Executive Summary
We can definitely say that Starbuck is one of the most popular and famous coffee shops. It was established in 1971 by
... [Show More] Jerry Bladwin, Gordon Bowker, and Zev Siegl in Seattle.. As rivalry is expanding in the business, Starbucks’ business strategy is at an ever significance stage, in order to keep up and develop as a company. In today, Starbucks coffee company has grown into the number on e specialty coffee retailer. It operates many coffee shops across the globe in more than 62 countries. Starbucks also is a dominant Fortune 500 company who has built a trusting brand name through various competitive strategies and has stood out among competitive forces. This case study analysis plans to decide the best strategic options for Starbucks’s future, and it reviews Starbucks’s performance and environment from different perspectives before strategic recommendation are made on the conclusion section. This case study analysis plan tries to address all area of the incorporated through proper analysis, to acquire these strategies.
Analysis of Firm Structure
A company firm’s structure is very important for a company. Starbucks has developed to have an organizational structure that matches current business needs. At this section, Starbucks did a good job in firm structure. It grows with the business, enabling the company to optimized processes and the quality of its goods and services. The four key features of Starbucks’s firm structure is functional structure, geographic divisions, product-based division and teams. The functional structure of Starbucks’s firm structure is grouping based on business function. Like, it facilitates top-down monitoring and control, with the president and CEO at the top. Starbucks’s firm structure involves geographic division. There are many stores over 62 countries. Each geographic division had a senior vice president in charge of company. Next, Starbucks’s firm structure also focuses on certain product lines. It helps them effectively develops and innovates its product with support from its firm structure. Last one feature of Starbucks’s firm structure is team. Teams are most important at the lowest organizational levels, especially the Starbucks. This feature of Starbucks firm’s structure enables the company to provide effective and efficient service to consumers.
SWOT Analysis
SWOT analysis stands for strength, weakness, opportunities and threats. A SWOT analysis is a tool that Starbucks has used to choose if a venture is profitable as well as evaluate whey they stand throughout the life of Starbucks. As a new division of Starbuck a new SWOT analysis has been conducted to determine the strengths, weakness, opportunities, threats, and trends, both external and internal, of this decision in conjunction to the achievement of Starbucks. This analysis will help Starbucks have the information that is needed to be successful in the industry.
Strengths
The first strength of Starbucks is strong brand image. When people think of coffee, they will immediately think of Starbucks. It is a huge advantage when it comes to brand recognition and wanted to visit the retail locations. Second strength is customer loyalty.
Most customers will come back to Starbuck and buy a coffee because Starbucks has a high quality of products and service. So, Starbucks has a strong customer base.
Next, the strength of Starbucks is locations. With 19,767 company-operated and licensed stores in over 62 countries, the brand outreach is truly incredible. Some of the prominent markets where Starbucks operate are United States, China, Japan, United Kingdom, and so on. This makes Starbucks be a international known brand.
Last strength of Starbucks is Starbucks partners. Starbucks calls their employee “ partners” because they feel that the employees are one of the most important keys to success. Starbucks have employed 182,000 partners worldwide. These Starbucks partners leads to customer satisfaction. It has the lowest employee turnover and looks to build from within.
Weakness
The first weakness of Starbucks is lower beverage innovation. Starbucks is reliance on beverage innovation. It is vulnerable to the possibility that their innovation may falter overtime, and the company growth is mostly driven by beverage innovation. Second, Starbucks has problems in some international operations. Like, a number of openings are failing in Japan. Although they said they are cheaper alternatives in the market, and many often complain on how expense a single drink can be especially being that it is a franchise. Even though, Starbucks operates over 62 countries. It focuses on more than 75% of the company’s store are in USA. It is not good for a global company like Starbucks. Another weakness would be Starbucks has a negative image.
Opportunities
With the expansion into teas and juices, Starbucks can continue to come out with new products to further diversity themselves from the competition. Another opportunity is expansion of retail operation. Starbucks has the opportunity to expand in Chinese market. Technological advances can help the company enhance their loyalty program. Another opportunity is growth in coffee markets. Which means being able to get the brand to a point where marketing does itself is something they continue to strive for. Last opportunity would be brand extension. It comes a point where Starbucks needs to rebrand their brand in order to ensure regrowth in the industry.
Threats
Even Starbucks is a successful company, it still have lots of threats. As a coffee market, it is low barrier to entry. Then, it has a high competition with in the industry. With companies like the coffee bean, Peer’s coffee, and Dunkin Donuts and so on. In recent years, Starbucks has slowing United States retails sales because markets are mature in United States. Another threat is changing health choice of consumers. As we know that, coffee is not health for us body. Some of the beverage option offered is not particular seen as health by consumers in Starbucks. In today society, global economical crisis is happened. Then, it may decrease people who wants buy coffee in daily life. The last threat is that cost of coffee bean is expected to rise in the future. If it happened, the price of Starbucks also will go up.
Five Forces Analysis
The Porter’s Five Forces Model is described as “ model developed by strategy expert Michael Porter that identifies five competitive forces that influence planning strategy.”(Kurtz, David & Boone, Louis 2015)It introduces how five competition forces impact the competitive landscape in an industry. These forces are Bargaining Power of Suppliers, Potential New Entrants, Bargaining Power of Buyers, Threat of Substitute Products, and Rivalry among Competitors within an industry. It will help establish Apple’s position in the market by using Porter’ fire forces
Confrontation Matrix
The Confrontation Matrix used to further analyze each combination of the SWOT analysis. It can help managers identify the most important strategic issues the organization is facing. In this matrix, the score 3 is identified as the best option, and the lower score is blank which means zero.
According to the Confrontation Matrix, this matrix outlines several trend. And the most important thing of this confrontation matrix is shows us that many of the opportunities available to Starbucks can be accomplished through the use of their internal strengths. Also, from this chart, many of the threat that is made can be taken care of by Starbuck’s internal strengths. Therefore, this matrix is very helpful for a company.
Impact/ Probability Matrix
In Impact/ Probability Matrix, we need to prepare the strategy to check the risk that has both high potential impact and high probability. The Impact-Probability framework is key to study the threats that Starbucks faces. A few threats were created from the SWOT analysis. These treats have both a probability and potential, that will decide how likely, and what the effect will be if these dangers are not oversaw. This matrix permits an organization, for example, Starbucks to understand that risks and threats are most important to concentrate on first. As the matrix graph, High market rivalry is the well on the way to affect Starbucks and destined to happen. The following conceivable range of concern is lessening in customer loyalty took after by the decline in coffee supply, financial pattern and diminishing in customer demand. It is better for Starbucks to be aware of the incensement of coffee bean pricing although it probability is medium.
Positioning Map
After company deciding its target markets, it is important for company to decide what position it wants to occur in their target market. According to textbook, product’s position is defines by consumers on important attributes such as price, quality, competitor, products class, application and so on. It is also business analysis tool as it helps explain how Starbucks is viewed in relation to direct competition.
Starbucks has many competitors like the coffee bean and Peet’s Coffee. Each brand offers similar products and strategy. Then, the different between these coffee shops is their “ quality”. It will make their price is different in each of brand. For example, the Coffee Bean has a little higher cost compare with others. And then, Peet’s Coffee has a lower price than Starbucks.
EFE Matrix
EFE Matrix is stands for external factor evaluation matrix. Which means this matrix analysis the Starbuck’s opportunities and treats. The factors are rated from 1 till 4, where 1 is the lowest score, and 4 is the highest score. Which also means the highest weight is assigned to the most important factors or several very important factors. In Starbucks, they are still many ways can increase the growth of the company. The biggest opportunity of Starbucks is expanding of retail operation in global. The other area not highlighted here should be improved. On the other hand, Starbucks is facing some threats like it is not as effective at responding to the United States retail sales.
IFE Matrix
Internal Factor Evaluation Matrix is an analysis tool to evaluate the major strengths and weakness in the functional area of business. Also, it can help Starbucks to determine how they responds to these factors and decide where more emphasis much be placed. Starbucks has much strength like the brand image, customer loyalty, location and so on. They created a good work environment and treat each other with respect.
According to the IFE matrix, it shows that Starbucks is relatively has a strong internal position. But Starbucks’s weakness is also very high, this means that Starbucks is still weak in identifying its weakness.
IE Matrix
According to the textbook, the Internal- External matrix is based on an analysis of internal and external factors which are combined into one suggestive model. In this matrix, Internal Factor Evaluation presents on the x-axis, and External Factor Evaluation presents on the y-axis.
SFAS Matrix
Strategic Factor Analysis Summary Matrix is an overall look at the strategic position of a company. From this analysis, plainly which key factor is imperative for a company, which it comes from Internal Factor Evaluation and External Factor Evaluation. These were selected based on the individual level of importance relating to the position of the company. Also, Starbuck need to know what customer need compare with others competitor.
The result of this matrix all in all taking into account the balanced weights is a score of 3.18. Another essential part of this test is that it shows the time times of length of effect for every section, which figures out what zone will be most helpful in the long haul or short-term, and along these lines how to react. In general this network presentations to Starbucks that they ought to attempt to keep up its clients, keep on expanding its business sector particularly developing markets, grow its item go, while augmenting their brand image and keeping their customer loyalty.
Competitive Profile Matrix
Competitive Profile Matrix is important for a company. It identifies a firm’s major competitors and its particular strengths and weaknesses in relation to its competitor. There are two major competitors with Starbucks. These competitors are the Coffee Bean and McCafe. In this matrix, rate 1 means a major weakness, and 2 means a minor weakness to a company. However, this Matrix will show the difference of total weight score between each coffee shop.
This competitive profile matrix is a particularly important one to consider when addressing competition, and helps to compare Starbucks based on the direct scores. This analysis concluded with Starbucks at a rating of 3.08, Coffee Bean at a rating of 2.87, and McCafe at a score of 2.43. These can be broken down individually to help address each strength and how each factor impacts the other in the industry. The result of this matrix shows how the competition between the three coffee shops.
BCG Matrix
According to textbook, the Boston Consulting Group matrix is enhancing a multidivisional firm’s efforts to formulate strategies. And also, the BCG allows a muti-focused firm to manage its portfolio by examine relative market share position and the industry growth rate each division relative all other divisions in the organization. In this matrix, Starbucks BCG matrix below show four divisions which include Cash Cows, Stars, Question Marks, and Dogs.
The result of this matrix shows that Starbucks is in Stars. Star division identifies best long-run opportunities for growth and profitability. Starbucks income statement shows steady increase. So, Starbucks were identified long-run opportunities for profitability is overall good. It is a division for a company.
GE/McKinsey Matrix
GE/ McKinsey is a strategic tool for portfolio study, it analyses and compares the different businesses on basis of two variables “competitive strength” and “market attractiveness”. Five important business factors were selected and use to analyze in the coffee industry.
The result of this matrix shows that the industry attractive ness score is 3.50 while the business unit strength test is 3.10. Also, we can see that Starbucks in Invest section, it means that their management would like to allocate recourses to investment. Additionally, Starbucks has high market share, and they have strong business units. It can help a company to suggest their particular strategy. It is good that a company has a strong unit.
Industry Life Cycle (ILC) Analysis
The industry life cycle matrix is a important tool to help access where a company is it with regards to its company growth and decide their business strategy among the industry. This helps Starbuck to determine strategies for continuation or decline that allow the best possible options for strategic business.
There are five stages on the industry life cycle matrix. These are emergence, accelerating growth, decelerating growth, maturity, and decline. However, Starbucks is nearing the deceleration growth area. Which means Starbucks still have opportunity for properly accessed growth plan. They can do expand the market and it have to be very well planned out in this particular stage in the industry life cycle. Also, competition is high in this stage, and revenue growth begins to decelerate. This leads into the area of maturity and decline where organizations' most significant choices become possibly the most important factor. Then again there is certainly stillroom for growth.
SPACE Matrix
The SPACE matrix which is also known as the strategic position and action evaluation. It is a tool of determining which strategies a company should undertake from four dimension frameworks: aggressive, conservative, defensive, and competitive. This matrix normally has two axes where one axis represents the two internal dimensions of an organization- financial and competitive position while the other axis represents two external dimensions, which is stability and industry position. A look at Starbucks’ performance shows that the company should be place on the aggressive quadrant since it is financially stable and competing very strongly in the various coffee industries that it serves. Also, since Starbucks qualifies to be on the aggressive quadrant, which means Starbucks have four option strategies like backward, forward, horizontal integration, market penetration, diversification and market development strategies.
Grand Strategies Matrix
Grand Strategies matrix is an important tool for creating alternative strategies for a company. This matrix was applied to develop strategies for Starbucks’ different business units. There are 4 different quadrants according to their competitive position and market growth in this matrix.
The result of this grand strategies matrix is shows that Starbucks is in Quadrant I. Which means product categories with a strong competitive position and rapid market growth. It suggests that Starbucks had a good opportunity to do market expansion and product development.
QSPM Matrix
Quantitative Strategic Planning Matrix is helpful to use in incorporation with several of the previous graphs in order to find the best strategy for Starbucks. It consists of three stages that are used in the strategies formulation process. Also, this matrix incorporate other internal and external factors to make the best strategic business plan for Starbucks. Another advantage this matrix holds is that this framework fuses inward and outside variables, with the outcomes appeared from whatever is left of the grids all in all, which gives exceptionally exhaustive and full information.
Another advantage this network holds is that this framework fuses inward and outside variables, with the outcomes appeared from whatever is left of the grids all in all, which gives exceptionally exhaustive and full data. The consequence of this test is a score of 5.73 on the flat incorporation test, and a score of 5.63 on the related expansion test. Each of these outcomes are fundamentally the same, and high also, which recommends that these are substantial regions of center for Starbucks.
OSPP Matrix
The Optimal Strategic Performance Positioning matrix is a very useful evaluative tool for company’ performance strategic nalysis. This matrix analyzes the interrelation of four variables. These are strategic posture, strategic investment, future competitive position and future industry prospects. This matrix can help Starbucks to determine their position in the industry.
As the follow graph, it can tell that there are 4 zones. For Starbucks, the environmental turbulence level is relatively low. This is good for Starbucks as they are responsive to change. The result of this matrix, it shows that Starbucks are in Zone 1. Which means recommended strategies for Starbucks is market penetration, market development, and product development. [Show Less]