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Starbucks: Analysis Of External And Internal Strategic Factors
Starbucks was found by Gerald Baldwin and Gordon Bowker who were two college friends. Howard Shultz purchased Starbucks Coffee in 1982 to introduce and improve the performance of the market. Starbucks is widely known in the United States and internationally as well, including countries like China, Canada, Germany, etc. Starbuck’s main mission is to inspire individuals throughout their brand.
Starbucks Strategies
Starbuck’s strategy was the experience of Starbucks, meaning the way customers experience was with Starbucks. Starbucks strategy included excellent customer service, community relation, location, layout and design of Starbucks, and top-quality products. In further detail, Starbucks had several strategies that led to having one of the best coffee beans. Employee involvement was another factor that attributed to Starbucks strategy, where employees are required to be enthusiastic and take pride in their work. Recruitment hiring those who bring to that table consistency and personality. Having a training program that extended and broaden basic customer service skills. Alongside building community relations and social purposes that build that customer bond. Where everyone is welcomed and not judged by one’s color or race. That connects shareholder value because everyone is part of the community. The layout and design of Starbucks attribute to the strategy Starbucks holds because layout and design are what catch a customer’s eye. The detail that Starbucks portrays in its store is critical. The layout and design are to be comfortable with an artistry approach to it. A layout and design with natural earthy tones that are rich and eye-catching. The location of Starbucks is a major role that plays in
the strategy aspect, putting stores in urban parts to build that brand buzz and get the word out. To build a bigger horizon in Starbucks Strategy, they started to diversify the business, which meant incorporating “other ownerships and management formats, more products, and different channels of distribution”. This included, but was not limited to Starbucks store cards, Starbucks bottled drinks (PepsiCo), retail packs of Starbucks through grocery stores.
Starbucks Financial Performance
Starbucks ‘ financial performance is important when evaluating how efficiently it performs. Starbuck’s financial performance will be an analysis and comparison of its performance through the years 2007- 2014. While analyzing Starbucks ‘ finances during 2007-2014, in the seventh period, the ratio and growth decreased (2008/09). Although after that recession, revenue growth remained well. The revenue growth in 2010- 2014 was at a high growth for Starbucks. The operating income has also increased tremendously from 2008 to 2012 by 15% during the year 2012. Although there was an operating loss during the year 2013, they didn’t let that hurt their future earnings, while they still managed to bounce back to a healthy state. The reason for this loss was due to legal actions from Kraft Foods. There was an improvement in the future (2014), as well the improvement in previous years apart from the 2013 loss, Starbucks had a high improvement during the year 2009-11 for instance. In general, Starbucks portrays healthy finance with low debt or equity.
Starbucks competencies core is effective and efficient. This is because of their strategies offering different types of products and top-quality beverages. Their equity is basically, formed on selling the best quality coffee. Where it is unique and sets them apart from others (competition). Such as its experience being operated on top-notch customer service skills and loyalty. Its human resources having values and building that external and internal link with its suppliers. This allows a successful business strategy to expand in the international market long-term.
Starbuck’s tangible (external analysis) resources are its equipment and supply of goods. Such as operating globally and showcasing tangible parts of it around the globe. High-quality coffee beans and merchandise is another factor in building business awareness and revenue. Whereas its intangible resources (internal analysis) are its skills, reputation, brand, and technology also. These four categories mentioned are key in differencing Starbucks from its competitors. The skills that employees hold are important in serving customers the best service that they deserve. The skills that the employees have, allows them to build relationships with customers. Successful employment interaction creates and builds trust with their customers. Having updated technology and a positive reputation, as well a brand name grows, a business successfully like Starbucks.
Starbucks’ external factors are its opportunities and threats, whereas its internal factors are there strengths and weaknesses. Starbucks’ external factors include new market opportunities where it can expand internationally in China or European countries. As well as forming partnerships that will expand their market. Another external factor is threats from competitors.
This is the same for the threat of new entry. Once McDonald’s came in as a competitor, it becomes a competition because of similar products and lower prices. As well as other private local coffee shops that offer similar products, such as Dunkin Donuts. Another is the bargaining power of buyers or customers. This is because there are many different buyers in the market and industry, where they can have the ability to put a decrease in prices. Competition rivalry is a factor in this because they have a bigger market share than others. Starbuck’s internal factors include (strengths) their design and layout being unique from others. Offering free Wi-Fi connection, friendly environment where there are comfortable seating areas. Alongside quality products and a strong brand name. Having a great representative and powerful human resource management. The weaknesses of Starbucks are another aspect, some of its weaknesses are its high prices compared to other coffee shops. As well as mostly being known for coffee or tea, beverage drinks.
Shareholder Interests & Future Strategy Solutions
Starbucks operated in the interests of its shareholders because they want to hold a shareholder value that is long-term. The reason behind this is because they would benefit from expanding the business and growing in the international market. It would be an opportunity to grow in the international market by merging in China or India for example. Their interests are more likely in shareholders because of the high profit they are making. There are hundreds of Starbucks stores in China, that are operating well. India is another venture that holds Starbucks stores in airports and malls mainly.
Starbucks’ solutions to their threats and strategies are that being unique and different is what sets them apart from the competition. As well as providing that top-quality product that allows them to have one of the greatest coffee beans. A solution would be to possibly lower prices down a bit because they are also known as having high product prices.
Starbucks Threats
Starbucks faces quite a few threats when it comes to being new into the market and its competitors as well. Starbucks competitors included McDonald’s, Dunkin Donuts, and Burger King for instance. Most fast-food services provided coffee drinks in their menus, where most were looking to build competition with Starbucks. They started doing this by including premium coffee into their menus like Starbucks. Apart from showcasing similar products, McDonald’s and Dunkin Donuts mentioned that “Starbucks is overpriced and snobbish”, where they were hurting Starbucks reputation and name; which threatened their advertising and true character. On the other hand, the competition threat was getting more serious with Starbucks’ withdrawal from Australia. Aside from competitor threats, Starbucks does have a possibility of facing threats to the consumption of coffee. Due to many people being more concerned about their health, it is likely that there could be a downward turn in coffee consumption. Another threat factor is the pricing of the products. High prices on their products or coffee beans could cause Starbucks in customers or a withdrawal in certain coffee blends. Its reputation and how other coffee brands are a threat to Starbucks because they could advertise Starbucks in a negative way. For example, McDonald’s and Dunkin Donuts did, which is harming the brand name.
In conclusion, Starbucks has greatly earned a positive brand name and reputation. They have grown in sales over previous years. Starbucks is unique and has deafferenting skills that set them apart from the competition. Starbucks’ strategies will keep on leading them to a successful future ahead.
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