Category: Starbucks

Starbucks Corporation, located in Seattle, Washington, is the subject of the executive summary. Starbucks Corporation is an American multinational corporation that owns and operates coffeehouses and roastery reserves worldwide. It is the worlds biggest coffeehouse chain, employing more than 383000 people worldwide. When analyzing the process of checking in a vendor at a shop, there may be many issues that may develop, but embracing the SPC to decrease faults in the process assists in adjusting to ensure the betterment of things. The SPC assists organizations such as Starbucks in a shift toward prevention-based quality control rather than location-based quality controls.

Summary of the Evaluation of Control Chart and Process Metrics Based on SPC Methods

By studying the SPC chart, Starbucks may properly forecast the behavior of the technique. The major advantages of SPC that aid when checking in a vendor depend on the important characteristics of employing SPC, including reducing needing to start a process over again, increment efficiencies, and progress quality overall (Six Sigma Material, 2022). Lowering the period taken when beginning to check in a vendor frequently due to DSD difficulties helps save big time when other things need to be performed throughout the day. Efficiency will be at an all-time high since less time will be consumed on repetition. The progress quality will be good since there is a likelihood of less risk that errors may develop when checking in a vendor manually versus utilizing the DSD technology device.

SPC Charts are used to assess the execution of a process by charting information points, control limits, and a centerline on a graph. At the end of the day, a process should be regulated to assess the methods capabilities. In the case of common cause changes, the modification must demonstrate the common cause of the change before the processing capacity can be evaluated. Starbucks must have a significant preparation capacity that is not prone to exceptions and variation due to a shaky control. Several stages must be taken to obtain crucial information about the chart and how it might aid the process of checking in suppliers, such as Starbucks. Seven major phases must be followed. The initial steps include separating processes, deciding on the method quantifiable attributes, selecting a measurement approach, and undertaking gage R&R in conjunction with other processes (Qui, 2017). The final phases are establishing a subgroup technique and assessing layouts, gathering information and graphing the SPC chart, describing the inherent discrepancy of properties, and monitoring the method variation.

Summary of My Evaluation of Whether The Process Would Benefit from the Use of Six Sigma, Lean, or Other Tools

After further study, my personal view is that the assessment of this process shows that processing a vendor order for the Starbucks firm may benefit from using either the SPC or the Lean methodologies. In addition to reaping the benefits of SPC, it has all of the required components for employees to perform better on the job while checking in orders. It is possible to acquire quality information in product or process estimates or readings from multiple gadgets or instruments (Six Sigma Material, 2022). Then collect the database and use it to examine, check, and regulate the process. SPC is an approach for driving constant enhancement that is used in manufacturing. Observing and regulating a process allows us to ensure that it is operating at its maximum efficiency (Six Sigma Material, 2022). When learning about the lean idea, it is advisable to start with a basic grasp of what it means. This is especially important for Starbucks management, who must comprehend what it implies.

Description of the SPC project

Lean management focuses on preserving value by making less effort. Starbucks mission is to offer customers the optimal value of their coffee by using the greatest value production method possible while producing zero waste. This is often accomplished by enabling each individual to realize their potential to generate the greatest substantial level of devotion possible (Qiu, 2017). Because of the use of lean on-the-job, the Starbucks store can ensure that one worker is checking in the vendor. At the same time, there is another individual at the register, an employee on the sales floor who is willing and able to assist customers with their needs, and another staff who can assist the other employees, whether they need it or not. Using this strategy, the worker responsible for checking in the vendor may save time and be more efficient. The work staff will not have to repetitively pause to help others, which will result in the vendor process being longer since the shop will be covered with assistance when required for specific parts of the store.

Recommendations for Improvements

As previously said, there are other merits to utilizing SPC to check in suppliers in addition to the ones already listed. It is expected that buyers will be pleased that the Starbucks workforce will be available to listen and help, and productivity will begin to rise. There will be an opportunity to reduce technology software support prerequisites and repeat maintenance costs on the DSD device, which will benefit the company as a whole. The recommendations, as highlighted, will involve improving the process monitoring during implementation to reduce the time when serving the clients, which saves time and allows general customer satisfaction.

References

Six Sigma Material. (2022). SPC Charts. Web.

Qiu, P. (2017). Introduction to statistical process control. CRC press.

A cup of coffee, that’s all it is? This business, rather than being founded by a big business conglomerate as we might expect, but Starbucks was actually founded in 1971 in Seattle, Washington by Jerry Baldwin, Zev Siegl, and Gordon Bowker, three students at the University of San Francisco. It was a single store offering coffee beans and a coffeemaker. But now, Starbucks Corporation is an American multinational chain of coffeehouses and roastery reserves headquartered in Seattle, Washington and it is estimated that since 1987 an average of 2 new Starbucks locations is opened every day. In addition, as the largest coffeehouse in the world, Starbucks is seen to be the main representation of the United States’ second wave of coffee culture.

It was announced in December 2016 that Howard Schultz would step down as CEO of Starbucks, and later in April 2017 that he had personally recruited Johnson to be his successor. Kevin R. Johnson is an American businessman and software engineer who became the fourth CEO in Starbucks history.

As the global coronavirus pandemic has brought companies to a standstill, Kevin showed how great a disturbance handler he was, when everything hits an unexpected roadblock, Kevin took charge. He posted a clear letter to all U.S. employees, appointing his company’s strategy for the next months in response to the current pandemic, Covid-19. In addition, that letter showed that Kevin was also an absolute figurehead. As he mentioned in his letter “I am proud of all Starbucks partners, and how you have shown up in support of one another and in support of the communities we serve. You are the heartbeat of Starbucks, and you have demonstrated why our company is resilient.” He was able to communicate effectively with internal contacts and be a source of inspiration for them.

‘The impact of COVID-19 varies across communities, and decisions will need to be made locally, with our field leaders, store managers, and local health experts.’ said Kevin in a letter to his partners, by that he showed that Kevin acted as a free rein leader. He gave complete freedom to his subordinates for making decisions. Additionally, he announced that field leaders would have access to a special tool to help inform their decisions. He did not use power, but he did maintain contact with them.

Culture acts as an anchor, which maintains a solid brand base. Starbucks ’ community is different. It brews the best coffee and that too is brewed with a human touch, respect, and love. Shared values are at the heart of Starbucks ‘ lifestyle and culture. Starbuck’s shared values embrace equality, accountability, ethics, integrity, and inclusion. Moreover, it is even as good at keeping its employees happy as its customers. It has focused on creating a culture of warmth and belonging where everyone from employees, regardless of their role, to customers can feel welcomed and are referred to as partners to form a sense of unity. It created an environment of inclusion and non-discrimination.

“Giving more than we take from the planet.” was one of the fundamental believes at Starbucks. They are committed to offering high-quality, ethically purchased, and responsibly produced products, and by 2025, the coffee retailer plans to have 10,000 environmentally friendly stores worldwide, this is the new ‘Starbucks Greener Stores’ initiative-showing an activist (Dark Green) Approach.

The purchasing perspective of generations has shifted consumer focus to social responsibility especially when it comes to the environment. Studies showed that customers are steadily willing to spend more when they recognize their investments would lead to a positive impact on the environment. Moreover, the impact isn’t all external. It was shown that employees feeling confident about the CSR program of their company increased their expectations to remain with their present employer and their commitment to the organization. Commitment includes a vast variety of optimistic beliefs, including how many employees like their organization, make personal sacrifices for the organization, and see their own success linked to the success of the organization.

An orientation towards growth was obvious since Starbucks started. It is the largest coffeehouse company in the world with more than 31,256 stores across the globe now.

Starbucks seems to be pursuing a general and global strategy, where they get products from their domestic market and sell them internationally with only minimum local customization. Besides, many managers at Starbucks are geocentric they pay very close attention to “what best is what is effective, regardless of origin”. Also, Starbucks used three main different entry mode strategies to internationalize: joint venture, licensing, and Strategic Alliance.

Starbucks in 2019 announced it was partnering with Uber Eats to expand its delivery in the United States, and the most recent partnership Starbucks announced on 25th of Feb 2020 was with Nestle, “Starbucks and Nestlé announced another collaborative innovation as a result of the global coffee alliance, the launch of Starbucks Premium Instant Coffee, available in Japan, China, Europe, Latin America, and the Asia Pacific.”,

Starbucks is trying to compete successfully only within a single industry. It relied heavily on concentration strategies to become dominant players. It did not limit itself to selling coffee, but also selling coffee beans and even selling beans in grocery stores. This allowed consumers who do not visit their coffee-houses to reach the products of Starbucks. Thus, Starbucks used market development which involves taking existing products and trying to sell them within new markets.

This Starbucks SWOT analysis shows how the world’s largest coffee chain is leveraging its strategic advantages to keep rising so effectively across the globe.

One of its main strengths is its strong brand image, in the food and beverage industry, Starbucks is the most popular, powerful, and strongest brand. As Interbrand ranking showed it had a brand value of $11.7 Billion. Nevertheless, one of its main weaknesses is a recall of products, where Starbucks has recollected many in-demand products over the years which can have a negative impact on the company’s brand identity and induce a loss of customer base.

Besides, Business diversification and Products Specifications act as the main opportunity for Starbucks, where it can further expand its business operations and its company activities to boost overall revenue growth. Also, producing products as per the customer preferences in the specific target market is also a profitable opportunity. However, competition with low-cost coffee sellers is a major threat. Starbucks’ offerings are more expensive than other coffee shops or products and these high prices reduce affordability for the consumers, which threatens the future’s stability of Starbucks.

In conclusion, looking at the outstanding rate of growth and achievements, I believe that was accomplished with the right strategies and decisions, from the friendly culture to the effective production stage. Also, the freedom the manager gave for his employees globally helped in having a great reputation worldwide as it maintained what was suitable locally. Starbucks aimed not only for a profit but also for satisfaction for both, internally and externally, employees and customers.

Starbucks effect may sound like a medical term or acronym, concomitant with caffeinated beverage or drink addiction, but rummaging through the pages of any medical journal, wouldn’t dig up anything. Rather, it is used as a parlance to delineate the phenomenon which benefits the homeowners dwelling near a Starbucks outlet. For the time being, let’s hold onto the horses running into our minds, before we make it to the depth of this subject, and ponder over the journey of transformation of a petite coffee bean store into a massively successful worldwide and globally eminent brand.

Starbucks – A must visit for any coffee connoisseur

Established in 1971 by three consociates; Jerry Baldwin, Zev Siegl, and Gordon Bowker, inspired to vend high-quality coffee, this Seattle-based coffeehouse chain has modified the way the world drinks coffee outside home and work. Initially, the store just dealt in coffee beans and coffee equipment but subsequently, it embarked on the voyage to quench the thirst of “coffee-yearning” people of Seattle by brewing superior grade “caffeine- infusion” libation. However, with the visionary Howard Schultz coming into picture, the local coffee chain augmented into a $84 billion fraternity. Upon his entry, the business expanded by introduction of aromatic and luscious espressos, mochas and lattes. What he believed in was, not to woo employees away from competitors, but unleash the enthusiasm that is already within employees, just dormant. Complete with intrinsic motivations and positive emotions, Schultz stimulated his employees to toil as to achieve greater returns and make the brand ubiquitous. Starbucks generally preferred a strategy of premium prices, using a menu and store layout somewhat modified for local tastes. It has expanded its tea, bakery, and grab-and-go offerings with acquisitions of Teavana, La Boulange, and Evolution Fresh, respectively. Currently, it offers a range of exceptional products encompassing more than 30 blends and premium coffee, Frappuccino, refreshers smoothies, pastries, sandwiches, yogurt parfaits fruit cups and what not to savour. Carrying out operations in over 76 countries, this premier and iconic roaster, marketer and coffee retailer has inaugurated nearly 28000 stores, becoming a very well-known and “heavenly” like- site to hang out for the coffee lovers.

Deducing the Starbucks Effect

Essentially, “Starbucks effect” is a conceived term used to portray the outcome of opening of a store, which leads to magnification of the property’s worth in the native area. A new Starbucks gives a sense to developers that the neighbourhood is on the rise. Coupled with this literary evidence, the statistics given by the real estate research group ‘Zillow’, which has conducted ample research on the Starbucks Effect, points a compelling view that the value of property within a quarter-mile of a Starbucks rise faster than those that aren’t. More specifically, the data shows that between 1997 and 2014, the holdings in close proximity to the coffee shop appreciated in value by 96%, compared to 65% for all U.S. residential properties. The greatest impact was witnessed in Boston, where nearby home values went up by a magnificent value of 171% in the same time period. It was 45% points over and above all the houses in the city as the outlet is usually a harbinger of good times for a locality. While residences near a Starbucks sell, on average, for $137,000, those that are distant from it are exchanged for just $102,000. It has also been corroborated that over 17 years, the Starbucks correlation was reflected by a 96% appreciation. Meanwhile, property far and away from it did not surpass 65% mark.

Living near the coffee shop entails gains for householders, whether he/she is a coffee drinker or not. Surveyors found a 0.5% increment in housing prices within a year of inauguration of Starbucks in a locality. Basically, it means that for a home estimated at $1.3 million—the median in both New York and San Francisco—a single new upscale coffee shop would raise the figure by $6,500.

But digging a little deeper to get more insight, it seems to be kind of a chicken and egg situation. It’s not actually like Starbucks can take full credit for changing a community. Simply stated, an increased number of commuters stopping for coffee and food and that the stops may have a discernible impact on the distances people drive, does not give rise to this phenomenon.

Then, how does the retail giant stay ahead of the curve? The soaring apartment prices are not due to the actual Starbucks opening but may be more of an indicator of affluent customers in the zone. As a matter of fact, the coffee chain is exceptional in finding locations that are up-and-coming. It has fine-tuned its ability to flourish and get ahead of the neighbourhood curve by successfully identifying the demographic, income, and economic metrics and trends that drive residents towards copious sales of elevated-priced coffee. When it comes to choosing retail locations, the Starbucks has a crew of 20 analytics experts around the world poring over maps and geographic information systems data, assessing factors like an area’s traffic patterns and businesses. The company also empowers dozens of regional teams to reach their own conclusions about location and draft store design and a host of other factors necessary to hold up this concept. In order to maintain its competitive edge and franchise esteem, it is imperative that it continually keeps on finding the next optimal store location and position itself as “first mover” in order to capture and maximize local market share before its competitors can get on the ground. The general perception is if we see a new outlet, or similar premium-priced competitor store pop up in our suburb, rest assured it would be a positive symptom of thriving real estate values. The correlation between increasing property values and Starbucks is termed the “Starbucks Effect”.

The Bottom Line

It is imperative to ascertain whether the Starbucks is the main mechanism driving the greater rise in worth or the added increase in value is part of a larger chain of events—some unrelated to coffee—that contribute to an increase in demand for housing. For this, correlation and causation should not be confused with. Regarding correlation, the credit for this should be given to the Starbucks site selection/real estate department, who did an excellent job in pinpointing neighbourhoods undergoing strong income and population growth, which induced a surge in property values. On the contrary, Starbucks offers umpteen amenity that up-and-coming localities want. The outlets encourages and enables people to spend time just hanging out, either visiting or working, well beyond the time that it takes to consume a cup of coffee or a snack. Consumers, usually teens, are drawn to non-traditional spaces, store’s Wi-Fi facility and comfortable seating. The increase in young adults means an increase in demand for housing. This implies to the causation aspect.

Unsurprisingly, Starbucks sustains its popularity through shrewd and unconventional marketing strategies. In a nutshell, the Seattle-based coffeehouse chain is arguably the most prominent of its kind. It has a phenomenal appeal- the ‘emerald mermaid’ remains beloved by millions, and is deservedly credited, by both its fans and detractors, with revolutionising the modern cafe experience.

Cost of Production

Coffee and tea are highly dependent on weather conditions because they are both agricultural products. Weather conditions can harm the supplies which would result in a shortage and the prices would increase. Examples of these weather conditions are heavy rain, storms, early frost, and droughts. On the other hand, an unexpected surplus would result with ideal weather which would drive the price of the commodity to decrease. Arabica coffee prices fluctuated a good bit in the last five years and between 2014 and 2015, it showed two record prices. The first prices showed $4.72 per kilogram and the second showed $4.97 per kilogram (“Coffee Arabica Price”, 2017). Arabica coffee is priced at $3.67 per kilogram as of February (“Coffee Arabica Price”, 2017). In the past five years, Robusta coffee also varied, however, unlike the Arabica coffee experiencing peaks, Robusta coffee experienced two noticeable dips. In 2014, the first price was at $1.76 per kilogram and in 2016 the second price was at $1.63 (“Coffee Robusta Price”, 2017). Robusta coffee is currently selling for $2.35 per kilogram (“Coffee Robusta Price”, 2017).

With extremely low yields, experts suggest that the price of Robusta coffee would eventually reach a four and a half year high (Toovey, 2017). Another key ingredient for coffee which is milk is experiencing a change from dairy to alternatives milks. The dairy industry is struggling with falling prices while the alternative milk is growing in sales and in popularity (Shah, 2016). In 2014, alternative milks hit $5.8 billion and by 2019 the milk is expected to almost double the price according to the BBC Research (Shah, 2016). Starbucks carries a variety of milk supply, for example, soy, whole, two-percent milk, nonfat, almond, and coconut (Cullum, 216). The demand for non-dairy milk is the second-highest consumer request stated by the company (Ayoub, 2015). Non-dairy milk usually does cost more than dairy milk. Starbucks will likely experience higher expenses within the growing market, and they will experience their profit margin shrinking as a result.

Unless, Starbucks is planning to rise costing pricing to the customers again like the company did when the price of coffee increased. However, throughout the years, dealing with the price hikes, Starbucks has proven that there doesn’t need to be a price spike in commodities to increase its menu prices. In fact, when Starbucks experienced a two-year low within the coffee prices declining, the company’s product prices stayed the same citing that the decrease would help offset the growing operational expenses, for example, marketing, labor cost, and rent (Gillespie, 2016). Due to high rent, Starbucks closed some of the locations in New York in 2015 (Green, 2015). It is important to note that this decision was not made due to Starbuck’s inability to afford the price increase, but because it wasn’t worth the money since other surrounding locations are just as effective as the locations that were closed (Green, 2015). Rent prices soared 20% in Manhattan, a location where Starbucks obtains nine stores per square mile (Green, 2015). Varying between 5 to 15 percent in 2016, “baristas” received a raise (Isidore, 2016). Coffee beans account for approximately 20 percent of the overall cost within the Starbuck’s industry per analysts (Gillespie, 2016).

The company’s variable cost include milk, syrup, coffee, straws, beverage cups, and heat sleeves (Lonen, 2014). The cost of those items will vary based off production activity. Spending cost will increase to keep up with demand because of the high output activity and while that is happening low activity will decrease spending due to the company’s adjustment to reduce the output. Regardless of the level of output, the fixed costs will remain the same with rent, advertising, and wages.

Overall Market

With their McCafé line, McDonalds and Dunkin Donuts remains Starbuck’s two leading competitors within the premium coffee industry in 2016 (White, 2016). Within the nation’s market, last year statistics showed that Starbucks had control of 40 percent, Dunkin Donuts with 22 percent, and an “other” category with 38 percent (Statista, 2016). It is possible that their market share is within the latter from the assist of the McCafé’s launch back in 2009. When comparing, in 2014 Starbucks and Dunkin Donuts obtained 85 percent which is a 27 percent drop within the two years (Brownell, 2014).

The barriers of entry to get into the coffee market are low, accepting Starbucks’s status level and attempting to become one of their competitors would prove to be difficult which would make the overall barriers of entry high. First, Starbucks obtains massive economies within their scale which results in cutting the cost of coffee and dairy, and non-dairy products. Furthermore, the company obtains a strong-brand name along with a loyal-customer base, who still stops in the stores and make purchases even after the price hikes occur. In the premium coffee market within the U.S. and globally, Starbucks hold the leading contender, however, Starbucks once started out as a single store located in Seattle, Washington before the company took off and became one of the most recognized chains.

Within the premium coffee market, there are a small number of competitors making Starbucks’s market structure oligopoly. Currently, Starbucks only hold two competitors which as stated before is McDonalds and Dunkin Donuts, however, Starbucks may see some other players in the mix soon. Burger King Worldwide Incorporated received Tim Hortons Incorporated in 2014, which is a fast food restaurant that is Canadian-based and known for their donuts and coffee; they plan to expand the locations within the U.S. (Shaw, 2014). When it comes to oligopolies, participants can “set prices, rather than take them” which allows companies to make profit margins higher rather than what a free market would allow (Investopedia, 2017). The product pricing of Starbucks remained the same when coffee beans priced went down, the competitors let their hopes down of luring customers away from the company’s “premium prices”. The “cheating” company could be isolated and put under financial strain if Starbucks would decide to implement another increase to product prices, which according to the trends, its likely to happen (Investopedia, 2017). To compete for a larger market share, Starbucks relies on methods, for example, product differentiation and branding since the company’s appeal is obviously not its prices.

Recommendations

Clearly Starbucks remains the dominant player when it comes to the premium coffee market, however, there is always rooms for improvement within any company. The company’s “Mobile Ordering App” has made Starbucks deal with some dissatisfied customers due to problems related to the app. Starbucks’s sale were negatively affected because when customer would enter the store and it would be crowed and the customer would have to experience a longer than normal wait time which resulted in customers exiting the store immediately (Taylor, 2017). The company must forecast the impact that these ongoing problems may have on the future demand so Starbucks can adjust the schedule of their supply and production to maximize the profits. Ongoing, the company must take advantage of the growing consumption of tea and specialty beverages. In 2016 the tea market reached $14.5 billon and data suggest that in 2024 it should reach $21.3 billion (Gebely, 2017). Considering that it is relevancy to the firm, another recommendation would be to invest interest in the alternative milk market. The scarcity and pricing would have a tremendous impact since the company has the second-highest request for the non-dairy milk.

Over Dunkin Donut, Starbucks is the leader in the market share by 20 percent as of 2016. If the mobile ordering app causes the sale to drop any further than what they already have or a possible boycott, the company could very much so lose market share. However, when it comes time to focus on the growing popularity over the tea (due to recent health trends) and specialty drinks, Starbucks could balance any potential losses that they may run into. Additionally, by Starbucks investing some interest in alternative milks, the company will ensure the availability of commodity in the future.

There is a small consumer response to the company’s price hikes that was revealed by the demand trends and price of elasticity of demand. Starbucks’s total revenue presented a very sturdy come up for the past five years even throughout increasing price several times. This result probably come about due to the fact that the price increases only account for small portions of consumers’ income and purchasing power of the Millennials. The companies that commit social and environmental responsibility obtain purchases from the Millennials because they are conscientious shopper and will be willing to pay more for goods and services from these companies. It is highly important that Starbucks continues their role in making a difference in the world.

International trade and economic transactions between countries. Commonly traded items include consumer goods, such as televisions and clothing; capital goods, such as machinery; and raw materials and foodstuffs. Other transactions include services, such as travel services and payments for foreign patents. International commercial transactions are facilitated by international financial payments, in which the private banking system and the central banks of commercial nations play important roles. International trade and accompanying financial transactions are generally carried out for the purpose of providing the State with goods that it lacks versus those that it produces abundantly; such transactions, which work with other economic policies, tend to improve the standard of living of the nation. Much of the recent history of international relations relates to efforts to promote free trade among nations.

Coffee is now a fun experience that anyone can have at any time of the day; thanks to Starbucks. When one buys a Starbucks coffee, they don’t just buy a cup of coffee; they buy an experience. From the strong aroma of the coffee, the laid-back atmosphere, and the rich taste of any combination you like, Starbucks customers understand the difference between regular coffee and Starbucks coffee experience. Starbucks, although technically the American name, is a well-known name and is spoken by people no matter where they are or from any language they speak. Originally just a narrow facade at Seattle’s Pike Place Market, Starbucks has become one of the largest companies in the world, with more than 15,000 stores in 50 countries. Since 1971, Starbucks has been offering some of the best coffee in the world for anyone who wants to pay the price stepped for a cup. Starbucks did not rise to the top with just luck; it did so through acquisitions, differentiation from its competitors, and protecting its name fought hard to create.

Analysis

The macroeconomic environment in which Starbucks operates is characterized by the ongoing global recession, which has weakened the purchasing power of consumers. However, market research conducted in the past few months has shown that consumers have not reduced their coffee consumption and instead are moving to cheaper options. This means that Starbucks can still take advantage of consumers’ purchasing power in a way that will give it a huge advantage over its competitors by offering cheaper alternatives. Apart from this, Starbucks has already taken some steps to leapfrog the emerging mobile computing revolution by linking it with Apple to offer discounted coupons in applications used on iPhone devices. Furthermore, this exercise is also accompanied by co-branding and cross-selling, which means that Starbucks is well-positioned to reap the benefits of the smartphone revolution. Having said this, it should be noted that consumers around the world are increasingly turning to “ethical verification”, which means that the products they buy and the brands they consume need to prove that they follow social and environmental standards in their manufacture. This is the main challenge for Starbucks as it faces the emerging challenges of the new era of consumer awareness and the stagnant smartphone revolution.

Political

The main political imperative faced by Starbucks is concerns about access to raw materials that have attracted the attention of politicians in the West and in the countries from which their raw materials are transported. This is why Starbucks is keen to adhere to social and environmental standards and to adopt appropriate sourcing strategies in accordance with “fair trade” practices agreed upon by international companies and governments of developing and developed countries. Another political imperative faced by Starbucks is the need to abide by the laws and regulations of the countries from which their raw materials are exported. This was necessary because of the activism and increased political awareness in developing countries, which form the basis of Starbuck’s sourcing strategies. The third political imperative faced by Starbucks is regulatory pressure within its home market in the United States due to further scrutiny of the business operations that are now subject to US multinationals.

Economical

The most important external economic driver for Starbucks is the ongoing global recession, which has reduced the profitability of many companies. However, studies have shown that instead of reducing their coffee consumption, consumers are turning to low-cost alternatives, an opportunity for Starbucks. Of course, the company still has to face rising operating and labor costs because the inflationary macroeconomic environment coupled with lower profitability is pressing the company from both ends of the spectrum.

Social and cultural

Although Starbucks can offer cheaper alternatives as previously mentioned, it must do so without sacrificing quality. This is the company’s main social and cultural challenge as it expands its consumer base to include lower- and middle-class consumers the income pyramid. Apart from this, the ‘green’ and ‘elegant ethical’ consumers who are concerned about the social and environmental costs of the brands they consume mean that Starbucks must be aware of this trend. Third, older consumer spending is likely to dwindle, so Starbucks will have to look to exploit the younger generation as part of its strategy.

Technological

Starbucks is poised to reap the benefits of the emerging wave of mobile phones, and since they are tied to Apple to offer discount coupons on the app, you can expect to ride a portable wave easily. The company has already incorporated Wi-Fi capabilities into its outlets so that consumers can browse the web and do their job while having coffee. It’s really an added value for the Starbucks brand and something, which enhances the consumer experience. It can also make mobile payments, which is something that it is already testing at pilot sites in the United States.

Starbucks must ensure that it does not conflict with laws and regulations in the countries from which its raw materials are exported as well as local markets in the United States.

There have been many concerns about the business practices of Starbucks from activists, international advocacy groups, and consumers themselves. Therefore, Starbucks should be mindful of these concerns if it is to continue to uphold the trust it enjoys with its customers.

PESTLE analysis proves that Starbucks operates in a relatively stable external environment. The main reason for this is the fact that it works in the food and beverage field, which means that despite the recession, consumers cut consumption somewhat rather than completely. The task before Starbucks is to reduce costs and increase value so that it retains its consumer base and attracts consumer loyalty.

Globalization of Starbucks

Global expansion is essential for successful businesses Starbucks is no exception. Despite the success of Starbucks in its domestic market, the company’s leaders knew they would have to exploit globalization and expand the company to foreign markets to take full advantage of the company’s potential. In 2003, Starbucks quickly expanded into overseas markets and began to develop into the global company we know today. Countries are beginning to experience the Starbucks Impact, the constant emergence of new competitors with superior business models that force companies to reconsider the feasibility of what they have always done. In short – if your company can’t keep up with the efficiency of Americans, it won’t work. Since globalization helped establish Starbucks as an international company, the company faced problems. These problems arose internally, within the company’s international business model, and abroad, in the form of external competition. Competing cafes began to copy Starbucks’ business practices, name,s, and even company logo. Starbucks had to use intellectual property laws to dispel customer confusion with competitors.

When Starbucks first expanded internationally, it used the same aggressive business model it developed in the United States, but soon discovered that the same tactics that established the market in the domestic market were not conducive to international expansion. In addition to cultural disputes between the organization’s retail practices and different regions, many cities opposed the establishment of Starbucks as a means of protesting against the larger trend of globalization. Because of this resistance in some areas, Starbucks had to create ways to adapt to foreign countries and seek the support of their populations. Starbucks does this, and it does so well, by listening to its customers. Starbucks experienced difficulties when trying to enter the European market. What Americans found strange did not translate well into Europe. Europe has been a trading hub for some of the world’s most exotic goods from distant regions for centuries. While beans from foreign locations were perceived as allergic to Americans, Europeans were thinking differently. Initially, Starbucks in Europe began to head to the United States, like a coffee shop/restaurant offering a Starbucks experience. Over time, Starbucks evolved to suit the demand of European citizens. Starbucks staff on the sidewalk will educate pedestrians on how to “make your own coffee”, in an effort to attract a classic French sense of art and creativity. The Starbucks strategy in Paris encourages the purchase of its coffee as an economic endorsement for foreign coffee bean producers that embody the unique characteristics of soil and light … which blends the classic French concept of pride in individual craftsmanship and professionalism, and land products, with the promise of a green and sustainable brand.

Starbucks not only listens to its customers; it also listens to and appreciates its employees. Starbucks was the first company in America to offer comprehensive health benefits and stock options to every employee, including more than 65% of those who worked part-time at the time. In addition to providing employees with a significant benefit plan, Starbucks also provides its employees with comprehensive training that enables the organization to promote its products through its employees. Starbucks, by recruiting words, is able to save big money on marketing costs and redistribute them to improve the company elsewhere. Starbucks spends $ 30 million a year on advertising or nearly 1% of revenue. Most consumer companies scale up to $ 300 million annually. This is an enormous advantage, not only in low spending but also in foreign countries where the recruiting of verbal words replaces traditional marketing methods that are not effectively available.

Competitive Forces

Since the beginning of Starbucks, the growth trend has been visible. After continued growth within the United States, the saturated market made it necessary to find alternatives in order not to decline. The result was the company’s international focus. In order to succeed in business, in the domestic market as well as in overseas markets, there are various factors of importance. These factors can be described and analyzed on the basis of Porter’s five forces model. The Porter Framework includes five key factors affecting business: the threat of alternative products, the bargaining power of suppliers, the bargaining power of buyers, competition between competitors, and market entry barriers.

Alternative products affect demand for a company’s product. More alternatives provide a greater choice for customers. As a result, as price elasticity increases and given the same benefit of the commodity, lower alternate prices will result in lower sales. In the ideal market, the lowest-priced competitor will attract all customers. To be successful, customers must be able to see greater benefit from using a particular item in order to be willing to pay a higher price for it. A different type of alternative is the alternative use of money, so instead of going to the cafe, visiting the cinema may be an alternative to spending money. However, most customers go to Starbucks for a drink and most likely will not give up a cinema visit for a cup of coffee making the threat of alternatives offering different experiences smaller.

Starbucks is not just a cafe but offers an experience. With regard to these alternatives, they should be measured in the package provided by Starbucks to its customers: a large selection of coffee, a pleasant atmosphere, great decor, and access to a wireless LAN in most of its American and European stores. It is difficult for a supermarket or regular cafe to offer hot and cold drinks to imitate Starbucks, for example in Britain, other different retailers have a similar assortment, similar music, decor, and ethics, they cannot equal the Starbucks brand and the associated image. Thus, Starbucks can request a premium on their offer. Problems appear when Starbucks is converted into a cafe. Then any other cafe equals Starbucks and the cheapest price or coffee culture is the main factor for customers, especially in countries with a large coffee culture where Starbucks is new and rare.

The bargaining power of suppliers is determined by their chances of influencing the price they get for their product. If suppliers are concentrated or low or if the costs of switching between suppliers are high, their impact will be significant. Today, as in past years, coffee is the second most traded commodity behind crude oil. In the coffee industry, there are many small suppliers, competition is high, and products are subject to global price fluctuations making it difficult for farmers to make long-term calculations. As a result of the increasing number of countries that began to produce coffee prices, they dropped from more than $ 1 in the 1980s to less than 50 cents per pound of coffee today. Since there are only two types of coffee beans, Robusta and Arabica, where the latter is used only for premium coffee, suppliers wishing to serve Starbucks should create and maintain a high-quality standard and offer good prices. Since prices are too low, their profit margin is too small, or may sell with a loss. Therefore the strength of suppliers can be considered weak. As a minimum of protection, Trade Fair coffee was established in the second half of the 20th century. It is a not-for-profit program that ensures coffee producers in poor countries get a fair price for their goods. But despite Starbucks paying higher prices for their grains, fair-trade contributes only a fraction of Starbucks’ business.

For high quality, Seattle trains suppliers specifically to meet their standards, and samples are taken to determine quality differences in the early stages. In addition to fair trade, prices pay above the market average in order to maintain their quality standards and get a good relationship with their suppliers. But with regard to the expansion strategy of Starbucks, maintaining a steady supply of high-quality coffee will become difficult. High-quality coffee is a rare resource and crops are naturally limited. Through this supplier, you may get a stronger position to negotiate with Starbucks and the coffee industry in general.

At the other end of the customer value chain. The average customer visiting a retail store has no negotiating power. Its price is fixed. Clients who enjoy a stronger position are those who demand large sums to give them a better position. Starbucks deals with both types. Besides the retail store customer, Starbucks has partnered with major companies such as Pepsi, and Barnes & Noble, and so on. They can improve Starbucks’ image and gain strategic value as they help develop new products and increase their Starbucks market share. Because of this, they are able to place orders towards Starbucks and negotiate prices.

Apart from these factors, great competition in retail between coffee chains. Starbucks’ biggest competitor is McDonald’s. They have an extremely large infrastructure, one of the largest networks in existence, but a different picture. They have a fairly simple picture and the presentation is still geared towards meeting needs quickly. In contrast to this Starbucks provides an environment where spending time is the key point. Different coffee chains try to imitate Starbucks and are able to attract customers because their focus is slightly different. One of the biggest contenders, the second Canadian Cup, has focused on shopping malls but is now expanding to one location. Even in general competition is very large. Despite this fact, Starbucks has succeeded in becoming the biggest player in this business, so its success in the United States is not only clear but a certain contribution from its international business is also included in this success. Since there is no supplier power, very few buyers can put pressure on Starbucks but the great competition with many different coffee cultures around the world is a very difficult expansion strategy.

Conclusion

Overall, Starbucks is a strong company in a growing industry, it takes a strong position in the coffee industry and launches promising strategic and environmental goals. Over the next few years, Starbucks will continue to grow in the international market. Although two-thirds of its stores are local at the moment, the percentage of foreign stores will rise over the next few years. Starbucks handles the transition from a local company to an international company very smoothly. It is taking the right steps to allow it to successfully achieve its long-term goals. Starbucks’ strong business model can and should be replicated by international companies. Starbucks is a company that takes its global products and specializes in them to suit the local and cultural needs of different regions and communities. They have a transnational business model that allows them to have a global product that can be tailored to national needs. Starbucks’ corporate learning system allows you to gain knowledge of new marketing or product ideas that can then be transferred to other national areas within Starbucks. Starbucks must be responsive to its different markets. Economic meltdowns and political instability can ruin the business market. Starbucks must be aware of the changes in government and culture in order to better predict the problems it will face. It is important for Starbucks to continue its robust communication system in order to continue to grow as a business.

Tim Horton is a Canadian fast food restaurant chain, specializing in coffee and donut items. It is Canada’s largest quick service restaurant chain. It is one of the most popular and demanding coffee shop in the modernized era of Canada. It was established by the two partners Tim Hortons and Ron Joyce in May 17, 1964 at Hamilton Ontario After the death of the Tim Horton the other partner Ron Joyce bought the Horton family’s shares for $1 million and took over as sole owner of the existing chain of forty stores. Joyce expanded the chain quickly and aggressively in both geography and product selection with the expansion of Tim Hortons restaurants, there was many major changes observed in the coffee and donut industry due to which some small scale and local coffee shops take their feet back from the industry because the company have clear mission statement and have clear goal of achieving the major position in the industry and want to be king as well as rich in the economy. As with the increase in growth of Tim Hortons restaurants, the owner of the Wendy’s restaurant decides to open a restaurant where both of these brands where operate together so that the companies earn more profit. Having the clear vision in the business contributes a lot in achieving the desire goals as the Tim Hortons have.

Mission Statement

Mission statement is one of the important document in the business which plays very significant role in business. Basically this written statement which briefly explains the company’s goal and philosophies. It also defines “what an organization is, why it exists, its reason for being”. Every company has the strong mission statement which helps the company in performing its functions and directs their efforts in achieving the goals which are set in the statement. Tim hortons also have mission statement which helps it to achieve its desire reputation and position in the competitive market so that they can remain at the top in the food industry. Mission statement of the Tim Hortons is to provide the superior quality of its products and services in order to make its customers happier and to achieve their attraction so that they can never think about any other restaurant. In their statement the overall goal of Tim Hortons is also reflected which is to be a quality leader in everything they do in their restaurant. The main focus of the Tim Hortons is to excel in the food industry and get innovate products and to enhance the existing services which strives the Tim Hortons to be the best through determination and passion. Tim Hortons also have the mission of serving their products to maximum number of people with a short waiting time so that customers get their meals as quick as possible and set that quick service in their mind so that they come to their restaurant net time without any hesitation. Promoting the coordination and team work among the employees is another mission of the Tim Hortons to direct their behavior and efforts towards the company’s goal.

Core Values

Values are defined as the beliefs and ethics of the organizations towards the thing which are surrounding all around. Core values are very important values which dictates the companies the behavior and efforts toward the goal and which tells the company about what is wrong and what is right for the company for present as well as for the future. Core values also help the companies to determine if they are on the right path and fulfilling their goals by creating an unwavering guide. Core values also reflect the decision making strategies of the management and how they interact with stakeholders. . Tim Hortons have many moral values which shows their coordination in the team members and how the mangers and all other employees work together under one roof and in such a manner which automatically highlights the values and culture of the this company. Addition to this tim hortons also have the values know that their Team Members are the heart of their Restaurants. They have great relationships with our Guests and provide them with the incredible service by which their brand is known for and the reason for its existence. Tim Hortons have the culture of rewarding its employs for their efforts in achieving the company’s goal of connecting more customers.

Social ResponsibilityActivities

Social responsibility means performing the task or activities which are valuable for the development of the society. it is an ethical framework and suggests that an entity of an organization that has an obligation to act for the benefit of society at large. As to survive in the competitive and demanding market where the customers have many choices, the companies have to perform the social activities which helps the company in making strong goodwill in the market due to which the reputation goes up among the other competitors. Tim Hortons also perform many social activities which are handless contributors of the success such as starting the Tim Hortons children’s foundation which have there are several programs which are designed in such a way to make the campers more responsible, caring and motivated individuals. Moreover Tim Hortons also contributes in providing the opportunities to the children to participate in local sports event organized by it. Tim Horton also perform a social work of providing the employment opportunities to the job seekers as well as to the farmers who grow coffee specially for them. Tim Hortons also donates its share of profit to the social charities across the Canada and US through the smile cookies.

Environmental Sustainability Activities

Every business uses the resources of the society in order to produce its goods and services which help the company to earn their living. In order to continue the usage of resources, company have to perform some environmental sustainability task so that the company can use the resources easily without any restrictions or obligations in this demanding era there is need to perform more and more sustainable activities which guides the company to use the resources in such a way which benefits the present as well as future generation. Tim Hortons perform many environmental sustainable activities which save the environment from many disastrous problems. Tim Hortons have ecofriendly packing designs, waste reduction at the restaurant and green building designs, and many other activities which are done to protect the environment from harm. It also reduces the 35% of usage of water consumption at the operating office. In order to protect the environment from the waste material. Tim Hortons addressing the waste generated at restaurants through reduction, reuse and recycling initiatives.

STARBUCKS

In Canada, there are many coffee shops were exist who serve the different types of coffee drinks to the people who enjoy the society. starbucks is one of the coffee shop and restaurant who offers the wide variety of coffee to its customers. Starbuck was founded in Seattle, Washington in 1971 by three partners name Jerry Baldwin , Zev Siegl and Gordon Bowke. It is considered as an Americana coffee and coffeehouse corporation who have 28,218 number of branches all over the world. Starbucks is also be choose as the main representative of “second wave coffee”which distimguish its coffee from other coffee venues in US through its taste, quality and customers point of view or experience. Starbucks serves hot and cold drinks, whole- bean coffee. Microground coffee which is omne of the special coffee of te starbucks. It also offers snacks and frappuccino beverages which make it more demanding and popular among the customers because customer always demand wide variety of things so that they can enjoy their meals. Starbucks is not just passionate purveyor of coffee, everything else going in the coffeehouse enhance the reputation and level in the competitive market.

Mission Statement

Every company has one mission statement which identifies company’s vision for the future that what they are doing and what they have to do for securing the future growth in the market. Moreover, mission statement also clarifies the path on which the company has to operate for its survival and serving the society its products and services. it also shows the philosophies used by the company to become unique and quality superior from the other competitors who also serve the same products to the market. Starbucks also have the strong mission statement which governs its policies. Starbucks mission statement is to inspire and nurture the human spirit which means one person, one cup and one neighborhood at a time. This statement shows how the Starbucks operation support the difference from the market. Starbucks also have the vision of always been and will always be about the quality which mean how they are passionate for sourcing the finest coffee beans which are roasted with great care in order to protect the people who grow them. in mission statement Starbucks also put focus on the partners which means employees perform their tasks with passion not with pressure in which they all hold each others to that standard. Addition to this, Starbucks’s vision focuses on leadership in the industry which gives company success in respond to the environment depend upon the effective implementation of this statement.

Core Values

Core values are defined as those values which shows the company’s fundamental beliefs which dictate the behavior of the company and help them in understanding the difference between right and wrong means that whether the company is on right track or not. Core values also reflect the attitude and culture of the company which display the real image of company in front of customers and society. Core values plays very important role in making the ladder of success for the company. Starbucks also have many core values which are implemented in the company in order to make the company reputation and standard. Starbucks have the value of creating a culture of warmth and belonging in which everyone is welcomed with respect and love. Moreover Starbucks also have a value of coordination and belongingness which means all have the feeling of one. Moreover, it also have the value of acting with courage, challenging the status quo and searching the new paths to grow the company and being present , connecting with transparency, dignity all these values together build a set platform for the Starbucks.

Social Responsibility Activities

Social responsible activities means performing some activities which contributes to the development of the society and raise the level of the economy at that place where the society enjoy the higher standard of living as well as the higher quality of life. to achieve their target. The company has to do some of the social activities to remain in demand and in the eyes of the customers. Performing social activities is one of the important responsibilities of the company Starbucks also performing several social activities in order to contribute some efforts towards the betterment of society. Moreover, Starbucks also helps the communities where its stores are located and to the ones where the coffee is grown. Starbucks also implemented the Youth employment program in which it helps the homeless and out of foster care and who have low level of education which make them eligible for earning the cost of education so that they can achieve their education and secure their future. Adding to the social activities done by Starbucks, it also donates $0,05 to $0.15 per transaction to the nonprofit organization in order to help the needy people and serve the society something valuable.

Environmental Sustainability Activities

Every business exist in the market use the various resources of the environment to manufacture its products and fulfill the demand of its customers and keep on using these resources until these are available. And to make long term use of resources, business has to protect these resources by performing the environmental sustainable activities so that the resources were used in efficient manner. Starbucks also uses many resources of the environment and it also performs various tasks to protect the environment from harmful materials. Starbucks started the recycling and waste reduction program in which Starbucks recycle the recycling items by itself. Starbucks also began providing recycling in the front of the house in a number of key markets in Canada and US. In order to save water in the environment, Starbucks installed dishwasher in all the stores so the usage of water might be reduced. Starbucks uses wooden products, recycling floor tiles and paint with lower amount volatile organic chemicals in their stores which directly reflects how the Starbucks save the resources of environment.

About

This is a join venture between Tata Global Beverages and Starbucks Corporation. Both the companies owns 50% if the companies share. It is know as Tata Starbucks Limited and founded on 19 October 2012. It is operated in India and has 115 stores. Tata Beverages is an Indian tea and coffee plantation company and Asia’s largest coffee plantation company. Starbucks is an American coffee company and coffeehouse chain. It is known as Starbuck A Tata Alliance in India (Tata Starbucks, 2019). The first store was opened in Mumbai on 19 October 2012 and then they started expanding to different cities. This has opened the new market entry opportunity for Starbucks in Indian market and the increasing trend in the beverage market has helped Starbucks to get good number of market share. All coffee that are sold in the Indian outlets are supplied by Tata Coffee (Tata Starbucks, 2019).

Products

There are various products that represents the Indian style offered only in India. Products that are offered in India are Tandoori Paneer Roll, Chocolate Rossomalai Mousse, Malai Chom Chom Tiramisu, Elaichi Mewa Croissant, Chicken Kathi Roll and Murg Tikka Panini (Tata Starbucks, 2019). They have started a tea brand named as Teavana which offeres 18 different varieties of tea. Also, there one tea that is exclusively sold in India is spice majesty blend.

STARBUCKS

About

Starbucks is an American company started in 1971 in Seattle, Washington. They first started as roaster and retailer of whole bean and ground coffee, tea and spices in Seattle’s pike place market. They have over 17,000 locations in 50 countries (Our Company – Starbucks). Starbucks offers variety of coffee and snacks. They have some specialty beverages that they offer seasonally. They also offer pre-packaged cold beverages such as Frappuccino which is the most consumed pre-packaged cold beverage offered by Starbucks. Also, “Starbucks Evenings” locations offer beer, wine and appetizers (Starbucks, 2019).

Products

Starbucks offers varieties of hot and cold beverages. They offer lower calories and sugar free beverages in which they use they use skim milk, they also give option to choose between natural sweeteners and artificial sweeteners or sugar-free syrup flavours (Starbucks, 2019). They sell iced beverages and these are offered in fruit flavours. They have varieties of sizes: Demi (89 ml) smallest size, Short (240 ml) smaller of two original sizes, Mini (300 ml) smaller than three original Frappuccino sizes, Tall (350 ml) larger of two original sizes. They have espresso and cappuccino. The sell tea as “Teavana” in variety of flavours. Not only beverages but Starbucks also offer different snacks and breakfast items. Those who are health conscious they offer protein boxes. They have covered almost all the market segments.

Customers

Starbucks target market are the individuals who are willing to pay extra for quality and service of products. They are also targeting more health-conscious customers by offering low calorie beverages. They target students, employees and professionals and both upper and middle class (Starbucks Segmentation, Targeting and Positioning, 2017). Their target market are high income and high spenders, urban-ish and on-the-go, healthy professionals, socially conscious customers, flexible to change (Who is starbucks’ Target Audience, 2019). Starbucks has 52 stores in Africa, 7484 stores in Asia, 1889 stores in Europe, 16309 stores in North America, 57 stores in Australia and New Zealand and 404 stores in South America.

TATA GLOBAL BEVERAGES

About

Tata Global Beverages is an Indian multinational non-alcoholic beverages company (Tata Global Beverages, 2019). It was in 1964 and its headquartered in Kolkata, West Bengal. It is world’s second largest coffee and tea producer and Asia’s largest coffee and tea producer. It has many subsidiaries brands through which they market tea, these subsidiaries are Tata Tea, Tetley, Good Earth Teas and Eight O’clock. Tata tea is the biggest selling brand in India and Tetley is biggest selling brand in Canada, US and UK. They produce 7 crore kgs of tea in India and they own 54 tea gardens and 10 tea blending and packaging factories (Tata Global Beverages, 2019). They have product and brand presence in more than 50 countries. They also have joint venture with PepsiCo called NourishCo which produces non-carbonated drinks.

Products

The products of Tata Global Beverages are Tetley, Tata Tea, Vitax, Joekels, Good Earth, Jemča and Teapigs (Products, 2019).

TYPE OF ALLIANCE

I think it is a strongly coupled strategic alliance because they have signed a contract for a joint venture and also in their contract they have agreed to promote agronomy practices which includes training for local farmers, technicians and agronomists to improve coffee-growing and milling skills (Tata Coffee & Starbucks sign MoU for Strategic Alliance in India, 2011). In their JV they have decided to pay equal license fee to Starbucks and Tata Global Beverages for using their brands and services (Tatas to get brand royalty from JV with Starbucks, 2012). Starbucks will use one of Tata’s roasting facility in Coorg as a part of agreement and then they will buy other roasting facilities together. Starbucks will buy coffee beans from Tata Coffee estates. This will open the door for Starbucks to enter into the Indian market. In their Sourcing and roasting agreement Tata Coffee will roast and export coffee to Starbucks Coffee Company and Tata Starbucks (Starbucks Stories, 2019). Tata has gained a lot of experience in the retail business which has been helpful for Tata to get more knowledge about the Indian market (Starbucks comes to India, Selling Coffee and Atmosphere, n.d.). One of the major benefits that the Tata is bringing on the table is the number of outlets owned by them and some can be used for the Starbucks (Starbucks comes to India, Selling Coffee and Atmosphere, n.d.).

ADVANTAGES AND DISADVANTAGES

Advantages

• Starbucks will get roasted coffee from Tata Coffee.
• They don’t have to buy the place for the outlets because it will be provided by Tata as they have different stores in many places and will provide space in their hotels.
• Easy entry into the Indian market.
• It benefited Tata Coffee to gain access to US market by exporting the coffee beans to Starbucks in the US.
• Starbucks gained access to Indian airline industry as they provide coffee on Vistara airline one of India’s fastest growing airline industry.
• Tata will get the brand value of Starbucks.
• Tata will get more in-depth knowledge about different beverages of Starbucks.
• Starbucks will get knowledge about the Indian market trend from Tata Coffee.

Disadvantages

• Increased competition in the Indian market.
• Difference in trend and cultural aspects.
• The Indian market is mostly tea-based culture.
• More number of lower income group people cannot afford high priced coffee of Starbucks.
• No frequent visits of Indians in café.

References

1. Our Company – Starbucks. (n.d.). Retrieved from Starbucks: https://www.starbucks.ca/about-us/company-information
2. Products. (2019, March 23). Retrieved from Tata Global Beverages: http://www.tataglobalbeverages.com/brands/tea/products
3. Starbucks. (2019, March 21). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Starbucks
4. Starbucks comes to India, Selling Coffee and Atmosphere. (n.d.). Retrieved from Knowledge@Wharton: http://knowledge.wharton.upenn.edu/article/starbucks-comes-to-india-selling-coffee-and-atmosphere/
5. Starbucks Segmentation, Targeting and Positioning. (2017, April 15). Retrieved from Research Methodology: https://research-methodology.net/starbucks-segmentation-targeting-and-positioning-targeting-premium-customers-with-quality-products-and-service/
6. Starbucks Stories. (2019, March 23). Retrieved from Starbucks: https://stories.starbucks.com/stories/2012/tata-global-beverages-and-starbucks-form-joint-venture-to-open-starbucks-ca/
7. Starbucks-Tata Global join venture: Can Starbucks master the india blend? (2012, February 05). Retrieved from The Economic Times: https://economictimes.indiatimes.com/industry/cons-products/food/starbucks-tata-global-joint-venture-can-starbucks-master-the-india-blend/articleshow/11760739.cms?from=mdr
8. Tata Coffee & Starbucks sign MoU for Strategic Alliance in India. (2011, January 13). Retrieved from Business Wire: https://www.businesswire.com/news/home/20110113005670/en/Tata-Coffee-Starbucks-Sign-MoU-Strategic-Alliance
9. Tata Global Beverages. (2019, 18 March). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Tata_Global_Beverages
10. Tata Global Beverages gains after Starbucks expands partnership. (2016, June 28). Retrieved from Business Standard: https://www.business-standard.com/article/news-cm/tata-global-beverages-gains-after-starbucks-expands-partnership-116062800389_1.html
11. Tata Starbucks. (2019, February 17). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Tata_Starbucks
12. Tata Starbucks Ltd A Strategic Analysis. (2012, November 10). Retrieved from LinkedIn SlideShare: https://www.slideshare.net/ranganathpandit/tata-starbucks-ltd-a-strategic-analysis-15117792
13. Tatas to get brand royalty from JV with Starbucks. (2012, February 12). Retrieved from Business Standards: https://www.business-standard.com/article/companies/tatas-to-get-brand-royalty-from-jv-with-starbucks-112020200080_1.html
14. Who is starbucks’ Target Audience. (2019, February 05). Retrieved from Small Business – Chron.com: https://smallbusiness.chron.com/starbucks-target-audience-10553.html

Levitt (1967), stated that to maintain the business in the strong competitive businesses’ world companies must adore innovation, not only as a desired however because it is a necessity for the company keep the existence and its growth in the marketplace.

In Starbucks coffee chain case developed by ‘Blue Ocean Strategy’s theory of innovation, using as an example one of its demanded successes. Companies can create the strategy of blue ocean in two diverse ways, in some cases companies can build a new businesses that they don’t have rival competing for the same place, generating a new demand that they are chasing to be different from the businesses which already exist, or some businesses can create the blue ocean from the red ocean which they change the restrictions of industry that already existed in the marketplace ( Mauborgne and Chan Kim, 2004).

The company has invested in its coffee stores to established the its store as the third place for customer between their home and job, investing continuously in its premium version of the brand calling Starbucks Reserve Roastery where the brand combined a selection of rare coffees and retail innovation to give to the customer an entirely coffee experience, where the company offers in its premium version stores, main bar, roasting area, experience bar, renowned bakery and coffee library. It makes Starbucks coffee chain a great example, it changed the boundary of the traditional coffee industry and became very success company.

Starbucks coffee chain has focused on technology as its main strategy to engaged consumers and give to them a fully company’s experience, the company new business model Starbucks Reserve Roastery the premium version in Shanghai for instance the company has combined offline and online digital experience, the company has stimulated consumers use their mobile phone in store in order to discover more about the company’s history and what the premium version of the company has to offer to the customers, through an interactive experience augmented reality (AR) and multi-sensory experience, customers have to use their mobile phones in store, thus, the augmented reality experience is a floor-to-ceiling, wall-to-wall visual image of Starbucks and its coffee process.

Therefore, the company has focused on personalized digital relationship, that is going to give to the organisation a new profits opportunity. The company launched the new model of its loyalty programme in order to influence more customers and place a customised order and pay, the mobile order and pay app is now available to non-Starbucks rewards members, teamed up with Visa Card, integrated directly into Starbucks loyalty programme, it empower purchasers earn stars in and out of Starbuck’s store, worldwide Visa Card is accepted as payment.

References

1. Mauborgne, R. and Chan Kim, W. (2004) ‘Best in brief: Blue ocean strategy’, WARC Market leader, 27 Available at: https://www.warc.com/content/article/mkt/best_in_brief_blue_ocean_strategy/79644#about-the-author [ Accessed 06 March 2019].
2. Levitt, T. (1967) ‘Innovative imitation’, Business Source Complete, 4(2), pp. 35-45

Upon closer investigation of the Starbucks dilemma in South Africa, it can be concluded that there are a multitude of reasons as to why they are not as successful as they would like to be. The following is a brief summarization of the current situation for Starbucks in South Africa. Taste Holdings, the local license holder for Starbucks in South Africa, has withdrawn from their dealings with Starbucks and their other food companies, and they have sold their 13 Starbucks locations for 7 million rand or about $464,000. They have retreated to their dealings with luxury jewelry and watches in order to focus on what they perceive as healthier and more secure markets. The reason for this shift is because their investment did not pay off. Originally, Taste Holdings wanted to open roughly 200 locations throughout South Africa, but they only managed to open 13. These alone have not been sufficient enough to provide a return on the initial investment. Even if more were opened, they would still be in the negative. Each location was coming out positive when taking annual earnings into consideration, but that was not enough to provide returns on all investments. Having to pay a portion of their earnings back to Starbucks was also a big financial hit to Taste Holdings, and it proved to be a massive source of stress for them. To summarize, the three primary reasons for Starbuck’s current situation in South Africa would be ridiculously high startup costs for each location, percentages to be paid back to Starbucks causing a financial burden for Taste Holdings, and unreasonable prices that were bested by local competitors at each location. These are only three of the more central issues with Starbucks in South Africa, and there was definitely a collection of smaller, contributing issues that were not addressed within a reasonable period of time.

Environment

Starbucks locations in South Africa cost a ridiculous amount to open and operate. According to an article on Business Insider South Africa, the investment would be about 3 to 5 million Rand on average; whereas, their one of their closest competitors, Vida e Café, builds a location for about 1.5 million Rand according to their director of business, Hitesh Patel. The difference is far too extreme, and they currently have no means to bridge that gap. In addition to the startup costs for each individual location, the menus for Starbucks are far too expensive when compared to their competitors. The following is a chart sourced from an article on Business Insider, South Africa: Sources: Seattle Coffee Co. (Online), Vida e Caffe (Sandton) & Starbucks (Melrose Arch)/Table: Business Insider SA.

Premium brands like Starbucks are expected to have a hard time conducting business in South Africa because of the inherent economic situation there. There is a massive difference in economic classes because South Africa has one of the smallest middle classes which sits at roughly twenty percent. The middle class would be Starbuck’s primary target market when entering this region, but the size is an obvious issue. Taste Holdings and Starbucks must have had some confidence in their strategy when initiating their dealings, but their efforts were in vain and full of flaws on multiple levels. The most obvious level would be the economic inequality issue in South Africa. For years, the country has suffered from an ever growing lower class and an overbearing, elite minority. Long have the people of South Africa been starved under the foot of an oppressive economic elite. The disparity here can be seen by viewing aerial photos of the South African living conditions. You can see luxurious mansions surrounded by greenery and lavish amenities, but you can also see vast fields of dingy housing swamped in the staining sludge of poverty and stagnation. According to a CNN article by Katy Scott, the richest ten percent hold seventy-one percent of the wealth, and the poorest sixty percent hold seven percent of the wealth in South Africa. The latter group is obviously not the target market for Starbucks or Taste Holdings, but they cannot be ignored. Their existence speaks to the rigidity of the barrier that exists when considering pricing. Starbucks and Taste Holdings want a target customer that can afford the elevated prices that come with the brand of Starbucks. They were able to find these consumers, but there are simply not enough people in this target market to reap a substantial profit large enough to pay back initial investment costs. It also isn’t possible to break even with this target market. By pursuing this route, Taste Holdings and Starbucks also, unknowingly, pursued stagnation. Realistically, Starbucks can target middle to upper class individuals, and they did so. The truth of the matter is that Starbucks may have to adjust their target market in order to survive in South Africa. The chaos and rigidity of South Africa also apparent in their government and political history. As stated before, the nation has long been influenced by a ruling elite that aims to selfishly pursue their own prosperity over the wellbeing of the overall population. Similarly, to the economic situation, the political situation has isolated large segments of the population. In the previously referenced CNN article by Katy Scott, the following information is stated:

“More than half of South Africa’s population (55.5%) live in poverty (making less than $83 a month. 25.2% live below the poverty line. 64.2% of those living in poverty are black, and 41.3% are mixed-race. Six percent are Indian or Asian, and one percent is white. In South Africa, the majority of the elite, the top five percent, is made up of the white population. This is according to Murray Leibbrandt, economics professor at the University of Cape Town.” (Scott 2)

This cultural segmentation puts Starbucks in a box. More revered brands tend to be tossed into the elite category and reserved for only the middle to upper classes. Lower income groups would not only be unable to afford the brand, but they would also resent Starbucks for catering to the elite. Of course, the previous statement relates back to pricing issues. These pricing issues have always been present for coffee in South Africa.

Cultural Influences

South Africa, like all of Africa, is known for its production of coffee. It is said that Africa is the birthplace of coffee, and the continent has had a long reputation for quality coffee. South Africa is a unique case in regards to Africa’s coffee culture. Coffee is not indigenous to South Africa, so South Africans have long preferred indigenous alternatives such as tea. This is why tea is much more affordable compared to coffee in South Africa. The country is still known for producing its fair share of coffee, but it is still “playing second fiddle” to tea. South Africa also has a history of accepting low quality coffee imports. Coffee Magazine’s Dylan Cumming states the following:

“South Africa did not sign into the International Coffee Agreement (ICA) due to their political position in the nineteen-sixties to eighties. This agreement aimed to keep coffee prices high and stable in the market. Because of South Africa’s lack of involvement in this agreement, they became a dumping ground for low quality coffee for years.” (Cummings 1)

Coffee has been historically consumed by South Africans through inexpensive coffee powders, mixtures of tea and coffee, and, more recently, local coffee houses that provide steeper prices but remain active due to proper price management. Examples of local coffee houses would Seattle Coffee Co. and Vida e Café. These companies stand as competition for Starbucks when it decides to try its hand at the South African market a second time.

Research Methods

When examining the coffee market in South Africa and Starbuck’s involvement in it, secondary research is being performed on my part. I am able to access a vast network of researchers online that have already committed themselves to fleshing out my selected research topic. In taking advantage of existing information and research to supplement my own research, I am acting as a secondary researcher. If I were “on the ground” in South Africa on a mission to compile coffee consumption data and report my findings, I would be performing primary research. If I were compiling new information and reporting it in a way that hasn’t been done before, I would also be acting as a primary researcher. In conducting secondary research, there are both advantages and disadvantages. Firstly, I am able to pick and choose which information I think is most appropriate for my research. I can better compare and contrast researchers and their studies in order to formulate a more unique and all-encompassing report. The disadvantages involved in secondary research is that I, as an individual researcher, have much less knowledge on any specific subject. In outsourcing my data, I am forced to take on a more general understanding of the subject because I am collecting bits and pieces of information from each researcher that I use as a reference. In drawing from secondary sources to create a multi-faceted research report, I am unable to deeply dive into any singular facet. To conclude, a secondary researcher like myself must opt for a more general understanding of a topic in order to make a report more well-rounded and less “laser focused” on any particular bit of information.

Entry Mode Selection

When entering South African, Starbucks chose to grant a License to Taste Holdings to open 200 locations. By choosing Licensing as their international market entry method, Starbucks was able to avoid some unnecessary risk. Starbucks knew that South Africa was a risky market, and they were naturally hesitant to rush into things themselves. By giving Taste Holdings a license to open locations, Starbucks could attempt to make a big move into South Africa without incurring full responsibility. Starbucks may have also had some degree of confidence in Taste Holding’s ability to understand and cater to the native market. Taste Holdings was supposed to be the entity that would work to understand the place and promotion aspects of the marketing mix. Ideally, Taste Holdings would have been able to work with Starbucks to better address the product and price aspects of the marketing mix. Together, these entities made the effort to go forth with these roles. Unfortunately, things did not work out as they had hoped. While Starbucks suffered an embarrassing defeat in South Africa, Taste Holdings stands as the primary failure in the expansion effort because they failed to collaborate with Starbucks and adjust to the market constraints in South Africa.

Market Segmentation and Target Market

When Starbucks and Taste Holdings first decided on an STP strategy, they were didn’t exactly miss the mark entirely. Starbucks provides premium coffee products, and the only market segmentation that can afford this is the lower middle class and above. With coffee still being a niche product in South Africa, it would still require a guiding hand to nurture its development into the mainstream. If anything, new products could have been introduced to bridge the gap between coffee and tea. This could lead to more regular customers. To attain consistent customers that can support each location and spread the normalization of coffee consumption, Starbucks would require the targeting of the middle class and above market, and Starbucks set out to do just that in South Africa. While this market could afford to regularly purchase Starbucks products, they would still be likely to choose cheaper alternatives that retain a similar standard of quality. If Starbucks and Taste Holdings could have found a way to lower product costs to a competitive level, the results would be at least satisfactory. The task of lowering prices of individual products would fall to those involved in supply and production logistics. If great minds worked together, a creative solution could be achieved. A more important problem with cost would be the cost of opening a new location. As stated above, each location was costing between three to seven rand while a competitor was opening locations for 1.5 Rand per location. The difference is painful to see and must be eliminated if investments are ever to be returned. The thirteen locations that had been opened by Taste Holdings were generating a profit, but the profit gained was not enough to make up for the absurd startup costs. In order to avoid making this mistake again, Starbucks is going to need a lower startup costs going forward. A Starbucks in South Africa is going to have to look very different from a Starbucks anywhere else in the world because it must evolve to its environment. Failure to lower startup costs is failure to evolve. Starbucks knew that South Africa was going to be a difficult environment to succeed in, but they never prepared for an evolution of their storefronts. To state yet again, most of the blame lies on Taste Holdings for their failure to manage the license appropriately. If Taste had realized what changes needed to occur, they may have been able to communicate with Starbucks in order to make the changes happen, but they failed in this respect. Once storefronts evolve to lower startup costs, Starbucks will be able to generate profitable business with their original target market. Lower cost locations will also appeal to the lower classes of South Africa, and there will likely be less resentment towards the brand. Lower pricing overall also contributes to mass brand appeal in the region because of the economic disparity that exists there.

Conclusion

When assessing what happened with Starbucks in South Africa, we can see that they did not adequately assess the market that they aimed to enter. When deciding to grant a license Taste Holdings to operate their business in the country, they failed to catch that Taste would be likely to retreat from the food industry entirely. Taste proved to be a bad manager of the Starbucks brand, and the local ecosystem was not properly adapted to. Of course, Starbucks knew very well of the coffee culture present in South Africa. They knew of the history of coffee and how often the population consumed it. An ideal target market was selected, the middle class. Unfortunately, this segment was very small and unable to provide the revenue that would have returned the investment that Taste had made. Ultimately, Taste was forced to leave the market entirely because of their failure to deal with economic complications. Everything narrowed down to costs. Startup costs for new locations exceeded what the competition payed by nearly double, and individual product prices were bested by every local competitor. Regardless of economic disparity between classes of South Africans or the history of culture in the region, costs adjustments could have remedied the situation. It seems that Starbucks was unyielding in their commitment to branding; they didn’t think to adjust ingredients, storefronts, suppliers, or products. Starbucks is a premium brand in South Africa, and the usual company image would help to enforce this premium status. Nonetheless, maintaining rigidity of brand is not worth suffering losses. If some adjustments had been made, Starbucks could have lowered costs and maintained operations in South Africa.

Introduction

In this research assignment two learning outcomes will be discussed and they will be written as LO1 and LO2, in LO1 I will be differentiating between what a leader and manager is. And in LO2 I will give some examples of how they apply their roles to Starbucks. The research assignment will start off by introducing Starbucks and explaining a little about their history including founders, and what inspired them to create Starbucks. Then I will explain their Mission, Vision, and Goals all with examples of how Starbucks achieves them.

Next the paper will move into learning outcomes. The first learning outcome will be the differences between a leader and manager. It will be titled as leader’s vs Managers, in that section what a leader and manager is will be defined and what some of their roles and functions in an organization. Lastly will be about how they differ and in which way they are similar.

Thirdly the paper will shift to the analysis were learning outcome two will be achieved. I will first give a small introduction to Starbucks leader Kevin Johnson background, secondly will identify his leadership style and explain what it is, after that I will give some examples of how he applies it in Starbucks; also in this section some theories will be introduced and analyzed.

Lastly will come the conclusion, it will be split into two parts the first will be a recap of all that was discussed in the research assignment, the second part will be the recommendations were I will be giving some recommendations to the Starbucks.

Company profile

Starbucks primarily competes in selling retail coffee, it’s a prestigious brand of coffee and snacks. It is considered both a product and a service, because they sell Starbucks ‘coffee’ and products to consumers. they first opened their doors in March 31/1971 with their three coffee enthuses founders Jerry Baldwin, Gordon Boawker, and Zev Siegl. Two teachers and a writer. decided that they would open up a coffee shop in Seattle Washington. Starbucks started off as a place where customers could purchase high quality coffee beans and equipment.

Their main supplier at the time was Dutch immigrant Alfred Peet. He was well known in LA for importing coffee beans from Arabica. Alfred was also their inspiration to create Starbucks according to an article written by a Peter Bondarenko on Britannica.com were he states that “through him the Starbucks founders based their business model on selling high quality coffee beans”. Business was blooming for Starbucks in the late 70s early 80s they were dominating the coffee trade in Seattle. In 1982 Howard Schultz joins Starbucks as a marketing and operations director, around that time co-founder Zev Siegl left the partnership to peruse some other interests he had. In the next three years Howard will continue to work for Jerry Baldwin and Gordon Boawker till 1985 when he comes back from a trip to Italy.

Inspired by what he saw in Italy. he loved the small cafes that sold espressos and cappuccino trip Howard Schultz decided to open up his own coffee shop after resighning from Starbucks, his new coffee shop was called Giornale he sold what espressos, cappuccinos, and teas. A few years later around 1987 Baldwin and Bowker put Starbucks up for sale Seizing the moment ( or opportunity?) Schultz quickly bought it and put his own shop under the Starbucks brand name.

A few years down the road around 2000 -2001 is were Starbucks really picked up momentum. Starbucks stores were opening up in Canada, Australia, Bahrain, Hong Kong, Qatar, Saudi Arabia and the United Arab Emerits. With over 4000 stores around the globe. Starbucks in present day is considered a multinational and global coffee company ranked as the 132 on fortune 500.

Mission, Vision and Goals

• Vision: to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow
• Mission: To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. They are achieving their mission through their employees, by having a culture of belonging and inclusion and by doing that it has created a harmony in the employees which in turn achieves their statement “inspire and nurture the human spirit” which intern trickles down to the customers, showing us that Starbucks will take their time in inspiring one person and one neighborhood at a time till they reach their goal.

In 2018 there was an incident that took place in Starbuck Philadelphia, were two African-Americans men were denied access to the restroom, asked to leave and then later on arrested when questioned the employee for the reasons why he was not allowed to use the restroom. On May 30, 2018 Starbuks close over 8000 of their stores throughout the country for a mandatory employee sensitivity training, to reconnect with their mission statement “inspire and nurture the human spirit”.

• Goals: Their goal is to satisfy the coffee enthusiasts. And Starbucks meets their goal by catering to the wants of the customers. They serve great quality beans, a variety of flavored coffee with the change of the seasons for instance in the winter they offer Peppermint Mocha and Chestnut Praline Latte. While in the summer they offer a Cold Foam Cascara cold brew, and for fall their amazing Pumpkin spice Latte. And all the coffee is brewed and spiced to the preferential taste of the customer (hot, cold, or shakes).

Values: With our partners, our coffee and our customers at our core, we live these values:

• Creating a culture of warmth and belonging, where everyone is welcome.
• Acting with courage, challenging the status quo and finding new ways to grow our company and each other.
• Being present, connecting with transparency, dignity and respect.
• Delivering our very best in all we do, holding ourselves accountable for results.

Leaders vs Managers

Intro Leaders and Managers are the individuals that keep a company ,business, or organization (whatever you want to call it). They keep it operating smoothly through team work and dedication, both are very important to a business because leaders cannot keep track of all the empolyees and make sure their needs are meet (like proper on the job training, their salary is always on time). They need someone who can be responsible for all of that, that is were Managers come in the leader delagates the tasks and the managers make sure they are done.

Definition of leader

A good leader is someone who motivates, delegates power to others, infulencess, and inspires others through their vision. Warren Bennis once said that “leadership is the capacity to translate vision into reality”. (BrainyQuote, 2019)

• Role in an organization
• Definition of manager
• A Manager is a person who is responsabel for people and day to day operations of an organization
• Functons in an organization
• Chart for Similarities and diffrences

What is a leader and a Manager? Well it is often said you cannot have one without the other. A Leaders in the simplest terms is a person who inspires and motivates others to do greatness through their actions. Warren Bennis “ the manager has his eye on the bottom line; the leader has his eye on the horizon”.

• Managers are people who get things done with the help of people and other resources. (Rosemary Stewart, 1967 AND 2010 beyond)
• General Managers is responsible for their units performance, and relies on the managers that are in charge of each function
• Functional Managers are responsible for an area of work- either a line manager or staff manager
• Line Managers are in charge of a function that creates value directly by supplying products or services to customers
• Staff Managers are in charge of activities like finance, personnel, purchasing or legal affairs which support the line managers
• Project Managers are responsible for a temporary team created to plan and implement a change, like a new product or system

(BrainyQuote, 2019)