Strategic Management and Starbucks' Success in United Arab Emirates

This report provides a detailed strategic management analysis of Starbucks Coffee Company in the United Arab Emirates, examining its operational framework and practices within the region. It begins with an overview of Starbucks' history and its entry into the West Asian market, specifically the UAE, highlighting the impact on local market dynamics. The report assesses external factors through PESTEL analysis, identifying political, economic, social, technological, environmental, and legal influences. Competitive dynamics are evaluated using the Competitive Profile Matrix (CPM) and External Factor Evaluation (EFE) Matrix. Internal factors, including strengths and weaknesses, are analyzed using the Internal Factor Evaluation (IFE) Matrix. Recommendations for improving Starbucks' market position in the UAE are provided, along with SWOT and SPACE matrix analyses. The report concludes by emphasizing the importance of strategic management in establishing a strong market presence for Starbucks in the UAE.

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Executive summary:
Starbucks Coffee Company is renowned in the coffee industry because of their high quality
products and the quality of service. Besides providing handcrafted beverages like espresso,
frappuccino and non-coffee blends like Starbucks refreshers the Company is also popular for its
customer services. In this regard, this report is going to discuss about the Starbucks Coffee
Company located in United Arab Emirates. The reason for choosing such location is to
understand the business dynamism of the company in a global scale. The report takes support of
different business matrix in terms of Competitive Profile Matrix (CPM) and External Factor
Evaluation Matrix (EFE) which provides a detailed analysis of the operational framework and
practices of the company in the United Arab Emirates region. Therefore, in a conclusion it can be
opined that strategic management has been played an effective role to establish strong market
occupation for Starbucks.

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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................3
Background..................................................................................................................................3
Mission and vision.......................................................................................................................3
New mission statement................................................................................................................3
External factors............................................................................................................................4
Opportunities...........................................................................................................................4
Threats.....................................................................................................................................4
PESTEL.......................................................................................................................................5
Political....................................................................................................................................5
Economic.................................................................................................................................5
Social.......................................................................................................................................5
Technological..........................................................................................................................5
Environmental..........................................................................................................................6
Legal........................................................................................................................................6
CPM Matrix.................................................................................................................................6
EFE Matrix..................................................................................................................................8
Internal factors.............................................................................................................................9
Strength....................................................................................................................................9

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Weakness...............................................................................................................................10
IFE Matrix.................................................................................................................................10
Recommendation.......................................................................................................................11
SWOT matrix.............................................................................................................................11
Space matrix..............................................................................................................................12
Competitive Advantage (CA)................................................................................................14
Financial Strength (FA).........................................................................................................14
Industry Strength (IS)............................................................................................................14
Environmental Sustainability (ES)........................................................................................15
Implementation..........................................................................................................................15
Evaluation..................................................................................................................................15
Conclusion.....................................................................................................................................16
Reference.......................................................................................................................................17

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Introduction
Starbucks Coffee Company is renowned in the coffee industry because of their high
quality products and the quality of service. The first initiative of the company was started in the
year 1971 in United States. The first store was opened in Seattle’s Pike Place Market. Gradually
the Company has proved its quality and service and today it has more than 21000 retail stores in
66 countries (mena.starbucks.com 2018). Besides providing handcrafted beverages like espresso,
frappuccino and non-coffee blends like Starbucks refreshers the Company is also popular for its
customer services.
In this regard, this report is going to discuss about the Starbucks Coffee Company located
in United Arab Emirates. The reason for choosing such location is to understand the business
dynamism of the company in a global scale. Moreover, it can be argued that the achievements
and popularity of the Starbucks Company has been analysed only in the Europe and Australia.
There are no such efforts to be taken in order to assess the business operation of the Starbucks
Company in Asian region especially in the Islamic regions of West Asia (mena.starbucks.com
2018). Therefore, the report is very significant in order to map the impact and organisational
performance of the Starbucks Company in countries like United Arab Emirates. In course of the
understanding, the report takes support of different business matrix in terms of Competitive
Profile Matrix (CPM) and External Factor Evaluation Matrix (EFE) which provides a detailed
analysis of the operational framework and practices of the company in the United Arab Emirates
region.

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Discussion
Background
The US based Coffee giant Starbucks had initiated its journey in the West Asia by
opening its first cafe in the Dira City Centre in Dubai in the year 2000. In fact, by the end of that
year the Company was willing to open seven cafes in the region in the Emirates. In this regard,
the M.H. Alshaya Company was the earliest company to set a partnership with the coffee giant.
In the words of the CEO of M.H. Alshaya Company, Mohammed Alshaya it can be argued that
the investment and entry of the Strabucks Company into the market of Emirates had amde a great
deal of impact on the market dynamics of the country (mena.starbucks.com 2018).
Mission and vision
The mission and vision of the company is strictly related to its customers and for the
benefits of the customers the Company sets some mission and vision statement. According to the
company website, the mission statement of the company is “one person, one cup and one
neighbourhood at a time” (Starbucks Coffee Company 2018). Therefore the company firmly
emphasises on the quality of the products with great care and services.
New mission statement
However, in case of continuing its business operations in the Emirates there must be
some addition to the mission statement of the Starbucks UAE. In this regard, the new mission
statement of the Company will be “Providing the best quality coffee beans with a soothing oasis
environment.”

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External factors
Opportunities
 It is important for every Company to diversify its business operations by introducing new
products that are more attractive than the existing items. In case of the Starbucks UAE, it
will be beneficial if the Company introduces some special items blended with the West
Asian tradition (Bauer, Matzler and Wolf 2016).
 Home delivery can be another possible opportunity for the Starbucks UAE. It can be
stated that through this strategy the company will be able to attract maximum customers
(Koehn et al. 2014).
 Lunch items can be considered as an important factor that will ensure more customers for
the Starbucks Company.
Threats
 In respect to the marketing aspects of Starbucks in UAE, the biggest threat is resembled
with the intense competitiveness in the market. In this regard, Costa Coffee is also
expanding its business in a rapid pace in UAE (Latif et al. 2014).
 It can be stated that the price of coffee beans in Starbucks UAE is too high in compare to
other beverages Companies. It is identified as a major setback for the Starbucks Company
in a long run (Grant 2016).
 Moreover, it can be articulated that the environment and the practice of Starbucks UAE
closely follows the lifestyle and culture of the European countries. However, there is
huge gulf between the tradition and culture of Europe and Asia (Rothaermel 2015).

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PESTEL
Political
The political situation in UAE is quite stable in compare to the other regions of West
Asia. Furthermore, the quality of life style is also high in Emirates. Therefore, it fosters a good
environment for Starbucks to expand the business in UAE (Pangarkar 2015).
Economic
According to the annual report of the Emirates government, it can be argued that the
Emirates economy relies on a good economic support with $668.9 billion amount for the GDP
(Elshelmani 2018). Moreover, the unemployment rate is very low with the percentage of 3.7
(Byun and Dass 2015). In fact, the inflation rate is also restricted into a good percentage of 1.8%.
These figures reflect the healthy economic environment for the company to invest here
(government.ae 2018).
Social
The local community of UAE is also very relaxed and fun loving. However, there are
some customs and taboos in the Emirates society that put some ban on the rights of the women.
In fact, the hostile attitude towards the western culture makes it problematic for the giant
companies based on western countries to invest here (Burmann et al. 2017).
Technological
Technological advancement is another facet that can foster a great deal of boost to the
economy and business irrespective of its industry and sector in UAE (Ng and Tan 2015).
Therefore, it will be beneficial for the Starbucks to ventilate its interests in order to expand
business in the region.

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Environmental
Limited water resource and the air pollution are the leading environmental challenges in
UAE. Based on this understanding, it can be stated that the foreign business companies must
have a framework to prevent the environmental challenges in the region (government.ae 2018).
Therefore, the Starbucks Company is also compelled to deal with the limited water resource
issues specifically.
Legal
The legal system in business is very transparent and direct in UAE and as a result of that
it is helpful for the foreign investors to express their willingness to invest here. As a matter of
fact, according to the “Doing Business 2010 Report” UAE ranked 8th internationally which
proves the better environment for business in the region (Abudhabi.ae 2018).
CPM Matrix
CPM Table
Starbucks Raw Coffee Costa
Critical
success
factors
Weight Rating Score Rating Score Rating Score
Brand
reputation
0.12 4 0.48 3 0.36 1 0.12
Level of
Product
0.09 5 0.45 3 0.27 4 0.36

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integration
Range of
Products
0.10 2 0.20 3 0.30 1 0.10
Successful
new
introduction
s
0.09 3 0.27 4 0.36 5 0.45
Market share 0.1 4 0.4 2 0.2 3 0.3
Sales per
employees
0.05 2 0.10 1 0.05 3 0.15
Low cost
structure
0.03 2 0.60 3 0.09 2 0.06
Variety of
distribution
channels
0.09 3 0.27 1 0.09 4 0.36
Customer
retention
Superior IT
capabilities
0.11 3 0.33 2 0.22 3 0.33
Strong
online
presence
0.15 4 0.60 3 0.45 3 0.45
Successful
promotions
0.07 1 0.07 2 0.14 2 0.14
Total 1.00 - 3.77 - 2.53 - 2.76

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EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Expansion in West Asia 0.3 4 0.12
Potential High growth 0.1 2 0.2
Potential menu 0.03 3 0.09
Economic stability in
UAE
0.03 2 0.06
Threats
High Price of the
Products
0.15 4 0.6
Cultural diversity 0.1 3 0.3
Trademark
infringements
0.06 1 0.06
High competition in the
UAE market
0.08 2 0.16
Lack of alternative
products
0.05 1 0.05
Issues with wastage of
water
0.1 3 0.3
Total 1.00 1.94

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Internal factors
The internal factors of a company are responsible to identify the possible internal
environments that are strictly dealt with the future development of the company (Shayah 2015).
In this regard, the possible internal factors of Starbucks UAE are as follows:
Strength
 The brand image of Starbucks is very high and popular because of the quality and service
they provide is exceptional. Therefore, it can be stated that despite of having issues
regarding the external factors the company can develop its business operations firmly
(Robinson 2016).
 Moreover, the global supply chain of Starbucks is also a key factor that facilitates a
strong support to the continuous supply of raw materials to the production of the
company (Nan, Y. and Li 2017).
 Diversification is also considered to be an important aspect in this regard. The Starbucks
Company is strongly put focus on the product diversification. In fact, in every week the
outlets change their menu based on the customer preferences (Brannon, D.L. and
Wiklund 2016). Furthermore, there are a number of subsidiaries who are helping to
change the course of the business orientation of Starbucks UAE. Therefore, this strategy
generates more profit for the company.

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Weakness
 High price is considered to be a major setback for the Starbucks Coffee Company. In this
respect, it can be argued that the high price strategy makes the target customers limited
and identified as detrimental to maximize profit (Kumar 2016).
 The main popularity of Starbucks is their Coffee. Despite of having different kinds of
products the company does not get much appreciation in this regard. As a matter of fact,
customers are fonder of the coffee products of Starbucks rather than other items provided
by the company (Haskova 2015).
 In addition to this, the products provided by Starbucks UAE are imitable. In fact, there
are other coffee rosters that produce the same quality beverages (Khan and Agha 2015).
IFE Matrix
Key internal factors Weight Rating Weighted score
Strengths
Popular products 0.15 4 0.6
Fair trade 0.15 3 0.45
Strong supply chain
management
0.15 3 0.45
Healthy financial
situation
0.15 4 0.6
Brand image 0.1 4 0.4
Weakness
Loss of brand identity 0.15 3 0.45
High competition 0.05 4 0.2
Environmental issues 0.1 2 0.2

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Total 1.00 - 3.35
Recommendation
There are some recommendations regarding the business operation of Starbucks in
United Arab Emirates. The recommendations are as follows:
 Reduction in the product price will be an effective step to incorporate more customers. In
this regard, it can be argued that the management team of the company should put
emphasis on this issue.
 In this context, the product diversification is a major factor. It can be stated that the
Starbucks Company should expand its business orientation with the addition of providing
more services and food items in the menu list. In fact, initiating new ventures is also a
better strategic step for the company.
 Due to cultural differentiation between Europe and Asia, the Starbucks Company should
implement some initiatives related to the culture and tradition of Asia in order to
successfully develop the business in UAE.
SWOT matrix
Strength Opportunity
 Popular products
 Fair trade
 Strong supply chain management
 Expansion in West Asia
 Potential High growth
 Potential menu

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 Healthy financial situation
 Brand image
 Economic stability in UAE
Weakness Threat
 Loss of brand identity
 High competition
 Environmental issues
 High Price of the Products
 Cultural diversity
 Lack of alternative products
Space matrix
According to the Space Matrix, it can be argued that the Starbucks Company has to implement
an aggressive strategy in terms of short to medium. In this regard, it can be argued that the WO
and WT alternatives are taking extremely defensive or aggressive stance and as a result of that
those elements will be eliminated. In addition to this, the reason behind such position can be

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identified to emulate low pricing strategies of the competitors. Subsequently, a pertinent question
arises with the strategy of the Starbucks Company to sustain its business operation in UAE. The
question is whether Starbucks should go for its business expansion or continue the existing
market shares. Based on this understanding, it can be derived that the matrix rightly points out a
conflict between SO and ST. As a result of that the dimension and evaluation of the SPACE
matrix will be as follows
Internal Position External Position
Axis X
Competitive Advantage (CA) Industry Strength (IS)
(-6 worst, -1 best)
-2 leadership related to the
market
-1 Improper store location
-2 Supply Chain Management
-2 Brand Image
(+1 worst, +6 best)
5 potential growth of the UAE
market
2 Intensive competitive mentality
in the market
2 Bargaining power of the
suppliers
2 bargaining power of the buyers
3 High threat of substitutes
-1.75 Average Score 2.8 Average Score
Total Axis X score: 1.05
Financial Strengths (FS) Environmental Sustainability
(ES)
(+1 worst, +6 best)
4 Steady Growth
5 High chance of profitability
-2 Political development
-3 Economic Development
-2 Social development

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Axis Y
4 Leverage of opportunity
4 flexible activity
5 liquidity
-3 Technological advancement
-3 Environmental progress
-5 Legal proceedings
4.4 Average Score -3 Average score
Total Axis Y Score: 1.4
Competitive Advantage (CA)
As far as the Competitive Advantage is concerned, in the global scale as well as in UAE
Starbucks company has firm position in terms of leadership in market, superior location of the
stores, supply chain management and the brand image.
Financial Strength (FA)
In response to the strategic position of Starbucks in the UAE market, it can be argued that
the financial performance of the company is quite satisfactory. As a matter of fact, the financial
ratio of Starbucks UAE is highly positive and even the profitability and the liquidity ratios are
increasing in a very aspiring trend.
Industry Strength (IS)
Based on the PESTEL analysis it can be derived that the UAE market for coffee and
beverages is very healthy for business. In fact, the government support and legal transparencies
make the scenario more suitable for Starbucks to take an interest in expanding their business in
the far East region.

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Environmental Sustainability (ES)
Despite of having an array of issues regarding the environmental sustainability of
Starbucks, the Company is doing well since its early days. Furthermore, there are innumerable
initiatives taken by Starbucks UAE that will guide the company to earn more profit in future. In
addition to this, the technological advance plays like a catalyst in the process the fosters a
support for the future sustainability of the Company.
Implementation
 For the management team, it will be helpful to add any Asian recipe in the menu list of
the company. However, it will be beneficial to enlist UAE dishes specifically like Kabab
so that the customers will be satisfied highly.
 As far as the marketing team is concerned, reducing the price of the product can be
achieved by decreasing the expenses in the production costs. As a matter of fact, using
energy saving items will be relevant in this context.
 For the R&D team it can be argued that innovation is an important factor on which they
have to be relied. Therefore, preparing delicious items besides serving quality coffee is
highly significant.
Evaluation
It can be argued that the recommendation can be developed on a better management
framework. In this regard, all the stakeholders have to come forward to deal with the crisis. At
first, it is important to conduct a proper marketing strategy. It will help to figure out the target
customers. At the same time, the management has to reduce the price of the product so that the
marketing strategy incorporates maximum number of customers. Besides this, a training program
for the employees is required in order to make the service facility more effective.

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Conclusion
The report tries to figure out all the possible factors that reflect the strength and weakness
of the Starbucks Coffee Company in expanding their business in UAE. At the same time, it can
also be derived that there are some business opportunities and international threats that are
responsible to influence the business operation of Starbucks profoundly. In course of the
discussion, the report includes some management mechanisms in terms of Competitive Profile
Matrix (CPM) and External Factor Evaluation which connotes the possible opportunities for the
Starbucks Company in retaining their business activities in UAE. Moreover, there are some
recommendations that are mentioned after getting a clear picture of the entire business scenario
of Starbucks UAE. Based on this understanding it can be opined that there are some threats that
create problem for the Starbucks UAE. The issues are enlisted as high pricing strategy, lack of
diversification in the production and cultural gulf. Therefore, it requires some initiatives on the
part of the management and the stakeholders to formulate a strong framework which can easily
sort out those problems. In this context, it can be argued that despite of having a number of
issues regarding its business operation, the brand value and brand image of the company are so
strong that they can fix the problems. In this matter, the management has to take some extra
responsibility so that the company get a firm stand in UAE.

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