Starbucks Corporation in the Global Market
Depending on the theories and materials you studied during this mini semester, analyze the case study of Starbucks Corporation.
Suggested areas you need to discuss:
The nature of the external and internal environment surrounding Starbucks.
Analyze Starbucks strategic Vision, Mission, and Core Values.
What is Starbuck’s strategic approach to gain competitive advantage
Analyze the overall Starbuck’s strategy using Porter’s Five Forces Model Competition
Choose one country that Starbucks’s considered to be strong and conduct a PASTEL analysis for that country.
Choose another country that Starbucks does not operate in at this time and suggest a strategic entry plan to operate in that country.
1.The nature of the external and internal environment surrounding Starbucks.
External environment consist of the following
i)Political/ Legal environment
Starbucks imports coffee beans from different countries and each of these countries has its own tariff and customs regulations. In addition, any political upheavals in the countries where Starbucks imports its coffee beans would greatly interfere with the company’s operations.
ii)Economic environment
The global financial crisis of 2008 greatly affected the operations of Starbucks in various countries. The recession resulted in an increase in the operational costs of the company The coffee industry is demand- driven and when economic conditions are harsh, consumers treat coffee as a luxury and this affects sales
iii)Socio-cultural environment
Consumers across the world are increasingly demanding fair practices, and this has seen many firms change their operating practices in order to accommodate these demands.The company has also had to adjust its product offerings in order to meet the growing demands of the rising number of educated and health conscious consumers.
iv)
Technological Segment
Advances in technology affect product innovation, product services, customers’ store experience, and the way organizations are able to interact with other business partners. Technological improvements can enable a company to market its products directly to their target market using emails, text messages, and social network sites as well Throughthe use of technology, Starbucks has managed to change its product mix to suit new market segment
v)
Competitors
The two main competitors of Starbucks are MacDonald’s McCafe and Dunkin Donuts. On the one hand, McCafe maintains a low price strategy o its products in Burritt, 2007. On the other hand, Dunkin Donuts offers customers a variety of coffee flavors to choose from, in addition to its emphasis on quality in Dicarlo, 2004.
Customers
Starbucks provides interpersonal services to its customers in whereby there is high contact between baristas, staff, and customers (Miller, 2010).. The company has tried to change the formula of some of its products to suit the tastes and preferences of customers in certain markets The management at Starbucks recognizes the important role played by the staff and Baristas, which is why they offer rewards and incentives in recognition of their exemplary work.
Internal Analysis
Products
Starbucks boasts of a wide variety of over 30 coffee products that customers can choose from. The company is always introducing novel products in the market to suit the changing demands, tastes and preferences of its growing customer base.
Price
Starbucks’ products are priced at a premium owing to the perceived upscale image in the eyes of the consumers. In this case, Starbucks uses high pricing to differentiate itself from the rest of the competition
Place
Most Starbucks coffee stores are located in neighborhoods with high traffic. The company’s coffee stores are also located in different large chains. The “third place” concept as practiced by Starbucks has helped to turn its stores into an ideal uenvironment away from home where customers can relax, surf the internet, or listen to music
Promotion
One of the fundamental requirements for successful promotion is to facilitate friendly and smooth interactions among the company’s representatives and the market without compromising the efficiency manner in which a company is able to offer its services to the target market.
The success of any service firm largely depends on the ability of the organisation in question to target, acquire, get hold of, and retain keep the ‘right’ customers. Good organisations are mainly based on cultivating customer retention relationships, as opposed to the acquisition/transaction mentality. Starbucks is one such organisation.
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2.Analyze Starbucks strategic Vision, Mission, and Core Values.
Mission-Starbucks Coffee’s corporate mission is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” This mission statement reflects what the company does to keep its business running. It is clear that target consumers are given emphasis in this corporate mission. The following components of Starbucks’s corporate mission statement influence strategic management in growing the business:
- Inspire and nurture the human spirit
- One person, one cup and one neighborhood at a time
Starbucks Coffee “inspires and nurtures the human spirit,” starting with its employees. To address this component of its mission statement, the company maintains a small company culture, where rapport and warmth are important. In this way, the corporate mission is a direct determinant of Starbucks coffee corporate cultures.
vission-
Starbucks Coffee’s corporate vision is “to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.” This corporate vision statement has the following components relevant to the business:
- Premier purveyance
- Finest coffee in the world
- Uncompromising principles
- Growth
uncompromising principles” component of its corporate vision statement. These principles include ethical conduct and a warm culture. The company maintains these principles, especially during Howard Schultz’s leadership as CEO. Also, the company satisfies the “growth” component of its vision statement, as manifested in the continuing global expansion of the business through new Starbucks locations. The company now has more than 28,000 locations around the world. Thus, the business effectively addresses its corporate vision.
values--
With their partners or customers they play a vital role to maintain their business these values:
- Creating a culture of warmth and belonging, where everyone is welcome.
- Acting with courage, challenging the status quo and finding new ways to grow our company and each other.
- Being present, connecting with transparency, dignity and respect.
- Delivering our very best in all we do, holding ourselves accountable for results.
they are performance driven, through the lens of humanity.
link-. http://panmore.com/starbucks
3.What is Starbuck’s strategic approach to gain competitive advantage
Strategy
Starbucks strategy is a simple saturate the market. By spreading out the outlet location it makes one store not cut the profits of another store. Usually, the stores would be placed on locations based on demographics, traffic patterns, the location of competitors as well as the location of its own stores.
However, the Starbucks strategy went against the grain. Instead of following the trend, CEO Howard Schultz had a different idea. He decided that the Starbucks strategy would be to blanket an area completely. Siding matter about one store cut the profits of another store, the Starbucks strategy focused on heavily increasing the foot traffic in one specific part of town. They think this will reduce the company’s delivery and risk, also the customer doesn’t need to stay in the waiting line for a long time. Schultz knew that his Starbucks strategy was a risk, but it was one he was willing to take.
For the result of this strategy. Starbucks quickly achieve market dominance. They have more than 20 million customers per week, this is the highest frequency of visiting customers. Since the company went public, sales have risen roughly 20% each year. Even when the rest of the economy seems to be in a slump, loyal patrons keep returning to Starbucks for their regular cup of Joe.
Starbucks using many kind of entry mode for expanding its business to another country. These include joint ventures, licensing, and wholly owned subsidiaries. Starbucks gain advantage of providing access to local partner knowledge by using joint venture. Starbucks also shares development costs and risks with Sazaby in addition. Starbucks use licensing way to enter the Middle East because with this mode it allow Starbucks to minimize capital outlays for marketing research and decrease local market expertise. And for the wholly owned subsidiaries it offers technology protection and ability to engage in the global strategic coordination.
now a days they became international Because of its high growth in major reason, Starbucks initiate international expansion. Starbucks adopted a strategy that characterizing through low local responsiveness and price considerisation. In the 1996 Starbucks start to grown in Japan through joint venture, and then it expand to Europe and the Middle East using the same way.
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4.Analyze the overall Starbuck’s strategy using Porter’s Five Forces Model Competition
The strong force of competition is the combined effect of the external factors identified in this Five Forces analysis. In this regard, the most significant forces for Starbucks Coffee Company’s strategic consideration are competitive rivalry, the bargaining power of customers, and the threat of substitutes. Still, the other forces also influence the company’s business performance. In summary, the following are the intensities of the Five Forces in Starbucks Corporation’s industry environment:
- Competitive rivalry or competition – Strong Force
- Bargaining power of buyers or customers – Strong Force
- Bargaining power of suppliers – Weak Force
- Threat of substitutes or substitution – Strong Force
- Threat of new entrants or new entry – Moderate Force
Competitive Rivalry or Competition with Starbucks Coffee Company (Strong Force)
tarbucks faces the strong force of 6competitive rivalry In the Five Forces analysis model, this force pertains to the influence of competitors on each other and the industry environment. In this case of Starbucks Coffee Company, the following external factors contribute to the strong force of competition:
- Large number of firms (strong force)
- Moderate variety of firms (moderate force)
- Low switching costs (strong force)
The large number of firms is an external factor that intensifies competitive rivalry. Starbucks Corporation has many competitors of different sizes. In relation, the population of competitors is moderate varied in terms of specialty and strategy.
Bargaining Power of Starbucks’s Customers/Buyers (Strong Force)
Starbucks Coffee Company experiences the strong force or bargaining power of buyers or customers. In Porter’s Five Forces analysis model, this force is based on the influence of individual customers and groups of customers on the international business environment. In Starbucks Corporation’s case, the following external factors contribute to the strong bargaining power of customers:
- Low switching costs (strong force)
- High substitute availability (strong force)
- Small size of individual buyers (weak force)
there are many suppliers of coffee and tea around the world. This external factor limits the influence of individual suppliers. The overall effect of the external factors in this component of the Five Forces analysis is the weak force or bargaining power of suppliers on the company
Bargaining Power of Starbucks Coffee’s Suppliers (Weak Force)
this force as the influence that suppliers have on the company and its industry environment. The following external factors contribute to the weak bargaining power of suppliers on Starbucks Corporation:
- Moderate size of individual suppliers (moderate force)
- High variety of suppliers (weak force)
- Large overall supply (weak force)
This external factor limits the influence of individual suppliers. The overall effect of the external factors in this component of the Five Forces analysis is the weak force or bargaining power of suppliers on the company.
Threat of Substitution or Substitutes to Starbucks Products (Strong Force)
this force pertains to the impact of substitute goods or services on the business and its external environment. The following external factors contribute to the strong threat of substitution against Starbucks:
- High substitute availability (strong force)
- Low switching costs (strong force)
- High affordability of substitute products (strong force)
it is easy for consumers to buy substitutes instead of Starbucks products. Moreover, many of these substitutes are affordable and cost less than the company’s products. Thus, this Porter’s Five Forces analysis of Starbucks Coffee Company determines that the threat of substitutes is a high-priority strategic management concern.
Threat of New Entrants or New Entry (Moderate Force)
this force refers to the effect of new players or new entrants in the industry. In this business case, the following external factors contribute to the moderate threat of new entrants against Starbucks:
- Moderate cost of doing business (moderate force)
- Moderate supply chain cost (moderate force)
- High cost of brand development (weak force)
Also, brand development typically requires years to reach the level of strength of the Starbucks brand. The combination of these external factors imposes the moderate force or threat of substitutes against the company. Thus, this Five Forces analysis shows that the threat of substitution is a significant but limited issue in Starbucks Corporation’s strategic management.
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5.Choose one country that Starbucks’s considered to be strong and conduct a PASTEL analysis for that country.
Starbucks is to be considered strong as in American multinational chains of coffeehouses and roasters reserves headquartered in Seattle Washington. As the world's largest largest coffeehouses chain, Starbucks is seen to be the main representation of the United States' second wave of coffee culture.
As of early 2020, the company operates over 30,000 locations worldwide in more than 70 countries. Starbucks locations serve hot and cold drinks, whole-bean coffee, microground instant coffee known as VIA, Many stores sell pre-packaged food items, pastries, hot and cold sandwiches, and drinkware including mugs and tumblers. There are also several select "Starbucks Evenings" locations which offer beer, wine, and appetizers. Starbucks-brand coffee, ice cream, and bottled cold coffee drinks are also sold at grocery stores in the United States and other countries. In 2010, the company began its Starbucks Reserve program for single-origin coffees and high-end coffee shops. It planned to open 1,000 Reserve coffee shops by the end of 2017
Pastel analysis-
The aspect of the PESTLE analysis model presents mostly opportunities for Starbucks Coffee
Economic Factors Important to Starbucks Coffee
This component of the PESTEL analysis model refers to the economic conditions and changes significant to business. Starbucks faces the following economic external factors in its remote or macro-environment:
- High growth of developing countries (opportunity)
- Declining unemployment rates (opportunity)
- Rising labor cost in suppliers’ countries (threat)
The high economic growth of developing countries and the declining unemployment rates create opportunities for Starbucks to gain more revenues from various markets around the world.
Social/Sociocultural Factors Influencing Starbucks Coffee’s External Environment
This aspect of the PESTEL analysis framework shows the social conditions and trends influencing consumers and business. Starbucks must address the following social/sociocultural external factors in its remote/macro-environment:
- Growing coffee culture (opportunity)
- Increasing health consciousness (opportunity)
- Growing middle class (opportunity)
Starbucks has opportunity to increase its revenues based on increasing demand for specialty coffee, which is due to a growing coffee culture and a growing middle class around the world. Also, the company has the opportunity to widen its array of more healthful products to attract health-conscious consumers to Starbucks cafés. Thus, all the identified external factors in this component of the PESTEl analysis model present opportunities for Starbucks Coffee.
Technological Factors in Starbucks Coffee’s Business
In this part of the PESTEL analysis model, technologies and related trends are identified. Starbucks experiences the following technological external factors in its remote/macro-environment:
- Rising mobile purchases (opportunity)
- Technology transfers to coffee farmers (opportunity)
- Rising availability of specialty coffee machines for home use (threat)
Starbucks has the opportunity to improve its mobile apps and linked services to gain more revenues through mobile purchases. The company also has the opportunity to improve its supply chain efficiency based on new technologies coffee farmers use. However, the rising availability of home-use specialty coffee machines is a threat to Starbucks because it increases the availability of substitutes to Starbucks products.
Ecological/Environmental Factors
This component of the PESTEL analysis model identifies the effects of ecological or environmental conditions and changes on business. Starbucks faces the following ecological/environmental external factors in its remote or macro-environment:
- Business sustainability trend (opportunity)
- Growing popular support for responsible sourcing (opportunity)
- Growing popular support for environmentally friendly products (opportunity)
The business sustainability trend focuses on business processes that ensure minimal environmental impact. In relation, responsible sourcing emphasizes corporate social responsibility in the supply chain. Starbucks has opportunities to enhance its performance in these areas. Note that the company already has responsible sourcing policies. Starbucks also has the opportunity to offer more of its products in recyclable packaging.
Legal Factors
The legal factors in the PESTEL analysis model are the laws and regulations on business. Starbucks must address the following legal external factors in its remote/macro-environment:
- Product safety regulations (opportunity)
- GMO regulations outside the United States (opportunity)
- Increasing employment regulation (threat)
Starbucks has opportunities to improve its performance by satisfying product safety regulations and regulations on ingredients from genetically modified organisms (GMOs). Starbucks is already performing well in these aspects. However, increasing employment regulation, especially in developing countries, threatens Starbucks Coffee’s access to the labor market. This external factor also impacts Starbucks through increased spending for human resources. Thus, in this aspect of the PESTEl analysis model, the identified external factors present mostly opportunities for Starbucks Coffee.
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6.Choose another country that Starbucks does not operate in at this time and suggest a strategic entry plan to operate in that country.
well as we know still there are many countries don't have Starbucks,The farthest we can get from a Starbucks on Earth is off the coast of South Africa. With the exception of the three locations in Morocco and 18 in Egypt, there are no Starbucks in continental Africa,and also in Baltic State there isn't Starbucks
if we start Starbucks by considering the above mentioned one country such as BALTIC STATE, we must first realize that Starbucks does not sell independent. They give license to like minded business man to open licensed Starbucks store along with the other business that they run. It is very important to select the position where we want to have such a Starbucks store.
strategic entry plan to operate Starbucks Globalisation and technology as the two core macro environmental elements of business settings have imposed and aided companies’ international expansion strategies and tactics. As such, success beyond the national borders of a corporation is not only an indicator of success, it has ultimately become necessary for survival in a competitive market carefully evaluate all factors influencing the decision regarding the area of expansion and the entry mode of the company in the new region
i) factors, country specific factors and market specific factors. Although their categorisation of factors is valid in the strategic management of internationalisation of firms
ii)quality of the products or operations of coffee shops that trade under their company name is significantly lower than in the case of joint ventures or wholly-owned subsidiaries.
iii) Starbucks, are able to determine the best mix of entry modes specific to the regions where the expansion is taking place in order to become global leaders
iv)need to take into account any cultural aspects of the countries where their subsidiaries are. As such, Starbucks adapts their food and beverage offerings in their cafés in order to suit their customers’ taste
Conclusions
The company that reinvented the way in which people enjoy their traditional cup of coffee, Starbucks has conquered the globe in less than half a century,focus is on creating long-lasting relationships with consumers in every geographical region, seeking and rewarding the loyalty of the brand’s
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