Business Management Strategies: Case Study of Starbucks and McDonald's

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Introduction to Business and Management
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Table of Contents
Introduction......................................................................................................................................3
The External Environment...............................................................................................................4
The Organisational Structure...........................................................................................................9
Organisational Performance..........................................................................................................12
Comparison and Conclusion..........................................................................................................15
Reference List................................................................................................................................16
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Introduction
Management of business refers to organising, analysing and planning different kinds of
operations of business. Through this, the goals and objectives of the organisation are fulfilled.
Starbucks is a public limited company that is based in US. Jerry Baldwin, Gordon Bowker, and
Zev Siegl have founded it in the year 1971. The organisation is part of the hospitality industry
and falls in the sector of food and beverage. This company has presence all over the world
including the United Kingdom. The products served by the company are smoothies, baked food,
sandwiches, and tea; however, it has gained popularity through its coffee beverages. The
organisation has entered the market of the United Kingdom in the year 1998. The organisation
has generated around £372 millions in the year 2017 in the United Kingdom (starbucks.com,
2019).
McDonald’s is a public limited company that is based in the United States of America.
McDonald, Richard, and Maurice have founded the company in the year 1940. The company is a
part of the hospitality industry and falls in the genre of fast food restaurant. This organisation has
worldwide presence including UK. The company produces products such as, French fries,
hamburgers, milkshakes, soft drinks, desserts, wraps, salads, coffee, and some others. This
organisation has entered the United Kingdom’s market in the year 1974 (icmrindia.org, 2019).
The company has made profit of £341 millions in 2017 in UK (thisismoney.co.uk, 2018).
These organisations have been chosen, as they are famous brands in food and beverage sector.
The customers’ rate of these organisations is more than the other companies that fall in the same
sector. Comparison between these two would help to analyse he different strategies incorporated
by both in the functioning of the business.
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The External Environment
Variable Construct
Political Brexit incident (theguardian.com, 2019)
Economic Inflation, deflation and recession (Coulter, 2016)
Socio-Cultural Healthy issues of society regarding food (dailymail.co.uk, 2019)
Technological Technological advancement (Ghaani et al., 2016)
Legal and
Regulatory
Various legislations have a major impact (Girotto et al., 2015)
Ecological and
Environmental
Several issues regarding environmental hazards (legislation.gov.uk, 2019)
Table 1: Pestle analysis of McDonalds
(Source: Created by the learner)
Variable Construct
Political Unstable political situation (McKellar, 2017)
Economic Global recession (Allen, 2016)
Socio-Cultural The change in food trend (Santeramo et al., 2018)
Technological Effect of negative and positive social media (Schivinski and Dabrowski,
2016)
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Legal and
Regulatory
Consumer protection law and labour law (Howells and Weatherill, 2017)
Ecological and
Environmental
Pollution in water bodies (bbc.com, 2019)
Table 2: Pestle analysis of Starbucks
(Source: Created by the learner)
Analysis
The impact of Brexit is increasing the cost of products in UK; unstable political condition can
harm the business of Starbucks. Global recession is a major problem, which will decrease the
business for both companies. McDonalds will have to stop creating offers for fast food, as it can
increase the rate of obesity in UK. It will be difficult for Starbucks to follow the trends in the
food industry. Various technological-advancement will affect both companies. There are several
laws in UK, which protects the rights of consumers. This will affect both companies in a major
way. McDonalds and Starbucks should ban the use of plastics in their business to prevent
damage to water bodies.
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Threat of New Entrants
Low
Power of Suppliers
Moderate
Existing Industry
Competitors
High
Power of Buyers
High
Threat of Substitutes
Low
Figure 1: Porter’s five forces for McDonalds
(Source: Created by the learner)
Threat of New Entrants
Low
Power of Suppliers
High
Existing Industry
Competitors
High
Power of Buyers
High
Threat of Substitutes
Low
Figure 2: Porter’s five forces for Starbucks
(Source: Created by the learner)
Analysis
The threat coming from new entrants is null for both companies, as these companies are well
established. The power of supplier is high for Starbucks, as they will have to get high quality of
coffee beans and suppliers can bargain prices for supply materials. On the other hand,
McDonalds will not face such pressure due to availability of many suppliers. The buyer power
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for both these companies is high, as buyers can switch companies. Competition is very high for
both companies and there is no availability of substitute products, which is why it is low.
Competitors Starbucks McDonalds
Company Contact
Details
Chiswick Park
566 Chiswick High Road
London
W45YE
United Kingdom
McDonald's Restaurants Ltd
11-59 High Road East Finchley
London N2 8AW
Company
Website address
www.starbucks.co.uk www.mcdonalds.com/gb
How many
physical stores?
29,324 37,855
Do they have an
Online store?
Yes Yes
How many staff
do they employ?
277,000 (forbes.com, 2019) 235,000 (forbes.com, 2019)
What is their
annual revenue
for 2018?
8.9 Billion USD (cnbc.com, 2018) 22 Billion USD (mcdonalds.com,
2019)
What is their
annual profit for
2018?
2.5 Billion USD
(statista.com, 2019)
5.9 Billion USD
(statista.com, 2019)
What is their
Market Share?
38 percent
(statista.com, 2019)
19 percent
(statista.com, 2019)
What is their
Market Growth?
0.32 percent decline
(statista.com, 2019)
0.76 percent decline
(corporate.mcdonalds.com, 2019)
What Brands do
they have?
None McCafe, Dairy queen,
Mcdelivery
(Mcdonalds.com, 2019)
What Products or Coffee, juices, cookies Burgers, chicken wings,
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Services do they
offer?
( Starbucks.co.uk, 2019) beverages
(McDonalds.com, 2019 )
What is their
current Marketing
Strategy?
Standard strategy Developmental strategy
Table 3: Competitors matrix
(Source: Created by the learner)
The Organisational Structure
Starbucks structure
Figure 3: Structure of Starbucks
(Source: Starbucks.co.uk, 2019)
Starbucks is using the matrix structure in their operations. This structure is providing them with
balance in the organisation. The authority in this structure flows downward and mangers
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provides influence in a sideways manner. Employees of this company directly reports to
managers and every employee reports to their respective bosses. This structure is a combination
of organisational and functional structure. Therefore, it allows the distribution and sharing of
skills, knowledge and various aspects of an employee within the organisation. Functional
manager has the responsibility to look at the functional part of the organisation and he or she is
accountable for distributing the work amongst employees. The company focuses on making
products according to the demand of public and therefore, by using proper segmentation, they are
able to place their stores in appropriate locations. The process of making decisions here is quite
complex and the company implements a vertical communication style. There are several benefits
for the organisation due to this structure. They have high skilled employees and dynamic nature
of this structure allows employees to communicate with ease. There is a significant increase in
loyalty of this organisation due to this (Burton et al., 2015).
Figure 4: Structure of McDonalds
(Source: Mcdonalds.com, 2019)
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Starbucks use a divisional organisational structure and this helps them to conduct various
activities of their business in the global market. The company divides its various sectors into
semi autonomous parts. It helps these parts to function by their own and they are answerable to
the Headquarter, which maintains the control over these segments. Staffs of the company are
responsible for making proper decisions for those divisions. The divisional organisational
structure enables a company to assess external situations of each region and use experts from
those regions to overcome with those situations by providing ideal solutions. This structure is
helping Starbucks to control their daily activity. This kind of structure is offering flexibility to
this company and this is bringing out solutions for problems easily, as every divisional head is
taking care of it, without reporting it to the top level. The environment of work is good because
there is collaboration between employees of this organisation. They all get the chance to show
their skills and proper job descriptions provides an employee with an opportunity to show
attributes and implement knowledge regarding their respective jobs. The joint contribution from
many employees is the main factor of the huge success of this organisation and divisional
structure is beneficial for them (Sahay, 2017).
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Organisational Performance
The organisations’ performance would be identified through applying situational or SWOT
analysis for both the organisations. The SWOT analysis would help in determining the internal
factors that affect the business environment. In this way, the strength and weaknesses of the
organisations would be recognised that affect the performance of the companies.
Starbucks’ SWOT analysis
Strengths
 The supply chain of the company is
effective (starbucks.co.uk, 2019).
 The organisation has strong image as a
brand (LOMBARDO, 2019).
 The quality of the products is good
(starbucks.in, 2019).
Weaknesses
 The price range of the products is high
(Walters, 2018).
 The company lacks innovation in
products (Bush, 2016).
 The outlets of the company are mostly
in malls, so the presence of the outlets
is restricted to a specific area of the
society (Bhasin, 2019).
Opportunities
 The organisation can expand its
business overseas (Serna, 2018).
 It should introduce unique products in
the market (FOSTER, 2018).
 The sales in the coffee market has been
increased globally, this would increase
the sales of the company (Whitten,
2018).
Threats
 The company has many competitors
that provide good quality products in
less cost such as Dunkin Brand Group
and Costa (Dalavagas, 2016).
 The reduction in the economy of the
country would affect the company
negatively (Wood, 2017).
 Fluctuation in weather of the country
would create difficulties for the
company (WORLAND and RICA,
2018).
Table 4: SWOT analysis of Starbucks
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(Source: Created by the learner)
It can be analysed from the given SWOT analysis that the supply chain and brand image of the
company enhanced the profit. The quality of the products increased the customers’ satisfaction
rate as well as profit of the business. The company needs to maintain an affordable price range to
face the competitors. It should introduce restaurants other than in malls to enhance its presence.
It should develop innovation methods to improve the products. The company should expand its
business overseas to increase the profit.
McDonald’s’ SWOT analysis
Strengths
It is one of the largest chains of restaurants all
over the world (Harding, 2018).
The products of the company are successful
among people (Harding, 2018).
It has branches worldwide (Dalavagas, 2015).
Weaknesses
The market share of the company has been
declined (Ungarino, 2018).
The quality of the products has been decreased
recently (LUTZ, 2014).
The profit of the organisation has been reduced
significantly (Haddon, 2018).
Opportunities
The company should expand its business in
different parts of the world (Zanoni, 2019).
It can incorporate joint venture method to
expand its business (Mundy, 2017).
The organisation should use CRM to enhance
the profit of the company (Coffee, 2019).
Threats
The competition from KFC, Burger King, and
some other fast food restaurants may affect the
company negatively (Jurevicius, 2019).
The consumers are becoming health conscious
and rejecting fast food (Bhasin, 2019).
The company uses HCFC-22 in packaging the
products that would affect eth environment.
People would be offended by this and the
consumption rate would decreased (Leo,
2016).
Table 5: SWOT analysis of McDonald’s
(Source: created by the learner)
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