The aim of this paper is to discuss about the Strategic Management of Starbucks and to know about the internal and external factors of the company. It further discussed about the SWOT Analysis and recommended some important terms that can be implemented by the company. It is then concluded that that brand name is one of the major strengths, whereas, premium pricing act as a major weakness for the company.
Strategy Management is a way of management that is followed in an organisation to reach towards a goal and objective. It also includes to analyse the internal environment, the competitive environment, evaluate strategies and many more. (Stewart, 2020) This paper will focus mainly on the internal and external factors, the PEST framework also about SWOT analysis of Starbucks. This will further elaborate on identifying the threats and opportunities of the organization.
Hence, this paper will discuss on the Strategy Management that is followed by Starbucks and also it will also suggest about some future modification that they can add on to the organisation.
An overview of the Organisation- Starbucks is a global chain of roastery reserves and coffeehouse, the headquarter of Starbucks is in Seattle, Washington. Starbucks café is famous in almost every part of the world and it therefore unlocked its doors to Australia on 2000 and opened the first store in Sydney CBD.
Posters 5 Forces: – (Geereddy, 2020)
- Supplier Power: It is the control amount that a vendor of goods or services can apply on the buyers. It is connected by the capacity of vendors to boost their prices, reduce their quality, or restrict the amount of goods they will sell, but the Bargaining Power of Suppliers of Starbucks is low to medium. Since, Starbucks directly source cocoa from the farmers it removes the need of a mediator which support both Starbucks and farmer to be profitable in the trade. This helps Starbucks to bring down the bargaining power of the supplier.
- Competitive Revelry: It analyses the number and power of your competitors. Where rivalry gets extreme then companies draws customers with price cuts and huge-impact marketing crusade. The force of competitive rivalry of Starbucks is medium to high. Since, competition for market participation is high and there exist a monopolistic competition in the industry. As Starbucks has the highest market share followed Dunkin and McCafé and the premium quality product which Starbucks provides have some advantage over the competitors.
- Buyer Bargaining Power: It refers to the stress that customers can apply on the companies to make them provide better client service, better quality products and lower prices. Buyers Bargaining Power is one of the strengths that frames the competitive structure of a business. The Buyers Bargaining Power in case of Starbucks is medium to low. Though, single customers do not have enough influence but they are quality conscious and ready to pay premium price for quality products. Based on these factors the bargaining power of customers is low.
- Threat of Substitution: It refers to the probability of the buyers finding an alternative way of finding a new substitute. The Threat of Substitution in case of Starbucks is medium to high. Some substitutes that provide threat to Starbucks are: pubs, restaurants and home-made products which add up to big threats to Starbuck.
- Threat for New Entrance: The position of the marker gets affected by the capability of others to enter the market. The Threat for New Entrance in case of Starbucks is medium. As Starbucks have a good brand image and affective pricing strategies, it is difficult for a new brand to have a competitive advantage over Starbucks but still there is holds a threat with aggressive pricing.
Political Factors: The primary political factor refers to suppling the raw materials. This has gathered a lot of focus from politicians over the countries. Starbucks also needs to follow the rules and regulations of the countries from which they purchase their raw materials. Some other factors to consider are: employment policy and tax laws.
Economic Factors: The continuous global economic crisis is the main factor that effected Starbucks economically. Because of the recession the customers are convinced to transfer to low-cost alternatives. It also has to deal with increase in labour and additional expenses. Some other factors are: domestic currency exchange rates, tax level, domestic economic situation in various markets.
Socio-Cultural Factors: As already mentioned, Starbucks might give up the quality to provide cheaper products. The other factors that lead to social factors are: consumer choice, level of education among the public in domestic market, change in values within the population, change in the way of living of the population, change in working arrangements.
Technological factors: Since, at the present-day internet plays a huge role, Starbucks started to provide free wireless internet in their joints, which attracts more customers. Starbucks also facilitated cashless payments like mobile and card payments. Some other technological factors are: agricultural growth, arrival of new and innovative technologies, development in biotechnology.
The first positive factor of Starbucks is, that among all the coffee retail brands it holds the top spot in coffee retail world. Since, it has a strong financial performing capacity due to which holds a strong place in the coffee making world.
The value of the company is more then 4 billion dollar which gives it a competitive edge over the competitors. Since, it one of the largest coffee houses in the globe, the intangible assets of Starbucks symbolise the brand name and superior quality with an affordable rate it is always remembered among the customers.
Other positive factor of Starbucks is that since, it is the biggest coffee house in the globe and so its large size and volume, it can provide flexible rates that is affordable by all level of consumers like the premium along with the middle-tire. This company is also known for pioneering human resource management in the industry and the skill associated with people makes the difference between success and failure. Starbucks also creates a positive environment and provide all sorts of benefits which helps both the employees and the customers to feel delightful when they ae around.
One of the negative factors of Starbucks is, that it does not have any diversification among the services that they are providing and strongly depends on coffee beans which bring down the profitability of the brand. This fluctuates the price of coffee beans and therefore it should modify and bring some variety in the product.
Due to the non-flexibility in the price range the working consumers prefer McDonald over Starbucks for coffee. Starbucks must revamp their product line-up to compete with their competitors like McDonald and Burger King which is rapidly growing due to quick grab and bite breakfasts and other meal options.
[bookmark: _Toc59352463]Strength: The main strength of this organisation is the strong brand image that it carries and have a large global supply chain and it also made diversification through subsidiaries. The company carries loyal customers throughout the world which adds consistency to this coffee house. It also provides flexibility in the price range.
]Weakness: In this competitive market one of the main weakness that Starbucks carries is the high price point which makes it difficult for many customers to afford it. The products of this company can be easily copied which is the major drawback for the company and most of the products are very generic in nature.
Opportunities: There are many opportunities that this company can use for their advantage like expanding their business in developing markets which will help them to improve their long-term stability. There is also an opportunity of tie-ups and making alliances with different firms which will boost their overall growth in the market.
Threats: Like every other company Starbucks also faces some threats which limits them from growing and expanding their business. This threat involves local coffee sellers who sales their product at low cost and gives a tough competition to Starbucks and also there are many local coffee houses which is a major threat to Starbucks due to price advantage.
From the above discussion it can be understood that like any other company Starbucks also have some strength and weakness which includes political threat that brings obstacles for importing raw materials from other countries. Due to the global economic crisis situation Starbucks financial stability gets effected. One of the strengths is that it provides free wireless internet to the consumers which makes them more popular. The SWOT Analysis highlights that brand name is one of the major strengths, whereas, premium pricing act as a major weakness for the company.
From the above discussion it can be concluded that as any other company Starbucks have many strengths and also suffers from many weaknesses. The brand name is one of Starbucks biggest strength and the kind of services that they provide is remarkable that is the reason of Starbucks being one of the globally famous coffee houses. One of the major drawbacks is that the price rate is much higher that brings a threat to the company as the local vendors provides the same product within a cheaper price.
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