Starbucks' Strategic Analysis & Business Strategy Assignment Sample

Explore how external factors influence business strategies and evaluate potential directions for the company's growth and expansion.

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Introduction Business Strategy Management Plan Assignment

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Numerous internal and external factors affect how a company operates. The ability of the organisation to sustain a successful relationship between the company and its clients depends on the balance between these forces. Successful businesses are always very careful to adapt to environmental changes that have an impact on their operations. This study will assess a few business techniques used by a well-known company (Ferrell, Hartline and Hochstein, 2021). Additionally, this study discusses how the organization's macro environment has an impact on it. By using Porter's Five and Ansoff's Growth Matrix, it also addresses the topic of different marketing strategies. Additionally, the evaluation will look critically at the inner environment to discover the internal competences, structures, and abilities of an organisation and their "strengths" and "weaknesses."

Discussion

“LO1 analyse the impact and influence which the macro environment has on an organisation and its business strategies”.

The “macro-environment” consists of six main forces:

Demographics

Demographic features of a population include elements like “gender, occupation, sex, age, ethnicity, and growth rate”. All of these population individuality have an outcome on “business strategies”.

Economic

Every region’s economic situation has a big impact on business strategy and overall success. The people's purchasing power reduces and they expend less money throughout economic recessions or periods of increasing interest amounts (Drabik, 2022), that ultimately has an effect on a business’s accomplishment. On the other hand, people spend more money overall when the economy is doing well.

Political

The strategic business decisions made by firms are directly impacted by governmental organizations and pressure groups. Considering that political issues may limit an organization's ability to operate.

Ecological

The natural resources that are used as direct inputs for corporate activities are all governed by ecological dynamics, and their scarcity has a big impact on those operations.

Socio-Cultural

Values and societal norms make up social and cultural factors, which have an immediate effect on how people make decisions (Da Silva and Castaeda-Ayarza, 2021). “Socio-cultural” facets of the atmosphere have an effect on a firm’s capability for better properties and input supplies for the production of their delivery.

Technology

Any kind of business which wishes to expand must think about how technology might be useful. For instance, how businesses run has been significantly impacted by the advent of new technologies including the internet, smart technology, robotics, and electronic media.

PESTEL Analysis

The “PESTEL analysis” works as a reminder to “strategic management” to build choices that take into account the macro-environment to ensure that management can consider all potential opportunities and hazards (Pan et al., 2019). Macro-environment elements are grouped in strategic management to aid in the search for general sources of opportunity and risk. Any organization can search out the finest possibilities and minimize risks by utilizing PESTEL analysis.

Political Factor

In strategic management decision, Political factors have a strong influence, any organization which is working in a specific country have an impact directly on the government’s rules and regulations, amendment of government laws, government interventions, and the other actions that are concerned with the government lobby (Océane, 2020). Starbucks can change the Frappuccino ingredients to make them healthier and have a positive effect on the goal market’s thinking. By maintaining the 10% flexibility development speed over the next three years, there is market evidence that the coffee sector will quickly recover. This, by producing about $50 billion, is a positive sign for Starbucks.

Economic Factors

Economic variables like – “inflation rate”, “interest percentage”, “unemployment percentage”, skilled-to-unskilled labor ratio, exchange rates, balance of trade, plus fiscal cycle (Océane, 2020). The economy of the studied region's aggregate demand, stage of economic maturation, and investment prospects. Starbucks has locations all around the world in nations with different economic levels of development and demand patterns. Starbucks should take into account the following:

  1. The kind of economic structure in the country of function
  2. Government rules and regulations in the quarter are under revision,
  3. The constancy of currency and the rate of exchange
  4. Infrastructure services
  5. Skillful labor and the cost of work available in the area
  6. Tax constitutions of the province under learning

Social Factors

Any kind of region’s “socio-cultural” characteristics plays a big part in determining customer buying habits and local sales estimates. The requirement for goods and facilities is exaggerated through the ageing population, shifting demography, and other socioeconomic problems in the country. Shared values, opinions, and cultural norms have an impact on the best marketing approach.

The below monition social factors Star Bucks should consider:

  1. Population-level based on skills and demographics
  2. Society’s power structure, class system, and hierarchy
  3. Level of education among the population under revise
  4. The beliefs of the population over shared values and culture,
  5. Leisure concerns and attitudes

Technological factors

Technology changes affect the outline and manner of doing business in a particular context as some channels and methods turn into outmoded and are replaced by new ones. The most successful marketing channels to use in a target market to attract customers are inclined by technology. Technology has a distinct effect on various businesses and to diverse degrees. The impact of local technological developments on product offers, cost models, and value chains needs to be examined by Starbucks.

“LO2 Assess an organisation’s internal environment and capabilities”

Analysis of the “internal environment as well as strategic” potential:

McKinsey 7S Model

The replica was created for assessing every possible company situation and create a strategy in line with it. The term “7s” is used in the model, and they are defined as follows:

  1. Strategy- For the change in environment plans that the company calls into action
  2. Structure- The size, diversity, and strategy of the organization all have an effect on specialization and coordination.
  3. System- The “formal as well as informal” systems that upkeep the “strategy and structure”.
  4. Style/Culture- Over time, shared principles, “beliefs, plus norms” were visible.
  5. Staff- the group of persons the organization employs.
  6. Skills- the capacity for differentiation.
  7. Shared Values- the guiding ideals and essential concepts that form the foundation of business.

To learn, comprehend, and manage the effect of the “7S Model” on the commercial, “Star Bucks” should inspect its operations using the “7S Model”. A balance between these seven elements is achieved by a successful organization (Cox et al., 2018). Given that 150 outlets were recently closed in various countries, Starbucks needs to assess these seven structures and develop a strategy based on them. Additionally, the company's regional presence needs to be assessed. The company must take into account both system and cultural values. When creating effective plans, consideration must be given to the values and skill sets of the staff.

VRIN Framework

As per to this pattern, an industry can advance a competitive benefit if its goods are exclusive, unusual, reproducible, and unique. To gain a competitive advantage Starbucks must cultivate these four elements in its products if it wants to maintain a competitive edge over its rivals. Due to health concerns with their two products, Starbucks seldom receives return business, whereas coffee enjoys brand loyalty and strong sales (Ramdhaniet al., 2018). Coffee appears to be an appreciated, exceptional, imitable, plus non-substitutable produce. “Starbucks” needs to effort on increasing its list of options selections besides breaking into unused markets where it can be able to preserve a “modest value chain”.

“Organization’s Growth Tactics, Abilities, and skills”

There aren't several laws that, when management is actively participating and assessing the organization, are guaranteed to have a positive effect on its growth. The necessity to introduce a new menu that presents its target market with fewer health hazards and gives them confidence to make regular modifications to that menu are a few other elements that Starbucks can take into account in this situation (Chatzoglouet al., 2018).

Market penetration

Market penetration is the process of boosting an existing product's market share or assisting the establishment of a new product by a range of strategies, including bundling, publicity from frequent sources, decreasing the product's cost, or offering mass reductions. “Market share” is easily calculated and produces accurate results as it signifies the segment of all potential trades that a firm is already producing from a certain industry. It involves scaling up marketing efforts by promoting existing items that the company already offers in fresh markets; in the matter of “Starbucks”, coffee is the major existing item (Zahra, 2021). The business should enter markets it hasn't yet thoroughly explored in order to maintain its stock price. The company's goal to sustain a 1% fall in stock values on the global “stock exchange market” during this procedure must be considered by management.

Market development

Any business that wishes to expand should concentrate on the current market in its place of looking for fresh markets for its goods or facilities. The corporation aims to expose its present product to a new group of customers in an effort to increase sales. It targets customers who are not currently on its customer list. The market expansion involves entering new markets with already available goods or services (Ahmad and Ahmad, 2018). However, Starbucks closed 150 locations worldwide as a result of a decline in business. Starbucks is exempt from market development because it is already cutting back on its global store count.

Product Development

This element comprises expanding the product or service offerings within their current offering. Here, after completing a review of the company's existing condition, it would be wise for the business to add on fresh items to the menu that lean more concerning the improved range, to draw in customers who are concerned about their health risks and get them to start purchasing food. According to data from the past thirty years, the rise in continual metabolic infection in the USA has had a considerable negative impact on “social and economic” conditions (Lombardi et al., 2021). The obesity rate among adult women in the USA is alarmingly high at over 10%, with more than two-thirds of adult population members being overweight or obese.

Diversification

Adding innovative objects to new markets is division of this “strategic growth component”. Such a strategy carries a great deal of risk because it requires a thorough investigation to determine the target market's culinary preferences. When a business releases new products that have never previously interacted with existing products in its product line on the market, this is known as diversification. Because of this, this strategy is riskier for Starbucks, which has already closed underperforming locations in other markets (Anson, 2022Since the problem has already been recognized—specifically, that consumers are growing more health conscious and desire food substance that are safe for their health—such a plan is not appropriate in the instance of Starbucks in this case study.

LO3 Evaluating and applying the consequences of an analysis using Porter’s Five Forces model to a specified market area

Porter’s Five Forces Model

This model is a significant tool to understand the whole “competitive forces” at work within an organization. This can aid one to measure the attractiveness of a company or a brand and highlight the areas where one can adjust their strategy to develop profitability. This analysis uses to guide business tactics to expand competitive advantages (Bakir,Engels and Bakir, 2019).

These forces confronted by “Star Bucks” can be acknowledged by presentation of “Porters five forces”:

Competitive Rivalry-

This defines to the rivalry handled by an organization within the marketplace as an example quantity of opponents, market share of them, superiority of products and facilities obtainable by contenders. Star Bucks must assess in the markets, where it functions the rivalry faced from other competitors. This term will allow “Star Bucks” to comprehend consumer purchasing behaviour, consumer requirements and wants. The company can then utilize the power of understanding of consumer choices to form value chain as well as attain competitive benefit (Khurram,Hassan and Khurram, 2020).Advertising and marketing wars start when there is penetrating rivalry, that can’t be for a corporation's "bottom line".

Bargaining power of dealers-

The term describes the market environment, consumer demands, and source characteristics of the resources required to create the final products. The "value chain" and the customer's ability to bargain should be estimated using Star Bucks (Ferdinand and Tresyanto, 2020). This research will help Starbuck's develop effective purchasing strategies, such as creating new suppliers, buying in bulk, or purchasing from certain suppliers referred to as "business partners."

Threat of fresh entrants-

This term of force refers to the convenient and difficult factors for the competitors to join to the marketplace. If a new rival enters the market quickly, the incumbent company's risk of losing market share increases. Obstacles to entry contain “absolute rate advantages”, “access to inputs”, “economies of scale” as well as “strong brand image” (Hussein. and Muchemi, 2019). Starbucks must detect threat of alternates in markets it functions as well as populace its objectives as impending consumers. Which can be beneficial for marketing strategy and formulation of costing.

Bargaining power of consumers-

The phrase evaluates the power of bargaining of the customer and how it can impact on the the cost and product superiority (Ferdinand. and Tresyanto, 2020). This force interconnected with other competitive rivalry too. Starbucks must evaluate the power of bargaining of their consumers and the loyalty of the brand within the market where they functions, which will aid the brand to articulate suitable directed marketing plans.

Threat of substitute-

This defines alternative process which are available in market, used by the consumers to fulfil the exact requirement and the wants, which impacts directly on the “bargaining power” of the business and will come up with precise marketing tactics, which can be effective for the company(Mehjabeen, 2018).

Starbuck's may precisely tailor its marketing strategies to the features of the sector in which it operates based on the recognition and analysis of the aforementioned forces. By identifying the holes in its "value chain," this research can also help "Star Bucks" raise its competitive profitability. The analysis aids the business in dividing its plans in a way that ensures long-term "competitive advantage. Consumers' propensity to switch and switching costs, both short- and long-term, are elements that influence the danger of alternatives.

LO4 Applying models, concepts and perceptions to assist with the understanding and clarification of planned directions available to an association

As applying several models, the situation of Starbucks has been discussed above, based on the analysis some strategic plans are being formulated here.

Cost Leadership:

Cost leadership mostly means to contend on the premise of costs presented to consumers by providing top-notch deals and programmes. In this industry, minimum margins are required, and the product's pricing is a defining feature (Chen et al., 2018).

Differentiation:

This is an orientation to rivalry based on a unique feature that fosters competitive benefit. This kind of promotion approach is right for sectors where clients are fiercely faithful and unlikely to switch products or companies due to price inequalities (Tintara and Respati, 2020).

Cost Focus:

In a small niche market, this entails the method of grabbing the leads on a cost basis. The population being targeted is limited and has particular shopping habits.

Differentiation Focus:

This makes reference to the differentiating tactic used to gain an upper hand in a convinced specialised market. The neutral of this technique is to spread a specific population.

The most actual strategy is resolute by the directed population's preferences, purchasing habits, and company loyalty. Starbucks functions in numerous regions around the world, each with its own decorations and drifts (Tian, 2022). Starbuck's may adopt a variation of strategies for its beverages; a “cost leadership strategy” for its snacks and Frappuccino. Meal plans may be offered to Starbuck's customers. Starbucks should seek to both open up new markets and expand into existing ones.

Four components of revenue growth are outlined by the "Ansoff Growth Matrix" and are as follows:

“Ansoff Growth Matrix"

Market Penetration:

In this strategy the goal is to use aggressive marketing techniques to boost sales of current products in existing markets. This strategy is effective in developing and potential-expanding economies. Star Bucks needs to identify potential brand extension markets.

Market development:

Businesses can use their present product lines to expand into new markets utilising this strategy. This strategy works well in unexplored markets that haven't been well investigated or exploited. It's critical to enter new markets rapidly in order to get benefit (Chen, 2019).

Product development:

Introducing innovative products in an existing market is meant by this. This is akin to giving clients more menu options. For locations with room for growth, this tactic works effectively.

Diversification:

By introducing new items to the marketplace with the purpose of growing market share, the aim is to spread risk.

As said, Star Bucks can employ a market penetration strategy for some underserved markets. Such a move could increase the company's sales in underserved markets. Because of the limited menu, Starbuck's can concentrate on product innovation to give its customers more options. In order to benefit from early entry, Star Bucks can indeed work on developing new markets. To stretch out and spread its risk, Starbucks can join a totally different industry with a range of items.

Proposed plan for business Tangible and Tactical Priorities-

An organisation must set strategic goals that include measures that may be used to gauge real performance and analyse whether the organisation is moving closer to its objectives in order to fulfil its mission. The purposes should be “SMART” (which refers precise, quantifiable, possible, accurate, as well as time-bound). Planned success depends on the construction of a well-conceived tactic that is practically attainable as well as measured against presentation measures. Although Starbucks can set purposes for expanding into specific geographic areas, presenting healthy goods, and setting modest prices for its products, each of these objectives must also include the presentation measures which will utilized to evaluate definite success.

Strategic Objectives:

It is a difficult scenario to manage as Star Bucks is now coming up short of growth expectations, has seen a tiny decline in the value of its share, and customers who are food hygiene sensitive are unwilling to purchase two items with health risks. Due of the limited menu at Starbuck's, there is room for product development plans as well as market growth methods that can open up new markets (Jacoba, 2022). As consumers are becoming more health conscious, investing in the production of wholesome, low-calorie foods can increase sales revenue. Starbucks intends to boost sales and expand its market share in the areas where it does business. Offering cheap, low-quality products to clients who are concerned about their budgets is another option for a firm. At the time of applying in a diversity of business types, diversity through new properties and businesses may also be deliberate as a marketing and commercial expansion policy, this will aid to lower commercial risk.

Star Bucks may also take into account "vertical or horizontal" growth plans. The expenses involved with the company's inventory management can be decreased by using just-in-time and stock management techniques.

Developing new markets and going global may also be effective strategies for increasing revenue. Starbuck's offers loyalty cards to regular customers, which may then be used to get rebates on any purchases (Gao, Zhao and Chen, 2021). This may increase consumer demand for items and aid the company in achieving its expansion goals. According to the consumer behaviours in each of the markets that it serves, Starbucks needs to segment its strategy. At the same time, Starbucks has brand-loyal customers and budget-conscious customers, all of whom have different requirements that must be met in various ways.

Tactical Actions:

Daily business operations, or tactical activities, are concerned with how a company handles and manages its daily tasks, including how it carries out operations, measures performance, and keeps track of that performance.

Starbuck's needs to determine the causes of health problems with its products, manage product quality, work to lower operating costs, price its competitor prices, improve customer support, introduce feedback from customers surveys to recover presentation, lower its standard points, and accomplish day-to-day procedures skilfully.

Conclusion

In this assignment, the macro environment of the chosen organization Starbucks has been discussed the impact and influence has been analysing in parts to demonstrate. With the different framework such as demographic and social aspects PESTEL analysis has been used to demonstrate the “macro environment” to update the strategic management verdicts. After that to evaluate Starbucks internal environment and capabilities has shown with the help of “McKinsey 7S Model” and” VRIN Framework” and some other segments to prove the point. Farther in this study the outcomes of the analysis has mentioned by the support of “Porter’s Five Forces model”. Lastly, the assignment consist a complete understanding and clarification of tactical instructions accessible to Starbucks with the help of different models and theories.

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