Strategic Analysis of Starbucks: Influencing Organisational Strategy

This report provides a comprehensive analysis of Starbucks' organizational strategy, focusing on its approach to influencing its business framework. The report delves into Starbucks' strategic planning, including the application of Porter's five forces model and intensive growth strategies such as market penetration and development, and product innovation. It assesses the company's financial performance, examining its balance sheet and identifying strategies employed during periods of financial downturn, like the 2007-2009 retrenchment. Furthermore, the report evaluates Starbucks' operations in relation to its stakeholders (employees, suppliers, customers, investors, government, and environment), emphasizing the importance of a multi-cultural team and a healthy business environment. The analysis also considers the external business environment through PEST analysis, and the internal business environment, highlighting the importance of a friendly and healthy environment. The report concludes by identifying potential threats to Starbucks and suggesting strategies to overcome them, such as market-intensive strategies in new regions like Africa and the Middle East.

Influencing Organisational
Strategy

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Strategy of Starbucks..............................................................................................................1
TASK 2............................................................................................................................................4
Starbucks strategy for finance and business environment......................................................4
TASK 3............................................................................................................................................7
Operations in favor of stakeholders........................................................................................7
TASK 4..........................................................................................................................................10
Threats for Starbucks and their overcome from such threats...............................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Strategy can be defined as a process or framework which is helpful in performing the
task. Influencing organisation’s strategy is defined as a change in business framework of a
company according to time (Barrick and et. al., 2015). Present report is based on Starbucks
which is one of the finest coffee companies based in UK. Here, there will be discussion on the
strategy followed by Starbucks to run business operations successfully. Also, strategy followed
by the firm in relation to financial performance and business environment will also be studied
here. Further, operations in favour of stakeholders will be highlighted in the report along with
stating several threats that company is facing with suggesting different ways to effectually
overcome the same.
TASK 1
Strategy of Starbucks
Starbucks is one of the well-known organisations in line of coffee shop. They are dealing
in variety of coffee brands with 182,000 employees and operated business in more than 60
countries of the world. Thus, it is having operations on large scale and generating higher profit
than any other organisation of same sector. Their total revenue for year 2013 is $14.89 billion.
Company is focusing their goals and targets according to present business world which is based
on fluctuating demand and preferences of customers.
Porter five forces model supports organisation to measure the extent to which its business
environment can affect operations. The major goal of a company is to create differentiation in
products from others which is helpful in generating higher revenue. Along with this, company
also used intensive growth strategy through which they can expand and grow their business in
diverse directions (Booth, 2015).
Every department or division of Starbucks has to prepare an appropriate strategy which is
helpful for them in their long term. Porter’s five forces analysis and intensive growth strategies
are helpful in expanding business in new market world and make product different from others.
Along with this, they also use PESTEL and SWOT analysis which are some more tools and
techniques that are helpful in such concern.
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One of the most appropriate strategies for Starbucks in market is market intensive
strategy in which they are going to expand their market in other countries other than existing 60
(Starbucks Coffee’s Generic and Intensive Growth Strategies, 2017). Market penetration: According to this strategy, organisation identifies several other
countries where they can expand their business (Brewster and Hegewisch, 2017). As they
are already operating in 60 countries, management has to conduct a research and identify
all other parts of the world where they have still not opened any store. This market
intensive strategy is helpful for them in opening more outlets in all over the world. Market development: Another major thing which have to take in account is market
development (Camisón and Villar-López, 2014). Starbucks management has to develop
their market by opening store in more countries.
 Product development: Innovation is an essential concept for every business and
Starbucks needs to innovate their products for sustaining in the competitive market. They
are going to deal in the new market where many raw users are identified and goods and
services are offered according to their satisfaction.
Management have to prepare their strategy according to mission, goals, targets and
objectives. This support them in doing all things in corrective manner. Hence, Starbucks mission
is “to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a
time” (Mission statement of Starbucks, 2017). Entity just want to foster the spirit of human so
that revenue get maximise. Their goal is to expand the market and grow business in diverse
direction which aid in increase their revenue. Leaders are also working effectively by making
multi-culture teams which can easily adopt culture of one another and deliver adequate quality
services.
Another major thing for an organisation is to improve their mission statement. Starbucks
needs to apply six major principles in their business for mission formulation:
 Our Coffee
 Partners
 Customers
 Stores
 Neighbourhoods
 Shareholders
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For attaining all targets and objectives, management has to employ all their strategies in
an appropriate manner. Their current strategy is Porter’s five forces analysis but intensive market
strategy is appropriate for them in relation with expansion of market and business in new
countries of the world (Doh and Quigley, 2014). Along with this, they have to reframe their
mission statement as well in which they have to include such aspects which are related to new
business world and signifies organisation in a proper manner.
Africa and Middle East are the areas in which business have to employ their intensive
market strategy as their significance of presence is lack in such areas. Moreover, manufacture the
products and services according to culture of Africa and Middle East so that they can deal with
all issues in an adequate manner. Thus, management have to associate their generic strategy with
the new one which is intensive market framework (Fraj, Matute and Melero, 2015).
A major strategy of Starbucks was location selection in which they lead to open their
more than 20 stores in urban areas. This aids them in making their experience more appropriate.
TASK 2
Starbucks strategy for finance and business environment
A) Financial performance of Starbucks:
Finance is defined as the backbone of a company which supports in operating all things
in an appropriate manner. Management of Starbucks has to formulate their strategies according
to entity’s financial performance so that they can run effectually in the market.
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(Source: Balance sheet from 2012 – 2016)
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Illustration 1: Balance sheet from 2012 - 2016

(Source: Balance sheet of 2012 - 2016)
Sufficient cash and cash equivalent of a company is less as compared to year 2013. This
signifies that Starbucks is having low market share as in the year 2013 but in middle of the years,
it is low. Thus, management have to frame strategies according to or by taking cash equivalent in
account. Another major thing which get identified from the financial statement of a company is
their total current assets are less in number as compared to year 2013. Their financial strength is
low so in case of cash requirement they do not have sufficient fund as compared to 2013. Thus,
Starbucks corporations have to show some concern towards their current assets by increase them
in number.
Thus, on the basis of this, management of Starbucks will be going to readjust their
strategy of retrenchment in the year 2007 – 2009 due to heavy downturn in selling of products.
Thus, this was a major reason behind their downturn. Due to this fact and problem Hovard
Schultz, chairman and founder of Starbucks had to return on his post in the beginning of 2008.
He again reformulated the framework of an entity by using two initiatives which are:
retrenchment and reaffirmation. Due to retrenchment, new opening of many stores get cancelled
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Illustration 2: Balance sheet of 2012 - 2016

and a revised operational practice for cost efficiency get done. In the summer of 2008, he
announced the closer of 600 US stores as well as many Australian stores. As a result, company
save around S500 million in 2009 which also includes cutting his own salary to S l.2 million to
S10.000 and selling two of the Starbucks corporate jet.
Company also take the initiatives of corporate social responsibility in which they New
Orleans clean up after Hurricane Katrina and launched a Starbucks Sharing planet: an
environment sustainability and community service program.
Along with this their financial strategy includes diversification within US during the year
2009 to 2015. During the year, 2014, company have a market share of 26.1% which was largest
as compared to other packed brand brands. For the quarter ended March 26, 2015, revenues were
higher than the corresponding quarter which is 18% as compared to 2014 and operating profit
rise with 21%. In the year 2013, their total revenue is 11,000.8 whereas during the year 2014,
they earned a profit of 11,979.
As their financial strategy are based on performance of a company for last few years.
According to balance sheet of Starbucks, it get measure that firm is not stable in nature and
performance is getting fluctuate according to business environment. For improving this thing, a
major step have to adopt by a company by increasing their long term investment. Along with
this, tighten of policies as well so that they can recover all of their debts on time. Moreover, cut
down in long term debts of a company is another major step because this lead to dilute and affect
strength of a company in negative manner. Hence, on the basis of financial performance of a
company, these strategies have to follow up by an organisation (Ganter and Hecker, 2014). This
support them in attain all targets in an effective manner as well as starting up new venture in
Africa and Middle East become easy. But this get done only when an entity have sufficient cash
balance and good financial strength. Along with this, they can raise fund from their shareholders
as well.
B) Overall coherence of Starbucks strategy in relation with external and internal business
environment:
As business is going to expand in Africa and Middle East, Starbucks have to formulate
several number of strategies which support in dealing with external and internal business
environment (Holland, 2016). Fir this, management have to conduct SWOT for internal
modification as well as PEST for external business framework alteration.
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 Political: Identification of all policies which are taking place in Africa have to determine
by management and frame their strategies according to that. Tax rates made a impact on
user and company as well. Economical: Africa have low economy which signifies that chances of depression are
high. By opening an outlet at moderate prices, company can create more job
opportunities. Social: Identify the user which present in Africa and then manufacture products according
to their requirement. This support them in gaining interest of society and they can
generate more profit in Africa and Middle East as well.
 Technological: Use of new technology according to time is an essential concept which
have to take in account by Starbucks so that they can produce quality based products with
minimum price and less wastage of cost as well.
This PEST analysis is helpful for external market analysis of an organisation and
management have to prepare their strategies according to this. Company have to use new and
modern technology in relation to gaining more satisfying customer. Along with this, company
have to determine the economic condition as well through which they are going to settle down
their prices of product.
Internal business environment is signifies as all employees which are working in an
organisation (Mills, 2017). They all are belong to different culture and thus chances of conflicts
are high in number. But leaders and managers of Starbucks are capable to build a team which
establish a multi culture team in an entity. They all starting to work together which is beneficial
in implementing all strategies in an adequate manner. Maintaining a friendly and healthy
business environment will support in executing all things in an adequate manner. Organise
several activities of whole staff together as well as using democratic approach of leadership is
helpful in implementing the internal strategy in an adequate manner.
TASK 3
Operations in favour of stakeholders
Stakeholders are such people or group of members which are helpful in operating the
business properly (Selznick, 2014). Mainly there are two types of stakeholders are identified
which are: internal stakeholders and external stakeholders.
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Both of them made a vast impact on business according to their nature. Following are the
Stakeholders of Starbucks which are as follow (Basic steps for creating Stakeholder Map. 2017):
 Employees
 Suppliers
 Customers
 Environment
 Investors
 Government
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(Source: Basic steps for creating Stakeholder Map, 2017)
CSR is an operation which operated by Starbucks in favour of their stakeholders through
which they gain sustainability in business context. As company is not looking themselves as a
profit generating organisation but also treated themselves as a member of society. Already they
are engage in many CSR activities through which interest of stakeholders get attain. In such
relation, corporate social responsibility has to perform by an organisation towards each of their
stake-holder's interest (Starbucks Coffee’s Stakeholders: A CSR Analysis, 2017).
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Illustration 3: Basic steps for creating Stakeholder Map

 For employees job security and good working condition and higher wages are essential
thing. Starbucks provide scholarship to all of their youth or young students who are
working with them. This get done in the year 2014 which signifies that they are working
towards employees. Company pays off 56% tuition fees of their employees which are
belong to junior or senior universities.
 Another major stakeholders of a company is their customers whom interest fulfilment is
essential for an organisation. Company promote healthy and friendly environment where
user feel comfortable. This get done through all baristas interact with consumers in an
adequate manner.
 Suppliers of coffee beans are taking place from all over the world. For suppliers and
protecting the farmer’s interest, several number of programmes get conducted through
business organisation. Starbucks Coffee and Farmer equity is one of them which signifies
that all farmers are paid properly.
 Investor invest into an entity with a motive to high return. Starbucks have to perform
their duty towards this group also in which company expanding their business all over the
world and increase profit as well as market share.
 Government frame several rules and regulations which have to follow by an organisation.
Starbucks got criticise in Europe due to paying less tax amount which define that they are
not performing and fulfil interest of this group in an adequate manner. Thus, this area
required to get improved on frequent basis otherwise good will of a company get
affected.
Starbucks fulfil the interest of most group of stakeholders which signifies that they are
operating for them. This is helpful in make them different from others. Management have to
work in improving their work towards government also in which they have to pay tax on time
according to imply rates. Thus, every group interest fulfilment is a duty of an entity which have
to perform in any manner. Corporate social responsibility is an operation which get done by
management in satisfying every stake-holder's group interest for maximising their sales and
revenue (Serra and Kunc, 2015).
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