Mubashshara CB009990 IBS

International business strategy
Individual Assignment
LANKA
BUSM 60003
HF2221IBMA
By- Mubashshara Ameer Hussain (cb009990)
Assesment Hand Out Date Hand in Date

Assignment 11th July 2022 14th Sep 2022
INSTRUCTION TO CANDIDATES:
1. Students are advised to underpin their answers with the use of references.
(Cited using the Harvard Name System of Referencing)
2. Late submission will be awarded zero (0) unless Extenuating Circumstances (EC) is upheld.
3. Cases of plagiarism will be penalized.
4. The assignment should be submitted on-line through LMS.

Acknowledgement
I would like to express thanks and gratitude to my lecturer “Mr. Rajitha Silva” for hi guidance
and support in completing this module successfully
I would like to extend my gratitude to APIIT and my parents for the guidance and support
throughout the course.
Moreover, I would like to extend my thanks to fellow classmates who helped me in completion
of this module.
Table of Contents
Company overview......................................................................................................................................1
1.0 Internal-environment Analysis..............................................................................................................2
1.1 SWOT Analysis.................................................................................................................................2
1.2 Johnson’s Cultural-Web....................................................................................................................7
1.3 Porter’s Value-chain Analysis...........................................................................................................8
2.0 External-Environment Analysis...........................................................................................................11
2.1 PESTEL Analysis............................................................................................................................11
2.2 Porters Five-force-analysis..............................................................................................................17
3.0 Trends..................................................................................................................................................19
3.1 Post-covid increase in buying coffee online....................................................................................19
3.2 Post-covid trend of preparing coffee at home change in coffee-culture of having coffee outside....19
3.3 Post-covid lack of social-outing.......................................................................................................19
3.4 Increase in health-conscious consumers..........................................................................................19
3.5 Coffee-Trends Among Millennials..................................................................................................20
4.0 Challenges...........................................................................................................................................21
5.0 TOWS-Matrix.....................................................................................................................................27
References.................................................................................................................................................33
Appendix...................................................................................................................................................39
Table of figures
Figure.1 Business-model canvas (The Business Model Course Hero, 2022)................................................1
Figure.2 Segment-breakdown (Pereira, 2021).............................................................................................3
Figure.3 US-RTD Market (Ready to Drink Tea and Coffee Market Report, 2030, no date)..........................4
Figure.4 Coffee price (Financial Times, 2021)..............................................................................................5
Figure.5 Coffee cultivation (International Center of Agriculture, 2022)......................................................6
Figure.6 Value-chain (Ashley, 2021)............................................................................................................8
Figure.7 Coffee-consumption (Fitch Solutions, 2021)................................................................................13
Figure.8 World-population (United Nations, 2015)...................................................................................13
Figure.9 Perceptual map (Thomas, 2021)..................................................................................................16
Figure.10 Porter's 5 forces (Muhammad Ilham, 2015)..............................................................................17
Figure.11 Revenue-Growth (‘CSIMarket’, 2022)........................................................................................21
Figure.12 Market-share (Rapier, no date).................................................................................................22
Figure.13 Stores (Forbes, no date)............................................................................................................23
Figure.14 Stores (Statista, 2021)................................................................................................................24
Figure.15 Presence (Knoema infographics, 2021).....................................................................................25

Figure.16 Global-Stores (FinanceOnline, 2020).........................................................................................25
Figure.17 TOWS-Matrix.............................................................................................................................27
Figure.18 Revenue-growth (Statista, 2021)...............................................................................................29
Figure.19 Market-share (Patrick, 2018).....................................................................................................31
Figure.20 Non-licensed store-growth (Gohil, 2021)..................................................................................32
Table of tables
Table 1 Application of SWOT.....................................................................................................................29
Company overview
Starbucks is an American coffeehouse headquarters situated in Seattle Washington. Starbucks is
largest coffeehouse-chain in world founded 1971 Jerry, Gordon ,and Zev By early 1980
Starbucks had opened four stores in Seattle, later scattered among different geographic areas
around world. Today Starbucks operating 17,133 company and 16,700 licensed stores
worldwide.
Figure.1 Business-model canvas (The Business Model Course Hero, 2022)
1
1.0 Internal-environment Analysis

1.1 SWOT Analysis
Strengths (High)
Brand-image, Premium-quality (Etienne Musonera, 2021)

Well-managed supply-chain, Excellent customer-service (Abhijeet Pratap, 2022)
Acquisition of 6 companies, Strong financial-performance Gupta, 2022)
Company has strong financial-performance with a revenue $29 billion, profit $4.2 billion fiscal year
2021 (Starbucks Corporation - Financial Data - Annual Reports, 2021)
Company strong brand in beverage-industry, total Licensed-stores internationally for year ended
2020 accounts 16,023 (Starbucks Corporation - Financial Data - Annual Reports, 2021)
Weaknesses (Moderate)
High-priced products, Imitation of products (Abhijeet Pratap, 2022)

Generalized standard for most products, doesn’t align with cultural-standards or doesn’t associate
with consumer-preferences.(Gupta, 2022)
Lack of international-expansion, saturation of stores in US can be major weakness in future.
(Manela, no date).
Company mainly fueled by US-markets, falling behind international-expansion of Dunkin-Donuts,
McDonald’s. Starbucks diminished attention on Australian, European Market. (Manela, no date)
2
Figure.2 Segment-breakdown (Pereira, 2021)
Opportunities (High)
Potential expansion into emerging-markets, Possibility of diversify product-mix, Possibilities of

cobranding, partnership with other brands (Abhijeet Pratap, 2022)
Possibility of introducing new products
Could exploit the latest coffee-trends, technology
possibility to adopt price-differentiation
could strengthen online-channels
(Gupta, 2022)
Demand increasing for specialty-coffee, cold-brew, nitro-coffee expected to grow 25.1% next 6
years, US$1.63billion by 2025 according to Grand View Research. (Jurevicius, 2021)
3
Figure.3 US-RTD Market (Ready to Drink Tea and Coffee Market Report, 2030, no date)
The RTD coffee segment anticipated to expand fastest CAGR 6.4% from 2022-2030.. (Ready to
Drink Tea and Coffee Market Report, 2030, no date)
Threats (Moderate)
Heavy competition from rivalry-brands

Changes in consumer-trends and coffee-culture
Post-covid effects
Cheaper imitation of company’s premium-products
(Abhijeet Pratap, 2022)
Coronavirus, pandemic had significant impact on company financial-performance, workforce,
customers, operations.
(Rupesh Kumar, 2021)
Raw coffee-beans price rise
(Gupta, 2022)
Price of unroasted Arabica-coffee-beans has hiked after 2022, extreme weather-conditions which
4
could adversely affect company (‘Starbucks SWOT Analysis 2022 | SEOAves’, 2021) (Jurevicius,
2021), social-trend over eating healthier-food, avoiding caffeine could pose potential threat in future.
(Jurevicius, 2021).
Figure.4 Coffee price (Financial Times, 2021)
5
Figure.5 Coffee cultivation (International Center of Agriculture, 2022)
“This map shows changes projected for 2050 viability of Coffee-arabica crop due to climate-change”
(Ovalle-Rivera et al.,2015). Globally 50% decline predicted over same period. (‘Billy Clarke’, 2016)
6
1.2 Johnson’s Cultural-Web
Stories Symbols
First Starbucks was set up In 1971 Company logo was
in Seattle’s historic market woman with brown
in 1971 background, in 1989
Company brought the woman was with green
Italian coffeehouse background, in 2011
tradition to US in 1983 Starbucks name removed
from Company-logo
Paradigm Power
Ritual / Routines
Strong anti-discrimination Challenging company
Many types of awards policy
(daily, monthly) Delivering best of quality
Strong-culture
Flexible-schedules, Dignity, respect
Friendly-environment Quality-Focused
HR is highly responsive
Employee health- Rules, Protocols for everyone,
insurance all treated equally
Organization-control:
franchising/standardization
Control
Structure
Bureaucratic-control
Company consists of
Extremely strict rules, power culture - Brand
protocols
Standardized bureau-
Bonus, awards for structures
recognition
Annual structured-
Focused on higher sales meeting of shareholders
(Marina Duarte, 2020)
7
1.3 Porter’s Value-chain Analysis
Figure.6 Value-chain (Ashley, 2021)
8
Inbound-Logistics
- Company obtains finest-quality coffee from LatinAmerica, Africa, Asia. Value-

added to these beans by roasting, packaging
Operations
- Starbucks operate in more than 80markets, with 32,000stores. company generated

81% revenue during first-half 2022 (company-operated stores). 11% (licensed-
stores)
Outbound-Logistics
Company has no presence of intermediaries in selling product, product is sold

directly in stores.
Marketing, Sales
Need based marketing-activities for new product-launches.
Service
Building customer-loyalty. Service-training for employees, high-value offered by

baristas.
Infrastructure
well-designed, pleasing stores with good customer-service, employees to ensure

high-quality service.
Human Resource Management
Benefits, incentives, training-programs conducted for employees for motivation.
9
Technology-Development
High-tech machines for coffee-making. Apple’s iBeacon-system, customers can

order drink though Starbucks Mobile-App
Procurement
Starbucks handles all of procurement for its own coffee-beans, sees this as
competitive-advantage.
(Prableen Bajpai, 2022)
10
2.0 External-Environment Analysis

2.1 PESTEL Analysis
Political (High)
 Tax-policies, employment-laws can have impact on company

 Government of countries that Starbucks-operating in will have different country specific
laws. (Detailed Starbucks Pestel EdrawMax, 2021)
 Government of U.S launched interest-free loan of $2million, $10million fund for loss
faced during covid.(US.gov.publications, 2022)
 The US-Brazil agreement of trade and economic cooperation where green-coffee-beans
imported from Brazil-US are tariff-free. (US.gov.publications, 2022)
 Fluctuating taxation-policies on farmers in bean-producing countries can increase rate
Starbucks would buy coffee-beans (Strategic Issues, 2021)
Economical (High)
 Most developing-countries having emerging-economies

 Increase cost of raw-materials, coffee labor-charges can become a threat (Detailed
Starbucks Pestel EdrawMax, 2021)
 Growth-rate of US 2021 was 5.7%. predicted decline 4% in 2022. 2.6% in 2023.
 Inflation in US is at high 7.5% inflation-rate would increase product prices, reducing
affordability of customers. (Kiara, 2022)
 Rental-rates in US have increased 1.2%. Stores in US will be impacted highly.(Kiara,
2022)
 Coffeehouse US forecasted to grow at CAGR 4.34% from 2022-2025. (Kiara, 2022)
 Labors demanding higher wages and coffee-beans become costly. Arabica-coffee and
11
other sellers, jumped 76% in 2021. This is consequence of extreme weather. Arabica
coffee-beans has risen 40% since 2020. (Hunter, 2022)
 Price-crisis of coffee industry might continue for next few decades. (Peter Kettler, 2019)
Social (High)
 Changed preferences, lifestyle affect company

 Items by Starbucks are expensive compared to alternatives (Detailed Starbucks Pestel
EdrawMax, 2021)
 Coffee-Consumption rising US with 60% people prefer coffee than other beverage, there is
increased trend drive-through, app-based ordering by 30% because of covid-safety. 30%
rise consumption of coffee by millennials in China, 58% people drink instant-coffee
weekly once, this trend is an opportunity to increase sales. (Kiara, 2022)
 Coffee-consumption growth, This mainly due to lifestyle changes, social-media, rising
income, innovations, changing-habits and population-growth. (Fitch Solutions, 2021)
Figure.7 Coffee-consumption (Fitch Solutions, 2021)
12
Figure.8 World-population (United Nations, 2015)
Technological (Moderate)
 People having access to delivery-services from home, use of smartphone-apps.

 Incorporation of technology in coffee making, brewing, farming . (Detailed Starbucks
Pestel EdrawMax, 2021)
 US spend extensively on R&D.US $606billion in 2020. Many technologies are
revolutionizing way retailer coffee-chains operate. self-service kiosks (Kiara, 2022)
 Coffee-chains uses artificial-intelligence to predict demand, QR-enabled menus becoming
popular, customer will scan QR-code, menu is received on the phone. (Kiara, 2022)
 Introducing coffee-brewing machines, Matrena-espresso. Installation of Merry-Chef ovens,
handheld ordering-devices. (Starbucks for 2030, 2022) (Starbucks Innovation, 2022)
Environmental (Low)
13
 Company’s sales, raw-materials growth suffer due to diseases, insects, natural-disasters,

climate, Company could work on recyclable-packaging to be environmentally-friendly to
attract green-consumers. (Detailed Starbucks Pestel EdrawMax, 2021)
 Washington food-waste laws, illegal for Companies dumping food-waste they should
compost, many states banned-plastic, banning Styrofoam-cups that are used extensively in
coffee-industry. China bans plastic-bags and plastic-straws in 2022. These decisions can
hike cost of coffee chains, replacements needed for cups. packaging.(Kiara, 2022)
 Companies stay aware of change in environmental-laws and preferences of government in
sustainability of operating country.
Legal (High)
 Company must adhere employment-rules, product safety-regulations, labor-laws,

consumer-rights, proposed by countries Starbucks is serving. Licensing-regulations, trade-
laws which can hinder or provide opportunity for expansion of company. (Detailed
Starbucks Pestel EdrawMax, 2021)
 Antitrust-laws restricting companies from engaging mergers to reduce competition.
(Federal Trade Commission, 2022)
 Fair-Labor-Standards Act 1938 (as Starbucks pay hourly, must pay minimum-wage-rate),
Americans with Disabilities Act 1990 (because it’s company prides itself on employing
diverse people, including disabled) (Kelly, Marce & McGowen, Jim, 2012).
14
Figure.9 Perceptual map (Thomas, 2021)
15
2.2 Porters Five-force-analysis
Figure.10 Porter's 5 forces (Muhammad Ilham, 2015)
Competitive-rivalry – Strong-Force
switching-cost is low, main competitors Costa, McCafé, Dunkin Donuts etc. market full of
specialty-coffee Brands. These brands sell differentiated products. (Team, 2022)
Bargaining-power of customers – low-Force
Consumers have low switching-cost between coffee-shops, high availability of substitute-

beverages. (Team, 2022)
Bargaining-power of suppliers – Low to Moderate-Force
Raw-materials, sourced from external farmers. These can be procured from any suppliers that
follow standards. Starbucks is large-multinational, has high bargaining-power. (Team, 2022)
Threat of substitutes – Strong-Force
Smoothies, tea, other beverages are main substitutes of Starbucks. These substitutes have great
potential to replace Starbucks and affordable. (Team, 2022)
Threat of new-entrants – Low to Moderate-Force
16
The supply-chain cost, operating-cost is barrier, for any new-entrant building brand equity as
Starbucks is hard process. (Team, 2022)
17
3.0 Trends
3.1 Post-covid increase in buying coffee online
On a survey, online-sales of coffee were on rise 21% after covid, respondents said that they are
buying coffee online more compared to 2019. (Vanessa L Facenda, 2020)
3.2 Post-covid trend of preparing coffee at home change in coffee-culture of having

coffee outside.
Consumers spending more time home, 45% tested new-brewing method at home. 33%
experimenting with new coffee techniques and recipes at home during 2020. The majority also
said they like to improve their home barista skills, with 46% desire to know more about how to
brew coffee at home. (Vanessa L Facenda, 2020)
3.3 Post-covid lack of social-outing

In post-pandemic world people have become more comfortable with less socializing at cafes or
coffeeshops (Alex, 2021)
3.4 Increase in health-conscious consumers

Main-reason for rise in consumers of decaffeinated-coffee today people looking for ways to
establish more healthy consuming-habits and they are specifically looking for more natural-
products. (Wallengren, 2021)
43% of US consumers say they try to eat healthy without strict-diet, Two-thirds of adults prefer
foods containing vitamins, minerals”, In UK, 71% plan to change their diets sustainably since
corona-pandemic. (Wu, Yeh and Hsiao, 2011)
“Consumers are making smarter choices to live healthier-lifestyles. looking for functional-
beverages. awareness of health issues as obesity and diabetes. many consumers are seeking
healthier, all-natural products that are low-sugar and calories. Through smart-devices, consumers
can learn about products” (‘Global Data’, 2020)
There has been interest in botanicals, plant-based milks and adaptogens, followed by natural-
ingredients, low-calorie drinks and energy. (Janie, 2020)
18
3.5 Coffee-Trends Among Millennials
Millennials are powerful as they are active in social media and could share feedbacks. 80%
millennials know the importance of “sustainable coffee”, 86% demographic are willing to pay
more for sustainability, coffee companies should include sustainability in packaging to attract
millennial audience. Green certification, Fairtrade added to packaging. The millennial coffee
culture focus on quality coffee. Millennials highest priority is quality of product. (Grant, 2021)
19
4.0 Challenges
 Competitive-rivalry- chief rivals are Dunkin-Donuts, McDonald ‘s, Nestle in US, Costa-
Coffee from UK etc. Starbucks priced higher than competitors giving rivals cost-
advantage. (Strategic Issues, 2021) Price of McDonalds and Dunkin’ 35%, 10% lower
than Starbucks. As Starbucks buys highest-quality beans which leaves company with
high raw-material costs. (Etienne Musonera, 2021). Starbucks is sensitive to economic-
turndowns when Starbucks sales dropped consumers going to low-expensive brands like
Dunkin’ , McDonald’s.” (Etienne Musonera, 2021)
Figure.11 Revenue-Growth (‘CSIMarket’, 2022)
20
Figure.12 Market-share (Rapier, no date)
 (Different consumer-preferences impacting Starbucks) Starbucks policy of non-

franchising- can be a concern. Franchising would allow company to open new stores
with less-risk, make considerable profits. Because of this firm’s research-development
costs would fall making use of franchisee-knowledge of local-market in terms of
geographic, psychographics, demographics, local-country regulations and make products
according to local-responsiveness. (Strategic Issues, 2021)
21
Figure.13 Stores (Forbes, no date)
Figure.14 Stores (Statista, 2021)
22
 (U.S Economic-downturn impact on Starbucks) Starbucks-dependency on United-

States for revenue - Company got difficulty positioning in international-markets,
Australia, Europe Starbucks revenue highly dependent on U.S economy therefore stores
has been badly affected by U.S lock-down enforcements, company has to close down
low-performing stores to make-up for capital loss. Evidence-shows “2019, Starbucks
earned $18.23B in U.S., $7.886B internationally, 70% of Starbucks revenue generated in
United-States, competitors, like McDonald’s, had revenues from international-markets
accounted 36.5% of its sales.” U.S. sales comprises nearly 70%, overdependence on U.S.
economy mean any changes in legal, economic conditions in US will directly impact
company revenue, profit-margins. (Etienne Musonera, 2021)
Figure.15 Presence (Knoema infographics, 2021)
23
Figure.16 Global-Stores (FinanceOnline, 2020)
Opportunities
 Growth opportunities in emerging-market- According to situational-Analysis there are

many opportunities. emerging-markets of Brazil, India, China, South, Africa, Mexico
with growing middle-class population offer significant opportunity to expand and grow.
Starbucks should be relevant to customer for growth in these markets, its management
should given freedom to operate to tailor store format, products. (Geereddy, 2013)
 Opportunities for offering healthy-products - as consumers become more health-
conscious, tea, fresh juice product-mix could be introduced as Starbucks coffee-culture
may not be widely-accepted in some countries.(Janie, 2020) (Etienne Musonera, 2021).
On January-2020 company launched Starbucks-Coffee with Essential-Vitamins, Golden
Turmeric. The company recently announced plans to expand plant-based options, migrate
toward a more environmentally-friendly menu. In interview with Bloomberg-News,
Kevin Johnson, CEO of Starbucks, said, “Alternative milks will be big part of solution.”
Starbucks currently offers dairy-alternatives soy, coconut, almond-milk. (Janie, 2020)
 Expanding product-portfolio- American/European coffee-culture is different from Asia,
other regions. Company has opportunities to expand its menu, people (middle-class) also
look for cheaper alternatives and variety in beverages, food. Many people spend cash at
Starbucks in morning, company failed to attract people during lunch, evening. This will
24
be great opportunity to expand menu to attract consumers for lunch and evening.
(Etienne Musonera, 2021)
25
5.0 TOWS-Matrix
Figure.17 TOWS-Matrix
Using Strength to capitalize on opportunities:

Market brand heavily using company’s global brand-image
Extend product-mix maintaining quality
Overcome weaknesses to capitalize on opportunities:
Set medium-price ranges to the products to attract middle-class, to increase sales in Asian
markets, other markets
Use strengths to avoid threats:
Focus on marketing to attract, retain consumers to overcome competitive-pressure of other
popular coffee-brands, advertise ethicality and quality of Starbucks
Reduce weaknesses to avoid threat:
Release range of middle-range or low-cost products to overcome competitors-cost-
challenges
26
Recommendation
 Market-development:
Expansion-schemes to enter Europe-Australian-international Markets. Starbucks should conduct

intense-market-research, marketing in these markets, use specialized innovative-approach instead
of traditional, establish itself in these markets. Through market-development, company can enter
into emerging markets such as Brazil, India, China, South-Africa, Mexico for an additional
penetration, stay relevant to local customers. Company should do this in organic way transferring
its core-competencies country to country. (Geereddy, 2013)
SWOT
Strengths Weaknesses
Have Strong financial status $29 billion Entirely depending on U.S which is
revenue for expansion risky if economic-turndowns happen
in U.S-economy
Opportunities Threats
Growing demand for specialty-coffee in Falling behind international-

Emerging-Markets expansion of Rivals
Table 1 Application of SWOT
27
Figure.18 Revenue-growth (Statista, 2021)
Limitations- High-cost in developing effective market-researches, continuously-navigating

different economies, cultures, would be required as company may quickly be impacted with
local-political issues, economic-problems. Continuous-navigation is costly, time-consuming.
(Etienne Musonera, 2021)
 Multidomestic-Strategy:
Multidomestic strategy would give Starbucks Low-global-integration, high-local-responsiveness.

When company enters emerging-markets, they need to tailor menus, operations, management-
style, stores, introduce localized product-mix and price-points as per needs of locals, to match
lifestyle and tastes.
28
PESTEL
Social element is strong, mainly: Most of markets shifting tastes, lifestyle therefore providing
more snacks, beverages, healthy product offerings, tea, fresh juice products could be included in
product-line. This helps competitive advantage and survive changing-needs of consumers in
different geographies. Sores are mainly for breakfast enthusiasts, failed to tailor-made products
to local responsiveness, people prefer having lunch, dinner items therefore company should
consider offering items such as sandwiches, wraps, salads as Starbucks 60% earnings from
breakfast items and does not offer anything for casual diners. Rival chains offer convenient
meals. Starbucks should expand menu to suit locals, offer on-the -go food options according
customer food-preferences of different regions. Starbucks should offer cheaper drink alternatives
to capture international market from competitors Dunkin Donuts, McCafé etc. (Etienne
Musonera, 2021)
Five-Force Analysis
Competitive-rivalry element is – Strong-Force, as Starbucks giving competitors advantage to set

lower prices, people easily switch to competitor’s product. Company facing challenge of
competition involving low-cost sellers, Starbucks should consider mid-price level coffee,
offering flexible-prices according to requirements of locals. Having different pricing-strategies
for different-regions to suit local needs, for an example having bundle-pricing. High local-
responsiveness as per multi-domestic strategy, and company should have low global-integration
with freedom to set tailor-made pricing-strategies for different regions. (Etienne Musonera,
2021)
29
Figure.19 Market-share (Patrick, 2018)
Starbucks policy of non-franchising- problems that comes with non-franchising could be

mitigated through multi-domestic strategy. The company should customize their methods,
processes and operations for specific country. This gives each country management the freedom
to adapt to local-needs. the country management would understand, have knowledge on local
laws, customs, regulations, tastes which helps to mitigate high market-research costs.
30
Figure.20 Non-licensed store-growth (Gohil, 2021)
Limitations- tailor made products have its consequences of consumers being reluctant to
purchase, not like the product. These new items can come with high cost of marketing,
advertising as u need to increase awareness among consumers. Starbucks need to sacrifice scale-
efficiencies and economies-of-scale for local responsiveness.
31
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web/ (Accessed: 8 September 2022).
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https://www.slideshare.net/MuhammadIlham32/starbucks-porters-case-study?from_action=save
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starbucks.htm (Accessed: 17 August 2022).
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August 2022).
37
Appendix
Starbucks is an American coffeehouse headquarters situated in Seattle Washington. Starbucks
the largest coffee chain in the current word the company was opened in 1971 by Jerry Baldwin,
Gordon Bowker, and Zev Siegl. Around the year 1980 Starbucks opend and operated four stores
in Seattle and later scattered among different countries geographic across the globe. In the
current day Starbucks operated 17,133 company and 16,700 licensed stores worldwide. Kevin
Johnson the current CEO of the company ,
the stores are not just coffeehouse it has become more than than, more like a third place of work
and home. The specialty coffee brand operating in 83 markets sellin coffee, tea and many
beverages and many variety of high-quality products stores. The company is also popular in
selling coffee and tea under their trademark. In addition to their main coffee brand the company
sells many goods and services below these brands Seattle’s Best Coffee, Teavana, Ethos,
Starbucks Reserve Evolution Fresh, and Principles.
PESTEL
Political
Facing regulatory pressures in its home market in United States because great scrutiny of
business processes that multinationals who are based inb US are subjected to now. (Prachi
Juneja, 2015)
The fluctuations in taxation policies levied on farmers in the bean producing countries can
consequently increase the rate at which Starbucks would buy coffee beans which would certainly
be passed on to consumers. International trade regulations and tariffs related to imports and
exports resulting in efficiency loss and extra charge borne by the consumers. The government
instability and political turmoil or civil wars in countries has a direct impact on taxation and
legislation. (Strategic Issues, 2021)
Economical
Labors demanding higher wages and coffee beans become more costly. This is contributing to
the inflation pressure of the global economy. The arabica coffee and the other sellers, jumped
76% in 2021. This is a consequence of extreme weather conditions in top producer countries,
38
which is expected to continue due to global warming in the coming years. The arabica coffee
beans has risen 40% since 2020. To cover this inflation Starbucks continue to raise prices.
(Hunter, 2022)
The price crisis of the coffee industry might continue for the next few decades. The price of
coffee changes every three minutes. High volatility of coffee pricing is due to weather
conditions, currency fluctuations, basic dynamics of supply and demand, rising cost of fertilizers.
Lower employment of farmers as lower prices are being paid to these families which is
insufficient for survival this is reducing coffee production. (Peter Kettler, 2019)
Unemployment-rate is falling. It was 3.9% anticipated to fall in 2022 3.8%, 3.5% in 2023.
China's growth rate 2021 was 8.1%. anticipated 5.1% in 2022, 2023. Unemployment rate in 2021
was 5.1% It has increased by two points to 5.3% in 2022. Reduction in growth-rate, with lack of
positive-change in terms of employment should lower consuming coffee at restaurants, casuing
sales loss. (Kiara, 2022)
Social
Virginia Tenpenny the board member said that “ company was committed to enhancing the
wellbeing of 1 billion people connected with the company by 2030, committed $30 million by
2030 for communities where Starbucks operates and 1 million women and girls by 2030.”
(Starbucks for 2030, 2022)
Coffee consumption growth in emerging markets will be the key driver of sustained global
consumption growth over forecast period. This is mainly due to lifestyle changes, social media,
rising income, product innovations, changing habits and population growth. (Fitch Solutions,
2021)
Technological
Introducing coffee brewing machines and the new Matrena espresso. Installation of MerryChef
ovens and handheld ordering devices. Launching App to control shifts virtually are few examples
of future technology deployment at Starbucks stores. (Starbucks for 2030, 2022) (Starbucks
Innovation, 2022)
Legal
39
The HR related laws that affect Starbucks are Fair Labor Standards Act of 1938 (as Starbucks
have employees that are paid hourly and must pay mandated minimum wage rate) and the
Americans with Disabilities Act of 1990 (because it is a company that prides itself on employing
a diverse people, including disabled) (Kelly, Marce & McGowen, Jim, 2012). Starbucks should
comply to Child labor laws, discrimination, working conditions, health and safety, human rights
and fair trade laws are all few legal requirements to certify responsibly produced coffee in supply
chain of the company. (Sally Ho, 2020). In addition, company should comply with legislations
on food safety (contamination, preservatives and packaging), food hygiene and consumer
protections acts especially those in the operating countries.(정, 2013).
China include, labor-laws Civil-Procedure-laws. companies should enter in the employment-

contract since end of first-month after hiring employee, if company fails then it should pay
doubling the fixed salary. Companies should not carry mass-layoffs. If lay-off needed for 10%
workforce, need approval from labor-bureau, China’s Data-Security-Law, those companies
leaking crucial data can confront heavy-fines, also jail. Companies shouldn’t be allowed to
transfer data to native countries in the absence of approval from government.(Kiara, 2022)
US has strict antitrust-laws restricting companies from engaging mergers with intention to reduce
competition, it’s illegal under Sherman Act to fix-prices, divide-markets, or rig-bids it’s
mandatory for restaurants to publish calorie, nutritional information for all items on menu.
(Federal Trade Commission, 2022)
Environmental
Commits to providing reusable cups by 2025, “We have a bold long-term sustainability vision
and ambitious goals for 2030,” said Starbucks president and CEO, Kevin Johnson in the 30 th
annual meeting at company’s 2030 planet positive goals, He also added “To help reach the
company’s goal of reducing waste by 50% by 2030, Starbucks is shifting away from single-use
plastic. The company is also launching a new Starbucks Partner Waste and Recycling App,
Volvo-branded electric vehicle (EV) chargers, powered by ChargePoint, will be available at up
to 15 Starbucks stores. By 2030, Starbucks aspires to lead the retail industry in decarbonization
solutions, including Electric Vehicle charging and onsite solar availability at stores and in
adjacent locations. Starbucks plans to continue expanding its solar pilot locations to 55 new
40
stores this year.” (Commitment to a Planet Positive Future, 2022) . Reforestation, water
replenishment, plant based menu, waste management, and responsible operations Are plans for
2030 by the company. (Sustainable Future, no date)
SWOT
Strengths
The company is a strong a brand in the beverage industry, the current size, volume and the
number of growing customers will lead to further growth overtime, the total number of Licensed
stores internationally for the year ended September 2020 accounts to 16,023 which (Starbucks
Corporation - Financial Data - Annual Reports, 2021) can be expected to grow further from
2022 onwards due to the brand value and popularity. Starbucks expansion of 55,000 stores in
over 100 markets by 2030 (Starbucks for 2030, 2022) (Starbucks Innovation, 2022).The
company has a strong financial performance with a revenue of $29 billion and a profit of $4.2
billion in the fiscal year 2021 (Starbucks Corporation - Financial Data - Annual Reports, 2021)
this can be expected to grow further due to Starbucks extensive global supply chain and
acquisition of 6 companies which has proven to be quite successful. (Waltman, 2021). Expects
ongoing non-GAAP EPS growth of 10% to 12% in 2023 and 2024. (Starbucks Vision for the
Future, 2020). The brand and revenue is also expected to grow due to Starbucks innovative
merchandises and food items for an example ice cubes made of coffee which attracts consumers.
(Waltman, 2021). Reinvestment strategies and well planned strategic decisions can be a
advantage to the company in the future.(Business Strategy Hub, no date). “The company’s global
store portfolio expected to grow by approximately 6% annually starting in FY22, fueled by
impressive new-unit investment returns, At the enterprise level, on annual basis starting in 2023,
Starbucks expects revenue growth of 8% to 10% ”.(Starbucks Vision for the Future, 2020)
Starbucks confirms to expand 55,000 stores over 100 markets by 2030, and with over $25B
return in the last four years, Starbucks recommits to return another $20B by 2025. (Starbucks, no
date). Starbucks driven to elevate customer experience by beverage innovation and expanding
digital customer relationships.(Starbucks, no date). Starbucks has been listed on the Fortune’s
top 100 best workplaces to work the employees get healthcare, discounts, and other benefits, this
is done under the philosophy that If employees are treated well then customers get better services
41
in the future, the company also provides loyalty programs such as earning star points to its
customers to which helps to grow sales. (Waltman, 2021)
Weaknesses
Starbucks relies heavily on brand loyalty as the coffee costs are higher than competitors, due to
the arabica unroasted coffee prices statistics for 2030 higher prices, if the world has to face an
economic crisis in the future this will greatly influence customers buying decisions. Company is
mainly fueled by the US markets and is falling behind to international expansion of Dunkin
Donuts and McDonald’s which is expected to growth in the future. The lack of international
expansion and saturation of stores in US can be a major weakness in the future. (Manela, no
date). Starbucks diminished attention on Australian and European Market. Further, Starbucks has
invested large capital into market penetration, product development and distribution channels
that could eventually cause fragility in the market and cause slow growth in the future.
(Starbucks PESTLE and SWOT Analysis, no date). Starbucks got accused of failing to pay taxes
in Europe, such negative accusations could damage the Brand’s goodwill. Also the company
failed to follow the coffee and farmer equity practices and the company has also faced
allegations in mistreatment of employees which could damage brand image in long-term.
(Waltman, 2021). Unethical procurement practices and contamination and allergens.(Business
Strategy Hub, no date)
Opportunities
the company’s strong branding has made it an excellent candidate for expansion as the brand is
popular around the world they have great opportunity to expand after 2022. The success of the
brewing and espresso machines will create opportunities in the future. (Manela, no date). The
delivery service for coffee through Uber Eats, Grubhub, and Postmates this will be a good
capitalizing point for Starbucks as the growing customer demand for coffee around the worlds.
(‘Starbucks SWOT Analysis 2022 | SEOAves’, 2021). Growing demand for specialty coffee,
cold brew and nitro coffee expected to grow by 25.1% for the next 6 years and US$1.63 billion
by 2025 according to research by Grand View Research. (Jurevicius, 2021)
The RTD coffee segment is anticipated to expand at the fastest CAGR of 6.4% from 2022 to
2030.. (Ready to Drink Tea And Coffee Market Report, 2030, no date)
42
Threats
The price of unroasted Arabica coffee beans has hiked dramatically over the years and the
pattern may continue after 2022 onwards as well dur to extreme weather conditions which could
adversely affect the company. (‘Starbucks SWOT Analysis 2022 | SEOAves’, 2021) (Jurevicius,
2021). The social trend over eating healthier food and avoiding caffeine could pose a potential
threat in the future. (Jurevicius, 2021). Executives may retire sooner due to their age and this
could weaken the company’s management capabilities. This already happened when Howard
Schultz left Starbucks in 2000. (Jurevicius, 2021)
“The increase in temperatures will mean that coffee could no longer be grown in some areas.
This map shows the changes projected for 2050 in the viability of the Coffea arabica crop due to
climate change” (Ovalle-Rivera et al., 2015). Globally a 50% decline is predicted over the same
period. The most likely outcome would be a drop in quantity and a rise in prices. (‘Billy Clarke’,
2016)
TOWS Matrix elaborated
Using Strength to capitalize on opportunities:
Market brand heavily in less penetrated areas using company’s global brand image
Extend product-mix at the same time maintaining the on the quality of the company-
products
Partner with other brands for easy penetration into markets Asia, Europe, Australia. These
partners could benefit by enormous capabilities of Starbucks as well.
Overcome weaknesses to capitalize on opportunities:
Set medium price ranges to the products to attract middle-class who been moving towards
competitor’s products, selling affordable-prices to increase sales in Asian markets, other
markets with high proportion of middle class population.
Use strengths to avoid threats:
Focus on marketing to attract, retain consumers to overcome competitive-pressure of other
43
popular coffee brands such McCafé, Dunkin Donuts.
Marketing, adopting to suit millennial-generation-preferences and new coffee-trends. Doing

so to capitalize on changing demographic trends, lifestyle, post covid situational changes.
Advertising quality of products to differentiate from these brands, this will reduce imitation-
challenge faced by company.
Ethical-side of company could be marketed to reduce competitive-pressure.
Reduce weaknesses to avoid threat:
Release range of middle range or low-cost products to overcome cost challenges from
competitors.
Marketing quality of Starbucks premium-products in order to overcome threat of cheaper-

imitation of Starbucks-products by other-brands.
VALUE CHAIN ANALYSIS elaborated
Inbound-Logistics
Company obtains finest-quality coffee from LatinAmerica, Africa, Asia. Value-added to

these beans by roasting, packaging which helps to increase selling-value. These coffee-
beans are sent to distribution-centers that are company-owned. The procurement isn’t
outsourced ensuring high-quality standards right from starting-point.
Operations
Starbucks operate in more than 80markets, with 32,000stores. These are either direct
company-owned or licensed-stores. According financial-reports 2020, company generated
81%net-revenue during first-half 2022 through its company-operated stores. And 11%
through licensed-stores.
Outbound-Logistics
Company has no presence of intermediaries in selling product, product is sold directly in

stores.
44
Marketing, Sales
Starbucks focus on giving high-level of customer-service, high-quality product than

spending on marketing. Need based marketing-activities are carried out by company
during new product-launches.
Services
Company focuses on giving unique Starbucks Experience. Building customer-loyalty

through in-store customer-service. Service-training is key in the company value-chain,
offerings made unique and high-value by baristas.
Infrastructure
Starbucks employs managers for its corporate offices, store managers for maintaining well-
designed, pleasing stores with good customer-service. Company employs dedicated team
of green aproned employees to ensure high-quality service.
Human Resource Management
Employees motivated through benefits, incentives; labor turnover is very low. There are
variety of training-programs conducted for employees in setting of work-culture, which
keeps its staff motivated, efficient.
Technology-Development
Company well-known for use of technology; Company uses high-tech machines for
coffee-making-process. Established several-platforms to obtain feedbacks from customers,
company uses Apple’s iBeacon-system, customers can order drink though Starbucks
Mobile-App and get notification of readiness when they walk in store.
Procurement
Starbucks handles all of procurement for its own coffee-beans, company sees this as
competitive-advantage.
(Prableen Bajpai, 2022)
Porters Five-force-analysis elaborated
45
(Muhammad Ilham, 2015)
Competitive-rivalry – Strong-Force
Starbucks belongs to specialty-coffee industry which is one of the highest-types. It belongs to

food-industry, switching-cost is extremely low, when it comes to differentiation Starbucks main
competitors Costa, McCafé, Dunkin Donuts etc. provides equally differentiated products as
Starbucks. U.S market is filled with specialty-coffee-Brands. (Team, 2022)
Bargaining-power of customers – low-Force
Consumers have low-switching-cost between coffee-shops and high availability of substitute-

beverages. Vending-machine, home-brewed coffee from local-roasteries, chances of buyers
getting recipes, preparing for themselves. However, Individual-purchases are small compared to
Starbucks’s total-revenue, this lack of cohesive behavior is Indicator of little barraging-power of
buyers. And brand-equity, high-quality-experience Starbucks gives will make consumers have
weak-influence on business. (Team, 2022)
Bargaining-power of suppliers – Low to Moderate-Force
Starbucks do not cultivate its raw-materials rather it sources it from other farmers as per required
standard and quality. They follow Coffee and Farmer Equity (C.A.F.E) Practices that allow them
to grow tea, coffee, cocoa and other raw-materials in sustainable environments. These can be
procured from any suppliers that follow standards. Starbucks in a large-multinational, therefore
gets more bargaining-power over its suppliers (Team, 2022)
Threat of substitutes – Strong-Force
Smoothies, tea, other beverages are main substitutes of Starbucks. These substitutes have great
potential to replace to replace Starbucks due to similar post-consumption effects. These are
comparatively affordable, people have home-made options such as instant-coffee, Nescafe, many
own coffee machines at home. (Team, 2022)
Threat of new-entrants – Low to Moderate-Force
The supply-chain-cost, operating cost is barrier. Besides, for any new-entrant building brand
equity as Starbucks is a hard and time-consuming process. Even though there are many new
46
cafes popping up in U.S market these coffee-shops are highly unorganized and unrecognized and
they do not pose direct threat to Starbucks. (Team, 2022)
47

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International business strategy

Assesment Hand Out Date Hand in Date

3. Cases of plagiarism will be penalized.

4. The assignment should be submitted on-line through LMS.

Figure.15 Presence (Knoema infographics, 2021).....................................................................................25

Figure.1 Business-model canvas (The Business Model Course Hero, 2022)

1.0 Internal-environment Analysis

Brand-image, Premium-quality (Etienne Musonera, 2021)

High-priced products, Imitation of products (Abhijeet Pratap, 2022)

Figure.2 Segment-breakdown (Pereira, 2021)

Potential expansion into emerging-markets, Possibility of diversify product-mix, Possibilities of

Heavy competition from rivalry-brands

Figure.4 Coffee price (Financial Times, 2021)

Figure.5 Coffee cultivation (International Center of Agriculture, 2022)

1.2 Johnson’s Cultural-Web

(Marina Duarte, 2020)

1.3 Porter’s Value-chain Analysis

Figure.6 Value-chain (Ashley, 2021)

- Company obtains finest-quality coffee from LatinAmerica, Africa, Asia. Value-

- Starbucks operate in more than 80markets, with 32,000stores. company generated

Company has no presence of intermediaries in selling product, product is sold

Need based marketing-activities for new product-launches.

Building customer-loyalty. Service-training for employees, high-value offered by

well-designed, pleasing stores with good customer-service, employees to ensure

Human Resource Management

Benefits, incentives, training-programs conducted for employees for motivation.

High-tech machines for coffee-making. Apple’s iBeacon-system, customers can

(Prableen Bajpai, 2022)

2.0 External-Environment Analysis

 Tax-policies, employment-laws can have impact on company

 Most developing-countries having emerging-economies

 Changed preferences, lifestyle affect company

Figure.7 Coffee-consumption (Fitch Solutions, 2021)

Figure.8 World-population (United Nations, 2015)

 People having access to delivery-services from home, use of smartphone-apps.

 Company’s sales, raw-materials growth suffer due to diseases, insects, natural-disasters,

 Company must adhere employment-rules, product safety-regulations, labor-laws,

Figure.9 Perceptual map (Thomas, 2021)

2.2 Porters Five-force-analysis

Figure.10 Porter's 5 forces (Muhammad Ilham, 2015)

Bargaining-power of customers – low-Force

Consumers have low switching-cost between coffee-shops, high availability of substitute-

Bargaining-power of suppliers – Low to Moderate-Force

Threat of substitutes – Strong-Force

Threat of new-entrants – Low to Moderate-Force

3.2 Post-covid trend of preparing coffee at home change in coffee-culture of having

3.3 Post-covid lack of social-outing

3.4 Increase in health-conscious consumers

3.5 Coffee-Trends Among Millennials

Figure.11 Revenue-Growth (‘CSIMarket’, 2022)

Figure.12 Market-share (Rapier, no date)

 (Different consumer-preferences impacting Starbucks) Starbucks policy of non-

Figure.13 Stores (Forbes, no date)

Figure.14 Stores (Statista, 2021)

 (U.S Economic-downturn impact on Starbucks) Starbucks-dependency on United-

Figure.15 Presence (Knoema infographics, 2021)

Figure.16 Global-Stores (FinanceOnline, 2020)

 Growth opportunities in emerging-market- According to situational-Analysis there are

Using Strength to capitalize on opportunities:

Expansion-schemes to enter Europe-Australian-international Markets. Starbucks should conduct

Growing demand for specialty-coffee in Falling behind international-

Figure.18 Revenue-growth (Statista, 2021)

Limitations- High-cost in developing effective market-researches, continuously-navigating

Multidomestic strategy would give Starbucks Low-global-integration, high-local-responsiveness.