1. INTRODUCTIONSTARBUCKS IS AN AMERICAN COFFEE COMPANY AND COFFEE HOUSE CHAIN.STARBUCKS WAS FOUND IN SEATTLE,WASHINGTON IN 1971. THIS STORE WAS OPENED BY THREE PARTNERS I.E BOWKER,BALDWIN AND SIEGL.THESE 3 PARTNERS WERE INSPIRED BY ONE OF THE LEADING COFFEE ENTERPRENEUR NAMELY ALFRED PEET.THE STARBUCKS MISSON STATEMENT IS : TO INSPIRE AND NURTURE THE HUMAN SPIRIT – ONE PERSON,ONE CUP AND ON NEIGHBOURHOOD AT A TIME.STARBUCKS IS CONSIDERED AS THE MAIN REPRESENTATIVE OF “SECOND WAVE COFFEE” INITIALLY DISTINGUISHING ITSELF FROM OTHER COFFEE SERVING VENUES BY ITS TASTE,QUALITY AND CUSTOMER EXPERIENCE WHILE POPULARIZING DARKLY ROASTED COFFEE.
STARBUCKS SERVE HOT AND COLD DRINKS,WHOLE-BEAN COFFEE AS VIA,ESPRESOO ETC. STARBUCKS HAS NOMINATED AS ONE OF THE LARGEST COFFEE HOUSES ALL OVER THE GLOBE.IT HAS APPROXIAMATELY 21,000 PLUS STORES LOCATED IN 61 COUNTRIES ALL OVER THE WORLD.THE KEY SUCCESS OF STARBUCKS IS BECAUSE OF ITS EMBRACED DIVERSITY,APPLYING HIGH STANDARDS IN OPERATIONS,TO PORTRAY RESPECT AND INTERGRITY,TO RECOGNIZE THE LEVEL OF PROFIT EARNED AND ALSO TO CONTRIBUTE TOWARDS THE ENVIRONMENT.STARBUCKS IS A SINGLE COFFEE SHOP THAT DOES NOT HAS A SINGLE DIRECT COMPETITOR.
STARBUCKS HAS FACED CERTAIN DIFFICULTIES, IT HAS BEEN ACCUSSED OF SELLING UNHEALTHY PRODUCTS AND HAS BEEN THE TARGET OF MULTIPLE CONTROVERSIES.STARBUCKS HAS A WELL ESTABLISHED FUTURE IN ALL PARTS OF GLOBE WAS DUE TO THE STRATEGIC DECISION MADE TO MOVE AND EXPAND ITS STORES.2. PESTEL- PESTEL ANALYSIS IS A FRAME WORK OR TOOL USED BY MARKETERS TO ANALYSE OR MONITOR THE MACRO ENVIRONMENTAL FACTORS (EXTERNAL MARKETING ENVIRONMENT) THAT HAVE AN IMPACT ON THE ORAGANISATION.THIS TOOL IS MAINLY USED WHEN STARTING A NEW BUSINESS OR ENTERING A FOREIGN MARKET.IT IS OFTEN USED WITH OTHER ANALYTICAL BUSINESS TOOLS SUCH AS THE SWOT ANALYSIS AND PORTERS FIVE FORCES TO GET A CLEAR UNDERSTANDING OF A SITUATION AND ALSO RELATED INTERNAL AND EXTERNAL FACTOR.
2.1 PESTEL STANDS FORA.POLITICALB.ECONOMICC.SOCIALD.TECHNOLOGICALE.ENVIRONMENTALF.
LEGALA. POLITICAL – POLITICAL FACTORS IS ALL ABOUT HOW AND TO WHAT DEGREE A GOVERNMENT INTERVENCES IN THE ECONOMY OR A CERTAIN INDUSTRY.POLITICAL FACTOR INCLUDE GOVERNMENT POLICY,POLITICAL STABILITY OR INSTABILITY,CORRUPTION,FOREIGN TRADE POLICY,TAX POLICY,LABOUR LAW, ENVIRONMENTAL LAW,TRADE RESRTICTIONS.CONSIDERING THE ABOVE LIST IT IS CLEAR THAT POLITICAL FACTORS OFTEN HAVE AN IMPACT ON ORAGANISATIONS AND HOW THEY DO BUSINESS.THE GOVERNMENT MAY ALSO HAVE PROFOUND IMPACT ON NATION’S EDUCATION SYSYTEM,INFRASTUCTURE AND HEALTH REGULATIONS.B.
ECONOMIC – ECONOMIC FACTORS ARE DETERMINANTS OF A CERTAIN ECONOMY’S PERFORMANCE THAT DIRECTLY IMPACTS A COMPANY AND HAVE RESONATING LONG TERM EFFECTS.FACTORS INCLUDE ECONOMIC GROWTH,INTEREST RATES,EXCHANGE RATES,EMPLOYMENT OR UNEMPLOYMENT RATES,INFLATION RATE,DISPOSABLE INCOME OF CONSTUMERS,BUSINESS AND SO ON.ECONOMIC FACTORS GREATLY AFFECT HOW BUSINESS OPERATES AND MAKES DECISIONS.C. SOCIAL – SOCIAL FACTORS ARE ALSO KNOWN AS SOCIAL CULTURAL FACTORS.THESE FACTORS INVOLVES SHARED BELIEFS AND ATTITUDES OF THE POPULATION.
MAINLY FOCUS ON SOCIAL ENVIRONMENT AND EMERGING TRENDS.THESE FACTORS INCLUDE:1. POPULATION GROWTH2. AGE DISTRIBUTION3 .HEALTH CONSIOUSNESS4. CAREER ATITUDES5. SAFETY EMPASIS6.
LIFESTYLE ATITUDES7. CULTURAL BARRIERS ETCTHESE FACTORS ARE OF PARTICULAR INTEREST AS THEY HAVE A DIRECT EFFECT ON HOW MARKETERS UNDERSTAND CUSTOMERS AND WHAT DRIVES THEM.FIRMS OR ORGANISATIONS ARE LIKELY TO SUCCED IF THEY CAN ADAPT PRODUCTS AND SERVICES TO PREVALENT SOCIOCULTURAL CONDITIONS.D. TECHNOLOGICAL FACTORS – TECHNOLOGICAL FACTORS CONSIDER THE RATE OF TECHNOLOGICAL INNOVATION AND DEVELOPMENT THAT COULD AFFECT A MARKET OR INDUSTRY.HENCE FIRMS MUST FOCUS AND STAY ON TOP OF TECHNOLOGICAL CHANGES TO REMAIN COMPETITIVE IN THEIR PRODUCTS AND SERVICES.TECHNOLOGICAL FACTORS AFFECT MARKETING AND THE MANAGEMENT IN DISTINCT WAYS:NEW WAYS OF DISTURBUTING GOODS AND SERVICESNEW WAYS OF PRODUCING GOODS AND SERVICESNEW WAYS OF COMMUNICATING WITH TARGET MARKETSIT CREATES OPPORTUNITES FOR NEW PRODUCTS AND PRODUCT IMPROVEMENTS IN TERMS OF MARKETING AND PRODUCTION.
IT ALSO HELPS TO UNDERSTAND LEVEL OF INNOVATION,TECHNOLOGICAL AWARENES,TECHONOLOGICAL INCENTIVES ETC.E. ENVIRONMENTAL – ENVIRONMENTAL FACTORS RELATE TO THE INFLUENCE WEATHER AND CLIMATE,ENVIRNOMENTAL POLICIES,CHANGES IN TEMPERATURE CAN CAUSE VARIOUS IMPACT ON MANY INDUSTRIES INCLUDING FARMING,TOURISM AND INSURANCE.ENVIROMENTAL FACTORS HAVE BECOME IMPORTANT DUE TO THE INCREASING SCARCITY OF RAW MATERIALS,POLLUTION TARGETS,DOING BUSINESS AS AN ETHICAL AND SUSTAINABLE COMPANY,CARBON FOOTPRINTS TEARGETS SET BY GOVERNMENTS(THIS IS A GOOD EXAMPLE WERE ONE FACTOR COULD BE CLASSIFIED AS POLITICAL AND ENVIRONMENTAL AT THE SAME TIME).DUE TO GLOBAL WARMING AND WITH GREATER ENVIRONMENTAL AWARENESS THIS EXTERNAL FACTOR IS BECOMING A SIGNIFICANT ISSUE FOR FIRMS TO CONSIDER.
F. LEGAL – LEGAL FACTORS INCLUDE HEALTH AND SAFETY,EQUAL OPPORTUNITIES,ADVERTISING STANDARDS,CONSUMER RIGHTS AND LAWS,ANTITRUST LAW,COPY RIGHT AND PATENT LAWS,FUTURE LEGISLATION AND COMPETATIVE LEGISLATION TDISCRIMINATION LAWS,LABELLING AND PRODUCT SAFETY.COMPANIES OR ORAGANISATIONS MUST UNDERSTAND WHAT IS LEGAL INORDER TO TRADE SUCCESSFULLY.
IF AN ORAGANISATION TARDES GLOBALLY THIS BECOMES A VERY TRICKY AREA TO GET RIGHT AS EACH COUNTRY HAS ITS OWN SET OF RULES AND REGULATIONS.2.2 IMPACT OF PESTEL ON THE STARBUCKS:A. POLITICAL FACTORS – POLITICAL FACTORS HAVE A DEEP IMPACT ON STARBUCKS SALES AND IT IS AFFECTED DIRECTLY OR INDIRECTLY.
THE KEY POLITICAL IMPERATIVE STARBUCKS FACES IS THE CONCERN OVER SOURCING OF ITS RAW MATERIALS THAT HAS ATTRACTED THE ATTENTION OF THE POLITICIANS IN THE WEST AND IN THE COUNTRIES FROM WHERE IT SOURCE ITS RAW MATERIAL.THIS REASON MADE STARBUCKS KEEN ON ADHERING TO SOCIAL AND ENVIRONMENTAL NORMS AND TO FOLLOW SOURCEING STRATEGIES THAT ARE APPROPRIATE AND IN CONFORMANCE TO THE FAIR TRADE PRACTICES THAT HAVE BEEN APPROVED UPON BY GLOBAL COOPERATIONS AND THE GOVERNMENT DEVELOPING.ANOTHER POLITICAL ISSUSE WHICH STARBUCKS FACES IS THE REGULATORY PRESSURES WITHIN ITS HOME MARKET IN THE UNITED STATES BECAUSE OF GREATER SCRUNITY OF THE BUSINESS PROCEESS THAT MULTINATIONALS BASED IN US ARE SUBJECTED TO.STARBUCKS ALSO NEED TO FOLLOW THE LAWS AND REGULATIONS IN THE COUNTRIES FROM WHERE STARBUCKS BUYS THE RAW MATERIAL.ACTIVISM AND INCREASED POLITICAL AWARENESS IN DEVEOPING COUNTRIES HAVE MADE THIS ESSENTIAL.SOME OTHER FACTORSTO CONSIDER ARE TAX POLICYEMPLOYMENT LAWSB. ECONOMIC – THE FOREMOST EXTERNAL ECONOMIC FOR STARBUCKS IS THE ONGOING GLOBAL ECONOMIC RECESSION WHICH AS EXPLAINED IN THE INTRODUCTION HAS DENTED THE PROFITABILITY OF MANY COMPANIES.THIS HAS CONVINCED BUYERS TO SHIFT TO CHEAP ALTERNATIVES.
AS THEYY DID NOT QUIT BUYING COFFEE,STARBUCKS SHOULD SEEK AN OPPORTUNITY HERE.THE COMPANY HAS TO DEAL WITH RISING LABOR AND OPERATIONAL COSTS.THE INFLATIONARY ENVIRONMENTAND FALLING PROFITABILITY IS CAUSING A LOT OF STRESS.SOME OTHER FACTORS WHICH AFFECT STARBUCKS ARE:LOCAL CURRENCY EXCHANGE RATESLOCAL ECONOMIC ENVIRONMENT IN DIFFERENT MARKETSTAXATION LEVELINTEREST RATES AND INFLATIONC. SOCIAL – STARBUCKS CAN OFFER CHEAPER ALTERNATIVES,IT HAS TO DO IT WITHOUT SACRIFICING ITS QUALITY AND THIS IS THE KEY SOCIO CULTURAL CHALLENGE THAT THE COMPANY FACES AS IT EXPAND ITS CONSUMER BASE TO INCLUDE THE CONSUMERS FROM THE LOWER AND THE MIDDLE TIERS OF THE INCOME PYRAMID.THE “GREEN” AND “ETHICAL CHIC” CONSUMERS ARE ALSO CONCERNING.THEY FRET ABOUT SOCIAL AND ENVIRONMENTAL COSTS OF THE BRANDS.STARBUCKS HAS TO BE AWARE OF THIS TREND.
THE OLDER GENERATION IS LIKELY TO TAPER OFF AND HENCE STARBUCKS WOULD HAVE TO LOOKOUT FOR TAPPING THE GEN X AND THE MILLENIALS AS A PART OF STRATEGY. OTHER SOCIO-CULTURAL FACTORS TO FOCUS ON ARE:CHANGING FAMILY PATTERNSCONSUMER PREFERENCESCHANGING WORK PATTERNSTHE LEVEL OF EDUCATION OF THE POPULATION IN LOCAL MARKETSCHANGING VALUES AMONG POPULATIOND. TECHONOLOGICAL – STARBUCKS IS IN A GOOD POSITION TO ENJOY BENEFITS OF THE EMERGING MOBILE WAVE.STARBUCKS HAS TIED UP WITH APP BASED DISCOUNT COUPONS IS HELPING IT RIDE THE MOBILE WAVE EASILY.IT IS AN ERA OF TECHNOLOGY AND TECHNOLOGICAL FACTORS AFFECT THE PROFITABILITY OF ANY BUSINESS.THE COMPANY INTRODUCED WIFI CAPABILITIES IN ITS OUTLETS ALREADY.
INTERNET IS IMPORTANT TO THE CONSUMERS.THEY CAN NOW SURF THE WEB AND DO WORK WHILE SIPPING STARBUCKS COFFEE.THIS IS ADDED VALUE TO THE BRAND.IT HAS ALSO FOCUSED ON DIGITAL INNOVATION TO DRIVE BUSINESS,IT HAS LAUNCHED MOBILE ORDER AND PAY FEATURE.
OTHER TECHNOLOGICAL FACTORS ARE EMERGENCE OF INNOVATIVE TECHNOLOGYDEVELOPMENTS IN AGRICULTUREBIOTECHNOLOGICAL DEVEOLPMENTSE. ENVIRONMENTAL – THE MORE ENVIRONMENTALLY RESPONSIBLE A BRAND IS HIGHER IS ITS POPULARITY AND THE BETTER IS ITS BRANDS.SUCH BRANDS OBTAIN HIGHER LOYALTY FROM THEIR CUSTOMERS.STARBUCKS HAS ALSO MADE SIGNIFICANT INVESTMENT IN ENVIRONMENTAL INITIATIVES.IT IS WORKING TO BRING ALL ITS STORES TO LEED BUILDING STANDARDS AND TO APPROACH THEIR DESIGN AND MAINTAINENCE IN A MANNER THAT IS INCLUSIVE OF ITS ENVIRONMENTAL EFFICIENCY GOALS.
IT IS ALSO WORKING TO SHRINK ITS ENVIRONMENTAL FOOTPRINT BY INCREASING RECYCLING AND BY REDUCING THE WASTE RELATED TO CUPS AND OTHER TYPES OF PACKAGING.IT ALSO FOCUSES ON WATER AND ENERGY CONSERVATION.ANOTHER IMPORTANT AREA WHERE ITS ENVIRONMENTAL INITIATIVES ARE FOCUSED IS CLIMATE CHANGE.IT IS HELPING FARMERS MITIGATE THE EEFECT OF CLIMATE CHANGE ON AGRICULTURE.OVERALL IT HAS INVESTED SIGNIFICANTLY IN ENVIRONMENT RESPONSIBILITY AND SOCIAL RESPONSIBILITY.
F. LEGAL – LEGAL COMPLIANCE IS AN IMPORTANT REQUIREMENT FOR ANY BUSINESSES.HOWEVER,THER SITUATION IS MORE COMPLEX FOR THE ONES OPERATING IN THE GLOBAL ENVIRONMENT.
SUCH COMPANIES ARE FACED WITH DIFFERENT LAWS IN DIFFERENT NATIONS.FROM THE TAX RATES TO THE LABOR LAWS AND OTHER TYPES OF LAWS,ALL OF THEM DIFFER ACROSS NATIONS.STARBUCKS IS ESPECIALLY CAUTIOUS REGARDING ETHICS AND LEGAL COMPLIANCE.IT HAS ENACTED A SPECIAL BUSINESS ETHICS AND COMPLIANCE PROGRAM THAT FOCUSES ON TRAINING THE EMPLOYEES AT COMPLIANCE AND ETHICS.THROUGHOUT THE GLOBE WHERE ITS BUSINESS OPERATES THE COMPANY IS FOCUSED ON REMAINING COMPLIANT WITH LAW.APART FROM IT,THE FOCUS IS ALSO ON NON DISCRIMINATION AND EQUAL TREATMENT OF ALL THE EMPLOYEES.WHILE IT REDUCES THE CHANCES OF LEGAL HASSLES,IT ALSO HELPS THE BUSINESS OPERATE FAIRLY AND CREATE A BETTER BRAND IMAGE.3.
PORTER’S 5 FORCES PORTER’S FIVE FORCES IS A MODEL WHICH IDENTIFIES AND ANALYZES FIVE COMPETITIVE FORCES THAT SHAPE EVERY INDUSTRY,IT HELPS IN DETERMINING AND INDUSTRY’S WEAKNESS AND STRENGTHS.IT IS ALSO USED TO IDENTIFY AN INDUSTRY’S STRUCTURE TO DETERMINE COOPERATE STRATEGY,PORTER’S MODEL CAN BE APPILIED TO ANY SEGMENT OF THE ECONOMY TO SEARCH FOR PROFITABILITY AND ATTRACTIVENESS.A.
COMPETITIVE RIVARLY IN THE INDUSTRY – THIS AREA EXAMINES HOW INTENSE THE COMPETITION CURRENTLY IS IN THE MARKETPLACE,WHICH IS DETREMINED BY THE NUMBER OF EXISTING COMEPETITORS AND WHAT EACH IS CAPABLE OF DOING.RIVARLY COMPETITION IS HIGH WHEN THERE ARE JUST A FEW BUSINESSES EQUALLY SELLING A PRODUCT OR SERVICE,WHEN THE INDUSTRY IS GROWING AND WHEN CONSUMERS CAN EASILY SWITH TO A COMPETITORS’S OFFERING FOR LITTLE COST.RIVALRY TENDS TO BE ESPECIALLY FIERCE IF:COMPETITORS ARE NUMEROUS OR ARE ROUGHLY EQUAL IN SIZE OR MARKET POSITION.INDUSTRY GROWTH IS SLOWFIRMS HAVE DIFFERING GOALS,DIVERSE APPROACHES TO COMPETING OR LACK FAMILARITY WITH EACH OTHER. WHEN RIVALRY COMPETITION IS HIGH,ADVERTISING AND PRICE WARS CAN ENSUE,WHICH CAN HURT A BUSINESS BOTTOM LINE.B. THREAT OF NEW ENTRANTS – THE FORCE EXAMINES HOW EASY OR DIFFICULT IT IS FOR THE COMPETITORS TO JOIN THE MARKET PLACE IN THE INDUSTRY.
IF AN INDUSTRY IS PROFITABLE AND THERE ARE FEW BARRIERS TO ENTER,RIVALRY SOON INTENSIFIES.WHEN THE MORE NUMBER OF ORGANISATIONS COMPETE FOR THE SAME MARKET SHARE,PROFITS BEGINS TO FALL.IT IS ESSENTIAL FOR EXISTING ORAGANISATIONS TO CREATE HIGH BARRIERS TO ENTER TO DETER NEW ENTRANTS.
THE THREAT OF NEW ENTRANTS IS HIGH WHEN:EXISTING FIRMS DO NOT POSSESE PATENTS,TRADEMARKS OR DO NOT HAVE ESTABILISHED BRAND REPUTATIONTHERE IS NO GOVERNMENT REULATIONSPRODUCTS ARE NEARLY IDENTICAL AND THERE IS LOW CUSTOMER LOYALITYC. THREAT TO SUBSTITUTE NPRODUCTS OR SERVICES – THIS FORCES IS ESPECIALLY THREATENING WHEN BUYERS CAN EASILY FIND SUBSTITUTE PRODUCTS WITH ATTRACTIVE PRICES OR BETTER QUALITY AND WHEN BUYERS CAN SWITCH FROM ONE PRODUCT OR SERVICE TO ANOTHER WITH LITTLE COST.TECHNOLOGICAL ADAVANCES CAN LEAD TO THE DEVEOLPMENT OF NEW PRODUCTS THAT SUBSTITUTE EXISTING ONES.
D. BARGAINING POWER OF SUPPLIERS – STRONG BARGAINING POWER ALLOWS SUPPLIERS TO SELL HIGHER PRICED OR LOWEER QUALITY RAW MATERIALS TO THEIR BUYERS.THIS DIRECTLY AFFECTS THE BUYING FIRM’S PROFITS BECAUSE IT HAS TO PAY MORE FOR MATERIALS.SUPPLIERS HAVE STRONG BARGAINING POWER WHEN:THERE IS FEW SUPPLIERS BUT MANY BUYERSFEW SUBSITITUTE RAW MATERIALS EXISTSUPPLIERS HOLD SCARE RESOURCESSUPPLIERS ARE LARGECOST OF SWITCHING RAW MATERIALS IS ESPECIALLY HIGHWHEN THERE IS NO SATISFACTORY SUBSTITUTESE. BARGAINING POWER OF CUSTOMERS – THE BARGAINING POWER OF A CUSTOMERS INCREASES WHEN THEY PURCHASE A LARGE SHARE OF THE FIRMS OUTPUT,THE PRODUCT IS IMPORTANT TO THEM,CLOSE SUBSTITUTES ARE READILY AVAILABLE,AND THE PRODUCT IS RELATIVELT STANDARDIZED.BARGAINING POWER OF A CUSTOMER IS ALSO REFFERED AS THE MARKET OF OUTPUTS,THE ABILITY OF CUSTOMERS TO PUT THE FIRM UNDER PRESSURE,WHICH ALSO PRESSURE,WHICH ALSO AFFECTS THE CUSTOMER’S SENSITIVITY TO PRICE CHANGES.FIRMS CAN TAKE MEASURES TO REDUCE BUYER POWER,SUCH AS IMPLEMETING A LOYALITY PROGRAM.BUYER’S POWER IS HIGH IF BUYERS HAVE MANY ALTERNATIVES.
POTENTIAL FACTORS –BUYERS CONCENTRATION TO FIRM CONCENTRATION RATIOBUYERS INFORMATION AVIALABILITYBUYERS SWITCHING COSTDEGREE OF DEPENDING UPON EXISTING CHANNELS OF DISTRIBUTIONBUYERS CONCENTRATION TO FIRM CONCENTRATION RATIO3.2 IMPACT OF PORTER’S FIVE FORCES ON STARBUCKSA. COMPETITIVE RIVALRY IN THE INDUSTRY – STARBUCKS FACES MODERATE TO HIGH FORCE OF COMPETITIVE RIVALRY OR COMPETITION IN THE FOOD SERVICE AND COFFEE HOUSE INDUSTRIES.THE LARGE NUMBER OF FIRMS IS AN EXTERNAL FACTOR THAT INTENSIFIES COMPETITIVE RIVALRY.THE ENTRY AND THE EXIT BARRIERS ARE SMALL.
THE MAIN FACTOR THAT MODERATES THE COMPETITION FOR STARBUCKS IS ITS MARKET SHARE.IT HAS THE HIGHEST MARKET SHARE FOLLOWED BY DUNKIN AND McCAFE. HOWEVER THE PREMIUM QUALITY AND PRODUCT BASED DIFFERENTIATION THAT STARBUCKS USES ALSO GIVE SOME EDGE OVER ITS COMPETITORS.HOWEVER, THE INDUSTRY HAS MATURED AND GROWTH RATE HAS MODERATED AS A HIGH NUMBER OF PLAYERS ARE COMPETITING FOR MARKET SHARE.STILL OVERALL THERE IS ALWAYS SPACE IN THIS INDUSTRY FOR NEW PLAYERS,WHICH ADDS TO THE INTENSITY OF COMPETITION IN IT.
THIS ANALYSIS SHOWS THAT STARBUCKS HAS BEEN ABLE TO MODERATE THE COMPETITIVE THREAT AGAINST IT BASED ON PREMIUM QUALITY OF ITS PRODUCTS AS WELL AS QUALITY OF CUSTOMER SERVICE.APART FROM IT,THE GLOBAL COFFEE BRAND HAS EXCELLENTLY MANAGED ITS SUPPLY CHAIN WHICH HAS REDUCED THEIR BARGAINING POSITION.STARBUCKS HAS ACQUIRED SOME EXCELLENT COMPETENCIES AND BUILT A STRONG BRAND THAT GIVES IT A COMPETITIVE ADAVANTAGE IN THE INDUSTRY.B. THREAT OF NEW ENTRANTS – THREAT OF NEW ENTRANTS FOR STARBUCKS IS MODERATE.THE BARRIERS ARE NOT VERY HIGH AND THE INTIAL INVESTMENT TO START A COFFEE BRAND IS NOT HIGH EITHER.
NEW ENTRANTS CAN COMPETE WITH BRANDS LIKE STARBUCKS AT LOCAL LEVEL.HOWEVER THE POSSBILITY OF BEING SUCCESSFUL REMAINS LOW TO MODERATE.STARBUCKS HAS A GRABBED A LARGE MARKET SHARE BASED ON ITS INFRASTRUCTURE, EFFICIENCY AND PRODUCT QUALITY.STILL,SWITCHING COSTS BEING LOW,THE NEW BRANDS CAN ATTRACT CUSTOMERS USING LOWER PRICES.SO THE THREAT OF NEW ENTRANTS REMAINS.
HOWEVER,IT GETS MITIGATED TO A LARGE EXTENT BY BRAND IMAGE,MARKET SHAREAND OTHER FACTORS LIKE LOYALITY. AN IMPORTANT FACTOR THAT GIVES THE STARBUCKS BRAND A COMPETITIVE EDGE IS ITS ACCESS TO RAW MATERIALS AND SUPPLIERS.THE THREAT HAS INCREASED TO SOME LEVEL DUE TO THE ENTRY OF McDONALDS IN THE LINE THROUGH McCAFE.C. THREAT OF SUBSTITUTE PRODUCTS OR SERVICES – THE NUMBER OF SUBSTITUTE PRODUCTS FOR THE STARBUCKS BRAND COFFEE IS HIGH.
FROM JUICES TO TEA AND ALCOHOLIC AS WELL AS NON ALCOHOLIC BEVERAGES THERE ARE SEVERAL SUBSTITUTES AVAILABLE IN THE MARKET.THERE ARE PUBS AND RESTAURANTS THAT PROVIDE BOTH GOOD AMBIENCE AND QUALITY PRODUCTS.ANOTHER SOURCE OF THREAT IN THIS AREA ARE THE HOME MADE PRODUCTS THAT THE CONSUMERS CAN MAKE AT HOME.APART FROM IT THE SWITCHING COSTS ARE NEGLIGIBLE.
THESE ALL FACTORS MAKE SUBSTITUTE A MODERATE TO BIG THREAT.STILL,THERE ARE SOME FACTORS THAT MODERATE THIS THREAT TO SOME EXTENT.APART FROM THE PREMIUM QUALITY COFFEE,EXCELLENT CUSTOMER SERVICE AND A GREAT AMBIENCE,STARBUCKS ALSO SELLS PREMIUM PACKAGED COFFEE AND COFFEE MAKERS.PREMIUM QUALITY AND BRAND LOYALTY MODERATE THE THREAT OF SUBSTITUTE TO SOME EXTENT.
D. BARGAINING POWER OF SUPPLIERS – SUPPLIERS CAN EXERT ONLY LOW TO MODERATE PRESSURE TO STARBUCKS.THE BRAND HAS ITS OWN SUPPLIER DIVERSITY POLICY THAT IT USED TO SELECT THE SUPPLIERS.ETHICAL SOURCING IS ANOTHER MAJOR POLICY AT STARBUCKS.THE BRAND SOURCES COFFEE ETHICALLY FROM SEVERAL PARTS OF THE WORLD.
IT IS ALSO GROWING WITH COFFEE FARMERS DIRECTLY THAT HAS HELPED IT GAIN HIGHER CONTROL OVER ITS SUPPLY CHAIN.IT ELIMINATED THE MEDITATORS AND STARTED SOURCING FROM THE FARMERS DIRECTLY.STARBUCKS HAS DEVELOPED GREAT RELATIONSHIPS WITH BOTH TEA AND COCOA FARMING COMMUNITES TO EDUCATE THEM,ABOUT BETTER COCOA FARMING PRACTICES AND TO HELP THEM DERIVE MAXIMUM PROFITS FROM IT.ALL OF THIS HAS WORKED TO REDUCE THE CLOUT OF THE MEDITATORS AND THE SUPPLIERS.MOREOVER,THE NUMBER OF SUPPLIERS IS HIGH AND STARBUCKS HAS PLENTY OF ROOM TO EXERCISE CHOICE.
SO ITS EXCELLENT SUPPLY CHAIN MANAGEMENT IN THE LAST DECADE HAS REDUCED THE BARGAINING POWER OF SUPPLIERS AND BROUGHT IT LOW.E. BARGAINING POWER OF CUSTOMERS – THE BARGAINING POWER OF BUYERS IN CASE OF STARBUCKS IS MODERATE TO LOW.THE SIZE OF INDIVIDUAL PURCHASES IS SMALL AND SO SINGLE BUYERS DO NOT HOLD ENOUGH INFLUENCE.
APART FROM IT THE COFFEE BRAND HAS A DIVERSE CUSTOMER BASE.ITS CUSTOMERS ARE MAINLY QUALITY SENSTIVE AND WILLING TO PAY HIGHER PRICES FOR PERMIUM QUALITY PRODUCTS.STILL, THE PRICES CANNOT BE EXCESSIVELY HIGH BECAUSE CUSTOMERS WATCH FOR SUCH TRENDS WOULD START SWITCHING.MOREOVER,THE PRODUCT MIX OF STARBUCKS IS DIVERSE.
4. STRATEGIC RECOMMENDATIONS – RECOMMENDATIONS FOR FURTHER GROWTH OF STARBUCKS ONE WAY IS TO INCREASE INTERNATIONAL EXPANSION : THE FIRST AND FOREMOST RECOMMENDATIONS FOR STARBUCKS WOULD BE TO INCREASE ITS EXISTENCE IN INTERNATIONAL COUNTRIES( EXCLUDING UNITED STATES OF AMERICA).AGGRESSIVE MARKETING STRATEGIES SHALL BE FOLLOWED AT STARBUCKS TO EXPAND ITS OPERATIONS.STARBUCKS SHALL TRY TO REDUCE ITS MARKETIG STRATEGIES IN US.AS IT HAS ENTERED THE MATURED STAGE OF PRODUCT LIFE CYCLE.
BECOME ENVIRONMENT FRIENDLY : MANY EFFORTS HAVE BEEN MADE BY STARBUCKS TO IMPROVE THEIR IMAGE AS A ENVIRONMENT FRIENDLY STORE:STILL THERE IS SCOPE FOR FURTHER IMPROVEMENTS.SOME OF THE WAYS WHICH SHALL BE FOLLOWED BY STARBUCKS TO BECOME AN ENVIRONMENT FRIENDLY STORE WOULD BE TO RECYCLE THE PORCELAIN CUPS,ENCOURAGE THE CUSTOMERS NOT TO WASTE THE FOOD PRODUCTS AND RECYCLE THE PLASTIC STARBUCKS CARDS.CONTINOUS IMPROVEMENTS IN THE COFFEE :IT WOULD BE AN IMPORTANT TASK FOR STARBUCKS TO CONTINUALLY IMPROVE THE TASTE OF THE COFFEE.IN ORDER TO IMPROVE THE QUALITY OF COFFEE,STARBUCKS SHALL ANALYZE ITS BREWING SYSTEMS ON TIMELY BASIS AND CONSIDER RENOVATIONS.THEY SHALL PATENTS AND COPYRIGHT THEIR WAY OF ACCOMPLISHING THE BREWING PROCESS.
THIS WILL ADD AS A COMPETITIVE ADVANTAGE FOR STARBUCKS.TECHNOLOGICAL FRIENDLY ATMOSPHERE : STARBUCKS SHALL TRY TO BUILD A TECHNOLOGY FRIENDLY ATMOSPHERE.WITH THE RISE IN INTERNET FACILITIES AN INCREASING SHIFTS HAVE BEEN MADE FROM CONSUMER’S WORK LOCATIONS TO HOME OFFICES.STARBUCKS HAVE BE REGARDED AS A MEETING SPACE WHERE IN AN ADDITIONAL FACILITY APART FROM WIFI WOULD BE PROVIDED TO THE CUSTOMERS.
5. CONCLUSION IT IS NO DOUBT THAT STARBUCKS IS ONE OF THE MOST SUCCESFUL COMPANY IN THE WORLD.THEY USED A SIMPLE STRATEGY,CONNECTING LINKS BETWEEN TREATING EMPLOYEES WITH DIGNITY AND RESPECT AND PRODUCING A GOOD PRODUCT AND SERVICES.THAT WAS THE MAJOR FACTORS THAT DIFFERENTIATE STARBUCKS FROM OTHERS AND BRING THE SUCCESSFUL TO STARBUCKS.THE FUTURE OF STARBUCKS,WHICH IS IN A FAST GROWTH PHASE,IS APPARENTLY TO BE SUCCESFULL AND PROMISING.DEFENDING AND GROWING A COMPETITIVE POSITION REQUIRES FIRMLY BUILT STRATEGIES BASED ON ITS UNIQUE,VALUABLE AND LEADING CAPABILITIES AND RESOURCES,RATHER THAN THE PRODUCTS AND SERVICES THEMSELVES,PROACTIVELY RESPONDING TO EVER CHANGING INTERNAL AND EXTERNAL ENVIRONMENT TO KEEP FENDING OF ITS COMPETITORS.ALTHOUGH CURRENTLY THERE IS NO FORMIDABLE COMPETITORS FOR STARBUCKS LEADERSHIP IN BOTH INTERNATIONAL AND DOMESTIC MARKETS,IT SHOULD NOT TAKE IT FOR GRANTED FOR GOOD.TOMORROW’S DESTINY OF STARBUCKS SHOULD DEPEND ON ITS STRATEGIC CAPABILITY TO PRESERVE AND SUSTAIN ITS STRENGTH ,OFFSET WEAKNESS,AVOIDS THREATS AND CAPATILIZE ON OPPORTUNITIES.IF STARBUCKS WOULD CORRECTLY IDENTIFY AND DEAL WITH THE ISSUES UNDER CURRENT AND NEAR FUTURE CIRCUMSTANCES,IT COULD REMAIN EXICTED ABOUT FURTHER GROWTH AND CONTINUES TO BE PROSPEROUS.REFERENCESArticlePorter M.E (2008).’The Five Competitive Forces That Shape Strategy, ‘ Harvard Business review’Books,JournalsBartol ,K.,; Tein , Metthews ,G.,Sharma,B.,; Scott-land,B(2011).Management :A Pacific Rim Focus 6e.Australia.McGraw Hill Pty LtdDavid F.and David ,F.R.,2016.Strategic Management ;A Competitive Advantage Approach,Concepts and Cases.Gomez-Mejia,L ; Balkin, D.(2011) Management :International Edition .Pearson Education Inc.Robbins,P.S.,; DeCenzo,A.D.,; Coulter,m.(2011).Fundamentals of management :Global Edition.Pearson Education Inc.Rotharemal,F.T.;(2015),Strategic Management,McGraw-Hill
