Starbucks Case Analysis

Starbucks corporation Starbucks Corporation Vision- Founded in 1971 Starbucks imaging enouncement is To establish Starbucks as the most recognized and respected cocoa shuffling inthe beingnessand puzzleanationalcompanywith look uponsandguidingprinciples that implementee could be proud of The mass statement clearly describes the stargaze or the future of the company that is to be the worlds most well known javaho exercise and also to be the most appreciated and positively graded brand by all in all levels of state around the world. Thecompany alsofocusesitsvisiontoemployeesatisfactions,sothatthe employees ordain be happy.It was an abstract vision that reflected the vision of the founders. Mission Their mission statement from the company profile is as follows Our mission is to inspire and nurture the military man spirit adept person, one cup, and one neighborhood at a time. Their core competencies washbowl be defined as high prime(a) drinking chocolate and products at price of admissionible locations and affordable harms, provided a union to sh atomic number 18 in the umber drinking experience, and variety of choices. Their mission statement includes six elements which they regard as part of their core competencies. Our Coffee It has al dashs been, and will always be, to the highest degree quality.Were passionate about ethically sourcing the finest deep brown bonces, roasting them with great cargon, and better the lives of people who grow them. We care deeply about all of this our work is never through. Our Partners Were called partners, because its non just a job, its our passion. Together, we get over diversity to take a shit a place where all(prenominal) of us crumb be ourselves. We always get by each otherwise with respect and dignity. And we hold each other to that standard. Our Customers When we are fully eng set upd, we connect with, laughter with, and uplift the lives of our guests even if just for a few moments.Sure, it starts with the promise of a perfectly made beverage, merely our work goes far beyond that. Its really about human connection. Our Stores When our customers feel this sense of belonging, our stores execute a take holdn, a break from the worries outside, a place where you bottomland meet with friends. Its about consumption at the speeding of life roundtimes slow and savored, well-nightimes faster. Always full of humanity. Our Neighborhood every(prenominal) store is part of a community, and we take our responsibility to be good neighbors seriously. We want to be invited in wherever we do business.We can be a force for positive action bringing unitedly our partners, customers, and the community to contribute every day. Now we see that our responsibility and our dominance for good is even astronomicalr. The world is looking to Starbucks to set the in the buff standard, yet again. We will channelise. Our Shareholders We know that as we deliver in each of these sur face areas, we enjoy the kind of success that rewards our piece of groundholders. We are fully accountable to get each of these elements right so that Starbucks and everyone it touches can endure and thrive emulous returnThe advantage a business has over its competition which allows it to draw greater profit margins, retain customers and remains sustainable is referred to as its emulous advantage. Businesses father to beat some condition of belligerent advantage to be lucky in the long run. Competitive advantage can take one of three forms that reflect basic customer values customers want goods and operate (1) better, (2) cheaper and (3) faster. These forms of competitive are known as (1) incompatibleiation, (2) cost leading and (3) affectionate reaction respectively.Research has proven that having some form of competitive advantage increases profitability of a immobile , having two forms combined leads to highest profitability and firms that piss neither form perf orm poorly or generate just normal pay. Competitive advantages that are gained because the induct was on the first to enter a market are sometimes called first movers advantages. The three forms of competitive advantage are described below Differentiation Creating a unique bundle of products and/or services that will be highly valued by customers constitutes competitive advantage based on differentiation.Product features, after-gross revenue service, wanted image, technological innovation, reputation, manufacturing consistency, status symbol are attributes that can differentiate products. Each of these features can be pictureed a form of quality. Differentiation allows firms to reap higher-than-typical returns because competitive rivalry whitethornbe littleened as firms madely fuck themselves brand faithful customers are less price sensitive, impertinently entrants entering the market have to flog the barriers to en castigate.However, if legion(predicate) firms adopt a differentiation strategy olibanum they are all perceived as equals and specialists operating in niche markets whitethorn be more successful at differentiation and a continuous attempt to stay ahead of customers whitethorn result in gold plating ( the maturement of features which are not valued by consumers but add to the price). Successful differentiation expects on (1) taste what customers value, (2) being uniquely able to provide that value, and (3) being able to charge a premium price for it.Cost leadership This competitive advantage requires achieving a low-cost property relative to ones competition. untarnished cost leadership strategy involves creating a no-frills product aimed at the most typical customer in a large target market. receivedization of products and services is looked for in cost leadership and targeting a large market segment for these standard products allows for mass production techniques which create greatest possible benefits from economies of mas ter and experience curve effects.Cost leadership addresses competitive forces in the following ways holding the low-cost position convinces rivals to hold a price war, low-cost producers are protected from customer pressures of lowering prices, because of higher margins low-cost producers are better able to withstand pressures from increasing in suppliers costs, barriers to entry exist for new entrants and manufacturers use price to threaten substitute products. However, cost leadership has some drawbacks namely cost leadership can be called an all-or-nothing strategy, cost cutting that leads to loss of desirable roduct attributes can be ruinous, it is easily duplicated by competitors, and dedication to cost cutting limits a firms abilities to remain competitive in other ways. Use of an effective cost leadership strategy depends on careful monitoring of a firms internal operations and its customers assume. Quick response This form of competitive advantage stresses on the render o f the quality and cost the customer wants faster than the competition does. Quick response refers to the speed with which a new product, a product improvement, or even a managerial decision that affects the customers can be made.It is a way of looking at a firms flexibility. Competitive advantage can be achieved through quick response in which such as faster development of new products, customizing products, ameliorate existing products, delivery of ordered products,, adjusting marketing efforts, answering customers questions. Firms with quick response can avoid tete-a-tete rivalry, faster forms can charge a premium pricing, faster firms encourage quick response from suppliers, and quick response deals with the threats of new entrants and substitute products by leading in innovation themselves.However it mustinessiness be unploughed in mind, speed is not equally important to all markets or customers, speed creates stress, and speed for speeds sake does not create competitive a dvantage. Starbucks Competitive Advantage Starbucks competitive advantage is a mixture of differentiation and quick response. Since their coffee is priced at $4 a cup they are clearly not competing on costs here. In fact at Starbucks its the opposite. The brand image that has been created callable to the strong differentiated marketing efforts, the ambience of their outlets has created a brand trueness in Starbucks customers.They are involuntary to pay a premium price because they feel they are having the best coffee made with the finest quality ingredients. Starbucks achieved the first movers advantage as they were among the pioneers of coffee houses in America, also they have maintained their leadership in the market by launching new variants and varieties faster than competition does and have upgraded their menu from time to time. Their furnish chain is integrated vertically and horizontally allowing for a faster response time among suppliers and with customers. They have ut ilise elebrities to endorse their brand further enhancing their differentiation strategy. Because Starbucks has successfully differentiated itself, developed a strong brand following, has opened up outlets to cater to their target market both in U. S. A. and globally, has always strived to serve its customers faster, and think on innovation, it is able to reap higher-than-average returns. They have also been quick in realizing their failures as the case mentions them windup mound stores that were not functioning. thusly this shows that the corporation is quite flexible in its operating decisions.Starbucks Corporate Strategy- how they have used it to create a successful business model The corporate strategy for Starbucks was an expansion strategy based on opening new outlets in U. S. and expanding overseas. Operations They looked for diversification and vertical and horizontal integration to maximize control over their supply chain and maintain satisfied customers. They launched new products and variants to maintain their leadership in the market. A differentiation and quick response strategy is used. HR Starbucks looks for diversity in its employees.They employ people from various backgrounds and communicate them independence and freedom to make decisions. This has enabled Starbucks to address customers faster and reduced their response time. Also hiring people form diversified backgrounds helps them in their expansion strategy and improves their communication in new countries of expansion. Marketing Their marketing has always been coffee centric. They have strived to create a strong brand individuation and brand loyalty. Starbucks is not just about coffee. It is about providing that experience of comfort, socializing and happiness. This is what they build on.The firm has been successful in maintaining premium pricing because of the creation of a brand image that allows for it. Finance The expansions have been fairish and not based on intangible goodwil l or long destination debts. The firm has invested a lot in fixed assets and their debt to asset ratio is low. The management started closing down low running(a) stores instead of letting they operate at losses, indicating the managements concentration on financial susceptibility and having good financial ratios. The following strategies have enabled Starbucks to maximize its reach to its consumers by opening up different outlets globally hich have lead to market development and increased profitability. Starbucks expansions have all been well financed and done sensibly. Also their quickness to act in areas where they were reporting losses further shows that their Corporate strategy has lead to successful business development model. The product variety offered at Starbucks has enabled it to remain market leader thence showing that R&D efforts are paying off. The exceptional customer service due to the employment of a diversified labor force has facilitated business expansion and increased the size of the pie for Starbucks.Starbucks thus has transpose the image of coffee. The strong brand loyalty supported by a well managed expansion intention which allows them to be hold where their customers want them has made the business a success. Need analysis A need analysis is the process of sending what the users need and want. It related to the goals, inspirations and objectives of the users. Following shows the movers that contribute to customer satisfaction at Starbucks. Thus Starbucks of necessity to discover what consumers want regarding the product quality, price and service.Following are SWOT ands muller analysis of Starbucks which give a clearer picture of the strengths and environment within which the firm is operating. SWOT Analysis Strengths Brand recognition and consumer loyalty Diverse product portfolio catering to all tastes and ages, including non? coffee beverages and food items Excellent customer service and the value of the Starbucks expe rience Licensing transactionhips with top? brands such as Pepsi? Cola and Kraft that minimize costs and leverage the strategical advantages of those companiesxviii Strong employee relationships Economies of scale providing superior distribution networks and supplier power Primly? make upd retail stores incontrovertible image attributed to socialresponsibility Weaknesses Pay 23% more for coffee than market prices Saturation of the market diminishes long? term growth prospects No monetary switching costs for consumers Negative large corporation image capableness limitations of global expansion due to cultural clashes with American coffee experiences. Opportunities Have the ability to reduce premiums give for coffee Room forinternational expansion (78% ofrevenues came from the United States in fiscal 2007 and international self said(prenominal)(prenominal)? store sales growth is strong)xix Room to compete on multiple fronts including quality and price Increase licen sing relationships to further utilise brand strength to capture profits at little cost to the company Threats Increasing coffee and dairy prices Intense competition in the specialty coffee beverage business Unfavorable frugal conditions that lowerthe demand for expensive beverages Community resistance to store expansion The possibility that the demand for specialty coffee is a fad Diverging from the Starbucks experience Further diversification of fast food restaurants that cuts into market share. PESTLE ANALYSIS The PESTLE analysis of Starbucks. Political Taxation policy High taxation imposed on farmers in those countries producing the coffee bean will usually mean Starbucks pay a higher price for the coffee they purchase. Any fluctuations in taxation levels in the industry are almost certain(p)ly last passed on to the consumer Deregulation A decade ago, the USA pulled out of the ICA (international Coffee Agreement) hat set merchandise quotas for producing nations and kept the price of coffee fairly stable. Coffee quotas andprice controls ended. Since the deregulation farmers have suffered and their earnings have dropped. galore(postnominal) have struggled to make a living so have given up. International handicraft regulations/ taxs Trade issues will affect Starbucks predominantly when exporting and import goods. When another countrys government imposes a tariff it not save results in an efficiency loss for Starbucks but large income transfers can become variable with equity. This extra charge can turn a bargain into a rip-off.Also, since 9/11, trade relations have been adversely affected between the USA and some other countries. Internationalstability The international economy must be brought into makeation as it can affect Starbucks sales and markets. The aftermath of 9/11 was an example of an economic downturn that affected the world market. If the world market is in a slump it is not usually the ideal time for abusiness to look at special K expansion. Employment law A reduction in licensing and permit costs in those countries producing the coffee bean forStarbucks would lower production costs for farmers.This saving would in turn be passed on to the purchaser. Economic * affaire grade A rise in interest judge means investment and expansion plans are put off resulting in falling sales for Starbucks and their suppliers. Also mortgage repayments rise so consumers have less useable income to spend on luxuryproducts such as coffee. Low interest pass judgment should have the opposite effect. * Economic Growth If growth is low in the nation of location of Starbucks then sales may also fall. Consumer incomes tend to fall in periods of negative growth leaving less disposable income.Consumer confidence in products can also fall if the economic mood is low* Inflation grade Inflation is a condition of increasing prices. It is measured using the Retail Price Index (RPI) in the UK. Business costs will rise for Starbucks th rough inflation, as will shoe-leather costs as they thieve around for new best prices ofmaterials, menu costs will rise as Starbucks have to create new price lists. Also, uncertainty is created when making decisions not least because inflation redistributes money from lenders to borrowers. Competitors pricing Competitive pricing from competitors can start a price war forStarbucks that can drive down profits and profit margins as they attempt to increase, or at least maintain, their share of the market. * Globalisation Globalisation of the coffee market has meant farmers of the bean now earn less money than they used to. This can result in a mitigate of people willing to do it for a living, which will mean a decrease in coffee produced, resulting in a drop in Starbucks supply levels and probably profits. * Ex motley rates Starbucks are affected by exchange rates when dealing with international trade.If the value of the currency go in the country of a coffee supplierthis enables Starbucks to get more for their $ or L when importing the goods to theircountry. This saving can be passed along to the customer. Exchange rates are foreverchanging throughout the world in todays market. Social Population demographics Population demographics are a very important agent forStarbucks as they identify what parts of the population they need to aim their products at or which parts of the population they need to encourage to visit their stores more than they presently do.Looking at the table in the case theater demonstrating thepercentage of the age assemblages that drink coffee or specialty coffee it can be seen that the age groups that Starbucks should be aiming their marketing at are the peoplebetween 35 and 54. They should consider targeting the 18-24 age group as they drinkthe least amount comparatively and by encouraging this segment to choose Starbucks coffee now, there is a chance they may continue to drink it long into the future.Income distribution Where i ncome is distributed is another factor that Starbucks should look at as this also demonstrates the ideal place to aim their marketing or to locate their stores. Coffee is more of a luxury product so it is those people/places with the most amount of disposable income to spend that should be targeted the most intensely. * Attitude to work Starbucks would not want to locate to an area where the topical anestheticpopulation have a poor attitude to work. Recruitment would be difficult, training arduous, and round perturbation would be high. Attitudes to work are important in otherways.A large number of workers in large cities now go out for their lunch rather than use an internal canteen. Starbucks can use this to their advantage and promote the shop as a place where people can meet up and so it will mean that they will get alarger amount of people in their stores at this time of the day. * Standard of education/skills When Starbucks are deciding upon new premises they must look at the standards of education and skills locally. They must be sure there arepeople who live there with sufficient skills to understand successful operation of thebusiness, or at least the potential to learn that comes with a good education. Working conditions/ safeguard Those people with the most disposable income, e. g. young single professionals etc, will be accustomed to high standards. Starbucks must ensure its shops are clean and comfortable, service is of the highest order and health and safety issues are fully address * Location Transport needs to the premises must be considered for both staff and customers. Easy access is vital to ensure there is no excuse for staff to arrive late orfor customers not to visit. Age distribution Research shows the average age of the population is getting olderand birth rates are stagnating. Starbucks is presently aiming its product at youngpeople but maybe these views will change in the long-term as the market proportion for young people dim inishes. The most profitable way forward may be to widen theirtarget market despite the risk of alienating present customers. * Health consciousness Good health and foodstuffs associated with healthy living are important I todays market place, as this is a trend that is occurring at the moment in western societies.Starbucks can use this information when deciding the additionalproducts to sell, as well as coffee, as a large number of their customers are looking forhealthy alternatives to cakes and biscuits, which have been associated with coffee in the past. Technological * IT development Starbucks is always looking to develop and improve its Internet facilities. Starbucks launched its first-generation e-commerce Web site in 1998. In late1999, Starbucks decided the site needed a major upgrade to enable new functionality and prepare for long-term growth.To achieve these goals, Starbucks upgraded to Microsoft Commerce Server 2000, one of the key Microsoft . NET Enterprise Servers. As a result, scalability and performance have improved, and the company now has the as well asls it needs to profile and target customers, analyze site data, and deliver new features to the market in the shortest time possible. * advanced materials and processes Developments in the technology of coffee making machines and the computers that Starbucks use to run their cash registers will enable their staff to work more quickly and efficiently.This will result in customers being served quicker and create the potential to serve more customers in a day. This willprevent customers from having to wait around for long periods thus improving customer relations along with increasing the customer base. * Software upgrades In the short-term, Starbucks must identify the most efficient software upgrades to use to keep up with the competition. This applies to the improving the accessibility of their website (www. starbucks. com) and also improving the speed and quality of the service provided o n the shop floor. Research and Development activity As a multi-national business empire, Starbucks has the budget and the resources to have a cutting-edge R+D department. The website is very accessible, the facilities are state of the art but more importantly new ideas are consistently being tried in terms of a constantly updating menu. * Rate of technological change The rate of technological change in the current world market is high, much higher than, say, thirty years ago. Much of this is down to the Internet and the speed with which information can be communicated around the globe.Starbucks will need to invest hard just to stand still in their ever expanding and developing market, and even more so to try to stay ahead of competitors. Legal * Trade and product restrictions Starbucks need to be aware of the trade laws in the various countries they occupy and do business with. They need to ensure they are not in rape of e. g. , religious laws. Also, certain countries impose a tariff that has to bepaid when goods are imported/exported so this must be taken into account. * Employment law Each country has varying employment laws.Some may have aSabbath day, diwali,some may have a limit on the number of hours an employee may workper week, all will have varying levels of minimum wage. Starbucks should considerthese factors when deciding on relocation. * Health and Safety regulations Starbucks may find these regulations are not as stringent or well enforced in certain countries. It would be wise though to enforce universally high standard of health and safety throughout all its shops to maintain a good global image and ensure all laws are carryd by.Also, by not maintaining high standards they will be liable for a large amount of civil cases as it is a legal requirement for them to enable that their staff and customers are safe when they are intheir stores. * Monopolies commission If Starbucks consider expanding their operations furtherto control an even lar ger percentage of the market than they already have they will have to consider the possibility of breaking monopolies legislation as they may have a share of the market that is too large. This would mean that they would have unfairadvantage over other companies in the same market.This would mean that they couldbenefit from economies of scale and would also be able to charge prices that were not competitive in the market and get away with it due to the lack of competition. * Land use Starbucks may have to abide by local planning regulations when building shops or altering purchased sites, as certain areas of land may be protected orunsuitable. All matters would be addressed by the local government. Environmental defilement problems Starbucks customers create a lot of waste as they often leave the shop with their cup of coffee and then dispose of it in the street.The packaging forthis cup must be carefully considered to make it as biologically degradable aspossible. Certain other ma terials can be very harmful to the natural environment. * planning permissions Planning permission may not be granted if Starbucks wish tobuild in an area that could be harmful to the environment. The land may be protected. * Work disposal Starbucks need to carefully consider the methods in which they dispose of their waste as there are strict laws in most countries to ensure a firm trading in their country disposes of the waste that is created in their business in a specific and efficient way.If they do not follow these laws they may find themselves being sanctioned, which not only affects them financially but also tarnishes the reputation ofthe brand name, as most of the waste created will take for the logo of Starbucks. * Environmental pressure groups Starbucks should be aware of the physical and influential power of groups such as Greenpeace and Friends of the Earth. Any violation of animal or environmental rights by a company is usually followed by a swift and attention-dr awing protest from one of the groups.Brand image and customer bases are often irreconcilably tarnished due to the actions of these groups doormans five forces Barriers to Entry Medium-High Low pileus requirementIt can be varied dependonthe location, butit would be safe to saycoffee industry stillrequires low capital compared to other industries. Littleproductdifferentiation It is difficult to establish a certain unique scent for coffee. can be offered at restaurants which normally dont serve coffee as a beverage this will allow for even lesser investment.Threat of Substitutes High Soda, young fruit succus, healthy juice for drink and tea are all direct substitutes for coffee. Alcohol drink- beer, wine,cocktail,and more can be corroboratory substitutes. ( Alcohol drinks will be sold in only a few selected places,so it istoo earlytoget rid of alcohol drinks in the threat of substitution part. ) Bargaining power of emptor Medium-high Even though the price goes up, the buyers w ho like onlyStarbucks would still come. The brand has generated enormous brand loyalty. Buyers canbuy their coffee from variousplaces Starbucks has their storesall over the nation, so as other major companies do. Buyers have a lot of substitutes to choose from. Supplier Power Low-Medium Starbucks is a global coffee chain and many suppliers are eager to work with them. The company has successfully established vertical integration to make suppliers loyal to its supply chain. It can be problematic ifa certain productsuppliers raise the price of their product, such as green tea powder or coffee bean.Although Starbucks decided tochange their suppliers because it still takes some time to informto the customer and price changes will be inevitable. Industry Rivalry High Many companies Coffee Bean, Mcdonalds, Dunkin Donuts, and localcafe. Also McDonalds had started an advertising attack aimed directly at Starbucks precept $4 coffee is dumb. Thus rivalry was high. Many people started to loo k formorehealthyand freshjuice instead of coffee, so there is little chance that demand is growing at the same rate as it was earlier.