Starbucks Strategy Analysis

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Starbucks Strategy Analysis| Business Strategy | Assignement | 24/05/2010 | | | | Making your organisation fit for purpose Starbucks Coffe Company is the world leading brand in roasting and distributing coffee. The company owns now more than 15 000 coffee shops around the globe: it is settled in North America, Latin America, Europe, Middle-East and Asia. The diversity and depth of its offer (from smooth to extra roasted coffee, African, Arabian or Latin, and all the muffins, cookies and sandwiches) allow them to count on an international exposure that has last for many years. Still, their business tends to be flattening. And the number of competitors in their core-business market, even if the competition stays way back them, is growing constantly. Considering these facts, the objective of Starbucks is to strengthen its leadership on the market. We were then approached by Starbucks in this particular goal. In this folder, you will find an entire analysis of the external environment of Starbucks Coffee Company: the macro-environment, the competitors and market and the stakeholders expectations will lead to being aware of opportunities and threats. Then, we went on the study of the internal capabilities: the resources and competences, the sustained competitive advantage and the diagnosis of strategic capability that will permit us to define Starbucks strengths and weaknesses. [Thus, owing to the results

obtained, we endeavour to recommend Starbucks some new and relevant elements for the future strategic direction of the organisation. I. The External Environment a. Macro environment i. Pestel ii. Porters Diamond iii. Key Drivers iv. Scenarios b. Industry and sector analysis v. Porters 5 Forces vi. Convergence c. Competitors and Markets vii. Strategic Groups viii. Market segmentation d. Conclusion ix. Opportunities x. Threats xi. Success Keys II. The Internal Envrironment e. Capabilities analysis xii. Ressources xiii. Competences f. Sustained competitive advantage

xiv. Marketing mix 7 Ps xv. Culture xvi. Positioning g. Diagnostic strategic capability xvii. Value Chain xviii. Value Network xix. Activity Maps xx. Innovation xxi. Knowledge Management xxii. Benchmarking h. Conclusion xxiii. Strenght xxiv. Weakness III. Conclusion and recomandation IV. Appendices I. The External Environment a. Macro environment i. Pestel PESTEL analysis is a tool that can aid organisations making strategies by helping them understand the external environment in which they operate now and will operate in the future. It is a method of examining the many different external factors affecting an organisation the outside influences on success or failure.

The PESTEL analysis will be used to identify and understand the important factors Starbucks must consider in all areas of the business. ii. Porters Diamond Firm strategy: High implication in faire trade showing that it is possible to contribute positively to communities and environment even if you are a worldwide company Demand conditions: More than 2.5 billion of cups of coffee are sold each day in the world which makes it the 2nd most consumed beverage in the world Chance Government Related and supporting industry: Thanks to the implication in fair trade and the creation of C.A.F.E (Coffee and Farmer Equity) Starbucks is supported by coffee farmers, processors and suppliers Nongovernmental organizations(NGOs);Coffee industry representatives; Starbucks partners Factors conditions: -Excellent customers service -product quality -emerging corporate responsibility -brand recognition -good financial resources iii. Key Drivers

Key drivers for change are environmental factors that are likely to have a high impact on the success or failure of strategy: * Green tech: many industries are being put under pressure by governments to lower their polluting emissions to fight global warming, or at least to show people they try to. This is true for car makers, wood industry, petrol industry and others. Starbucks must be aware that sooner or later these changes will cover all industries/markets/companies. Starbucks has long been a pioneer in fair trade and organic food retail, and we believe the green revolution is a great opportunity for Starbucks to appear as a green leader. * The new speed of information: considering the fact that the major part of Starbucks customers are relatively young and urban means they more or less know how to use a computer. Being in a daily, close relationship with your customers means you need a flawless service anytime, anywhere. Especially at the age of the all-mighty internet and its fast paced information sharing capacities on social networks such as Facebook or Twitter. Local marketing cannot ignore that. * Ageing population: Starbucks must take in account that nations are facing radical changes such as the issue of global ageing. Pharmaceutical corporations and global health programs make people live longer. People that have usually higher purchasing power and the desire to keep up with the world they live in because of their free-time. Again, this is a huge opportunity. iv. Scenarios These are views of how the business environment might look like, depending on the decisions Starbucks will make and the key drivers. It improves organisational learning by making managers more perceptive concerning the evaluation and the development of strategies in each scenario. A B

high D C IMPACT high low UNCERTAINTY A: Innovation B: Preoccupation for health C: Economical crisis D: Sustainable development trend Scenario A : People care more and more about their health (B) and about going green (D). Starbucks is a leader in fair trade and sustainable development. R&D money (A) will be spent on recycling process in waste management, and product development to promote healthy solutions for lunch. Scenario B : Economical crisis (C) means people focus more on what they really need and will skip what is expensive to them. Also, if there is a government intervention to alert about new health dangers in junk food and if R&D (A) doesnt focus on this trend, there is a certain level of threat for Starbucks. b. Micro environment v. Porters 5 Forces Porter's five forces analysis is an important tool for analyzing an organizations industry structure in strategic processes. It helps the marketer to contrast a competitive environment. It tends to focus on the

single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products. Porter has identified five competitive forces that shape every industry and every market. These are: The threat of entry, The power of buyers, The power of suppliers, The threat of substitutes and Competitive rivalry. The Power of Suppliers: Low pressure because suppliers are numerous and scattered, and so they have a low negociation power. Gteaux Gobelets The Power of Buyer (B to C) Low pressure because they are too many and diverse. Threat of new entrants: Barrier to entry: reputation and expertise. That is why the pressure is low for potential entrants and strong for restaurants. Cafs Restauration Intensity of rivalry: Low pressure because Starbucks remains unique and leader of the market. Strong Pressure Weak Pressure Caf cakes Threat of Substitution products :For coffee : hot chocolate and others energizing beverages For cakes : all pastries * Barriers to Entry

The first barrier to entry is reputation. In fact Starbucks is an international company, they have a worldwide reputation. If a company wants to relocate, it will "perform important communication costs" in order to compete with Starbucks. The threat of new entrants to the market is fairly low. In fact, there are many indirect competitors. Nestls Nespresso, other coffee chains and the arrival of coffee for Senseo particular type. Regarding restaurants, there are Dunkin Donuts, Burger King, McDonald's, which sell products similar to products of Starbucks. The company remains the market leader in the coffee shop. The concept is unique even though some chain restaurants can compete with him, like La Brioche Doree, where the concept is the same. However, the image and the customers are completely different. It is difficult to precisely define the barriers to entry, as different from one country to another, but also from one sector to another. They are not the same for coffee and catering. Indeed, difficulties entering the market are much greater for the coffee for the restoration. Firstly, because coffee is the heart of Starbucks' business and especially because they have experience and know-how. Starbucks is the market leader. You can find their delicious "caf latte" everywhere. It is this strength of the strategy "first to market" that is to say that Starbucks is the first company to have entered the market, making it difficult to compete because of its visibility and image as a leader. * Substitution products There are many similar products to Starbucks products. First for coffee, are the automatic coffee machines which are very fast, not expensive for the consumer, even if the quality is often poor. These machines are usually placed on the workplace. Then there is the instant coffee that can be done at home, fast and inexpensive. The new Senseo coffee type or Nespresso, are also products that can compete with Starbucks products even if their use is different. Indeed, in this case, we can make a good coffee at home, much cheaper than at Starbucks. Finally, new products appear every day, such as capsules or pods of coffee. These new products contain a coffee extract and can be eaten

anywhere, they do not need to be reheated. Note also all energy drinks such as Coca new Black, which contains caffeine and has the same virtues as coffee. Remember that when we speak of substitute products, we talk about products that do not contain coffee, but thanks to which it is possible to replace the coffee. For examp