Starbucks Business Report: Strategy and Analysis for Future Growth

This report provides a comprehensive analysis of Starbucks' business operations, focusing on both its internal and external environments. It begins with an introduction to Starbucks, highlighting its global presence and market position within the specialty coffee industry, while also acknowledging its main competitors. The report then delves into external environment analysis, utilizing PESTLE and Porter's Five Forces models to assess political, economic, social, technological, legal, and environmental factors, as well as competitive dynamics. Internal environment analysis explores Starbucks' strengths and weaknesses. A stakeholder report is presented, identifying key internal and external stakeholders, with an emphasis on employees. Finally, the report concludes with strategic recommendations to improve performance and foster growth over the next three years, taking into account market trends, competition, and stakeholder needs.

Starbucks Business Report

Contents
INTRODUCTION...........................................................................................................................1
PART 1- Starbucks Business Report...............................................................................................1
Introduction..................................................................................................................................1
External environment analysis.....................................................................................................3
Internal environment analysis......................................................................................................6
Recommendations........................................................................................................................8
PART 2- Starbucks Stakeholder Report..........................................................................................9
a) Starbucks’ internal and external Stakeholders.........................................................................9
b) Priority stakeholder’s Group - Employees............................................................................10
c) Power and interest of Employees stakeholder group.............................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy includes the combination of different aspects that contributes in the
attainment of growth in business (Bharadwaj and et.al., 2013). To build effective strategy
requires to do proper analysis as this will provides an opportunity to select the path which is
most favourable in nature towards growth. The two different kinds of analysis are there which
includes external and internal. External analysis includes the determination of the conditions
present in outer business environment and have impact over the business activities of the
organisation. These factors are not in control of the management. Internal analysis includes the
determination of the factors and conditions that are present internally within the organisation and
impacts over their performance ability (Blackburn, Hart and Wainwright, 2013). These are in
control of the management but their non management hinder in respect to attain competitive
advantage in market. The main aim of this report is about identification of the external and
internal factors and providence of effective strategy that help to attain positive growth within the
market. This report is based on Starbucks which is a global coffee chain and having their
operations worldwide.
This report is divided into two parts; one and two. First part includes external and internal
environment analysis. Also, providence of recommendations to the management of organisation
in respect to improving their performance over next 3 years of time period. Second part of this
report includes Starbucks Stakeholder Report that provide information in respect to internal and
external stakeholders along with those which are prioritised in nature.
PART 1- Starbucks Business Report
Introduction
Starbucks is a large organisation and having their operations worldwide. This
organisation operates their operations with the aim of providence of quality products and
services to their existing and potential customers. (Boies, Lvina and Martens, 2011). This is an
American coffee chain and huge in nature, either in terms of employee, market share and
turnover. The establishment of this global brand is noticed in the year 1971 in Washington,
United States. This organisation is considered as the market leader in this industry due to
adherence and acceptance of effective marketing campaigns. The annual revenue ascertained by
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Starbucks in year 2015 is around 16 billion dollars. In the launch of this organisation, the
individual’s contribution is noticed and named as Jerry Baldwin, Zev Siegl and Gordon Bowher.
After having the nature of big and market leader, tough competition is faced by this
organisation at market place. The basic reason behind this is that it operates in Speciality Coffee
Cafe industry. The amount of competitiveness in this industry is high in comparison to other due
to the presence of many big organisations. The main competitors of the organisation that
provides significant impact over their sales and profit in accordance to the data ascertained from
the case study includes McDonald's, Dunking Donuts and Caribou Coffee etc. From the analysis
of the case study of Starbucks, 2015, ascertained that highest return is getting by this
organisation in comparison to their other competitors present at market place. This organisation
also provides their shares and securities to public to access public fund and expansion of
business in market. Its shares and securities are listed over NASDAQ and considered as the most
revenue generating stocks in comparison to the other organisations which are of its competitor in
nature and have listed stocks. The amount noticed to be gained by the Starbucks in respect to the
return on equity is around 47.08%. This is much higher than of its other competitors like
McDonald's as their ROE is around only to 32.97%.
Competition is not only faced by this organisation on terms of equity and return, also
faced in respect to the number of employees and the strength of the manpower. According to the
information analysed from the case study ascertained that the total number of employees
working Starbucks worldwide are around 191000. On the other hand, the number of employees
possess by McDonald's at worldwide level is around 420000 (Starbucks, 2019). This depicts that
the strength of the employees and manpower of McDonald's is more than double from the
Starbucks. It is the duty of the management of Starbucks in respect to grow and attain
competitiveness in market focus over earning of reliable profits. This will help in future to deal
with contingent situations. The amount of Net profit margin of Starbucks is around 14.57%
whereas, in respect to McDonald's and Dunkin Donuts the amount of Net profit margin is
noticed as 17.34% and 23.55%. Determination of these stats in respect to Starbucks and its
competitors clears out the scenario that amount of competition for Starbucks is intense in nature
as net profit margin of McDonald's and Dunkin Dounuts is quite high. The management of
Starbucks requires to focus over the adoption of aggressive marketing strategies which help to
sustain and survive in market for longer period of time.
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From the overall analysis of the case study determined that high competition is present in
market but after that Starbucks is market leader in speciality coffee industry. The number of
stores have by this organisation in all over the world is around 21100 that provides monopoly in
market. This position is attained by organisation through the usage of various effective business
strategies that contributes in process of gaining high amount of revenue. Till now, these are
identified by the organisation through the analysis of conditions present in market. To attain
better future growth, organisation focus over integration of concept which includes the
formulation of strategies on the basis of external and internal analysis. This will provide an
opportunity to identify the internal strength along with its optimum usage and application over
completion of business operations in accordance to the conditions present in business
environment (Campbell, Edgar and Stonehouse, 2011).
External environment analysis
This includes the analysis of the market conditions present in external business
environment and have impact over the business operations of the organisation. Effective analysis
of all is must to do in respect to frame future 3 years’ growth strategies for Starbucks.
PESTLE Analysis
This is the effective model that contributes in analysis of the attributes present in different
factors. All these factors have their own positive and negative contribution over the operations of
business (Ghezzi, 2013). These factors are named as Political, Economic, Social, Technological,
Legal and Environmental. The detailed analysis in respect to the speciality coffee cafe industry
along with Starbucks is understood from the detailed analysis presented below:
Political factors: Starbucks have their main operations in US. The presence of high
interest rate and strict policies over export have direct impact over the power of an organisation
in respect to procuring quality beans. This is the main raw material that help the organisation to
provide quality coffee in this industry. So, high interest rate and strict policy over exports
negatively impacts their profit margin that resultants into reduction in competitiveness in market.
Economic Factor: This includes the factors that depicts economic conditions of the
nations where Starbucks have their operations. The factors which are considered includes
inflation, recession, per capita income, economic policies etc. At present, recession is considered
in all over the world. Starbucks is global leader in speciality coffee industry so, the impact of the
same is ascertained in negative manner over its operations. One more aspect that demonstrates
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the negative impact over Starbucks is high taxation rate due to offering of luxury products and
services at worldwide level. This will lead the reduction in profit margin and ability of expansion
with the same growth rate.
Social factors: The different determinants which are incudes in this are age, preferences,
choices and standard of living (Grover and Kohli, 2013). The nature of factors that are present in
speciality coffee industry in different nations have their both positive and negative impact. The
presence of high living standard considered as positive impact over the operations as they deal in
providence of quality coffee. Another aspect which has negative impact is health consciousness
of individuals. This will lead reduction in operations as consumer prefer to consume green tea or
coffee which is healthy in nature. The opportunity created by this behaviour of consumers to
growth in next 3 years is about expansion of business over providence of healthy or green coffee.
Technological factors: Starbucks have major operations in the nations which are
developed in nature. This represents that technology present at all these nations are advanced in
nature that allows the organisation like Starbucks to attain positive growth in their operations.
This would be the reason that Starbucks provides WIFI to all of their stores. The opportunity
presents in front of the organisation to grow in next three years through utilisation of positive
attributes includes provide more advanced operations which allows to made digital order.
Legal factors: This includes all the legislations that have impact over business.
Starbucks have its presence in all over the world. They have separate legal team that focus over
compliance of regulations. But the development of new regulations in respect to the safety of
environment and other areas creates difficulty for the management of Starbucks to comply all
properly. The negative impact is ascertained by the organisation as non compliance attracts legal
penalties.
Environmental factors: Use of plastic straws have negative impact over the
environment (Woodard and et.al., 2013). Strictness of the laws have the negative impact over
this act of organisation. This creates the opportunity for growth of an organisation through use of
paper straws. So, consideration of environmental laws and regulations help the Starbucks in
conversion their operations towards eco-friendly in nature. This will must contribute in
attainment of environmental sustainability in next three years of time period.
Porter Five Force Analysis
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This model helps to analyse the overall industry attractiveness (Johnson, 2016). The
detailed description of the different factors along with the power of Starbucks is understood from
the points defined below:
Bargaining power of buyers: The overall number of buyers present in speciality coffee
industry is high but the availability of the organisations in this sector is also quite good or high.
The less switching cost and high availability of substitutes creates the opportunity to buyer in
respect to shift from one company to other easily. This represents low power of Starbucks
against to the buyers. To combat this situation better to focus over the use of qualitative but cost
efficient products that improves their profit margin.
Bargaining power of suppliers: This includes those that are responsible to supply the
raw materials to the organisations working in this industry. Number of suppliers are high in
industry and in context to Starbucks their presence is also high. This represents that power of
organisation is high that provides competitive advantage to the organisation as easily availability
can be ascertained of the good quality raw materials.
Competitive rivalry: The level of competition in speciality coffee industry is high due to
the presence of many organisations like costa, McDonald's, Dunkin Donuts etc. This represents
that power of Starbucks is low in industry as many new and innovative organisations exists that
provide coffee at reasonable price. To improve positive focus over providence of quality in cost
efficient manner.
Threat of substitutes: The number of substitutes in speciality coffee industry is high.
This is so because many organisations like Costa able to provide the coffee of same quality with
different varieties. This will represent the low power of Starbucks at market place. To improve
focus over deliverance of new product lines.
Threat of new entrants: The threat of new entrants in this industry is low in nature
because not easy to enter in this industry. Large number of funds requires along with adherence
of legal regulations to operate operations. This represents high power of Starbucks in industry
due to having their established presence along high market share.
Industry Life Cycle Model
It is the model that includes the description about the different stages from which an
organisation of same nature goes through includes operate, progress, prospect and slump in the
industry (Khalili Shavarini and et.al., 2013). Life cycle of speciality coffee industry is long in
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nature as this will falls in the category of reliable industries. The different stages from which
organisation goes through along with Starbucks is understood from the detailed description
provided below:
Introduction stage: Under this stages organisation starts their operations as start-up in
speciality coffee cafe industry. The main purpose of these start-ups is about increasing their
revenues. Heavy loss is faced by the new start-up in this stage due to presence of negative impact
of external factors. To sustain as this period of time, Starbucks focus over providence of coffee at
lower price.
Growth stage: In this stage, organisation focus over earning small profits through
formulation of strategies. Starbucks uses effective marketing strategies at this stage to attain
growth.
Maturity stage: One of the most profitable stage where organisations under the
speciality coffee industry charge high prices to earn maximum amount of profits. Starbucks lies
over this stage in the life-cycle where charge high prices can earn high amount of profits.
Decline stage: Last stage of life cycle. At this stage, profit of the organisations belongs
from the speciality coffee cafe industry starts declines. As strategy organisation starts to charge
less prices to sustain in market. Discount offers are also provided to attract consumers.
Internal environment analysis
This includes the use of tools and frameworks that help in analysis of the internal strength
and weakness of the organisation through the analysis of their available resources and
competencies.
VRIO Analysis
It is the tool that help in determination of the most valuable resource that help the
organisation in attainment of overall competitive advantage in market. The four determinants
which are considered in respect to the ascertain the importance of resources includes valuable,
rare, inimitable and organized in overall nature (Scholes and et.al., 2014). Use of VRIO in
respect to analyse the internal capabilities of organisation is understood from the description
provided below:
Component Valuable Rare Inimitable Organized
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Especial coffee ✔ ✔ ✔
Powerful global
existence
✔ ✔
Worker ✔ ✔ ✔ ✔
Valuable
Especial Coffee: The coffee provided by Starbucks is valuable in nature because the
beans used are very confined and hard to find. The optimum quality of these beans makes them
valuable in nature that help the organisation to gain the trust of consumers over their offerings.
Powerful global presence: The presence of Starbucks is wide and having its operations
at world-wide level. This works as the valuable in nature in respect to the organisation as
consumers have belief that organisation always does everything in the good faith of their
consumers that have no negative impact over the health of anyone in society.
Worker: These are the manpower of an organisation which includes employees working
in all over the world at this organisation to handle its operations. These are valuable because
unique in nature in terms of skills and characteristics that help to utilise the resources optimally
and have least contribution towards wastage.
Rare
Especial coffee: The coffee of Starbucks is rare in nature in terms of quality due to the
use of quality beans. The beans used are of high quality that resultants high cost of production.
This will build the same rare in nature as not possible for everyone to do the same.
Worker: The employees of the organisation have special skills and characteristics that
build them rare in nature from the other organisational employees. They possess multiple
qualities that help to work many activities simultaneously. This aspect made addition in their
performance along with rareness (Schrader, Freimann and Seuring, 2012).
Inimitable
Worker: The employees of the organisation are inimitable in nature because not possible
for anyone else to copy their specific skills and characteristics. This inimitably nature of
employee provides advantage to the organisation in respect to their usage to competitiveness in
market.
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Organisable
All the three are organisable in nature due to the ability of organisation to use all
integrally to attain competitive advantage in market (Sia and et.al., 2016). This will make
addition in the overall functional capacity of the organisation in respect to the performance in
market which is unique and differentiated from others.
The one resource that provides overall competitive advantage to the organisation and
fulfils all the four criterion is worker. This is the one resource that have by organisation which is
able to provide overall competitive advantage in any condition. Employees of the organisation
not only help to carry on the day to day operations but they work as the base for the near future
to attain growth in more sustainable nature.
Value Chain
This is the effective model that help to ascertain the link between the primary and
supporting activities (Slater and et.al., 2011). In respect to Starbucks, ascertained from the
description provided below:
Integration: Not ascertained the integration in between the technology and marketing.
Objectives: To improve marketing through use of innovative technological options.
Application: Use of omni channel help to effective utilise the power of technology along
with bring integration in marketing activities with technology.
Monitoring: Quarterly analysis help to ascertain the effectiveness along with deviations.
This will provide an opportunity to attain maximum growth
Recommendations
The model used for bring improvements in offerings of organisation is Ansoff along with
integration of SMART framework. The four different options available to attain growth in
accordance to this are market penetration, product development, market development and
diversification (Spender, 2014).
The one which is most beneficial in respect to Starbucks to attain growth in speciality
coffee industry is about focus over market penetration along with integrated use of cost efficient
raw materials. This is the method which includes marketing of the operations of organisation
with the help of advance methods, techniques and tools.
SMART objectives
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 To improve market growth rate by 10% through adoption of new omni marketing
channels for the disbursement of information about the use of new qualitative cost
efficient materials within next 6 months of time period
 To improve the sales of coffee offerings by 10% within the next 6 months of time period
through use of cost efficient and qualitative materials along with omni marketing
channels.
Overall strategy includes the use of Kona beans that help to sustain the quality along with
availability in cost efficient nature. Also, omni marketing channels Instagram and Facebook will
be use for the disbursement of information. The advantage associated with the use of omni
marketing channel is that provides an opportunity to the user in respect to get the direct access
over the product on official website of the organisation through single click over picture. This is
better than multi channel marketing and improves the experience of customer too. In context to
the organisation and current strategy, provides an opportunity in easy disbursement of
information about the use of Kona beans for coffee offerings which are equivalent qualitative
along with cost effective. Also, the click over picture provide direct access over the official
website of an organisation for its purchase. So, the integrated operation must help the
organisation in future to improve their sales along with market share. Adherence of all the
determined activities and strategies in effective proper manner help in getting the actual results
as stated in objectives within stipulated period of time.
PART 2- Starbucks Stakeholder Report
a) Starbucks’ internal and external Stakeholders
Stakeholder Group Internal or External Justification for including
them
Customers External They are reason of earning
high revenues
Employees Internal As they are operating hand of
the company
Government External They are the regulatory bodies
which hold power in the
affairs of the organisation
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