Starbucks Company was established in 1971, and has expanded to become a leading brand in the coffee industry. The organization’s product mix includes roasted high-quality priced teas, coffees, various beverages and fresh food items. Since its establishment, the company’s mission has been to nurture, and inspire the human spirit. To achieve this mission, the company tries to choose the best quality of coffee to serve its clients. Starbucks’ corporate culture revolves around the warm ambience in cafes. The corporate culture resonates with the product differentiation strategy that the company relies on while penetrating other markets (Mason et al., 2017). Starbucks culture has been part of its growth strategy, and it has various characteristics that make it unique. The major features of the culture are openness, servant leadership, inclusion and diversity, collaboration and communication, and relationship-driven approach. The company’s business strategy is founded on four key pillars: providing “third-place’ experience, selling highest quality coffee, expansion into emerging economies, and integration of technology into business processes. This report seeks to conduct an exploration of Starbucks’ business strategy and competitive plan, internal assessment using SWOT analysis, external environment through an external scenario evaluation, business process, and potential ethical issues that could affect the company’s traditional management functions. Preventative measures for the potential ethical issues are also presented.
Business Strategy and Global Competitiveness Plan
The company deploys the broad differentiation generic strategy to make it unique from others. Apart from emphasizing on specialty coffee from other companies offering coffee, the broad differentiation strategy allows the company to extend to other business areas. For example, the company uses a sustainable sourcing policy for differentiating its offerings from the products offered by competitors. The company’s culture also embraces the generic strategy by emphasizing a warm and friendly ambience enjoyed by people through t he “Starbucks Experience” (Mason et al., 2017). More importantly, the broad differentiation strategy enables Starbucks Coffee to continuously innovate to make it unique and more competitive. In recognition that the generic strategy is vulnerable when competitors find ways of standing out, Starbucks continues to innovate its supply chain and product mix (Krikorian, 2014). Innovation in the supply chain enables it to search for the most sustainable ingredients while innovation in the product mix allows the company to focus on specialty ingredients and products, including baked goods. Basing on its generic strategy, the strategic objective of Starbucks Coffee is the continuous innovation of the supply chain, and products.
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Starbucks Coffee also relies on various intensive growth strategies to enhance its competitive advantage. The main intensive growth strategies are market penetration, market development, and product development. Market penetration acts as the major intensive growth strategy that supports Starbuck’s growth through maximization of revenues from the markets it operates in. Today, Starbucks operates in 65 nations globally, and it uses the market penetration intensive growth strategy to open more stores (Mason et al., 2017). Market penetration also facilitates Starbuck Coffee’s growth through franchising and licensing in some countries like the Dominican Republic. The company deploys market development as a secondary intensive growth strategy to generate revenues in new market segments. Product development growth strategy is also used for creating new products, and innovating the product mix. For instance, after acquisition of Coffee Connection, Starbucks Coffee began offering Frappuccino at its cafes. The company’s intensive growth strategies align to its generic strategy, and because of differentiation, it can penetrate markets and compete with other organizations.
SWOT Analysis
Starbucks Corporation maintains its position through innovative strategies that use various organizational strengths to overcome weaknesses, overcome threats, and exploit opportunities in the coffee industry as described in this SWOT analysis. Ideally, SWOT analysis is a strategic management technique for assessing strengths, weaknesses, opportunities and threats to a business, and its environment. The strengths component of the analysis addresses the internal factors the organization can rely on to tackle weaknesses and wade off competition. The major strengths of Starbucks are extensive global supply chain, strong brand image, and moderate diversification (Mason et al., 2017). Starbucks has one of the most popular brands with a population of loyal client that enhances the stability of the business. The supply chain makes Starbucks stronger by supporting operations. For instance, the organization has carefully selected a global network of suppliers based on quality. In addition, the organization diversifies its business by acquiring subsidiaries such as Seattle’s Best Coffee, Ethos Water, and Teavana. Diversification is instrumental for reducing the impacts of industry and market risks. Overall, Starbucks’ strengths suggest that the company has competences and capabilities that enhance resilience through a global supply chain as well as diversification.
Starbucks Coffee’s weaknesses are imitability of products, high price points, and generalized standards for products. The company has high price points for maximizing profit margins, but minimizes the affordability of products. High price points reduce the organization’s market share, particularly in areas that have comparatively lower disposable incomes. On the other hand, generalized standards reduce the flexibility of the business. For instance, generalized standards adopted by the company for crafted beverages minimize the cultural alignment of these products to the local markets, and consumer preferences. Thirdly, many products offered by Starbucks could be imitated by other companies. For example, small local competitors can develop beverages that may not be the same, but have some similar characteristics to Starbucks’. Also, the ambiance and design of Starbucks’ cafes can be imitated, thus providing competitors with an opportunity to increase their market share through the development of similar products (Mason et al., 2017). Starbucks’ weaknesses highlight that the company should develop strengths for minimizing the adverse impacts associated with imitation as well as the effect of high price points on the market share of the company in the industry.
The main opportunities for Starbucks Coffee Company are business diversification, market penetration, and alliances or partnerships with other organizations. Starbucks can increase revenues by expanding into the developing markets, thus drawing attention from the United States’ market where it generates most of its revenues (Mason et al., 2017). Business diversification can also enhance the long-term stability of Starbucks. For instance, using higher diversification, Starbucks could minimize its reliance on current industries, thus enhancing opportunities for increasing its revenues. Currently, the company does not place much emphasis on diversification in its intensive growth and generic competitive strategies. The industry environment also offers an opportunity for strengthening the presence of the company, and market partnerships with other organizations. For example, developing alliances with leading retailers would improve Starbucks’ market share in consumer goods. The opportunities component highlights that Starbucks could enhance its position through the development of operations in order to take advantage of opportunities within the global industry environment.
Finally, the major threats that reduce the performance of Starbucks Coffee Company are imitation, competition, and independent coffeehouse movements. Starbucks competes against various organizations in the global market, including famous restaurant chains, which provide low-cost products (Mason et al., 2017). Competition threatens the company since competitors could minimize its market share using low prices to attract customers. The ability of other companies to imitate the look, taste and feel of products in the industry also poses a major threat to Starbucks. In addition, independent coffeehouse movements support small local coffeehouses while limiting the growth of multinational coffeehouse chains. Such trends affect consumer behaviors and perceptions.
External Environment
As the largest coffeehouse company in the world, Starbucks has consistently led the industry through sustainable innovation. Starbucks’ success is determined by the ability of the organization to respond to external environmental factors (Yuksel, 2012). The external environmental factors that will be examined will be based on the PESTEL analysis framework. The main external political factors affecting Starbucks’ macro-environment are regional market integration, increased governmental support for infrastructure, and bureaucratic red tape, especially in developing states. Ideally, regional integration provides an opportunity for Starbucks Coffee to expand into international markets. Secondly, many governments globally are investing in better infrastructure, thus creating an opportunity for the company to access other suppliers and markets. Contrarily, bureaucratic red tape remains a major issue in many nations, and threatens Starbucks’ business expansion, particularly in developing countries. The political aspect of the external business environment provides ample opportunities for Starbucks. Regarding the economic external factors, the major forces that affect Starbucks are high growth level of developing states, increasing labor costs in suppliers’ states, and declining rates of unemployment. High economic growth and lower unemployment rates provide opportunities for the company to raise more revenues, but rising labor costs within developing states threatens Starbucks since it increases its expenditures on ingredients. The economic component, therefore, provides more opportunities that Starbucks can exploit.
Sociocultural factors affecting the company’s operations are growing coffee culture, health consciousness and a larger middle class. Starbucks can increase its revenues because of the growing demand for coffee that has is attributed to the growing coffee culture and middle class. Starbucks could also widen its offering of more healthful products in order to attract consumers who are health-conscious. Therefore, sociocultural factors also present an opportunity for Starbucks to increase its products, attract more customers and get more revenue (Mason et al., 2017). Contrarily, the major technological factors in its business are rising mobile purchases, technology transfers, and higher number of coffee machines available for home use. Starbucks has a chance of improving its mobile applications to get more revenues. The new technologies being used by farmers also suggest that Starbucks has an opportunity to improve the efficiency of its supply chain. Unfortunately, the increased availability of coffee machines in homes threatens Starbucks since it increases the number of substitutes for its products.
The main ecological factors that Starbucks should consider are business sustainability trend, increasing support for responsible ways of sourcing, and higher support for products that are environmentally friendly. Current business sustainability trends emphasize processes that lead to less minimal environmental impact. Responsible sourcing places emphasis on corporate social responsibility within a company’s supply chain (Mason et al., 2017). In this regard, Starbucks has opportunities for improving performance in these aspects. Finally, the major legal factors in Starbucks’ macro-environment are GMO regulations, product safety regulations, and increasing employment regulation. The company has opportunities for improving performance through satisfaction of product safety regulations as well as ingredients used in GMOs. Today, Starbucks is performing well, but the increased number of employment regulations, particularly in developing nations, threatens its ability to access the labor market. Employment regulations affect Starbucks by increasing the expenditures for human resources. Consequently, external legal factors mainly provide opportunities for Starbucks.
Organizational Structure
Starbucks’ Business Process
Starbucks places emphasis on premium design for its services and goods. Premium design is connected to the broad differentiation generic strategy deployed by the firm. Other organizations, including manufacturers, also engage in designing some products like Starbucks mugs. In this operational management area, Starbucks makes sure that its services depict the high-end brand image it has developed over time (Sakhartov, 2016). The company also deploys the premium character for quality management. For example, it carefully obtains coffee beans from farmers who comply with its quality standards. It also has preference for purchasing farmers who are certified under its coffee program. One of the major contributors to the company’s success is process and capacity efficiency. Processes of the company are highly efficient, and Starbucks maximizes capacity through designing processes geared towards meeting demand fluctuations. Through process efficiency, the company optimizes cost-effectiveness of processes and workflows. Furthermore, the location strategy enables the company to focus on urban areas, particularly ones with upper and middle class populations. Many Starbucks’ cafes are located within densely settled areas (Mason et al., 2017). Moreover, Starbucks’ layout design optimizes workflow efficiency, and supports a friendly ambiance to match its culture. Human resources management ensures that Starbucks integrates its organizational culture in all business areas. At cafes, the organization utilizes teams of baristas, and other functional positions on functional positions. The other critical parts of the business process are supply chain management, inventory management, scheduling, and maintenance.
Ethical Issues
The first ethical issue that could affect the traditional management function of Starbucks is the unfair treatment of employees. There is likelihood that Starbucks management model may be prone to disregard the rights of employees in the quest of the company to achieve success. The organization may mainly focus on maximizing profits without considering the welfare of employees who play a crucial role in generating these returns. The other ethical issue is that the company’s processes may result in environmental pollution, thus make people to become vulnerable to environmentally-related diseases. This could result from the focus on the organization’s bottom-line without considering the need to provide products and services in a sustainable way. The preventative measure is that the company should come up with a code of conduct, and corporate social responsibility program for addressing all aspects that may be prone to these ethical issues.
Conclusion
Overall, this report has conducted an exploration of Starbucks’ strategy, SWOT analysis, external analysis of its environment, organization’s business process, and potential ethical issues that may arise from its traditional management functions. The report has established that the company has various opportunities that it can exploit to generate more revenue, and expand into more markets. Also, it is crucial for the company to find mechanisms for addressing its weaknesses and threats that could hamper its market penetration, and revenue generation. However, the company has a healthy financial status, and is undertaking the necessary steps towards superior performance.
References
Krikorian, M. (January 24, 2014). A Starbucks on every corner: A guide to the SBUX business model . <http://marketrealist.com/2014/01/starbucks-every-corner-guide-sbux-business-model/>.
Mason, A., Cole, T., & Goza, N. (2017). Starbucks: A Case Study of Effective Management in the Coffee Industry. Journal of International Management Studies , 17 (1).
Sakhartov, A. V. (2016). Selecting Corporate Structure for Diversified Firms. In Academy of Management Proceedings (Vol. 2016, No. 1, p. 11521). Briarcliff Manor, NY 10510: Academy of Management.
Yüksel, I. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management , 7 (24), 52.
