The Starbucks Corporation was born in Seattle in the early 70s and has blossomed into the largest selling specialty coffee retailer in the world. It has stores in many countries worldwide, including many domestically, and has competitors in two markets. The first being the Tea and Coffee Manufacturers (Non-Alcoholic Beverages) industry and the second is restaurants.
Starbucks is the largest coffeehouse company in the world, with 17,133 stores in 49 countries, including 11,068 in the United States, nearly 1,000 in Canada and more than 800 in Japan. The outcome of the report will come after an in-depth analysis of Starbucks external environment has been done, where the pestle analysis and porter`s five forces will be discussed to identify the current opportunities and threats that exist in each of the industries.
With the use of several conceptual tools, such as the VRIO, Value Chain framework, SWOT, and BCG Matrix Starbucks internal capabilities will then be examined to discover how well it is performing. The current issues and challenges faced by Starbucks to remain competitive in each sector will then be discussed by doing each of the calculations of the financial ratios to see how well they are performing in their business. After completion of the external and internal analysis it will be possible to draw up several strategic options open to Starbucks.
Using the TOWS, ANS OFF, and BCG MATRIX evaluation tool developed by Johnson et al each of the strategic options will be ranked on their suitability, acceptability and feasibility. After evaluating each option the most appropriate will then be chosen and discussed in finer detail by using Bowman`s Strategy Clock, and then finally, a conclusion will provide a logical summary to the report and provide information on whether the recommend strategy is sustainable. Part 1: External Analysis: PESTLE ANALYSIS: Political: Taxation policy:
If Starbucks charges high tax to the consumer then lot of consumers won`t come to Starbucks as they will have to pay more, so Starbucks will lose customers which will decrease their sales which in other words occur a loss in their industry. Government stability: A change in government policies affects the industry as they may bring in new laws or new or existing government who might involve taxes. When mentioning new ventures the political turn oil or civil war should be taken great care. International trade regulations/tariffs:
Tariffs and International Trade regulations has contributed to some of the environmental factors for Starbucks; due to high tariffs the company would be compromised, the ability to source quality coffee beans would affect Starbucks reputation, global sales, and competitiveness as less people will come to Starbucks and they will be able to get limited amount of coffee beans as they would pay less. Economical Influences pertains to the exchange rate, Starbucks import coffee, sugar, and milk; with a weaker currency the cost will eventually increase.
International stability: Where there are earthquakes, tsunamis, and wars Starbucks they purchase their coffee beans from those countries. This can affect Starbucks as the countries won`t be able to provide coffee beans and they will have no coffee to sell. Employment Law: The Americans with Disabilities Act is pretty self-explanatory: it protects against discrimination of people with disabilities and ensures that “reasonable” accommodations are made for those with disabilities. Starbucks is affected by this law just as much as any other company.
During the hiring process a potential employee cannot be turned down because he is, say, deaf. He has to be given the same opportunity to work as any other prospective employee with the same qualifications. It is the responsibility of Starbucks to work with the deaf individual to see how/what he can contribute to the company. It is also their responsibility to see what assistance they can offer the individual to ensure that he can be successfully integrated into the network of Starbucks employees.
Before the Family and Medical Leave Act were passed in 1996, women who became pregnant while employed had a lot to worry about. They had to work very hard to get time off of work after their child was born. They had to make some very hard decisions and received little legal support. To even further complicate the situation, their positions were not always guaranteed to be available when they returned to work. Their bosses might hire someone else while they are away taking care of their new-borns!!
So the passage of this law is huge for expectant mothers but it also helps out people whose family members become seriously ill. If your mom or husband is on their deathbed the last thing you want to worry about is your work. Economic: Economic Growth: After the Asian Crisis, consumers in Macau spend even more carefully. Starbucks needs to provide coffee of higher quality with more reasonable price. Starbucks is targeting the people with white collars as they are the ones who will spend the most as there income is more. Majority of the Starbucks customers can be classified into this group.
Although Starbucks attract some white-collar workers and tourists, Macau people spending on food and drink has declined starting from the past several years. Starbucks needs to pay attention on this change and make suitable adjustment so as not to affect the sales of its coffee. Inflation Rates: As the inflation rate increases of Starbucks the disposable income of the people drops, so the inflation affects Starbucks as limited number of people will obviously come to Starbucks and pay less, which, might affect Starbucks business as their sales may decline.
Competitors Pricing: Competitors can compete with Starbucks which could decrease the profits and profit margins as they try to increase or at least retain their share, as Starbucks competitors may sell their items at a lower rate than Starbucks, so majority of the people will definitely go to other coffee shop as they are selling at a cheaper price and Starbucks will slowly start to lose their customers which will occur a loss. Globalisation: The farmers of the coffee bean income are now less than their income which they had before the globalisation occurred.
This might affect as very few people may want to work, which on the other hand means that less number of coffees will be produced, which will affect the supply of Starbucks and the possible profits. Exchange rates: The exchange rates affect Starbucks when dealing with the international trade, as if the rate of the currency falls in the coffee supplier’s country, then this will assists Starbucks to get more money which is when they will import the goods to their country.
However, if the rate of the currency rises in the coffee supplier’s country this will assist Starbucks to achieve less money which is when importing the goods to their country. So, both the ways the exchange rates are being affected. Social: Income distribution: Income is an important factor for Starbucks as it determines where they are going to promote or detect their stores. Starbucks should target those people who have high income and also are willing to pay more as coffee is more of a indulge product.
Starbucks would not consider opening their store where people have a humble attitude to work. Recruiting people would be difficult, it would be hard to train people, and the income of the staff would be very massive. In large cities large numbers of people have their lunch outside rather than going to a canteen. Starbucks can gain money from this as they can built up their shop as a place where people can talk with each other, this will mean that they will slowly increase the number of people in their stores during that period of day.
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