BUSINESS STRATEGY STARBUCKS CORPORATION

BUSINESSSTRATEGY: STARBUCKS CORPORATION

CHAPTERONE: INTRODUCTION

Strategicanalysis of a company helps in the identification of problems thatexist within its operations. It also aids in identifying potentialthat an organization harbors. There are various factors thatinfluence an organization’s operations and result. They areclassified into internal and external factors. The internal factorscould be influenced directly from within the firm while the externalones are rarely in control by an organization. This paper intends tolook into the strategic position of Starbucks Corporation. It beginsby giving a quick look into the company and the coffee industry. Itthen proceeds to identifying problems within it strategy. The mainobjective of this paper is to come up with a proposal to solve theproblems that will have been identified, in a bid to enhanceStarbucks’ productivity and achievement of goals and objectives.

StarbucksCorporation is one of the largest retailers of food products in theworld. It, therefore, serves as a good case study for the fulfillmentof our course objectives. Starbucks commands a great proportion ofthe coffee and snack industry. The company also has a huge successstory which we would like to transcend by being part of itsfuturistic success.

Thepaper explores information, majorly from secondary sources such asthe company’s website, peer reviewed articles, books, journals andnews websites. The secondary sources are assessed for credibility andthe information obtained from each is related to the paper. The mainsetback of our research is the fact that being a multinationalcorporation, Starbucks’ stores are too many for physical visits.

Inthe problem identification process, we use economic matrices andmodels such as SWOT analysis, PESTEL and Porter’s five forcesanalyses. The proposal for the solution also employs structuredmodels such as the Balanced Scorecard.

CHAPTERTWO: COMPANY AND INDUSTRY OVERVIEW

2.1&nbspIntroduction

StarbucksCorporation, a multinational company that was started in Seattle, WA,in 1971 by three entrepreneurs. The company is a premier retailer,marketer and roaster of specialty coffee globally. The firm employshas around 182,000 people in all its over 19, 500 licensed storeswhich have been established in 62 countries (Starbucks CoffeeCompany, 2014). Their product mix comprises of handcrafted androasted high-quality/premium priced teas, coffees, a number of freshfood products along with other beverages (Starbucks Coffee Company,2014). In addition they sell a number of tea and coffee products aswell as franchising their own trademarks via other channels such aslicensed stores and groceries. Starbucks also explores othermarketing channels to sell their products it makes mix along withother notable brand names, which are within the firms portfolio ofcompanies, such as Starbucks VIA, Evolution Fresh, Seattle, Teavana’sBest Coffee, , Tazo, La Boulange, Starbucks Refreshers as well asVerismo (The Seattle Times, 2014). Starbucks made a total income of$14.89 billion in the financial year ended September 29th, 2013(Starbucks Coffee Company, 2014).

2.2Industry Overview and Analysis

Starbucksprimarily competes and operates within the retail snacks and coffeestore industry. The coffee and beverage industry underwent asignificant slowdown during 2009 because of the financial crisis thataltered consumer preferences and tastes, with all the industryrevenue in America going down by 6.6%, equating to $25.9 billion.Earlier on, the industry had 10 years of consistent growth. Theeconomic crisis led to consumers, spending less on luxuries such asreducing the number of times they ate out and alternatively opting tobuy low-price goods rather than high-priced coffee drinks because oftheir small budgets. The industry marketplace is now projected todevelop at an annual rate of 3.9% throughout the next 5 years, with apossible to achieve $35.1 billion revenues within the US. This growthmight possibly be primarily guided by an improving increase, economyin consumer confidence as well as expansion of what is offered inmenus in the industry. Starbucks is the leading player the industrywith a share of the market of 36.7%, while others like The DunkinBrands scoop 24.6% along with other competitors like Tim Horton’s,McDonalds, Costa Coffee, among others.

Figure1: USSnacks and Coffee retail market share

Source:IBIS World Report

2.3Industry Life Cycle and Share of the Market Concentration:

&nbsp&nbspThismarketplace is mature stage and is characterized by medium levels ofconcentration. Dunkin and Starbucks Brands make up significantly morethan 60% for the share of the market (Figure 1), providing them witha lot market power in influencing trends in the market. &nbspTheindustry’s structure can be shown in figure 2.

Figure2: Industry Structure

Source:IBIS World Report

2.4Industry Demand Determinants and the Profitability Drivers:

&nbsp&nbspThe demand for premium snack and coffee items industry are majorlydriven by a variety of factors such as per capita coffee usage,people’s attitudes towards health, global pricing of coffee,disposable income, and demographics. This marketplace is highlyresponsive to the macroeconomic factors which affect the developmentin household disposable. Throughout the global financial crisis, lowlevels of disposable incomes due to stagnant wages and unemploymentresulted to strain on the company’s profit margin.

CHAPTERTHREE: PROBLEM IDENTIFICATION

Theobjective of an environmental analysis, relating to strategicplanning, will be identifying ways in which alterations in thecompany environment can directly influence a business. &nbspThe nextpaper examines Starbucks’ external and internal weaknesses,threats, environment, opportunities, strengths, and trends. &nbspSeveralmajor expected environmental changes in addition to their effect onStarbucks throughout the next 10 years will likely be presented,together with a collection of long-term objectives when it comes tocompany (Starbucks Coffee Company, 2014).

Successfulstrategic management will depend on thorough and accurate evaluationof an organization’s environment, recognizing internal weaknessesand strengths along with external threats and opportunities.&nbspAdditionally, forecasting future trends is crucial to build adefinite feeling of market opportunities and threats. &nbsp

Youwill find an expected shift as people move towards taking healthydiet and eating, and that might be a possible threat to your industrybecause they will become a little more conscious of issues associatedwith obesity and weight. There`s been a proactive change as one ofthe market players has been subjected to enhance their menus towardsmore healthy and organic products.

StarbucksCorporation Internal Analysis

3.1Core Competences of Starbucks

Themajor competence of Starbucks corporation has been its ability toeffectively leverage their strong strategies in productdifferentiation by providing a premium product combination of goodquality snacks and beverages. The brand equity at Starbucks is madeon selling the best quality coffee among other related products, aswell as also by providing each customer an original “StarbucksExperience” (Starbucks Coffee Company, 2014), that is produced bysupreme customer support, well-maintained and clean stores reflectingthe culture of the communities for which they operate. This is acritical step in enhancing customer loyalty. Starbucks other corecompetence has to do with its human resource management, that adheresto a values-based method that the relationship with internal andexternal suppliers, hence facilitating the easy and successfuldeployment of the company’s business strategy of expanding intoforeign markets, as well as acquisitions which uphold the company’slong term strategic objective of standing out as the absolute mostrespected and recognized brands in the field (Starbucks CoffeeCompany, 2014).

3.2Starbucks TOWS Analysis

5problems of Starbucks

(S1T1)Competition

S1:Starbucks is the number one brand in the coffee house segment whichhave built an excellent reputation globally for the quality ofproducts(Global Brand)

T1:Starbucks faces intense competition from both restaurants and otherspecialty retailers (Intense competition)

Starbucksface significant and increasing competition in both domestic andinternational markets. Global Brand Recognition and Strong MarketPosition: Starbucks has an important geographical presence around theworld and keep a 36.7% share of the market in the United States(Figure 1) and has now its operations running in over 60 countriesaround the globe. Starbucks can also be the absolute most recognizedbrand within the coffeehouse segment and it is ranked 91st within thebest global labels of 2013(Starbucks Coffee Company, 2014).

• &nbsp&nbspProductsfor the finest quality: they provide the greatest importance to yourquality of the products and steer clear of standardization of thequality even when production output is high.

• &nbsp&nbspLocationand Aesthetic benefit of its Stores: Starbucks positions its storesin a few of the most extremely strategic and prime location aroundthe world. They target premium, high-visibility, high-trafficlocations near a number of settings, including university campuses,downtown and suburban retail office, centers buildings, as well as inoff-highway locations and selected rural areas and over the world.They offer great music, free Wi-Fi, warm atmosphere, high classservice and offer an atmosphere of community meeting spot thatenhances the element of the ‘Starbucks Experience’ (StarbucksCoffee Company, 2014). The primary try to get this company will bemaking the firms stores to be a ‘third place’ besides work andhome (Starbucks Coffee Company, 2014).

• &nbsp&nbspClientbase loyalty: Starbucks employs a cult of following status amongtheir consumers and they have got also implemented programs to pushloyalty with all the Starbucks Rewards programs, Starbucks Card amongothers. The Starbucks Card is program that delivers convenience,supports gifting, and boosts the frequency of visits by cardholdersto their stores and it is integrated along with their mobileapplication.

• &nbsp&nbspSelf-Cannibalizationby overcrowding: Owing to the high saturation and aggressiveexpansion leading to overcrowding within the market, further resultsinto self cannibalization and kills long lasting growth targets ofthe company. This might be happening particularly in the UnitedStates of America where Starbucks runs over 8000 stores.

• &nbsp&nbspOverdependencein the U.S. market: consistent with self-cannibalization for theUnited States market, with 8078 Starbucks, stores generates a bigpercentage of the total revenue through the US and that will make itvery responsive to prospects for the United States economical growth.

• &nbsp&nbspAmerican/Europeancoffee culture clash with this of various countries: Starbucks coffeeculture might not widely accepted in a few countries as an element oftheir foreign strategies aimed at expansion.

(S2O1)Business strategy problem

S2:Strong research and development teams are responsible for thetechnical development of food and beverage products and new equipment(efficient R&ampD teams)

O1:Opportunity to expand its international operating segments includesboth company-operated stores and licensed stores (Market expansion)

Starbucksfail to achieve its growth target in a timely manner because itsresearch and development teams failed to innovate and develop newfood and beverage products. Human Resource Management: The Company isrecognized because of its highly-knowledge based employees. These arethe main assets for the company plus they are supplied with greatbenefits like retirement accounts, stock option, and an excellentorganizational culture. The effective human resource managementresults in great customer services. It had been rated 91st within the100 best organizations to operate for by Fortune Magazine(Fortune, 2014).

• &nbsp&nbspGoodwillamong consumers because of Social Responsibly Initiatives: Starbucksstores are community-friendly, centered on reducing and recyclingwaste. The company builds goodwill among the communities where itoperates.

(W1O2)Customerrelation/ publicity problem

W1:Negative publicity regarding the business practices of licensees.

O2:Rapid development of social media has allowed Starbucks to retainloyal customer and to build customer relationship

Thereare lots of reasonable substitute beverages to coffee, that aremainly fruit, tea juices, water, soda’s, energy drinks etc. Pubsand Bars with non/alcoholic beverages can also replacement for thesocial connection with Starbucks

Consumerscan also make their particular home produced coffee with householdpremium coffee makers at a portion of the price for purchasing frompremium coffee retailers like Starbucks.

Thereare not any switching costs when it comes to consumers for switchingto substitutes, which helps make the threat high. However it isimportant to remember that industry leaders like Starbucks arecurrently attempting to counter this threat by selling coffeemachines, premium coffee packs in super markets but this threat stillputs pressure their the margins.

Starbucksfaces fight to restore reputation and to retain customer relationespecially in the regions that company brand is less well known

(W2T2)

W2:Increases in the cost of production

T2:threat of substitute

Withthe increasing cost of production, the price of Starbucks’ productsare getting higher. Highpricing which cost not all kind of market could buy Starbucks’products.

Customerswould easily switch to buy substitute products which include otherdrink items such as colas, teas or juices that are sold in retails.

Thereare lots of reasonable substitute beverages to coffee, that aremainly fruit, tea juices, water, soda’s, energy drinks etc. Pubsand Bars with non/alcoholic beverages can also replacement for thesocial connection with Starbucks. Consumers can also make theirparticular home produced coffee with household premium coffee makersat a portion of the price for purchasing from premium coffeeretailers like Starbucks.

Thereare not any switching costs when it comes to consumers for switchingto substitutes, which helps make the threat high. However it isimportant to remember that industry leaders like Starbucks arecurrently attempting to counter this threat by selling coffeemachines, premium coffee packs in super markets but this threat stillputs pressure their the margins.

(W3T3)R&ampD problem

W3:Failure to understand and meet the needs of customer (fail to meetcustomer’s need)

T3:There is increasing consumer awareness of health risks(Trend tohealthy food)

&nbspUtilizationof Technology as well as Mobile Outlets: The company efficiently usestechnology such as its own mobile application titled “StarbucksApp” which is used in both android and apple software’s. Theyinject huge sums in investing in technology so as to aid their growtheach year.

&nbsp ExpandingProduct mix and its menu offerings: Starbucks has begun to expandwhat they are selling mix by getting into the fresh juice and Teaproduct offerings with a good acquisition strategy. This suppliessignificant opportunities for Starbucks.

Declinesin general consumer demand for coffee productsis due to the failureof taking customer into account when designing new beverage and fooditems, as there is increasing consumer awareness about the healtheffects of consuming products contain caffeine, dairy products, sugarand other compounds.

ENVIRONMENTALSCANNING: PESTEL ANALYSIS

• &nbsp&nbspRegulatoryand Political Analysis: &nbspStarbucks believes that China might beits number two market in the field, however the company recentlylearned, while attempting to expand in Russia, that regulations andlaws, particularly regarding trademarks, require extra attention(Drujinina, 2005).

• &nbsp&nbspSocialAnalysis: &nbspStarbucks faced difficulties in internationalmarkets, particularly Israel and Japan, with sluggish same-storesales and achieving to shut stores during these places wherecustomers failed to accept Starbucks.

• &nbsp&nbspMacroeconomicAnalysis: &nbspCoffee costs are rising because of productionslowdowns in Brazil and Vietnam, the world’s two largestcoffee-producing nations, along with natural disasters. &nbspGrowingrapidly poses challenges for Starbucks, because the company tries togenerate consistency from store to save this can lead to lowerincome and revenues per employee ratios that is reflected adverselyin employee efficiency. &nbspThe business attracts good qualityemployees featuring its excellent profit sharing and benefitsstrategy.

• &nbsp&nbspTechnologicalAnalysis: &nbspImproved technology productivity-enhancinginnovations (such as the cultivation of less frost-prone areas,better mechanized harvesting, increased irrigation, andsteam-cleaning technologies that may better mask coffee’s bittertaste) have raised productivity, that will put many small coffeegrowers away from business (Campbell, 2004).

PortersFive Forces Analysis of this Retail Coffee and Snacks Industry:

Threatof the latest Entrants: Moderate

• &nbsp Itis easier for one to find an average threat of the latest entrantsinto the industry because the barriers to entry are not high enoughto deter new competitors to make their way into marketplace.

Figure3: Barriers to Entry Checklist

Source:IBIS World Report

• &nbsp&nbspTheindustry’s saturation is moderately high with a monopolisticcompetition structure.

• &nbsp&nbspForbrand new entrants, the first investment is certainly not significantas they possibly can lease equipment, stores etc. at an averageamount of investment.

• &nbsp&nbspAta localized level, small coffee houses can contend with the likes ofStarbucks and Dunkin Brands since there are no switching costs whenit comes to consumers. Even thought it’s an aggressive industry,the potential for new entrants to achieve success in the market ismoderate.

• &nbsp&nbspButthis relatively simple entry into the marketplace is usuallycountered by large incumbent brands identities like Starbucks whopossess achieved economies of scale by lowering cost, improvedefficiency with a big share of the market. You will find a moderatelyhigh barrier when it comes to new entrants because they differentiatethemselves from Starbuck’s product quality, its prime real propertylocations, as well as its store ecosystem ‘experience’.

• &nbsp&nbspTheincumbent firms like Starbucks have a bigger scope and scale,yielding them a learning curve advantage and favorable use of rawmaterial utilizing the relationship they build along with theirsuppliers.

• &nbsp&nbspTheexpected retaliation from well-established companies for brandequity, resources, prime real property locations and pricecompetition are moderately high, which creates an average barrier toentry.

Threatof Substitutes: High

• &nbsp&nbspThereare lots of reasonable substitute beverages to coffee, that aremainly fruit, tea juices, water, soda’s, energy drinks etc. Pubsand Bars with non/alcoholic beverages can also replacement for thesocial connection with Starbucks

• &nbsp&nbspConsumerscan also make their particular home produced coffee with householdpremium coffee makers at a portion of the price for purchasing frompremium coffee retailers like Starbucks.

• &nbsp&nbspThereare not any switching costs when it comes to consumers for switchingto substitutes, which helps make the threat high.

• &nbsp&nbspHoweverit is important to remember that industry leaders like Starbucks arecurrently attempting to counter this threat by selling coffeemachines, premium coffee packs in super markets but this threat stillputs pressure their the margins.

BargainingPower of Buyers: Moderate to Low Pressure

• &nbsp&nbspThereare lots of buyers within this industry with no single buyer candemand price concession.

• &nbsp&nbspItprovides vertically differentiated products with a varied consumerbase, which will make relatively low volume purchases, which erodesthe buyer’s power.

• &nbsp&nbspAndeven though there are not any switching costs with a highaccessibility to substitute industry, products leaders like Starbucksprices its product mix with regards to rivals stores with prevailingmarket price elasticity and competitive premium pricing.

• &nbsp&nbspConsumershave an average sensitivity in premium coffee retailing because theypay a premium for higher quality products but they are watchful ofexcessive premium in relation product quality.

BargainingPower of Suppliers: Low to Moderate Pressure

• &nbsp&nbspTheprimary inputs into the worth chain of Starbucks is coffee beans andpremium Arabica coffee grown in select regions that are standardinputs, which helps make the price of switching between substitutesuppliers, moderately low.

• &nbsp&nbspStarbucks,featuring its scale and size, contains the capacity to make use ofits suppliers however it maintains a reasonable trade certifiedcoffee under its farmer and coffee equity (C.A.F.E) program thatgives its suppliers a reasonable partnership status, which yieldsthem some moderately, low power (Starbucks Coffee Company, 2014).

• &nbsp&nbspThesuppliers in the market also pose a low threat of competing againstStarbucks by forward vertical integration, which lowers their power.

• &nbsp&nbspStarbucksalso forms an extremely important an element of the suppliersbusiness, due its scope and size, which will make the effectivenessof the suppliers lower. Given these suppliers, factors pose amoderately low bargaining power.

Concentrationof Competitive Rivalry: High to Moderate

• &nbsp&nbspTheindustry has a monopolistic competition, with Starbucks getting thelargest markets share as well as its closest competitors also havingan important share of the market, creating significant pressure onStarbucks.

• &nbsp&nbspConsumersdo have a price of switching with other competitors, which crateshigh intensity in rivalry.

• &nbsp&nbspButits important to remember that Starbucks maintain some competitiveadvantage because it differentiates the products it makes withpremium services and products, which cause a moderate amount ofintensity in competition.

• &nbsp&nbspThemarketplace is mature and rate of growth happens to be moderately lowwhich result in the intensity of competition one of the companies tobe moderately high because of them all looking to increase marketshaper from established firms like Starbucks.

• &nbsp&nbspThisindustry do not have over capacity currently and all sorts of thesefactors play a role in the intensity among rivals to be moderatelyhigh.

Takinga look at the Porters five forces analysis, we could get an aggregateindustry analysis that the strength of forces and also theprofitability within the retail snacks and coffee industry areModerate.

CHAPTERFOUR: RECCOMENDATIONS AND SOLUTIONS

HowardShultz joined Starbucks 10 years after it had been founded in Seattlein 1971. &nbspAt that time, you can only buy roasted beans fromStarbucks. &nbspAfter a visit to Italy in 1983, Shultz returned witha vision to carry the Italian coffee bar to America. &nbspObtainingspace within the corner of a shop back in 1984, Shultz slowly builtthe business one cup at one time. &nbspShultz, not able to convincethe people who own Starbucks to took, expand his idea and supportedby investors opened his very own chain of coffee houses named IlGlornale, opening three stores within just a year. &nbspStarbucks’owners chose to sell their stores to Shultz to be able to focusenergy on Peet’s Coffee, purchased by Starbucks back in 1984. &nbspTheremainder is history with Shultz establishing a very good vision whenit comes to company “to establish Starbucks because the mostrespected and recognized brand in the field” and also the mission“to nurture and inspire the human being spirit-one person, one cup,and another neighborhood at one time” (Starbucks, 2014). &nbspStarbuckssuccess will be the outcome of great leadership, great vision, andsolid strategic planning. &nbspAn excellent strategic plan hinges onsuccessful implementation, proper utilization of strategic controls,and fallback contingency plans. &nbsp

Inorder to keep the mission going and make the vision realistic,Starbucks needs to focus on a strategy that eliminates the threatsand weaknesses, and enhance their strengths as well as utilizingtheir opportunities. This section focuses on the solutions to theaforementioned problems. It provides a method which formulatesstrategies, offers practical exercises, puts measures in place forthe purpose of control and evaluation and obtains feedback regardingprogress.

4.1Strategy Formulation

Starbucks’vision will be to have coffeehouses in almost every neighborhoodaround the globe, and can continue steadily to grow by finding anddelivering the world’s best coffee to your world’s best customerswithout compromising our world-class principles. &nbspAn interioranalysis shows Starbucks has more strengths than weaknesses, while anexternal analysis things to several threats and several obviousopportunities. &nbspOne of the keys is within deciding on the bestmethods of minimize threats and maximize opportunities.

LongLasting Objectives

Long-termobjectives “should connect with the requirements and expectationsof the many major stakeholders, including employees, and reallyshould reflect the root reasons behind running the company”(Planware.org, 2005). &nbspBecause of the above environmentalStarbucks, analysis should adopt the next long-term objectives:

1.&nbsp&nbspAggressively and profitably grow Starbucks while keepingStarbucks’ brand recognition and position because the world’sleading specialty coffee retailer.

2.&nbsp&nbspOffer innovative and new services and products which willenhance employee and customer experiences.

3.&nbsp&nbspGain entry into new markets through new distributionchannels with strategic acquisitions or alliances.

Implementingthe strategic plan usually takes a Herculean effort, but we possessthe right capital and team in position. &nbspMonitoring andmeasuring results will likely be instrumental in reaching ourstrategic goals. &nbspThere are Starbucks secret recipe to achieveyour goals within the following strategic plan, so grab a cup of javaand enjoy!

VisionStatement

Anorganization’s vision ought to be the dream – in which thecompany desires to go, exactly what it desires to be. &nbspA visionstatement may be seemingly unattainable or always just away fromreach, considering that the mission statement will show the way theorganization intends to attain the vision. &nbspStarbucks visionharkens back into CEO Howard Shultz’s 1983 trip to Italy, where hewitnessed espresso bars on almost every corner, likened to“extensions for the front porch in each neighborhood,” and everycoffeehouse had bartenders, called baristas, that has strong bondsalong with their customers (Ioannou, 1998). &nbspStarbucks, Todayoperates in nearly 10,000 locations worldwide and serves over 33million customers every week (Starbucks Company Profile, 2005).

MissionStatement

Anorganization’s mission is analogous to a compass, guiding thecompany to a location (or vision) which will forever be pursued butnever really reached. &nbspA mission statement defines anorganization’s core purpose – or why they exist – and will actas a beacon when it comes to work being carried out. &nbspThemission statement ought to be a cross between an unforgettable anexecutive and slogan summary. &nbsp

Figure4: Mission Statement

(StarbucksCompany Profile, 2005)

RecommendedMission Statement

ValuesStatement

Anorganization’s values are simply as complex because they aresimple, as values are far more than written slogans or words. &nbspValuesare developed and displayed by people’s and organization’sbehaviors during the context of “corporate brand, culture identity,service standards, codes of conduct, and individual’s core ethics”

Avalue is an idea or orientation that a person considers important andcorrect. Corporate values represent the typical denominator, in abusiness as with an organization, or that which people consider worthstriving for within this context. Corporate values determine businessaspects, policies and methods, all relevant management processes, andthe daily cooperation of employees in the company and/or withcustomers, suppliers, and contractual partners (Duetsche Post AG,2004). &nbsp

StarbucksSWOT Analysis

Inline with the SWOT and environmental Starbucks, analyses candetermine where the way it stacks up resistant to the competition andin the market. &nbspStarbucks ought to make good use of GrandStrategies Cluster Matrix to graphically reveal that Starbucks iswithin Quadrant 1 this is really important to know within thestrategic analysis phase.

Table1: Strategies Cluster Matrix

(Fuller&amp Green, 2005)

StarbucksGrand Strategy Clusters Matrix

Solutionsto identified problems

(W3T3)R&ampD problem

Thesolution lies in the utilization of Technology as well as MobileOutlets as well as tailor-made products to suit consumers’immediate needs. Starbucks’ culture is regarded as creativity andinnovation. &nbspThe business is consistently developing excitingnew items. &nbspIt developed the Starbucks Card which makes a goodgift along with giving customers convenience. &nbspThe card can alsohelp extend the company. &nbspStarbucks mobile app allows customersto pay and order ahead, avoiding long lines when they go into thestore.

(W1O2)Customerrelation/ publicity problem

Thecompany ought to build goodwill among the communities where itoperates within. It is organized Corporate Social Responsibility thatleads to gaining confidence of the company among the societies in theglobal scale.

(S1T1)Competition

Solution:ExpandingProduct mix and its menu offerings (Lower products price)

Competitionwithin the global coffee marketplace is intense, stemming primarilyfrom local coffee, restaurants shops, bistros, and street carts.&nbspBecause the coffee market keeps growing, it is anticipated thata significant competitor with strong financial backing will go intothe market and compete directly against Starbucks. &nbspMaintainingits operational performance and getting more innovative – both inproducts and services – will likely be necessary for Starbucks tokeep its status for the “world’s leading specialty coffeeretailer” (DataMonitor, 2005).

Starbuckshas experienced tremendous success and growth, however it cannotremainder of on its laurels in the event that company would like tocontinue creating wonderful experiences for the value and customersfor the shareholders. &nbspThese three long lasting objectives alignwith Starbucks’ vision, mission, and values, along with maximizingthe company’s opportunities and strengths while minimizing itsthreats and weaknesses.

(S2O1)Business strategy problem

Solution:HumanResource Managementpay extra attention on regulatory and political analysis as well associal analysis

(W2T2)

W2:Increases in the cost of production

T2:threat of substitute

Solution:Diversesuppliers networklower suppliers’ bargaining powerlower production cost and selling price

Risingdairy and coffee prices, together with supply and demand issues, poseeven the biggest threat to Starbucks’ future operations. &nbspDuringsummer of 2005, Starbucks raised its retail costs for the very firsttime in four years as well, the business is reaching U.S. marketsaturation. &nbspIt is anticipated that U.S. sales will slowthroughout the next 3-5 meaning, years Starbucks must grow itsinternational business significantly. International development inChina poses even the largest chance for Starbucks, as young newlyaffluent urban personnel are driving the trend of a café culture,where businesses for example Starbucks are increasingly sought after.&nbsp

StrategicAnalysis and Choice

Thusfar, we now have analyzed the present situation (environmentalanalysis) and where we would like to go (growth, new items, and newdistribution channels). &nbspIt has reached this time within thestrategic plan that Starbucks must ask: How are we likely to employour resources to accomplish our goals?” (Fuller &amp Green, 2005).&nbspAnalyzing and deciding on the best strategic position meanschoosing how to handle it, along with what never to do (Porter,1980).

Starbucksaspire to get at least one of the coffee stores in almost everyneighborhood worldwide. The vision is somewhat, lofty and is notrealistically attainable. However, it speaks about the company’sdesire to have continued growth. Starbucks ought to assure itsstakeholders that, the firm will advance its phenomenal growth byexploitation of its opportunities and strengths, while, at the sametime, reducing weaknesses as well as possible threats from theexternal forces. Even though Starbucks enjoys brand recognition andstrong name, the company must reach to the intended rate of growthwithout the need of cannibalizing or even saturating the marketplace.

Recentalliances and acquisitions have been successful. &nbspOne of thekeys is within finding and taking benefit of additional opportunitiesto get more acquisitions as well as strategic alliances in order toensure deeper market penetration that will stimulate growth. Thetable below explains why strategic alliances and acquisitions areimportant.

Table2: Strategic Alliances and Acquisitions

Expand the U.S. Market

Broaden the Product Line

Expand into China and Eastern Europe

  • Do market research on U.S. remote and rural areas

  • Design products/services to appeal to this market

  • Train company resources to sell in this market

  • Consider advertising and promotion

  • Continue producing high quality coffee product

  • Increase market share

  • Do market research on consumer trends

  • Introduce hot food and fresh fruit

  • Acquire regional coffee stores

  • Consider advertising and promotion

  • Continue producing high quality coffee product

  • Increase market share

  • Do market research on China and Eastern European countries

  • Trade shows

  • Create retail operations from scratch

  • Consider advertising and promotion

  • Continue producing high quality coffee product

  • Maintain U.S. market share

(Fuller&amp Green, 2005)

StrategicChoice

4.2Practical Exercise

In2008, almost all Starbucks’ store designers were stationed duringthe company’s Seattle headquarters. &nbspPeople designing a shopfor Chicago or Houston may have never held it`s place in either ofthese cities. &nbspWhile Starbucks primary objective remains todetermine the business because the most respected and recognizedbrand in the field, Starbucks new long-term objective will be designstores which have a nearby flavor. &nbspThe intent will be result inthe Starbucks brand a little less brand-y through customization.&nbspLast November Starbucks opened an innovative new store inSwitzerland this is certainly really customized when it comes tolocation. &nbspIn partnership with Swiss train company SBB, theyconverted a double-decker train car to create a moving store forcommuters. &nbspRather than the customer going to the shop, the shoprelates to them plus they will enjoy a good beverage as they commute.&nbspThe recession of 2008 and also the closing of 600 stores inthat period resulted in the rethinking of design. &nbspThe objectivewill be design stores which are strongly related to your localaesthetics and also the local culture (Stinson, 2014).

FunctionalTactics

Productionand Operations

Starbuckstypically clusters stores in high-traffic, high visibility areas inthe market. &nbspThe business has the capacity to vary thedimensions of stores letting it locate in a number of settings.&nbspBased on location and size for the store, product mix maydiffer. &nbspStarbucks continues to concentrate on improvingefficiency. &nbspOne notable was happens to be decreasing the widerange of U.S. dairy suppliers from 65 right down to less than 25.

Marketing

Positioningthe products it makes on an easy Starbucks, plane focus remains onexperience and quality. &nbspStarbucks’ image is key to itssuccess. &nbspStarbucks does not sell coffee, it sells the feeling.&nbspPeople started to Starbucks not only for your coffee, but inaddition for the songs, the atmosphere, to read through, to analyze,and also to socialize. &nbspAn integral part of Starbucks successfulpromotion of their image happens to be focusing on local advertisinginstead of during the national level.

Researchand Development

Starbucks’culture is regarded as creativity and innovation. &nbspThe businessis consistently developing exciting new items. &nbspIt developed theStarbucks Card which makes a good gift along with giving customersconvenience. &nbspThe card can also help extend the company.&nbspStarbucks mobile app allows customers to pay and order ahead,avoiding long lines when they go into the store.

Management

Itis Starbucks’ firm belief its workers are certainly one of its mostsignificant assets. &nbspIts good quality staff permits it tomaintain an aggressive advantage. &nbspStarbucks continues tomaintain an empowering culture, keeping featuring its informalorganizational chart, avoiding a hierarchal organizational structure.&nbspStarbucks continues to encourage employees to think within theproducts it sharing and serves common goals.

Financialand Accounting

Withcurrent assets of $5.47 billion and current liabilities of $5.38billion, Starbucks quick ratio is lower than one, indicating itoffers not a problem paying its current obligations (Starbucks,2013).

Table3: Financial Position

(Starbucks,2013)

Table4: Starbucks Corporation Fiscal 2013 Annual Report

Breakeven Analysis

Starbucks

Amounts shown in U.S. dollars

Sales

&nbsp

&nbsp

&nbsp

Sales price per unit

3.65

Sales volume per period (units in millions)

3,014

Total Sales (millions)

$11,001

Variable Costs

&nbsp

&nbsp

&nbsp

Commission per unit

&nbsp

Direct material per unit

&nbsp

Shipping per unit

&nbsp

Supplies per unit

&nbsp

Other variable costs per unit

1.40

Variable costs per unit

1.40

Total Variable Costs (millions)

$4,219

Unit contribution margin

2.25

Gross Margin (millions)

$6,781

Fixed Costs Per Period

&nbsp

&nbsp

Administrative costs

&nbsp

Insurance

&nbsp

Property tax

&nbsp

Rent

&nbsp

Other fixed costs (millions)

4,423.10

Total Fixed Costs per period (millions)

$4,423

Net Profit (Loss) in millions

$2,358

Results:

Breakeven Point (units in millions):

1,966

(Starbucks,2013)

4.3Evaluation and Control

Thisplan hinges on proper controls and implementation with Starbucksbeing ready to help make adjustments as necessary. &nbspEachdepartment will likely be accountable for making use of the rightfunctional tactics to place the generalized strategy into specificaction to be able to obtain Starbucks’ objectives. &nbspStarbucksought to continue to treat its employees well because happy employeeslead to happy customers who cannot wait to return. &nbspIn the longrun all strategy ought to be geared towards repeat business since itis repeat business that has kept and will continue to keep Starbucksatop the coffee shop industry.

StrategicControl

OnceStarbucks has implemented their strategic results, plan for thestrategy needs to be measured and evaluated, making changes asrequired. &nbspThis helps Starbucks guarantee that the program isfound on track in the long run. &nbspPerformance standards are set,the specific performance is measured, and any action required toachieve success is taken

Starbucksought to utilize a company scorecard to evaluate, measure, andcontrol strategic programs and initiatives. &nbspMetrics aredeveloped in line with the priorities for the strategic plan, whichoffers key business drivers and criteria for metrics that managersutilize. &nbspProcesses are then designed to “collect informationstrongly related to these metrics and minimize it to numerical formfor storage, display, and analysis. Decision makers examine the finalresults of numerous measured strategies and processes and track theleads to guide the business and offer feedback” (Arveson, 2008). &nbsp

Thescorecard acts as a link between their operational and strategicplans along with communicating and clarifying their values andmission. &nbspThe management ought to review and develops scorecardsfor every business unit before distributing the scorecard to theentire company (Bateman-Snell, 2003). &nbspStrategic reviews areconducted annually at Starbucks, along with employee surveys to guagethe way the company is performing in accordance with their strategicplan (Bateman-Snell, 2003).

ContingencyPlanning

Shouldrevenue exceed Starbucks, projections should take the additionalprofit into a year later and make use of this in marketing efforts.&nbspAdditionally, the senior management team should examine allaspects of operation to find out what exactly is being carried outwell and what triggered the success to be able to build upon it inadjacent years. Should revenues fall noticeably in short supply ofprojection, senior management ought to isolate the areas in which theproblems lie. &nbsp

&nbspStarbucksalso should continue to communication with customers to remain up todate with who they really are, what they need, and ways to sell tothem. &nbspWhen tastes Starbucks, change may find how todifferentiate itself by innovation to help make new excitingbeverages. &nbsp&nbsp&nbspChange Management

Starbuckshas been around the industry for a few decades and it is undoubtedlythe industry leader. &nbspStill, as evidenced by events during thelast few market, years conditions do change. &nbspWhen coupled withcontinued Starbucks, globalization might discover the necessity toreform its strategy. &nbspStarbucks has experienced the opportunityto study from its expansion into different areas of the world alongwith from the acquisitions of other company. &nbspThese expansionsand acquisitions have now been transformative. &nbspLearning from atransformative expertise in a melting pot may be good at creating newleadership once Shultz decides to step down again. &nbspPreferencesand tastes change constantly. &nbspStarbucks must monitoralterations in customer behavior and market conditions (Bennis &ampThomas, 2002).

4.4Feedback

&nbsp &nbspThepresent information method is able to providing sufficient feedbackon implementation activities and gratification since it is designedto expedite reporting information. It quickly collects and editsdata, and then summarizes results, and become able to modify andcorrect errors promptly. In line with the ability for the currentinformation system, it may also measure strategic factors.

PlanGoals and Implementation

Thestrategic plan goals are two-fold. &nbspFirst, it establishes theroadmap based on how Starbucks will achieve its vision of getting acoffeehouse in almost every neighborhood around the globe, andsecond, it can help Starbucks “produce fundamental actions anddecisions that shape and guide what a business is, exactly what itdoes, and why it will it, with a concentrate on the future”(Bryson, 1988). &nbsp&nbspStarbucks’ strategic plan stresses thesignificance of making decisions which will make sure the companywill have the ability to successfully and proactively react toalterations in environmental surroundings, with a close look towardmaking certain that all objectives and strategies are communicatedexternally to stakeholders, along with internally to yourorganization.

WithStarbucks’ vision, mission, values, objectives, and strategicalternatives chosen, we currently concentrate on perhaps the absolutemost challenging aspect: &nbsphow exactly to implement them. &nbspWhilethere are lots of discrete tasks that needs to be performed to makeusage of the strategic plan, the good thing is that Howard Shultz,Starbucks’ chairman, has recently built a business which has proventhe company can hold out of the strategic alternatives centering ongrowth. &nbspBoth the organizational culture and organizationalcapability for executing strategy have been in place. &nbspOne ofthe keys will likely be in selecting a great team which includes allamounts of management, assigning the right roles, and letting thegroup result in the right strategic moves. &nbspKathleen Eisenhardt,professor of strategy and organization at Stanford University,believes that “if you start with all the right people, you are ableto more readily adjust to a fast-changing world considering that theright people are already self-motivated and adaptable” (Fuller &ampGreen, 2005).

Withall the strategic initiatives, plan, and team in position, Starbucksneeds to build an implementation agenda which includes specific goalsand intent. &nbspSpecific measurable objectives that needs to beachieved at specified intervals ought to be defined. &nbspSpecificprograms that have to be implemented to be able to attain thestrategies ought to be spelled out, and really should includeoperational budgets, objectives, and schedules for every program.&nbspEach program need to have triggers (what may go wrong) andcontingency plans (what`s going to Starbucks do differently if ithappened).

Eachstrategic program need to have its very own implementation plan,clearly showing who, what, when, where, why, how, and resourcesneeded. &nbspEach program need to have its very own objectives andrealistic timetables, along with communication plan directed towardthe affected shareholders, stakeholders, and employees.

CHAPTERFIVE: CONCLUSION

Astrategic plan should identify the fundamental direction and conceptof a business. &nbspStarbucks’ vision is to have coffeehouses inalmost every neighborhood, while their mission is going to be thepremier purveyor of the best coffee in the field and continuesteadily to grow. &nbspThe company’s six guiding principlesoutline the values that Starbucks hinges on to satisfy their missionand vision. &nbspThe completed environmental analysis forces thebusiness to check internally and externally and think criticallyregarding their, strengths, weaknesses, , and opportunities. &nbspThissets the stage for creating long lasting objectives, or a roadmapbased on how Starbucks is certainly going to navigate throughenvironmental surroundings. &nbspIt has reached this time within thestrategic planning procedure that Starbucks analyzes differentstrategies to accomplish their long lasting objectives, and also thecompany makes choices about which strategies to follow. &nbsp

Whenthe strategic choices were made, a strategy is made based on how toreally attain the chosen strategies, and an implementation plan wasdesigned to include contingencies and triggers. &nbspAn in depthfinancial forecast is made in line with the chosen strategies thiscan provide many metrics to guide Starbucks in evaluating the potencyof their strategies. &nbspCritical success factors are analyzed,making certain that they align with the entire strategic plan. &nbspThelast step is within setting controls or performance standards,measuring results, and following through according to those findings.&nbsp

Starbucksgrew from a little company within the Pacific Northwest sellingcoffee, to a very large company selling beverages around the globe.&nbspStrategic planning was, and still is, a vital ingredient inachieving Starbucks’ success, and can continue being an importanttool in the event that company will be achieve its vision of gettinga Starbucks coffeehouse in almost every neighborhood around theglobe.

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