Business Report: Analysis of Starbucks' Strategies and Environment

This report provides a comprehensive analysis of Starbucks' business operations, encompassing both external and internal environmental factors. It begins with an introduction outlining the need for strategic analysis in business growth and the importance of stakeholder involvement. The first part of the report delves into an external analysis using PESTLE and Porter's Five Forces models to assess the political, economic, social, technological, environmental, and legal factors affecting Starbucks, as well as competitive dynamics within the coffee industry. Internal analysis includes VRIO and value chain analysis to evaluate Starbucks' resources, capabilities, and competitive advantages. The report offers recommendations to improve Starbucks' long-term business development. The second part shifts focus to stakeholder groups within Starbucks. The report concludes with a discussion of industry life cycle and sources of competitive advantage, providing a thorough understanding of Starbucks' strategic positioning and challenges.

Starbucks Business Report

Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................4
External analysis.....................................................................................................................4
Internal environment analysis.................................................................................................8
Recommendations................................................................................................................11
PART 2..........................................................................................................................................13
Stakeholder Group of Starbucks-.........................................................................................13
REFERENCES..............................................................................................................................16

INTRODUCTION
Every business requires different types of strategies in order to grow and expand in
markets. The strategy is developed on basis of company products or target market. However, it is
necessary to involve stakeholders in strategy formulation so that market data is obtained and
effective decision are taken. Moreover, with help of strategies organisation is able to enter in
new market and compete. For this it is important to evaluate internal and external factors so that
its impact is determined and accordingly measures are taken in strategy. On basis of business
nature and type strategies are formed and implemented. basically, there are three types of
strategic decision made that are operational, tactical and functional. However, at global, national
or local level of strategies are developed as well.
Report is prepared on company name Starbucks who have a large chain of stores all over
in America. In this report we are going to prepare Pestle analysis, five force analysis to gain
information about external environment of their business. Internal analysis like Vrio and value
chain analysis help them to expand business at an extreme level. Need to provide
recommendations to improve Starbucks to develop their business for long run in future.
Whereas in second part it is stakeholder report will be developed.
Starbucks is an American company which provides products like coffee and have their stores
available all over the world and promote their business at a leading level to improve
effectiveness of their products & services. Starbucks provide hot and cold drinks like bean
coffee, espresso, cafe latte, provide different fresh juices, provide snack like chips
(Taecharungroj, 2017). Starbucks is founded by jerry Baldwin, Zev siegal and Gordon Bowker.
Their aim is to provide quality products & services to their customers to expand their business at
a dominant level. Attract large number of customers to increase their profitability in market.
Provide friendly environment to their customers to make them familiar with their products and
service to establish their business at a large scale. Try to bring people together and develop
strong relation with the farmers to get quality products. Aim is to work ethically with all
suppliers and employees those helps them to develop their business. Working hard to grow
business at a large scale. Need to be environment friendly and work towards welfare of society.
Starbucks need to make their price effective that helps them to attract customers from lower
income

PART 1
External analysis
Pestle analysis
Pestle analysis help Starbucks to analyse impact of external issues in overall growth of
their organization (Logan, 2016.) . Pestle helps to analyse consumer awareness for their products
& services.
Political
Starbucks need to know the impact of government on their services and rules and
regulations imposed by government on their services and how it will effect overall success of an
organization. They need to know political stability of each nation. Tax rates and policies by

government on their company and impact of those policies on overall working of an
organization. Need to the employment laws about minimum salary and benefits provided to their
workers. Government impact on health regulation need to be analysed is company is a food and
beverage industry.
Economic
Economic factors are important for overall profitability of company needs to develop
plans and policies for economic development of their organization. Need to analyse
unemployment rate of the people of those territories. Starbucks identify various economic factors
such as tax rate, GDP, income level, etc. of nation (Harrington, Ottenbacher and Fauser, 2017.) .
Economic analysis is most important for profitability of an organization at a extreme level to
innovate their abilities and expand resources for their organization.
Social
These factors are related to change in taste and preference of people. Starbucks determine
preference of their consumers if they reduce prices of their products to engage middle and lower
income level consumers then company need to compromise with quality of their products.
Education level of people in a new market need to be analysed to attract them towards companies
products and services. Lifestyle of their consumers effect overall preference and purchase of
their products. Cultural barriers become an impact on overall growth of company. Social factors
need to be analysed effectively when Starbucks going target their customers.
Technological
The factors are related to change in technology. They need to develop technology like
availability of internet in their stores so that customers are able to surf online. Innovation of new
technology to develop products in a new economy is useful for Starbucks because creativity
influence customers towards their product. They need to make proper research in a new market
to promote their business.
Environmental
They are related to environment laws and regulations. Environmental awareness is
important to earn consumers trust. Company analyse availability of raw material and impact of
environment and climate changes on those raw material. Weather of a new market need to be
analysed effectively because it changes consumer preference about their products (Rastogi and

Trivedi, 2016.) . They implement CSR activities effectively to grow their business at a high
level. They take care wastage of products that increases pollution like plastic and paper wastage.
Legal
These factors include employment laws, health and safety laws, etc. any change in these
laws affect Starbucks operations. Company know consumer protection laws in an economy
where they are developing their services. they follow healthy and safety laws to provide healthy
products to their customers. Employment laws about salary and incentives given to their
workers. Because each and every territory have their own rules and regulation and Starbucks
need to analyse those rules before developing their business.
Five forces model
Rivalry among competitors
Starbucks is multinational company but faces large number of competition in market
from companies those are trying to establish their firm at a large scale. Because large number of
competitors are available in market and variety of products are available that have ability to
influence choices of their customers. Competitors like costa coffee and CCD are affecting their
business at a large scale. Customers loyalty is decreasing with increase in competition.
Competition reduces growth rate of an industry at a large scale. there is intense competition in
industry
Bargaining power of customers
When bargaining power of consumers are strong then it effects overall profitability of
Starbucks. If large number of competitors are available in market for products of Starbucks then
it effects overall development of their organization. Substitutes for their products attract their
customers(Gupta, Gupta and Gupta, 2019.) . If few buyers are available or large number of
substitute for products and services are available then buyers have power to demand products
and services at low prices to Starbucks. The bargaining power is high.
Bargaining power of suppliers
If suppliers for raw materials is low then it increases their power to purchase their
products and services. If suppliers are low then switching cost to another supplier is also high
and effects overall development of organization. If suppliers are high then it reduces overall
ability of suppliers to bargain and reduce price of their products & services. Substitutes for
products and services effects overall expansion of organization. Starbucks need to develop large

number of suppliers in a market that helps them to reduces price of suppliers in their products
and services the bargaining power is low.
Threat of substitutes
Company have a threat from their substitute as they provide products at low prices and
more affordable for their customers. If buyers find substitute with better quality and less prices
then if effects profitability of Starbucks. The threat of substitute is high.
Threat of new entrants
If barriers to enter in new market is low then it effects development of Starbucks.
Because low amount of capital is required to enter in a new market. Customer loyalty is also
decreases and effects overall development of an organization. The threat of new entrant is high
Industry life cycle
Starbucks prevail at growth stage. Cycle is prepared to know the stages a product go
through to sale their products in market (Sakal, 2018.) . It helps marketers of Starbucks to
manage their products in market place and acquire large number of market share by engaging
customers with their products & services.
Introduction stage
It is a first stage in which products of Starbucks are just launched. Marketing activities
are higher then all other stages. Starbucks need to attract customers towards their new product
with the help of effective marketing techniques. Mainly profit in this stage us generally low
because company need to incur production and marketing cost. Starbucks need to decide on the
price of their new product and need to create awareness in their customers about their product.
Growth stage
In this stage customers are attracted towards companies products & services and
Starbucks started earning profit in this stage. Starbucks can use their brand name against their
competitors to earn revenue. Product prices goes down then it helps to increase revenue for
Starbucks and expand their business at a extreme level.
Maturity stage
In this stage Starbucks develop strategies to reduce their rivalry. Company can use their
marketing to extend their maturity period because in this stage company earns maximum revenue
and increase their profit because demand of their products are high and prices of their products

are affordable for their customers. Company can change their products size and packaging or
quality of their products to engage large number of customers with their products and services.
Decline stage
When sales of products and services of Starbucks reduces then it is a declining stage for
their company. Company faces decline stage when consumers preference changes or better
alternatives are available in market. Company need to focus on their products in order to
maximize their profit.
Internal environment analysis
Starbucks need to analyse their internal environment to attain goals & objectives of their
organization and to develop their business at a high level. Internal analysis help company to
know their abilities to promote their business at a large scale and improve effectiveness and
abilities of their company. Starbucks need to analyse their internal resources to achieve an
competitive advantage to expand their business at a leading level. Starbucks have a strong brand
image and provide special flavour and quality products, effective services to their customers and
customer friendly environment helps them to grow their business at a dominant level.
Sources of competitive advantage
VRIO analysis
Value
Starbucks is having a high value as they provide variety of coffee products to people.
(VRIO of starbucks 2016). As Starbucks have a strong brand image and name that helps them to
increase customers with their products and services and develop their business at a large scale
and strong reputation helps generating value of products (Liu and Gui, 2017, April.) the
company is trying to attract more customers. Special flavours in their product help them to attract
customers effective customer services and quality products help them to develop their value in
market.
Rare
Starbucks brand name and logo is unique. It enables people to identify coffee chain outlet
easily. Moreover, there company is highly recognised globally. Alongside, coffee flavours
provided to customers are rare. Also, the coffee beans used by them is rare and are cultivated
only in limited areas. Quality of their coffee are different companies and rare in market. They
have effective supply chain that other companies need to face problems to get because it needs

large amount of investment and an effective strategy to develop supply chain. They have a global
presence that other companies are not able to achieve.
Inimitable
Starbucks resources and products that are not easily imitable for other companies. Like
their brand image is not imitable or substituted but other companies are able to get it in a long
run. In addition, company brand image and global presence can not be easily attained by
competitors in such a quick time. Also, their products are difficult to copy because they different
technology or resources to develop their products. Effectiveness of customer services of
Starbucks are not imitable for competitors. Company need to use resources that other companies
are not able to get easily. If Starbucks is able to create value of their product and make it rare and
hard to imitate then customers are only attracted towards their company and resources.
Organization
Starbucks have an organised management system that helps them to achieve competitive
advantage. With more than 5,500 coffeehouses in over 50 countries, it's clear that our passion for
great coffee, genuine service and community connection transcends language and culture Their
global presence and brand image helps them to increase their profitability (Chen, 2019.) .
Valuable and quality products help them to satisfy their customers. Their organised friendly
environment is provided to their customers. The effective supply chain helps them to utilize all
available resources and minimize wastage. Their organized customer service helps them to
develop their business at a large scale.
Value chain analysis
Inbound logistics
Starbucks select quality coffee beans and products to develop their end products. Here,
company directly procure green and unroasted bean from farms. Then they are transported to site
and packed. Thus, company do not outsource their procurement and in this way ensure high
quality standards.
Operations
Starbucks nearly operates all over the world and have number of coffee shops chain. the
stores are either licensed or owned. Thus, it enables in maintaining quality of products and
services and generating value for coffee.
Outbound logistics

Starbucks does not use outbound logistics or intermediaries in selling products.
Therefore, the company is solely responsible for selling goods and raw materials. In this way
they are able to generate value.
Marketing and sales
Starbucks are less concern towards effective marketing of their products and services
rather than they are more concentrated towards providing quality products and services to their
customers. they focus on aggressive marketing and carry out activities to their stores only.
Service
Starbucks provide effective customer services to build a customer loyalty (Haskova,
2015.). Their aim is to provide quality products and services to their customers to develop their
business at a large scale. so, by selling finest quality of coffee to customers they provide unique
experience.
Capabilities and Competencies framework
Capabilities framework helps company to analyse strength and weakness of their
products and services. Starbucks capabilities in different areas are
Managerial
Starbucks management is highly effective in maintaining smooth flow of business. They
set goals and attain in given time. Effective management helps them to achieve their goals and
objectives and saves money for development of their business at a large scale. Starbucks
managers and employees are highly skilled and qualified and work effectively and have ability to
achieve goals and objectives of their business.
Marketing
Company develop an effective marketing strategy for their products and services.
Marketing helps them to engage large number of customers with their products and services and
develop their business. Company identify needs of people and target market and then do ad of
products to attract customers.
Financial
Finance is required for smooth working of an organization and helps business to achieve
their goals and objectives at large scale. Company financial performance is effectively
maintained as they are having surplus funds and capital to grow and expand in other market.
Technical

Starbucks uses high and advance technologies to develop a unique product that helps
them to achieve goals and objectives of their business. There are several application and
software been used. Technology helps them to achieve a competitive advantage and increase
their profitability.
Competencies framework
Durability
They provide products and services that have ability to satisfy customers wants and
desires and have ability to engage large number of customer with their products and services
(Nan and Li, 2017, April.). Durability helps them to develop their business in a long run by
attracting customers towards their unique products and technology.
In transparency
Starbucks is having a transparent process through which business operations are carried
out. It enables them to make gain trust of customers and stakeholders.
Immobility
Company utilises their capabilities by training their employees and develop their
resources and technology that their competitors are not able to get easily. (Rothaermel, 2017.).
Dun kin Do nuts and McDonald's are main competitors of Starbucks from many years and they
are keep fighting for first position in market and to develop their business at a large scale.
Dunkin Donut started their coffee line products in 2000 to develop their business. McDonald's is
a fast food restaurant and introduce their coffee products in 2000. Starbucks is competing with
their competitors by innovating new products and services that helps them to engage large
number of customers with their products and services and develop their business at a large scale.
Recommendations
Starbucks is an already established company but needs to develop effective plans and
polices that helps them to develop their business in a long run. Starbucks needs to innovate new
technology and products that help them to engage customer and future development of
organization.
SMART objectives
Specific – to provide innovative coffee flavours and at 7.5% low cost as compared to
competitors.
To implement new software and application in taking customer feedback.

Measurable – to measure the outcomes monthly.
Attainable – to attain 10% growth in 10 -20 markets of Europe.
Realistic – to attain at least 8% market growth.
Time bound – to achieve objective within 6 months.
Innovate Cheaper products
Starbucks needs to develop new products with low prices that helps them to develop their
business at a large scale. They need to innovate products at low prices so that customer from
lower and middle income group are attracted towards their products and services. Low prices
help them to increase demand for their products and engage large number of customers with their
products and services.
Effective marketing technique
Starbucks needs to use effective techniques for marketing of their product.
Marketing help them to develop their presence and engage customers. They have already
established name and marketing helps them attract customers easily. Marketing help them to
increase sales of their product and that requires to develop their business at a large scale.
New technology
Need to use new technology that reduces their work and develop their business at a large
scale (Chowdhury, 2016.). Effective utilization of resources help them to minimize wastage and
increase profit of their company. Company needs to develop policies that help them to engage
large number of customers with their products and services.
Conduct seminars for customers
Starbucks needs to conduct seminars that help them to develop their business and
increase effectiveness of their products and services. Seminars is about to provide knowledge to
their customers about their products and services. It helps to build trust and positive image in
minds of customers and helps Starbucks to develop their business in a long run.
Build customer relationship
Company needs to develop effective relation with their customers that helps them to
increase their ability and profitability of their business at a large scale and need to maintain
effectiveness of their products and services. By providing quality services help them to build
positive customer experience.
Expand business in new territories

Company needs to develop and expand their business in territories that helps them to
engage large number of customers with their products and services (Grabs and Ponte, 2019.) .
Develop their business at a large scale to improve effectiveness of their products and services.
Build customer experience
Company need to build an effective customer experience that help them to gain customer
loyalty and attach them with their company for a long run and helps company to develop their
business in future.
PART 2
Stakeholder Group of Starbucks-
Stakeholder Internal or
external
Justification
Employees Internal Starbucks has set their priority to look after their employees.
The employees of the company ask for environment which
is equipped with suitable machinery and positive vibes so
that it can improve the working condition, security of job
and decent packages for providing service. The employees
of the company are hired on a wage level that is above the
legal wage level. The company even initiated a program to
give scholarship to their employees as they are in a
partnership with the University of Arizona State. The
company pays up to 56 per cent of their fees so they can
study in the University.
Customers External
Suppliers External Suppliers of the company are wholesalers and coffee
farmers. Farmers want to generate more revenues so they
increase their coffee yield and they are able to do that
because the demand of the products of the company is high.
Above that they have initiated a program to make sure that
their farmers get their fair share.
Investors Internal Interest of the investors are in the higher outcomes and
profitability of the company and the achievements such as

dominance over the competitors and expansion of the
company on a global level tells that the company is
successful to give higher results to their investors. There
was a time when the company was in losses but now they
have fully recovered from them and they are satisfying their
investors.
Government External Company follow all the rules and regulations which are
imposed by the government. If they don't then it will be
difficult for them to serve and will degrade the image of the
company on a global level (Wei, 2016.) . Although they
faced a case of tax evasion in Europe. Still now they are
paying low taxes with the help of some exploitative
methods. The company can improve this aspect in order to
improve their reputation in the eyes of government and to
satisfy the stakeholders.
From this list customer stakeholder is selected. In Starbucks there are different types of
customers that avail their products and services. It includes all age group from age 15- 65. Also,
the income level is of upper and high class income group. These stakeholders size is it include
male, female, youngsters, etc. furthermore, they belong to different occupation that is
businessman, student, employee, etc. thus, company focus on this target group as its size is very
large. Top stakeholders of the company are their customers. They offer products and services
which are of high quality. Treating the customer at best is the main priority of their customers.
The company has turned out to be the best coffee chain (Qian and Xing, 2016.). Starbucks is
changing their culture from coffee house to cafe because they believe that customers as their
major stakeholders.
So, the influence of customers on Starbucks is high. It means that any change in their
taste and preference will highly impact on company decision. Here, Menedelow’s matrix is used.
So, the customer interest and power is high. It forces Starbucks to keep them involve in decision
making. Moreover, they need to be informed and kept satisfied to retain them. Thus, customer

fall in category D of menedelow’s matrix. It means key players and involve high power and
interest.

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