Comprehensive Business Report: Starbucks' Performance and Strategy

This report presents a comprehensive business analysis of Starbucks, a global coffeehouse chain. It begins with an introduction to Starbucks' mission, competitors, and the report's objectives. The first part of the report delves into the external environment using PESTLE and Porter's Five Forces ...Read More

Starbucks Business
Report
Table of Contents

INTRODUCTION...........................................................................................................................1
Part 1 – Starbucks Business Report ................................................................................................1
Introduction.................................................................................................................................1
External Environment Analysis..................................................................................................2
The Internal Environment...........................................................................................................5
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business strategy can be defined as a collection of different plans that are formulated in
order to achieve growth and development of an organization (Atzori, Shapoval and Murphy,
2018). Starbucks which is a coffee house chain that was founded in 1971. The company
missions to establish itself as the premier provider of the finest quality of coffee worldwide along
without compromising on the quality of its products. The company was named after the first
mate in the famous novel Moby Dick. McDonald's and Dunkin' Donuts are some of the
company's competitors that target Starbucks' customers by offering high quality coffee and
coffee drinks. This report primarily aims to present a business report on Starbucks and covers
recommendations and how can the company improve its overall efficiency and performance.
PART 1 – Starbucks Business Report
Introduction
Starbucks is American coffee house chain, founded in Seattle, Washington. The company
is the leading retailer and marketer for coffee and is recognized worldwide. In addition to
offering a wide variety of coffees and caffeinated drinks, the company also sells teas, pastries
and other items of food, coffee and tea related items etc. (Cachia, 2017) Starbucks also sells its
products through its website and via mail. It also sells its coffee to various restaurants and cafes,
airlines and hotels at wholesale prices. Various bottled Starbucks coffee drinks can be seen for
sale at various supermarkets and drug stores. From operating as a single store to operating
globally Starbucks has come a long way. Starbucks today has pioneered in becoming a leading
coffee producing brand globally. The company has exceptionally skilled staff that offers high
class and excellent service with a classic experience provided to the customers through
ambience, music playing at the background that is especially chosen to please the customers.
People can come to a Starbucks out can can catch up with their work or just meet and chat. The
company is also committed towards working for the environment in order to reduce harm that is
done to it. Starbucks lives by its values of creating a warm culture which gives the sense of
belongingness.
In the year 2012, coffee accounted for 37% of all the cups of coffee consumed in the
United States. Starbucks has been able to maintain a leading position in its home market by
dominating the local coffee competitors like Caribou coffee and Peet's coffee and tea in the
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country but in the recent years brands like McDonald's and Dunkin' Donuts have began
targetting Starbucks' customers by offering high quality coffee and coffee drinks. The
competitors were able to pose a big threat to the company as the number of existing coffee stores
is increasing day by day. Besides this, Starbucks face intense competition in mauny international
markets.
Founded in 1992, Caribou coffee has operations in more than 20 states and many markets
internationally (Campbell and Helleloid, 2016). The company sells only speciality coffee, coffee
brewing supplies and baked goods with outlets designed like mountain lodges. How ever, like
Starbucks Caribou coffee also sells roasted coffee to many grocery stores.
On the other hand, McDonald's came up with the concept of Mc Cafe – a coffee outlet
that would sell high end coffee similar to Starbucks. With a positive response from the
customers, McDonald's also introduced special coffee drinks that are now sold at various grocery
stores and supermarkets. Dunkin' Donuts is a globally known Donut shop that has operations in
approximately 30 countries. Though the company offers coffee, it did not start offering espresso
drinks until the year 2003. All these brands have proved out to create a highly competitive
environment for Starbucks.
External Environment Analysis
External environment analysis refers to an examination and evaluation of all the macro
factors like political, economic, social, technological, environment and legal factors that
influence the overall growth and performance of the organization (Chowdhury, 2016).
PESTLE Analysis of Starbucks
Despite being a global leader in coffee production business, Starbucks should constantly
evaluate its macro environment in order to remain updated regarding what influence can the
macro factors pose on the functioning of the company. Through this, the brand can continue to
grow and succeed in a highly competitive market. Starbucks has already made efforts to remain
competitive and to sustain in the market. The PESTLE analysis of Starbucks is described below -
 Political Factors – Starbucks mainly operates in producing high quality coffee. Hence,
the main raw material required by the company is coffee beans. Political factors like
interest rates, export policies of different countries have been posing issues to procure the
raw coffee beans. Also, due to an increase in the rates of same, Starbucks recently had to
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sacrifice a portion of its profit margin which as a result decreased company's productivity
in the US.
 Economic Factors – Economic factors generally relate to the economic conditions of a
country or a region (Cohen, 2017). Some examples of economic factors are various
economic policies, recession and inflation. These factors impact the functioning of the
company negatively. Also, Starbucks had to face high tax rates in Japan due to which
there were several impacts on the functioning of the company there. The currency rates
have also impacted the operations of the company.
 Social Factors – Factors like age and gender of the population, levels of disposable
income also pose significant influence on Starbucks both positively as well as negatively.
The standard of people is constantly growing which results in people spending more
money on high quality products. But on the other side, people are also becoming health
conscious and prefer having green tea. This has to some extent resulted in a decline in the
company's functioning.
 Technological Factors – Starbucks makes use of the latest technology in order to
provide the customers with an improved and enhanced service (Easton and Sommers,
2017). The company has been successful in implementing and using the latest trends of
technology in the United Kingdom where it has also received a positive response from
the customers.
 Environmental Factors – Having operations in China, the company is bound to using
only paper bags and cups as the country has strict laws against the usage of plastics. Also,
since the water quality isn't good in China, Starbucks also has to reduce the wastage of
water to a significant amount. All of this depends on how well the company is able to
manage all of its operations.
 Legal Factors – Starbucks has a special team that is responsible for looking after various
rules and laws in different countries as the company has operations in various regions.
The company has to manage its operations in Brazil due to trade regulations set by the
country.
5 Forces Analysis
Starbucks, being a well recognized international brand deals with several external factors
that are components of Porter's 5 Forces Model. This analysis provides information regarding the
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impact that the 5 components have on Starbucks and the Speciality Coffee Cafe industry. An
analysis of theses factors is explained below -
 Competitive rivalry or competition – The cafe industry is among the most rapidly
growing industries in the world and therefore has a high rivalry among the competitors
(Gray and Huels, 2018). This can prove to be a threat for Starbucks as the company is
expected to become more competitive in the coming years.
 Bargaining power of the buyers/ customers – In Speciality Coffee Cafe industry there
are chances of availability of substitutes being high, therefore the customers have a
choice of choosing from a large number of options and bargain more. This can act as a
threat to the company as Starbucks will then have to reduce the prices of its products
which can in turn impact the profitability of the company.
 Bargaining power of suppliers – The bargaining power of suppliers in the Speciality
Coffee Cafe industry is low as there are a number of independent suppliers operating in
the market that can be easily made the substitutes of existing ones. Large overall supply
can be a factor that makes the bargaining power of suppliers low.
 Threat of substitutes – As explained, the Speciality Coffee Cafe industry has a high
rivalry among the competitors and a company can be easily replaced/ substituted by
existing companies. This reflects that there is a high threat of the company getting
replaced by other companies in the market. Therefore, the company will have to market
itself aggressively. If an appropriate action is not taken then, there are chances that people
may lose their loyalty towards Starbucks and shift towards other brands.
 Threat of new entrants – There is a moderate threat of new entrants entering into the
market and posing as competition to Starbucks as this requires high amount of money and
skills to be able to sustain against the new entrants of the market (Gupta, Nagpal and
Malik, 2018). This can act as an opportunity as the company can introduce new products.
This will help the company gain a competitive advantage against the competitors as well
as develop a unique brand image.
Industry Life cycle Model
The life cycle of an industry comprises of various stages for the development of the
products. A life cycle can last from weeks up to years and this depends upon how popular the
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company's product is. The Speciality Coffee Cafe industry is an area where the popularity of a
product increases as the its life increases. The life cycle model of this industry is describe below-
 Introduction stage – This is the stage where new products are introduced within the
industry and the main focus is kept on increasing the revenues (Hutt, 2016. The
organizations do not pay their primary attention to making profits and there are chances
where some companies may even face losses due to low prices of their products. In
context to Starbucks, the company also has introduced products with low prices so as to
survive against competition. This stage is generally characterized through negative
profits because of high costs involved in advertising etc.
 Growth stage – During this stage, the companies operating in the Speciality Coffee
Cafe industry start growing and the brand also starts getting recognized by the people.
The companies are able to earn small profits as their cash and revenue increases
dramatically. Starbucks has increased the prices of its products in order to earn small
profits. The companies can either increase their product prices or reduce or lower down
the prices in order to attract customers.
 Maturity Stage – Maturity stage is the most profitable of all the stages for a company
(Jo and Kim, 2017). The companies at this stage, including Starbucks price their
products at high rates and are able to generate enormous amounts of profits. The
company is currently operating in this stage of its life cycle. The features of this stage
are high brand awareness among the people, wider distributions across various regions,
product modifications etc.
 Decline stage - This is the last stage of the industry as in this stage the revenues and
profits of the company start to decline. As a result, the companies lower their product
prices and this is why the profits start going down. At this stage, the companies either
shut themselves down or come up with new products in order to sustain themselves.
The Internal Environment
VRIO ANALYSIS
Resources Valuable Rare Inimitable Organised
Coffee Brewing ✔ - - -
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Equipment
Product Quality ✔ ✔ - -
Employee Benefit
Strategies
✔ ✔ ✔ -
Employees ✔ ✔ ✔ ✔
By considering the above analysis, there are several resources which are related with an
organisation. However, this analysis is important in order to showcase that which of these are
valuable, rare, imitable and organised. Hence, this analysis is mentioned as under:
Valuable:
 Coffee Brewing Equipment: This resource is valuable as it helps the company in order to
maintain its image and goodwill in the market as same equipments does not have with
each and every organisation (Peterson, 2016). It also help in enhancing the global image
effectively and efficiently in order to make sure the easy entry in potential market.
 Product Quality: The quality of product is valuable for company as it help in order to
improve or develop the customer base by offering them qualitative products by their
essential research and development and also analysing the needs and requirements of
customers in order to fill the gap of market.
 Employee Benefit Strategies: These strategies are valuable as it helps in order to improve
the performance of employees and also beneficial to retain the talented employees. It also
helps in order to enhance the competitive edge by there repeated enhancements and
additions in portfolio of the products of an organisation:
 Employees: This resource is much responsible in order to develop the offerings and
market ans sell their products in the respective market and marketing themselves is quite
valuable for the company.
Rare:
 Product Quality: The quality of product is also rare for the company as it helps in
developing the customer base and also ensure the effective supply of rare equipments
which helps in providing enhanced efficiency and effectiveness as the market is rare
(Schoja, 2016).
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 Employee Benefit Strategies: These strategies are rare as it is beneficial for employees
only which is not concerned by every company. As Starbucks always keep their
employees motivated with appropriate strategies as it helps in order to retain them and
improve their overall performance.
 Employees: This resource is very difficult in order to search or find the set of individuals
who have same kind of dedication and skills as these kind of employees are present in
Starbucks because they take care of their employees because of their servant leadership
style which is used by the company.
Imitable:
 Employee Benefit Strategies: The strategies which are adopted by the company are
imitable as these are prominently registered under the guidelines or employees benefit act
and adopted by company in order to enhance the inimitableness in all the new functions
which are introduced by the company (Steinfield and et. al., 2019).
 Employees: The employees of the Starbucks are imitable because of their skills, talent
and competence which cannot be copied by any other organisation.
Organised:
 Employees: The manpower of Starbucks is effectively trained and developed as by using
advanced and updated technology and important in the equipments of training. It helps in
enhancing the scope of organising the employees of Starbucks in working in the company
and helps them in developing better products and services.
Value Chain Analysis
A value chain analysis is a tool used in strategic management to evaluate and examine
internal activities of a firm and is divided into primary and support activities (Kang and
Namkung, 2018). Value chain analysis for Starbucks is explained below -
Primary Activities Inbound Logistics : Starbucks produces its own unroasted and green beans from farms
that are owned by the company. These are then transported to the sites where they are
stored, roasted and packaged. The beans are then transported to logistics centres. Operations : The company has operation in more than 75 countries worldwide and
approximately 24000 stores globally. Some of these stores are company operated while
others are licensed.
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 Outbound Logistics :There is almost no involvement and presence of mediators as the
products are sold in their own and licensed stores only. Although, the company has come
up with special coffee products which will be sold at some leading retail stores. Marketing and Sales : Starbucks is known to invest a considerable amount of money in
maintaining the high quality of its products and a high level of customer service rather
than marketing aggressively.
 Service : The company aspires to build the loyalty of the customers through its in store
customer service. The company is known for providing high class customer experience to
the people who visit its stores (Kimball, 2016).
Support Activities Infrastructure : Infrastructure includes various departments like finance, management,
legal, finance etc. These departments help in keeping the Starbucks stores operational
throughout the year. Human Resource Management : The committed workforce at Starbucks is counted
among the key components that have helped the company in gaining the success and the
level it has reached today. The company is famous for treating its employees in the best
way possible as compared to the competitors. This has proven to be of advantage for the
company in retaining employees which indicates that the company has a well managed
human resource department (Koh, Singer and Edmondson, 2019).
 Technology Development : Starbucks is among the companies that are known for their
efficient and effective use of technology. The company not only uses technology for
improving its functions but also to connect with the customers. The company has a
platform wherein customers can share their experience, complaints as well as suggestions
easily.
Resources, Capabilities and Competencies framework
Starbucks is known for providing its customers with the best quality products. The
company sources its raw material from the best suppliers of the world. The company has various
valuable resources that have helped the company in maintaining its product quality till date.
Starbucks uses costly equipment that helps in saving time as well as in maintaining a consistent
taste of all its products (Krishna, 2018). The products that are sold by Starbucks are key
components that generate revenue and profits for the company. The company sells only the finest
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quality coffee, coffee beans and coffee drinks around the world. One of the main resources of
Starbucks are coffee beans. Thus, the company has its private farms where the coffee is grown.
Also, the employees, farmers, cashiers are considered as the company's major resources.
The company finds pride in the atmosphere, products and its overall structure. The
goodwill and reputation of Starbucks is what keeps bringing the customers back to it. The
company has been able to maintain a reputation of a brand that sells high as well as premium
quality products that it has built over the years. The company uses a marketing strategy which is
based on the company logo as well as store recognition. Any competitor of the company will
take a considerable amount of time to reach up to the level of Starbucks. With high importance
given to its customers, customers who visit the company outlets know that they will be treated
well.
The major competencies of Starbucks include its unwavering attention towards the
quality of its products and providing exceptional experience to its customers. The company is
constantly involved in advancements of its products so as to attract more customers and retain
the existing ones. The company uses fresh ingredients in their products and not old ones. The
company has come a long way from offering limited products to now offering a variety of coffee
drinks like Lattes, Frappucinos etc. The company has the largest network of outlets all over the
world. Also, maintaining a good and healthy relationship with its suppliers has helped Starbucks
in retaining them for years now. Lastly, the company controls every major step that is involved
in its business and can influence its overall functioning (Paik, Kwon and Chen, 2017).
Recommendations to improve Starbucks performance over the next 3 years
From taking various initiatives to having plans of expanding in the Asia Pacific region,
Starbucks is among those brands that are constantly working towards their growth and
sustainability. The company should not only focus on expanding itself but also change its overall
store mix. Like besides opening more dine-in stores, the company can focus on opening more
drive through outlets in the outer regions of different countries. This will help it in gaining a
competitive edge and compete with its competitors. Also, with the coffee market growing
rapidly, Starbucks should make efforts in making itself the most preferred coffee shop
throughout the world by elevating the customers' experience by making it more personal and
customized. This will help it attract and lure more customers as well as retain the existing ones.
Most food and beverage outlets are taking advantage of the lunch hours of the employees in the
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corporate sector. Starbucks can also enter this segment by offering more varieties of products on
their menu in order to reach out to an increased segment of potential customers.
Being a market leader in the coffee industry, Starbucks has an opportunity to influence
and leave an impact on people through conducting more corporate social responsibility activities.
The company should come up with the decision of purchasing 100% authentic coffee that is
sourced ethically. This will help gain people's trust and thereby build a brand that is sustainable
and focuses on doing only good to the environment as well as giving back to the society.
Establishing partnerships with new firms and organisations will help Starbucks expand itself as
well as in creating and maintaining a long term relationship with other brands. Mobile payments
today have become a driving component for many organizations, hence Starbucks can partner up
with digital payment firms and improve the payment experience of its customers. This will help
the firm in driving the spending behaviour of its customers thus increasing its overall sales. Since
the most profitable market for the company- the US market is experiencing high traffic, he
company should look at the Chinese market to be its major driver for growth. Also, the company
should come up with new branding strategies as this will help it recreate and rebrand itself.
PART 2
Stakeholder Report
Stakeholder analysis is a report which is useful in order to assess the system the potential
changes in order to link with the relevant and interested parties. It is concerned with the
organisational project and include internal people and teams and involve them in decision
making. It is a kind of method which is used in order to analyse the impact of external
environment on an organisation and its products are stakeholders analysis. This matrix is
mentioned as under:
INTEREST LEVEL
POWER LEVEL
HIGH LOW
HIGH Employees, Shareholders Government
LOW Customers Suppliers
As discussed above, there are two effective and ineffective variables which need to be
understood in the context of assessing the stakeholders. The first variable is associated with
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power which describes the authority whereas the second variable is concerned with the interest
and also reflects the that how the stakeholders get affected from the decisions of company and
strategies. Therefore, out of all this valuable stakeholders are discussed above and there analysis
is discussed as under and their impact on the organisation. Employees: These individuals are the most concerned stakeholders of an organisation. In
the context of Starbucks, the power of employees are high because of their organisational
culture in the company. Therefore, Starbucks need to adopt the strategies which is useful
for their employees and satisfy their personal objectives (Tikson, 2018). Furthermore,
interest of their stakeholders group is high in Starbucks. Hence, this reflects that the
company need to choose a pathway which influences the employees in a positive way. Shareholders: In the context of shareholders, they also have high power and interest in
the company as because of their investments. For example, because of their current
economic downfall in the markets like UK, as they put more and more impact on
organisation in order to gain higher financial returns from Starbucks. Hence, in order to
deal with this, company is needed to appropriately and effectively function in the ways
which helps in order to sustain in the difficult scenario, and also provide beneficial
returns to their individuals. Customers: These are the individuals who purchase the products and services from the
organisation. Thus, their interests are high and the power is low (Weinzimmer and Esken,
2016). For instance, while the company launch its products in order to consider and make
contact with the market and also the customers does not have the right or authority in
order to decide the strategies which are made by Starbucks. Hence, they have the
moderate impact on an organisation.
 Suppliers: It is that group of an organisation who provide raw materials to the
organisation. Thus, their interest as well as power both are low. For example, if company
wants to purchase some sort of raw materials then they need to make contact with
company as there are lot of suppliers present in this industry and Starbucks has many
options to purchase their raw materials. Hence, they have low impact in the context of
both power and interest.
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CONCLUSION
Starbucks is a leading coffee retailer in the world and has a lot of competition posed to it
which the company should be able to face in order to sustain itself in the market. For this the
company can take various steps like it should be more active on social media as this will help the
company to reach out to new segments of customers and also keeping them updated regarding
new offers and discounts that the company might be coming up with. Many people as well as
companies are not aware of the fact the Starbucks motivates volunteering of local residents and
that anyone can be a part of the service project. Therefore, the company should pay more focus
on making people aware of this so as to attract more people to be a part of the service programs.
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