Starbucks case analysis
History and overview
Starbucks corporation was founded in March 1971. The founders of this corporation were, Jerry Baldwin, a teacher by profession, Zev also a teacher, and an academia Gordon. In the year 1982, Howard Schultz started his career in Swedish kitchenware. In the year 1983, after his visit to Millan, he reported back with a brilliant idea that he saw in the espresso bar. A kind of warm community experience and proposed an approach to the board. Though the board of directors did not support his view, this disagreement marked the end of Howard Schultz’s career with Starbucks coffee, after which he opened his coffee bar the II GIORNALE. In the year 1987, Howard bought Starbucks. The Company is among the leading coffee companies in the world. It has used aggressive growth in most of its competition, making it the most successful coffee value chain in the world (Allison et al.,2008).
Current situation and significant issues
Currently, the coffee industry growth rate is 7%, resulting in a fast-growing restaurant business. Generally, the production of coffee in the world is at 110-120 million annually. The espresso coffee is well distributed around the globe, with 14 billion espresso coffee reaching over 20,000 bars in Italy. America is the largest consumer of coffee, consuming over 146 billion cups of coffee per year. Consumption of coffee in America is estimated to rise in the future. Starbucks has expanded to China, forming connections with other tea- coffee companies, extending their brands. Starbucks has opened over 20,000 stores in the world (Allison et al.,2008). Consequently, the Company is affected by the high cost of their coffee and poor marketing strategies. It focuses on the quality other than the proper distribution of coffee to the market.
Starbucks competitive swot factors
This an analysis based on the internal and external environmental factors affecting a business. The domestic determinants strongholds and weaknesses, while foreign, include risks, opportunities, and pressures (Gillespie, 2007).
| Strengths | Weaknesses | |
| ü Strong financial performance
ü Strong brand image ü Growth in stores ü Extensive international supply ü limited diversification ü Quality, quantity standardization ü Reinvestment strategy ü Employees welfare ü Gender-neutral restrooms
|
ü High selling prices
ü Product imitability ü Similar standards for products ü Tax avoidance ü Unfair tender procedures ü Product reminiscence
|
|
| Opportunities | Threat | |
| ü Market expansion and development
ü Diversification of business, products requirements ü Introducing new market products ü Collaboration alliances with similar farms ü Gender-neutral restrooms |
ü Competition with other companies
ü Imitation ü Coffee house movements ü Hullabaloo on California state warning ü Arrest in Philadelphia ü Coronavirus
|
|
Strengths
- It has a well-founded brand, and entire corporations’ image is the more popular and most reliable Company with a brand value of $11.7 Billion (Gillespie, 2007).
- Had strong financial performance – the corporation had an annual income of about 30 billion dollars, a profit of about 3.9 by the end of 2019(Gillespie, 2007).
- Stable growth in stores where store number has increased from between 1999 and January 2020.
- Extensive market internationally; It is known for its global supply
- , moderate diversification where the corporation has diversified by innovative merchandises and foodstuffs. Such products are ice cubes, resulting in a strong flavor of coffee (Gillespie, 2007).
- The quality scent, taste, and standardization- Starbucks has extended globally through offering excellent quality coffee.
- Efficient planning and reinvestment – the corporation reinvests all profit, and also its efficiency and strategic planning work as an advantage.
- Employee treatment – it treats employees very well, which transits to happier employees, offering excellent to customer services. The Company is listed as the top ten fortune places an individual can work (Gillespie, 2007).
Weaknesses
- Imitability of products; cheap branding making it easy for other companies to imitate Starbucks coffee corporation products.
- Generalized product standards. Consequently, products do not align with the known cultural limitations of the market. For example, some cultures do not prefer crafted beverages. (de Luca et Al., 2020)
- European tax avoidance, the result of avoiding tax, resulted in facing much criticism. Rutter’s investigation stated that star bucks heard tax aviation of $1.3 in three sales before 2012(Grant, 2010).
- Procurement practices not equitably done. The Company has been criticized for its unethical coffee procurement, especially from the third world countries. The Company has been condemned of violation of fair principles in coffee trade (Grant, 2010).
Opportunities
- Expansion in market developing – Starbucks coffee house majorly located in the United States of America, has been able to expand globally to India, Japan, China, and a few Africa regions (Gillespie, 2007)
- Business diversification and product specification where star buck corporation has an opportunity for its product per the customers’ preferences (Gillespie, 2007).
- Partnership and collaboration with other coffee firms; the Company has a compelling opportunity to team up with other major successful companies (Gillespie, 2007).
Weaknesses
- Competition with low coffee sellers- Starbucks ‘ future stability can be threatened by those companies that sell their coffee at low prices (Grant, 2010).
- Imitation is a significant threat, and rivals continuously imitate products (Grant, 2010).
- Independent coffee movements, The social culture organization that opposes the expansion of multinational chains. (de Luca et Al., 2020)
- Coronavirus outbreak, the disease has led to the closure of approximately 2000, considering this is approximately half of the stores that Starbucks haves in china this will lead to a negative deviation for its profits in 2020(Grant, 2010).
Competitor analysis
Starbucks corporation has a wide range of competitors because of its extensive expansion in the globe. The corporation has influenced an excellent competitive position. Since it has a quality brand and reputable capabilities (Avlonitis, 2006). The competitors are both direct and indirect. The main Starbucks competitors consist of; costa coffee company, Mc Donald’s brand, Dunkin Donets, and café joint coffee day.
Indirect rivals include; independent first bakeries, Kentucky fried chicken, and Tazo.
General coffee market analysis
Starbucks dominate Chinese coffee market shops with 80.7 %. The second in the market is the mc café with 8%, costa coffee with 5.2 % and finally costa with 3.5 %.
Primary objectives and its reason
Main objective
Starbucks aims at earning profits, doing charitable things, across the globe through the high-quality provision of services and products.
Reasons
- China coffee Market Analysis
As the leading coffee company in the world, Starbucks sales have rapidly increased, ranging from185 billion in 2006 to 110 1026 in 2011(Avlonitis,2006). With tariff reduction, the tendency of the number of coffeestores has increased, leading to a high-profit margin.
Coca-Cola Company SWOT and PESTLE Analysis as a Competitor
Situational Analysis
SWOT
Strengths
Coca Cola company has the following strengths:
- It has the dominant market share over other beverage industries
It produces the largest alcohol-free drinks in the world (Jurevicius, 2020). Coca Cola company has over 1.9 billion consumers, with branches to over 150 identified countries.
- Variety product portfolio
It has an offer of about seven different beverage products (Jurevicius, 2020).
In addition, it operates about thirteen brands generating an estimate of US$1 billion (Jurevicius, 2020).
- Most customer loyalty
With most customers addicted to Coca-Cola beverages, they have difficulty with finding its suitable alternatives (2020)
- Larger Brand Valuation
According to Interbrand’s annual ranking, it has 3rd ranking in terms of global branding (2020)
- Acquisitions
By acquiring Ades, it managed to expand into Latin America.
Weaknesses
- Competition with Pepsi
Pepsi continues to rival greatly Cocacola thus sharing their markets
- Low Product Diversification
It is behind Pepsi in terms of product diversification (2020).
- Health Emerging Issues
Due to sugar being raw materials in their products, the majority of dietic experts have campaigned against the consumption of Coca Cola products.
Opportunities
- Introduce new products and diversify its segments – Coca-Cola can introduce changes in its products; this will enable them to get more revenue.(2020).
- Increase presence in developing nations – It will help acquire new market bases as most of these nations are not yet utilized.
- Bring advanced supply chain system– It should consider a more reliable, flexible, and cheaper means of distributing their products.
Threats
1Water usage controversy – Water activists have condemned the Company over the regulations of excess water consumption.
2Packaging controversy – Many environmental organizations have harshly condemned the use of plastic material (2020)
3Direct and indirect competition – Besides Pepsi, Coca Cola also faces competition from brands like Nescafe (2020)
Assumptions
The Company faces merits like government incentives like decreased taxation in some countries, and this enables it to enjoy the extensive market exploration. The Company is, however, limited to global market exploration by some socio-economic forces and also by political factors creating an unstable environment for trade.
Problem definition
Reduction in the fall in volume in sales can rise from the intense competition by other non-alcoholic beverage producing companies like Pepsi. Intense advertising can help with this, yet it can also lead to excess expenditure in terms of the cost of the advertisement.
Alternatives
The Company can also promote its market by producing a higher quality range of products to compete against those of its competitors. Besides, it can also increase the number of sales agents as a marketing strategy.
Recommendations
From the above analysis, it is clear that the Company, despite being a strong competitor, also has some limitations. The following are some of the recommendations it can apply:
- Venturinginto the foodindustry – Company should widen its products (2020).
- Safe-guarding health of consumers– Use of harmful products such as sugar as raw materials should be limited (2020).
- Regulating its water usage plussolving conflicts with the criticisms from environmental activists (2020)
- Promoting environment protection- This can help in the promotion of its brand image (2020).
PESTLE ANALYSIS
It is a means of analyzing the present environmental factors that affect the Coca Cola Company(“The Coca-Cola Company PESTEL / PEST & Environment Analysis [Strategy],” 2020). They include:
Political Factors
The various trade tariffs that govern Consumer goods in a country, In addition, ant-trust laws that govern non-alcoholic drinks can also be included (“The Coca-Cola Company PESTEL / PEST & Environment Analysis[Strategy],” 2020). The political stability present in the Company’s operating region also affects how it can operate to generate profits. Another factor can be through the pricing regulations present in the operation-based region (“The Coca-Cola Company PESTEL / PEST & Environment Analysis [Strategy],” 2020).
Economic Factors
They are both Macro environment factors and Microenvironment factors. Macro environment factors include the rate of inflation, interest rate, foreign exchange rate, and finally, economic cycle (“The Coca-Cola Company PESTEL / PEST & Environment Analysis [Strategy],” 2020). Microenvironment factors can involve the following: Competition from other companies, rate of growth, education level present in the economy and productivity costs (“The Coca-Cola Company PESTEL / PEST & Environment Analysis [Strategy],” 2020)
Social Factors
They have a role in determining the consumer’s attitudes and beliefs towards the use of Coca Cola’s products (“The Coca-Cola Company PESTEL / PEST & Environment Analysis [Strategy],” 2020). They can include: The type of age group present in the population, class structure, level of entrepreneurship interest, and finally health factors (“The Coca-Cola Company PESTEL / PEST & Environment Analysis [Strategy],” 2020)
Technological Factors
They are the rate of technology advancement in a country, changes in technological developments by the Company, impact on value chain structure, technological diffusion rate present and lastly influence of technology on product distribution (“The Coca-Cola Company PESTEL / PEST & Environment Analysis [Strategy],” 2020)
Environmental Factors
They refer to environmental standards needed to operate within a region, and they are: climate changes, pollution regulations, waste control system, support for renewable energy by the government and not excluding protection of vulnerable species (“The Coca-Cola Company PESTEL / PEST & Environment Analysis [Strategy],” 2020)
Legal Factors
The legal structures to be considered are: health laws, patent laws, consumer protection law, employers-employees relationship laws and finally information protection laws (“The Coca-Cola Company PESTEL / PEST & Environment Analysis [Strategy],” 2020)
Th 4p analysis
The 4 p’s review is a strategy that helps in developing a company brand image and popularity. It also identifies significant components of the company marketing strategy this are product, place, price, and promotion (Grant,2010).
Starbucks products strategy
Starbucks is the leading coffee company globally. It produces an unchallenged quality of products offered (Avlonitis,2006).
- Diversification, despite been popular in coffee production, Starbucks also offers other quality products like hot and cold drinks, fresh evolution juice, and other products.
- Product segmentation Starbucks coffee is classified into; the whole bean, including VIA, medium, and dark. Caffeine deafens finally flavored, and unflavored coffee, segmentation allows the reach of significant customer preferences.
Price strategy
The pricing of the corporation based on premium strategy, where their first study the behavior of the consumers — however, the products depending on the purchasing ability of the consumers (Grant, 2010).
Place strategy; the corporation is present in more than 70 countries in the world. The corporation has a well-organized, which entails a description of coffee making procedure. The website also contains information on the locations of their store (Grant, 2010). It gives Starbucks a competitive advantage.
Promotion strategy
(Grant, 2010); Starbucks pays attention to brand building through;
- Modern technology, including visual media, prints, and social media add.
- Community programs, like local communities
- Feedback schemes
- Loyalty programs
- Gift card with free WIFI, farmer equity practices, and Starbucks prepaid card.
Integrate the managerial and strategic planning
Starbucks uses the following administrative and integrated strategies;
- Hire experienced coffee managers to join teams
- Hire designers that understand the context to design the packaging and promote the brand.
- Starting up long-term programs to penetrate higher-end as well as form partnership with other companies (Avlonitis,2006).
The VRIO analyses of the Starbucks corporation
The VRIO analysis is a business strategy that forms part of the firm’s large strategic schemes. The VRIO analyses is an internal procedure in any business model. That forms part of long-term goals (Grant, 2010). If improved, the below resources can sustain Starbucks coffee corporation in the global coffee market.
The VRIO analysis
| Resources and strengths of Starbucks | Rating | Rare | Costly to intimate | exploited | Competitiveness |
| Site selection to locate their business | Yes | No | No | Yes | Temporary
Advantage |
| Popular brand | Yes | Yes | Yes | Yes | Competitive advantage |
| Stores attraction strength | Yes | No | Yes | No | Competitiveness advantage |
| World widespread | Yes | Yes | Yes | Yes | limited advantage |
| Human management and company culture | Yes | Yes | Yes | Yes | limited advantage |
| Loyal customers | Yes | Yes | Yes | Yes | limited advantage |
Conclusion and Recommendation
In summary, the Starbucks Corporation is a well-established company. The corporation reigns the coffee industry in central parts of the world. However, it still has the chance to reach out to other parts of the world. Though, Starbucks corporation lacks a competitive advantage over other companies because of its high price (Grant, 2010).
References
(2020). Retrieved 19 February 2020, from https://bstrategyhub.com/swot-analysis-of-coca-cola-2019-coca-cola-swot-analysis/
Allison, M. (2008). Starbucks co-founder talks about early days, launching Redhook and Seattle Weekly, too. Seattle Times.
Alveolitis, George (2006). Product and services management New York; sage,
de Luca, P., Pegan, G., & Vianelli, D. (2020). Customer Experience in the Coffee World: Qualitative Research on the US Market. In Handbook of Research on Retailing Techniques for Optimal Consumer Engagement and Experiences (pp. 257-283). IGI Global.
Gillespie, A. (2007). SWOT analysis of the macro environments foundations of economics. Oxford press the USA
Grant, Robert (2010). Contemporary strategies analysis New York; willy Blackwell, 2010
Jurevicius, O. (2020). Coca Cola SWOT Analysis (6 Key Strengths in 2020). Retrieved 19 February 2020, from com/swot-analyses/coca-cola-swot-analysis.html”>https://strategicmanagementinsight.com/swot-analyses/coca-cola-swot-analysis.html
The Coca-Cola Company, PESTEL / PEST & Environment Analysis [Strategy]. (2020). Retrieved 19 February 2020, from http://fernfortuniversity.com/term-papers/pestel/nyse4/710-the-coca-cola-company.php
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