Starbucks: Strategic Analysis Using PESTLE and Porter's Five Forces

This report provides a comprehensive analysis of Starbucks, focusing on its strategic management within the Singaporean market. It employs PESTLE analysis to evaluate the political, economic, social, technological, legal, and environmental factors impacting Starbucks' operations. Additionally, Porter's Five Forces model is used to assess the competitive intensity, bargaining power of buyers and suppliers, the threat of substitutes, and the threat of new entrants. The report identifies key issues such as intense competition and pricing challenges, and offers strategic recommendations for Starbucks to enhance its value chain, strengthen public relations, and adapt to the local market dynamics. Ultimately, the analysis aims to provide actionable insights for Starbucks to achieve sustainable success in Singapore.

Running head: STARBUCKS ANALYSIS
STARBUCKS ANALYSIS
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Executive summary
The aim of this report is to discuss the management of a popular coffee chain Starbucks. In
order to work successfully in the market of Singapore, the company needs to check the
possibilities and opportunities in the market. Based on this the company can make strategies
to flourish in this highly potential Asian market. This report has analysed the PESTLE as well
as Porter’s Five Forces so that it can act according to the demand of the customers and the
market. Through this the company will be able to judge the specific units which can support
their business. The report concludes with the recommendation on management strategies so
that small changes can be made and utilised by Starbucks.

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Table of Contents
Introduction:...............................................................................................................................3
PESTEL analysis of the company..............................................................................................3
Porter’s five forces analysis:......................................................................................................5
Issue analysis:.............................................................................................................................8
Strategic management recommendation:...................................................................................9
Conclusion:..............................................................................................................................10

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Introduction:
The aim of this report is to analyse the market situation of an international company
Starbucks Corporation. This is a Seattle based company which was established in 1972.
Starbucks is a premier roaster retailer as well as a provider of speciality coffee in
international market. More than 180,000 employees are working in more than 62 countries in
the world. The company has 19,767 licensed and operated stores operating internationally
(Starbucks.in, 2018). The product mix of this company are basically handcrafted roasted
premium tea and coffee including variety of food items as well as beverages. The company
focusses to spread its outlet in more countries of the world especially in he developed
national. This report discusses the PESTLE analysis of the country so that the company
understands the external environment of the country which will give opportunities to this
company (Susanty & Kenny, 2015). On the other hand, through Porter’s five Forces will help
it to understand the market strength and the presence of the competitors.
PESTEL analysis of the company
Political factors: the political risks in Singapore is very low as it is a democratic
country and a single party state. This is why the country has a stable government which aims
to increase foreign investment in Singapore (Gov.uk, 2018). Political stability has led to have
peace and granted to provide a high standard of living. Hence Starbucks can get an improved
business opportunity in this country. The stable government has assented to many
international agreements which has created the country a secured place for business
(Taecharungroj, 2017). This government of Singapore is also initiated to support the issues of
public welfare, society, laws and other supporting factors in the growth of business as well as
industries.

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Economic factors: the economic factors of Singapore have a vibrant free market
economy which has been showing a fast-growing market for the company like Starbucks. In
ASEAN the economy of this country is the highest as the per capita income is much higher
than other neighbouring countries in Asia. The market is completely corruption free which
supports the business of any company (Martinez-Simarro, Devece & Llopis-Albert, 2015).
Moreover, Singapore is one of the most competitive countries where the financial as well as
legal business framework has supported the business well (Gov.uk, 2018). In order to
diversifying the economy of the country the government has invested a lot in the market and
provides support various domestic as well as international companies to flourish in the
Singaporean market.
Social factors: the country has a traditional family value system like all other Asian countries.
Despite the fact that the younger generation has the tendency to follow the western culture
which will be good for the company (Lin & Wu, 2014). The people of this country tend to
work hard in order to fulfil their materialistic desires. This has resulted in the high availability
in the labour market of the country which is much skilled as well as educated. This has
helped the country to flourish from the business perspectives along with the productivity of
the nation. This is the reason why the business sector expects a high purchasing power from
the customers.
Technological factor: the chief reason of the flourishment of this country is the support from
the technological advancement. The citizens of the country are the highest user of internet in
the region. Excessive use of interest along with other technological advancement has
increased the connectivity and supported the communication. The cost as well as time of
conducting business has been lowered with the use of technology. The social networking has
boosted the purchasing though online market (Lechner & Gudmundsson, 2014). The

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government has greatly supported the IT infrastructure of the country which has encouraged
the MNCs to set up a regional operation in the market of Singapore. Therefore, the company
will also get all these benefits which they need from this market.
Legal factors: the legal system of the country is quite praise worthy as well as systematic.
The these are quite transparent and quite favourable for the market. Certain regulatory, legal
mad business settings are required for supporting the industrial development along with
economic growth. Singaporean government has introduced a huge number of e-commerce
policies along with E-Commerce programmes in 1996 for developing the e-commerce
services in the country (Solberg, 2017). In addition to this, some cross-border e-commerce
laws as well as policies are also being introduced. The export and import system of the
country is quite liberal for opening the scopes for the foreign investors which will enable
Starbucks to gain adequate advantages over its competitors.
Environmental factors: the urban areas of the country suffer from water and air pollution for
which the government has made decisions to change the strategy for preventing the inductile
pollution in the country. The country has lost more than 30% of its mangroves due to
urbanisation and industrialisation (Rahman, 2014). The water resources are also much less in
the country than its neighbours. This is one of the major reason of concern for the companies
doing business in the country. Despite the facts that the government has implemented various
environmental regulations, the company will be able to develop the effective waste
management practices in the workplace. With the changing waste management practices, the
packaging materials will also be changed due to the company policies to match the
regulations.
Porter’s five forces analysis:
Competitive Rivalry

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In the market of Singapore, Starbucks face a high competition in the market. Through
the five forces analysis model, the company can judge the influence of the competitors in the
market with their strong hold and presence (Keller, 2017). The market of Singapore has a
large number of coffee chain companies which have a strong hold of the market and already
gained popularity. The company needs to face strong forces of competition as there are-
Large number of firms (strong force)
Low switching cost (strong force)
Variety of firms (moderate force)
These competitors have various size, strategies and specialities. All of these are not
only speciality coffee retailers but other fast-food chains operating in the country (Hsu,
Fournier & Srinivasan, 2016). The competition is tougher as the customers have the benefit
of low switching cost which refers to the advantage of shifting from one brand to the other.
Based on this particular analysis, the high competition present in the market of Singapore is
one of the top most changes that Starbucks will face.
Bargaining Power of customers:
In the market of Singapore, the company experiences strong force or bargaining
power if the buyers.
Low switching cost (strong force)
Substitute availability (strong force)
Small size of individual buyers (weak force)
In the market there are many competitors which gives the customers the scope to switch
among the brands more easily as this is quite affordable to do so. The customers also can

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easily avoid visiting the Starbucks store if they want as there are high number of
substitutes for instant beverages along with fast foods.
Bargaining Power of the suppliers:
Starbucks corporation in the market of Singapore will be facing weak force in the
bargaining power of the suppliers which means that the suppliers have much less impact on
the business of the company. This is due to the factors-
High variety of suppliers (weak force)
Large overall supply (weak force)
Moderate size of individual suppliers (moderate force)
The suppliers of the company do not have any impact as the market has a large number of
suppliers that lessens the effects of the single supplier on Starbucks (Heding, Knudtzen &
Bjerre, 2015). In addition to this, the company has a policy of diversifying its supply chain
which reduces the impact of suppliers on its business despite these suppliers have moderate
size in comparison to the supply chain of Starbucks.
Threat of Substitution
As mentioned before, the company has a high number of rivals which compel the
company to face the threat substitution. In this five forces model, this force relates to the
impact of the substitute goods or services. In this respect, the external factors are-
Availability of substitutes (strong force)
Low switching cost (strong force)
Low cost of substitutes (strong force)

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This substitute aspect indicates that these goods can have a strong potential that may
negatively impact the business of the company. The customers who were once loyal to this
particular company an easily shift to the substitutes like the beverages from various local
restaurants, instant or bottled beverages and goods from the grocery markets (Thompson,
2017). As the cost of switching is quite low, the customers do not need to spend more as
switching costs. Moreover, many of these substitutes have low cost which attract the
customers which pose challenge for this particular company.
Threat of New Entrants
Starbucks may face moderate force of new entrants though the government of the
country does not cause any barrier to enter the market of the country (Ragozzino, Reuer &
Trigeorgis, 2016). The company faces some external factors that contribute the threat of the
new entrants:
Moderate cost of doing business (moderate force)
Moderate supply chain cost (moderate force)
High cost of brand development (weak force)
The new entrants have significant but very strong effect on the business of Starbucks.
The new entrants may potentially compete with Starbucks due to the moderate cost and
supply chain developments. However, the new entrants with no popularity in the international
level like Starbucks can find it problematic to compete with this established brand as it is
quite costly to develop a strong brand (Palmer, Simmons & Mason, 2014). Therefore, this
factor of threat of new entrants can be secondary priority for the company.

9STARBUCKS ANALYSIS
Issue analysis:
The chief issues that the company may face in the market of Singapore are completely
related with the competitors and the price of the products of Starbucks. As mentioned before,
the market already has many local and national brands to serve speciality coffee service in the
market and their popularity is also high. Despite the fact that these companies have different
sixe, services and strategies, they can be potential competitor of the company. Moreover, the
issue of cannibalism effect can hamper the business of Starbucks. As in the USA, there are
numerous Starbucks outlets present in a few minutes’ distance, the business of one store
engulfs another. This can be the case of Singapore also.
Strategic management recommendation:
This is undeniable that the company has a high competitive advantage over its
competitors in terms of quality of both its products and services. Singapore can be a potential
market for Starbucks but it must have some strategy to enter this market and do business
successfully.
First, the company needs to add more values to its value chains through the expansion of
website function as the communication tools can link all the stakeholders, like customers,
management, employees, suppliers and others.
The company needs to consolidate their public relation function so that it can act more to
increase the brand image and reputation than merely being an online business window.
Through this the company can build a chat room through which it will be taking feedbacks
from their customers to spread fame as well as consolidate the loyalty of the customers.
The idea of the themed stores may be applied in working in the Singaporean market.
It is because all the outlets of Starbucks serve the place as corporate business meetings. By

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leaving extra area for this reasons and creating atmosphere with all essential equipment, it
can definitely make extra revenue.
Constant researching about the tastes and expectations of their customers is obviously
needed because these matters change with times. Beforehand this company failed to attend
the customers with some exotic flavours that are much in demand. Therefore, the diversity
must be there in their menu otherwise Starbucks will lose market to its potential rivals.
For a long term effectiveness, the company can focus on franchisee model This will
help the company to minimize control on the stores directly. Thus it can concentrate on the
quality and the product development process. This will also create the scope for entering the
market of Singapore without any restriction.
The company needs to increase more visibility in the local market through the local
events, investing in the education of the children and the development of the communities. In
Singaporean market, if seen to be true caregiver, will be able to spread like US market.
Finally, the company needs to meet the taste a preference can act local. For doing this,
it can introduce alcoholic beverages in the special happy hours in the country. Singapore has
a huge alcohol consuming culture like coffee in order to boost the revenue.
Conclusion:
Therefore, it can be concluded that the analysis of porter’s five force and PESTLE
analysis have pointed out the potential opportunities for the company in this market of
Singapore. Through PESTLE analyses, it can be understood that the company will have a
supportive market it enters or do business effectively. The stable political force has direct
connection with the economy and legal factors of the country. All these interconnected
factors have positive effect on the market. The governmental initiative to support the business

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in the country and high economic growth have supported both the domestic as well as
international Omanis to act freely. the high investment and governmental support in
technological advancement can be fruitful for the company where it can utilise the best
technological support to flourish its business. However, the five forces have disclosed the fact
that the market is full of potential competitors to compete in the Singaporean market.
Moreover, the customers can switch their choices to the more affordable products. Despite
the fact that the company gets support from the bargaining power of the suppliers, it has
many a barrier to survive in the market of Singapore. This is the reason why he company
needs to utilise its brand value and strategize its marketing mix in such a way that the
company can attract more customers and create a pool of loyal customers in the market of
Singapore. In doing so the company needs to identify the strong elements of PESTLE factors
so that it can get the best help from each and every way than its competitor in the market of
Singapore.

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