Strategic Management Plan for Starbucks: PESTLE, SWOT, and Porter's

This report delivers a strategic management plan for Starbucks, encompassing a PESTLE analysis to evaluate macro-environmental factors like political and economic influences on the coffee bean business, a SWOT analysis to assess the company's strengths, weaknesses, opportunities, and threats, ...Read More

STRATEGIC MANAGEMENT
PLAN

Table of Contents
INTRODUCTION...........................................................................................................................3
PESTLE Analysis of Starbucks..................................................................................................4
SWOT Analysis of Starbucks.....................................................................................................7
Porter's five strategies for Starbucks...........................................................................................9
Strategic management plan for Starbucks.................................................................................10
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
The study is on Strategic Management plan which means the future decisions to taken by the
management which can help a company in using strategies which can increase its performance,
help recover from losses and withstand crisis. The organisation being taken for study is
Starbucks which is an American multinational coffee house chains and roastery reserves. The
company has headquarters at Seattle, Washington. It is also seen to be the second wave of coffee
culture at United States. The impact and influence of the macro environment factors on the
company has been discussed and further recommendations given to improve market presence.
The evaluation of the internal environment and capabilities has been done in the form of SWOT
analysis. Porter's five forces model has been evaluated to judge the competitive forces present in
the market and recommendations given. The detailed strategic management plan has been
provided to produce a set of valid strategic decisions and actions for strategic management plan.
PESTLE Analysis of Starbucks
Pestle analysis helps in analysing the macro factors which affect a company's economy within a
country. The factors influencing the company Starbucks are:
Political
The coffee beans business highly depends on international trade. As the biggest coffee producers
are in continents like Asia, Africa and South America but the drink is majorly popular in
continents like Europe and North America. Starbucks thus has to import coffee beans from
around the world and the trade relations with other coffee producing countries influence the
pricing of coffee beans within the country (Shtal and et.al., 2018). The tariffs are the decision
makers of the pricing and thus impact the sales of the company. There are a number of
international trade agreements which help in ensuring success for coffee industry. The other
factors playing a prominent role are tax policy and employment laws.

Economical
The economic factors related to the business is the purchasing power of customers. When
economy faces recession it is bound to have impact on sales of coffee. People would prefer
having it at home rather than taking the service outside at cafe. But when there is a good growth
rate in the economy, this has a good effect on food and drink industry. People have higher
purchasing power and can afford to enjoy outside services. Premium coffee products will also be
able to sell in these times. Starbucks has to check in these factors in pricing the product
appropriately (Basak and et.al., 2020).
Social
There are certain factors of social environment affecting the food and drink industry as:
Health consciousness
The present century has seen people growing a lot more health conscious. They are spending
more time on exercising and eating right. Thus, they are now more focused than earlier to go for
healthy choices. Coffee drinking although has not been considered unhealthy but is said to have
high amount of caffeine. People thus have decided to reduce intake of coffee and go for
decaffeinated products. This will mean reduced number of customers for the coffee business and
Starbucks would have to watch out for same (Shtal and et.al., 2018).
Changing Generation
The factor focuses on the changing revenues as the older generation who used to experiment and
spend on new products is now retiring. The company Starbucks will have to now focus on
marketing techniques to catch on the attention of the new generation.
Technological factors
The technical factors like providing of Wi-Fi access while consumers sip coffee is an advantage
of providing an added facility when customers drink coffee. Apart from this, Starbucks is also
enabling mobile payments to make convenient for customers to pay as per their convenience.
This adds to the customer experience. Speaking of the additions in coffee making, the business
has seen changes in the way coffee has made. The technical factors affecting the industry are:

Genetic engineering
The method involves modifying produce at the genetic level which help improves yield, taste,
shelf life etc. The genetic modification in process of beans growth in farm can help improve
coffee taste with intersection of different breeds of coffee. It allows producers to generate good
profits. If the product's taste suits the customers, it becomes a new segment for the customer
(Roy, 2019).
Coffee machines
The changes next happening in the coffee industry is the advent of new coffee dispensing
machines. The machines like coffee grinders, drip machines and espresso makers are available at
most of the stores. These machines while making handle customer orders quickly can also pose a
risk of customers purchasing these machines and making coffee at home. This can result in a
decline of customers while reducing business for the company.
Environmental factors
The factors affecting Starbucks in environment can be practice of sustainable farming. The other
issues like green house emissions, environmental pollution etc. are not affecting the coffee
business but farming activities do as they utilise pesticides and urea in farming. This can make
the coffee production harmful. There is more emphasis being laid on organic farming to help
make the crop a healthier one. However, this may lead to a rise in prices affecting customer
which may influence the sales (Basak and et.al., 2020).
Legal factors
The coffee industry has to follow the legal standards set by food and drink regulations. Further, it
is subject to a wide range of laws on how it is being stored, transported and brewed. Coffee
contains a high amount of caffeine and therefore can be subject to use of caffeine standards. The
company has to follow the policies for safety of customers.

Recommendations:
Starbucks has to keep these above mentioned factors in consideration when making future
decisions to increase the business. In expansion of its branches in different countries it will have
to consider the political relations of the country with the home country. Tax rules is one example.
The product pricing has to be revised if need be regarding the current purchasing power of the
customers. The social factors of the behaviour changes of the customers towards product has to
be kept in mind and focus should be on giving customer a healthier version of coffee by reducing
amount of caffeine by technology use in machines. The company has to keep in mind the
technical changes happening in the market, follow the government guidelines and also take on
some corporate responsibility towards society and build sustainability.
SWOT Analysis of Starbucks
Strengths
Starbucks has a strong brand image and is the most popular in food and beverage industry.
Starbucks has around 31000 plus stores catering to millions of customers. It has an extensive
presence internationally with sourcing of coffee beans from different regions. The acquisitions
done by the company has proven successful for the company and made it a bigger brand
(Khushman, 2019).
Starbucks is known for its well treatment of employees and this helps in better employee
management and productivity. The brand offers a wide range of products which customers can
try out and thus increase sales for the company. Also there is a reputation of value for the
products.
Weaknesses
Starbucks does not spend highly on marketing and advertising which goes against the brand.
There is a direct and indirect competition in Tea brands or soft drinks as substitutes. Thus
requires an investment in the same by roping in celebrities to endorse the brand.

The high prices set by the company reduces affordability for the customers. It also doesn't
own unique product range which can be copied by other competitors thus reducing the market
share of the company. There are some areas where the product offerings does not align with the
customer preferences. People having different tastes have to be properly studied and researched
before giving the nod to a product. The European Tax avoidance has not gone down well with
the company (Clements, 2019).
Starbucks has high concentration in US and thus business deals mostly on profits
received in US. The company has to expand in other markets to diversify business risk and
reduce the same.
Opportunities
The Starbucks can use the policy of business expansion to expand in more countries with most of
it being concentrated in US. Global expansion in economies which are emerging can become a
great opportunity.
The company can tie up with many corporate houses for setting up corporate vending
machines and the business can boom in many countries. The company can enter in strategic
alliances with other nations who have restaurant chains and deliver its own coffee to customers.
The company can introduce new products with various flavours to catch attention of the
public which can help add up more customer segment. The company can also start up its own
coffee delivery service like Uber eats, Post mates etc. and be a leader in its field as currently
there are a few restaurants only who deliver beverage products. Company can also diversify its
product range in beverages with options like soft drinks and other refreshing drinks which are at
low price , affordable for the customer during this period and generate mass sales (Khushman,
2019).
Threats
Starbucks has competition with low cost coffee sellers because there are many players who are
offering products at an affordable rate. This can lead to a loss of market share for the company.
Competition with other big outlets also pose a threat to the market position of the company
(Clements,2019). The products can also get imitated by rivals. The products have to be of unique
recipe to evade off threat. The rising prices of raw coffee beans in the pandemic due to concerns

over availability, hoarding and supply chain disruption has led to price concerns for the
company. It will not only delay in shipment and also company will have to cut down on its
operational costs as already the prices of their products are high. The company will have to find
out ways to maintain revenue. It also may happen that the premium products of the company
suffer a loss with fall in purchasing power of the customers. Company will have to innovate
products which consume less of operational costs and market those products which can stay
affordable to the pocket of customers as well as increase sales with its popularity.
Porter's five strategies for Starbucks
It is a simple tool for analysing the level of competition in industry. It helps to analyze how the
business is positioned relative to the competition and strength. The five forces which influence
the competitive position within industry are:
a) Threat of new entrants: The threat of new entrants is moderate. The barriers are not very
high and the initial investment is not very high to start a coffee brand. The level of saturation is
moderately high. The local brands can compete with Starbucks at local level. The possibility of
success rate remains from low to moderate. Starbucks has achieved a large market share
considering the infrastructure, efficiency and product quality. The company brand name helps
customers to remain aligned with the product (Bruijl, 2018).
b) Threat of Substitutes: The number of substitutes is moderate to high. There are substitutes
available like tea and other beverages like soft drinks. There are restaurants who are providing
good ambience. Other substitutes are through coffee machines now being used at home to make
coffee. But still there will be people who would like to have an outing, and consume coffee
where they are provided excellent service and ambience (Helmold, 2019).
c) Bargaining power of Buyers: This factor ranges from moderate to low. Customers do have
options to make a switch but generally people look for quality and are also willing to pay for
premium products. The product mix of Starbucks is diverse and this makes the customers remain
aligned with the brand. However, an excessive raise in price will not go well with the business.

Starbucks can keep a high price in a way that customers do not mind paying extra for the service
and ambience.
d) Bargaining power of suppliers: This factor exerts low to moderate pressure on Starbucks.
The brand has own supplier diversity policy which is used to select the suppliers. The ethical
sourcing is major policy at Starbucks. The brand sources coffee from different parts of the world.
It directly sources beans from the farmers and thus does not face difficulties in supply chain. The
tea and cocoa farming communities have also been educated by Starbucks over the new farming
methods and thus have made a good relationship with them (Bruijl, 2018).
e) Competitive rivalry: The competitive rivalry is moderate to high. This is because there are
other big firms working in the same business. There is a range of products offered by other
businesses at low switching cost which makes this factor strong. Starbucks has to keep
innovating on its products to keep the customers lured to the product. The premium quality and
product based differentiation Starbucks uses gives some edge over competitors. The company
has to do marketing of new products to keep the customer attention intact with the product
(Helmold, 2019).
Recommendations:
Starbucks should focus on its strengths to make the brand stronger and continuously innovate
while taking customer feedback to help retain the customers and check the competition. This can
help sustain business. Starbucks can also go for business diversification in terms of products like
cold drinks and fruit juices to reduce the risk associated in competition. The company can also
make use of genetic engineering to make the product better and increase sales by launch of new
versions of coffee.
Strategic management plan for Starbucks
The term strategic management means decision-making by the management to implement
strategies to help realize the objectives of the organization.
Aim: To increase market revenue by 20%.

Objectives: To increase market share in adjoining nations.
To increase customer segmentation.
Operational Budget: The budget for executing the plan can be kept US $ 150000.
SWOT Analysis of Starbucks
Strengths
Starbucks has a strong brand image and is the most popular in food and beverage industry.
Starbucks has around 31000 plus stores catering to millions of customers. It has an extensive
presence internationally with sourcing of coffee beans from different regions. The acquisitions
done by the company has proven successful for the company and made it a bigger brand.
Weaknesses
Starbucks does not spend highly on marketing and advertising which goes against the brand.
There is a direct and indirect competition in Tea brands or soft drinks as substitutes. Thus
requires an investment in the same by roping in celebrities to endorse the brand (Sakal, 2018).
The high prices set by the company reduces affordability for the customers. It also doesn't
own unique product range which can be copied by other competitors thus reducing the market
share of the company.
Starbucks has high concentration in US and thus business deals mostly on profits
received in US. The company has to expand in other markets to diversify business risk and
reduce the same.
Opportunities
The Starbucks can use the policy of business expansion to expand in more countries with most of
it being concentrated in US (Clements, 2019).
The company can tie up with many corporate houses for setting up corporate vending
machines. The company can enter in strategic alliances with other nations.

The company can introduce new products with various flavours to catch attention of the
public which can help add up more customer segment. The company can also start up its own
coffee delivery service. Company can also diversify its product range in beverages with options
like soft drinks and other refreshing drinks (Mason, Cole and Goza, 2017).
Threats
Starbucks has competition with low cost coffee sellers because there are many players who are
offering products at an affordable rate. Competition with other big outlets also pose a threat to
the market position of the company. The products can also get imitated by rivals. The rising
prices of raw coffee beans in the pandemic due to concerns over availability, hoarding and
supply chain disruption has led to price concerns for the company. It also may happen that the
premium products of the company suffer a loss with fall in purchasing power of the customers.
Company will have to innovate products which consume less of operational costs and market
those products which are affordable
STP Analysis
Segmentation
Starbucks does segmentation on various factors such as geographic, demographic, behavioral,
psychographic. The geographic region comprise of US, Canada, Europe etc. The density is of
urban population here. The demographic factors comprise of age factor which is 22-60 years.
The occupation is of students, employees, professionals of the customers (Sisson and Bowen,
2017). The behavioural factor is personality of individuals such as easy going, determined and
focused mostly the young individuals. The user status is of regular customers with high degree
of loyalty. The psychographic status is of following an aspiring lifestyle to continuously better
the standards.
Targeting
The target segment is of the youth and professionals. The youth like college going students
would generally like to try out new coffee products with their friends. The young executives and

professionals are also the target customer as they generally like to converse and make deals with
clients over coffee. Also company makes best service possible for the family customers visiting
the cafeteria.
Positioning
Starbucks uses following types of positioning:
a) Mono segment positioning: The coffee chain targets the premium customer segment i.e. of
customers who do not mind paying a bit extra for quality.
b) Adaptive positioning: Speaking of increasing tendency of consumer health awareness,
Starbucks developed coffee beverages with less calories.
c) Standby positioning: Certain Starbucks beverages like Frappuchino had to wait for a certain
period of time to get demand for the product (Sisson and Bowen, 2017).
Action Plan: Starbucks has to take in account customer feedback of its products and register
demands or changes to be made in the product. They can go for new coffee beverages which are
famous in other continents and make market strategies to promote the products among
customers. A new product will create curiosity among customers and motivate them for making
a purchase. This can increase the daily operational sales while affecting the overall revenue. A
discount can also be kept on these products initially to create a demand for them. As they grow
famous over time, a premium version of them can be launched which will bring increase in
revenue (Mason, Cole and Goza, 2017).
CONCLUSION
This study concludes that the internal and external factors contribute to the decision-making
process in strategy management. Company gets to know its strengths to focus upon and how it
can use them in making opportunities. Also, the external factors help in decision-making for the
company how to survive the threats faced by the company in the competitive era. This helps
company form an action plan to increase customer segment and its market share.

REFERENCES
Books and Journals
Basak, S. and et.al., 2020. Business Idea for Starbucks: Organic Yerba Mate
Beverages. International journal of Tourism and hospitality in Asia Pasific. 3(2). pp.89-
96.
Berisha Qehaja, A., Kutllovci, E. and Shiroka Pula, J., 2017. Strategic management tools and
techniques usage: A qualitative review. Acta Universitatis Agriculturae et Silviculturae
Mendelianae Brunensis, 65(2).
Bondarenko, T.G. and et.al., 2017. Optimization of the company strategic management system in
the context of economic instability.
Bruijl, G.H.T., 2018. The relevance of Porter's five forces in today's innovative and changing
business environment. Available at SSRN 3192207.
Clements, M., 2019. Strategic Audit: Starbucks.
Helmold, M., 2019. Tools in PM. In Progress in Performance Management (pp. 111-122).
Springer, Cham.
Khushman, A., 2019. An Evaluation of Entrepreneurial Activities and Growth Strategies–The
Case of Starbucks Coffee House. Available at SSRN 3594916.
L’AUDIT MARKETING, U.M.D. and DE, C., 2019. MARKETING AUDIT A METHOD OF A
CONDUCT EVALUATION OF THE MARKETING STRATEGY AND THE
BUSINESS PERFORMANCE. Revue Internationale du Marketing et Management
Stratégique. 1(4). p.156.
Mason, A., Cole, T. and Goza, N., 2017. STARBUCKS: A CASE STUDY OF EFFECTIVE
MANAGEMENT IN THE COFFEE INDUSTRY. Journal of International
Management Studies. 17(1).
Roy, R., 2019. Proposal for Additional Approaches to Performance Improvement. In Annual
Conference.
Sakal, D.V., 2018. COMPANY ANALYSIS OF STARBUCKS CORPORATION.
Shtal, T. and et.al., 2018. Methods of analysis of the external environment of business activities.
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.