Starbucks Business Strategy: Environmental Analysis and Planning

This report provides a comprehensive analysis of Starbucks' business strategy, focusing on the impact of the macro environment using PESTLE and stakeholder analysis. It examines the company's internal environment and capabilities through SWOT and value chain analysis, and applies Porter's Five Forces model to assess the competitive landscape. The report further develops a strategic management plan, incorporating concepts like the Ansoff matrix and Porter's generic strategies, to provide strategic directions for Starbucks' future growth and success, covering market development, penetration, product development, and diversification.

BUSINESS STRATEGY
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1- Impact of macro environment on Starbucks and their tactics............................................3
2- Internal environment and abilities of chosen company by using suitable frameworks.....6
3- Application of Porter’s five forces model..........................................................................9
4- Development of strategic management plan with range of concepts and models.............9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
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INTRODUCTION
Business strategy is one of the most important elements for a company, which they can
use to grow their ventures in strategic and effective manner. It provides several benefits to
organizations in term of gaining more knowledge about firms and competitive advantages. The
current study will be based on Starbucks, which falls under list of leading American international
chains of coffeehouses, established in Seattle, Washington. This assignment will explain macro
environment impact on chosen brand, their strategy and will also define critical analysis of
internal atmosphere and capabilities of firm by using relevant models. Furthermore, this report
will describe implication of porter’s five forces concept, appropriate tactics and methods. It will
clarify application of range of models, theories and concepts included in strategic management
plan.
MAIN BODY
1- Impact of macro environment on Starbucks and their tactics
Pestle analysis-
Political factor-
Trade policy, tax rate and political stabilities are all political factors, which may have a
direct impact on current practices of companies, operated in any industry (Sisson and Bowen,
2017). Tax rate is one of those elements that put negative impact on Starbucks success in term of
increasing tax charges, as organization source their raw materials from different nations or
regions. They need to pay extra charge on each import or export activity that affects profitability
of brand.
Economic factor-
Unemployment rate, education level, recession and local currency exchange rates are
include in list of economic factors. Decreasing rate of unemployment put positive impact on
productivity and practices of firm because it allow management to do not hire more people as
they can work with existing applicants and with few new one, they could not recruit extra
workforce that consume efforts and money as well (Sokol and Jordanov, 2020).
Social factor-
Life style change, preferences, health concern and demographic changes are all social
components that may impact pricing strategy, production and other operations of companies.
Here, preference change is one of those factors that put negative impact on current customer’s
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strategy of Starbucks. In recent time, people like to visit those places where he or she can drink
and eat food with good music, great connectivity with Wi-Fi system and other things. In short
they want value added services which may be impossible to arrange in short term period as it
require depth research and time as well (Bramantyo, 2017).
Figure 1PESTEL Model
(Source: What is PESTLE Analysis, 2020)
Technology factor-
The advancement of technology put positive impact on sales and brand image of
Starbucks because marketing department of this company can use the latest digital marketing
tools and channels to promote business services and products successfully. With social media as
current marketing tool and traditional marketing sources, firm can generate brand awareness and
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aware people about their value added services, which in return increase profits margin even
better.
Environmental factor-
Increased rate of air, land and water pollution affect business operations and management
practices negatively. In case of Starbucks, this element impact positively because firm has
already taken major steps towards reduce carbon foot print, they offer coffee in recyclable mug
that could not harm land and water or polluted them, which is quite impressive. The Cain’s are
easy to recycle and restructure.
Legal factor-
Health and Safety Act impact Starbucks food & drink production procedure in positive
manner as it give a new guidance along with exiting one to firm which they can follow and
product less caffeine consumption coffee for buyers. It protects company from dishonesty and
unethical practices as well as build strong bond with each consumer.
Stakeholder analysis-
Keep satisfied-
Government is the main stakeholder to Starbucks as they have power to influence
strategy and business activities (Ding, Frecknall-Hughes and Kim, 2020). By making new law
and policies, this stakeholder can put impact on organization practices. So according to this
thing, firm needs to keep satisfy local or national government and follow rules appropriately
which make them able to sustain its venture for longer period of time.
Manage closely-
Suppliers are another stakeholder of chosen brand who can put impact on supply chain
activities and strategies by making chances within their work. Organization to operate their
business successfully needs to manage relationship with these stakeholders appropriately. By
managing relation with them firm can receive raw material on time and delivery products to
people in ethical manner.
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Figure 2Stakeholder Matrix
(Source: Stakeholder Analysis, 2017)
Monitor-
Customers have power to increase and decrease price of goods as they have so many
options in market relate to services and products. Starbucks should monitor market trends and
changes within customer needs, which make them able to satisfy target customer for longer
period of time.
Keep informed-
Workers are less interested in success and great progress of business because they have
employment opportunity in market which allows them to switch to better workplace or company.
Firm can keep their applicants aware about current and further changes within operational and
functional units.
All above macro environment factors directly impact strategic management decisions
making of Starbucks, in positive manner as it allow firm to grab current opportunities and permit
them to determine threat like regulatory change, which company can overcome by developing
effective tactics.
2- Internal environment and abilities of chosen company by using suitable frameworks
SWOT analysis-
Strength-
The strong financial performance of Starbucks is its strength which then capable to
business even better. It help firm to reach at global level and build its venture at number on
position in Food & beverage industry (Kang and Namkung, 2018). This strength can be
considered as internal ability of company which permit management to invest for making better
quality products like Coffee.
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Weakness-
High prices of any product put negative impact on production and other operational
efficiency of companies. It can impact Starbucks customer’s base and sales level negatively,
because some people still could not be able to buy high cost food items as it reduce affordability
for buyer that can lead to decrease profits margin of chosen brand.
Opportunity-
Business expansion with new or affordable pricing strategy is quite beneficial for
company as it give them a chance to attract new buyers and retain potential one for longer period
of time. Starbucks can grab this opportunity which in return generates a lot of revenue and profit
for them.
Threat-
Intense competition within Food & beverage industry can put negative impact on
marketing and manufacture procedure of Starbucks. International organization like McDonald’s
and Dunkin Donuts can poses the biggest threats for chosen firm as they can affect its market
image and position negatively.
Value chain analysis-
Primary activities-
Inbound logistics-
It refers to choosing the excellent quality of coffee beans by firm which they can use to
make world famous coffee especially for people who wants to drink and purchase it eagerly.
Company is able to manage their inbound activities as they procured unroasted and green beans
direct from farms.
Operations-
Chosen brand has internal ability in form of managing their business operations in more
than 65 nations successfully with skilled workforce who are able to satisfy buyer and produce
coffee according to their taste. Company has excellently managed their 21,000 outlets globally
that help building strong brand image in whole world.
Outbound activities-
At this point, weakness of Starbucks can be considered because firm has no pressure of
intermediaries in goods selling, most of their items are provided by customer through own
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outlets or licensed shops only. It can impact on product services and business growth negatively,
which is not good for its position in market.
Marketing and sales-
Another weak point in context of Starbucks can be recognized by focusing on their
marketing attempts. It has been identified that company more than aggressive marketing, invest
in high degree of target market services and extreme quality items, which may be beneficial for
buyer but not for internal environment of firm in term of decreasing brand awareness.
Services-
Firm has build consumer loyalty via great degree of consumers services at their outlets.
This strength can make firm able to become competitive because people wants value added
services along with quality products like Starbucks offer.
Secondary activities-
Organization infrastructure-
The outlets of Starbucks are well designed and structured where people can enjoy
evening and morning coffee time with their friends and family members. It create positive
environment at workplace where workers also feel happy and serve the best services to customer
after seeing smile on his or her face.
Human resource-
HR manager always attempts to motivate applicants at workplace because it can enhance
their morale and productivity level even better. Motivated employee performs happily, which in
return build positive atmosphere in firm and can increase sales of Starbucks. Human resource
department encourage all candidates to work productively by increasing their motivational level
through providing incentives.
Technology development-
Firm is able to make investment for making their coffee the best which is quite beneficial
for growth and success of its business. They use advanced technologies to make connection with
target market, but less interested in usage of this in context of marketing.
Procurement-
The management of Starbucks and their agents travel the best places like Latin America,
Asia and Africa as well for collection high grade coffee beans to bring excellent products to each
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buyer. Administration by developing good connection with suppliers and partnerships can
deliver items to people on time with better quality.
3- Application of Porter’s five forces model
Covered in PPT
4- Development of strategic management plan with range of concepts and models
Strategic directions-
Ansoff matrix-
Market development-
This strategic direction can be beneficial for Starbucks when they implement it
appropriately and develop each strategy accordingly (Clemens and et.al., 2018). It can drive
company towards developing new market or enter into profitable place where they can generate
revenue and increase profitability even better. With this strategy firm needs to think which
market or region is suitable for their business expansion.
Market penetration-
Starbucks to gain competitive edge and always be a competitor can use this strategy,
according to this tactic they needs to sell their existing coffee and other items to current buyer by
making changes or improving their quality standards even better (Seo and Asakura, 2017). Firm
accordant to this concept can think how to sell more to potential buyer, which in return can
increase sales.
Product development-
Furthermore, along with above strategic directions, Starbucks can consider this one as
well and plan to use if they think it is appropriate for business growth and success factors.
Organization in order to retain existing customer, attract new one and gain competitive benefits
can develop new products or add value within exiting one which is very beneficial for company
in term of increasing productivity and generate brand awareness within market place.
Diversification-
Accordant to this strategy firm needs to introduce new item by developing innovative
idea that help increase sales level more than other players.
Porter’s generic strategies-
Cost leadership-
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This direction can lead to increase market shares and financial performance of Starbucks,
when firm can reduce their products cost. It can help them to become market leader and attract
new people towards purchase.
Cost focus-
Firm can use this strategy by increasing cost of their items only for a large market
segments, it can bring a lot of benefits to business.
Differentiation leadership-
With this tactic company can focus on creation of unique and attractive item that can
drive people towards products of Starbucks and allow making promotion as well after purchase.
Executive summary-
Starbucks wants to successfully managed their growth by expanding business in new
market and open new stores where customer will get services which he or she consider as value
added things. By taking right actions this thing can be obtained which in return give many
benefits to firm.
Vision-
The vision of company is to reach at international level with strong customer base and
high satisfaction level.
Objectives-
 To open new stores successfully.
 To satisfy buyers
 To be competitive in industry
Strategies-
Starbucks according to this strategic management plan will use beneficial and useful
strategies as they will utilize cost leadership by reducing cost and differentiation tactic which
make them capable & much stronger to drive international buyers.
Tactical action-
Firm can take action in systematic and ethical manner in context of their plan. They can
divide role and responsibilities to each applicant equally that help get excellent success.
Monitoring-
The success of strategic management plan and progress of company after its implication
can be considered by determining gap between last and current year profits and sales margin. It
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is one of the most effective and easiest way can be used to monitor growth of business and
effectiveness of overall plan. Furthermore, Starbucks management will use Benchmarking as
management tools which allow workers to make compare their plans with other well know brand
and then permit to develop their effective approach.
CONCLUSION
By summing up above discussion, it has been concluded that Starbucks successfully
managed their operational and functional activities as well as practices by taking right decision
and using appropriate strategies. It has been analysed that organization has considered all internal
and external factors which make its management and workers able to take right action in context
of performance and productivity improvement. Furthermore, it has been identified that chosen
brand gained competitive edge because they has satisfied their consumers either local or internal
successfully. Before making any plan and developing strategies, company by conducting market
or environmental analysis has collect a lot of data about customer’s needs, taste and preferences,
which is quite beneficial for its business in term of increased sales.
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REFERENCES
Book and Journals
Belyaeva, Z., Rudawska, E.D. and Lopatkova, Y., 2020. Sustainable business model in food and
beverage industry–a case of Western and Central and Eastern European countries. British
Food Journal.
Clemens, H and et.al., 2018. Africa Biogas Partnership Program: A review of clean cooking
implementation through market development in East Africa. Energy for Sustainable
Development. 46. pp.23-31.
Ding, Y., Frecknall-Hughes, J. and Kim, J.R., 2020. 13 Starbucks and media allegations of tax
avoidance. Behavioural Public Finance: Individuals, Society, and the State. p.253.
Kang, J.W. and Namkung, Y., 2018. The effect of corporate social responsibility on brand equity
and the moderating role of ethical consumerism: The case of Starbucks. Journal of
Hospitality & Tourism Research. 42(7). pp.1130-1151.
Seo, T. and Asakura, Y., 2017. Endogenous market penetration dynamics of automated and
connected vehicles: Transport-oriented model and its paradox. Transportation Research
Procedia. 27. pp.238-245.
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.
Sokol, V. and Jordanov, K., 2020. Site selection for small retail stores using sustainable and
location-driven indicators: Case study: Starbucks coffee shops in Los Angeles.
Online
Stakeholder Analysis. 2017. [Online]. Available Through:
https://www.copperproject.com/2017/11/whats-stakeholder-mapping-important/
What is PESTLE Analysis. 2020. [Online]. Available Through: <
https://pestleanalysis.com/what-is-pestle-analysis/>
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