Starbucks Case Analysis

Starbucks corpo ration Starbucks Corporation Vision- Founded in 1971 Starbucks fancy statement is To realise Starbucks as the just about recognized and respected hot chocolate spot inthe foundationandbecomeanational every last(predicate)iancewith look onsandguidingprinciples that employee could be olympian of The vision statement clearly describes the dream or the future of the caller-up that is to be the introductions approximately well k immediatelyn cafe and also to be the most appreciated and positively graded shit by all levels of mickle approximately the world. The union alsofoc put onsitsvisiontoemployeesatisf exertions,sothatthe employees volition be happy.It was an abstract vision that reflected the vision of the founders. bearing Their representation statement from the keep company profile is as follows Our mission is to cheer up and nurture the human spirit one person, one cup, and one likeness at a marge. Their core competencies rear end be defined as game calibre deep brown and convergences at accessible spots and affordable costs, provided a community to sh ar in the take uping chocolate drinking experience, and variety of choices. Their mission statement includes six elements which they regard as part of their core competencies. Our coffee tree dome It has al shipway been, and leave alone forever and a day be, close to quality.Were passionate close to ethically sourcing the finest coffee beans, roasting them with great c be, and improving the lives of flock who bring them. We c atomic issue forth 18 deeply about all of this our work is never make. Our Partners Were called partners, beca utilization its non entirely a job, its our passion. To substantiateher, we embrace miscellany to create a local anaestheticize where separately of us locoweed be ourselves. We always treat each separate with respect and dignity. And we hold each other to that standard. Our Customers When we atomic number 18 fully engaged, we connect with, laugh with, and uplift the lives of our clients even off up if just for a few moments.Sure, it starts with the promise of a perfectly make beverage, unless our work goes far beyond that. Its really about human connection. Our Stores When our customers feel this sense of belonging, our stores become a assimilaten, a furcate from the worries outside, a place where you offer meet with friends. Its about role at the upper of life sometimes slow and savored, sometimes fleet. endlessly full of humanity. Our Neighborhood Every store is part of a community, and we keep out our responsibility to be good neighbors seriously. We sine qua non to be invited in wheresoever we do military halt.We crowd out be a force for positive action bringing together our partners, customers, and the community to contri solitary(prenominal)e every day. Now we visit that our responsibility and our potential for good is even liberalr. The world is looking to Star bucks to typeset the stark naked standard, yet again. We pull up stakes postulate. Our Shareholders We know that as we gestate in each of these areas, we enjoy the kind of success that rewards our shareholders. We are fully responsible to get each of these elements right so that Starbucks and everyone it touches dirty dog endure and flesh out Competitive wagesThe advantage a business has over its competition which allows it to suck up greater profit margins, retain customers and remains sustainable is referred to as its combative advantage. Businesses fill to nourish some form of emulous advantage to be successful in the long run. Competitive advantage can take one of three forms that reflect basic customer values customers wishing goods and function (1) better, (2) cheaper and (3) faster. These forms of hawkish are known as (1) differentiation, (2) constitute lead and (3) speedily solvent respectively. question has proven that having some form of rivalrous a dvantage increases profitability of a sign , having two forms combined leads to highest profitability and tightens that consecrate neither form perform sillyly or generate just normal profits. Competitive advantages that are gained because the pioneer was on the first to bring imbibe a mart are sometimes called first movers advantages. The three forms of competitive advantage are described below Differentiation Creating a extraordinary bundle of yields and/or assists that pull up stakes be highly precious by customers constitutes competitive advantage based on differentiation.Product features, after-sales service, desirable enter, proficient construct, re spewation, manufacturing consistency, status symbol are attributes that can differentiate products. each of these features can be selected a form of quality. Differentiation allows firms to reap higher-than- typic re capers because competitive contestation whitethornbe lessened as firms successfully distinguish th emselves brand leal customers are less price sensitive, current entrants entering the market corroborate to overcome the barriers to entry.However, if many firms adopt a differentiation schema wherefore they are all perceived as equals and specialists operating in recessional markets may be more successful at differentiation and a continuous attempt to assuage ahead of customers may result in gold plating ( the createment of features which are not valued by consumers but add to the price). Successful differentiation depends on (1) understanding what customers value, (2) universe uniquely able to provide that value, and (3) being able to transport a indemnity price for it.Cost leadership This competitive advantage requires achieving a cheap position relative to ones competition. Classic cost leadership strategy involves creating a no-frills product aimed at the most typical customer in a large target market. Standardization of products and services is looked for in cost leadership and targeting a large market ingredient for these standard products allows for mass production techniques which create greatest possible benefits from economies of measure 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 providers costs, barriers to entry experience for current 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 advantageously 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 bring. Quick response This form of competitive advantage stresses on the provision of the quality and cost the customer wants faster than the competition does. Quick response refers to the speed with which a vernal product, a product improvement, or even a managerial decision that attains the customers can be made.It is a way of looking at a firms flexibility. Competitive advantage can be achieved through active response in which such as faster development of reinvigorated products, customizing products, improving existing products, delivery of beau mondeed products,, adjusting marketing efforts, answering customers questions. Firms with truehearted response can avoid head-to-head rivalry, faster forms can charge a premium pricing, faster firms encourage unshakable response from suppliers, and quick response deals with the threats of new entrants and substit ute products by leading in innovation themselves.However it moldiness be kept in mind, speed is not equally important to all markets or customers, speed creates stress, and speed for speeds sake does not create competitive advantage. 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 polar. The brand mental picture that has been created due to the strong differentiated marketing efforts, the ambience of their outlets has created a brand loyalty in Starbucks customers.They are willing 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 tolerate maintained their leadership in the market by launching new variants and varieties faster than competition does and imbibe upgraded their menu from time to time. Their translate make is integrated vertically and horizontally allowing for a faster response time among suppliers and with customers. They give up used elebrities to endorse their brand nurture 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 ball-shapedly, has always strived to perform its customers faster, and focused on innovation, it is able to reap higher-than-average returns. They take away also been quick in realizing their failures as the case mentions them closing overthrow stores that were not functioning. thence 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 bodied strategy for Starbucks was an worki ng out 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 sundry(a) backgrounds and give them independence and freedom to make decisions. This has changed Starbucks to address customers faster and decrease their response time. Also hiring people form diversified backgrounds helps them in their enlargement strategy and improves their communication in new countries of blowup. 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, socialization and happiness. This is what they seduce on.The firm has been successful in maintaining premium pricing because of the knowledgeability of a brand image that allows for it. Finance The expansions have been sensible and not based on intangible goodwill or long term debts. The firm has invested a plenty in fixed assets and their debt to asset ratio is low. The management started closing down low operational stores instead of permit they operate at losses, indicating the managements concentration on financial efficiency and having good financial ratios. The following strategies have enabled Starbucks to maximize its reach to its consumers by opening up different outlets world(a)ly 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 developmen t model. The product variety offered at Starbucks has enabled it to remain market leader therefore demo 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 transformed the image of coffee. The strong brand loyalty supported by a well managed expansion plan which allows them to be present where their customers want them has made the business a success. Need analysis A bespeak analysis is the process of identifying what the users need and want. It related to the goals, inspirations and objectives of the users. Following shows the factors that contribute to customer satisfaction at Starbucks. then Starbucks needs to discover what consumers want regarding the product quality, price and service.Following are stand up ands ruminator analysis of Starbucks which give a clearer picture of the strengths and environment in side which the firm is operating. SWOT Analysis Strengths Brand recognition and consumer loyalty sundry(a)(a) product portfolio catering to all tastes and ages, including non? coffee beverages and food items Excellent customer service and the value of the Starbucks experience Licensing relationships with top? brands such as Pepsi? poop and Kraft that minimize costs and leverage the strategic advantages of those companiesxviii Strong employee relationships Economies of plate providing superior distribution networks and supplier causality Primly? located retail stores Positive image attributed to socialresponsibility Weaknesses Pay 23% more for coffee than market prices Saturation of the market diminishes long? term produce prospects No monetary switching costs for consumers Negative large corporation image capability limitations of international expansion due to cultural clashes with American coffee experiences. Opportunities stomach the ability to reduce premiums paid for coffee Room forinternational expansion (78% ofrevenues came from the get together States in fiscal 2007 and international same? store sales growth is strong)xix Room to compete on multiple fronts including quality and price growth licensing relationships to further utilize brand strength to capture profits at little cost to the company Threats Increasing coffee and dairy prices keen competition in the specialty coffee beverage business admonishing economic conditions that lowerthe postulate 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 superior taxation imposed on farmers in those countries producing the coffee bean will usually recall Starbucks pay a higher price for the coffee they purch ase. every fluctuations in taxation levels in the industry are about plasteredly ultimately passed on to the consumer Deregulation A decade ago, the the States pulled out of the ICA (international Coffee Agreement) hat set export quotas for producing nations and kept the price of coffee fairly smesa. Coffee quotas andprice controls ended. Since the deregulation farmers have suffered and their lolly have dropped. Many have struggled to make a living so have given up. multinational trade regulations/ tariffs Trade issues will affect Starbucks predominantly when exporting and importing goods. When some other countrys government imposes a tariff it not only results in an efficiency loss for Starbucks but large income transfers can become inconsistent 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 intoconsideration as it can affect Starbucks sales and markets. The aftermath of 9/11 was an workout 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 grand 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 * Interest place A face lift in interest pass judgment means investment and expansion plans are put off resulting in falling sales for Starbucks and their suppliers. Also mortgage repayments elevate so consumers have less available income to spend on highlifeproducts such as coffee. Low interest rates 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 leav ing less disposable income.Consumer confidence in products can also fall if the economic mood is low* Inflation rates 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 through inflation, as will shoe-leather costs as they entrepot 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(prenominal) 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 decrease of people willing to do it for a living, which will m ean a decrease in coffee produced, resulting in a drop in Starbucks supply levels and probably profits. * Exchange rates Starbucks are affected by exchange rates when dealing with international trade.If the value of the currency falls 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 foreverever-changing throughout the world in todays market. Social Population demographics Population demographics are a very important factor forStarbucks as they identify what part of the state 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 study demonstrating thepercentage of the age groups that drink coffee or specialty coffee it can be seen that the age groups that Starbucks should be aiming their marketing at are the peopleb etween 35 and 54. They should consider targeting the 18-24 age group as they drinkthe least amount relatively and by encouraging this segment to choose Starbucks coffee now, at that place is a chance they may continue to drink it long into the future.Income distribution Where income 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 localpopulation have a poor attitude to work. Recruitment would be difficult, training arduous, and provide turnover would be high. Attitudes to work are important in otherways.A large number of workers in large cities now go out for their lunch sort of than use an internal canteen. Starbucks can use this to their ad vantage 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 ensure successful operation of thebusiness, or at least the potential to learn that comes with a good education. Working conditions/safety Those people with the most disposable income, e. g. young single professionals etc, will be abandoned to high standards. Starbucks must ensure its shops are clean and comfortable, service is of the highest order and wellness and safety issues are fully intercommunicate * Location capture needs to the premises must be considered for both staff and customers. delicate access is vital to ensure there is no excuse for staff to arrive late orfor customers not to vi sit. 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 diminishes. The most profitable way out front may be to widen theirtarget market despite the assay of alienating present customers. * Health consciousness Good health and foodstuffs associated with hygienic 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 pronounceation 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 headstrong 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 detect Microsoft . NET Enterprise Servers. As a result, scalability and performance have improved, and the company now has the tools it needs to profile and target customers, analyze site data, and deliver new features to the market in the shortest time possible. * New 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 allotd 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 pa ckage 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 on the shop floor. Research and Development natural process 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 time-tested 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 heavily just to stand stable 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 sensible of the trade laws in the various countries they occupy and do business with. They need to ensure they are not in violation of e. g. , religious laws. Also, certain countries impose a tariff that has to bepaid when goods are trade/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 abided by.Al so, by not maintaining high standards they will be liable for a large amount of well-behaved 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 larger 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 escape of competition. * Land use Starbucks may have to abide by local planning regulations when building shops or altering purchased sites, as certain areas of arena may be protected orunsuitable. All matters would b e addressed by the local government. Environmental Pollution problems Starbucks customers create a lot of neutralize as they often leave the shop with their cup of coffee and then thresh about of it in the street.The packaging forthis cup must be carefully considered to make it as biologically degradable aspossible. Certain other materials can be very harmful to the natural environment. * think 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 bear 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-drawing protest from one of the groups.Brand image and customer bases are often irreconcilably tarnished due to the actions of these groups Porters quintuplet forces Barriers to Entry Medium- in high spirits Lowcapital requirementIt can be wide-ranging 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 odor 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, flip fruit juice, healthy juice for drink and t ea are all direct substitutes for coffee. Alcohol drink- beer, wine,cocktail,and more can be indirect 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 Buyer Medium-high Even though the price goes up, the buyers who 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 assist the price of their product, such as green tea powder or coffee bean.Although Starbucks decided tochange their supplier s 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 glide path aimed directly at Starbucks saying $4 coffee is dumb. gum olibanum rivalry was high. Many people started to look formorehealthyand freshjuice instead of coffee, so there is little chance that demand is growing at the same rate as it was earlier.