Strategic Analysis of Starbucks: Market, Position, and Challenges

This report offers a comprehensive strategic analysis of Starbucks Corporation, examining its position within the coffee industry. The report begins with a description of Starbucks' business operations, including its product offerings and global presence, followed by an analysis of the industry's struc...Read More

Running head: STRATEGIC MANAGEMENT
STRATEGIC MANAGEMENT
Name of the Student
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Author Note

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a) Description of the business
Starbucks Corporation is an organization which mainly specialises in the production
of coffee and has its origins in Seattle, Washington. The organization was established in the
year 1971 and currently operates more than 28,000 stores all over the world. Starbucks has
thereby been able to become a representative of “second wave coffee”. The different types of
products which are offered by the organization mainly include, cold and hot drinks, micro-
ground instant coffee, tea based items. The new CEO of the organization Howard Schultz is
mainly responsible for the position which has been developed by Starbucks in the industry
(Starbucks.com., 2018).
The discussion will be based on the analysis of the industry in which the organization
operates and strategic position that has been developed as well. The structure of the industry
of operations of Starbucks will also be analysed in the report in detail.
b) Analysing the structure of specific industry
The coffee based industry of USA has shown a growth of 6.4% in the last five years
and has been able to reach the revenue of 16 Billion Dollars in the year 2018. Number of
organizations which operate in the industry has also grown by around 9.4% and employee
growth is around 4.6%. The industry is prone to different types of threats which are based on
the per capita consumption. The per capita based consumption of coffee is thereby expected
to increase in the next few years. The worldwide price of coffee is able to determine the price
of products which are offered by the organizations in the industry (Borrella, Mataix &
Carrasco‐Gallego, 2015).
c) Main source of competitive advantage of the business
The major source of the competitive advantage which has been developed by
Starbucks is the differentiation of products. This strategy is mainly implemented by the

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organization in order to operate in the industry in a sustainable manner. The “Starbucks
Experience” has been achieved by the company which plays a key role in differentiating the
organizations from others in the industry. The differentiation of products offered by
Starbucks to the consumers is an important factor which helps in the development of a
sustainable competitive advantage in the industry. Starbucks has been able to maintain a
competitive advantage with the help of proper levels of innovation within the products
(Candelo et al., 2018). The organization has also provided importance to the changes which
have been seen in the preferences of the consumers. The ambience of the stores of the
organization and design is a major differentiating factor of the organization. The force based
on competitive rivalry which is faced by the organization is however quite high as there are
large number of organizations operating in the industry. The switching based costs in the
industry are also low (Cole & Brown, 2014).
d) Strategic position of the organization in the market
The market segmentation process is implemented Starbucks in order to target the right
group of consumers. The consumers are separated by the organization in such a manner
which is based on their market based capabilities. The location of stores of Starbucks is
related to the strategic position which can be developed by the organization. Development of
the strategic position of Starbucks is based on the competitive position which can be
developed by the company in the industry. The buyers are able to play a key role in the
position which is developed by the organization in the industry. The items which can thereby
substitute the products of Starbucks include, the instant beverages provided by the vending
machines (Engert, Rauter & Baumgartner, 2016). High availability of substitutes is thereby
considered to be a major factor which is able to affect the strategic position of Starbucks. The
power of suppliers is an important force that can affect the strategic position which has been
developed by the organization in the coffee based industry. Suppliers have the power to affect

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the prices which are set for different products which are offered by Starbucks to the
customers. The power which has been developed by the suppliers in the industry is an
important factor which affects the operations of the company (Hill, Jones & Schilling, 2014).
e) Key challenge faced by the organization in the market
Starbucks has faced major levels of issues based on the competition which is present
in the industry. The threats based on substitute of the products faced by the company are also
quite high. The products which are offered to the customers by Starbucks can be substituted
by many other organizations and products which are offered to them. The customers have
many different options that are available in the industry. This is a major factor which can
affect the operations and levels of profitability of Starbucks in a huge manner (Huang et al.,
2017). The challenge which is faced by Starbucks based on its competitors is able to affect
the levels of profitability in a huge manner. Starbucks is facing the challenge or competition
from organization which have recently made an entry in the industry. The costs based on
supply chain of developing a new organization are quite low which is an important facilitator
for the establishment of new companies. This can be considered to be a major factor which
has affected the operations of the organization and its level of profitability as well (Kim &
Jung, 2016).
f) Conclusion
The analysis can be concluded by stating that Starbucks has been able to maintain a
competitive advantage in the industry with the help of its products. The ambience which has
been developed by the organization within the stores is also an important factor which has
affected the operations of Starbucks. The organization is thereby able to operate in industry in
a profitable and sustainable manner. The buyers and suppliers play a key role in the ways by

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which Starbucks is able to maintain its operations in the industry. The growth in the industry
is thereby considered to be a major factor which facilitates the operations of Starbucks.

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g) References
Borrella, I., Mataix, C., & Carrasco‐Gallego, R. (2015). Smallholder farmers in the speciality
coffee industry: opportunities, constraints and the businesses that are making it
possible. IDS Bulletin, 46(3), 29-44.
Candelo, E., Casalegno, C., Civera, C., & Mosca, F. (2018). Turning Farmers into Business
Partners through Value Co-Creation Projects. Insights from the Coffee Supply
Chain. Sustainability, 10(4), 1018.
Cole, N. L., & Brown, K. (2014). The problem with fair trade coffee. Contexts, 13(1), 50-55.
Engert, S., Rauter, R., & Baumgartner, R. J. (2016). Exploring the integration of corporate
sustainability into strategic management: a literature review. Journal of cleaner
production, 112, 2833-2850.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an
integrated approach. Cengage Learning.
Huang, H. W., Wu, S. J., Lu, J. K., Shyu, Y. T., & Wang, C. Y. (2017). Current status and
future trends of high-pressure processing in food industry. Food control, 72, 1-8.
Kim, H., & Jung, O. H. (2016). Determinants of Price in Specialty Coffee by
Consumers. Culinary Science & Hospitality Research, 22(6), 151-159.
Starbucks.com. (2018). Starbucks – The Best Coffee and Espresso Drinks. Retrieved from
https://www.starbucks.com/