Starbucks Business Report: Analysis of Internal and External Factors

This report provides a comprehensive analysis of Starbucks' business operations, market position, and competitive landscape. It begins with an introduction to Starbucks and its competitors, followed by an examination of the external environment using PESTLE and Porter's Five Forces analyses. The internal environment is also assessed, highlighting the company's strengths and weaknesses. The report then identifies key stakeholders and emphasizes the importance of employees. It concludes with strategic recommendations for Starbucks to maintain its market leadership. The report covers the coffee market, industry trends, and the impact of political, economic, social, technological, legal, and environmental factors. It also assesses the competitive rivalry, bargaining power of buyers and suppliers, and the threat of substitutes and new entrants. The analysis provides insights into Starbucks' performance, asset turnover, and return on assets, offering a detailed overview of the company's strategic considerations and market dynamics.

Starbucks Business
Report

Table of Contents
INTRODUCTION ..........................................................................................................................3
PART 1............................................................................................................................................3
Introduction of Starbucks and its competitors............................................................................3
External environment analysis....................................................................................................4
Internal environment of organisation..........................................................................................9
Recommendations.....................................................................................................................12
PART B..........................................................................................................................................12
Internal and external Stakeholders of Starbucks.......................................................................13
Employees as the priority in the stakeholders group................................................................13
Internet and power of the employees........................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Coffee market and the industry is increasing their business's size at global level through
formulating effective alignment into private and public corporations. At the time of European
colonial expansion the subdivision of coffee is also introduced among other countries which
include America, Asia and in other countries also. Coffee is one of the most second traded
commodity among the world. This report is written from the perspective of Starbucks which is
performing their business's at global level in the coffee industry. Further, this report highlights
on internal and external environment of organisation and the brief description about Starbucks
and its competitors (Aiello and Dickinson, 2014). Along with this recommendation will also be
given in this report on the basis of case study and research.
PART 1
Introduction of Starbucks and its competitors
Cafe and the beverage market is developing within a more diverse market by providing
and offering hot coffee, cold coffee, tea, cold-drink and many more. Coffee market is one of the
ongoing and continuous product among the beverage industry which is increasing their market
size with rapid speed by segmenting the market on demographic and characteristics basis.
Starbucks is one of the largest coffee chain that is operating their business's at global level. It is
an American coffee organisation which is satisfying the beverage needs of customer's in an
appropriate manner. Starbucks was founded in the year 1971 and initiate their business's by
offering spices and beverage products to its customer's. In the present scenario, there are more
than 2,80,000 employee's are engaged in the operations of Starbucks. Along with this, all the
products of organisation are present at worldwide level. Coffee market is growing with rapid
speed as it is enhancing the market share with 5% for each year. Among the recent years, the
potential market share for coffee is increasing among the business to business market as well as
business to customer market. From the year 2015, Starbucks is one of the major leader in coffee
retail business's that is performing their business's at global level (Booth, 2014). Costa coffee,
Barista, McDonald's are the major competitor of Starbucks which is impacting on the sale of
their business's. Their are large number of organisation are performing their work at global level
for increasing market size and enhancing the profits for management. In the context of
Starbucks, management is increasing their market with implementing new and

innovative methods to gain competitive advantage as per to other organisation. UK, America and
many more are the major nation and market area in which the demand of coffee is too high.
From the year 2014, the market share of coffee is raised with 8%. Moreover, Dunkin and
McDonald's are the major competitors of Starbucks and the number of stores, profits, employee's
are increasing and competing with each other at a global level. In the context of Starbucks and
its competitors such as Dunkin both formulate effective strategy which leads management to
increase their market with the 6% on individual basis and year. This demonstrate that market is
increasing with rapid speed and it is increasing their market area at a global level. Competition in
the coffee segment is increasing with rapid speed because of industry attractiveness. Caribou
coffee is operating their business's among 20 states. Another competitor McDonald's is well-
known for its quick service restaurant at international level (Chowdhury, 2016). Similarly,
Dunkin Donuts, is the another organisation which is performing their work at global level
along with this they are also Baskin Robbins and Togo sandwiches are also operated by Dunkin
Donuts. In the context of Starbucks, they are the leaders who are performing their work at global
level as a leader of coffee market. In the last, Starbucks is also performing their business's as per
management considerations of Starbucks and also on franchise basis.

Statistics related with business's of Starbucks are impacting on operations and functions at global
level. This determines it is mandatory for business's management to manage its stores according
to their annual sales. Return on asset is a crucial part for organisation which impact on business's
and its performance. In context of Starbucks it is more than 22% which is a positive aspect for
management because it provide better returns on investment. They are also used to make better
goals by enhancing market gap as well as increasing profit margin on gross as well as net basis.
On the other side, the asset turnover of Starbucks is high so it leads management to gain
competitive edge in market as compare to rival organisation.
External environment analysis
Starbucks is one of the global organisation so it is essential for them to understand the
overall market conditions and environment in which they are operating their business's.
Therefore, some tools such as PESTLE, Porter five force and industry life cycle model is
included in this report. PESTLE analysis in context of coffee industry is mention as follow:

Illustration 1: Source(https://prezi.com/p/bnb9wzxwymt6/pestel-
analysis-of-starbucks/)
Political factor- The term political aspects includes various aspects such as rules,
regulations that are formulated by ruling government of a country. In the context of coffee
industry it is totally different among all countries. Like UK is one of the developed country due
to which its political conditions are stable. Along with the constitution of UK is open for all
countries as it allow other multi-national corporations and individuals to perform their operation
with a flexible approach in the country (Dooley, 2014). Coffee industry of UK develops positive
relations with other countries such as with suppliers and manufactures of beverage industry. It is
also mandatory for coffee industry to make positive relations with other countries as coffee is
most traded commodity among other countries. Like Starbucks operates their business's in those
countries which are not anti-Americanism.
Economical factor- Economic aspects includes all those aspects that are related with
financial aspects of a country as the industry of a country is directly linked with economic
conditions. Coffee industry is also impacted with economic aspect of country like the spending
power of consumers for a particular area impact on the sale of coffee industry. In the present
scenario, due to Brexit decisions economic conditions of UK is not constant. It determines that
the spending power of UK individuals is not high. So it is essential for the coffee industry to
perform their work as per economic policy of country (Emeseh and Songi, 2014). Like Exchange

rate of UK is sufficient and high for those organisation who are performing their work in coffee
industry. So it is a positive aspects for coffee companies such as Starbucks, Barista, Dunkin
Donuts and many more.
Social factor- Coffee industry and social needs of organisation both are related with each
other. As for the term recent years, sociological factor is essential aspect for organisation like
they are performing their work at global level. In the present scenario, consumption of coffee
among the society of UK is a status symbol. So it works as positive factor for coffee organisation
to perform their work effectively in market. Black coffee is the best example due to which
demand of coffee is increasing with rapid speed.
Technological factor- Techniques and innovation are the major aspect for organisation
that is increasing demand of its products. Coffee industry must follow the better brewing
techniques that formulates better production of coffee in a efficient way. This leads the
organisation to perform their work in more efficient way. Development in coffee machines also
prepare coffee within minimum time period. Due to efficient time it is essential for new
organisation to perform their work with best techniques and methods.
Legal factor- Their are various laws are formulated by the organisation to manage,
monitor and control the organisational functions in proper manner. It also determines that with
various laws, legislation and policies it is essential for coffee industry to perform their work as
per management considerations. Coffee industry is impacted due to the legal factor because like
the minimum wages for labour in UK is too high (Hackman, 2018). So it is mandatory for
organisation to perform their work as per the regulations and legal laws that are developed by
country.
Environmental factor- Coffee is product which is depend on the crop as the coffee beans
are harvested as similar to other crops. This determines the production of coffee undertakes the
aspects of land and crop and its production related with nature of products. It includes rain, green
lands, water and many more. This results coffee industry is increasing their business's size due
to which the goals and objectives are achieved in proper manner. On the other side, consumption
of beverage products is also influenced by weather. Like in context of UK, weather conditions
are high for winter season, it results the demand for the coffee product is too high in European
countries which work as positive factor for organisation (Hutt, 2016).

Porters five force analysis
 Threat of substitution product- Their are various products in the beverage industry are
present in market. Like coffee, tea, fruit, soda, water and many more drinks. Places of the
coffee industry performs a major role in the industry of country. It governs that it
provides the place for party, hang out, relax and entertainment. Along with this there is
large list for the substitute of coffee is present so the approach for substitute products is
high and also it is increasing on daily basis.
 Threat of new entrants- Some of the major threat related with the new products is
increasing on daily basis due to high coffee industry attractiveness. Some of the major
player such as McDonald's, Barista etc. are already performing their work in beverage
industry. Therefore, the power of new entrants is moderate as organisation who are high
in capital easily enter in industry to complete their work effectively.
 Rivalry- In the context of UK, there are various task are performed by coffee industry.
Among which one of them is the best possible method relates with organisational
performance. The major challenge for industry relates with the intense competition as
there are many players are present in organisation who perform their work at local level
as well as international level (Lemma, 2017). Due to the intense competition among
industry it is analysed that the rivalry power is too high in the market which is impacting
on sales of goods on daily basis.
 Bargaining power of buyer- Customer's are the major player and stakeholder of the
organisation who are performing their work in minimum time period. Therefore, the
bargaining power of supplier is too high. Like it is mandatory for the existing
organisation to update their products as well as to offer wide range of products due to
which it is easy for management to control the bargaining power of supplier.
 Bargaining power of suppliers- Coffee beans is one of the most essential products for
the organisation as it is used by them to complete the process. This determines that it
turns the raw-materials into finished products. Like, technology and market is one of the
most important aspect to perform their work in easy manner. The sheer scale of coffee
industry is too high as the bargaining power of supplier as the demand in industry relates
with quality products (Omar, Leach and March, 2014).

Starbucks is performing their work at global level, it determines that there are various task are
performed due to which it is mandatory to perform the role as per management and its
consideration to sale their coffee among overall world. As compare with the Dunkin Donuts and
Mcdonald's management of Starbucks is selling more products to the consumers.
Industry life-cycle model
Industry life-cycle is consists of the various stages or the process that is related with
business function, prospect, operates and stages that is related with organisation function.
Industry life-cycle consists of start-ups, growth, maturity and decline. In the present scenario,
there are various task must be included to perform their work in effective manner. Industry life
cycle model for coffee company such as Starbucks is as follow: Introduction stage- In the introduction stage the main motive of organisation is to
establish them in market. In the context of large organisation such as UK, there are
various task are performed by management but they are low in cost. As the main motive
of all organisation at initial stage is to establish them in the market to gain high market
share in the industry.

 Growth stage- It is the second stage of the life cycle model according to the growth stage
there are various task are performed by management. It leads organisation to perform
their work as per rules. So the growth stage will be improved by considering the profits
for the organisation. Coffee industry and its organisation add more products, variety and
flavours to improve market share. Maturity stage- According to the maturity stage, the profits for the organisation is
increasing with rapid speed as per the demand increases. As the competition increases in
industry due to saturation an organisation face challenges in brand value (Phan, 2015).
 Decline stage- With the innovation and innovative products it is complex for organisation
to survive in market for longer period. So by monitoring the life-cycle model it is
analysed that maturity and decline stage are complex factor for organisation. Like, due to
health conscious individuals people are more attracted towards green tea.
Internal environment of organisation
An organisation perform their work in the external environment by considering their
work performance and productivity on individual basis. This determines it is mandatory for
organisation to understand their internal environment. So VRIO model is implemented by the
management of Starbucks for understanding long term benefits through formulating competitive
advantage by increasing their strength and to overcome form loopholes which is impacting on
the sale of business's. So it increases sale of business's in short intervals as well as to achieve
their objective in an appropriate manner. VRIO model in context of Starbucks is as follow:
Valuable- According to the value perspective, it is mandatory for Starbucks to perform
their work and task with those resources that leads organisation to perform their work with those
resources that increases value in the operations and functions of Starbucks. Brand image is the
major part for the organisation which is increasing their work value in the market. Like the logo
of Starbucks is recognised at the world level. Customer service is the another major positive
factor for Starbucks that is increasing performance in the value of products (Pulido, 2017).
Supply chain is one of the major aspect for organisation which is enhancing business's
performance at global level. Like it is increasing their work performance by providing their
products to all customer's with a quick service. Quality of the Starbucks products is too high due
to which excellent results will be gained by organisation.

Resources- All the resources which are managed and controlled by organisation must be
performed in proper manner. Raw-materials, resources, ingredients which are used by Starbucks
are high in products and it is related with management aspects that is enhancing their goals and
objectives to perform their work as per management results. In the current scenario, there are
various aspects such as brand image is one of the major resource that is rare. Customer's
services is the another mandatory aspect for organisation that is also rare (Ragozzino, Reuer and
Trigeorgis, 2016). Investment is the another important aspect that is rare as well as valuable
which increases business's performance of the Starbucks as compare to its competitors.
With the implement of rare resources it is easy for organisation to gain long term results
as well as it also increases business's performance due to which the benefits are gain by the
Starbucks for longer period.
Imitability- All of the major resources that are utilised by the Starbucks are high in cost
due to which it is complex for other organisation to use the same products. This also refers that
resources which is related with business's and products of Starbucks are rare as well as valuable.
This is also require by management to make better products which leads management to gain
competitive edge in market. Brand image, quality, global presence and many more are the major
products that is increasing their business's performance at global level (Tučková, 2017).
On the other side, with the increase in imitable products. It is easy for organisation to
develop positive products as well as to perform their work according to agreeable aspects that
enhances business's performance for increasing quality of products.
Organisation- With the increase in organisational sales there are various products are
used by management for performing their work in effective manner. Like company is achieving
more goals by performing their work according to the VRIO framework. The main aim of the
Starbucks is to enhance their organisation at global level. Brand image and supply chain are the
major aspects that leads them to develop positive environment in organisation.
Value chain analysis- It is mandatory for the organisation to perform their work as per
the global standards. This is can be divided into two different categories for accomplishing all
task in a exact manner. It undertakes primary activities to develop physical conception of
products. Secondary activities is the another task that is related with infrastructure of companies.
In the context of primary activities operations, marketing and sales are the major concepts for
organisation that leads organisation to perform its operations in more than 60 countries.

Secondary activities helps the management to complete their work as per infrastructure of
business's (Voigt, Buliga and Michl, 2017). Like in context of Starbucks human resources and
technology are the major actions which enhancing business's performance of organisation.
Resources- Starbucks is offering their products that are tangible as well as consumed by
the individuals to gain competitive edge in market. Further, the major strength of the Starbucks
relates with physical evidence such as their outlets, retail organisation and machines which is
used by management to perform their work with high efficiency. With the roast and brew of the
new technology is used by management to perform their work as per final services which leads
organisation to gain competitive edge in market.
Capabilities- Brand equity, goodwill, perceptions of customer's towards organisation are
the major aspects which leads management to gain top position in market by utilising all
resource as the strength for its operations. With the capabilities organisation also introduced their
products at global level due to which profits of Starbucks is increasing with rapid speed such as
customer's base for its products. In the last, the major strength and capability is the beans that is
used to make coffee of good quality.
COMPETENCY FRAMEWORK
The competency framework denotes comprehensive structure that is used to develop
effective foundation about attributes, knowledge and skills that are needed by employee's. The
working environment and competency framework of Starbucks is mention as follow:
Leadership development- It include all action, activities and operations that are
performed by Starbucks to enhance skills and capabilities of employee's such as motivating
seminars, training and development for employee's.
High potential talent- Majority of the employee's who are engage in Starbucks are
possessed with high skills and experienced that leads organisation to match their operations with
customer's expectation.
Recruitment and selection- Roles and responsibilities of organisation are different from
each other. It governs that it is mandatory to select right candidate for the right job. So by
utilising effective tools it is easy for management to recruit right person (Yang and Kankanhalli,
2014).