Introduction

The Starbucks Corporation is a leading global producer, distributor, and supplier of specialty
coffee. The business was established in the year 1971 in Seattle, Washington, and has its
headquarters there. Approximately 182,000 people are employed by Starbucks all over
19,767 corporation and contracted locations located in 62 different countries. Their
assortment of goods features handmade and roasted coffees and teas of superior quality
and price, in addition to a wide range of fresh foods and other refreshments. In addition to
this, they offer a wide selection of tea and coffee products for sale as well as allow their
trademarks to be used in a range of other contexts, including such stores worldwide,
supermarket retail locations, as well as nationwide catering contracts. Additionally,
Starbucks promotes its product range with those other big brands that are part of its
collection of businesses. These brands involve Teavana, Tazo, Seattle's Best Coffee,
Starbucks VIA, Starbucks Refreshers, Evolution Fresh, La Boulange, and Verismo. As of the
September 29, 2013, Starbucks reported a total turnover of $14.89 billion. (SEC, 2013)

Starbucks is predominantly in the business of operating and competing in the business of

selling coffee and refreshment stores. The global financial crisis combined with shifting
customer preferences led to a significant downturn in this sector in 2009, which resulted in
a decline of 6.6% in the industry's earnings to $25.9 billion in the United States. Previously,
the sector enjoyed a ten years of development that was relatively steady. As a result of the
recent economic downturn, consumers have cut back on spending on indulgences such as
going out to dine, opting instead to reduce their spending on high-priced coffee drinks in
favor of cheaper alternatives. From 2008 until 2013, the market expanded at a modest
yearly average rate of expansion of 0.9%, resulting in present industry earnings in the
United States of $29 billion. It is currently anticipated that the market will expand at a rate
of 3.9% annually over the course of the subsequent 5 years, again with possibility of
achieving earnings of $35.1 billion in the United States. An economic recovery, a rise in
consumer trust, and extending menu selections inside the sector are expected to be primary
drivers of this development. Dunkin Brands comes in second with a market share of 24.6%,
behind industry leader Starbucks, which holds a share in the market of 36.7%. Other
companies in this space include McDonald's, Costa Coffee, Tim Horton's, and others.
(Starbucks, n.d.)
This market is well established and has a moderate degree of competitive consolidation.
Because Starbucks as well as Dunkin Brands together account for further than 60 percent of
the overall market, they wield a significant amount of market influence in dictating the
patterns that impact the sector.

The desire for coffee beans and snack foods within the sector is primarily driven by a variety
of variables, the most important of which are disposable spending, each individual coffee
intake, views forward into wellness, the global cost of coffee, and demography. This sector
is exceptionally susceptible to the socioeconomic variables that influence the rate of
increase in disposable income for households. As a consequence of rising jobless and
salaries that did not keep pace with inflation, family discretionary income decreased during
the crisis, which put a downturn on the industry's revenue as well as earnings ratios. The
amount of coffee consumed on a per individual basis is another essential component to
consider when evaluating the industry's demand. An rise in sales for coffee and snack stores
is directly correlated to an increment in coffee consumption overall. The rise in consumers'
discretionary income could be the primary force behind this uptick in spending. As the
economic keeps growing, people's financial constraints are beginning to loosen, and as a
result, they are spending more. The total earnings of the industry is positively impacted as a
result of this driver. In 2014, it is anticipated that there will be an increase in the
consumption of coffee on an individual basis. (Starbucks, n.d.)

Because coffees are the main resource inside the supply chain of company's players, the
current volatile values of coffee beans influence both market expenses and revenue profits.
In latest days, the demand for coffee in those other nations has risen significantly, which has
led to resource constraints. As a consequence, the cost of coffee around the globe has
increased significantly. It is anticipated that prices for coffee beans will fall over the period
of five years leading up to 2018, which will most likely result in reduced expenses just on
market and increased revenue. The degree to which individuals prioritize their own health is
another significant factor that helps determine the level of demand in the business.
(Starbucks, n.d.)
It is anticipated that there will be a change toward healthier eating and nutrition between
many buyers in the year 2014, which might present a significant hazard to the business as
customers get more conscious of problems pertaining to being overweight or obese. A trend
of purposeful change between many industry players to adjust their offerings forward into a
blend of organic and healthful products. (Starbucks, n.d.)

Theory – Strategic Analysis

2.1 An Examination of the Coffee and Snacks Retailing Business Using Porter's Five Factors
Model
A. Danger Posed by Fresh Market Participants
1. Given the lack of obstacles standing in the way of new companies wanting to enter
the market, there is only a middling amount of danger posed by new participants
further into business. (Siregar et al., 2019)
2. There is a monopolistically competitive structure present within the business, which
has a relatively high level of dominance.
3. Initial investments are not substantial for new competitors because they are able to
acquire stores, machinery, and other facilities at a level of expenditure that is
modest.
4. Small coffee stores are able to contend locally with larger establishments like
Starbucks as well as Dunkin Brands due to the fact that customers do not incur any
additional costs as a result of brand loyalty. Despite being a highly saturated sector,
there is still a reasonable chance of new companies finding financial success in this
market. (Vakili et al., 2022)
5. However, major established brand names like Starbucks, that have obtained scale
advantages by reducing costs and improving efficiency while maintaining a
substantial share of the market, are typically able to compete effectively against
newcomers despite the comparatively low barrier to entrance through into market.
A competitive barrier that is relatively high for new competitors to overcome
because they must distinguish oneself from Starbucks' quality of product, its
prominent commercial sites, as well as its shop environment encounter. (Wang,
2020)
Conclusion: Moderate
B. The Danger Posed by Alternatives
1. Tea, fruit liquids, water, cocktails, energy drinks, and other beverages are some of
the many acceptable alternatives to coffee that can be consumed. The communal
experience that Starbucks provides could also be replicated at other establishments
such as pubs and bars that serve non-alcoholic and alcoholic refreshments. (Winarno
et al., 2018)
2. Customers might also prepare their own luxury coffee in their own homes with
domestic luxury coffee machines for a little over the price of purchasing coffee
products from coffee products merchants like Starbucks. (Wu et al., 2012)
3. Because customers are not required to incur any expenses in order to transition to
substitutes, the level of threat is considered to be significant.
4. However, it is essential to note that market leaders such as Starbucks are presently
attempting to combat this danger by attempting to sell espresso machines and
coffee products packs in super markets. Despite these efforts, however, this threat
keeps putting stress on the fringes of these companies' products. (Xingang et al.,
2013)
Conclusion: High

C. The Buyer's Position in the Negotiation Process

1. Within this business, there are a myriad of purchasers, and not one of them has the
leverage to require a price reduction.
2. It provides laterally unique product to such a wide range of customers, that also
makes comparatively low procurement activity, that also corrodes the buyer's
power.
3. despite the absence of transition expenses as well as a large supply of alternative
products, industry executives such as Starbucks market their goods blend in
reference to competitor shops also with prevalent market rate flexibility and viable
cost advantages. This is done in a bid to remain competitive. (Zhang et al., 2020)
4. When it comes to coffee products purchasing, customers get a middling sensibility
because they are willing to spend more on goods of better quality, yet they're wary
of paying an overwhelming price in connection to the product performance.
 Conclusion: Moderate to Low Pressure

D. Authority of Suppliers to Negotiate Prices

1. The coffee grounds and luxury Arabica coffee that are produced in specific regions
seem to be the primary imports through into supply chain of Starbucks. Because
coffee grounds and luxury Arabica coffee seem to be normal imports, the expense of
transitioning between alternative providers is only slightly higher than average.
2. Additionally, there is a minimal risk that sector vendors will compete with Starbucks
through forward economies of scale, which will result in the suppliers' having less
power. (Niederwieser et al., 2016)
3. Because of its magnitude and breadth, Starbucks is also a very significant component
of the industry of supplying, which has the effect of reducing the influence that the
vendors have over Starbucks. In light of these considerations, the negotiating
strength of vendors is somewhere between moderate and poor.
Conclusion: Low to Moderate Pressure

E. The level of ferocity of the competition

1. The sector is marked by monopoly competition; despite the fact that Starbucks holds
the greatest share of the market, its closest rivals also hold substantial market
shares; as a result, Starbucks is subject to a great deal of competitive pressure. (Tian
et al., 2018)
2. Because there is no expense to the customer for transferring to a different
competition, there is a high level of competitive intensity.
3. It is essential to keep in mind, however, that Starbucks is able to sustain a certain
degree of competitive advantage by differentiating its offerings through the
provision of expensive goods and services, which results in a degree of rivalry that is
only moderately intense.
4. The marketplace is stable, as well as the gdp growth is just relatively low; as a result,
the level of rivalry amongst businesses is only fairly high; this is because all of them
are trying to boost their share of the market by poaching customers from well-
established businesses such as Starbucks.
 5. This sector is not presently experiencing excess capacity, and all of those particular
event to its fairly high competitive intensity. (Yetkin, 2013)
Conclusion: High to Moderate

2.2 Internal Analysis

2.2.1 Core Competence
Starbucks's ability to successfully utilize the core element differentiation techniques for
products they've developed over the years and give a premium blend that shows higher
drinks and snacks is one of the company's most important strengths. The value of the
Starbucks brand is established through the sale of high-quality coffee and other similar
items, as well as through the provision of a one-of-a-kind "Starbucks Experience" for every
single consumer. This "Starbucks Experience" is characterized by outstanding client service,
as well as clean and very well shops which are representative of an areas where they
operate. As a result, a significant amount of consumer loyalty as well as a group of followers
are developed. Other core competency is its human capital management's principles
method for developing very powerful external and internal connections with providers. This
gets to drive the effective implementation of the its business model of natural growth into
global markets, process design thru the obtain suitable and coalitions, which retains their
lengthy strategic goal to become among the most admired and trusted company worldwide.
(Yuan, 2013)

2.2.2 SWOT Analysis

A. Strength
Starbucks does have businesses including over sixty nations and maintains a market share of
36.7% in the U.s. Additionally, Starbucks does have a substantial geographical reach across
the world. In addition to being the most well-known name inside the cafe industry,
Starbucks came in at number 91 on the list of the best worldwide companies in 2013. The
wealthy corporate reputation of Starbucks is successfully leveraged by the company through
the merchandising of products and the licensing of its brand insignia. The business is able to
obtain a major edge in further extending into global markets but also help generate higher
development both in the national and global markets as a result of its strong competitive
edge and brand awareness. They have improved their network infrastructure and global
sourcing over the years, which has allowed them to achieve substantial economies of scale.
(Yunna, 2014)

They give the great priority to the workmanship of their goods and avoid standardizing their
quality in any way, shape, or form, even in the interest of higher manufacturing output.

Starbucks has locations all over the world, including in a few of the best and most important
shopping and business districts. They look for prime, elevated, rising sites in close proximity
to a wide range of environments, such as metropolitan and suburban shopping centers,
workplace structures, and schools and universities, as well as certain remote then off sites in
various parts of the globe. Because of this, they now have a substantial skill as well as an
edge, which allows them to be able to infiltrate primary markets as well as draw into
consumers' persuade factor. Their retail locations are not only aesthetically pleasing but also
have a "cool" factor to them due to the fact that they are intended to represent the distinct
personality of the community in which they operate and are eco friendly. They offer free Wi-
Fi, fantastic music, outstanding service, and a welcoming environment, all of which are
components of the "Starbucks Experience," which describes the overall ambiance of a
Starbucks as a community gathering place. The company's primary objective is to transform
their retail establishments into a "third location" in addition to the consumer's house and
place of employment.

B. Weakness
In periods of financial slowness, customers tend to find themselves cost of switching to
rival's goods at cheaper price levels as well as eschew the cost of a premium. This is true
despite the fact that Starbucks may indeed distinguish itself by having a high quality coupled
with the entire "Starbucks Experience." These expensive costs could also be seen as a
potential obstacle to the product's success in underdeveloped countries. (Mahat, 2019)

Self-cannibalization and a reduction in Starbucks' potential for long-term development are

both caused by the company's overzealous development and the excessive domination of
the marketplace caused by excessive competition.
Starbucks earns a significant portion of its overall income as from United States, and as a
result, the company is extremely sensitive towards the opportunities of the economic
system and the country's economic growth. This is because the company self-cannibalizes
the American market, which now has 8078 shops.

C. Opportunity
The United States market is becoming increasingly saturated, and as a result, it is
cannibalizing itself, which renders further essential for the country to focus on its
internationalization process. Starbucks had also finally introduced India to the list of
countries in which it operates, through the establishment of a partnership. The company
has been successful in penetrating a large number of countries. Starbucks has a significant
opportunity for development if it continues to broaden its operations into countries that are
newly emerging or developing. They have the capacity to expand their customer base by
leveraging their scale, expertise, bring money, and savings. (Lu et al., 2018)

D. Treats
Even with industry having reached its maturity phase, it is immense pressure on Starbucks
out of its rivals such as Dunkin Brands, Mcd's, Costa Coffee, Pete's Coffee, and mom-and-
pop specialized coffee shops. The above represents by far the most significant risk that
Starbucks confronts. Dunkin Brands faced its greatest competition in the United States
market from Starbucks, which held a percentage of the market that was 24.6% larger than
Dunkin Brands'.

2.3 Key Strategies

Since the company's inception, among the most important strategies which Starbucks has
utilized has been the use of differentiated products. By providing distinguishing features in
the form of a high price product offerings, places, coffee beverages' notoriety, and presiding
customer support, Starbucks has been capable of creating a high price appreciated brand
that is difficult for its rivals to replicate. In addition, Starbucks has adopted a clever business
strategy that emphasizes the formation of strategic partnerships and the purchase of savvy
companies. Starbucks did not operate its shops in global markets according to the
franchising model; rather, it managed corporation stores and collaborative partnerships. In
order to implement its merchandise diversification, Starbucks has completed a number of
significant acquisitions, including Teavana (which sells tea products), Bay Breads (which sells
quality bread products), Evolution Fresh (which sells fresh beverage products), and others.
(Dobbs, 2014)

Conclusion
The international operations of Starbucks have seen the most expansion recently. The
developing markets of Brasil, India, China, South Africa, and Mexico keep providing
substantial opportunities to add new shops and service an increased number of consumers.
These countries all have growing middle-class populations. Although Starbucks already has
packs a powerful headway into the Chinese market, there is still a great deal of unrealized
growth potential in both of these markets. Starbucks should expand into such developing
markets by winning regionally and becoming the market leader. In order for Starbucks to
continue to grow in these markets, the company must continue to be relevant to its
customers. Starbucks' management teams should be given the freedom to operate within
their overall framework in order to tailor store format, introduce local product mix, and
price points to the specific needs, lifestyles, and preferences of each individual market or
community.

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