Business Strategy Report: Starbucks Internal and External Analysis

This report provides a comprehensive analysis of Starbucks' business strategy, examining its internal and external environments. It begins with an introduction outlining the importance of business strategy in a competitive market and highlights Starbucks as the case study. The main body of the report delves into a PESTLE analysis to assess the impact of macro-environmental factors on Starbucks. It then proceeds to analyze Starbucks' internal environment using VRIO and McKinsey 7S models to evaluate its capabilities, strengths, and weaknesses. Furthermore, the report applies Porter's Five Forces model to assess the competitive forces within the coffee industry and evaluate Starbucks' competitive position. The report concludes with a strategic management plan, including strategic priorities and recommendations for improving Starbucks' competitive edge and market position. The report also includes relevant references to support the analysis.

Business Strategy

Table of Contents
INTRDOUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
P1 Analyse the impact and influence of macro environment on an organisation and its strategy
.....................................................................................................................................................3
M1 Analyse macro environment to determine along with to inform strategic management
decisions......................................................................................................................................5
TASK 2............................................................................................................................................5
P2 Starbucks internal environment and their capabilities...........................................................5
M2 Analyse internal environment to evaluate strength and weaknesses of organisational
structure and skill-set..................................................................................................................8
TASK 3............................................................................................................................................8
P3 Porter's Five forces model to evaluate competitive force in Starbucks.................................8
M3 Appropriate strategies to improve competitive edge and market position based on
outcome.......................................................................................................................................9
TASK 4............................................................................................................................................9
P4 Range of theories, concept and models to interpret strategic plan........................................9
M4 Production of strategic management plan which has strategic priorities...........................10
D1 Interpretation of environmental and competitive data to form set of strategic directions. .10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRDOUCTION
In this competitive market, it is becoming important to focus on achieving of goals &
objectives. Business strategy refers to set of tactics that are used to increase performance and
productivity level. It is not possible for organisation to achieve business goals within time period.
Market is flexible which makes it crucial for entity to be competitive & ahead. Main aim of this
report is to examine the importance of business strategy. Starbucks, an American multinational
firm which is chain of coffee houses and is headquartered in U.S. It is located at global scale and
has number of competitors such as Cafe Coffee Day, McDonalds McCafe, Costa etc. This report
comprises of PESTLE analysis, porters five forces, Bowman's model, concept of business
strategies and internal capabilities (Pinto and Bellini, 2017).
MAIN BODY
TASK 1
P1 Analyse the impact and influence of macro environment on an organisation and its strategy
PESTLE Analysis
This refers to a strategic analysis tool which is used to analyse the impacts of external
issues in any business. This includes different factors like Political factor, Economic factor,
social factor, technological factor, legal factor, environmental factor.
Political factor- This one is one of main factor which have high impact on business of
Starbucks. This one high effects on sourcing of raw materials which is imported in all over the
country. There are different political effect which can be there can have adverse impact on the
import of raw material which is due to any change in political issues. There are different laws
and legislation which can have high impact on the business. Starbucks have to follow all the laws
and legislation which is there due to change in political view and this may highly impact the
Starbucks business (Whitler, 2020). To success of any business there is need to political stability
and this may help in to grow to Starbucks which is there can have better business and not further
change in any rules and legislation. Tax policy and employment laws are there which have high
impact on an business which is there can help the Starbucks when such rules are in their favour.
Economic factor- This is another factor which is able to highly effect the Starbucks
business. In this, people have the purchasing power and when there is high purchasing power to
people then there is high economy and business of Starbucks should have high profit by getting

high business. There is less business when there countries economy is low and due to this there is
less purchasing power to people. Starbucks have the deal with operational costs and rising
labour. There is inflationary environment and falling profitability is able to cause high stress to
Starbucks. In current time there is high fall in each and every country which is due to impact of
COVID. There is high fall in country economy and due to this there is less business to Starbucks.
There is high fall in the business of Starbucks which shows the result as high fall in buying
coffee, There is need to find out some strategy which can help them to take their business on
track which can have better result in profit. There is some economic factor like change in local
currency exchange and local economic environment which is there in different market along with
this there is another economic factor like taxation level which is there having impact on the
business of Starbucks (Stathakopoulos, 2019).
Social factor- Starbucks is able to offer cheaper product but this may take to sacrifice in
quality of their product which can have negative impact on business of Starbucks. There are
different customer base like middle class and upper middle class who are there want to come and
there are green and ethical chic of consumers which are also there concerning about which needs
to Starbucks to focus on this. there are different social factors like changing family pattern,
consumer preferences, changing in work pattern, level of education of population in local market
and there is also changing value among population which are there which is able to impact on the
business of Starbucks.
Technological factor- There is different use of technology which is there can have
different impact on business of Starbucks. There are partnership with apple which is there able to
provide different coupons to there mobile app users. There is use of app which is there only can
be access by the Apple user. Starbucks is able to provide different technology which is like using
of Wi-Fi in their outlets. Internet is very useful which make their user to stay long in their
outlets. Starbucks in context to technology there is testing on the mobile payment which is there
on the pilot locations in U.S. Some of the technology factor like emergence of innovative
technology, biotechnology development, develop0ment in agriculture which is there have the
ability to impact the business of Starbucks.
Legal factor- Starbucks must be ensure about that there should not be any violation of
any laws and legislation. There is need to stay alert which is about introduction of caffeine
production and their consumption which can have ability to change in regulation and its policy

which his there by health authority. There are also some factors which are able to impact on
Starbucks business which are like trade regulations and licensing regulation which are related
with industry (Pourkhani and et. al., 2019).
Environmental factor- Starbucks is the company which is highly concentrates on the
environment which is there always trying not to negative affect the environment which are there
can cause any problem to environment. There are different environmental factors which are there
like environmental rules and regulations, global warming and different environmental issues
which is there in global level and environmental disasters which is there in countries which is
able to produce coffee beans.
M1 Analyse macro environment to determine along with to inform strategic management
decisions
There is need to make some strategy which can help Starbucks to deal with changing
political environment which should be there can help in to get business. Strategy should be
enough effective that it should have the impact on economy and there can heal of economy of
that country which is by high contribution by their business (Zomorrodi, 2019). There is need to
evaluate and modify their strategy which is regarding to demand and need for the better business.
Strategy is the one which should be there for Starbucks and there is need to have better impact on
society which can create interest to avail their services and leads to better -productivity and
profitability.
TASK 2
P2 Starbucks internal environment and their capabilities
Internal capabilities are the one which plays a huge role in overall development of
Starbucks. There is need to develop business strategy which can be there considering factors
which are able to assist and securing better position along with this to help in the company better
business with high growth rate for longer period of time, VRIO and McKinsey 7 s model is used
to conduct internal analysis of Starbucks.
VRIO Analysis
Valuable- Starbucks have strong brand image which is one of the valuable resources.
This helps in increasing the customer base along with greater reputation which is good for
marketing. Starbucks have the high quality of coffee which is having special flavour which is

one of the big reason to attract their customer. There is high level of customer service there in
Starbucks which is able to highly attract their customer to avail their services again and again.
This also helps in retaining their customer. Starbucks have the highly valuable sources which are
able to provide them best quality of raw material which helps in creating of best product. There
is high presence of Starbucks which is there high in numbers and present globally which refers as
a stronger competing brand (Ahmed and et. al., 2017).
Rare- Starbucks is having strong brand image which can said to be rare one. There is
special flavour of their product which is rare in nature. This needs high investment in their
procurement and that's why their product are costly. Their customer service are better but that
can be achieved by other firms easily which required high attention towards this. So, it can be
said that customer service is not rare for Starbucks. There can be achievement of their store
environment by other businesses which is not rare. For this, there is requirement of staff training
and some special focus. Supply chain of Starbucks is rare which is very difficult to achieve by
other because there is high requirement of strategy and investment. For other competitors there is
high need to investment which is not possible by others in manner to global presence.
Inimitable- There is difficult to imitate the strong brand image like Starbucks which
require high focus on their product innovation, customer service, supply chain integration etc.
Taste is also inimitable which is because of high investment in their procurement which needs
high price and different procedures. Customer service and store environment is little bit difficult
to imitate. Supply chain be imitate in long term but not possible in short term. There is need of
high investment which is difficult to inimitable which is there in terms of global presence.
Organised- Starbucks is an organised business which is there in relation to their brand
image and flavour and quality of their coffee. Quality and its flavour is the reason for talk in
town which is their marketing along with strategy of customer retention. Organised customer
service is the which is the reason of popularity of Starbucks. Store environment is well organised
along with this, supply chain are well organised (Bianco, 2020).
Core
competencies
Valuable Rare Inimitable Organised Competitive
advantages
Brand image Yes Yes Yes Yes High
competitive

advantage
flavour and
quality
Yes Yes Yes Yes competitive
advantage
customer
service
Yes No Yes Yes Moderate
competitive
advantage
supply chain Yes Yes No Yes competitive
advantage
McKinsey 7S Model
This model is used to highlight the different ways through which seven elements of
bushiness which can be aligned which is to increase effectively. These seven elements are
structure, strategy, system, style, staff, skills and shared value.
Strategy- Strategy of Starbucks depends on product differentiation along with this, there
is focus on quality of products along with services. There is strategy which is like to provide the
outlet on each and every third place. This can give the place to enjoy with friends, relative or to
spent their time on that place. There is also launching of mobile app which can help in increasing
the popularity of brand along with this there it gives the paying features (Riera and Iborra, 2017).
Structure- Starbucks follows the divisional organisational structure along with this there
is also following of brand-based division and integrated geographical structure. Starbucks
organisational structure is very long and comprises of 35 senior vice presented, 3 president, 12
executive vice president along with this 2 group presidents.
System- Starbucks is the world largest coffee retailer which is having wide range of
system. They are having include the employee recruitment system, team development system,
transaction processing system, management system customer relationship management system
and many more. There is about 9 % of orders are done by mobile phones which is expected to
increase in future.
Skills- Starbucks claims that they are more then others think. They claim to provide a
good atmosphere along with this, there is walk the talk in which there are many of the employees
which are having different skills which is there to follow by their action which follows the

strategy. There are different training programme in Starbucks which are here able to make their
employees trained in relation to satisfy customer (Di Domenico, 2020).
Style- Style of organisation is able to influence employee and the performance of
business. This style can be better observable on shop floor in which there is observation of
interaction with each other or customer.
Staff- There are different staff who are very trained and able to provide high level of
quality service which are there can have better business for Starbucks. These are the resources
which can have better impact on Starbucks business.
Shared value- Starbucks sells their experience with friendly staff, comfortable meeting
place and interesting music along with ethical and environment. These are some of values which
are there shared by employees and can be shared as external communication (Matković, 2018).
M2 Analyse internal environment to evaluate strength and weaknesses of organisational structure
and skill-set
There are different internal capabilities of Starbucks which are there having different
advantages for the Starbucks. Starbucks is very strong financially which make them global
business which is there have better marketing of their product and able to maintain their high
quality of coffee. Organisational structure is very strong which gives them the advantage of
being high valuable in market. Better service quality is able to make better business which is due
to their high level of service which have better impact on business.
TASK 3
P3 Porter's Five forces model to evaluate competitive force in Starbucks
Starbucks is one of the brand which is having high quality of business of coffee in very
short time. Porters Five Forces are able to provide better explanation to identify different
competitive forces which are there in company (Buhalis, 2019).
Porters Five Forces Analysis
Threat of new entrants- This includes increasing competition which is due to easy entry
of new firms which is there in industry. This require less investment in relation to start business.
There is high chances of entry of new brand which is the threat for the Starbucks.

Threat of substitutes- There is high number of substitute of coffee but there is very less
option for that flavour and quality. This can be threat for substitute which is there can be
introduced by other big brands.
Bargaining power of suppliers- there is high bargaining power of suppliers which is due
to having less suppliers and there are very few who are able to provide required quality of beans
to Starbucks. This gives them the power to their suppliers.
Bargaining power of consumers- There is low switching cost along with high
availability of their substitute and due to small size of individual buyers give high bargaining
power to customer of Starbucks (Bolton, 2020).
Competitive Rivalry- There is strong competitive rivalry which is there in the food
services along with coffee house industry. There are some external factors like large number of
firms, moderate variety of firms, and low switching cost make high competition.
These competitive forces is generated in all over the Starbucks which is able to help in
earning more profit and getting growth for longer period of time.
M3 Appropriate strategies to improve competitive edge and market position based on outcome
There is need to improve and focus on the quality of coffee which is able to avoid the
threat of substitute which can have better result in business. To reduce the bargaining power of
consumer there is need to increase their customer base which is there need to decrease in their
high price. There is need to increase the suppler who are there able to provide them the required
quality of raw materials (Min and Smith, 2019).
TASK 4
P4 Range of theories, concept and models to interpret strategic plan
Porters Generic Strategy
This is adopted to secure advantage position in market place. There are some description
about this strategy.
Cost leadership- This strategy is basically on minimising the cost which can be there in
market to attract high customer base. This is not applicable to Starbucks because there is high
cost of procurement of raw material.

Differentiation strategy- There is need to develop and offer new product to customer
which is also not possible in case of Starbucks. Coffee is the identification of Starbucks which
can't be replaced others wise brand will loose their image (Park and Park, 2019).
Focus strategy- In this, there is focus on satisfying their customer base of target market
which is in relation to full fill the demand of customer. This strategy can be used by Starbucks
which can have better impact on their business.
Bowman's Strategic clock
This is the suitable way which uses suitable way to analyse the competitive position.
There are different strategy which are there in Bowman's strategy clock such as low price and
low value added, low price, hybrid, differentiation, focused differentiation, risky high margins
and monopoly pricing is there.
M4 Production of strategic management plan which has strategic priorities
Effective business strategy is able to assist and achieve the business objectives for survive in
market for long time. This involves aims and tactics where Starbucks business strategy is
discussed further.
Mission- Mission of Starbucks is to reach after every three house for their consumer in
all over world.
Vision- Starbucks vision is to deliver their high quality flavoured coffee to everyone
which an raise the taste of people.
Objective- main objective of Starbucks is to provide high quality of coffee to their
customer.
Strategy- There is need to reduce their high price in order to affordable by middle class
customer.
Tactics- Starbucks needs to focus again on the quality and flavour of their coffee which
have better taste.
Starbucks needs to analyse internal capabilities and there is need to use external factors as
the advantage in relation to get better business.
D1 Interpretation of environmental and competitive data to form set of strategic directions
There are different external factors which are affecting the business of Starbucks. In order
to get better business there is need to use the strategy in proper manner. There is need to attract
their customer which needs to focus on quality of product rather than other services. Apart from

this there is high need of increase in customer base which is there to sustain in market (Hooper,
2020)..
CONCLUSION
After a brief analysis of above report, it has been concluded that it is essential to use
strategies within business as it makes it easy to achieve benefits. So, discussions have been made
about porters generic model, PESTLE analysis, internal capabilities, porters five forces. With
changing needs of target audience, customers, it is essential for every entity to be well aware
about most appropriate strategy which is beneficial for future growth & development. Moreover,
scanning of business is to be done with use of marketing approaches & methods so that negative
impacts are reduced.

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