Strategic Management Report: Starbucks Strategic Business Analysis

This report provides a comprehensive strategic management analysis of Starbucks, a leading coffee shop chain. It begins with an overview of the organization, highlighting its core competencies, including satisfying products, brand recognition, and quality service. A detailed SWOT analysis is presented, evaluating Starbucks' strengths, weaknesses, opportunities, and threats. The report then applies Porter's Five Forces to assess the competitive landscape, examining competitive rivalry, the threat of substitutions, and the bargaining power of suppliers and buyers. Strategic risk management and stakeholder theory are also discussed, providing a holistic view of Starbucks' business strategies and challenges. The report concludes with a summary of key findings and strategic recommendations for the company's continued success.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student
Name of the University
Author Note

1STRATEGIC MANAGEMENT
Table of Contents
Introduction:...............................................................................................................................4
Overview of the Organization:...................................................................................................5
Core Competencies:...................................................................................................................5
Satisfying Products:...............................................................................................................5
Presence of the organization and the Brand Recognition:.....................................................6
Quality of Services:................................................................................................................6
SWOT Analysis:........................................................................................................................7
Strengths:................................................................................................................................7
Weakness:..............................................................................................................................7
Opportunities:.........................................................................................................................8
Threats:...................................................................................................................................8
Porter’s Five Forces:..................................................................................................................9
Competitive Rivalry:..............................................................................................................9
Threat of Substitutions:..........................................................................................................9
Bargaining Power of Suppliers:.............................................................................................9
Bargaining Power of Buyers:...............................................................................................10
Threat of the New Entrants: Moderate.................................................................................10
Strategic Risk Management:....................................................................................................10
Stakeholder Theory and Application:......................................................................................11
Conclusion:..............................................................................................................................12

2STRATEGIC MANAGEMENT
References:...............................................................................................................................13

3STRATEGIC MANAGEMENT
Introduction:
The modern business world is seen to experience notable amount of competition
across various sectors of the industry. One of the prime reason of such intense competition is
identified in the form of the new entries into the profitable business sectors. Many of the
existing organizations are facing the heat of the competition and that is seen to force them
towards the application of various strategies. Two of the most prominent strategies that these
organizations are observed to apply for the effective management of the impact of the
competition are observed to be the increment in the product chain or the opening of the new
business with a completely different product (Tukker and Tischner 2017). Apart from the
existing organizations, many of the new organizations also seen to opt for the business ideas
and the basis of the idea is seen to be the consumption of the products and the profit that the
product or the business is capable generating. In the modern generation, the consumption of
the coffee is seen to notably increase across globe and that plays a crucial role in influencing
the business organizations to consider it as the product for the business openings (Harith,
Ting and Zakaria 2014).
The paper is focused in the elaboration of one such organization which is seen to have
a significant business in the global coffee shop industry in the form of Starbucks. The chosen
organization is a renowned market leader in the mentioned business industry. Adding to this,
the paper analyses the strategies that the mentioned organization uses in their business
conduction and evaluates the external and internal factors that are affecting the business
conduction of the organization. In addition to this, the paper summarizes the strategies that
are seen to be significant in providing the much needed competitive advantage to the chosen
organization over the competitor organizations. Adding to this, the paper evaluates the risk

4STRATEGIC MANAGEMENT
elements that are associated with the implementation of the strategy and portrays the
application of stakeholder theory in the business conduction of the chosen organization.
Overview of the Organization:
As mentioned earlier, the chosen organization operates in the coffee shop
industry. The organization was established in the year 1971 in Washington by Jerry Baldwin,
Zev Siegl and Gordon Bowker (Starbucks.in. 2019). The organization currently serves the
customers across the world with active presence at more than 6500 number of locations
(Starbucks.in. 2019). The organization is seen to serve the products such as the coffee,
beverages, smoothies, tea, baked goods and sandwiches. The excellence of the 238000
number of employees in producing the above mentioned food products and the visionary
leadership of the chairman of the organization, Myron Ullman and the president and Chief
Execute Officer of the organization Kevin Johnson are seen to be crucial in the generation of
a revenue of 22.387 billion US dollars and an operating income of 4.135 billion US dollars in
the year 2017 (Starbucks.in. 2019). With a number of subsidiaries such as Ethos Water, La
Boulange Bakery and Seattle’s Best Coffee, the organization has the capability to improve
their business conduction through the application of effective business strategies
(Starbucks.in. 2019).
Core Competencies:
Satisfying Products:
One of the main unique selling proposition for the chosen organization is seen to be
the significant product chain of the organization. The company provides a number of food
products such as coffee, beverages, smoothies, tea, baked goods and sandwiches. Adding to
this, the organization is capable of producing a significant variety in the products as it is seen
that the Starbucks outlets serves whole bean coffee, hot and cold drinks, micro ground instant

5STRATEGIC MANAGEMENT
coffee which is also recognised as VIA, caffe latte, La Boulange pastries, espresso, full and
loose leaf teas and that includes Teavana tea products and Frappuccino beverages
(Starbucks.in. 2019). Apart from these, many of the outlets of the chosen organization are
seen offer a variety of fresh juices along with the snacks, ice creams, chips and crackers. The
portrayal of the variety of the products that the chosen organization offers to the customers of
it, is significant in the increasing the satisfaction of the customers and plays a crucial role in
the achievement of the preferences of the customers (Han et al. 2018). Hence the notably
efficient product chain of the organization produces a significant competitive advantage to
the mentioned organization over the competitors of it.
Presence of the organization and the Brand Recognition:
As mentioned earlier, the company is able to serve the customers across the globe.
The company is currently operating in 70 countries of Africa, Asia, North America, Europe,
South America and Oceania (Starbucks.in. 2019). With active presence at more than 6500
locations in the form of the outlets, the organization is able to reach to the customers in a
significant manner (Starbucks.in. 2019). This helps the company in the achievement of the
reviews or opinions of the customers regarding the products of the company and at the same
time, enables the organization to aim at a considerably large customer base with their
products. Adding to this, the presence of the chosen organization at such high number of
locations helped the organization to communicate regarding their products to the probable
and the existing customers in a more efficient manner. This helped the organization to set up
a significantly strong brand which has the potential to attract a larger number of customers so
that the new products of the chosen organization be able to achieve the maximum market
limelight (Wilson and Wilson 2014). The significantly strong brand of the chosen
organization is crucial for the organization in the achievement of a competitive edge in case
of marketing and promoting the products.

6STRATEGIC MANAGEMENT
Quality of Services:
The company is able to generate such high preferences from the part of the customers
for their products with the improved quality in the services of the employees. The efficient
recruitment and the selection of the probable employees is seen to be one major reason
responsible in the achievement of such customer base. Apart from that, the continuous
conduction of the training and the developmental activities is also significant for the
organization in improving the quality services and in the generation of the customer
satisfaction (Elnaga and Imran 2013).
SWOT Analysis:
Strengths:
One of the main strength of the organization is their significantly strong brand name
and the brand visibility which is capable of attracting the customers of different age groups in
an efficient manner. However, the company’s policy of targeting the youth generation for
their products is significantly helpful for the organization in increasing the consumption of
their products. Adding to this, the company is able to create an excellent atmosphere for their
customers in almost each of the outlets across the world which helps in achieving the
preferences of the customers. Apart from that, the product chain of the organization and the
variety of the products that the chosen organization sells, is expressively helpful for the
organization in achieving larger number of customers which is influential in the improvement
in the brand that the chosen organization is able to create (Elnaga and Imran 2013). In
addition to this, the company’s presence in 70 countries with the opening of more than 6500
number of outlets is of great significance as it enables it to reach out to the customers with
their products in a significantly efficient manner (Starbucks.in. 2019).

7STRATEGIC MANAGEMENT
Weakness:
Starbucks is considered to be Premium pricing coffee seller. The products and the
services of the organization have a higher price compared to the products and the services of
the other competitor organization. The expensive products are considered to be a major
weakness of the organization considering the fact that the main targeted segment of the
market for the chosen organization is the youth generation. Apart from this, the company’s
heavy dependence on the market of United States is a prime concern as the shareholders as
they are seen to be notably influenced with even the minor changes of the mentioned nation’s
legislation and economy. Adding to this, the company’s urge of extracting the best and the
perfect service from the employees at each and every time to make sure that the customers
are delighted with the services and the products of the organization, injects added pressure on
the employees which has the potential to create dissatisfaction among the employees.
Opportunities:
The introduction of the products and the services of the organizations at cheaper rates
is much needed from the part of the organization, specifically for the youth generation and
that will have the possibility to influence the customers in repetitive purchasing of the
products. Apart from this, the organization is in need to target the small cities for the opening
of the outlets so that the products and the services of the organization reaches to the
customers of those places and the application of the comparatively low pricing will make a
feasible ground for the generation of profit in those places for the chosen organization
(Hamilton and Webster 2018).
Threats:
The chosen industry is notably expanding and the other existing coffee chains and the
fast food outlets are providing tough competition to the organization. Apart from the

8STRATEGIC MANAGEMENT
significant competition, the global financial crisis which bars the customers from spending
excessive amounts is a significant threat to an organization which is seen to be concentrated
on premium pricing policy. The increasing of the raw materials is a major concern as it is
reducing the margin of profit for the organization.
Porter’s Five Forces:
Competitive Rivalry: High
The organization is seen to face a fierce competition from the other organizations
operating the mentioned region. The companies like Dunkin’ Donuts, Cafe Coffee Day and
Costa Coffee re seen to provide a tough time to the chosen organization in UK market. The
revenue of Costa Coffee in the year 2016 is observed to be £ 1.167 billion (Costa.co.uk.
2019) and apart from that, Dunkin’ Donuts generated a revenue of US $ 828.9 million in the
same year and these statistics confirm the significant market share that mentioned
organizations are able to achieve (Dunkindonuts.com. 2019). Adding to this, Café Coffee
Day was able to generate a revenue of US $ 180 million in the year 2015 and is considered to
provide a notable competition to the chosen organization as well (Cafecoffeeday.com 2019).
Hence it is pretty evident that the chosen organization is facing an intense competition in the
mentioned industry.
Threat of Substitutions: High
Considering the above discussed intensity of the competition that the chosen
organization is facing from the various companies in the market, it is visible that the
mentioned industry is populated with considerable number of organizations. With the
application of the lower pricing policy and the improvement of the quality of the products,
the competitor organizations are able to increase the threat of substitution for the chosen
organization.

9STRATEGIC MANAGEMENT
Bargaining Power of Suppliers: Low
The industry is able to experience the participation of considerable number of
suppliers with the skills of on time delivery, accurate delivery and the delivery of the quality
materials. However, the basic objective of these suppliers is evaluated to be the selling bulk
amount of materials and in such cases they consider of providing heavy discounts to the
organizations as well. Hence it is pretty evident that the impact of the suppliers over the
mentioned organization is significantly limited.
Bargaining Power of Buyers: High
As it is pretty evident that the industry is filled with business organizations, capable of
providing the quality products and the services to the customers in significantly cheaper rates,
the customers will have considerable number of organizations to choose from, for their coffee
and the food products. Adding to this, the premium pricing policy of the chosen organization
influences many of the customers to consider the services of the other organizations and that
increases the bargaining power of the customers.
Threat of the New Entrants: Moderate
The intense competition of the market is considered to be one of the major threat that
the new organization faces in terms of considering their entry into the market. Adding to the
competition, the strategies like the competitive pricing policy and the increasing prices of the
raw materials along with increasing labour charges are observed to be significant concerns
for the new organizations in entering the market. However, the 4174 million US dollars

10STRATEGIC MANAGEMENT
revenue of the industry is one of the fundamental influential factor for the new entries in
entering the market.
Strategic Risk Management:
The selection of the pricing policy of the organization, the increasing cost of the
materials and the increment in the labour charges in the industry along with the significant
competition of the market are observed to have the potential to become significant risk for the
chosen organization. As mentioned earlier, the organization follows the premium pricing
policy which indicates the pricing of the products and the services of the organizations is
notably high (Hanna and Dodge 2017). Adding to this, the other organizations applying the
low pricing policy has the potential to attract the customers who are intending to spend less.
Hence the organization is in need apply lower or competitive pricing policy to attract a larger
number of customers (Hanna and Dodge 2017). Apart from this, the organization is in need to
make sure that they are connected with multiple number of suppliers so that the company be
able to reduce the impact of the increasing cost of the materials. One of the significant
strategy to cope up with the increasing competition of the market other than the application of
the competitive pricing is the increment of the marketing and the promotional campaigns
from the part of the organization. The increased occurrence of the promotional events and the
improvement in the social media promotions will be significant for the chosen organization in
making sure that the products of the organization gains maximum market limelight (Jackson
2013).
Stakeholder Theory and Application:
The conceptual briefing of the stakeholder theory indicates that the purpose of the
business operations of the business organizations is to make sure that the business creates
value for the possible stakeholders along with the shareholders of the organizations. In order

11STRATEGIC MANAGEMENT
to create a sustainable business, the value creation for the various segments of the
organizations such as the suppliers, communities, employees, customers and the shareholders
is notably important (Harrison and Wicks 2013).
For a sustainable business conduction, the employees of the organization is in need to
make sure that they be able to provide optimum quality service to the customers of the
organization. Adding to this, the importance making sure that the employees of the
organization are motivated towards the higher production and the improvement of the quality,
is notably high and that is pretty evident with the formation of the effective rewarding policy
with the inclusion of the intrinsic and the extrinsic rewards from the part of the organizations
(Tessema, Ready and Embaye 2013). Apart from this, the manufacturing of the products and
the design of the services that will be able justify the compensation of the customers are seen
to be significant in the creation of the value for the customers of the organization. As a result
of this, the repetitive purchases of the products and the services of the organization from the
part of the customers will be initiated and that will certainly increase the value of the business
for the shareholders of the organization. The increased consumption of the products
manufactured by the chosen organization will force the organization towards the increment in
the sourcing of the raw materials and that will be important in the value creation for the
suppliers of the organizations.
Conclusion:
On a concluding note, the chosen organization has significant potential in becoming
one of the market leader of the mentioned industry and with the idea of the significant growth
that is associated with the industry, the organization is expected to improve their financial
condition in an effortless manner. However, the organization is in need to make sure that they
target the lower income groups in a more efficient manner with the application of the low

12STRATEGIC MANAGEMENT
pricing policy. Apart from this, the organization needs to make sure that they expand their
business in the small cities and towns in a more increased manner and with the application of
the low pricing that will be significantly visible from the point of view of the organization.

13STRATEGIC MANAGEMENT
References:
Cafecoffeeday.com 2019. Cafe Coffee Day – India's favourite Coffee Shop & hangout place.
Café Coffee Day | A Lot Can Happen Over Coffee. [online] Available at:
https://www.cafecoffeeday.com/
Costa.co.uk. 2019. The Nation's Favourite Coffee Shop | Costa Coffee. [online] Available at:
https://www.costa.co.uk/
Dunkindonuts.com. 2019. Dunkin’ Donuts. [online] Available at:
http://www.dunkindonuts.com/
Elnaga, A. and Imran, A., 2013. The effect of training on employee performance. European
Journal of Business and Management, 5(4), pp.137-147.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford
University Press.
Han, H., Nguyen, H.N., Song, H., Chua, B.L., Lee, S. and Kim, W., 2018. Drivers of brand
loyalty in the chain coffee shop industry. International Journal of Hospitality Management,
72, pp.86-97.
Hanna, N. and Dodge, H.R., 2017. Pricing: policies and procedures. Macmillan International
Higher Education.
Harith, Z.T., Ting, C.H. and Zakaria, N.N.A., 2014. Coffee packaging: Consumer perception
on appearance, branding and pricing. International Food Research Journal, 21(3).
Harrison, J.S. and Wicks, A.C., 2013. Stakeholder theory, value, and firm performance.
Business ethics quarterly, 23(1), pp.97-124.
Jackson, N., 2013. Promoting and marketing events: Theory and practice. Routledge.

14STRATEGIC MANAGEMENT
Starbucks.in 2019. Starbucks Coffee Company. Starbucks. [online] Available at:
http://www.starbucks.in/
Tessema, M.T., Ready, K.J. and Embaye, A.B., 2013. The effects of employee recognition,
pay, and benefits on job satisfaction: cross country evidence. Journal of Business and
Economics, 4(1), pp.1-12.
Tukker, A. and Tischner, U. eds., 2017. New business for old Europe: product-service
development, competitiveness and sustainability. Routledge.
Wilson, A.P. and Wilson, N.L., 2014. The economics of quality in the specialty coffee
industry: insights from the Cup of Excellence auction programs. Agricultural Economics,
45(S1), pp.91-105.