Case Study Analysis for Starbucks Corporation †Sample Solution

Question: Describe about the Case Study Analysis for Starbucks Corporation. Answer: Introduction This assignment is about the case study analysis of the company Starbucks Corporation. It is an American coffee supply chain founded in the year of 1971 in Seattle, Washington. Jerry Baldwin, Zev Seigl and Gordon Bowker are the founder of the company. Presently the company is operating in more than 23,000 locations all over the world (Starbucks, 2016). The main products of Starbucks are Coffee beverages, baked food, tea and different types of smoothies. Total revenue of the company is US$ 19 billion (till 2015) (Starbucks, 2016). There are more than 238,000 employees, work for the company. Mission and vision statement of the company reflect the emphasis of the company on leadership in the coffee industry. Careful review of the website reveals that the vision statement of the company is to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow (Starbucks, 2016). It includes some major components like: Finest quality of coffee in the world Premier purveyance Growth Uncompromising principles The mission statement of the company is To inspire and nurture the human spirit one person, one cup and one neighborhood at a time (Starbucks, 2016). Problems and Challenges It has been found that Starbucks is one of the few organizations that continuously started to grow during the time period of 2001-2001. However, the company has to face various issues at the marketplace. For instance service quality and employee retention and motivation were the continuous problems for the company (Starbucks, 2016). It has been found that rapid expansion of the company is challenged by the fatigue of employees. It has been found that employees and store managers of the company are overworked and underpaid. Pricing is also another major issue that the company has to face in recent times. Lemus et al (2015) stated that, presently coffee industry is in crisis. Price of coffee has become lowest. For this reason, coffee companies have to improvise innovative strategies to reduce the price of their products. However, Starbucks has not lowered consumer process and depends on product differentiation. Although maintaining profitability is becoming challenging task for the com pany even taking account for the premium quality products in the coffee industry. There are various other controversies that the company has to face related with market strategy, labor disputes and opening stores without planning permission. SWOT Analysis SWOT analysis of the company given below: Strengths Financial performance of the company is considered as one of its major strengths. It helps the company to become the number one coffee company. It is valued more than $4 Billion which is major strength compared to its competitors The intangible strengths of the company is its brand value that symbolizes excellence. The company provides high quality products to customer at a reasonable price. Starbucks is known for its pioneering people management in the industry where hard skills and soft skills of people can make the difference between failure and success. Weaknesses The business performance of the company is highly dependent on its key input, which are coffee beans. In case of profitability, the company depends on the price of coffee beans. Hence, the company must need to diversify its products to reduce this type of dependence (Geereddy, 2012). The company is facing issues related with procurement practices. There are various environmental and social activists pointed out the unethical procurement practices incorporated by Starbucks in order to collect coffee beans. The company has priced its products from premium to middle range. For this reason, the company is not able to gain the market share of lower end customers. Opportunities The company has a huge opportunity to expand its market in the emerging markets of India and China. There are billions of customers in these two countries eagerly waiting to join the customer pool of Starbucks. The company also the opportunity to expand its product offerings and become a full scale food and beverage retailers like Burger king and McDonalds. Threats Rising prices of the Coffee beans is one of the major threats that the company might has to face in future (Ayub et al., 2013). Presently the company has to face intense competition from local coffeehouses and spatiality stores. Economic fluctuations, recession and saturation of US market are some common threats the company has to face in future (Yuece, 2012). Porters 5 forces Analysis Porters 5 force analysis for the company Starbucks have been given below: Competitive rivalry or competition (strong force) The company Starbucks is facing string competitive rivalry from companies like Dunkin Donuts and McDonalds and various other specialty coffee houses. Grant (2016) stated that, there are various external factors that have increased the market competition for the company. They are such as: Large number of companies Large variation of food and beverage companies Low switching cost Bargaining power of buyers or customers (strong force) It has been found that the consumers of Starbucks have strong bargaining power. There are three major external factors that have contribution to the strong bargaining power of consumers: Lower switching cost for customers Large number of product substitution available Small size of the individual buyers Bargaining power of suppliers (weak force) Suppliers of the company have lower bargaining power. There are some external factors that contribute to the weak force of bargaining power for suppliers. They are such as: High variety of the suppliers (weak force) Huge amount of overall supply (weak force) Moderate size of individual suppliers (moderate force) Threat of substitutes or substitution (strong force) Starbucks has also experienced strong threat of product substitution. Customers can easily shift to other company because there are various foods and beverage products available at local coffeehouses and restaurants. Roby (2012) mentioned that the cost of product substitution is low because customers have to pay less for the shifting process. For this reason, the company has to consider the threat of substitutes as it highest priority concerns. Threat of new entrants or new entry (moderate force) Threat of new entrants can be considered moderate for the company Starbuck. There are some external factors affected the threat of new entrants. They are such as: Moderate supply Chain cost (moderate force) Moderate cost of doing business (moderate force) High cost of brand development (weak force) VRIO analysis With the help of VRIO analysis the resources and capabilities of the company Starbucks can be assessed. They are mentioned below in the table: Resource or capability Valuable Rare Inimitable and non-substitutable Organized to exploit Impact on competitive advantage Strong Global presence Yes Yes Yes Yes Help to get sustainable competitive advantage Specialty coffees Yes No No Yes Realized competitive parity Cozy and friendly atmosphere Yes Yes No Yes Provides temporary competitive advantage Strong Global presence of the company: Starbucks is considered as the largest coffee company globally (Borza Borza, 2014). The passions of grate coffee and community connection are the main reason behind this strong global presence for the organization. Presently the company has 5,500 coffee stores in more than 50 countries (Sureerattanan, 2013). Premium coffee products: The Company offers different unique and satisfying beverages that other competitors cannot offer. The company also provides calorie information for these products in the menu. This makes the menu more appealing for different segment of customers. However these specialty coffee products are not actually rare. Companies like Dunkin Donuts and various other local coffee shops develop these types of products. Hence they are not rare. Friendly atmosphere: Cozy atmosphere is one of the major advantages of the company. It enables customers to enjoy their coffee with or without any companion. Problem Statement: Starbucks, at present is confronting a difficult choice. The question is that should the organization expand globally, or should it consider other alternatives that can enhance the profitability of the organization within its local market. Strategic Alternatives Available : Global expansion- Starbucks has so far dominated the market of the Asia Pacific, European and Latin American countries. However, in case the organization is willing to sustain itself, it must consider the wider scope of global expansion. The food retailing organizations such as McDonalds and KFC, has expanded even in the Asian countries, that has given them greater public recognition, increased consumer value and competitive advantage. Hence, it is advised that the organization adopts the global expansion strategy keeping in mind the Asian markets. Development of non-dairy product The organization can consider the possibility of introducing a variety of product alternatives, such as pumpkin spice latte or coconut milk that can help the organization gain competitive advantage within its territorial zone, without availing expansion. The organization can consider the sale of unique and innovative products that will help it capture consumer attention easily. The company Starbucks has to focus on increasing product alternatives. The company can introduce Sumatra Coconut milk. It will be a creamy and delicious alternative to the dairy beverages available at the coffee shops. This product will be made from single origin coconuts from the tropical Indonesian island of Sumatra. From various research and development activities and after adding various recipes, it has been found that it is the best alternative of Starbucks hot coffee, ice tea and Frappuccino. However, before introducing this product in the market, the company has to make appropriate market campaign about the product. It will increase customers attraction towards the new product coconut milk. It should be noted that the Americans have an unusual fascination with non-dairy products, and hence the shift in focus from the production of dairy products is being considered to be lucrative. The organization can consider focusing on the production of beverages, instead of the production of the dairy products. Innovative Promotional Strategy: The organization must adopt an innovative promotional strategy that will set it apart from the other organizations. The effective use of catchy logos, proper branding and effective PR strategies can easily help the organization gain greater reputation among the masses. Starbucks must consider the idea of segmenting the target audience, and selecting the effective strategies accordingly. The youngsters may find the concept of drinking coffee cool, and hence the organization can promote its products via advisements that the young consumers can relate to. The organization can also consider the option of providing coffee cups, at free of cost, to the selected, most loyal consumers. Implementation of the Best Alternative: The best alternative chosen is the global expansion of the organization. The organization can gain a competitive edge over the other organizations. Though the adoption of the alternative strategies can help to boost the sale of the products as well, it should be noted that global expansion will help in increasing the revenue and annual share of profit by multiple times. Besides, though the organization is highly recognized in any part of the world, yet the organization can promote the brand and goodwill of the organization, through the expansion strategy. It should be noted that its major competitors, such as McDonalds and KFC, use expansion strategy, and hence can effectively gain greater competitive advantage. Besides, the expansion strategy can also be utilized for engaging in CSR activities, if the organization intends to gain greater recognition. The company can consider setting up stores in the economically unprivileged local communities of developing countries. This action, ev en as a part of the business strategy, helps in offering a solution for social change, while promoting the goodwill of the company. Thus, the organizations engagement in the CSR strategy will help it in opening up employment opportunities for a minimum of 26 people, in each region. This will not only solve the socio-economic problems plaguing these regions, but will also help in improving the reputation of the organization. Conclusion This assignment is about the case study analysis of the company Starbucks. It has been found that Starbucks is one of the leading coffee business chains not only in USA but also in all over the world. Presently the company is operating in more than 23,000 locations all over the world (Doherty Lu, 2012). The main products of Starbucks are Coffee beverages, baked food, tea and different types of smoothies. The company has to face various issues related with service quality, employee retention and motivation. There are various other controversies that the company has to face related with market strategy, labor disputes and opening stores without planning permission. In order to analyze the current position of the company, SWOT analysis, Porters 5 forces analysis and VRIO analysis have been undertaken. The company has a huge opportunity to expand its market in the emerging markets of India and China. There are billions of customers in these two countries eagerly waiting to join the cust omer pool of Starbucks. The company also the opportunity to expand its product offerings and become a full scale food and beverage retailers like Burger king and McDonalds. Rising prices of the Coffee beans is one of the major threats that the company might have to face in future. In order to solve these issues, there some recommendations have been provided to the company along with appropriate implementation strategy. Reference list Ayub, A., Adeel, R., Muhammad, S. A., Hanan, I. (2013). A conceptual framework on evaluating SWOT analysis as the mediator in strategic marketing planning through marketing intelligence.European Journal of Business and Social Sciences,2(1), 91-98. Borza, S. I., Borza, I. C. (2014). A Broad Analysis of Marketing Strategies for their Incorporation as Activities in a User Centred Process.Procedia Economics and Finance,16, 239-250. Doherty, N., Lu, F. V. (2012). Strategic Marketing: Models and Plans.Service Science Research, Strategy and Innovation: Dynamic Knowledge Management Methods: Dynamic Knowledge Management Methods, 417. Frynas, J. G. (2015). Strategic CSR, value creation and competitive advantage.The Routledge Companion to Non-Market Strategy, 245-262. Geereddy, N. (2012). Strategic Analysis Of Starbucks Corporation. Gong, Y. (2013). Resource-Based Fundamentals. InGlobal Operations Strategy(pp. 141-172). Springer Berlin Heidelberg. Grant, R. M. (2016).Contemporary strategy analysis: Text and cases edition. John Wiley Sons. Lawton, T. C., Rajwani, T. S. (2015). Where next for non-market strategy?.The Routledge Companion to Non-Market Strategy, 412. Leih, S., Linden, G., Teece, D. (2014). Business model innovation and organizational design: a dynamic capabilities perspective. Lemus, E., Von Feigenblatt, O. F., Orta, M., Rivero, O. (2015). Starbucks Corporation: Leading Innovation in the 21st Century.Journal of Alternative Perspectives in the Social Sciences,7(1), 23-38. Roby, L. R. (2012). An Analysis of Starbucks as a Company and an International Business. Starbucks. (2016).Starbucks Coffee Company. Retrieved 23 November 2016, from https://www.starbucks.in/ Sureerattanan, N. (2013). Applying SWOT Analysis to Solve a Learning Problem: An Experiential Case at Thai-Nichi Institute of Technology. In2013 International Conference on Educational Research and Sports Education (ERSE 2013). Atlantis Press. Yuece, I. (2012). SWOT Analysis of McDonalds and Derivation of Appropriate Strategies.