External Environment
Starbucks primarily operates in the retail coffee shop market. The UK coffee shop market alone is estimated at over 16,000 outlets and showed a strong growth of 6.4% in sales during 2013 (FDIN, 2014). The branded coffee chain segment recorded a turnover of £2.6 billion, delivering a higher than market sales growth of 9.3% (FDIN, 2014). The coffee shop sector has seen a considerable growth in the past 15 years and Allegra Strategies (as cited in FDIN, 2014) forecasts that UK’s branded coffee shop market will grow at 10% compound over the next five years.
A “PESTLE” analysis is a strategic analysis model used to identify the current and future external environment in which a company operates in and the environment’s macro economic functions (Worthington & Britton, 2006). The analysis includes the political, economic, socio-cultural, technological, legal and environmental factors that influence and affect a company.
I will use the “PESTLE” analysis to identify and understand the macro economical factors that Starbucks must consider when conducting its business.
Political:
• Taxation policies – High taxation imposed by a country’s government on the coffee bean farmers may ultimately lead to Starbucks having to pay a higher price for the coffee they wish to purchase, which may be passed on to the customer.
• Government stability – Starbucks must consider and investigate the political situation of any country they plan to open stores in. Changes in government can lead to drastic changes in legislations and taxation policies. The same consideration must be done when looking at suppliers of coffee beans.
• Tariffs and trade regulations – Regulations on trade will affect Starbucks primarily when exporting and ...
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Ramagopal, C. 2008. Financial Management 1st ed. New Delhi: New Age International (P) Ltd., Publishers
Starbucks Investor Relations, 2014. Starbucks Annual Shareholders Meeting Spotlights Record Performance Driven Through the Lens of Humanity [Online] Available: http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-newsArticle&ID=1910182&highlight= [28 March 2014]
Starbucks Corporation, 2014. Starbucks Fiscal 2013 Annual Report [Online] Available: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjE4MDQyfENoaWxkSUQ9LTF8VHlwZT0z&t=1 [26 March 2014]
Shultz, H. 2011. Onward: How Starbucks Fought for Its Life without Losing Its Soul. New York: Rodale Books.
Rochester Institute of Technology, RIT, (n.d.), Cost Benefit Analysis [Online] Available: https://www.rit.edu/~w-outrea/training/Module5/M5_CostBenefitAnalysis.pdf [28 March 2014]
Starbucks in today’s date is the world’s largest coffee chain. The brand which was founded in 1971 has established itself as the world’s leading specialty coffee brand with its more than 13000 outlets in 39 countries. The company has had an impressive record of sales and growth also. Something that differentiates Starbucks from others is its coffee as well as the special Starbucks experience. Starbucks serves more than just coffee. It is also known for the relaxing ambience where the customers can relax and sip with their friends. Starbucks is famous for its genuine service, inviting atmosphere and of course superb coffee. The company is committed to quality and it is due to its commitment to quality that its product pricing is also premium. However, despite the premium prices of its products the brand is loved around the world by the customers for the quality of products that it serves.
“For most organizations, particularly for-profit firms, the end game is a change in financial performance… Most company strategies aim for long-term, sustainable financial growth,” (Balestrero & Udo, 2014, p. 251). Being a publically traded company, Starbucks legally must adhere to strict financial reporting regulations. Nevertheless, by tying into their SEE model of organizational sustainability, Starbucks can further sway investors to participate in supporting their business (in big and small ways) in order to continue thriving. Marshal Goldsmith is credited with the phrase: “What got you here, won’t get you there.” This means, in order for Starbucks to truly remain sustainable, hard-nosed economics, measuring their full-range impact will be necessary via triple bottom line definitions.
Starbucks mission statement states: “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” The corporation focus on the local communities and takes a proactive strategy to be a part of their lives. According to the Starbucks’ principles, every single store is a part of a community and it is a responsibility to live in a good relations with everyone. Instead of looking for an opportunities to expand in the most profitable places, it would rather be invited to do business in particular areas. Also, the company principle states that the business can take the lead in changing and helping in improving the society around. It is going to be a force pushing everyone ahead.
The book revealed why Starbucks is one of the fastest-growing companies in recent years. Starbucks ' story is endlessly fascinating because of the unusual way the company has built a global chain and a global brand, explains Joseph Michelli, a Colorado Springs, Colorado, consultant and author of The Starbucks Experience: 5 Principles for Turning Ordinary Into Extraordinary. Moe, CEO of ThinkEquity Partners in San Francisco and author of Finding the Next Starbucks: How to Identify and Invest in the Hot Stocks of Tomorrow, says Starbucks ' early leaders were also distinguished by their exceptionally highflying entrepreneurial visions. "What Starbucks does magnificently well is treat employees not as pawns, but as partners," says John Moore, an Austin, Texas, marketing consultant, former Starbucks marketer and author of Tribal Knowledge: Business Wisdom Brewed From the Grounds of
Shah, A. J., Hawk, T. F., & A, T. A. (2011). Starbucks' Global Quest in 2006: Is the Best Yet to Come. In A. A. Marcus, Management Strategy: Achieving Sustained Competitive Advantage (pp. c468-c495). New York: McGraw-Hill.
The importance of economic indicators to the strategic planning process in any organization is the ability to benchmark economic conditions that contribute to improve profitability, business growth and market size. Leadership sets up the mission “to establish Starbucks as the most recognized and respected brand in the world.” In doing so, they have created a set of industry-leading, comprehensive coffee-buying guidelines addressing coffee quality, financial transparency, social and environmental responsibility. Starbucks strategy is also expanding market in globally to provide high quality coffee in convenient and visibility locations. They are continuing to innovate and extend the business with imaginative new ready-to-drink beverages and expanded packaged coffee offerings (Starbucks Corporation, 2007).
Social issues will always be a parto f major coporations however, Starbucks has shown through excellent leadership that they are ready to counter any attacks to their beliefs. They have mitigated the gun issue, the race issue, and signed the Fair Trade agreement. This stance on fair treatment and standing by their convictions has gotten Starbucks respect and new customers. Though many did not feel comfortable with the “Race Together” campaign, it was still a respected
Starbucks' quest for healthy growth: An interview with Howard Schultz. (2011). McKinsey Quarterly, (2), 34-43. Retrieved from Business Source Premier database.
There are a few risks facing the company. One of which Starbucks is already attacking and trying to overcome. The expansion of Starbucks is coinciding with one of the worst economic surges in history. It has become unaffordable for the average person to go to Starbucks for a coffee seeing that a coffee costs as much as a gallon of gas. If you drink one coffee a day for a week, that’s almost a tank of gas! This is why Starbucks is now offering a less expensive cup of coffee with a completely different label and all.
It is important for companies like Starbucks to know the reasons behind this trend because of the following. First of all this trend has an impact on strategic planning. It is crucial to take in to account uncertainties of changing market while assessing external environment (customers, industry, competitors, etc) and internal strength and weaknesses of the company. This trend influences company's formulation of objectives and business strategies.
Starbucks Corporation. (2006, February 8). Starbucks Annual Meeting of Shareholders Starts over a Cup of Coffee; Company's Impact Now Extends Well Beyond Stores' Four Walls. [Financial release]. Retrieved from http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-newsArticle_pf&ID=814454&highlight=
Starbucks is an international coffee house and it was created in 1971 when they opened the first store in Seattle, Newcastle. Currently, they own 21,000 stores in 65 different countries of the world, and their passion for the great coffee, excellent service and community interaction exceeds cultures and languages (Starbucks, 2014). This company is the number 1 brand coffeehouse chain in the world due to the best roaster, marketer and seller of speciality coffee. Its main slogan: “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time” (Jurevicius, 2013).
When starbucks enter the Australian market in 2000, It was successful. Starbucks targeted the capital cities before going into regional centers. The reason is simple, as demand for pricey coffee is higher in the capital cities, and during that time less competition are expected. Starbucks became the leading and competitive company in the coffee chains globally. By 2007, Starbucks has opened more than 84 company-operated stores across the country. It was until mid 2008, that Starbucks realise its peak of success has ended in the Australian market.
According to Investopedia website, “a technique that reduces risk by allocating investments among various financial instruments, industries and other categories is known as diversification. Diversification is the most important component of reaching long-term financial goals while minimizing risk” (“Investopedia”, 2011). “Fundamentally, this strategy is about creating new products with new product life cycles and making existing ones obsolete” (Olsen, n.d.). With diversification, Starbucks would be able to enter new markets with new products. By having a diversification strategy enforced, this will create a path for effective growth for the business. As with any company considering new products in new markets, there are risks associated with it and Starbucks would need to be prepared to respond accordingly.
Starbucks Company was established in 1971 with their first store in Western Avenue from that same year to 1976. They started as retailers of ground coffee tea and spices with a single in Seattle’s historic Pike Place Market. Starbucks is named after the first mate in Herman Melville’s Moby Dick and their logo is inspired by the sea-featuring a twin-tailed siren from Greek mythology. Starbucks had always wanted to inspire the human spirit. They believe in serving the best coffee by growing the coffee under quality standards. Starbucks believes rendering good services to customers is very significant to the success of the company. From just a narrow storefront, Starbucks now has more than 20,000 stores in over 60 countries and they offer some of the world’s finest fresh-roasted whole bean coffees. Their coffee houses have become a beacon for coffee lovers everywhere. Starbucks believe that they can elevate their customers, partners, suppliers and neighbours to create positive change. They call their corporate offices “a support centre” for some reasons. They try to make everything they do there to support their retail store partners and make an impact on the communities they serve. They have a research and development team of over 200 people which are responsible for the science behind their great products. They are the innovators of delicious beverages and brewing equipments. They drive the innovations, conduct the research and test products. They have a public affairs, communications and community team of over 50 people who promotes and protects the company’s reputation all around the world. They also have a partner resources team of over 500 people that help their partners all around the world become their very best...