Running Head: STARBUCKS

Starbucks Business Report

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Table of Contents

Introduction......................................................................................................................................3
Part 1: External Environmental Analysis........................................................................................4
PESTLE Analysis........................................................................................................................5
Political Factors........................................................................................................................5
Economic Factors.....................................................................................................................6
Social/Sociocultural Factors.....................................................................................................6
Technological Factors..............................................................................................................7
Legal Factors............................................................................................................................7
Environmental Factors.............................................................................................................8
Internal Environment Analysis........................................................................................................8
SWOT Analysis...........................................................................................................................9
Strengths...................................................................................................................................9
Weaknesses............................................................................................................................10
Opportunities..........................................................................................................................10
Threats....................................................................................................................................11
Recommendations..........................................................................................................................12
Part 2: Starbucks’ Stakeholder Report..........................................................................................13
References......................................................................................................................................16
Appendices....................................................................................................................................18
Appendix A: List of Stakeholders..............................................................................................18
Appendix B: VRIO Analysis.....................................................................................................18
Appendix C: Products of Starbucks...........................................................................................20
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Starbucks Business Report

Introduction

Starbucks is an organisation that is established on environmental responsibility, customer

satisfaction, and high quality. The company was established for selling high quality roasted

coffee in the year 1971. The organisation started its operation from a single store that was

located in “Seattle’s Pike Place Market”. The organisation has greatly extended their presence

and position of market, in the last two decades. Currently, the organisation is serving the

enthusiasts of coffee in more than 64 different countries and has evolved into the largest house of

coffee globally. The organisation’s undisputed leadership position of the market can be devoted

to the organisation’s clever diversification of the products and the strategies that they adopt for

market expansion.

In accordance with the varying customer demand and needs, Starbucks has transformed

from just a coffee products’ seller into a full-fledged restaurant chain, providing not just the

products related to coffee; however, also other foods, beverages, and merchandise. In addition to

this, the stagnating growth of market in the developed countries, has impelled the organisation to

move into the developing countries, which are having a high potential of growth. Countries such

as India, Bangladesh, and Brazil have been displaying increasing consumption ratios of the

coffee products and are probable to surpass the consumption of coffee from the developed

economies by the year 2020.

In the year 2015, the company became undisputed leader globally with a speciality in the

retail of coffee, having approximately a yearly revenue of about $16 Billion. Starbucks by that

time has approximately 200,000 employees and more than 21,000 cafes in 60 different nations.
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Furthermore, Starbucks also did some acquisitions, which comprises of Torrefazione Italia,

Seattle’s Best Coffee, Teavana’s Heaven, and many others. As per the records of 2019, the

company is having 30,000 cafes in 78 different countries. The organisation had grown

extraordinarily fast over the last three decades and the company. The business model of the

organisation is also known to be a strategic strength of the company. The business of Starbucks

is operated through licensed and company operated stores.

The contribution of licensed stores is only 11% of the total revenue that was generated in

the year 2018. The company was exceptionally profitable back by the year 2014, having 23.1%

return over their assets by the year 2014 (in comparison with 6.8% at “Peet’s Cofee and Tea”,

14.0%at “Keurig Green Mountain Coffee”, 13.4% at “McDonald’s”, and 5.5% at “Dunkin

Donuts”). Thus, the key competitors of Starbucks comprise of Costa Coffee, Dunkin Donuts,

McDonald’s, and Café Cofee Day. However, Starbucks is maintaining a competitive advantage

over the other by approximately 60%.

However, in spite of the confident market outlook and a significant competitive

advantage over the other competitors in the coffee market, the company is still in need of an

effective business report. For examining the internal and external factors that might affect the

operations of Starbucks in a negative way. Therefore, this report is divided into two parts, in the

first part a business report needs to be provided. Furthermore, in the second part stakeholder

report of Starbucks also needs to be provided. The focus group country that is going to be

emphasised in this study will be Japan.

Part 1: External Environmental Analysis

It is a type of analysis of the macro-environmental factors, competitor analysis, and the

industry analysis in purview of company’s growth. The macro-environmental aspects are the
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dimensions in wider society that affect the company within it. Following is the tool that will be

utilised to examine the macro-environmental factors;

PESTLE Analysis
PESTLE analysis is going to be applied, in order to examine the macro-environmental

aspects to which the Starbucks is exposed or disclosed. It assists the organisation to determine

the external factors in a better way that could have affected the performance of an organisation in

the international market of coffee. The PESTLE analysis can be divided into six macro-

environmental factors, which are political, economic, social, technological, legal, and

environmental. Through its sustained effectiveness in addressing the external aspects that are

recognised in PESTLE analysis of macro-environment, the Starbucks can endure to succeed, in

spite of the adverse forces that are influencing the business.

Political Factors
This part of the analysis tool recognises the influence of government policies or strategies

over the company’s operation. Generally, the political impact over the coffee markets is not as

dominant as it is with the other type of markets. As coffee is generally seen as a beverage, which

is not harmful to the health of customers; thus, it is not subjected to the political debates. Japan is

based upon monarchy system of governance; it is a system that is based over the undivided rule

or sovereignty of a single individual. Naruhito is the current ruler of Japan, replacing his father

Akihito. Moreover, the Japan is linked with ASEAN and G8.

As they are also having better relations with China, which is also one of the top producers

of coffee globally. Thus, it has a positive impact over Starbucks. However, the main political

aspect that influence the operations of Starbucks is regarding the sourcing of the raw materials.

Thus, the company adheres to the political policies and strategies that are structured by the
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regulating bodies of Japan and the international strategies. Thus, the Starbucks require to obey

the regulations and laws of the countries, from where the Starbucks gets their raw material. Some

other aspects that also needs to be considered under this category is the laws of employment in

the region of Japan and the policies related to tax payment.

Economic Factors
This element of the analysis tool denotes to the economic changes and conditions that are

fundamental to the business. The economy of the country in which the organisation operates

impacts the performance of organisation to a large extent. However, the economic conditions of

the developed economies can be highly volatile as well, specifically during the crises. The

economy of Japan is considered as one of the strongest and stable economy of the world. It enlist

itself in the world’s top economies, as it is the third-largest globally by the nominal “Gross

Domestic Profit (GDP)” and is known to be fourth-largest country in terms of “Purchasing

Power Parity (PPP)”. Being a contributor into the community is a vital part of the Japanese

tradition. Therefore, for Starbucks investing into such stable and growing markets is fundamental

to hedge in contradiction to the changing sales in other countries. Moreover, the high economic

development of Japan and a small unemployment rate develop opportunities for Starbucks, in

attaining more revenue as compared with other countries. However, in Japan the unemployment

rates have climbed to approximately 2.4% as of September 2019.

Social/Sociocultural Factors
This component of the analysis tool demonstrates the societal trends and conditions

impacting the business and consumers. Starbucks needs to address a number of

social/sociocultural factors in order to effectively operate in Japan. The coffee popularity in

Japan is engrained deeply into economic golden ages of 60’s-80’s. This gives Starbucks a better

and positive position in this market, as the business is supported by the societal norms. However,
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Starbucks needs to be aware about the trends and social norms of the Japanese society.

Furthermore, Starbucks needs to emphasise over the customer preferences, variations in the

population lifestyles, and the varying work patterns of Japan. In addition to this, Starbucks

attains the opportunity to enhance its revenues based upon the surging up demand of coffee in

the region of Japan. Moreover, as the culture of Japan is evolving to health-conscious culture;

thus, the company attains better opportunity for enhancing their revenues in this country.

Technological Factors
In this component of analysis tool, the technologies and the associated trends are

recognised. The experiences of Starbucks need to adopt a number of technological factors. Japan

acquires one of the latest systems of telecommunication, specifically with the devices of mobile.

Starbucks is at a better position, for enjoying the advantages or benefits of the surging wave of

telecommunication in Japan. Moreover, the company’s partnership with the telecommunication

and technology giants (such as Apple), have assisted the organisation to drive this mobile wave

much more easily. Starbucks has also enabled mobile payments, in order to decrease the chaos

situation at the cafes. As Japan have made it probable in virtually connecting with Wi-fi, at any

place of populated area. Therefore, the Starbucks have also provided the facility of Wi-fi in their

cafes to enable the consumers to utilise the services in an efficient manner.

Legal Factors
It is fundamental to interpret that the intellectual property licensing issues and right laws,

when entering into emerging market. For Starbucks it is essential to make utilisation of

protection laws of intellectual property, as the technology with the organisation utilisation is a

fundamental element of organisation’s competitive benefit. Moreover, the Japan is having

several regulations related to product safety over the ingredients from “Genetically Modified

Organisms (GMOs)”. Thus, Starbucks attains the opportunities for improving the performance
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by satisfying these regulations of product safety. However, surging regulation of employment in

Japan, threatens the access of Starbucks into the market of labour. Japan is having a number of

laws related to labour, such as “Labour Standards Law Japan” that is implied by Starbucks

successfully.

Environmental Factors
The scenario of market is daily changing, the situations of market can be regulated and

there are several things that cannot be regulated. The environmental or ecological stewardship

has become a priority for the organisations that are working in the coffee industry, and producing

fair and green coffee is an effectual attribute, for enhancing the image of brand amongst the

environmentalists and customers. The coffee production has a distinctive impact over the

biodiversity, forests, and utilisation of water, and the companies such as Starbucks dynamically

try to decrease their ecological footprint. A large portion of Japan is concerted around and in

Tokyo. The land of Japan is susceptible to earthquakes and tsunamis. Thus, the developments

and housing are closely packed to one another for accommodating the high amount of

population. Moreover, Starbucks is currently abiding to the rules and regulation that are set by

Japan related to environmental efficiency, such as “The Basic Environment Law”.

Internal Environment Analysis

Internal analysis of an organisation is done, to offer the way to recognise the strengths to

build upon and weaknesses for overcoming when structuring the strategies of organisation.

Internal analysis examines the internal environment of organisation, to assess the competencies,

competitive advantages, and resources. This information assist the strategic decision-making of

management, whilst they conduct strategic structuring and the process of execution. Following is

the tool that will be used for analysing the internal environment of Starbucks.
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SWOT Analysis
SWOT analysis is a way by which the organisation determines the strengths, weaknesses,

opportunities, and threats. This tool is utilised in order to determine the effectiveness of the

strategies that are adopted by the organisation and where they still requires improvement. It also

enable the organisation to have better insights related to the market. The weaknesses and

strengths represent the internal company perspective and can be influenced and controlled. On

the other hand, threats and opportunities are related with market and signifies the factors that are

not able to be regulated. Companies such as Starbucks requires to be aware about the factors, in

order to cope the changes of market in the foreseeable future.

Strengths
Strong position in market and international recognition of brand attains a fundamental

geographical presence, throughout the world. The population of Japan is known for their efficacy

in a number of industries; along with this Japanese are also known for their coffee love, which is

a positive or strength of Starbucks. Another strength of Starbucks is the production of supreme

quality products, as they give great significance to the product quality and elude standardisation

of their quality not even for increasing their output production. The location of stores in Japan is

also a strength of Starbucks, as the stores are in the most strategic and premium locations

globally. Therefore, they target high-traffic and premium locations near a range of settings.

Moreover, as Japan is one of the most stable country globally; thus, operating in such a country

with a stable economy and decreased rate of unemployment is strength for an organisation.

Moreover, as operating in a technologically advanced country; Starbuck has demonstrated to be

an innovative country. Through introduction of automated machines for coffee and pre-paid

cards. Another strength that is possessed by Starbucks is tha name of brbd, store ambiance, and
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consumer service in Japan. Moreover, the organisation has maintained the global operations, in

order ensure the recognition of customer. Furthermore, the CSR programs also enhances the

brand reputation not only in Japan, but globally. Japan is also a safe country, in comparison with

other countries, which is another strength for organisation to operate in this region.

Weaknesses
Whilst Starbucks does distinguish their products with supreme quality, along with

integration of Starbucks experience, in the economic sluggishness times, customers would switch

towards the products of their competitor, which have lower prices and decline paying for

premium. The competition is given by the local coffee cafes of Japan, such as Doutor Cofee and

Pronto Café. Thus, these high prices can also result into a weakness for the organisation to

succeed specifically in the countries that are developing. Japan has a large population, in

accordance with the little island over which they have possession. Thus, majority iof the

population of the country like in the main citiies, such as TOKYO. High saturation and

aggressive expansion because of over-crowding in market lead towards one-shop taking

consumers of the others; thus, diminishing the long-term development pf Starbucks. Another

issue that the organisation face, whilst operating in Japan is the different coffee culture of Japan

in comparison with that of the home country (USA). In addition to this, as the organisation

majorly emphasises on over-expansion; thus, at many times the company ignores the issues or

the concerns that are raised because of the consistent dissatisfaction of the employees working at

organisation.

Opportunities
The Japanese customers are fascinated by the brands of West and they have a fondness

for those western brands. Thus, the Japanese are open to the new tastes and products, which is
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the reason why Japan is known to be a viable area for testing the new products. New ideas and

concepts can be brought a concocted out in this market at much faster pace, in comparison with

the UK or USA. Thus, the products that gets positive feedback from the market of Japan are

introduced in the western markets with confident expectations. Such as, the “Green Tea

Frappuccino” was initially launched in the market of Japan, after it was turned into a sensation, it

was brough to the market of the West. Therefore, the flexible Japanese customer’s taste give

Starbucks a chance or an opportunity, for developing new products and gaining profit.

Approximately 60% of whole coffee that is sold in the Japanese markets is soluble. Thus,

Starbucks is able to capitalise over this factor of Japanese coffee market, in order to surge the

sales through several soluble ready-to-make products of coffee. Although, the whole Japanese

market is close to the point of saturation, and he over-expansion of Starbucks in the big-cities has

provided organisation with lesser variation at sleep growth, it might still develop to the regions

that are less-saturated, permitting it to exceed the potential of growthy.

Threats
Starbuck’s over-expansion and extravagant growth encompass a risk of consumer fatigue.

The company has introduced a set of new products, with an increased innovation of product

reduces the sales pf existing products. Therefore, cannibalisation is known to be a key threat as

the chain of coffee is reaching to its saturation point in majority of the big cities. The changing in

the dairy and coffee prices are the probable threat for the company. It can have a major impact

over the pricing of their products, which indirectly affects the consumers. In the home-country,

approximately 80% of the sales of Starbucks are related with takeaway orders. However, in the

market of Japan 80% of the customers prefer to have the coffee or have other beverages at the

outlets. Thus, the cultural change can eb a bif threat for organisation. Another threat to Starbucks
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is the increasing competitors in the saturated market of Japan, such as Doutor Cofee and Pronto

Café.

Recommendations
Based upon the above external and internal analysis, it can be articulated that the

organisation is currently facing from complex condition. Whilst growing at a faster pace,

Starbucks requires to deal with the surging up competitions both locally and internationally; and

is thus emphasised to examined the new product offers and market opportunities. At the identical

time, the workforce of company is feeling underappreciated and overworked. In order to make

the condition even more complex, the organisation also faces from ambiguous perception of the

consumers regarding the image of brand, because of their diverse backgrounds. Hence, the

company is itself trapped into the growth and success the company has went through in the past

years. It is the right time for Starbucks for making a move, for maintaining the success into its

long-run.

However, the company needs to make sure that the goals that are set for the future needs

to adhere the SMART goals. As this framework makes sure that the goals set are, specific,

measurable, aggressive, realistic, and time-bound. Following are the strategies/goals that are

recommended for Starbucks to adopt, after examining the external and internal factors of

organisation. One of the best way to handle all of the issues discussed above is by introducing

low-price-based brand of Starbucks, as their subsidiary. It can be brought as a fighter brand in

competition with the competitors of Starbucks that operate on low-pricing. By adopting to this

suggestion, Starbucks would be able to compete with these competitors without putting the real

brand in forward.
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However, the company needs to create difference between the two brands. After adoption

of this suggestion, the real brand can continue operating at their regular pricing strategies. The

fighter-brand would require to satisfy the requirements of the individuals that are not able to buy

their products from the real brand of Starbucks. Because of development of two different brands,

the distribution system of Starbucks needs to be re-structured as well. The organisation should

also emphasise over keeping their employees motivated, as it assists the organisation in better

performance. Varying consumer demand and competition forces the company to not just change

the model of business, but also make a change in their range if products.

Part 2: Starbucks’ Stakeholder Report

Over the last 2 decades, the company has become the undoubted leader when it is related

with the retail business of coffee. With being the leader in multi-national coffee industry, the

company understands that it needs to manage and maintain its relationship with their

stakeholders, to continue the organisation’s reign over the industry of coffee. In most generic

type of stake-holders’ groups, the company has an impact over its customers, employees,

suppliers/ coffee framers, competitors, government, and shareholders of the organisation. Apart,

from the coffee framers in most of the multi-national organisation, these are the stakeholders that

are considered whilst analysing the organisation’s stakeholders. Employees is the stakeholder

group that is selected for further analysis. The reason for their selection is the dissatisfaction with

the company’s policies, which is reported in the previous studies. This dissatisfaction can

adversely affect the performance of Starbucks.

Precise employee stakeholders may be the typical employees of Starbucks; for instance,

the baristas wearing green apron and the managers of franchise. Numerous type of barista

employees, which work at this organisation vary from female to male, younger to old, or in some
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of the cases even minorities are also involved into this. In most of the cases, Starbucks prioritises

the employees in their efforts for “Corporate Social Responsibility (CSR)”. However, the

employees characteristically demand for higher wages, job security and working conditions. The

organisational culture of Starbucks focuses over the employee-first behaviour. The things that

needs improvement in this section is the necessity of multi-tasking, the managers of franchise are

bosses, ambassadors of community, coaches, and even entrepreneurs.

Mendelow’s Matrix is utilised to examine the stakeholders of an organisation. There are

four sections of this matrix, which includes; Minimal Effort, Keep Informed, Keep Satisfied, and

Key Players. The first one that is minimal effort includes that group of stakeholders with whom

minimum communication is done; however, they are regulated to check whether the power

change or not. After this, comes keep informed this group involves those stakeholders who have

less power but are highly interested individuals. Thus, they are informed adequately, and are

communication takes place with them, so that no issue arises.

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The third one is keep satisfied, it involves the stakeholders that have high power; but are

less interested. The last category is key players, these involve thee individuals having high

power, along with high interest. These are the individual that makes the big decisions regarding

the organisation operations. The chosen group of stakeholders lies in the group of Keep

Informed. Thus, the company needs to communicate with each employee personally and try to

resolve if any concern is raised.

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Appendices
Appendix A: List of Stakeholders
Internal Stakeholders External Stakeholders
Employees Suppliers
Managers Customers
Owners Society
Government
Shareholders
Coffee farmers

Appendix B: VRIO Analysis

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Appendix C: Products of Starbucks

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