Starbucks Case Study: Strategic Management Analysis

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Strategic Management- a case study of Starbucks
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Table of Contents
Introduction................................................................................................................................3
VALUE CHAIN ANALYSIS....................................................................................................4
PESTLE Analysis.......................................................................................................................5
MARKET DEVELOPMENT....................................................................................................7
PRODUCT DEVELOPMENT...................................................................................................7
CSR............................................................................................................................................8
Conclusion..................................................................................................................................9
References List.........................................................................................................................10
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Introduction
The study will consider the case study of Starbucks, a multinational coffee roasting company
with annual sales not less than $ 9 billion. In order to understand how company can initiate its
strategic management; the study will focus on value chain analysis, macro factors analysis,
product development, market development as well as corporate social responsibility
strategies.
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VALUE CHAIN ANALYSIS
Starbucks value chain analysis will help in understanding how the business activities of the
organisation can develop values and competitive advantages for the business. In order to
analyse the value chain it is necessary to analyse the primary and support activities of the
organisation.
Primary Activities
Inbound Logistics
In the year 2010, the inbound logistics underwent a complete restructure and the
restructuring intuitive of the inbound logistics has involved a simplification of the supply
chain as well as developing a single and global logistics system. The organisation has been
closing down all the outlets that are not performing and have thus achieved a greater supply
chain cost savings. Unroasted and high quality Arabica coffee beans are being brought form
Africa, Asia to Europe and USA via sea. Coffee that are roasted are packed and sent to local
distribution centres and the centres thus make 70,000 deliveries every week to the
organisation’s 11,000 stores of USA and 6000 stores on the international platform
(Scholar.harvard.edu ,2019).
Strategic relationships between the suppliers and the organisation are one of the chief sources
of value.
Starbuck Operations
Starbucks are known to sell coffee, tea as well as other beverages and they have the strategy
to seek innovative products, new flavours and maintain a rich connection with their
consumers The organisation has enhanced their projected growth from 25000 to 30,000 stores
internationally (Starbucks Coffee Company, 2019)
Starbucks Outbound Logistic
Consumers can purchase the products from the licensed and company operated stores. The
organisation even used the online sales channel (Gereffi and Fernandez-Stark, 2016).
Marketing and sales
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Use of high-end technological medium and adapting the greener strategies for marketing and
sales is crucial, for Starbucks. “Word of mouth” has been their main channel for promoting
their high products and services.
Starbucks services
Enhanced customer services give the organisation competitive advantage and this add value
to their brand image too
(Source: Christopher, 2016)
PESTLE Analysis
In order to conduct the external factor analysis, the study will conduct a PESTLE Analysis
Political: UK has been known for political stability and the restructuring of the taxation
policy developed opportunity for the coffee brewing industry. The import and export policies
are flexible and hence importing coffee from Asia, Africa as well as North America has been
creating opportunities for Starbucks. Brexit has however created uncertainties and a threat to
the organisation (Nugent, 2017).
Economic: UK has a growing GDP, and the present GDP is 2622.43 billion US dollars as on
2017. The interest rate ranges from 0.55 to 0.75% and the minimum wages have increased
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from 7.50 € to 7.83 £. Unemployment rate is 4.1% (Pollard, 2018). However, the inflation
rate has been on the higher side posing threat to Starbucks business operations.
Social: The consumption of coffee is high due to the weather and climate of the country.
People have changing taste and preferences. The population has multicultural and birth has
been outnumbering death (Sullivan and Gershuny, 2018).
Technological: UK has higher and advanced technology in the country with more amount of
investment done for technological purpose. Use of social media and virtual platforms can
help in running the business smoothly.
Legal: The Equality Act of 2010 and the discrimination act have been the chief UK laws that
have been followed by almost all form of businesses. “Coffee Extracts and Chicory
Extracts (England) Regulations 2000” needs to be considered by the business.
Environmental
UK has 25 years plan for environmental development, the business has to adopt the greener
strategies, and they have strong policies with respect to the green strategies. Sustainable
coffee can be one of the sustainable methods to cope up with the countries environmental
strategies.
In order to analyse market and product development the report will focus on the Ansoff
Matrix. The Ansoff Matrix has four quadrants and they are, Market Penetration, Product
Development, Market Development and Diversification.
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Figure 1: Ansoff Matrix
(Source Fuller, 2016)
MARKET DEVELOPMENT
This is concerned with the growth of sales by launching the present products on a new market
(McDONALD, 2016). Starbucks has been expanding their business by opening their stores in
the emerging markets of China, Japan, India, Singapore, and South Korea and so on. The
organisation has 748 stores in Japan, China has 591 stores, South Korea has 231 stores and
Singapore has 50 stores. Starbucks has developed new markets with all their existing
products in these countries.
PRODUCT DEVELOPMENT
This quadrant intends to enhance sales with the help of new products in the existing market.
Product development will ensure that the business can use their innovation in developing
their products and thereby capture more customers in the same market. A glaring example
can be Starbucks introduction of new and premium coffee made of exclusive and rare beans.
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CSR
The CSR activity of the organisation is supreme and strong. They have a Farmer Support
Centre located in Costa Rica for supporting their local suppliers of coffee and it even
operated a third party procedures of verification of its number of agricultural suppliers. This
ensures that the organisation is conscious about their responsibilities towards their local
producers of coffee (Fuller, 2016). Moreover, the organisation sets a rich emotional
connection for developing a third place for their consumers other than workplace and home.
This portrays their social responsibilities. Starbucks for years have powerful policies with
respect to green strategy.
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Conclusion
The report has concentrated on the external factors and the value chain analysis that will help
an organisation to strengthen the competitive advantages of Starbucks and analysis of the
activities of the value chain will ensure that company can enhance their return on investment
by considering the value. Pestle has successfully focussed on the external business
environment and the Ansoff matrix will help in analysing the alternative methods of
achieving competitive advantage and an expansion of consumer base.
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References List
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Fuller, G.W., 2016. New food product development: from concept to marketplace. CRC
Press.
Gereffi, G. and Fernandez-Stark, K., 2016. Global value chain analysis: a primer.
McDONALD, M.A.L.C.O.L.M., 2016. Strategic marketing planning: theory and practice.
In The marketing book (pp. 108-142). Routledge.
Nugent, N., 2017. The government and politics of the European Union. Palgrave.
Pollard, J.S., 2018. Brexit and the wider UK economy. Geoforum.
Scholar.harvard.edu. (2019). [online] Available at:
https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf [Accessed
9 Jan. 2019].
Starbucks Coffee Company. (2019). Company Information. [online] Available at:
https://www.starbucks.com/about-us/company-information [Accessed 9 Jan. 2019].
Sullivan, O. and Gershuny, J., 2018. Speed-up society? Evidence from the UK 2000 and 2015
time use diary surveys. Sociology, 52(1), pp.20-38.
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