ASSIGNMENT 2 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 1: Business and Business Environment

Submission date 27/6/2021 Date Received 1st submission

Re-submission Date Date Received 2nd submission

Student Name Tran Thi Gia Khanh Student ID GBD 201548

Class GBD 906 Assessor name Vo Thi Thao Ngoc

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I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism. I
understand that making a false declaration is a form of malpractice.

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Contents
I. Introduction.......................................................................................................................................................... 4
II. Company Analysis ................................................................................................................................................ 4
1. Macro Environment ......................................................................................................................................... 4
1.1 Definition of Porter’s Five Forces model and PESTEL ............................................................................... 4
1.2 The competitive environment .................................................................................................................. 4
III. Conclusion ...................................................................................................................................................... 11
IV. Reference........................................................................................................................................................ 12
 I. Introduction
I work as a business analyst for Wells Fargo, an American global financial services corporation. It is the
fourth-largest bank in the world by market capitalization and the fourth-largest bank in the United States
by total assets. The company I've chosen is an American international chain of coffeehouses and roastery
reserves based in Seattle, Washington. The company's internal and external environments are quite
varied. For this project, my firm learns about the company's internal and external environmental
analyses, and I recognize that this company has the potential to be fruitful speculation.

II. Company Analysis

1. Macro Environment
1.1 Definition of Porter’s Five Forces model and PESTEL

PESTEL: A PESTEL analysis is a framework or tool used by marketers to analyze and monitor the macro-
environmental (external marketing environment) factors that have an impact on an organization. The
result of which is used to identify threats and weaknesses which are used in a SWOT
analysis. (Professional Academy, 2021)

PESTEL stands for:

- P – Political
- E – Economic
- S – Social
- T – Technological
- E – Environmental
- L – Legal

Porter’s Five Forces: Porter's Five Forces is a model that identifies and analyzes five competitive forces
that shape every industry and helps determine an industry's weaknesses and strengths. Five Forces
analysis is frequently used to identify an industry's structure to determine corporate strategy. Porter's
model can be applied to any segment of the economy to understand the level of competition within the
industry and enhance a company's long-term profitability. (Scott, 2020)

1.2 The competitive environment

Porter’s Five Forces

Current competitors (Strong Force)
 No Companies Price Design
1 Starbucks 2.10$-5.25$ Because Starbucks was
(the price will named after a marine
rise character, the original
if the customer Starbucks logo was created
custom their to represent the alluring
beverages) images of the sea. As a
result, Starbucks' logo has
always been a two-tailed
mermaid from its humble
origins in 1971. Even though
the newest logo design does
not plainly reveal that she
has two tails, we now refer
to her by her true name -
the siren.
Market Growth
Starbucks had a 40
percent share of the
coffee shop market in
the United States as of
October 2019. In its
home country, the
world-famous chain has
approximately 14.88
thousand shops.

2 Dunkin Donuts 1.85$-4.99$ On the left side of the In comparison,

(only corporate name was a hot
beverages) Styrofoam coffee cup. The
latest version features a
steaming coffee cup in
brown with a monogram
"DD" in addition to the pink-
and-orange wordmark. The
letters appear so clever and
circular that they are
appealing. On the white
backdrop, the mix of
Magenta and Orange gives a
joyful and cheerful feeling.
competitor Dunkin'
(previously known as
Dunkin' Donuts) had
around 9.57 thousand
locations and owned the
second-largest portion of
the market with a 26
percent share.

Many companies of various sizes in the coffee market, such as global chains like Dunkin Donuts.
Starbucks is experiencing market saturation in the United States, a Starbucks outlet or two in nearly
every community. The level of competitive competition in the industry ranges from moderate to strong.
The business is defined by monopolistic competition, with a large number of businesses fighting for
market share. The access and exit barriers, on the other hand, are low. Starbucks' market share is the key
element that keeps competition at bay. It has the most market share, followed by Dunkin' Donuts.
However, Starbucks' analysis of high quality and product-based uniqueness gives it an advantage over its
competitors. However, the sector has matured, and the development rate has slowed as many firms
compete for market share. Based on all of these factors, the level of rivalry with Starbucks remains
moderate to high. (Statista, 2016)

Threat of substitutes or substitution (Strong Force)

Customers have deliberately cut back on needless purchasing and luxury services due to the impact of
the covid-19 pandemic, which has had a major influence on the economy, but their choice to consume
pre-packaged beverages instead of drinking fresh coffee. Starbucks brand coffee has a plethora of
alternatives. There are several options on the market, ranging from juices to teas and alcoholic and non-
alcoholic beverages. Several bars and restaurants provide both a pleasant atmosphere and high-quality
food. Homemade goods that customers may create at home pose another challenge in this sector.
Furthermore, the conversion cost is insignificant. All of these variables combine to elevate replacements
from a minor danger to a serious threat. Several factors, however, limit this hazard to some extent.
Starbucks sells bottled coffee and premium espresso machines in addition to high-quality coffee,
excellent customer service, and a pleasant ambiance. To some extent, premium quality and brand loyalty
assist to reduce the danger of alternatives. (Greenspan, 2019)

Potential Competitor (Moderate Force)

Starbucks faces a strong number of prospective competitors in the food service and coffeehouse
industries. Starbucks faces a modest danger of entry. However, the hurdles are low, and the initial
expenditure to launch a coffee business is also low. The industry has a modest level of saturation. On a
local level, new entrants can compete with companies such as Starbucks. However, their chances of
success remain low to moderate. Starbucks has amassed a significant market share due to its
infrastructure, efficiency, and product quality. Despite the low switching costs, new companies might
attract customers by offering lower prices. As a result, new entrants continue to be a threat. However,
brand image, market share, and other variables such as brand loyalty help to reduce this significantly.
Starbucks' access to raw materials and suppliers is a key aspect that provides them a competitive
advantage. Starbucks has access to higher-quality coffee and a bigger number of suppliers throughout
the world due to its size, breadth, and capacity to pay. All of these variables work together to mitigate
the danger posed by new entrants. The threat has increased to some extent due to McDonald's entry
into this business with Mc Cafe. McDonald's has long been known as a fast-food restaurant, but in the
mid-2000s, the worldwide company joined the growing coffee trend by launching flavored and iced
coffees. McDonald's surpassed both Starbucks and Dunkin' Donuts in 2017, with revenues of $22.82
billion, owing to the restaurant franchise's enlarged menu. (Hawley, 2019)

Power of Suppliers (Weak Force)

Suppliers can only apply light to moderate pressure to Starbucks. The brand has its own supplier diversity
policy, which it employs in the selection of suppliers. Another important principle at Starbucks is ethical
sourcing. Coffee is responsibly sourced from all around the world by the brand. It is also growing directly
with coffee producers, which has allowed it to acquire greater control over its supply chain. It cut out the
middlemen and began procuring straight from farmers. Starbucks has built strong partnerships with both
tea and cocoa farming communities in order to teach them about better cocoa growing methods and
assist them in maximizing earnings. All of this has worked to reduce the power of the intermediaries and
suppliers. Furthermore, the number of suppliers is large, and Starbucks has lots of flexibility in terms of
selection. Key suppliers for the company are based in the United States, Singapore, Hong Kong, Mexico,
Indonesia, India, France, Canada, and other nations. Regency Centers (REG), which rents property to
Starbucks, is the main supplier in the United States. In the extremely competitive and ever-changing real
estate market, the firm aims to be an industry leader. Starbucks accounted for 0.7 percent of Regency's
sales as of December 31, 2019. Its strong supply chain management over the previous decade has
decreased and brought down suppliers' bargaining strength. (Investopedia, 2019)

Power of Buyers (Strong Force)

Starbucks Coffee Company experiences the strong force or bargaining power of buyers or customers. In
Porter’s Five Forces analysis model, this force is based on customers' and customer groups' signal
business environment. In Starbucks Corporation’s case, the following external factors contribute to the
strong bargaining power of customers:

- Low switching costs (strong force)

- High substitute availability (strong force)
- The small size of individual buyers (weak force)

Buyer bargaining power is one of the most critical factors impacting the firm in this component of the
business's Five Forces analysis model. Customers may move from Starbucks to other brands due to the
cheap switching costs. Furthermore, the great availability of replacements implies that customers may
avoid Starbucks if they so want, as several competitors, such as sharing economy instant beverages.
These powerful forces conceal the reality that individual transactions are little compared to the
company's total revenue. (Greenspan, 2019)

Based on the premium quality of its products and the quality of its customer service, this research
demonstrates that Starbucks has been able to minimize the competitive threat against it. Besides from
that, the global coffee company has effectively controlled its supply chain, which has decreased its
negotiating power. Starbucks, according to Porter's five forces analysis, has stayed strong against
competitive challenges within its core strengths. Overall, the five forces examined in this research have a
moderate level of strength. Moreover, Starbucks has made several good acquisitions.
PESTEL ANALYSIS
ECONOMICAL FACTORS (SWOT & PESTLE Analysis, 2020)
• CO-VID 19 Pandemic

The current COVID-19 epidemic has disrupted the supply chain and shut down all companies
throughout the world. Starbucks' global location is no exception. Companies have been locked and
shut down to cause widespread fear. It led to stockpiling, disruption to the supply chain, delays in
shipping, burdens and unjustified price increases. Since it has been acquired from other nations by
Starbucks, coffee beans. The firm therefore faces all these problems.

• MARKET CONSUMPTION RATE

Price and demand have a very delicate relationship. Coffee's demand falls as its price rises. Starbucks,
as we all know, has competitively high prices for their goods. The firm should consider the market
consumption rate of coffee, cold drinks such as juices and shakes, and customer income level. If the
price of replacement items such as juices rises, consumers will gravitate toward coffee as their
income rises.

• INFLATION/IMPORT/EXCHANGE RATES

Starbucks is a multinational corporation with hundreds of suppliers worldwide. Import taxes on raw
material supplies, as well as the exchange rates of various countries, are a major source of concern
for the company. Because even a minor change in the exchange rate could cost the company millions
of dollars. Consumer purchasing power is eroded as the inflation rate rises. As a result, coffee
demand is decreasing.

SOCIAL FACTORS (SWOT & PESTLE Analysis, 2020)

• CHANGING CUSTOMER’S PREFERENCES

Every year, customer tastes and purchasing trends change, affecting the company's development and
profitability. For example, in recent years, the consumer market has turned toward organic food and
a healthier diet. Nowadays, fast food firms are also customizing their products to consumer demand.
On the other hand, Starbucks has taken the first step by selling natural energy drinks and fresh,
handcrafted juices to health-conscious customers. It was a significant step forward for the firm.

• CHANGING DEMOGRAPHIC

The coffee-drinking generation is retiring all over the place. Millennials and Generation X are on the
rise. Starbucks must now shift its focus to meet the needs of the new population. This implies that
the firm will need to develop new marketing tactics aimed at younger generations. It necessitates
research on their hobbies, habits, lifestyle, and the types of items they enjoy.
 • STARBUCKS SHARED PLANET

Starbucks has launched a project called "Starbucks Shared Planet." It is in response to the company's
criticism from social and environmental campaigners. The goal of this campaign is to demonstrate to
the world that the firm engages in fair trade practices. In addition, the company collaborates with the
African Wildlife Foundation to produce and promote ecologically responsible coffee.

Starbucks' PESTLE analysis demonstrates that the firm is in a strong position and is a steady one in a
competitive market. This company's major strength is its beverage and food business. This demonstrates
that the use of these items will almost never decrease. However, the recession is a big difficulty in the
entire process since it might affect customers' purchasing power. As a result, Starbucks should
reconsider its price approach and focus on providing fair items. It is one of the most critical aspects in
Starbucks' ability to keep its customer base. In this approach, companies may attract new clients while
also maintaining customer loyalty. That indicates that Starbucks has several possibilities in terms of
popularity and profitability to develop its company.

2. INTERNAL ANALYSIS
• Human Resources (Strengths)

Human resources are also increasingly solid with strong and non-stop development. In 2020,
Starbucks has a workforce of 228,000 in the United States. When they start working at Starbucks,
they will have to undergo a thorough and professional training process. This approach requires
perseverance and a good attitude to learn from each employee. Along with that is the close
supervision of the manager to give the most effective training. Starbucks treats its employees well,
which is evident in employee satisfaction. Happy employees serve their customers well and this leads
to consumer satisfaction. Starbucks was named Greatest Workplace on Fortune's Top 100 Companies
list, and it has a high employee satisfaction rating. This is an important asset to the brand. Your total
bonus package includes base salary and bonuses, as well as benefits, retirement savings, stocks and
perks. To help protect the health and well-being of its partners, the company incurs additional labor
costs, such as paying wages and benefits to partners who are unable or uncomfortable to work from
mid-March to May 5, temporary pay increases for partners who continue to work during this period,
and additional benefits for partners who are separated or separated due to reduce in-store hours.
Starbucks' purpose as a corporation is to not only achieve better financial outcomes by delivering
excellent and distinctive products and services, but also to build meaningful relationships with
consumers row the neighborhood in where we operate. We think that one of the main elements to
our success as a meaningful global brand is the strength of our employees. This makes a lot of sense
because our partners (workers) work hard every day to make our atmosphere pleasant and
customer-friendly. As a result, one of our primary objectives is to invest in and assist our partners in
order to differentiate our brands, goods, and services in the highly competitive specialty coffee
industry. Starbucks encourage constant training and development opportunities to assist our
partners thrive in their positions. These include, but are not limited to, safety and security standards,
product and service offers upgrades, and technology implementation. Our Pour Over workshops give
training on a wide range of subjects, including setting attainable goals, giving and accepting
constructive criticism, and engaging effectively with customers and communities. To assist build an
inclusive culture and better serve our customers, we urge our U.S.-based partners to participate in
the To Be Welcoming courses we developed in collaboration with Arizona State University to address
various kinds of bias and discrimination.

• Financial/ Factors (Weakness)

Total net revenues decreased 11% to $23.5 billion in fiscal 2020 compared to $26.5 billion in fiscal
2019. Consolidated operating income decreased to $1.6 billion in fiscal 2020 compared to operating
income of $4.1 billion in fiscal 2019. Fiscal 2020 operating margin was 6.6% compared to 15.4% in
fiscal 2019. Operating margin contraction was primarily driven by sales deleverage and additional
costs incurred attributable to COVID-19, including catastrophe pay and enhanced pay programs for
retail store partners, net of benefits provided by government subsidies. Higher restructuring
activities related to our Americas store portfolio optimization and investments to support key
business partners also contributed. The decrease was primarily driven by the adverse impacts of
COVID-19, including lower revenues due to temporary store closures, reduced customer traffic and
modified operations, as well as incremental labor expenses and restructuring costs. During the fourth
quarter of fiscal 2020, the firm closed approximately 100 stores in the U.S, and expect to close an
additional 700 stores in those markets over the next 18 months. This reflects an additional 200 store
closures than the initial announcement estimates of 600 stores. Costs incurred related to the
restructuring efforts are recorded as restructuring and impairments on our consolidated statement
of earnings and will continue to be recorded in accordance with the anticipated timeline of store
closures.

3. External Macro Factor

The real business decision of Starbucks today is human resources. And this is also the strength of the
company. Starbucks offers specific training programs for its employees to help them understand how
important they are to the company, utilizing the company's vast human resources. Because they are
the individuals closest to the customer and able to fulfill their requirements. Starbucks always strives
towards a professional, pleasant, engaged workforce and close relationships with customers, which is
also its own style of thinking or advertising the company widely on various channels. media.
Starbucks has opted to engage in casual and informal discussions with customers to capture the
general mood, understand the customer experience, and gather feedback. Starbucks treats all of its
employees as equal partners, regardless of race, color, religion, sex, nationality, age, physical or
mental disability, or sexual orientation, marital status, veteran status, gender identity and
expression, genetic information or any other legal information matters. Furthermore, the company
offers its employees a number of perks such as stock options and health insurance. Starbucks
announced in 2014 that it would pay its US employees to earn an online bachelor's degree from
Arizona State University. Starbucks treats its employees well, which is evident in employee
satisfaction. Happy employees serve their customers well and this leads to consumer satisfaction.
Starbucks was named the Greatest Place to Work in Fortune's Top 100 Companies list, and it has a
high employee satisfaction rating. This is a significant asset to the brand. Starbucks has decided to
invest in people, enhance employee perks, and monetize consumers. The bottom line represents the
organization's human resource management capabilities. Starbucks was able to create an iconic
global brand that has resonated with people worldwide for nearly 50 years by finding new and
innovative ways to define its own customers. By delivering a unique experience, Starbucks has
effectively focused consumers' attention on the quality of the experience, the good memories that
can be created together at its locations, rather than the cost of the store. goods. Customers will have
a one-of-a-kind, enjoyable and calming experience. (Roll, 2018)

In addition to improving the customer experience, which has always been the company's core
priority, future innovation focus areas will increasingly revolve around the product offering.
Without question, the firm is a successful worldwide marketer with extensive expertise entering and
establishing themselves in new areas. Last but not least, it must constantly develop and upgrade the
consumer experience of drinking coffee in its outlets. This is significant because consumers are
rapidly informed in today's interconnected environment, and their expectations for basic and
hygienic client experiences are continuously rising. As a result, a fantastic brand experience today
may become a standard one tomorrow. Starbucks must keep ahead of this curve to remain
competitive and unique in the eyes of the customer.

III. Conclusion
In conclusion, the analyst has indicated that Starbucks must try to fix and maintain its strengths and
weaknesses following techniques to assess Starbucks' external opportunities and dangers. To reduce
weaknesses, the corporation has to develop strategies and policies and keep it going ahead in a
competitive market such as the United States.
 IV. Reference
Professional Academy (2021). Marketing Theories - PESTEL Analysis. [online] Professionalacademy.com.
Available at: https://www.professionalacademy.com/blogs-and-advice/marketing-theories---pestel-
analysis [Accessed 24 Jun. 2021]
Scott, G. (2020). Porter’s 5 Forces. [online] Investopedia.
Available at: https://www.investopedia.com/terms/p/porter.asp [Accessed 24 Jun. 2021]
Mourdoukoutas, P. (n.d.). Starbucks’ Problems At Home And Abroad. [online] Forbes.
Available at: https://www.forbes.com/sites/panosmourdoukoutas/2018/06/27/starbucks-problems-at-
home-and-abroad/?sh=1515a3e39bc5 [Accessed 25 Jun. 2021]
Statista. (2016). Market share of major U.S. coffee chains | Statista. [online]
Available at: https://www.statista.com/statistics/250166/market-share-of-major-us-coffee-
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Greenspan, R. (2019). Starbucks Coffee Five Forces Analysis (Porter’s Model) & Recommendations -
Panmore Institute. [online] Panmore Institute.
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2021]
Hawley, J. (2019). Who Are Starbucks’ Main Competitors? [online] Investopedia.
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competitors.asp.[Accessed 25 Jun. 2021]
Investopedia. (2019). Starbucks Stock: Analyzing 5 Key Suppliers (SBUX). [online]
Available at: https://www.investopedia.com/articles/markets/051316/starbucks-stock-analyzing-5-key-
suppliers-sbux.asp [Accessed 26 Jun. 2021]
SWOT & PESTLE Analysis. (2020). PESTLE Analysis of Starbucks. [online]
Available at: https://swotandpestleanalysis.com/pestle-analysis-of-starbucks/ [Accessed 25 Jun. 2021]
Starbucks (2020). Fiscal 2020 Annual Report Starbucks Shanghai Container Store. [online].
Available at: https://s22.q4cdn.com/869488222/files/doc_financials/2020/ar/2020-Starbucks-Annual-
Report.pdf [Accessed 26 Jun. 2021]
Roll, M. (2018). The Secret to Starbucks’ Brand Success - Martin Roll. [online] Martin Roll.
Available at: https://martinroll.com/resources/articles/strategy/secret-starbucks-brand-success/
[Accessed 26 Jun. 2021]
Starbucks to Close 8,000 U.S. Stores for Racial-Bias Training After Arrests. (2018). The New York Times.
[online] 17 Apr.
Available at: https://www.nytimes.com/2018/04/17/business/starbucks-arrests-racial-bias.html