number of coffee lovers tend to avoid Starbucks due to its expensiveness. This is
can hinder sales growth in economically developing countries especially with the growth of
cheaper coffee outlets.

Lack of resources: the lack of resources of starbucks ultimately resulted in the poor
management of the number of coffee outlets that Starbucks had started with. The shortage
further led to poor quality operation and closing of number of outlets.
Negative Image: similar to a number of other corporations, starbucks too had come under the
scrutiny of negative criticism on its huge expansion. The case study mentions that by the year
1996, Starbucks had established over 1,000 stores resulting in criticism and lampooning from
newspapers and business magazines.
Over-crowding: in United States, Starbucks operates through 8078 stores therefore resulting
in overcrowding of Starbucks stores1. This could have a negative impact on the reputation of
Starbucks in the long run.
Lack of Uniqueness: starbucks specializes in farppucinos, cookies there is lack of
distinctiveness in this section which can provide the other coffee shops plenty of
opportunities over Starbucks.
Opportunities:
Expanding Market: one of the many reasons accounting for its expansion is the unique taste
of Starbucks coffee when compared to the other brands provided by America. Starbucks has
made its entry into many countries and has created a good niche in the international market.
1 How Starbucks Plans to Make an Impact by 2020 and beyond, Starbucks Newsroom [Web
document] (2017), < https://news.starbucks.com/news/starbucks-2016-global-social-impact-
report >, accessed 9 April 2018.

Technological advancement: owing to the amount of expansions, Starbucks with the help of
technology had made the process easier for customers to buy their products leading to a boost
in sales.
Brand Image: over the years, Starbucks had taken a number of strategies to expand its brand
image and created a loyal customer base who equated Starbucks coffee with class and
aristocracy. This has provided its rival competitors with a stiff market competition.

Threats
Fierce competitors: the cost of Starbucks coffee can be considered as one of the threats in its
business accentuated by the rise of rival competitors across the globe. Customers have the
option of switching to cheaper options compared to starbucks coffee.
Moving away from brand: Schultz’s decision to provide Starbucks products can have a
negative impact on company’s brand image. This is all the more true in a time Starbucks is
facing a strong reputation problem and failing to attract customers to its stores due to the
current political turmoil going on in several countries like America.
SO- Starbucks should concentrate on its product mixing and a well-coordinated management
of its different outlets.
To offer better brand recognition to its products Starbucks can also partner with other brands
for market penetration.
WO- should introduce cheaper priced products to expand its current number of customers
and prevent fall in popularity due to the rise of cheaper coffee brands.
As starbucks has a already built a strong brand image in US, it should now focus on market
expansion internationally.
ST- owing to its presence in a number of developing countries, with the introduction of
cheaper products it can expect a hike in its sales.
Starbucks should primarily identify the economic condition of the country as economic
instability can be a huge reason for business mal-operation for Starbucks.
WT- development of better advertising strategies in order to bring in product innovation and
distinctiveness from its rival firms.

To deal with the growing number of competitors it has to diversify its items after a careful
study of the market in order to bring in distinctive products than what is being already
offered.
(Appendices 1)
S
 Strong brand recognition
 Location and availability
 Aesthetic pleasure
W
 Expensiveness
 Overcrowding
 Lack of resources
 Lack of uniqueness
O
 Expanding Market
 Technological
Advancement
 Brand Image
T
 Fierce Competitors
 Moving away from
brand

Some of the main Issues that Starbucks need to address:
1. Change of lifestyle pattern amongst its customers has been a major reason in
declining Starbucks sales.
2. Starbucks has never renewed its inadequate marketing strategy resulting in its gradual
loss of customers as well as reducing the old customer. Constant innovation in
marketing sector is considerably lacking.
3. The expansion of outlets has resulted in the decline of the quality of Starbucks
products creating a negative brand image. The management is responsible for failing
to address the core issues resulting in the failure.
(Appendices 5)
Figure: Growth Chart
Source:

Competitive profile matrix of Starbucks
Competitive analysis is essential in the evaluation of external factors for starbucks and
can be understood with the tool of Porter’s five forces’ model for a thorough understanding
of the current scenario of Starbucks’ in the market. The analysis will provide a
comprehensive overview of the market structure.
Porter Five Forces Analysis
Threat of New Entrants in the Market: Moderate. The saturation level of the market is
moderately high and there is a scant presence of new competitors in the market. Rival
competitors with cheaper options and better quality product can be a stiff competition to
Starbucks.
Threat of Substitutes: High. Other suitable substitutes to coffee could be health drinks and
beverages. The primary substitute products are the caffeinated drinks coming from brands
like Pepsi and Coca-Cola2. Consumers have no switching costs and therefore this is one of
the major threats of Starbucks. Another substitute product that can be considered as a threat is
the rise of homemade products that many people are preferring over Starbucks due to lifestyle
changes.
Bargaining Power of Buyer: Moderate to Low. Moderate because of the premium quality
coffee that Starbucks is known for producing but this is highly dependent on the consumer
base. Customers can both switch to lower costs or choose expensive products for better
quality of taste.
Bargaining Power of Suppliers: Low to moderate. Owing to its brand image Starbucks have
the power to take advantage of suppliers. It has occurred a higher control on the supply chain
2 Leduc C, How Starbucks fought for its life without losing its soul, 1/58,(2017), pp. 4-10.

and therefore has the choice of choosing from a number of suppliers. Starbucks has started to
collaborate with the coffee-bean farmers on a direct basis and is therefore at a strategic
position to make strategic decisions. It is therefore that the bargaining power of suppliers can
be considered low due to the size and brand image of the Starbucks coffee business.
Existing Competitive Rivalry: High to Moderate. It is a monopolistic market where both
Starbucks and its rival competitors have considerable amount if market share and the entry
and exit barriers are low. However, Starbucks still has maintained a competitive based due to
the premium quality coffee that Starbucks produces has given them a competitive advantage
over rest of the coffee brands.