Starbucks: Assessing Strategy, Financials, and Stakeholder Interests

This report provides a comprehensive analysis of Starbucks' organizational strategy, examining its evolution in response to financial challenges and market dynamics. It begins by outlining Starbucks' core strategies, including its turnaround strategy during the 2007-2009 financial crisis, diversification efforts within the US market, and international expansion initiatives. The report assesses Starbucks' financial performance, highlighting the impact of strategic decisions on its profitability and growth. Furthermore, it evaluates the coherence of Starbucks' strategy in relation to its internal and external environments, considering factors such as changes in consumer behavior, technological advancements, and social responsibility. The analysis also explores whether Starbucks operates primarily in the interests of its shareholders or stakeholders, examining the balance between financial returns and broader societal impacts. Finally, the report identifies the threats Starbucks faces, such as competition and economic fluctuations, and proposes strategies for mitigating these risks and maintaining a competitive advantage in the global market.

Influencing Organisational
Strategy

TABLE OF CONTENTS
INTRODUCTION:..........................................................................................................................1
1) What is Starbucks’ strategy? ......................................................................................................1
2) Assess Starbucks’ strategy in relation to:....................................................................................3
A) Starbucks’ financial performance..........................................................................................3
b)The overall coherence of Starbucks’ strategy in terms of its fit with the company’s external
and internal environments and the internal consistency of the strategy......................................3
3) Does Starbucks operate in the interests of its shareholders or its stakeholders?.........................4
4) What threats does Starbucks face; how should it counter these threats? ....................................6
CONCLUSION:...............................................................................................................................8
REFERENCES :..............................................................................................................................9

INTRODUCTION:
Every business needs to develop different strategies in order to survive in the market.
Strategies help business to grow and develop in the market. It also provides a platform through
which competitive advantage can be gained (Serra and Kunc, 2015). Also, the success of
organisation depends on how strategies are developed and implemented. Business needs to
change its strategies to retain its customers. Besides this strategies are developed on basis of
market condition and target customer. Moreover, strategy helps in maintaining growth and
market share by increasing sales and profits. This report is based on how strategies influence
business performance and growth. Also, how financial performance of enterprise has an impact
on developing strategy is described. For undertaking this report, organisation chosen is
Starbucks. It operates at global level.
1) What is Starbucks’ strategy?
Starbucks operates at global level. So it has to frequently make changes in its strategy to
grow and develop. Its strategy focus on people who are coffee addicted (Doh and Quigley,
2014). Also, it focuses on providing leisure to people by creating a peaceful environment. In
context to case study it can be seen that Starbucks followed different strategies according to their
performance. So this enables them to focus on strong areas so that it can be improved. Its
purpose was to close down those areas who were not performing well. There are various
strategies followed by Starbucks as mentioned as follows:-
Turnaround strategy – During the financial crises of 2007-09, Starbucks was not able to
maintain its operating profits. This made it difficult for company to manage its stores around the
world. Also, they were not able to open new stores due to lack of finance (Barrick and
Courtright, 2015). This made their growth stuck. Due to this, CEO decided to follow turnaround
strategy in which company stores were shut down. It comprised of two initiatives. First one was
to cancel the opening of new stores. This was done to improve operating cost and maintaining
cost efficiency. It was decided that around 600 new stores in US were closed. It led to saving of
total $500 million in 2009. The CEO also sold two of his corporate jets. The second initiative
was to redevelop Starbucks experience by connecting with its customers. In this, overall

company principles were revised. They highly contributed in Corporate Social Responsibility
(CSR) during the natural disaster of Hurricane and Katrina. Besides this, they renewed their
machines by making them automatic (Frank, Ribeiro and Echeveste, 2015). This was done to
improve the quality of coffee and other products. By interacting with customers, it allowed
Starbucks to use social media for promotion and advertisement. Moreover, company started
customer loyalty program in which a new payment system was established. It allowed customer
to pay via mobile. By this they earned points that can be used to collecting rewards. It allowed
company to attract customers by interacting with them.
Diversification within US- With stability in operating cost and change in overall principles,
Starbucks was able to maintain its growth. They were growing slowly in the market. Besides
this, its core values were changed that lead to provide new opportunities for growth (Fraj,
Matute and Melero, 2015). There were a lot of changes that occurred within organisation due to
this that helped them to develop products. Starbucks launched new type of coffee in 2009. The
entire taste of coffee changed. Within two years, its sales went to $200 million. Besides this, they
began producing K cups pods. It enabled them to produce its own espresso system. Moreover,
there were various acquisition(s) done by Starbucks in order to expand its business. In 2011, they
acquired Evolution, a premium juice maker company to expand into retail sector. In 2012, LA
Boulange a bakery brand was acquired. In same year, Starbucks acquired Teavana Holdings.
This was beneficial to expand its operations in different sectors.
International expansion – Starbucks is having almost 800 stores opened in china since past 12
years. In India they entered by collaborating with Tata group (Higgins, Omer and Phillips,
2015). A joint venture was established with 50 – 50% partnership. Till July 2014 they were
having 50 outlets in India. In other countries Starbucks is having full ownership. In Japan they
brought their partner for $915 million. From given table it overall stores in world can be
analysed:
Hence, it is analysed that Starbucks focused on controlling its operating cost by taking
effective measures. Afterwards, they started to expand in retail sector by acquiring companies. It

helped them to diversify in different sector. These both strategies were implemented at same
time so that it do not affected its operations.
2) Assess Starbucks’ strategy in relation to:
A) Starbucks’ financial performance
The strategy that was developed and implemented in Starbucks was due to its financial
performance. Company was not able to maintain its operating cost (Mellahi and Siegel, 2016)
This was due to opening of new stores but there was not enough profit generated from them.
Along with this, organisation was not able to control its expenses. They were not able to
maintain its stores in US and around the world. The first step taken was to cancel the opening of
new stores as it helps in reducing operating cost. This cost can be used in developing products
and acquiring other companies to expand in other sector. The financial performance of Starbucks
was not so good. First of all they implemented retrenchment strategy ad then diversification. So
it had to focus on expansion without opening new stores. For this they acquired small companies
like LA Boulange, Teavana Holdings, etc. this helped them to expand in retail sector from where
revenue started generating. There purpose was to control operating expenses and then develop
expand business operations (Deery and Jago, 2015). Starbucks introduce new type of coffee in
Feb 2009. in less than two years its sales reached $200 million. In June 2012, Starbucks
acquired bakery LA Boulange. By end of 2013 they distributed 2500baked goods and pastries in
their stores.
b)The overall coherence of Starbucks’ strategy in terms of its fit with the company’s external and
internal environments and the internal consistency of the strategy
Every business considers its internal and external environment while developing a
strategy. It is because any changes in these both factors can have a great impact on overall
organisation. This can lead to failure of strategy. So, it was important for Starbucks to consider
its internal and external environment (Riggio and Porter, 2017). The strategy developed by
Starbucks shows that :-

Internal – There was change in principles and core values of company. This shows that there
was change in internal environment. It may be due to weakness of company. Moreover, they can
have found it growth area of opportunity to expand its business. The purpose was to make
changes in product quality. It was done by redeveloping core values that focus on providing high
quality product and services. They also changed it production process. Due to product
development roles and responsibilities were changed. The entire process and procedure were
modified leading to increase employee efficiency (Chadwick and Raver, 2015). The
organisational culture was changed. The strategy followed by very effective for Starbucks. The
change in process allowed them to improve its product quality. Also, it lead to introduction of
new services that was provided to customers. This was beneficial in increasing customer
satisfaction. With this it was easy for Starbucks to retain their customers.
External – The external change was done due to technological and environmental changes.
Starbucks has to install new equipment and machinery in their production process. It was useful
for them to improve product quality. Also, by identifying customer needs, new products were
developed. Starbucks also got involved in social activities. This was due to change in
environmental factors. It forced companies to make contribution in CSR. With this, Starbucks
highly got involved in these activities. US is very threatened to natural disasters like Hurricane
and Katrina, so it transformed overall business activities to focus on social activities. Starbucks
took advantage of this and played a vital role in social commitment (Jackson, Schuler and
Jiang, 2014). Apart from this, technological changes forced Starbucks to use digital media to
promote and advertise their product. It allowed them to target large number of people. They
were already leaders in using Facebook and twitter for promotional activities. Beside this, they
introduced a new payment method that helped people to facilitate transactions. By issuing their
own debit card they started a customer loyalty program. It helped them to build loyal customers.
For this they developed Starbucks app. It was beneficial in making payment that resulted in 14%
of sales in US through mobile transaction. It resulted in reducing order process and delivery
time.

3) Does Starbucks operate in the interests of its shareholders or its
stakeholders?
Every business consists of stakeholder and shareholders. These both play a crucial role in
developing strategies as business have to work in the interest of both. Business always works for
the benefit of stakeholder (Thuan, Antunes and Johnstone, 2016). It provides high quality
goods and services to shareholders to satisfy their needs. Sometimes, strategies are developed to
while considering shareholders instead of stakeholders. This is because business wants to grow
and develop in the market. Also, in order to retain its shareholders organisation needs to operate
in their interest. If business successfully operates in the interest of these both then it becomes
easy for them to grow. There is a slight difference between shareholders and stakeholder. A
shareholder is a person who has invested money in the company to earn dividend while
stakeholder is a party who is directly or indirectly affected by actions taken by company. A
stakeholder may contain shareholder within them. Every business aims to provide more and
more dividend to its shareholder so that its market value increases (Kwayu, Lal and Abubakre,
2017). It will help company to grow and attract more customers.
In context to Starbucks, it operates in the interest of its stakeholders. As it is a MNC, it
operates globally thus creating a positive brand image. Also, they have a large number of people
related with them So they have to operate in the interest of stakeholder. They are connected with
large number of suppliers, customers, employees, etc. Also, government of different countries
has an influence on action taken by Starbucks. So if any action has to be taken, it must be
considered that stakeholder does not have an impact on it. Moreover, Starbucks has taken
decision to expand in different sector by acquiring several companies (Coombs, and Holladay,
2018). So this created a positive image on its stakeholders. It was also beneficial for company as
they were able to grow and develop. They also launched customer loyalty scheme that helped
them to make quick payments and retain customers. It was useful for them as its 14% sales was
done via mobile transaction. Besides this, Starbucks highly contributed in CSTR activities that
showed that they were concerned about interest of society and people. The strategies developed
by them was helpful in creating a strong brand image in the market. Starbucks knows that
operating in interest of stakeholders will automatically increase their sales. Thus, they have to

ensure that any action taken does not harm the interest of stakeholders. Otherwise, it will lead to
poor brand image and decrease in profits.
Moreover, Starbucks is bounded by various customers and suppliers. The suppliers
supply coffee beans to company (Frank, Ribeiro and Echeveste, 2015). Besides this, Starbucks
does not choose their own stakeholders rather than stakeholder choose their share in the
organisation. The decisions taken by corporate is influenced by business operations. The analysis
of stakeholder is described below :-
Customers- Starbucks business is customer oriented. It means company is defined by its features
and characteristics. Customers play a vital role in business activities, Starbucks focus on
motivating individual towards them.
Suppliers- The company top management focus on social and environment performance of
manufactured products. Starbucks suggest their suppliers on what corrections are needed in
products. Thus, taking this it helps them to improve raw material quality. Also, they maintain
effective relations with suppliers and treat them as partners.
Local community – Starbucks awarded more than 100 employees in various organisation to
inspire youth (Fraj, Matute and Melero, 2015). Moreover, company has a significant impact on
34 countries around the world in providing community service to people. By this company is
able to position itself as corporate citizen. It has developed strong relationship with society.
Shareholder- They are an important part of stakeholder. Starbucks is having two basic legal
obligations of shareholder that are duty of care and duty of loyalty. In first one company operates
within interest of people. In second one company emphasizes on being loyal to its customers.
This is done by organising loyalty programs and schemes to retain its customers.
Thus, from above discussion it is cleared that Starbucks operated in the interest of
stakeholders. This is because company is connected to various people, so any action taken by
them will have direct impact on its stakeholders (Higgins, Omer and Phillips, 2015).

4) What threats does Starbucks face; how should it counter these threats?
In today's world, business are facing various threats that is affecting their growth and
development. A threat can make a business difficult to survive in the market. It can also lead to
loss and may even make business to liquidate. Therefore, it is very important to develop
strategies so that threat can be removed.
Apart from strong brand image in the market, Starbucks is also facing various threats.
These threat has to be removed so that company can sustain in the market (Mellahi and Siegel,
2016). For this Starbucks has developed several strategies so that it can be implemented in
critical situations. There are various threats faced by company as mentioned below :-
 Firstly, company is facing major threat from rising prices of coffee beans. This has forced
them to increase its product price. Moreover, it the price of coffee is fluctuating making it
difficult for company to set a standard price. The rise in price of coffee beans is major
threat for Starbucks.
 Secondly company is facing intense competition from local coffee house brands. This is
resulted in reduction of profits in recent times. Also, it has allowed Starbucks to lower
their price so that they can compete with them. These local brands have broke the target
customer of Starbucks.
 The future growth of Starbucks is highly dependent on markets like Asia and China. But
here risk factor includes political and regulatory uncertainty (Deery and Jago, 2015).
Thus, it becomes difficult of Starbucks to maintain its intellectual property. They have to
rely on foreign partners.
 Other famous brands like costa coffee, McDonald, etc. are also providing beverages to
people. They are targeting people who want to have snacks and drink together. It has also
affected market share of Starbucks as these companies are giving stiff competition to
them. They have broadened their menu providing a variety of items to customers.
Therefore, in order to overcome these threats Starbucks should develop different
strategies. It will help them to maintain its market share and provide stability in profits. Also, by
this Starbucks will be able to find out growth opportunities (Riggio and Porter, 2017).

Moreover, it will enable them to develop future strategies. Company can overcome threats in
various ways as given below :-
Company can establish themselves as a strong brand in the market by promoting and
marketing its products is effective way. They can do this by using social media to attract large
number of people. This will help in generating product value. By this Starbucks will be able to
increase its sales and generating more revenue. Company can set a standard price for product. It
will help them to control prices in case of increase or decrease in price of coffee beans. Setting a
standard price will be beneficial in retaining customers. Along with this, offers and discounts can
be given on festive seasons (Chadwick and Raver, 2015). Besides this, Starbucks can broaden
its menu by providing more food and types of coffee to customers. It will be easy to attract
people. Moreover, this will allow company to retain its customers. For international markets
Starbucks can develop strong database to maintain its IP rights. For this they can install strong
security measures. This will help in protecting data and IP rights.
CONCLUSION:
This report concludes that implementing different strategy according to change in market
condition helps an organisation to survive. Strategies are developed on the basis of financial
performance of firm. Every business needs to consider its internal and external environmental
factors while developing a strategy. It is because any changes in these both factors can have a
great impact on overall organisation. Every business consists of stakeholder and shareholders.
These both play a crucial role in developing strategies as business have to work in the interest of
both. Business faces various threats that is affects their growth and development. A threat can
make a business difficult to survive in the market. It can also lead to loss and may even make
business to liquidate.

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Online :
Starbucks, 2018. [online] Available Through : <https://www.starbucks.com/>
Starbucks Threats, 2018. [online] Available
Through<https://www.managementstudyguide.com/swot-analysis-of-starbucks.htm>