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Running Head: BUSINESS STRATEGY

BUSINESS STRATEGY: STARBUCKS CORPORATION


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BUSINESS STRATEGY

CHAPTER ONE: INTRODUCTION


Strategic analysis of a company helps in the identification of problems that exist within
its operations. It also aids in identifying potential that an organization harbors. There are various
factors that influence an organizations operations and result. They are classified into internal and
external factors. The internal factors could be influenced directly from within the firm while the
external ones are rarely in control by an organization. This paper intends to look into the strategic
position of Starbucks Corporation. It begins by giving a quick look into the company and the
coffee industry. It then proceeds to identifying problems within it strategy. The main objective of
this paper is to come up with a proposal to solve the problems that will have been identified, in a
bid to enhance Starbucks productivity and achievement of goals and objectives.
Starbucks Corporation is one of the largest retailers of food products in the world. It,
therefore, serves as a good case study for the fulfillment of our course objectives. Starbucks
commands a great proportion of the coffee and snack industry. The company also has a huge
success story which we would like to transcend by being part of its futuristic success.
The paper explores information, majorly from secondary sources such as the companys
website, peer reviewed articles, books, journals and news websites. The secondary sources are
assessed for credibility and the information obtained from each is related to the paper. The main
setback of our research is the fact that being a multinational corporation, Starbucks stores are
too many for physical visits.

BUSINESS STRATEGY

In the problem identification process, we use economic matrices and models such as
SWOT analysis, PESTEL and Porters five forces analyses. The proposal for the solution also
employs structured models such as the Balanced Scorecard.
CHAPTER TWO: COMPANY AND INDUSTRY OVERVIEW
2.1 Introduction
Starbucks Corporation, a multinational company that was started in Seattle, WA, in 1971
by three entrepreneurs. The company is a premier retailer, marketer and roaster of specialty
coffee globally. The firm employs has around 182,000 people in all its over 19, 500 licensed
stores which have been established in 62 countries (Starbucks Coffee Company, 2014). Their
product mix comprises of handcrafted and roasted high-quality/premium priced teas, coffees, a
number of fresh food products along with other beverages (Starbucks Coffee Company, 2014). In
addition they sell a number of tea and coffee products as well as franchising their own
trademarks via other channels such as licensed stores and groceries. Starbucks also explores
other marketing channels to sell their products it makes mix along with other notable brand
names, which are within the firms portfolio of companies, such as Starbucks VIA, Evolution
Fresh, Seattle, Teavanas Best Coffee, , Tazo, La Boulange, Starbucks Refreshers as well as
Verismo (The Seattle Times, 2014). Starbucks made a total income of $14.89 billion in the
financial year ended September 29th, 2013 (Starbucks Coffee Company, 2014).
2.2 Industry Overview and Analysis
Starbucks primarily competes and operates within the retail snacks and coffee store industry.
The coffee and beverage industry underwent a significant slowdown during 2009 because of the

BUSINESS STRATEGY

financial crisis that altered consumer preferences and tastes, with all the industry revenue in
America going down by 6.6%, equating to $25.9 billion. Earlier on, the industry had 10 years of
consistent growth. The economic crisis led to consumers, spending less on luxuries such as
reducing the number of times they ate out and alternatively opting to buy low-price goods rather
than high-priced coffee drinks because of their small budgets. The industry marketplace is now
projected to develop at an annual rate of 3.9% throughout the next 5 years, with a possible to
achieve $35.1 billion revenues within the US. This growth might possibly be primarily guided by
an improving increase, economy in consumer confidence as well as expansion of what is offered
in menus in the industry. Starbucks is the leading player the industry with a share of the market
of 36.7%, while others like The Dunkin Brands scoop 24.6% along with other competitors like
Tim Hortons, McDonalds, Costa Coffee, among others.
Figure 1: US Snacks and Coffee retail market share

Source: IBIS World Report


2.3 Industry Life Cycle and Share of the Market Concentration:
This marketplace is mature stage and is characterized by medium levels of concentration.
Dunkin and Starbucks Brands make up significantly more than 60% for the share of the market
(Figure 1), providing them with a lot market power in influencing trends in the market. The
industrys structure can be shown in figure 2.

BUSINESS STRATEGY
Figure 2: Industry Structure

Source: IBIS World Report


2.4 Industry Demand Determinants and the Profitability Drivers:
The demand for premium snack and coffee items industry are majorly driven by a variety of
factors such as per capita coffee usage, peoples attitudes towards health, global pricing of
coffee, disposable income, and demographics. This marketplace is highly responsive to the
macroeconomic factors which affect the development in household disposable. Throughout the
global financial crisis, low levels of disposable incomes due to stagnant wages and
unemployment resulted to strain on the companys profit margin.
CHAPTER THREE: PROBLEM IDENTIFICATION
The objective of an environmental analysis, relating to strategic planning, will be
identifying ways in which alterations in the company environment can directly influence a
business. The next paper examines Starbucks external and internal weaknesses, threats,
environment, opportunities, strengths, and trends. Several major expected environmental
changes in addition to their effect on Starbucks throughout the next 10 years will likely be
presented, together with a collection of long-term objectives when it comes to company
(Starbucks Coffee Company, 2014).

BUSINESS STRATEGY

Successful strategic management will depend on thorough and accurate evaluation of an


organizations environment, recognizing internal weaknesses and strengths along with external
threats and opportunities. Additionally, forecasting future trends is crucial to build a definite
feeling of market opportunities and threats.
You will find an expected shift as people move towards taking healthy diet and eating,
and that might be a possible threat to your industry because they will become a little more
conscious of issues associated with obesity and weight. There's been a proactive change as one of
the market players has been subjected to enhance their menus towards more healthy and organic
products.
Starbucks Corporation Internal Analysis
3.1 Core Competences of Starbucks
The major competence of Starbucks corporation has been its ability to effectively
leverage their strong strategies in product differentiation; by providing a premium product
combination of good quality snacks and beverages. The brand equity at Starbucks is made on
selling the best quality coffee among other related products, as well as also by providing each
customer an original Starbucks Experience (Starbucks Coffee Company, 2014), that is
produced by supreme customer support, well-maintained and clean stores reflecting the culture
of the communities for which they operate. This is a critical step in enhancing customer loyalty.
Starbucks other core competence has to do with its human resource management, that adheres to
a values-based method that the relationship with internal and external suppliers, hence
facilitating the easy and successful deployment of the companys business strategy of expanding

BUSINESS STRATEGY

into foreign markets, as well as acquisitions which uphold the companys long term strategic
objective of standing out as the absolute most respected and recognized brands in the field
(Starbucks Coffee Company, 2014).
3.2 Starbucks TOWS Analysis

5 problems of Starbucks
(S1T1) Competition
S1: Starbucks is the number one brand in the coffee house segment which have built an excellent
reputation globally for the quality of products(Global Brand)
T1: Starbucks faces intense competition from both restaurants and other specialty retailers
(Intense competition)
Starbucks face significant and increasing competition in both domestic and international markets.
Global Brand Recognition and Strong Market Position: Starbucks has an important geographical

BUSINESS STRATEGY

presence around the world and keep a 36.7% share of the market in the United States (Figure 1)
and has now its operations running in over 60 countries around the globe. Starbucks can also be
the absolute most recognized brand within the coffeehouse segment and it is ranked 91st within
the best global labels of 2013 (Starbucks Coffee Company, 2014).
Products for the finest quality: they provide the greatest importance to your quality of the
products and steer clear of standardization of the quality even when production output is high.
Location and Aesthetic benefit of its Stores: Starbucks positions its stores in a few of the most
extremely strategic and prime location around the world. They target premium, high-visibility,
high-traffic locations near a number of settings, including university campuses, downtown and
suburban retail office, centers buildings, as well as in off-highway locations and selected rural
areas and over the world. They offer great music, free Wi-Fi, warm atmosphere, high class
service and offer an atmosphere of community meeting spot that enhances the element of the
Starbucks Experience (Starbucks Coffee Company, 2014). The primary try to get this company
will be making the firms stores to be a third place besides work and home (Starbucks Coffee
Company, 2014).
Client base loyalty: Starbucks employs a cult of following status among their consumers and
they have got also implemented programs to push loyalty with all the Starbucks Rewards
programs, Starbucks Card among others. The Starbucks Card is program that delivers
convenience, supports gifting, and boosts the frequency of visits by cardholders to their stores
and it is integrated along with their mobile application.

BUSINESS STRATEGY

Self-Cannibalization by overcrowding: Owing to the high saturation and aggressive expansion


leading to overcrowding within the market, further results into self cannibalization and kills long
lasting growth targets of the company. This might be happening particularly in the United States
of America where Starbucks runs over 8000 stores.
Overdependence in the U.S. market: consistent with self-cannibalization for the United States
market, with 8078 Starbucks, stores generates a big percentage of the total revenue through the
US and that will make it very responsive to prospects for the United States economical growth.
American/European coffee culture clash with this of various countries: Starbucks coffee
culture might not widely accepted in a few countries as an element of their foreign strategies
aimed at expansion.
(S2O1) Business strategy problem
S2: Strong research and development teams are responsible for the technical development of
food and beverage products and new equipment (efficient R&D teams)
O1: Opportunity to expand its international operating segments includes both company-operated
stores and licensed stores (Market expansion)
Starbucks fail to achieve its growth target in a timely manner because its research and
development teams failed to innovate and develop new food and beverage products. Human
Resource Management: The Company is recognized because of its highly-knowledge based
employees. These are the main assets for the company plus they are supplied with great benefits
like retirement accounts, stock option, and an excellent organizational culture. The effective

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human resource management results in great customer services. It had been rated 91st within the
100 best organizations to operate for by Fortune Magazine (Fortune, 2014).
Goodwill among consumers because of Social Responsibly Initiatives: Starbucks stores are
community-friendly, centered on reducing and recycling waste. The company builds goodwill
among the communities where it operates.
(W1O2)Customer relation/ publicity problem
W1: Negative publicity regarding the business practices of licensees.
O2: Rapid development of social media has allowed Starbucks to retain loyal customer and to
build customer relationship
There are lots of reasonable substitute beverages to coffee, that are mainly fruit, tea
juices, water, sodas, energy drinks etc. Pubs and Bars with non/alcoholic beverages can also
replacement for the social connection with Starbucks
Consumers can also make their particular home produced coffee with household premium
coffee makers at a portion of the price for purchasing from premium coffee retailers like
Starbucks.
There are not any switching costs when it comes to consumers for switching to
substitutes, which helps make the threat high. However it is important to remember that industry
leaders like Starbucks are currently attempting to counter this threat by selling coffee machines,
premium coffee packs in super markets but this threat still puts pressure their the margins.

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Starbucks faces fight to restore reputation and to retain customer relation; especially in the
regions that company brand is less well known
(W2T2)
W2: Increases in the cost of production
T2: threat of substitute
With the increasing cost of production, the price of Starbucks products are getting
higher. High pricing which cost not all kind of market could buy Starbucks products.
Customers would easily switch to buy substitute products which include other drink items such
as colas, teas or juices that are sold in retails.
There are lots of reasonable substitute beverages to coffee, that are mainly fruit, tea
juices, water, sodas, energy drinks etc. Pubs and Bars with non/alcoholic beverages can also
replacement for the social connection with Starbucks. Consumers can also make their particular
home produced coffee with household premium coffee makers at a portion of the price for
purchasing from premium coffee retailers like Starbucks.
There are not any switching costs when it comes to consumers for switching to
substitutes, which helps make the threat high. However it is important to remember that industry
leaders like Starbucks are currently attempting to counter this threat by selling coffee machines,
premium coffee packs in super markets but this threat still puts pressure their the margins.
(W3T3) R&D problem
W3: Failure to understand and meet the needs of customer (fail to meet customers need)

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T3: There is increasing consumer awareness of health risks(Trend to healthy food)


Utilization of Technology as well as Mobile Outlets: The company efficiently uses
technology such as its own mobile application titled Starbucks App which is used in both
android and apple softwares. They inject huge sums in investing in technology so as to aid their
growth each year.
Expanding Product mix and its menu offerings: Starbucks has begun to expand what they
are selling mix by getting into the fresh juice and Tea product offerings with a good acquisition
strategy. This supplies significant opportunities for Starbucks.
Declines in general consumer demand for coffee productsis due to the failure of taking
customer into account when designing new beverage and food items, as there is increasing
consumer awareness about the health effects of consuming products contain caffeine, dairy
products, sugar and other compounds.

ENVIRONMENTAL SCANNING: PESTEL ANALYSIS


Regulatory and Political Analysis: Starbucks believes that China might be its number two
market in the field, however the company recently learned, while attempting to expand in Russia,
that regulations and laws, particularly regarding trademarks, require extra attention (Drujinina,
2005).

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Social Analysis: Starbucks faced difficulties in international markets, particularly Israel and
Japan, with sluggish same-store sales and achieving to shut stores during these places where
customers failed to accept Starbucks.
Macroeconomic Analysis: Coffee costs are rising because of production slowdowns in Brazil
and Vietnam, the worlds two largest coffee-producing nations, along with natural disasters.
Growing rapidly poses challenges for Starbucks, because the company tries to generate
consistency from store to save; this can lead to lower income and revenues per employee ratios
that is reflected adversely in employee efficiency. The business attracts good quality employees
featuring its excellent profit sharing and benefits strategy.
Technological Analysis: Improved technology productivity-enhancing innovations (such as
the cultivation of less frost-prone areas, better mechanized harvesting, increased irrigation, and
steam-cleaning technologies that may better mask coffees bitter taste) have raised productivity,
that will put many small coffee growers away from business (Campbell, 2004).
Porters Five Forces Analysis of this Retail Coffee and Snacks Industry:
Threat of the latest Entrants: Moderate
It is easier for one to find an average threat of the latest entrants into the industry because the
barriers to entry are not high enough to deter new competitors to make their way into
marketplace.
Figure 3: Barriers to Entry Checklist

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Source: IBIS World Report


The industrys saturation is moderately high with a monopolistic competition structure.
For brand new entrants, the first investment is certainly not significant as they possibly can
lease equipment, stores etc. at an average amount of investment.
At a localized level, small coffee houses can contend with the likes of Starbucks and Dunkin
Brands since there are no switching costs when it comes to consumers. Even thought its an
aggressive industry, the potential for new entrants to achieve success in the market is moderate.
But this relatively simple entry into the marketplace is usually countered by large incumbent
brands identities like Starbucks who possess achieved economies of scale by lowering cost,
improved efficiency with a big share of the market. You will find a moderately high barrier when
it comes to new entrants because they differentiate themselves from Starbucks product quality,
its prime real property locations, as well as its store ecosystem experience.
The incumbent firms like Starbucks have a bigger scope and scale, yielding them a learning
curve advantage and favorable use of raw material utilizing the relationship they build along with
their suppliers.

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The expected retaliation from well-established companies for brand equity, resources, prime
real property locations and price competition are moderately high, which creates an average
barrier to entry.
Threat of Substitutes: High
There are lots of reasonable substitute beverages to coffee, that are mainly fruit, tea juices,
water, sodas, energy drinks etc. Pubs and Bars with non/alcoholic beverages can also
replacement for the social connection with Starbucks
Consumers can also make their particular home produced coffee with household premium
coffee makers at a portion of the price for purchasing from premium coffee retailers like
Starbucks.
There are not any switching costs when it comes to consumers for switching to substitutes,
which helps make the threat high.
However it is important to remember that industry leaders like Starbucks are currently
attempting to counter this threat by selling coffee machines, premium coffee packs in super
markets but this threat still puts pressure their the margins.
Bargaining Power of Buyers: Moderate to Low Pressure
There are lots of buyers within this industry with no single buyer can demand price
concession.

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It provides vertically differentiated products with a varied consumer base, which will make
relatively low volume purchases, which erodes the buyers power.
And even though there are not any switching costs with a high accessibility to substitute
industry, products leaders like Starbucks prices its product mix with regards to rivals stores with
prevailing market price elasticity and competitive premium pricing.
Consumers have an average sensitivity in premium coffee retailing because they pay a
premium for higher quality products but they are watchful of excessive premium in relation
product quality.
Bargaining Power of Suppliers: Low to Moderate Pressure
The primary inputs into the worth chain of Starbucks is coffee beans and premium Arabica
coffee grown in select regions that are standard inputs, which helps make the price of switching
between substitute suppliers, moderately low.
Starbucks, featuring its scale and size, contains the capacity to make use of its suppliers
however it maintains a reasonable trade certified coffee under its farmer and coffee equity
(C.A.F.E) program that gives its suppliers a reasonable partnership status, which yields them
some moderately, low power (Starbucks Coffee Company, 2014).
The suppliers in the market also pose a low threat of competing against Starbucks by forward
vertical integration, which lowers their power.

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Starbucks also forms an extremely important an element of the suppliers business, due its
scope and size, which will make the effectiveness of the suppliers lower. Given these suppliers,
factors pose a moderately low bargaining power.
Concentration of Competitive Rivalry: High to Moderate
The industry has a monopolistic competition, with Starbucks getting the largest markets share
as well as its closest competitors also having an important share of the market, creating
significant pressure on Starbucks.
Consumers do have a price of switching with other competitors, which crates high intensity in
rivalry.
But its important to remember that Starbucks maintain some competitive advantage because it
differentiates the products it makes with premium services and products, which cause a moderate
amount of intensity in competition.
The marketplace is mature and rate of growth happens to be moderately low which result in
the intensity of competition one of the companies to be moderately high because of them all
looking to increase market shaper from established firms like Starbucks.
This industry do not have over capacity currently and all sorts of these factors play a role in
the intensity among rivals to be moderately high.
Taking a look at the Porters five forces analysis, we could get an aggregate industry analysis that
the strength of forces and also the profitability within the retail snacks and coffee industry are
Moderate.

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CHAPTER FOUR: RECCOMENDATIONS AND SOLUTIONS


Howard Shultz joined Starbucks 10 years after it had been founded in Seattle in 1971. At
that time, you can only buy roasted beans from Starbucks. After a visit to Italy in 1983, Shultz
returned with a vision to carry the Italian coffee bar to America. Obtaining space within the
corner of a shop back in 1984, Shultz slowly built the business one cup at one time. Shultz, not
able to convince the people who own Starbucks to took, expand his idea and supported by
investors opened his very own chain of coffee houses named Il Glornale, opening three stores
within just a year. Starbucks owners chose to sell their stores to Shultz to be able to focus
energy on Peets Coffee, purchased by Starbucks back in 1984. The remainder is history with
Shultz establishing a very good vision when it comes to company to establish Starbucks
because the most respected and recognized brand in the field and also the mission to nurture
and inspire the human being spirit-one person, one cup, and another neighborhood at one time
(Starbucks, 2014). Starbucks success will be the outcome of great leadership, great vision, and
solid strategic planning. An excellent strategic plan hinges on successful implementation, proper
utilization of strategic controls, and fallback contingency plans.
In order to keep the mission going and make the vision realistic, Starbucks needs to focus
on a strategy that eliminates the threats and weaknesses, and enhance their strengths as well as
utilizing their opportunities. This section focuses on the solutions to the aforementioned
problems. It provides a method which formulates strategies, offers practical exercises, puts
measures in place for the purpose of control and evaluation and obtains feedback regarding
progress.

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4.1 Strategy Formulation


Starbucks vision will be to have coffeehouses in almost every neighborhood around the
globe, and can continue steadily to grow by finding and delivering the worlds best coffee to your
worlds best customers without compromising our world-class principles. An interior analysis
shows Starbucks has more strengths than weaknesses, while an external analysis things to several
threats and several obvious opportunities. One of the keys is within deciding on the best
methods of minimize threats and maximize opportunities.
Long Lasting Objectives
Long-term objectives should connect with the requirements and expectations of the
many major stakeholders, including employees, and really should reflect the root reasons behind
running the company (Planware.org, 2005). Because of the above environmental Starbucks,
analysis should adopt the next long-term objectives:
1. Aggressively and profitably grow Starbucks while keeping Starbucks brand recognition and
position because the worlds leading specialty coffee retailer.
2. Offer innovative and new services and products which will enhance employee and customer
experiences.
3. Gain entry into new markets through new distribution channels with strategic acquisitions or
alliances.
Implementing the strategic plan usually takes a Herculean effort, but we possess the right capital
and team in position. Monitoring and measuring results will likely be instrumental in reaching

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our strategic goals. There are Starbucks secret recipe to achieve your goals within the following
strategic plan, so grab a cup of java and enjoy!
Vision Statement
An organizations vision ought to be the dream in which the company desires to go,
exactly what it desires to be. A vision statement may be seemingly unattainable or always just
away from reach, considering that the mission statement will show the way the organization
intends to attain the vision. Starbucks vision harkens back into CEO Howard Shultzs 1983 trip
to Italy, where he witnessed espresso bars on almost every corner, likened to extensions for the
front porch in each neighborhood, and every coffeehouse had bartenders, called baristas, that
has strong bonds along with their customers (Ioannou, 1998). Starbucks, Today operates in
nearly 10,000 locations worldwide and serves over 33 million customers every week (Starbucks
Company Profile, 2005).
Mission Statement
An organizations mission is analogous to a compass, guiding the company to a location
(or vision) which will forever be pursued but never really reached. A mission statement defines
an organizations core purpose or why they exist and will act as a beacon when it comes to
work being carried out. The mission statement ought to be a cross between an unforgettable an
executive and slogan summary.
Figure 4: Mission Statement

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(Starbucks Company Profile, 2005)


Recommended Mission Statement
Values Statement
An organizations values are simply as complex because they are simple, as values are far
more than written slogans or words. Values are developed and displayed by peoples and
organizations behaviors during the context of corporate brand, culture identity, service
standards, codes of conduct, and individuals core ethics
A value is an idea or orientation that a person considers important and correct. Corporate
values represent the typical denominator, in a business as with an organization, or that which
people consider worth striving for within this context. Corporate values determine business

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aspects, policies and methods, all relevant management processes, and the daily cooperation of
employees in the company and/or with customers, suppliers, and contractual partners (Duetsche
Post AG, 2004).
Starbucks SWOT Analysis
In line with the SWOT and environmental Starbucks, analyses can determine where the
way it stacks up resistant to the competition and in the market. Starbucks ought to make good
use of Grand Strategies Cluster Matrix to graphically reveal that Starbucks is within Quadrant 1;
this is really important to know within the strategic analysis phase.
Table 1: Strategies Cluster Matrix

(Fuller & Green, 2005)


Starbucks Grand Strategy Clusters Matrix
Solutions to identified problems

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(W3T3) R&D problem


The solution lies in the utilization of Technology as well as Mobile Outlets as well as
tailor-made products to suit consumers immediate needs. Starbucks culture is regarded as
creativity and innovation. The business is consistently developing exciting new items. It
developed the Starbucks Card which makes a good gift along with giving customers
convenience. The card can also help extend the company. Starbucks mobile app allows
customers to pay and order ahead, avoiding long lines when they go into the store.
(W1O2)Customer relation/ publicity problem
The company ought to build goodwill among the communities where it operates within. It is
organized Corporate Social Responsibility that leads to gaining confidence of the company
among the societies in the global scale.
(S1T1) Competition
Solution: Expanding Product mix and its menu offerings (Lower products price)
Competition within the global coffee marketplace is intense, stemming primarily from
local coffee, restaurants shops, bistros, and street carts. Because the coffee market keeps
growing, it is anticipated that a significant competitor with strong financial backing will go into
the market and compete directly against Starbucks. Maintaining its operational performance and
getting more innovative both in products and services will likely be necessary for Starbucks
to keep its status for the worlds leading specialty coffee retailer (DataMonitor, 2005).
Starbucks has experienced tremendous success and growth, however it cannot remainder
of on its laurels in the event that company would like to continue creating wonderful experiences

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for the value and customers for the shareholders. These three long lasting objectives align with
Starbucks vision, mission, and values, along with maximizing the companys opportunities and
strengths while minimizing its threats and weaknesses.

(S2O1) Business strategy problem


Solution:Human Resource Management pay extra attention on regulatory and political
analysis as well as social analysis

(W2T2)
W2: Increases in the cost of production
T2: threat of substitute
Solution:Diverse suppliers network lower suppliers bargaining power lower production
cost and selling price
Rising dairy and coffee prices, together with supply and demand issues, pose even the
biggest threat to Starbucks future operations. During summer of 2005, Starbucks raised its retail
costs for the very first time in four years; as well, the business is reaching U.S. market saturation.
It is anticipated that U.S. sales will slow throughout the next 3-5 meaning, years Starbucks must
grow its international business significantly. International development in China poses even the
largest chance for Starbucks, as young newly affluent urban personnel are driving the trend of a
caf culture, where businesses for example Starbucks are increasingly sought after.

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Strategic Analysis and Choice


Thus far, we now have analyzed the present situation (environmental analysis) and where
we would like to go (growth, new items, and new distribution channels). It has reached this time
within the strategic plan that Starbucks must ask: How are we likely to employ our resources to
accomplish our goals? (Fuller & Green, 2005). Analyzing and deciding on the best strategic
position means choosing how to handle it, along with what never to do (Porter, 1980).
Starbucks aspire to get at least one of the coffee stores in almost every neighborhood
worldwide. The vision is somewhat, lofty and is not realistically attainable. However, it speaks
about the companys desire to have continued growth. Starbucks ought to assure its stakeholders
that, the firm will advance its phenomenal growth by exploitation of its opportunities and
strengths, while, at the same time, reducing weaknesses as well as possible threats from the
external forces. Even though Starbucks enjoys brand recognition and strong name, the company
must reach to the intended rate of growth without the need of cannibalizing or even saturating the
marketplace.
Recent alliances and acquisitions have been successful. One of the keys is within finding
and taking benefit of additional opportunities to get more acquisitions as well as strategic
alliances in order to ensure deeper market penetration that will stimulate growth. The table below
explains why strategic alliances and acquisitions are important.
Table 2: Strategic Alliances and Acquisitions

Expand the U.S. Market

Broaden the Product Line

Expand into China and

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Eastern Europe
Do market research on U.S.
remote and rural areas
Design products/services to
appeal to this market
Train company resources to
sell in this market
Consider advertising and
promotion
Continue producing high

Do market research on
consumer trends
Introduce hot food and fresh
fruit
Acquire regional coffee
stores
Consider advertising and
promotion
Continue producing high

quality coffee product

quality coffee product

Increase market share

Increase market share

Do market research on China


and Eastern European
countries
Trade shows
Create retail operations from
scratch
Consider advertising and
promotion
Continue producing high
quality coffee product
Maintain U.S. market share

(Fuller & Green, 2005)


Strategic Choice
4.2 Practical Exercise
In 2008, almost all Starbucks store designers were stationed during the companys
Seattle headquarters. People designing a shop for Chicago or Houston may have never held it's
place in either of these cities. While Starbucks primary objective remains to determine the
business because the most respected and recognized brand in the field, Starbucks new long-term
objective will be design stores which have a nearby flavor. The intent will be result in the

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Starbucks brand a little less brand-y through customization. Last November Starbucks opened
an innovative new store in Switzerland this is certainly really customized when it comes to
location. In partnership with Swiss train company SBB, they converted a double-decker train car
to create a moving store for commuters. Rather than the customer going to the shop, the shop
relates to them plus they will enjoy a good beverage as they commute. The recession of 2008
and also the closing of 600 stores in that period resulted in the rethinking of design. The
objective will be design stores which are strongly related to your local aesthetics and also the
local culture (Stinson, 2014).
Functional Tactics
Production and Operations
Starbucks typically clusters stores in high-traffic, high visibility areas in the market. The
business has the capacity to vary the dimensions of stores letting it locate in a number of settings.
Based on location and size for the store, product mix may differ. Starbucks continues to
concentrate on improving efficiency. One notable was happens to be decreasing the wide range
of U.S. dairy suppliers from 65 right down to less than 25.
Marketing
Positioning the products it makes on an easy Starbucks, plane focus remains on
experience and quality. Starbucks image is key to its success. Starbucks does not sell coffee, it
sells the feeling. People started to Starbucks not only for your coffee, but in addition for the
songs, the atmosphere, to read through, to analyze, and also to socialize. An integral part of

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Starbucks successful promotion of their image happens to be focusing on local advertising


instead of during the national level.
Research and Development
Starbucks culture is regarded as creativity and innovation. The business is consistently
developing exciting new items. It developed the Starbucks Card which makes a good gift along
with giving customers convenience. The card can also help extend the company. Starbucks
mobile app allows customers to pay and order ahead, avoiding long lines when they go into the
store.
Management
It is Starbucks firm belief its workers are certainly one of its most significant assets. Its
good quality staff permits it to maintain an aggressive advantage. Starbucks continues to
maintain an empowering culture, keeping featuring its informal organizational chart, avoiding a
hierarchal organizational structure. Starbucks continues to encourage employees to think within
the products it sharing and serves common goals.
Financial and Accounting
With current assets of $5.47 billion and current liabilities of $5.38 billion, Starbucks
quick ratio is lower than one, indicating it offers not a problem paying its current obligations
(Starbucks, 2013).
Table 3: Financial Position

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(Starbucks, 2013)
Table 4: Starbucks Corporation Fiscal 2013 Annual Report

Breakeven Analysis
Starbucks
Amounts shown in U.S. dollars
Sales
Sales price per unit
Sales volume per period (units in
millions)
Total Sales (millions)

3.65
3,014
$11,001

Variable
Costs
Commission per unit
Direct material per unit
Shipping per unit
Supplies per unit
Other variable costs per unit

1.40

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Variable costs per unit


Total Variable Costs (millions)

1.40

Unit contribution margin


Gross Margin (millions)

2.25

Fixed Costs Per Period


Administrative costs
Insurance
Property tax
Rent
Other fixed costs (millions)
Total Fixed Costs per period

$4,219

$6,781

4,423.10

(millions)

$4,423

Net Profit (Loss) in millions

$2,358

Results:
Breakeven Point (units in millions):
(Starbucks, 2013)

1,966

4.3 Evaluation and Control


This plan hinges on proper controls and implementation with Starbucks being ready to
help make adjustments as necessary. Each department will likely be accountable for making use
of the right functional tactics to place the generalized strategy into specific action to be able to
obtain Starbucks objectives. Starbucks ought to continue to treat its employees well because
happy employees lead to happy customers who cannot wait to return. In the long run all strategy
ought to be geared towards repeat business since it is repeat business that has kept and will
continue to keep Starbucks atop the coffee shop industry.

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Strategic Control
Once Starbucks has implemented their strategic results, plan for the strategy needs to be
measured and evaluated, making changes as required. This helps Starbucks guarantee that the
program is found on track in the long run. Performance standards are set, the specific
performance is measured, and any action required to achieve success is taken
Starbucks ought to utilize a company scorecard to evaluate, measure, and control
strategic programs and initiatives. Metrics are developed in line with the priorities for the
strategic plan, which offers key business drivers and criteria for metrics that managers utilize.
Processes are then designed to collect information strongly related to these metrics and
minimize it to numerical form for storage, display, and analysis. Decision makers examine the
final results of numerous measured strategies and processes and track the leads to guide the
business and offer feedback (Arveson, 2008).
The scorecard acts as a link between their operational and strategic plans along with
communicating and clarifying their values and mission. The management ought to review and
develops scorecards for every business unit before distributing the scorecard to the entire
company (Bateman-Snell, 2003). Strategic reviews are conducted annually at Starbucks, along
with employee surveys to guage the way the company is performing in accordance with their
strategic plan (Bateman-Snell, 2003).
Contingency Planning
Should revenue exceed Starbucks, projections should take the additional profit into a year
later and make use of this in marketing efforts. Additionally, the senior management team

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should examine all aspects of operation to find out what exactly is being carried out well and
what triggered the success to be able to build upon it in adjacent years. Should revenues fall
noticeably in short supply of projection, senior management ought to isolate the areas in which
the problems lie.
Starbucks also should continue to communication with customers to remain up to date
with who they really are, what they need, and ways to sell to them. When tastes Starbucks,
change may find how to differentiate itself by innovation to help make new exciting beverages.
Change Management
Starbucks has been around the industry for a few decades and it is undoubtedly the
industry leader. Still, as evidenced by events during the last few market, years conditions do
change. When coupled with continued Starbucks, globalization might discover the necessity to
reform its strategy. Starbucks has experienced the opportunity to study from its expansion into
different areas of the world along with from the acquisitions of other company. These
expansions and acquisitions have now been transformative. Learning from a transformative
expertise in a melting pot may be good at creating new leadership once Shultz decides to step
down again. Preferences and tastes change constantly. Starbucks must monitor alterations in
customer behavior and market conditions (Bennis & Thomas, 2002).
4.4 Feedback
The present information method is able to providing sufficient feedback on
implementation activities and gratification since it is designed to expedite reporting information.
It quickly collects and edits data, and then summarizes results, and become able to modify and

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correct errors promptly. In line with the ability for the current information system, it may also
measure strategic factors.
Plan Goals and Implementation
The strategic plan goals are two-fold. First, it establishes the roadmap based on how
Starbucks will achieve its vision of getting a coffeehouse in almost every neighborhood around
the globe, and second, it can help Starbucks produce fundamental actions and decisions that
shape and guide what a business is, exactly what it does, and why it will it, with a concentrate on
the future (Bryson, 1988). Starbucks strategic plan stresses the significance of making
decisions which will make sure the company will have the ability to successfully and proactively
react to alterations in environmental surroundings, with a close look toward making certain that
all objectives and strategies are communicated externally to stakeholders, along with internally
to your organization.
With Starbucks vision, mission, values, objectives, and strategic alternatives chosen, we
currently concentrate on perhaps the absolute most challenging aspect: how exactly to
implement them. While there are lots of discrete tasks that needs to be performed to make usage
of the strategic plan, the good thing is that Howard Shultz, Starbucks chairman, has recently
built a business which has proven the company can hold out of the strategic alternatives
centering on growth. Both the organizational culture and organizational capability for executing
strategy have been in place. One of the keys will likely be in selecting a great team which
includes all amounts of management, assigning the right roles, and letting the group result in the
right strategic moves. Kathleen Eisenhardt, professor of strategy and organization at Stanford
University, believes that if you start with all the right people, you are able to more readily adjust

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to a fast-changing world considering that the right people are already self-motivated and
adaptable (Fuller & Green, 2005).
With all the strategic initiatives, plan, and team in position, Starbucks needs to build an
implementation agenda which includes specific goals and intent. Specific measurable objectives
that needs to be achieved at specified intervals ought to be defined. Specific programs that have
to be implemented to be able to attain the strategies ought to be spelled out, and really should
include operational budgets, objectives, and schedules for every program. Each program need to
have triggers (what may go wrong) and contingency plans (what's going to Starbucks do
differently if it happened).
Each strategic program need to have its very own implementation plan, clearly showing
who, what, when, where, why, how, and resources needed. Each program need to have its very
own objectives and realistic timetables, along with communication plan directed toward the
affected shareholders, stakeholders, and employees.
CHAPTER FIVE: CONCLUSION
A strategic plan should identify the fundamental direction and concept of a business.
Starbucks vision is to have coffeehouses in almost every neighborhood, while their mission is
going to be the premier purveyor of the best coffee in the field and continue steadily to grow.
The companys six guiding principles outline the values that Starbucks hinges on to satisfy their
mission and vision. The completed environmental analysis forces the business to check
internally and externally and think critically regarding their, strengths, weaknesses, , and
opportunities. This sets the stage for creating long lasting objectives, or a roadmap based on how

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Starbucks is certainly going to navigate through environmental surroundings. It has reached this
time within the strategic planning procedure that Starbucks analyzes different strategies to
accomplish their long lasting objectives, and also the company makes choices about which
strategies to follow.
When the strategic choices were made, a strategy is made based on how to really attain
the chosen strategies, and an implementation plan was designed to include contingencies and
triggers. An in depth financial forecast is made in line with the chosen strategies; this can
provide many metrics to guide Starbucks in evaluating the potency of their strategies. Critical
success factors are analyzed, making certain that they align with the entire strategic plan. The
last step is within setting controls or performance standards, measuring results, and following
through according to those findings.
Starbucks grew from a little company within the Pacific Northwest selling coffee, to a
very large company selling beverages around the globe. Strategic planning was, and still is, a
vital ingredient in achieving Starbucks success, and can continue being an important tool in the
event that company will be achieve its vision of getting a Starbucks coffeehouse in almost every
neighborhood around the globe.

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