Starbucks: Strategic Analysis of Business Issues and Recommendations

This report provides a comprehensive business analysis of Starbucks Corporation, examining its key issues, current strategic approaches, and potential strategies for growth. The analysis delves into the financial crises faced by the company, its competitive landscape, and the impact of high prices on its market position. The report explores the gap between Starbucks' strategies and its goals, utilizing VRIO analysis to assess the company's capacity to achieve its objectives. Furthermore, it offers strategic recommendations tailored to Starbucks' capabilities and strategic plans, focusing on market development and product development to enhance its global presence and customer retention. The report also discusses the company's strengths, weaknesses, opportunities, and threats, providing a detailed overview of its operations and future prospects.

Business Analysis

EXECUTIVE SUMMARY
Starbucks is the American coffee organisation which have large number of stores in the
65 countries. The organisation is adopting the marketing development strategies where they are
trying to open their more store. The report includes the different issues faced by the company
such as financial crises, high prices etc. the report also includes the gap between their strategies
and goal, with that it also includes VRIO analysis which help to identify the capacity of the
organisation to attain their aim and objective

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
Assignment 2...................................................................................................................................1
Key issues faced by the Starbucks Corporation.....................................................................1
Current strategic approach of the organisation.......................................................................2
Strategies which are available and suitable for the organisation............................................3
Starbucks Corporation VRIO Analysis which help to find the capacity of the organisation in
order to attain their objective..................................................................................................4
Gap between the current organisation's strategies and their achievable goal and expectation.. .5
Recommendation as per their capacity and strategic plans so that they can success their
business...................................................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Starbucks corporation is the American coffee organisation and coffee house chain. The
company was founded in 1971 by Seattle. They have 23768 store in all over the world, they are
also represented as the “Second Wave Coffee”. They have differentiated themselves from the
other coffee sore on the basis of quality, customer experience and taste. They have been popular
for the darkly roasted coffee. They have targeted the quality coffee drinkers and home made
coffee drinkers. They serve hot and cold drinks such as micro-ground coffee, whole bean coffee
such as espresso, caffe, latte etc. Since 1992 they have been listed in the public listed
organisation on the National Association of Security Dealers Automates Quotations which have
trading name that is SBUX and their headquarter is located at the USA, US, Seattle and
Washington.
Assignment 2
Key issues faced by the Starbucks Corporation
The biggest problem which the organisation is facing is the financial crises in the global
economy which force them to stop and close their many stores in the Australia as well as in all
over the world. Another issues they are facing are their challengers and competitors. The key
factor fir any company is customer, there are many other store of coffee which are able to satisfy
customer. Their key competitors in the UK are McDonald's, Dunkin Donuts and Nestle, in the
UK are Costa coffee and Caffe Nero (Camillus and Mohan, 2017). The other issue they are
facing is their products and services prices. They charge higher prices as compare to the other
coffee shops, the reason behind high prices are they are purchasing high quality raw material
from the suppliers and their prices are high. Therefore, the competitors are gaining competitive
advantage on the basis of prices (Carrolland Richter, 2016).
Other than that they are also not adequate in their marketing strategy while doing
advertisement. This is becoming hindrance in their opportunity of business growth. They are
making their brand image by promoting their coffee that is cup by cup with the clients. The
advertisement ends when the customers drink the coffee, this promotion strategy does not highly
influence to the customers and it decreases the chances to attract the target market. The biggest
problem they are facing are they do not have intermediates for distributing their products, they
do not give their products and services to the supermarket to sell them. They key reason behind
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it is they are more concerned fir their product quality, if the coffee is packed in the polythene
bags then it spoils the quality of coffee beans (Deresky, 2017). The other issues they are facing
are they are rapidly opening their store in the different areas of the world, this can toll on their
brand image. Nowadays, Starbucks have their tendency to open their store so they are enhancing
their location and output but they are not focusing on the different promotion strategies.
Other than that they not giving franchise to the other coffee dealers because it is against
their policy and this can become big problem for the organisation. If they have adopted this
strategy, they can open their many stores with small risk as well as make high profit. As
organisation wants to open large stores, they need to make more emphasis on the research and
development, but if they give franchise, they can reduce their cost on research and development
(Mason and Goza,2017).
Current strategic approach of the organisation
The company are focusing on different strategies in order to gain large target market and
competitive advantage. They have made different growth and generic strategies, the different
strategic approach are as follows:
Growth strategies
 Business and competitive strategies:- They are the largest organisation which holds
75% of targeted market share in US ready to drink coffee. There additional market share
is of 1 billion (Nagle and Zale, 2016).
 Starbucks product differentiation:-Providing potential offering different & variates in
coffee which is for there customer satisfaction pour-over, siphon, clover, They
specialised roasted reserved coffees by scoop bars, baristas.
Competitive and Business strategy
 Offering experience of 'third place':- there stores are very effectively as on ' 3rd place'
position where people & there customers can spend time & feel relaxed & comfortable
environment enjoyable with the friends & alone to (Teece, 2017).
 The Highest quality coffee:-there basic business strategy is classified as there product
differentiation. They coffee chain mainly focuses on high quality. It includes mobile
order system & payment feature, launching of voice ordering app and so on are there
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business targeted strategies which help them to advancement of there customers (Stead
and Stead, 2016).
 Increasing No. of coffee stores:-:-Its an essential key which is long-term perspective.
There increased to 14% to 7% in 2016 as 2719 new Starbucks where open in last two
years.
 Innovative technologies in different business process:- They have their own website
by this a customer can easily enjoy coffee as compare to waiting in lines (Snell and
Yemen, 2017).
Strategies which are available and suitable for the organisation
There are several strategies that are available for the organisation by which they can
grow their market share and gain competitive advantage, that are as follows:
Illustration 1: Types of growth strategies
(Source: Types of growth strategies, 2016)
Market penetration: It is selling strategy where product and services is sold to the specific
market, it is being measured by the sales volumes of the current products and services which is
compared to the total target market. It is the marketing activity of enhancing the market share of
the current products or promoting the new product with the help of bundling, reduced prices,
volume discounts and advertisement. Starbucks are already having large number of stored in 65
countries, they can reduce their stores and target the specific market to generate revenue (Types
of growth strategies,2016).
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Market development: It is the growth strategy, where the organisation find and develop the
new market or segment for their existing products and services so that their target market can be
increased. It is the strategy where the company target the customers who are not buying their
products and services with that they also target the new customer in the new segment. The
Starbucks key aim and objective is to be the first international coffee seller so by expansing their
store they can attain their objective (Percy and Elliott, 2016).
Product development: It is the strategy where the organisation start producing and selling new
products to the market. This strategy basically focus on selling new products to the existing
customer or segment. The key objective of this strategy is to retain the customer customers. Most
of the customers are variety loving, they switch to other brand in the need to varieties, so the
company can produce new products to retain that customers
Diversification: The organisation can grow themselves with the help of diversification, it is the
strategy where the company sell their new products and services to the new market. It is very
significant for the firm to do proper research and development with the market analysis to adopt
diversification strategy. Hence, it is very risky for all the organisation who is planning to grow
their business with the help of diversification (Peppard and Ward, 2016).
After analysing different strategies which can be suitable for the organisation, the most
appropriate strategy as per their action plan is market development, the organisation want to be
the first international coffee seller in the world so they can expand their store in the different
countries which help them to be the international seller who have existence in many countries
and state. Market penetration will not be suitable because they are not focusing on specific
market and diversification will be more risky for them as they are facing financial crises. Other
than that suitable strategy can be product development, they can serve new products and services
to the customers in order to retain them (Camillus and Mohan, 2017).
Starbucks Corporation VRIO Analysis which help to find the capacity of the organisation in
order to attain their objective.
The Starbucks is having a valuable competitive advantages that make them more capable
in the market world. There brand recognition & there equity is very much popular across the
world as coffee house segment. There effective leverages as a rich & popular brand equity by the
merchandising products & licensing in its brands (Camillus and Mohan, 2017). There concepts
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& aesthetic appeal are visual stores & have a 'cool' factor attached by them. There concept of
stores are being as a 3rd place besides the home & there work scheduled. They unique character
of the neighbourhood to reflected designed structures. They serve an environmental friendly &
wastages. They include some entertaining elements which attracts there customers like, great
music, great services, warm atmosphere, free Wi-Fi. Apart from that they provide community
meeting spot environment, which is usually forms as wider part of the 'Starbucks experience.'
There human resource is that they provide great benefits like stock, option, retirements accounts
which they enjoy & well taken care of them. Provide knowledge based programs that creating a
healthy corporate culture environment. They ranked 91st in top 100 best places they work for the
fortune Magazine (Carrolland Richter, 2016). They have large no. of human resource capital
management & a great corporate culture that translates into supreme customer based services.
They have Loyalty - based programs, Starbucks cards includes convenience, support gifting, &
increases frequently store visits.
As they have some temperate competitive strategies that follows:-
Basically there are some less competitive factors affects somehow. There prime
strategies related to location is one of them where high traffic, high visibility of settings that
includes office buildings, universities campus, retail centres a lot of off main road locations
across the world (Deresky, 2017). There stores are community friendly & basically focussed on
the recycling and reduce the wastage but these temporary advantages told be the prime
advantage that create on the market of there brand image. They build the goodwill among the
communities and take initiatives for fulfil the social responsibility strongly. There large size and
strong global brand image now always being same as per they should take more innovative &
take more initiatives for the society (Mason and Goza,2017). These some temporary advantages
will remain same that help to earn trustworthiness in customer view. The temporary factors are
created a brand image in the market world. Operating in so many countries is being a difficult
task. Economies of scale through superior distribution channels & there supplier relationships
will remain same (Nagle and Zale, 2016).
Gap between the current organisation's strategies and their achievable goal and expectation.
The organisation is implementing the market development strategy where their can
achieve their goal that is to be the international coffee seller, but the problem in achieving that
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goal with this strategy is they are facing financial crisis this is becoming the gap between their
strategy and goal.
Recommendation as per their capacity and strategic plans so that they can success their business
After analysing the current capacity of Starbucks, the organisation is facing the financial
crises, they do not have adequate fund because the prices of beans is greeting high, they are
suffering from the market share because new competitors are getting into the market. Due to this
situation the company have to close their some stores as well as they are not able to open new
store in the new market (Carrolland Richter, 2016). Other than that they are having other huge
capabilities such as they are having strong supply chain, their serve quality products which help
them to stand in the market and gain competitive advantages. The recommendation which is
given to them are they should focus on reducing on their expansion efforts and focus to promote
their existing stores.
CONCLUSION
It can be concluded from the project report that Starbucks is very sound brand which
have great image in the mind of customer, but they are facing lots of issues such as financial
crises, high prices, competition etc. they need to stop their market development strategy on focus
on their current store so that they can resolve their issues and gain competitive advantage.
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REFERENCES
Books and Journal
Camillus, J. and Mohan, N. C., (2017). The Business of Humanity: Strategic Management in the
Era of Globalization, Innovation, and Shared Value. CRC Press.
Carroll, R. J. and Richter, B. K., (2016). Using item response theory to improve measurement in
strategic management research: An application to corporate social responsibility. Strategic
Management Journal. 37(1). pp.66-85.
Deresky, H., (2017). International management: Managing across borders and cultures.
Pearson Education India.
Mason, A. and Goza, N., (2017). STARBUCKS: A CASE STUDY OF EFFECTIVE
MANAGEMENT IN THE COFFEE INDUSTRY. Journal of International Management
Studies. 17(1). pp.66-85.
Nagle, T. T. and Zale, J., (2016). The Strategy and Tactics of Pricing: New International
Edition. Routledge.
Peppard, J. and Ward, J., (2016). The strategic management of information systems: Building a
digital strategy. John Wiley & Sons.
Peppers, D. and Rogers, M., (2016). Managing Customer Experience and Relationships: A
Strategic Framework. John Wiley & Sons.
Percy, L. and Elliott, R. H., (2016). Strategic advertising management. Oxford University Press.
Ragozzino, R. and Trigeorgis, L., (2016). Real Options in Strategy and Finance: Current Gaps
and Future Linkages. The Academy of Management Perspectives, pp.amp-2014.
Sisson, D. C. and Bowen, S. A., (2017). Reputation management and authenticity: A case study
of Starbucks’ UK tax crisis and “# SpreadTheCheer” campaign. Journal of Communication
Management. 21(3). pp.287-302.
Snell, S. A. and Yemen, G., (2017). Starbucks: Schultz Back in the Brew. Darden Business
Publishing Cases. pp.1-18.
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Stead, J. G. and Stead, W. E., (2016). Spiritual Capabilities: Keys to Successful Sustainable
Strategic Management. In Spirituality and Sustainability. Springer International
Publishing.
Teece, D. J., (2017). A capability theory of the firm: an economics and (strategic) management
perspective. New Zealand Economic Papers.
Online
Types of growth strategies,2016.[Online].Available
through:<http://www.retailstartup.com/growth--expansion.html>[Accessed on 27
September 2017]
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