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Part B - Environmental analysis (Case study analysis)

Complete a value chain analysis, PEST and SWOT for your organisation, plus
analyses of the potential competitors and allies.

Performance objective

In this assessment, you are required to complete analyses of the organisational


environment to develop an understanding of potential competitors and allies, and the
associated risks and benefits.

Specifications You must provide:

 A completed set of analyses (PEST and SWOT).


 A report on existing and potential competitors and allies.
 A report on potential allies and a statement of their alignment with
organisational values (as described in Assessment Part A).

Your assessor will be looking for:

Evidence that you have analysed and identified the needs of organisation, and
reflected these in the reviews you have developed.
Analyzing the internal and external environment
“The Company’s goal is to maintain the Starbucks as one of the most recognized and
respected brands in the world. Authorized store base, to introduce relevant new products in
all its channels, and to explicitly develop new channels of distribution. The Company’s
Global Responsibility strategy and commitments related to coffee and the communities it
cooperates in, and also in accentuation on being an employer of choice, are furthermore key
supplements to its business strategies.”

Internal Situation Analysis of the company


SWOT Analysis

STRENGTHS:
Product Diversification – Starbucks offers its customers an extensive range of coffee
blended premium beverages with various flavors.

Developed brand – Starbucks is one of the universally recognized brands, operating in


more than 58 countries.
The company-operated retail outlets – The company has a wide chain of Starbucks, which
operate across the world, these stores are wholly owned by the company, thus the company
can have full control over its operations.

Globalization – With the increasing globalization, the company has acknowledged an


opportunity to operate its store all across the world, building its span in various countries.

High brand awareness – Starbucks is a strong brand name that is recognized all over the
world. Customers and the general population are aware of the brand. In 2005, a film was
also launched which told the experience of Starbucks, also expressing the ‘Starbucks
Experience”.

WEAKNESSES:

The absence of internal focus – In 2007, the company was losing its market share as the
company lacked the internal focus, thereafter Starbucks was losing its shape.

The lack of Product advancement – With the increasing development and technological
innovation, the company was not prepared to adopt several inventive strategies, it didn’t
intertwine the innovative technology in the perspective of this the company endured major
losses in the year 2007.

Despicable use of resources – The resources of the company are sometimes not utilized to
its fullest.
The high cost of the products – Starbucks offers differentiated products with high esteem,
so it is out of range from common people.

Dissatisfaction with the taste and quality of coffee

OPPORTUNITIES:
Developing business sector for coffee lovers – Coffee is a product that is demanded by a
significant number of people throughout the world. In the past couple of years, according
to research, there has been an extreme augmentation in the enthusiasm for coffee.

Extension of retail operations – Starbucks has expanded itself into retail operations, which
has increased the profitability of the company.

New Products – Starbucks is inventive with its product offering. It offers differentiated
products to its customers.

Brand extension - Along with the coffee blended drinks, the organization has additionally
extended in operations and offers premium coffee beans to its customers. It is increasing its
brand width by expanding its reach. In 2009, Starbucks VIA™ Ready Brew was launched.
This product is marked as solvent simmered coffee beans. “Starbucks VIA™ gives
customers a simple and affordable single-serve option at home and on-the-go. The
organization anticipates broadening the product internationally—both in stores and in
grocery channels” .

Emerging international markets – The organization has augmented its operations in


international market, Kuala Lumpur, China and other Asian nations are a couple of current
destinations where the organization has recently opened in company operated stores.

THREATS:
Competition – as the demand for coffee is increasing worldwide, numerous coffee outlets
are being opened throughout the world, which is giving tough competition to the
organization.

Australia market saturations – The Australian market as well as US market is getting


saturated.

Changing consumer trends – The consumer trends are changing, the organization needs to
adapt to the changing trend so as to survive in the market.

Variations in different quality coffee beans - There are distinctive coffee beans, which are
available in the market. Ranging from a low coffee bean to the premium and roasted coffee
beans each delivering different aroma, flavor and taste.
Economic Conditions – as Starbucks is a premium coffee retail outlet, the organization is
exceptionally influenced by the economic conditions of the market. The downfall in the
economy affects the profitability and sales of the company.
External analysis

COMPETITION:

With the increasing demand for coffee among coffee lovers. The competition faced by
Starbucks has increased. The main competitors of Starbucks are the Specialty coffee shops
and quick service restaurants. With the changing consumer perception and tastes,
consumers pick a coffee shop based on their product quality, the essence of the coffee,
flavor, service, accomodation, environment of the coffee outlet and price.

The coffee bean market of Starbucks likewise faces intense competition from the coffee
makers such as Nescafe which are sold in the general stores.
“The Company’s whole bean coffees, its coffee beverages, and its recently launched
soluble coffee VIA, compete indirectly against every other coffees available. “

PESTLE ANALYSIS

Political Condition:
The political changes as change in government, war, labor discord, terrorism, political
precariousness also influences the productivity of the organization.

Economic Condition:
One of the major external condition that affects the sales of the organization is the
downfall in the economic condition of the nation. If the economic condition of the
organization diminishes than the organization is affected directly as the walk ins of the
customers decreases. The organization faces low traffic, which impacts the sales of the
organization which affects the profitability. Recently, America and the other parts of the
world has faced an economic crisis. This influenced the purchasing power of the people and
people preferred low priced coffee instead of the differentiated expensive product of
Starbucks. The income of an individual directly affects the organization. “Unfavorable
general monetary conditions in the markets in which Starbucks operates that adversely
affect customer spending.” (Annual Report, 2015)

Social Condition:
The ever evolving preferences, demand of the people, incredibly influence the business of
the organization. If there is a change in the labor market the business is tend to be affected.
Lack of customer acknowledgement of new products or price increases necessary to cover
expenses of new products is also one of the condition that may affect the business of the
organization.

Technological Conditions:
Technology and innovation are driving the organization’s in today’s time, the organization
need to stay aware of the progressions and move as needs be so as to survive in the
competitive world. If we see in 2007, Starbucks faced major issues in respect of its
profitability, there was an abatement in the customer traffic. The fundamental reason was
the absence of product technology and development. The organization did not embrace the
innovative machines for preparing coffee, which effected the flavor and aroma of coffee,
and reduced the customer base.

Legal conditions:
Diverse legal taxes and duties imposed by the government of various nations while buying
the coffee affects the business of Starbucks. The other legitimate charges, import duties,
increasing cost, interest rates affect the business.

Strategic Alliance:
Starbucks has strongly focused on strategic alliances, it has aligned with different
companies like Pepsi, Tata group so as to make the presence in the market.