Comprehensive Business Strategy Analysis for Starbucks Corporation

This report provides a comprehensive business strategy analysis of Starbucks. It begins with an introduction to business strategy and Starbucks, followed by an examination of the external environment using PESTLE analysis, detailing political, economic, social, technological, legal, and environmental factors impacting the company. The report then delves into an internal environmental analysis using the VRIO framework to assess Starbucks' valuable, rare, inimitable, and organized resources and capabilities. Furthermore, it analyzes the competitive landscape using Porter's Five Forces model, evaluating competitive rivalry, the threat of new entrants, the bargaining power of suppliers and buyers, and the threat of substitutes. Finally, the report concludes with a discussion of strategic planning and recommendations for Starbucks' future growth, integrating the insights from the preceding analyses to propose effective strategies.

Business
strategy

Contents
INTRODUCTION...........................................................................................................................1
TASK1.............................................................................................................................................1
P1: Describe the impacts of factor of external environment on Starbucks............................1
TASK2.............................................................................................................................................3
P2: Discuss internal environmental analysis of Starbucks with capabilities..........................3
TASK3.............................................................................................................................................6
P3: Analysis competitive factors for Starbucks based on Porter’s five force model.............6
TASK4.............................................................................................................................................7
P4: Implement theories with providing strategic plan for Starbucks.....................................7
CONCLUSION..............................................................................................................................10
REFEREN CES.............................................................................................................................11

INTRODUCTION
Business strategy is refers as long-term plan that is created by business entities in order to
reach desired future state and position. It is important to make effective business strategy that
contains goals & objectives, type of products and goods needs to build, customer to whom wants
to sell and market to serve for profit generation.
Starbucks is multinational chain of coffee houses & roaster reserves based on America.
The company founded in 1971 with it’s headquartering in Washington, US. It is represented as
second wave of coffee culture as the world’s largest coffeehouse chain.
This report contains external environmental factor that affects business in significant or
sometimes negative ways, further internal analysis is done based on opportunities exploration for
business growth and competitive factors that affects business are considered. At the end growth
model and strategic business plan is provided within report for effective functioning of
organisation.
TASK1
P1: Describe the impacts of factor of external environment on Starbucks.
PESTLE Analysis:- It is the effective method of identifying external factors of elements that
affects future growth and sustainability of business organisation in positive or negative ways. It
is essential to conduct pestle analysis before adopting step regarding future growth of business.
In context of Starbucks influence of these factors are explained as follows:
Political: In terms of UK political factor that impacts respective organisation are as laws
and regulations made by government of country that affects supply of raw material required for
production of Starbucks. Thus in terms of securing business for future respective firm should
need to gather a lot of attention from political parties of country. Tax policies and employment
laws of United Kingdom are major political factor that affects respective firm. Political stability,
tax relaxation fro UK government is also a positive impact of political factor on respective firm
that generates sustainable growth opportunities (Ajagbe and et. al., 2016).
Economical: The ongoing global recession is major external economic driver for
respective organisation and leads to reduce profit of firm. This influence buyer to shift towards
cheaper available supplements and if they are not stop to buying coffee it will create
opportunities for Starbucks. In term of overcome from negative impacts of rising labour cost and
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operational cost of business respective company should deal effectively with these cost in order
to obtain growth opportunities (Anwar and Hasnu, 2016).
Social: Cultural factors such as- changing family patters of UK, changing work patterns,
life styles, education level of customers, consumer preferences all are considered under social
factor of pestle analysis. Starbucks offers cheaper products but might have to compromise on
product quality refers as the major challenge for firm as per socio-cultural factor.
Technological: Another significant factor or element that impacts respective business
terms of exploring growth opportunities or generating threats are considered elements such as-
emergence of technological innovations, agricultural development & biotechnological
developments of nation. In terms of UK respective organisation uses WIFI capabilities in its
outlets and uses various platforms and shipping ways based on new technology that shows
positive impact of technological factor over Starbucks. This will help in future expansion and
growth of respective firm (Cagnin, 2018).
Legal: Food and beverage industry of UK is very sensitive in terms health policies so as
to secure health of customers and public. Starbucks should focus on effective implementation
and follow up of laws and regulation of countries that helps in getting raw material that is
essential for effective functioning of production process. It should concentrate on introduction of
caffeine production and consumption related policies and laws from health authorities. Other
factor included in legal factor of pestle analysis is licensing regulation related to industry,
introducing of strict trade & custom duty that leads to successful running of business.
Environmental: This is also an essential factor of pestle analysis related to elements
such as- environmental rules & regulation of nation, global warming and other issues relating to
environment at global level, environmental disasters within country which produce coffee beans
etc. Starbucks applied business strategy towards combat climate changes through investing
renewable and clean sources of energy for instance conserving water & energy by 25%, adopting
climate smart agriculture actions form farmers, reducing waste replanting and undergoing coffee
renovation etc. Starbuck promoted store recycling through sue of recycle bags and cups and
eliminating over 90,000 kg plastic in order to save the environment from global warming. Thus,
it leads to significant impacts over business sustainability and generates huge opportunities for
future growth of business (Evans and et. al., 2017).
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Although above analysis of external environment factors that impacts business of
respective organisation. it is observed that all factor are equally important to address before
thinking of any growth option of long term sustainability of firm. In terms of Starbucks pestle
analysis of UK reflect positive impacts over business and generates huge opportunities due to
better political relations of firm that creates easy supply of raw materials, environmental
effective laws that aim as to save nature from global warming, availability of better quality at
affordable prices etc. Successful follow up of legal obligation from government, use of better &
advanced technology in production, distribution and other activities of firm reflects positive
influence of different components of external environmental analysis that carets waste
opportunities for business growth.
TASK2
P2: Discuss internal environmental analysis of Starbucks with capabilities.
VRIO Analysis:- It considered as the model or method to analyse internal capabilities and
environment of business organisation that has prominent role in successful operation &
functioning of firm as well as exploring relevant growth opportunities and minimising impacts of
threats and barriers occurs in process (Ghemawat, 2016). There are four major resources that
reflects capability of business are narrate as under with respect to Starbucks:
RESOURCES VALUABLE RARE INIMITABLE ORGANISABLE COMPETITIVE
ADVANTAGE
Brand
Image
Brand
Image - - -
Temporary
Competitive
Advantage
Product &
Service
Quality
Product &
Service
Quality
Product &
Service
Quality
- -
Temporary
Competitive
Advantage
Innovation
Capability
Innovation
Capability
Innovation
Capability
Innovation
Capability
Sustainable
Competitive
Advantage
Global
Presence
Global
presence
Global
presence
Global
presence
Global
presence
Potential
Competitive
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Advantage
Valuable resources: These are the resources that hold prestige of firm in their hand that has
prominent impact in making awareness business among potential customers, competitors and
investors and communicate the reason how they are differ from other competitors. Valuable
resources of Starbucks includes strong brand image, store environment of firm, supply chain,
special flavour and quality of coffee, customer services etc. (VRIO Analysis of Starbucks Coffee.
2017)these are detailed below:
Brand Image: Starbucks has more than 22500 stores globally with huge capacity of
serving effective quality of good and products that leads to enhance brand image of business.
Thus, brand image or reputation of respective organisation is considered as valuable resource for
organisation.
Product & Service Quality: Starbucks provide only premium quality of coffee and offer
extensive customer services with ethics in order to taking care of the interest of customers and
rising firm’s market share and profits. Based on VRIO analysis product and service quality of
respective organisation comes under category of valuable resources of firm.
Innovation Capability: Respective business uses higher technology in production process
of its coffee and roaster products and distribution channel or method of firm is also follow
advanced technology that helps in engaging customers more and save their time & efforts.
Innovation capacity of firm is also consist as valuable resource for firm based on VRIO analysis
of company.
Global presence: Due to successful operation of Starbucks in different nations with
having more than 22500 stores it creates huge brand awareness internationally that plays
significant role in immense success of firm. Global presence of respective brand is also comes
under valuable resource of business that reflects effective position of firm within home and other
countries.
Rare Resources:- These are the resource of business organisations that not only shows prestige
of business but also acquired by one of few organisations that grand competitive advantages.
Rare resources of Starbucks include product quality, financial resources, and innovation
capabilities of firms, human resources and employees as well as global presence of business
(Habib and Hasan, 2017). These are further explained as follows:
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Product & Service Quality: Due to effectiveness of product quality and services offered
by respective organisation is rare and not easily available that reflects biggest competitive
advantage for firm and helps in rising customer base day by day.
Innovation Capabilities: Starbucks constantly invests huge capital in market research
and allocation of new and advanced technology in order to maintain existing global image of
firm that reflect as rare resource for firm.
Global Presence: Starbucks concentrates on constant expansion of business in different
countries worldwide in order to fulfil the demands of customers and raise business will
automatically results in successful global presence of firm and considered as rare resource of
firm.
Inimitable Resources:- These are considered as the resources that are not easily acquired and
theft by competitors or other players of industry (Johansson and Kask, 2017). In context of
Starbucks inimitable resources includes technological advancement, financial & human
resources and international presence of company are discussed below:
Innovation Capabilities: Respective organisation spends huge amount on technological
innovation that is rare and not easy to acquire due to requirement of huge capital investment and
generates benefit for firm based on competitive strong position.
Global Presence: Starbucks enjoying huge success in terms of international presence of
firm in effective ways leads to impossible to copy by other players within the industry due to
high capital investment and application of effective business strategies.
Organisable Resources:- These are the resources that are controllable by organisation as well as
organised in effective manner (Johnson and et. al., 2017). In context of respective organisation
these resources are considered as follows:
Global Presence: As per above analysis of VRIO model global reputation of firm is
considered as valuable, rare, inimitable and organised resource at the same time. This generates
huge competitive advantages & reflects firm’s capability to grab growth opportunities.
TASK3
P3: Analysis competitive factors for Starbucks based on Porter’s five force model.
Porter’s Five Force Analysis:- It is defined as the method of analysing competition among
industry that leads to effective implementation of business strategies required for building
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stronger position within existing market as well as ensuring future sustainability of business or
exploring business in new markets. In context of Starbucks impact of these five factors are
explained as under:
Competitive Rivalry: Specific coffee and quick service restaurants in industry are intense.
The major competitors of respective organisation are Dunkin Donuts, McDonald and much other
small coffee soap. Starbucks captured 40% share as a leader within industry. In context of
respective organisation competitors are constantly working on specialize, innovative business
strategies in order to attract more customers. Low switching cost of consumers leads intense
competition within market. Coffee and beverages served by Starbucks are also served by other
competitors but few specific & unique products of respective firm helps in building huge brand
loyalty and trust among its customers (Leischnig, Woelfl and Ivens, 2016). Although,
competitive rivalry is high for Starbucks.
Threats of New Entrants: Due to number of barrier to enter into food and beverage
industry for instance requirement of huge capital investment for making chain stores. Product &
brand development and promotion or entering into industry takes a lot of time for business
organisations. Thus, threats from new entrants are moderate for Starbucks due to difficulty in
making same taste offered by respective organisation. It is moderate because of successful
development of customer base by local coffee shops.
Bargaining power of Suppliers: Food and beverage industry if broad and covering huge
area of industry results in availability of n number of suppliers. Commodity or other raw material
needed by Starbucks is easily available at variety of suppliers. It has large numbers of suppliers
worldwide that makes paramount for suppliers. Except high Arabica coffee switching cot of
supplier is not high for Starbucks. Due to easy availability of coffee beans used to make best
coffee by respective company suppliers are not in position to bargain over raw material prices
with Starbucks. This shows bargaining power for Starbucks in low within industry (Leonidou
and et. al., 2017).
Bargaining power of Buyers: Another important force of competitive analysis is
bargaining power of buyers who purchase and use of goods and services. Respective
organisation facing huge competition which results in plenty of choices for buyers. Today’s
customer is well aware about their choices, if Starbucks raises their prices customer is switch
towards lower producer. The environment and atmosphere given by respective firm is unique and
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taste of its coffee is unique that leads to brand loyalty among customers. There are certain
customers who trust only on Starbucks and prefer to purchase its products even when prices are
little high. Overall analysis of this force results in high bargaining power of buyers.
Threats of Substitutes: The products offered by Starbucks have a lot of substitutes. For
instance juice, drink, coffee, make tea at home products have substitutes within market. Food
items of it also are substituted on the basis of price fluctuations. There are various substitutes of
Starbucks’s drinks and foods products with lower costs and prices that reflect high threat from
substitutes. This leads to negative impact over sales of respective organisation affected by risk
from availability of substitute products (Lim, Chalmers and Hanlon, 2018).
TASK4
P4: Implement theories with providing strategic plan for Starbucks.
Ansoff’s Growth Vector Matrix:- This plays significant role in providing growth opportunities
for business entities according to the requirement of situation of firm. This matrix provides four
major strategies discussed as follows in chosen organisational context:
Market Penetration: It is related to increasing customer base and sales with existing
products and services within existing market without taking huge investment over development
strategies. It is most quick, easy, time & cost saving method of business growth. It can be applied
through rising promotion of firm or through little modifications within goods and products.
Diversification: This is most beneficial strategy that helps in enhancing profits and
market shares of business. It is effective in case of entering into new markets with launching of
new or innovative specific goods and products that has prominent benefits for firm in terms of
attaining higher prices over effective quality that contributes to profit maximisation. But at the
same time it is most risky, time consuming & cost generating growth strategy (Lin and et. al.,
2020).
Market Development: It is used to enhance market size of business through expanding
business within different areas nationally or internationally that leads to future growth of
business. It is risky and costly business strategy but help in rising market share and revenues of
company. Huge investment is associated with this strategy of business growth for instance
requirement of capital for establishing into new industry, conducting research for knowing
market patterns, trends, customer behaviours & attitudes etc. that generates cost for firm.
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Product Development: It is also a growth strategy for business entities to raise market
share as well as customer base of firm and generates revenues. As per product development
business strategy new product is made to enhance product portfolio of firm that contributes to
rising customer base and increasing sales revenues of firm. This is as risky and time consuming
as market development strategy consumes and equally profitable as market development
(Martinez and Ferreira, 2019).
As per above analysis of all strategies provided by Ansoff;s growth matrix it is
summarised that Starbucks should focus on product development strategy due to its high image,
financial stability and huge customer base. This will helps in retaining customers and influencing
new customers.
Strategic Management Plan
Executive Summary: Strategic management plan of Starbucks id based on successful
application of business strategies for effective operation and growth of business for future
sustainability based on secondary data.
Business Details
Vision & mission: The vision of Starbucks is to “treat people like family & they will be
loyal” and mission of respective company is to “inspire and nurture human spirits, one cup& one
night board at a time”. This reflects purpose of business in terms of serving society.
Business objective: As per implementation of suggested business strategy main objective
of Starbucks is to raise profit of firm from 8% within specified time period of one year.
Products & services: For successful, achievement of above objective of respective
organisation new product of firm will be fast food with better taste and variety of flavours with
associate of health & hygiene services (Sanden, 2016).
Industry and competitors analysis: Food & beverage sector of United Kingdom is broader in
scale with n number of business growth opportunities. Starbucks is already a well brand will help
in capturing huge market share within industry.
Customer values: In context of Starbucks potential customers of new product will be existing
buyers who come for coffee and other drinks as well as new customers or business users who
needs good quality of products as per the demand of customers (Vlachos, 2016).
Company structure
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Resources: For effectual application of chosen business strategy Starbucks needs supply
for raw materials like vegetables, nutrition’s and other resources required for development of
final product.
Suppliers: In terms of successful implementation of new product development the
suppliers for respective organisation will be sellers of vegetables, equipments like blender,
grinder, mixer, backer etc.
Financing: In context of respective organisation have huge financial strength and profits
will help in successful implementation of above business strategy. It also required some finance
from external sources like bank loans, public deposits etc.
Financial projection:
Risk plan: The
high bargaining power of suppliers etc. and use corrective actions to overcome risks creates
barriers in execution of plan.
CONCLUSION
As per above report it is concluded there are variety of components and elements that
plays prominent role in evaluating opportunities and threats occurs in business growth and
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Year 2020 2021 2022 2023 2024
£m £m £m £m £m
Sales 25 15 20 30 35
Expenses
Cost of goods sold 5 6 7 8 9
Depreciation 0.5 0.5 0.5 0.5 0.5
Advertisement 1.5 2 2.5 3 3.5
Rent 0.2 0.2 0.2 0.2 0.2
Salaries and wages 1.1 1.2 1.3 1.4 1.5
Furniture and equipment 4
Travel 0.1 0.2 0.3 0.4 0.5
Interest expense 3 3 3 2 3
Total Expenses 15.2 12.7 13.5 14.7 16.5
Net Income before taxes 4.9 9.2 10.5 10.3 12.6
Income tax expenses 0.98 1.84 2.1 2.06 2.52
Net income after taxes 3.92 7.36 8.4 8.24 10.08

influence business at boarder level. Internal factors and capabilities of business entities also an
important factor to analyse in order to successful application of growth opportunities based on
various resources that are valuable, rare, inimitable and organisable for firm. Further growth
matrix is also discussed within the report in order to adopt effective business strategy for success
of firm. At last competitive forces of respective company are evaluated with availability of
strategic management plan for successful application of chosen business strategy.
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REFEREN CES
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Lin, Y.E. and et. al., 2020. Corporate social responsibility and investment efficiency: Does
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