Starbucks Strategic Management Report: Environment and Innovation

This report provides a comprehensive strategic analysis of Starbucks, a leading global coffeehouse chain. It begins with an introduction to strategic management and its application to Starbucks. The report then delves into an in-depth examination of Starbucks' external environment using PESTLE and Porter's Five Forces analyses, identifying key political, economic, social, technological, environmental, and legal factors, as well as competitive dynamics. Following this, the report assesses Starbucks' internal environment, including its vision, objectives, core competencies, and resources, with a focus on how these elements contribute to innovation and competitive advantage. The report also includes an analysis of the company's value chain. The evaluation section examines Starbucks' current innovation strategies, such as digital tipping and mobile ordering. It concludes with recommendations for leveraging innovation opportunities and discusses the implications of these innovations for stakeholders. The report is supported by references to academic sources, and the report's findings provide insights into Starbucks' strategic positioning and future prospects.

Strategic management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
1. ANALYZING THE EXTERNAL ENVIRONMENT OF STARBUCKS .................................3
2. ANALYZING THE INTERNAL ENVIRONMENT OF THE STARBUCKS 'S COMPANY. 6
Vision of Starbucks .....................................................................................................................6
Can you please add 2-3 line of analysis under objective, competencies and resources how they
are using it to bring innovation and getting competitive advantage please…listing objective is
not enough (with reference please)..............................................................................................6
Objectives of Starbucks- .............................................................................................................6
Providing people finest coffee at fair prices................................................................................6
Competencies of Starbucks .........................................................................................................7
Resources of Starbucks – also talk about intangible resource like brand name, reputation and
intellectual property.....................................................................................................................7
3. EVALUATING THE OUTCOMES OF ABOVE WHICH SHOWS THE ORGANIZATION
CURRENT INNOVATION STRATEGY.......................................................................................9
4. RECOMMENDATION TO TAKE ADVANTAGE OF INNOVATION OPPORTUNITIES.11
5. IMPLICATIONS ON STAKEHOLDERS BY THE INNOVATIONS....................................13
CONCLUSION..............................................................................................................................15
References......................................................................................................................................16

INTRODUCTION
Strategic management refers to formulation and implementation of goals and objectives
of the company given by the top management on behalf of owner of the company, resources
available and seeing the internal and external environment (Ackermann and Eden, 2011). This
process helps in recognizing the opportunities and the threats for the company. The present repot
is based on Starbucks which is a leading coffeehouse chain of America, operating globally. The
company was founded in 1971, however, today, it operates in more than 23,768 locations
worldwide. The company’s has more than 428 stores in the United Kingdom which is counted to
be on 5th place As per the data of 2014, the company employs more than 191,000 employees
from all around the world (The Statistics Portal, 2016). The company offers both hot and cold
drinks, whole-bean coffee, VIA, espresso, caffe latte, including Teavana tea products. This report
analyzes the external and internal environment and the impact on the strategy of the company.
Determining the innovation strategies which company adopt according to the environment. It
also emphasizes on recommendations of new strategy involved and the advantages of these
strategies for the organization.
1. ANALYZING THE EXTERNAL ENVIRONMENT OF STARBUCKS
External environment refers to the outside factors which have a great impact on the
strategies and operations of the company. There are two types of environment, micro and macro
environment.
It is tool used by the company to analyze the macro environment factors which affect the
company. Pestle stands for- Political factors- Political factors include tax policy, labor laws, and trade restrictions etc.
which have a great impact on the company. In UK, recently the government has boosted
the rural productivity of coffee. The tax for small holder farmers were lowered which
help the Starbucks to save money on the purchase of coffee (The Statistics Portal, 2016). Economic factors- Economic factors include economic growth, interest rate, exchange
rate, inflation etc. The percentage of economic growth in UK is rising every year. It is
growing at the rate of 0.6 percent which means that there is an increase in the financial
stability of the people (United Kingdom GDP Growth Rate, 2016). It is beneficial for
Starbucks Company as more people will purchase goods which will directly increase the
profit of the company, however, declining unemployment rates affects countries.

 Social factors- Social factors are also known as socio-cultural factors. This includes the
population growth, age distribution, career attitudes etc. The population rate is increasing
at 0.63 % in UK. Further, it will also result in increasing sales of Starbucks. The people
who are conscious about health, the young generation, people with good income are
attracted towards the Starbucks as they provide with the best quality products. (Strategic
Analysis of Starbucks Corporation, 2016). Technological factors- Technological factors include the include the latest technology
which include rising purchases by mobile phones. This made the customers convenient to
order products There is a potential growth in the online and web based operations in
Starbucks. However, in other aspects, the technology as increased the opportunity to
improve the supply chain of coffee farmers (Strategic Analysis of Starbucks Corporation,
2016). Environmental factors- Environmental factors refer to the external factors which effect
production of the company. It mainly includes government targets to keep the city green.
The people also need to have environmentally friendly products which affects business.
Starbucks is providing its maximum products in the recycling material which makes them
environment friendly (The Statistics Portal, 2016).
 Legal factors- Legal factors include the regulations related to product safety, GMO
regulations etc. Starbucks is improving their performances by satisfying the product
safety. This is done by getting products mainly from genetically modified organisms.
This help the Starbucks to increase the sales using the legal factors (Strategic Analysis of
Starbucks Corporation, 2016).
SWOT Analysis
SWOT analysis is a technique used for understanding the strengths, weaknesses,
opportunities and the threats of the company (Keupp, Palmié and Gassmann, 2012). It refers to
an internal analysis.
Strengths Weaknesses
 Efficient quality human resources
 Customer are loyal to the company
 Extensive global supply chain
 Cutting down number of stores from
last year 549 to 428 in the UK.
 Imitable products and High price points

 Increasing revenue growth in recent
year from 16.5% top 33% (Starbucks
SWOT analysis, 2016)
 Generalized standards for most
products.
Threats Opportunities
 Intense competition within the market
 Change in the tastes of customers
 Imitation
 Independent movement in coffeehouse
market
 Entry in existing markets i.e. Asia, the
Middle East, and Africa
 Diversification in products
 Partnerships or alliance (Starbucks
SWOT analysis, 2016.)
 Using new technology for production
Porter's five Forces
The five forces of Starbucks are-
Competition with Starbucks coffee- High
The Starbucks is facing a large amount of competition with the competitors like
McDonalds, Dunkin Donuts which have different strategies, sizes and also the specialties. One of
the reason for the competition is due to low switching cost, which means people are easily
switched to other brands where they get low prices ((Hitt, 2011).).
Bargaining power of Starbucks coffee customers - High
The Starbucks is facing the problem of the high bargaining power of the customers
because the number and the variety of products are increased in the market which have exceeded
by the demand of the customers. Thus the bargaining power of the customers have increased as
they have the option to switch to different brands who are providing the same product at lower
price (Elms and et.al., 2010).
Bargaining power of suppliers- High
The bargaining power of suppliers are increasing as the raw material of Starbucks are
available only from some areas like latin America, some parts of Asia etc. This leads to increase
the competition with other companies and it is becoming fierce within the chains ((Zhou and Wu,
2010).).
Threats of new entrants- Low

The Starbucks faces moderate level of threat by the new entry of products. This is
because Coffee chain market is saturated in UK. Moreover to come up with new product or
brand a big amount of capital is required which resist the entry of new products in the market
(Greco, Cricelli and Grimaldi, 2013).
Threats of Substitute products- High
Starbucks faces a strong force of threat by the subtitutes. This is because he people are
switching to the substitutes which have low cost. This also include the reason of increasing the
range of energy drinks.
2. ANALYZING THE INTERNAL ENVIRONMENT OF THE STARBUCKS
'S COMPANY
Vision of Starbucks
The vision of Company is to be the premier purveyor of the finest coffee in all around the
world however, it wants to maintain uncompromising principles to reach the success path grow.”
In the long run the company wants to be a provider of finest coffee in the world to reflect the
commitment of meeting the needs of the customers (Starbucks Coffee’s Vision Statement &
Mission Statement, 2016).
Objectives of Starbucks-
 Providing people finest coffee at fair prices: Starbucks first and foremost objective is to
provide the customers with the best quality products at reasonable price.
 To accelerate the growth of complementary coffee product: The Starbucks focuses on
different products which can benefit the employees in the best manner. This requires
various innovations to come up with new products.
 To ensure reaching more people by adopting additional channels and expanding business
throughout emerging countries
 To enhance customers’ experience: Starbucks main purpose is to satisfy the customers to
their best. This including providing good products and services to the customers.
Competencies of Starbucks
 Building sustainable competitive advantage
 Environment friendly practices

 Human resource competencies as diversification of the workforce
 Improving the lives of people
 Its “secret” menu
Resources of Starbucks – Human resources- The employees of Starbucks are very efficient. The skill, knowledge,
efficiency etc are regularly updated by managing different training programs like retail
marketing training program, barista basic training program etc. for the employees so that
they can serve customers well (Barney, 2012). Financial resources- The Starbucks manages their finance and the profits and
continuously growing. The organization has financial resources to expand business and to
invest in future profitable decisions as they are earning profit of US$2.757 billion in 2015
which is being increased by 33.3% over US$2.068 billion in 2014 (Starbucks SWOT
analysis, 2016).
 Physical resources- Starbucks is having various outlets in different locations worldwide.
They are having new technology machines which help them to work efficiently. This help
the Starbucks to be competent in the market.
 Intangible resources- Starbucks enjoys the regular growth for brand equity which is one
of the most valuable resource. It is known by its strong brand recognition and also by its
consistent customers. It also enjoys many privileges while exploiting new market. It serve
the customers with new innovations in the products, seasonal themes, free wi-fi services
etc.
Different models of internal environment are-
Value Chain analysis –
The value analysis helps to understand the activities through developing a competitive
advantage and creating shareholder value (Barney, 2012).
The activities involved in value chain analysis are-
 Inbound logistics: The Company sourcing coffee from diverse coffee beans
producers, direct from farmers and maintain efficient supply chain management.
 Operations: The Company operates in 60+ countries and having more than 23768
stores company operated and licensed stores worldwide.

 Outbound Logistics: The company sales product mix same in the store and through
large box retailers by the stores, payment is made on point of sale, through prepaid
Starbucks Cards and via payment on mobiles (Sakas, Vlachos and Nasiopoulos,
2014).
 Marketing & sales: Starbucks identify the customer needs or preferences of how the
customer would be comfortable to get the product. The company has created
reputation for premium quality product mix and superior customer services.
 Services: Starbucks provides supreme level of customer services and ask the
customers to provide feedback for their sales so as to improve customer services
(Strategic Analysis of Starbucks Corporation, 2016.).
Following are the internal or secondary activities which are included in value chain:
 Procurement: In this context, it is essential that organization make sure that resources
are made available as per the demand and better services can be provided to
customers (Andersén, 2011). It procures products from diverse group of supplier and
makers fixed contracts.
 Human resource management: It is important for the organization to understand their
employees and provide them all the services. Cited firm provides great benefits,
empowers employees and creates a corporate culture to make people happy
 Technological development: Technology changes frequently, Starbucks is upgrading
use technology as it came with mobile app (Strategic Analysis of Starbucks
Corporation, 2016).
3. EVALUATING THE OUTCOMES OF ABOVE WHICH SHOWS THE
ORGANIZATION CURRENT INNOVATION STRATEGY.
According to the outcome received by analyzing the internal and external environment the
Starbucks company addresses the current innovation in different ways-
Digital tipping, shake to pay, mobile order and pay
By this the Starbucks company enables the customers to show their appreciation of the
stores by online tipping. It also provide the service to make payments in an easy way. The
customers can bring the bar code of the product at any center and can pay it just by shaking the
mobile phones (Greco, Cricelli and Grimaldi, 2013). With the improvement in technology
Starbucks has developed their own application in which customer has the power to make

payment online. This is convenient for customers they do not need to bring their wallets and can
make their payment easily.
New logo
With the change in time, frequent changes are made by the cited firm in their logo and
this is done in order to develop a unique identity among customers mind. When logo is modified,
then customers feel that the product is new and the services and experience which they have will
be different. In addition to this, packaging play vital role in attracting customers. There are
different set of research done which have presented that services users get attracted to those
products which have attractive packaging (Barney, 2012). In this context, one of the innovations
which are done by cited firm is related with packaging. Starbucks focus on developing attractive
packaging and this enables to develop a strong customers base and has also helped in increase
the sale level.
Tasting process
The Starbucks has the testing process for the customers. This feature help the customers
to have choices in their product. They can vast their preferences as by tasting the different items
they can know about the different products and their taste.
Interactive window display
This is a type of strategy which is used by Starbucks in order to grab attention of people
who walk outside of the shop. Further, it enables the organization to provide customers with
proper information regarding the services which they will offer (Hitt, 2011). When the offer
provided are attractive, then it helps the firm to attract customers. This innovation has helped the
firm in gaining customers attention.
Positioning
Ultimate aim of any organization is attract customers. However, it becomes difficult as
there are many firms which provide their customers with similar products and services (Wheelen
and Hunger, 2011). In order to be different from other companies, it is essential to attain
competitive advantage. In this context, one of the strategy which is used by Starbucks so as to
develop strong positioning is that they aim at providing their products and services at low price.
This enables the firm to be different from other organizations. In order to reduce the price, they
make comparative analysis and determined the price on which its competitors are providing their

services and products. Accordingly, they set a price which is lower than the competitors. This is
helpful for Starbucks to achieve their organizational goals and objectives.
Verifies with the use of Ethical Source Coffee
Starbucks supply chain is certified by the use of ethical sourced coffee. It is the first
sustainable agricultural product in the world. Its research shows that the Starbucks benefit the
entire coffee industry by providing the coffee to all. It is connected by the social, economic and
environment conditions of the coffee communities in the world. This makes the customers to be
consistent with the brand (Ward and Peppard, 2016).
Creating First of Its kind digital experiences
Starbucks is providing the customers with the digital experiences whether the customer is in or
out of the store. They gives the customers the access to the Starbucks music on spontify and also
to influence the in-store playlists. They also unveiled the digital news experience through the
app. This makes the customers happy as they can avail lots of other services with the products.
Delivery
The Starbucks is providing with delivery of the food and beverages to the place of the customers.
This is the most attractive feature of the Starbucks as everyone wants to get things at their home
only. This leads to increase in the sale of Starbucks.
Iced coffee s brewed to personalize at home
Starbucks being inspired by the handicraft iced coffee, they now provide the customers with the
iced coffee to enjoy at home. Moreover, they also provide various options which include
unsweetened ice coffee, caramel iced coffee etc. This helps in increasing the sales of the
company.
4. RECOMMENDATION TO TAKE ADVANTAGE OF INNOVATION
OPPORTUNITIES
To take the advantage of innovation opportunities, Starbucks should re-invent the innovation
technologies by-
Online shopping with in-store pickup

By the help of this app, the customers are able to order Starbucks coffees and other
related products via online and can pick them up in-store. This helps the customers to save their
time. This innovation is recommended to Starbucks as it will help them to attract the customers
of every age. The old people and children who are not able to visit stores can order their products
and ask their family members to get it from the stores (Hitt, Ireland and Hoskisson, 2012). This
will also enhance the means by which Starbucks is providing services. It will help to attract new
customers also with the existing customers. Most of the competitors of Starbucks provides it
services online. In this context, it includes McDonald's, Coco-Cola, Coke, Nescafe, etc. These
organizations provide their services online and this enables them to provide their customers with
high quality services.
Personalization
Starbucks should use the system of customization. It means that they can offer coffees
and other related products by using the concept of customization where people can make changes
in products as per their need and requirements (Barney, 2012). This can help to drive the amount
of sales from each customer. By this approach the Starbucks store keepers can suggest the
customers about the similar products of those which can be consumed by them. This will also
enhance the satisfaction level of the customers by consuming products which is completely
customized. It can be also stated that the strategy of customization is completely unique and
therefore it will provide Starbucks with competitive advantage over other coffee stores operating
in the marketplace. In this context, McDonald's is an organization which provide their customers
with fast food. They understand their customers taste and preference and accordingly, develop
services which enable them to satisfy their customers (Wheelen and Hunger, 2011). With this
respect, Chicken maharajah mac is a product which is developed by cited firm just for Indian
customers.
Mobile Wallets
It can be recommended that Starbucks can provide its customers with mobile wallet. The
use of mobile wallets is becoming popular among the people to pay for their purchases (Greco,
Cricelli and Grimaldi, 2013). The customer should be given with the service which make easy
for them to pay for their purchases. The stores should have the devices by which they can swipe
their credit card to pay. This facility helps the customers as there is no need to carry liquid cash

with them every time. They should also make an app of the store which enables the customers
with online payment of goods. Starbucks should adopt these innovations to enhance their sales.
This type of services are provided by Highlands Coffee. It enables them to provide easy services.
Self-Serve Scanning
It can be also recommended that Starbucks should provide the customers with service of
self-serve scanning. This service should be provided at in-stores as well as in the company app.
This service enables the customers to scan their items themselves and check out the purchases
(Zhou and Wu, 2010). This service is convenient for the customers as they do not have to wait
for the cashier to check the goods and make the bill. This reduces the time of the customers. It
will take less time to shop from the stores. This type of services are been used Costa Express.
This enables to save time and reduces waiting time.
Market research
In order to carry out the best and most effective utilization of its innovation strategy, the
brand needs to conduct effective market research at regular intervals. Furthermore, such type of
researches will support in getting aware of need and demand of people in the market. Starbucks
will be able to find out the gap within their services. As with the help of market research needs
and requirements of customers can be determined and accordingly services can be developed.
This type of strategies is used by McDonald's, Coke, Costa Express, etc. On the basis of
information gathered Starbucks can carry out innovations in its products and services. Market
research will also support the coffee brand to identify key strategies which has been adopted by
its major competitors in terms of innovation (Reuter, C and et.al., 2010).
Providing suggestion and complaint boxes
Starbucks should keep suggestion as well as complaint boxes in every store. This will
help the company to know about the suggestions to improve the services and products. It will
also help to know the problems which are faced by them while availing the services (Hill, Jones
and Schilling, 2014). This will help to satisfy the customers at their best. This is mainly used by
its competitors like McCafs and Trust Equity. This enables them understand the issues and make
decisions accordingly.