Program – MSC Management

Module – Strategy

Table of Contents

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Executive Summary

Business policies and strategic management play a very significant role in attaining the objectives of the organization and setting the path for success. These strategies help to formulate the overall management within the organization in an effective manner. It also helps to achieve long-term success plans in a well-organized way. It guides the Managers to connect with the customers, generating the profits and managing the resources available in an optimal manner. These policies help to maintain the responsibilities as well as guides to the set the clear objectives. Business policies are closely related to the business strategies as it helps to put the strategy in action and help to overcome the problems related to the management.  This business report will present the strategic analysis of the “Starbucks”, which is a repudiated name in the coffee retail, the report will present the external as well as an internal environmental review of the company strategy. It will present the recommendations to eliminate the weak areas and achieve business goals.

Part –A   Starbucks Business Report

1.0.            Introduction

Business development is the process that is performed to achieve the objectives of the organization strategically. Further, to achieve better business profits and customer satisfaction is another objective. The main aim of business development is to provide the strategy to achieve these goals in the well-versed form. Firstly, it is required to turn the decision easy for the prospects that help to convert the opportunities in the clients. Then the next step is to deepen the engagement with the set goals and prospects and turn them into the qualified opportunities. Lastly, it is required to attract the potential buyers, influencers and referral sources through it.  A business strategy is a course of action and set of decisions which assist the entrepreneurs in achieving the specific goals (Alan, Barbara and Roberta, 2019).

The main objective of designing a business strategy framework is to provide the road map to make effectiveness. Additionally, perceiving and utilizing the opportunities, mobilizing the resources, securing the market position, meeting the challenges, and facing the business threats. Besides, directing the efforts and behaviour as well as gaining the command over the situation.

The business strategy report for the coffee retail company –Starbucks is analyzed in an analytical manner (Alan, Barbara and Roberta, 2019). Till 2015 the Starbucks was a leader in the retail coffee business with over $16 billion annual turnovers. Starbucks has its brand café in 60 countries along with this, Starbucks has also owned Seattle’s Best coffee, Torrefazione Italia, Teavana’s heaven of tea brands. Though the company has its well-established reputation in this business still, the organization is facing many business challenges in the past years. The annual turnover of the company has also slowed down. The company is facing many challenges, including competition in the speciality coffee segment worldwide. According to the reports until 2012 U.S.A was the top supplier of the coffee worldwide, but Brazil has given good competition and has developed its big market (Starbucks, 2019). Initially, Starbucks had a 50 % market share in the USA coffee market, but the increasing demand for Brazil coffee retail has put an effect on the market segment of Starbucks too.

The second biggest competitor for Starbucks is the Carbine coffee company. It has developed a big market in South Korea and the Middle East. Another competitor for the Starbucks is Mc -Donald and Dunkin donate who are themselves a big name in their speciality food products. They are serving coffee along with their products which are putting a significant impact on the business prospects of the organization.

Understanding the effects of the above factors and impact on the turnover of their company, the management of Starbucks is seriously taking strategic planning for achieving high business goals and better business profits. In this process, the organization is firstly focusing on employee satisfaction as the management believe that happy employee is the key to competitiveness and growth of the company. Most importantly, the business objectives cannot be achieved without the right workforce at the organization.

2.0.            External Environmental Analysis

As mentioned in the above section that Starbucks is facing many challenges in the coffee business retail. In this phase, it is required to analyze the Speciality Coffee Café Industry through a PESTLE analysis, and porter’s five forces. It is very important that the firms should formulate and implement strategies from an environmental perspective. The operation of the firm is affected by the environmental aspect.  The environmental factors include the firm’s labour practices, product sourcing, energy efficiency, environmental impact and practices of business ethics (Ayo, Charles, and Mbarika, 2017). These factors put a profound impact on the productivity of the organization. It is required that firm should develop strategies that support green environmental business practices, policies that promote products in low cost, less waste, minimization of energy use, conserving natural resources and other sound environmental practices.

The main objective of designing a business strategy framework is to provide the road map to achieve the effectiveness, Perceiving and utilizing the opportunities, mobilizing the resources, securing the market position, meeting the challenges, facing the business threats, directing the efforts and behaviour and gaining the command over the situation.

Industry overview and analysis

Starbucks, as discussed primarily operate and competes with the coffee makers and the snack store industry (Chuang, 2019). The company has experienced the slow -down in the market in terms of profit in comparison to the benefit achieved in the previous years. The company experienced the loss due to economic slow -down and changing the taste of customers, and before that company has experienced a stable financial position and gain in the business. (Koch, 2019). Even after stability in the economy worldwide, the company has experienced a slowdown in their business due to emerging competitors such as casein coffee and other companies who are providing new products for the customers and advance form of the coffee products too. The coffee industry is in its mature position as coffee is one of the traditional products worldwide. Starbucks and Dunkin’s brand has equipped the 60%of the coffee market worldwide.

PESTLE Analysis

Porter’s Five forces Analysis of the Retail coffee and snacks Industry

1. Threat through new entrant: Moderate

• According to the study conducted, it is observed that there is a moderate threat that new entrant is creating many problems for the organization as it is increasing the competition for the organization (Amelia et al., 2019).
• The industry is facing high and monopolistic architecture in the business competition.
• For the new entrants in the coffee, the industry does not require having much investment.
• Most importantly, in the case of the local market, the local shopkeepers and eateries are giving serious competition to Starbucks than rival companies.
• Entering the coffee market is relatively easy, and it does not require much investment. There is a moderate barrier for the new entrant to join in this business as they can present their products at relatively less cost.
• Many companies like Starbucks have developed their good market in not only coffee but also in other food products at their franchise.
• Another threat is from the well-established companies in a particular region as they have their market share and have eateries and café at the best localities in the area.

The threat of Substitutes- High

• These days as customers are drifting towards the healthy foods, so they are getting inclined towards tea, juices, health drinks, natural foods and other eateries more, the company should also get its inclination towards healthy food substitutes.
• These days ready to make coffee vouchers provided by the companies is also a high threat in this fast life and consumers are getting attracted towards these homemade coffee products due to less cost and time-saving (Amelia et al., 2019).
• There is no switching cost for the customers from one coffee label to another, so they change their preferences too.
• The Starbucks has also applied an innovative way of providing the coffee to the customers and has also adopted new delicacies in its menu at the café. They are giving huge benefits and margins to the grocers too.

Moderate to low pressure

• There are many buyers in the market, so the bargaining for the coffee cost is comparatively low (Amelia et al., 2019).
• Company provide various ranges of their coffee products and many ranges due to its high cost, and unique taste has fewer buyers in a comparison study, but this is a moderate threat as the company is itself taking care of the supply at a particular region of their coffee products.
• Consumers have moderate sensitivity towards the quality of coffee beans in general sense, and many consumers are ready to pay for the premium products.

Low to moderate pressure

• The main factors for the value chain are its coffee beans and premium Arabica coffee grown by them in the selected areas. This makes switching low and also provide cost stability, too (Amelia et al., 2019).
• As Starbucks is a well-established brand and is highly repudiated, it can take hands with local companies under its franchise and can moderate the business pressure over it (Starbucks, 2019).
• By maintaining the clear policies for the partnership and franchise, the moderate business pressure can be achieved easily.
• The suppliers also provide threats to the business so by taking the appropriate logistic mechanism the danger in this concern can be reduced to a high level and can develop strategic steps in this concern for providing the better opportunities to the suppliers.

High to moderate

• Starbucks has a high level of market share in the coffee market worldwide and is providing its best services for many years, so brand value development is not an issue for it (Amelia et al., 2019).
• But customers frequent switching to other brands due to their great marketing features and advertisement is a significant threat for the company.
• The industry is mature and in the growing state, so making the market value is not an issue for the company.
• The Starbucks should take advantage of its market value, competitive policies and better avenues to get the desired results in the well-versed form.

3.0.            Internal Environmental Analysis

Industry Demand determinant and profitability drivers

These days the customer has become more aware of the latest trends in food and are have become more health-conscious due to digital awareness and health hazards. Most importantly, the Coffee Industry is driven by many factors which include the disposable income, per capita coffee and demographics. Most importantly, the coffee industry is susceptible to the macroeconomics factors that affect the overall growth of the industry. A second important factor for analyzing the coffee consumption in particular region helps in setting the supply and other business activities in the specific locality. Another essential element of analyzing the business prospects in the coffee industry is to access how much revenue the competitive companies are giving to the shop keepers, vendors and suppliers. The main driver to increase the profit is to increase the per capita consumption of the coffee by providing the appropriate products with health benefit highlights too.

Analysis of the competitive advantages of the company

Distinctive competencies evaluation

1. a) Resources

The Starbucks is a well-established company the critical resources of the company are –

• Own coffee production land and rich experience in coffee beans production.
• Well, I have established infrastructure and centres at the primary location in various countries.
• Starbucks has its brand café in 60 countries along with this, Starbucks has also owned Seattle’s Best coffee, Torrefazione Italia, Teavana’s heaven of tea brands (Starbucks, 2019).
• The well-trained staff with rich experience in the coffee Industry.
• Good experience in the coffee industry.

Capabilities and competencies

Due to extensive experience in the coffee industry, Starbucks management team knows to handle the market fluctuations in a well-established manner (Enrique, 2019). Moreover, the company has a high level of scope and well-implemented policies to manage the business processes at their organization.

The value chains

The coffee beans are the primary input in the value chain system in the coffee industry; most importantly, the prevailing volatile cost of the coffee beans determines the market costs and profitability margin. Most importantly, the world prices of the coffee have been increased in these years due to the growing demand for coffee worldwide as the production of coffee is not available in all countries. But in recent years as the production of coffee beans worldwide, the cost of coffee beans is lowering down, and peoples are becoming more health-conscious, so the overall cost of coffee is dropping down.  Most importantly currently the customers are getting attracted to the products that provide complete detail of nutrients value and rival companies are presenting food products with an overview of the health benefits, this is a serious threat for the company.  The main factors for the value chain are its coffee beans and premium Arabica coffee grown by them in the selected areas. This makes switching low and also provide cost stability, too (Starbucks, 2019).

Competitive advantages –

• Starbucks is already a well-established brand and is highly repudiated, so making the market edge is not a problem.
• Hiring an excellent staff for a business plan will not be difficult as employees prefer to work with the well-established employees.
• Star bucks have 60% of the market share, and currently, it is required to develop better strategies for the implementation (Starbucks, 2019).
• Most importantly, as discussed above, its coffee beans and premium Arabica coffee is grown by them in the selected areas. This makes consumer switching low and also provides cost stability too, along with this, and it helps in maintaining the quality and uniqueness of their brand.

Value creation cycle

• The primary process of creating the value of the product is to provide high quality in the products.
• The second step is the price fixation, Starbucks has to maintain the prices not only according to the international market but has to consider the local market too.

The primary activities required to be performed for developing robust strategies for Starbucks will be as follows-

1. Research and development

Though Starbucks has its own dedicated Research and development department, still organization should provide extensive support to this department so that by applying the innovative methods the market research, customer inclination can be well understood. Then according to the results found, the products should be designed (Munuro, 2019). Along with this, Starbucks should also focus on the quality of service provided and should provide the training to the staff members.

2. Developing strong strategies

The Starbucks management team should provide the policies and guidelines to all its concerned franchise so that the quality standard is not degraded at their centres (Munuro, 2019). The guidelines should contain complete detail from preparing standard recipes to the presentation key techniques of the food products provided at the centre’s Moreover the policies should give instructions on the hygiene and interior designing of the café under the star buck’s franchise. The standard guidelines to handle the customer issues should be adequately addressed in the policies too.

3. Production

Starbucks should adopt innovative methods for production at its department. There are lots of innovative ways for the products that are widely available, and Starbucks should provide secure techniques for logistics and supply at its centre. Most importantly, the production strategies should focus on providing high-quality products with lower costs so that the market cost of the product can be lowered down.

4. Marketing and Sales

As discussed in the above section too, The Starbucks should take advantage of its market value, competitive policies and better avenues to get the desired results in the well-versed form. The company should adopt advanced methods for marketing and sales for its products in a well-inclined manner (Munuro, 2019). The sales of the products should e has done according to the customer requirement and feedback.

5. Customer service

All customer services and the policies should provide instructions about the hygiene and interior designing of the café under the star buck’s franchise. The standard guidelines to handle the customer issues should be adequately addressed in the policies, too (Yrjola et al., 2017). All the queries and problems of the customers should be treated in the responsible manner and customer services should be kept at the priority.

6. Human resource

The organization should develop strong recruitment policies for the selection of the staff members as the quality, and trained staff is the essential driving force to achieve the set goals.

Starbucks core competencies

The core competence of Starbucks has been its ability to leverage its cornerstone product with its strong strategic policies effectively. The main objective of the business development strategy is to provide the strategy to achieve these goals in the well-versed form. Firstly, it is required to turn the decision easy for the prospects that help to convert the opportunities in the clients. Then the next step is to deepen the engagement with the set goals and hopes and turn them into the qualified opportunities then lastly it is required to attract the potential buyers, influencers and referral sources through it.  A business strategy is a course of action and set of decisions which assist the entrepreneurs in achieving the specific goals. The biggest strength of Starbucks is its high quality and understanding of its customers. The brand equity is built through selling the most excellent quality of the coffee and providing the unique features in their product ranges. As discussed above, it is highly required to provide a high level of services with proper presentation and hygienic procedure for delivering the products to the customers. The core competency of Starbucks is in its human resource system. Along with this, it is also required to develop the appropriate policies and value system at the organization. Most importantly, strong business strategy is needed to operate in the international market, and this can be achieved through smart integration of the acquisition and alliances that help in maintaining the strategic objective for the long-term goals.

Starbucks SWOT analysis

4.0.            Recommendations

• Starbucks should adopt innovative methods for production at its department.
• The organization should develop strong recruitment policies for the selection of the staff members as the quality, and trained staff is the essential driving force to achieve the set goals.
• By maintaining the clear policies for the partnership and franchise, the moderate business pressure can be achieved easily.
• The standard guidelines to handle the customer issues should be adequately addressed in the policies too. All the queries and problems of the customers should be treated in the responsible manner and customer services should be kept at the priority.

Part –B   Starbucks Stakeholder Report

1.0  Primary Starbucks Stakeholder Group- Customer

Customers are the primary stakeholders as they generate revenue and make an organisation successful. Similarly, Starbucks completely depends on their customers because of their preferences towards caffeine. Coffee and related beverages have been launched by Starbucks so that customers could choose from them as per their product selection. Further, Starbucks, as an organisation, consider the customer as first priority and does everything to impress them. For example, whenever, a new customer visits operated the store, they are greeted warmly; further, explained about coffee beans used in the beverages through barista (Thompson, 2017). Whereas, quality control is done by checking each order done by the customer effectively. Several reasons which prove that customers are more important; for example, price, loyalty membership programs, unlimited Wi-Fi, blankets and much more to make them engaging. Additionally, digital mediums are applied so that customers can make orders from mobile apps. It is essential to understand how customers affect Starbucks to become more successful.

1. Characteristics

The major characteristics of customer value over price and affording prices as per products. Customer will always look after a value; however, will only buy a product that matches affordable prices. Secondly, they do not like to wait for the order and demands instant delivery. Lastly, always compare the same products with other brands for better quality.

1. Demographics

Demography is another concern in which the customer visits the places which are in the clear distance. However, if stores are located miles away than customers will not prefer store located in another location. Therefore, demography is a must and should be considered effectively.

1. Size of the stakeholder

The customer stakeholder group is in a larger size and are approximately 80 per cent preferring coffee. Hence, for such a large capacity, it is important to fulfil their preferences and demands. The size will be much larger if considered in regards to global operations. For example, millions of customers visit the organisation operated stores for good coffee. Additionally, many of them are an employee from several big or small-scale workplace. Therefore, the size of stakeholders is an important concept and should be considered effectively.

2.0 Analysis of Stakeholder Group

Mendelow’s matrix

Communication Strategy

Customers are important stakeholders and therefore, must be able to communicate with Starbucks. There are several communication strategies which are already introduced, such as application. The mobile application is helpful so that people could book orders online, which is a customer engagement strategy. On the contrary, new fan pages could be created effectively. The younger customers could be rewarded with new programs to attract customers effectively. Another communication strategy could be introducing the tour of coffee making. People will get attracted and understand how the company develops several coffee beverages. Additionally, Starbucks could have good-aligned strategy management for advertising. Overall, customer reach is important, and thus, digital platforms are considered the best options. Hence, customers are major stakeholders who could make a company successful.

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