Introduction
Starbuck Coffee Company was established in 1971, being the first retail store opened in Seattle’s Pike Place Market, in the United States. Mobby Dick inspired the company name attached to the romance of the high seas and the seafaring tradition of the early coffee traders (Starbucks, 2010). The company witnessed a transition with Howard Shultz being the Starbucks president and the CEO from 1987 after acquiring the company from the initial sellers. He has integrated his previously established company policies (II Giornale Coffee Company) with Starbucks leading to tremendous growth. He not only steered the company towards increasing the number of stores to installing values and guiding principles that have been embraced as part Starbuck culture. Currently, Starbucks Company still continues to expand globally earning a good reputation as they still find the best things to their customers.
The Company’s products and services are diversified in various categories. The most popular products availed by the company include; drinks, food and nutrition. The company has been able to create a worldwide slogan on their drink product stating “a perfect cup of coffee” based on the exclusive selection of the best beans throughout the world and processing them to add great flavor their drink hence offering the perfect drink to their customers. The company avails various sorts if food for their customers to enjoy. Their food is not only naturally scrumptious but also very good for the customer’s health. Other service and products availed by the company to their customers include; entertainment where the company entertains their customers when they came to the stores, wireless internet which is strategy attracting customers to come to the stores, this enables the customers check emails, surf the web and feel free to connect right in the stores, community online where the company likes thinking about the Starbucks shops as being special, they have facilitated the feeling by the creating online communities for people who love to drink coffee and the people can exchange experience to taking. Other include; mobile application offered by the company card on iPhone to enable the customers life easier, Card of Starbucks, that is one of the strategies of the company has enabled increase high sale volume as the customers feel good that they are a part of the company. The card avails numerous varieties of rewards to the customers such as discounts and collecting potions.
The mission statement of Starbucks Company is based on principles of running business every day “how we live that every day”. The company focuses on the quality of the bean and enhancing farmers live who grow the coffee bean. The company embraces their employees by calling them partners.
Two segments of general environment and how they affect the corporation
Though Starbucks has been able to create a good reputation of their brand name, which is influenced by the external and the internal environment have marginal impact on the operations of the business. Some of the internal and the external environmental factors can either be controlled or uncontrolled by the organizations. These force the company to develop strategic approaches aimed at ensuring that they avert the influence and tap the benefits creating more opportunities for the company. Some of the major segments of the general environment that affect the company performance either positively or negatively are; technology and environmental based initiatives (environmental policies). The two environmental segments offer various outcomes in relation to defining the success of the company.
Technology
The current dynamism in technology is forcing organizations to indulge in strategic approaches aimed at ensuring they tap the benefits attached. In the coffee and food industry where the company operates, technological trends have largely impacted the performance of the businesses around the globe. Currently, everything is done online from sales to other essential aspects within the business. According to researchers, the technology impact has the potentiality of undermining or supplementing on both internal and external operation of the business. Starbucks is embracing the dynamism in technology developing strategic approaches aimed at tapping the benefits attached to the technological innovations. Such initiatives include; developing online communities where consumers can meet and share their love on coffee and developing mobile application that is availed to the Starbuck card on iphone to make customer’s life easier by trying to find new ways to serve customers better and make them enjoy the coffee even more.
Environment
Environment under this approach incorporates the need to develop strategic mechanisms to safeguard and embrace the growing concerns on environmental pollutions. Currently, companies are going green with endless pressure and policies from environmental governing bodies on the need to develop products that safeguards environmental awareness. This has propelled organizations towards developing corporate social responsibility. Consumers have also discovered the need to associate themselves with products that consider environmental conservation as part of their daily operations. Starbucks has discovered this strategy where the organization has strongly developed strategic approaches with the greatest aim focuses on manufacturing cups which are 100 percent recyclable (Starbucks, 2010). Furthermore, the company has developed one of the most effective and efficient Corporate Social Responsibility hence being ranked as one of the corporate that has succeeded in the business world through the use of CSR. The notion behind the need to the success by Starbucks through the use of CSR is the use of the strategy as a long-term business strategy. The company has discovered the essentiality of natural capitals by enhancing reservation of life and ecosystem balance.
Five forces of competition
Analysis of the company level of competition in the industry can be achieved through the use of Porter’s five forces of competition. In order to analyse the Starbucks competitive environment the use of the five forces is used. These forces include (Porter, 2003);
- Threat of the substitute’s products and services
- Threats of entry of new competitors
- Intensity of competitive rivalry
- Bargaining power of buyers
- Bargaining power of suppliers
The stipulated five forces have a marginal impact on the performance of the company within the industry. The two forces that impact the company hence the need to develop approaches to address the impact include;
- Threats of competitive rivalry where the existing companies operating in the same industry reflect high competition over the market. The company is propelled to develop unique aspects to enable the company to achieve a competitive advantage within the market. The company has been able to limit the level of competition through focusing on quality products advocating for customer’s health and safety which are significant for the business. Ensuring clean and hygienic process in the food service and facility has enabled the company to achieve a competitive advantage within the market.
- Bargaining power of suppliers where the company has to ensure that they develop and maintain long term relationships with the suppliers and the sellers. The bargaining power of the suppliers is high based on the various similar companies offering the same products. The company has to work closely together with the suppliers especially the coffee farmers through fair trade with guaranteed prices, offer financial credits and education among others.
The company is developing strategic approaches aimed at addressing the threats. The company in order to avert and minimize threats of competitive rivalry from the existing companies, the company is entering into an agreement with competitors under regulations such as not talking about the price. In the recent future, the company is seeking to diversify and venture in international markets increasing dominance and market share within the industry. To address the bargaining power of the suppliers, the company is venturing on more competitive relationship with suppliers through partnering as a strategic alliance. This strategy in the near future will witness a development of mutual benefits attached relationship with the suppliers especially the farmers while aiming at getting high quality products and control prices while protecting the environment. To achieve this, company aims at creating an environment where coffee bean is grown and also rising farmer revenue, as well.
SWOT Analysis
Strengths
- The company has established competitive and growing brand recognition
- Has product and brand consistency
- Has established eco friendly practices indicating the company endless concerns to conserve energy, water and climate change
- Offers internet services in their stores
- Have a strong Ethical mission statement
- Has an international brand with over 5,500 stores in over 50 countries globally
Weakness
- Failure to have a wide spread customer base
- Lack of competitive pricing strategy
- The number of competitors is increasing
- Minimal size of store
- Lacks coupons, deals and promotions
- Poor strategic locations being scarce in suburban
- Frequent product recall
Opportunities
- Emerging of more products while adapting to other markets
- Creation of a coffee house experience in the global target markets
- Focusing on emerging economies
- Opportunities in third house experiences
- More promotions on coupons and discounts
- Increase use of technology
Threats
- The company depends on international trade for its coffee beans such as Arabia and South America
- Regulations on compliance towards international governments on production and distributions
- High competitive environment with leaders in the food business
- Has become a luxury brand
- Cultural values and routines which may interfere with the coffee house experience
- Recession impacting the economy hence affecting the consumer spending
Based on the stipulated analysis, the company needs strategic approaches to address the serious threats and how to utilize the greatest opportunities. Some of the opinions on how the corporation should deal with the most serious threats and greatest opportunities are based on the trends and dynamism in the market that can enable the company achieve a competitive advantage. The greatest threat limiting the company performance is; very competitive environment with leaders in the restaurant or food business, to avert the threat the company should develop more effective marketing strategies to enable the company to create a competitive advantage. This can be achieved by establishing a strong marketing team and availing the team with resources while tapping technological trends such as online marketing and sales among others.
The corporate greatest strengths and most significant weakness can be used to reflect the change within the company operations. The company greatest strength is the establishment of great and growing brand recognition plus the product and brand consistency. The company brand name can be used to venture in more foreign markets increasing dominance and creating a competitive advantage. According to researchers, creating a strong brand name provides numerous benefits that the company can use to increase shares within the market. The most significant weakness is on the need of the company to have a widespread customer base. The weakness offers numerous benefits if fully explored, this can be achieved through establishing a wide spread customer base where more consumer based strategies are developed.
Company resources, capabilities and core competencies
The company is one of the world class organizations with the most successful business trends. The company has over 5,500 stores in over 50 countries the resources and enables the company has a wide range of capabilities which ensure core competencies (Starbucks, 2010). The corporation’s policy is based on ethics in business operations. The company capabilities include ability to engage in the environment, all people and following the laws of every country, provide quality products and services plus the creation and maintaining good relationships with both suppliers and customers. The company core competencies include; maintaining quality products and service where customer’s health and safety are the aim of the business, complying with laws and regulations on international markets and maintaining mutual relationship with the suppliers.
Company value chain
Based on the financial reports by the company from 2009 to 2011, the company has witnessed tremendous and great financial success by maintaining a good percentage on the profit value. In 2009, the company recorded net earnings of $390.8 million that was an increase of 23.87 per cent in 2008. Analyzing the financial reports from 2007 to 2009, the company earnings increased though in 2008 slow down because of the economic crises in the USA and the international markets affecting the customer’s purchasing power. The company can create value using the stated core competencies, capabilities and resources based on the effectiveness of strategies that the company can implement. The high number of stores can be expanded to minimize overcrowding which is one of the limitations, the capability of the company to engage all members of the society especially on environmental conservation through Corporate Social Responsibility offers vast benefits that can be reflected on the company value chain. The core competence in quality products and services that hold consumer’s health and safety in the front line can also be used as a strategy increasing the company value chain. Another core competence that the company can utilize is on ability to establish a mutual relationship with the suppliers. This is an essential competitive advantage as organizations seek to develop effective and efficient supply chain. Supplier like customers forms an essential part of the business where the firm may fail to exist without either of them.
References
Fiscal 2009 Annual Report. Starbucks Corporation Fiscal 2009 Annual Report [Online]
Porter, Michael E. and Mark R. Kramer (2003) “The Competitive Advantage of Corporate Philanthropy”[Online]
Starbucks Report (2010). Care.Conection.Change.Starbuck in your community. [Online]Available: http://me.starbucks.com/NR/rdonlyres/9CDCEFA6-8C0C-4748 B05D36B0862B4D75/8815/StarbucksCSRandCommunityConnectionsArchive.pdf[2010-05-11]
Visser W. (2005). Revisiting Carroll‟s CSR Pyramid An African Perspective. Define CSR, [Online] p.32.Available: http://www.waynevisser.com/chapter_wvisser_africa_csr_pyramid.pdf [2010-04-5]
