STRATEGIC MANAGEMENT ANALYSIS SID# 1031489
1.1 Strategic Management Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. This definition captures two main elements that go to the heart of the field of strategic management. First, the strategic management of an organization entails three ongoing processes: analysis, decisions, and actions. That is, strategic management is concerned with the analysis of strategic goals (vision, mission, and strategic objectives) along with the analysis of the internal and external environment of the organization. Next, leaders must make strategic decisions. These decisions, broadly speaking, address two basic questions: What industries should we compete in? How should we compete in those industries? These questions also often involve an organization’s domestic as well as its international operations. And last are the actions that must be taken. Decisions are of little use, of course, unless they are acted on. Firms must take the necessary actions to implement their strategies. This requires leaders to allocate the necessary resources and to design the organization to bring the intended strategies to reality. As we will see in the next section, this is an ongoing, evolving process that requires a great deal of interaction among these three processes. Second, the essence of strategic management is the study of why some firms outperform others. Thus, managers need to determine how a firm is to compete so that it can obtain advantages that are sustainable over a lengthy period of time. That means focusing on two fundamental questions: How should we compete in order to create competitive advantages in the marketplace? For example, managers need to determine if the firm should position itself as the low-cost producer, or develop products and services that are unique which will enable the firm to charge premium prices-or some combination of both.
1.2 The Importance of Strategic Management Strategic management has gained importance in recent years. During last century organizations focused on long-term planning. Long-term planning supposed that external and internal environment will remain stable for long period of time and thus they made plans for long duration. Today it is clear to the managers and entrepreneur’s that environment can change at any point of time and their plans should follow a strategy that includes contingency planning too. This assignment will take a look into the life span of the coffee company Starbucks and how Strategic Management is implemented within the organization. The assignment will go into indebt detail of how Starbucks came about, how they market their product, how successful they have been since launching their product and what techniques where used in the process. The chosen country for this research is the United States of America.
STRATEGIC MANAGEMENT ANALYSIS SID# 1031489
2.0 Company Background
2.1 History of Starbucks The history of Starbucks starts back in 1971 when the first store opened in Seattle, Washington. Jerry Baldwin, Zev Siegl and Gordon Bowker got the idea from Alfred Peet (of Peet's Coffee fame). The store initially sold just coffee beans and coffee making equipment rather than the drinks they have become so famous. After about 10 years, Howard Schultz was hired as Director of Retail Operations and came to the conclusion that they should be selling drinks rather than just beans and machines. He couldn't convince the owners, so he went his own way to start the Il Giornale chain of coffee bars in 1986. The next year, Baldwin and the others sold Starbucks to Schultz who then renamed his Il Giornale locations to Starbucks and quickly started to expand. After conquering Seattle, the chain spreads across the United States and then internationally. The first location outside of North America was in Tokyo and they still have a sizable presence in Japan today. Over the course of its life, Starbucks has bought or acquired companies like Peet's and Seattle's Best Coffee, and took over many locations of Coffee People and Diedrich Coffee stores. The company’s logo was initially a wood-cut style image of a 2-tailed mermaid or siren, but it has undergone a lot of changes over time. The original design had the mermaid with bare breasts, but the modern version has become more stylized and her hair covers her body. The name comes from Captain Ahab's first mate in the classic novel Moby Dick, who was named Starbuck. Aside from the ubiquitous coffee shops, they also own the Hear Music label and Ethos bottled water. Today, Starbucks has expanded to more than 17,000 stores in 55 countries around the world. Their biggest presence is still in the United States, with 11,000 locations. You can find a Starbucks in such diverse nations as Chile, Romania, Bahrain and Bulgaria. The most recent expansion was to Budapest in June of 2010.
2.2 Starbucks Mission Statement “To inspire and nurture the human spirit one person, one cup and one neighborhood at a time”.
2.3 Starbucks Vision Statement “To establish Starbucks as the premier provider of the finest coffee in the world while maintain our uncompromising principles while we grow” 2
Competitors Pricing. Changes in lifestyles of population. Income Distribution. Trading agreements. Buying power of consumers. Employment Law. Working Condition/Safety. Consumer preferences. International Stability. Health Consciousness. Globalisation. IT development New Material and Processes Software Upgrade Rate of Technology change Introduction of policies and 3 Critical success factor. this is an integral part of environmental scanning. Opportunity Threat Threat Threat Threat Threat Critical success factor Opportunity Opportunity Threat Opportunity Opportunity Opportunity Opportunity Threat Opportunity Opportunity Critical success factor Opportunity Threat Opportunity Critical success factor Critical success factor Critical success factor Opportunity Opportunity Opportunity Opportunity Threat
. Lifecycles and Porters 5 forces.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 Task 1
3. Location. Standard of Education/Skills. Developments in agriculture. Age Distribution. Economic Growth. Deregulation. Political stability. Changing family patterns. Taxation Policy. These activities include the PESTLE. Local currency exchange rates. Biotechnological developments.0 Market Environment Analysis
To critically analyse different external forces that can directly or indirectly affect an organization we use three different types of marketing research. Local economic environment within each market. Emergence of innovative technology.1 PESTLE Analysis of Starbucks in the USA Political Industry-specific rules and regulations. Attitude to work.
Global warming and other environmental issues in a global level
3.1 Political: Taxation policy High taxation imposed on farmers in those countries producing the coffee bean will usually mean Starbucks pay a higher price for the coffee they purchase. Many have struggled to make a living so have given up. since 9/11. 2003) Tanzania's Minister of Finance harmonized and rationalized local government taxation to boost rural productivity of the coffee bean. trade relations have been adversely affected between the USA and some other countries. Coffee quotas and price controls ended. International trade regulations/tariffs Trade issues will affect Starbucks predominantly when exporting and importing goods. Recently (June 13. Since the deregulation farmers have suffered and their earnings have dropped. Any fluctuations in taxation levels in the industry are almost certainly ultimately passed on to the consumer.
Deregulation A decade ago. Introduction of tougher customs and trade regulations. Licensing regulations related to the industry. the USA pulled out of the ICA (international Coffee Agreement) that set export quotas for producing nations and kept the price of coffee fairly stable. Environmental disasters in countries producing coffee beans. This extra charge can turn a bargain into a rip-off.
. Also. When another country's government imposes a tariff it not only results in an efficiency loss for Starbucks but large income transfers can become inconsistent with equity. Environmental Environmental rules and regulations.1.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 regulations by health authorities about caffeine production and consumption. Tax was lowered for these s mall holder' farmers and this saving will have been passed on to purchasers of coffee like Starbucks.
Business costs will rise for Starbucks through inflation. It is measured using the Retail Price Index (RPI) in the UK.1. their share of the market. menu costs will rise as Starbucks have to create new price lists. resulting in a drop in Starbucks supply levels and probably profits.
Employment law A reduction in licensing and permit costs in those countries producing the coffee bean for Starbucks would lower production costs for farmers. Consumer confidence in products can also fall if the economic 'mood' is low Inflation rates Inflation is a condition of increasing prices.
Competitors pricing Competitive pricing from competitors can start a price war for Starbucks that can drive down profits and profit margins as they attempt to increase. If the world market is in a slump it is not usually the ideal time for a business to look at grand expansion. which will mean a decrease in coffee produced. Exchange rates are forever changing throughout the world in today's market. This saving can be passed along to the customer. or at least maintain. 5
. Consumer incomes tend to fall in periods of negative growth leaving less disposable income. Also. The aftermath of 9/11 was an example of an economic downturn that affected the world market.
3. A firm that borrows L1000 during an inflation period will pay back less in 'real terms' as the value of this money will decline over the period. This saving would in turn be passed onto the purchaser.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 The international economy must be brought into consideration as it can affect Starbucks' sales and markets. If the value of the currency falls in the country of a coffee supplier this enables Starbucks to get more for their $ or L when importing the goods to their country.
Globalisation Globalisation of the coffee market has meant farmers of the bean now earn less money than they used to. uncertainty is created when making decisions not least because inflation redistributes money from lenders to borrowers. as will shoe-leather costs as they shop around for new 'best prices' of materials.2 Economic: Economic Growth If growth is low in the nation of location of Starbucks then sales may also fall.
Exchange rates Starbucks are affected by exchange rates when dealing with international trade. This can result in a decrease of people willing to do it for a living.
Starbucks is presently aiming it's product at young people but maybe these views will change in the long-term as the market proportion for young people diminishes.1. Coffee is more of a luxury product so it is those people/places with the most amount of disposable income to spend that should be targeted the most intensely.
Age distribution Research shows the average age of the population is getting older and birth rates are stagnating. and staff turnover would be high. will be accustomed to high standards. young single professionals etc.3 Social: Income distribution Where income is distributed is another factor that Starbucks should look at as this also demonstrates the ideal place to aim their marketing or to locate their stores. service is of the highest order and health and safety issues are fully addressed. Starbucks can use this to their advantage and promote the shop as a place where people can meet up and so it will mean that they will get a larger amount of people in their stores at this time of the day.
Location Transport needs to the premises must be considered for both staff and customers.g. A large number of workers in large cities now go out for their lunch rather than use an internal canteen. The most profitable way forward may be to widen their target market despite the risk of alienating present customers. Easy access is vital to ensure there is no excuse for staff to arrive late or for customers not to visit.
Working conditions/safety Those people with the most disposable income.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 3.
Standard of education/skills When Starbucks are deciding upon new premises they must look at the standards of education and skills locally. training arduous.
Attitude to work Starbucks would not want to locate to an area where the local population have a poor attitude to work. or at least the potential to learn that comes with a good education. They must be sure there are people who live there with sufficient skills to ensure successful operation of the business. Recruitment would be difficult. Attitudes to work are important in other ways.
. e. Starbucks must ensure it's shops are clean and comfortable.
starbucks. which have been associated with coffee in the past. and even more so to try to stay ahead of competitors. Starbucks launch edits first-generation e-commerce Web site in 1998. Starbucks upgraded to Microsoft Commerce Server 2000. as a large number of their customers are looking for healthy alternatives to cakes and biscuits.
New materials and processes Developments in the technology of coffee making machines and the computers that Starbucks use to run their cash registers will enable their staff to work more quickly and efficiently.
3. much higher than. This will prevent customers from having to wait around for long periods thus improving customer relations along with increasing the customer base.
Software upgrades In the short-term. scalability and performance have improved. Starbucks can use this information when deciding the additional products to sell. This will result in customers being served quicker and create the potential to serve more customers in a day.
. Starbucks decided the site needed a major upgrade to enable new functionality and prepare for long-term growth. thirty years ago. as this is a trend that is occurring at the moment in western societies. Much of this is down to the Internet and the speed with which information can be communicated around the globe.1.4 Technological: IT development Starbucks is always looking to develop and improve its Internet facilities.
Rate of technological change The rate of technological change in the current world market is high. In late 1999. analyze site data. As a result. as well as coffee.NET Enterprise Servers. This applies to the improving the accessibility of their website (www.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 Health consciousness Good health and foodstuffs associated with healthy living are important I today's market place. and deliver new features to the market in the shortest time possible. To achieve these goals. Starbucks must identify the most efficient software upgrades to use to keep up with the competition. and the company now has the tools it needs to profile and target customers. one of the key Microsoft . say.com) and also improving the speed and quality of the service provided on the shop floor. Starbucks will need to invest heavily just to standstill in their ever expanding and developing market.
This would mean that they would have unfair advantage over other companies in the same market. It would be wise though to enforce a universally high standard of health and safety throughout all it's shops to maintain a good global image and ensure all laws are abided by.
Health and Safety regulations Starbucks may find these regulations are not as stringent or well enforced in certain countries. Some may have a Sabbath day. Starbucks should consider these factors when deciding on relocation.g.
Monopolies commission If Starbucks consider expanding their operations further to control an even larger percentage of the market than they already have they will have to consider the possibility of breaking monopolies legislation as they may have a share of the market that is too large. as certain areas of land may be protected or unsuitable. some may have a limit on the number of hours an employee may work per week. They need to ensure they are not in violation of e.1. by not maintaining high standards they will be liable for a large amount of civil cases as it is a legal requirement for them to enable that their staff and customers are safe when they are in their stores..
Land use Starbucks may have to abide by local planning regulations when building shops or altering purchased sites. certain countries impose a tariff that has to be paid when goods are imported/exported so this must be taken into account. Also.5 Legal Trade and product restrictions Starbucks need to be aware of the trade laws in the various countries they occupy and do business with.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 3.
. all will have varying levels of minimum wage. CC (back then the MMC) block BskyB attempted takeover of Manchester United in 1999]. Also. religious laws.g. The Competition Commission are in place to try and prevent these situations occurring [e.
Employment law Each country has varying employment laws. All matters would be addressed by the local government. This would mean that they could benefit from economies of scale and would also be able to charge prices that were not competitive in the market and get away with it due to the lack of competition.
3. As of now Starbucks is in the Maturity stage because of their level of success over the past few years and the large amount of income they also earned in the past years. Brand image and customer bases are often irreconcilably tarnished due to the actions of these groups.6 Environmental Pollution problems Starbucks customers create a lot of waste as they often leave the shop with their cup of coffee and then dispose of it in the street. Certain other materials can be very harmful to the natural environment. Starbucks doesn’t look like it’s going to be slowing down anytime soon and it is only going to get bigger in time.
Planning permissions Planning permission may not be granted if Starbucks wish to build in an area that could be harmful to the environment. If they do not follow these laws they may find themselves being sanctioned.1. The land may be protected.
Environmental pressure groups Starbucks should be aware of the physical and influential power of groups such as Greenpeace and Friends of the Earth.
Work disposal Starbucks need to carefully consider the methods in which they dispose of their waste as there are strict laws in most countries to ensure a firm trading in their country disposes of the waste that is created in their business in a specific and efficient way. The condition in which a product is sold (advertising. which not only affects them financially but also tarnishes the reputation of the brand name. saturation) changes over time and must be managed as it moves through its succession of stages.
.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 3. Any violation of animal or environmental rights by a company is usually followed by a swift and attention-drawing protest from one of the groups. The packaging for this cup must be carefully considered to make it as biologically degradable as possible. as most of the waste created will bear the logo of Starbucks.1 Product Life Cycle Defined Product life-cycle management (or PLCM) is the succession of strategies used by business management as a product goes through its life-cycle.2.2 Product life cycle 3.
Porter of Harvard Business School in 1979.3 Porters 5 Forces Porter's five forces analysis is a framework for industry analysis and business strategy development formed by Michael E.
3. the abnormal profit rate will tend towards zero (perfect competition). Attractiveness in this context refers to the overall industry profitability. A very unattractive industry would be one approaching "pure competition". It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. The 10
. This results in many new entrants. in which available profits for all firms are driven to normal profit.3. which eventually will decrease profitability for all firms in the industry.1 Threat of new competition Profitable markets that yield high returns will attract new firms. Unless the entry of new firms can be blocked by incumbents.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489
thus. However. which had the caffeine inherent in specialty coffee.
3. Competitors like Pepsi and Coca-Cola offered beverages.3. In the case of Starbucks customers have a lot of influence over the prices and menu presented by Starbucks. p. This is why Starbucks needs to reinvent itself constantly.. when there are few substitutes. labor.3.
3. This is why Starbucks needs to keep their consumers happy by keeping their prices low and product quality at a high standard. charge excessively 11
. components. and services (such as expertise) to the firm can be a source of power over the firm. 24).
3.2 Threat of substitute products or services The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. 1998 p.4 Bargaining power of suppliers The bargaining power of suppliers is also described as the market of inputs. 7) Starbucks can experience a loss in both profit and customer. If consumers decide that Starbucks coffees and treats are too expensive and decide to cut back on the amount they consume for the year this will affect the profit and therefore cause a loss for Starbucks as well as cause them to reduce prices which will still affect profit within the organization. Suppliers of raw materials. 2006). (Porter. Note that this should not be confused with competitors' similar products but entirely different ones instead. their might still be loyal consumers but if the product offered by the competitor or competitors satisfy consumer wants and needs this can affect Starbucks and may even cause the franchise to be put out of business. there existed large differences in taste and the demographic makeup of consumers between the two products. at significantly lower prices (Quelch.g.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 primary deterrents to new entrants into any industry are the barriers to entry. bargain for higher-quality products or more services. 1998.3 Bargaining power of customers (buyers) The bargaining power of customers is also described as the force of the buyer’s bargaining power is proportional to the ability of buyers to force down prices. Consumers have a habit of wanting to try new products and services and if it’s cheaper and the quality is better they quickly branch over and this poses a threat for many companies.3. Suppliers may refuse to work with the firm. and pit rival organizations against one another (Porter. The higher the barriers to entry are within any given industry the smaller the threat of new entrants to that industry. consumers were unlikely to directly substitute coffee for caffeinated soft drinks or vice versa. or. If substitute occurs Starbucks can and will see a decrease in sales. For example. e.
giving them very little collective bargaining power. Green Mountain Coffee Roasters Coffee Bean and Tea Leaf Costa Coffee (London) Peet's Coffee and Tea Caribou Coffee
.3. (Lee. the Pacific Rim and East Africa.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 high prices for unique resources. Although Starbucks aren’t really competing with any large competitors there are still those coffee shops that sell the same quality of coffee as Starbucks these are the threats which Starbucks has to prepare for in the long run. the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. this can cause Starbucks to either go out of business in the US or any other country that they operate in or it can do damage to Starbucks in terms of making a good profit. (Lee. 2007). these farms were located in Latin America. This is why organizations need to keep their suppliers happy in order to keep consumers happy and also to remain successful within the market.
3. Although Starbucks is as successful as it is it can still be affected by any one of these threats of competitive rivalry. with no unionization. cups or anything else they supply to Starbucks in order for Starbucks to make a profit they will have to elevate the prices on menu items and this could cause a problem for consumers. Starbucks Competitors are. They might see it as paying too much and therefore would cut back or stop buying and this would cause Starbucks great loss. 2007).5 Intensity of competitive rivalry For most industries. These farms were numerous and unrelated to one another. If Starbucks suppliers were to either rise the prices on the beans. The suppliers of Arabica beans were mostly small to medium-sized family owned farms and typically sold their crops to processors through local markets. Primarily.
Through achieving these factors companies could insure competitive performance for the organization. that will be enjoyed by all. Perks Offer wireless Internet. only offer it for a two-hour stretch unless there is another purchase. Offer entertainment on the weekends. The products must be created in the same manner every time to assure consistency. Customers must feel wanted and well cared for. After you are in business for a time. Of course. Don't close your doors at 2p.
Staff Hire conscientious employees with positive attitudes. sandwiches. Offer prepaid gift cards. stay open until 9 pm and even later on Fridays and Saturdays. such as Sundays. Punch their card every time they purchase a coffee drink. relaxed atmosphere. rework your menu to eliminate items that don't sell well. Add a comfortable couch along with bistro-type tables and chairs.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 3. when there is little evening traffic cut hours to reflect the needs of the café. wraps and soups make the difference between keeping your customers in the café. they get one free coffee drink. Be sure the café is spotless inside and out. if there are particular days. The basis of the modern café is the coffee or espresso. That means trying different beans and learning how to make espresso properly.
. Get a liquor license so you can serve wine and specialty beers in the evening. staff and perks. After so many punches. Be sure to overlap employee work schedules. Stay open later in the day. Give your frequent customers frequent drink cards. even if it is just an open-microphone night that costs you no money. atmosphere. you may find you will lose those who check their email or conduct business during their coffee break or lunch. If you don't offer your customers internet access.. make sure your coffee taste good. Restructure the menu to feature the best-selling products Atmosphere Create a welcoming. Serve food. Frequent other cafes or coffee houses and make notes about what you like and don't like. If you are concerned about loafers who sit for four hours using your Wi-Fi. they must follow procedures laid out in the company manual. You need choices that are delicious but don't require that you hire an expensive chef. Other times. offer gentle music from a stereo system. On the other hand. Before you do anything else. while sipping on the same coffee drink. or satellite radio.4 Starbucks Critical Success Factors Main aspects of Starbucks critical success factors defined using (Lei decker and Bruno. 1984) key sources are the product.m. more than just pastries and cookies. so there is seamless transfer of staff. Healthy salads. Product Taste your own product.
business systems and relationships with business partners. storage containers and other accessories.0 Starbucks Strategic Analysis
4. any vehicles they own for transporting goods and all the equipment that is used to create the cup of coffee (or pastry etc). coffee grinders. debtors & creditors. skills and adaptability of the workers at Starbucks.
4.1. and suppliers of money (e. Practically all resources fall into one of four categories: Physical. Financial Resources: These are the capital. foodstuffs.3 Human Resources The human resources are the knowledge.4 Intellectual capital These are the intangible/immeasurable resources of Starbucks.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 Task B
4. In January 2004 the company opened their 8000th store (www.g.2 Physical resources The physical resources of Starbucks are the shops that they own.1. coffee mugs. shareholders) of Starbucks. Staff who work to their potential in these areas often become a company's 'most valuable asset'. teas. Some of this capital includes varieties of whole coffee beans.1. the founder of Starbucks. filters.Starbucks. Financial or Intellectual capital. Human.1Republic Resource Audit The strategic capability of any company is underpinned by the resources available to it. customer databases.
4. Those resources that are younger and in better condition are deemed more useful to Starbucks. In 2002 Starbucks had 5689 outlets around the world. believes every member of staff plays an equal part in the 'customer experience' regardless of whether they be CEO or waiter. patents. One of the few ways Starbucks can protect this intangible information is to ensure employees sign confidentiality agreements to protect any leaks of knowledge to competitors. coffee-making equipment.1. Obviously for Starbucks the less debt they are in. the more positive their resource audit looks. All these can contain great value and when a business is purchased these values fall under the price-tag marked 'goodwill'. Schultz.com)
4. Starbucks have a lot of working capital tied up in the business. This is the information captured in brands.1 Resources 4. cash. which at the time was still increasing at a 'breakneck speed' and at the end of the 1990's the company was opening an average 2 stores per day.
support activities can be used to obtain or increase competitive edge in the marketplace. The Value System. Each instruction for the development of the product is detailed and explained at each stage of the value system. It follows the production of the service/product from raw material stage right through to the customer purchase. SUPPLIER VALUE CHAINS FIRM VALUE CHAINS CHANNEL VALUE CHAINS BUYER VALUE CHAINS
4.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 4.2 Starbucks Value System The value system is the inter-organisational links that are vital in the creation of the product or service of a company.1 Suppliers Value Chain
As it is seen from the figure above in value-chain analysis the business activities are divided into two categories: primary activities and support activities. whereas.2. 15
. The primary activities directly deal with the creation of products or services.
Accordingly.1. Starbucks does not heavily invest in marketing relying instead on the word-of-mouth achieved through the high quality of products and high level of customer services. For Starbucks it would be coffee beans and raw food items. Accordingly. ensuring the consistency of the quality of products and offering a high level of customer experience in general.87). establishing strategic relationships with suppliers and organizing the supply-chain management .1. For instance. with the introduction of computerized coffee roasters the consistent taste of Starbucks coffee was ensured and this has contributed to the level of customer retention for the company.2. accounting.
4. whereas 8139 stores operate on the basis of license (Starbucks Company Profile. in UK Starbucks staff is entitled to free drinks during the shift. the company staffs are encouraged to go to great lengths in order to ensure the high level of customer satisfaction. occasional marketing activities initiated by the company involve sampling of new products that are usually conducted within areas nearby the stores. Marketing and Sales. a wide range of training and development programs are available for them and they are motivated by both. This involves purchasing items that are needed for the production of final products or offering services. Specifically. machinery etc. The outbound logistics for Starbucks has traditionally involved selling its products through its stores without any intermediates. Starbucks inbound logistics involve company agents choosing coffee beans producers mainly in African continent. Outbound logistics. starting from recent a range of Starbucks products such as 3-in-1 coffees in sachets are being sold through a set of leading supermarkets. Service.2 Primary activities Inbound logistics. Currently there are 8870 companyoperated stores globally. p.
. as well as fixed assets such as buildings. Technology development. 2011). as well as. However. Providing superior level of customer services is one of the Starbucks’ main objectives and it is driven from the mission statement of the company. 2009. Starbucks relies on technology for cost-saving purposes. Human Resource Management. planning. tangible and intangible incentives. Starbucks operations are conducted in more than 50 countries in two ways: direct operation of the stores by the company and licensing. The workforce is duly perceived to be the most valuable resource by Starbucks. Procurement.2. Operations. online. However. finance. Starbucks infrastructure includes a range of general support activities such as “management.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 4. communication the standards related to the quality of coffee beans. legal support and government relations that are required to support the work of the entire value-chain” (Hitt et al.1 Support Activities Infrastructure.
4. the coffee is consistently up to a high standard. dominant market shares. the menu is broad and varied enough to cater for most tastes. a company has 99% market share and is open to attack from every new player. Customer value can be increased by Starbucks by ensuring the store environment is how it should be. e. however. value for money is achieved and most of all the service is exemplary. Every organization also has some weakness.3 Starbucks SWOT Every organization has some strength. a good manager will understand the whole process and how to manage each individual link and relationship to maximise customer value.4 Buyers Value Chain Customer value chains' illustrate how value is added by the end buyers of the product. In other cases.
.2 Firm Value Chain The 'firm value chain' is the most important to a manager because that is their company.used to obtain premium retailing sites -or foreign suppliers. In some cases. for instance. for example. for example. be they retail estate agents . it is a matter of perspective. How badly these weaknesses will affect the company is a matter of analysis. It is important to note that companies that are in a bad position also have strengths. it is a matter of perspective. All organizations have some opportunities that they can gain from.3 Channel Value Chain The 'channel value chain' deals with the outlets Starbucks uses to enable consumers to purchase their product. Managers should also need to learn the whole value system because most of the cost and value creation occurs in the supply and distribution chains. In other cases. Starbucks should know in detail all information regarding any business partners they are involved with. Starbucks should know everything that is sold under their banner and also the sales methods used to customers. this is obvious. also have weaknesses. It is important to note that companies that are extremely competent in what they do. say for example. In some cases this is obvious. Through training and research and development all these factors are achievable and maintainable for Starbucks and should ensure a bright and prosperous future. Identifying hidden opportunities is the mark of an astute analyst. Whether these strengths are adequate is an issue for analysis.2.2. etc.
4. They should know the location of every store along with its surrounding area so it can generate an idea of the surrounding customer demographics.g.who can take advantage of market conditions. young professionals.
4. a company is very small and hence has the ability to move fast. students.2. These could range from diversification to sale of operations. a stricter regulatory environment.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 4.
Or they could be external. 4. Valued and motivated employees: low employee turnover Good Relationship with coffee suppliers Not a Franchise Coffee industry market-leader Globalised
4. developed brand. other caffeine products. Consumer trends toward more healthy ways and away from caffeine Expansion into retail operations Technological advances Finding new distribution channels. International Stores High Visibility Locations to attract customers.US Coffee Saturated Market by 2004 Coffee price volatility in developing countries Poorly treated farmers struggling to make a living in those countries supplying thecoffee beans negative publicity. delivery Launch new products Further international market expansion Asia etc. other coffee shops. trademarks. i.4 Threat Competition: restaurants.Brand Extension
.1 Strength 4.e. such as lower priced international Competition. baked goods.. and patents Company Operated Retail Stores.3. Distribution Agreements. websites.3.3 Opportunity 4.Price: expensive Excellent product diversification: coffee. cds.3.3. street carts. These could be internal. and etc Established logo.2 Weakness Ever increasing number of competitors in growing market Clustering of too many shops in a small area: self cannibalization Cross Functional Management.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 No organization is immune to threats. copyrights. such as falling productivity. supermarkets.
business. the amount of income generated by Starbucks with in the US alone is said to be 4.
. re-igniting the emotional attachment with customers and making foundational changes for the long term. 'Starbucks is committed to a role of environmental leadership in all facets of our business”
Weaknesses Starbucks has a reputation for new product development and creativity. in order to spread business risk. The organization is defendant on a main competitive advantage. Starbucks value chain helps the company to match the right products and solutions to consumer’s specific needs.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 Task C
5. They are focused on improving the current state of the U. The organization has strong ethical values and an ethical mission statement as follows. 5. The company is a respected employer that values its workforce. It is often argued that they need to look for a portfolio of countries. earning in excess of $600 million in 2004.8 billion plus cups of coffee per year.1 Strategic fit At present Starbucks is the number one leading in the coffee industry.3 SWOT Analysis Strengths Starbucks Corporation is a very profitable organization.0 Strategic Fit Analysis
5. The organization has a strong presence in the United States of America with more than three quarters of their cafes located in the home market.S. It has almost 9000 cafes in almost 40 countries
Starbucks was one of the Fortune Top 100 Companies to Work For in 2005. the retail of coffee. Starbucks first online community which takes the Starbucks experience outside the store and enables customers to play a role in shaping the company’s future. It is a global coffee brand built upon a reputation for fine products and services. However. Then leading the company’s’ strategy and development efforts and finally concentrating on worldwide corporate marketing activities: 5.2 Business Activities Starbucks currently employs strategic goals that can be broken down into four major categories. The launch of MyStarbucksIdea. they remain vulnerable to the possibility that their innovation may falter over time.The company generated revenue of more than $5000 million in the same year. Starbucks also introduced the first phase of a Starbucks Card Rewards program.com. rewarding registered cardholders and providing unique new benefits when using their cards in Starbucks stores. This could make them slow to diversify into other sectors should the need arise.
5 Recommended Option On the basis of all the research and evidence consulted for these three strategic decisions. at the end of the day.4 Future Strategic Options Having analysed the external and internal forces of Starbucks it is now possible to generate three possible future strategic decisions.
.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 Opportunities Starbucks are very good at taking advantage of opportunities. or whether another type of beverage or leisure activity will replace coffee in the future? Starbucks are exposed to rises in the cost of coffee and dairy products. In 2004 the company created a CD-burning service in their Santa Monica (California USA) cafe with Hewlett Packard. where customers create their own music CD. These are Diversification. The company has the opportunity to expand its global operations. and strength of brand is often the key factor in whether a growth strategy is a success or failure. It also seems this decision has the most undiscovered potential for Starbucks to exploit. such as Fair Trade products. Starbucks' success has led to the market entry of many competitors and copycat brands that pose potential threats
5. Seattle in 1971. the researcher inclined to suggest Expansion would be the most profitable and successful venture to undertake. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge. Co-branding with other manufacturers of food and drink.
5. and brand franchising to manufacturers of other goods and services both have potential. Mergers and Expansion. The prospects for this plan look good and. Since its conception in Pike Place Market. Threats
Who knows if the market for coffee will grow and stay in favor with customers. New products and services that can be retailed in their cafes. Starbucks are a strong brand.
the expected moves of rivals are all designed to keep up with Starbucks.
. The researcher discovered that Starbucks is taking a strong stand in the coffee industry and initiating promising strategic and environmental goals. The Starbucks mission is to nurture the human spirit of everyone around the globe by offering the finest coffee. customer service aptitude. An analysis utilizing Porter’s five-forces model outlining competitive pressures will show that the coffee industry is able to provide for attractive profits by firms in the industry. Today Starbucks serves as a model that many other successful rivals try to emulate or improve on. Starbucks does this through a decentralized leadership style that emphasizes lower level decision making and information sharing to promote product innovation and customer service. act local expansion strategy. Starbucks is a strong corporation that is in a growing industry. innovates products that are in demand and profitable. Starbucks is powered by their continual product innovation. This is due largely through the efforts and vision of Howard Schultz. They are the only firm in this position. Most other firms offer moderate or few product offerings at a lower price point. His success and leadership of the industry has been compared to what Ray Kroc did to McDonald’s and the fast food industry. Starbucks may have started from the humble beginnings of three friends that liked high quality. selects convenient locations.0 Conclusion
Overall. This coupled with the forces that drive change in the industry result in a net positive force that makes the industry attractive to businesses. tea. It is also securing coffee supplies from India as well as China in order to keep its costs under control. As Starbucks is in the strategic group position of power. and continually looks to conquer new markets and market share ahead of rivals. The overall competitive pressures are moderate and firms can be successful but they will have to be efficient and effective in the strategies that they undertake or they risk being removed from the industry by consumers. Starbucks enjoys a favorable position in the strategic group that it is in. and successfully select locations. Starbucks has been able to build its brand image and market power while in this position which has yielded annual profits. The customer service is a key component to the organizational culture of rewarding and treating employees as partners in the business. high quality product with a wide breadth of product offerings. and food products in a friendly and inviting atmosphere that serves as a home away from home. Starbucks also enjoys critical know how and experience in the key success factors that the coffee industry demands of successful firms. The structure of Starbucks is one of geographical business units that allow Starbucks to enter into any market and achieve the think local. No firms have been able to successfully produce new products that meet market demand in as convenient locations as Starbucks has been able to offer. Starbucks keenly utilizes technology to enhance customer experience. Coffee and/or tea are consumed globally by most of the population. premium roasted coffee it has since turned into a leader in the coffee industry. Starbucks has a high priced. ability to expand globally.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489
market with a declining market share as a result from intensified rivalry in the marketplace. This will serve to further differentiate Starbucks from rivals and will also open new customer bases for the new products. The second objective will be to expand globally into emerging economic markets using a franchising approach. By implementing both of these strategic objectives Starbucks will continue to be the leader in the coffee industry and further enhance its brand power and market position. These financial ratio increases have positioned Starbucks in a greater financial situation. Starbucks achieves this by utilizing its human capital and expertise to constantly strive for excellence in product innovation.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489 Starbucks is able to leverage its resources. This weakness can be overcome by utilizing Starbucks’s strong finances to realize the present opportunities to expand into emerging markets.S. to create competitive capabilities and core competencies that allow for strategy execution. Furthermore. The weakness of Starbucks is an over reliance on a saturated U. The SWOT analysis of Starbucks reveals that the strength of Starbucks lies within their strong financial performance based on their retail store operations. tangible and intangible.
. Starbucks is able to internally fund strategic initiatives from free cash flow produced from sound financial performance. Starbucks will be able to create revenue streams via franchise fees while the markets mature and retail revenues increase. To realize the present opportunities Starbucks will need to implement and execute two critical objectives. The first is to continue to be an industry leader in product innovation. Starbucks’s financial ratios have increased over the last three years due partially to a recovered general economy and partially to the return of Howard Schultz to the leadership position in the company.
com/article_print?SB118851606386114020.html http://online. (2006. A1.wsj.L. from Wall Street Journal: A. (2007. quality teas. At Starbucks. Van Houtte.0 Recommendation
http://online. November 15). Different Brew: Eyeing a Billion Tea Drinkers. Too Many.html Adamy. from Wall Street Journal:
.com/Adamy.vanhoutte.wsj. Van Houtte-fine coffee.STRATEGIC MANAGEMENT ANALYSIS SID# 1031489
7. Wall Street Journal. Starbucks Shifts More Executives. Its Big Challenge: Creating A New Taste for Coffee. p. J. January 12). J. J. (2008. (2005). Wooing the 'Little Emperors'. November 29).com/article/SB119508847922393547. Too Quick?. filtered water. Adamy. Starbucks Pours It On in China. And Charging Top Prices. from About Van Houtte: http://www.
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