Strategic Analysis Of Starbucks Corporation

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Requirement

Starbucks: Contemporary Developments in Business and Management.

Solution

Executive summary

Starbucks is a leading coffee giant in the food and beverage global market and has been the first choice for the coffee lovers. Recently, the company has been facing a number of issues related to the influence of the external factors over the company’s basic operations. The prime factors among all the other external factors are the Demographic ones that may include the age, sex, gender, caste, creed, marital status and the income levels of the customers as well as of the employees. 
The company’s success highly depends upon the type of Coffee beans it is supplied with and if an Environmental disaster hits a country in the coming future hen it may have a drastic impact on the quality of the coffee beans being supplied to the outlets. The quality and production of Coffee may also be hampered by the Global warming issues prevailing in the world.
Starbucks is currently leading the Coffee retail market by selling its products at the premium prices to increase their profitability. However, the emerging competition in the Coffee industry is posing a great threat to the existence of the Starbucks in the current and potential markets.The economic recessions in a country are also accompanied by the low-priced coffee offerings at the fast-food stores. 
The customers are the major asset for a business and their perceptions keep on changing with time. Every company needs to align its operations and strategies with these changing behaviors. Starbucks has recognized the prime importance of the customers, but at the same time, it has been known to serve its customers with premium-priced coffee products, which could not be afforded by the people falling under medium to low-levels of income. To pace up with rapid changes at the global level, the Lifestyle of people in European and Asian countries is changing with time. At present, these changes include long working hours in offices and homes. This change has made coffee, the most desirable drink of such people. The other notable key finding of this work is that high caffeine content often increases pulse rates and may lead to myriads of heart-related issues, hence it is recommended by doctors to patients with high blood pressure and heart ailments to avoid caffeine in daily uses.
The company could respond to the income levels factor by introducing some low-priced food products and beverages, which could be easily afforded by the people falling under the lower or middle-income groups. Starbucks could also work on its pricing strategy so that it could target all sorts of customers in myriads of markets. Targeting different types of consumers with a single product will definitely give a great experience to the company’s employees to evaluate the actual needs and demands of different customers in the markets. 
The company could seek alliance with the local marketers and experts who already have a great knowledge of their domestic markets. This would help the firm members to know the specific demands and tastes of the new customers they are targeting and then the incorporation of resources and ideas will be aligned with the key findings about the markets. 

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Introduction

Management plays a pivotal role in every organisation as it clearly determines the short and the long-term goals for the business along with the variety of strategies that could be employed to achieve them in the given time frame. In the recent times, the researchers in this field are constantly reporting the presence of a number of interlinked variables that interacts to highly influence the ways in which a firm delivers its services. 
The following report has been written undertaking the discussion over a leading American coffee company and a coffee house chain, Starbucks. In the first part, the report will closely evaluate the primary external factors that influence the working of the company. In the second segment, the report will unveil the myriads of demographic factors that are constantly influencing the working methodologies, Policies and Decision-making process of this leading giant. In this part the responses from the company towards these influences are also critically evaluated along with the suggestion of areas of improvement. 
There are a number of factors that could not be voluntarily controlled by the company and at the same time have the potential to highly influence the internal workings and strategic operations of the firm. The executives of the firm are required to analyze these factors and evaluate the strategies that could be readily incorporated to manage these factors in the best possible manner. This is needed because the nature and impact of these factors are unpredictable and with time these factors can either be beneficial or harmful. So, if evaluated in a proper way then the company could use these factors for yielding lucrative results.

Primary external influences

The Primary external influences often remain similar for most of the industries in the market; however, their level of influence may vary. The leading companies always keep a number of contingency plans to tackle the ill influence of these factors, but the way in which these plans are improvised creates a difference. 

The crucially identified primary external factors for Starbucks are:

  • Globalization: At present, Starbucks has over 15,012 stores in around 44 countries across the world and this has allowed it to be a Globalization Icon. The company is striving to become a global brand and for this it has tripled its revenues over the past 5 years. To increase the pace of the growth the country has not only targeted all sorts of markets in its homeland, but has also amended its taste to meet the needs of the customers outside the US. Starbucks has tried to bring American- style coffee sales to international marketplaces regardless of the volatile political and economic situations of different countries (Bears, 2008). The company has not only invested its resources in expanding its business internationally by gaining customers from all over the world, but at the same time the company has also hired highly experienced MBAs and Corporate Executives from different parts of the world to deliver high quality services to its customers. Globalization has allowed the company to understand different tastes of the people across the world and what all changes could the company make in its operations to attract the consumers with different tastes (Hart, 2011).

  • Environmental Influences: Different nations have different Environmental laws and policies to which a foreign company adheres in order to deliver its services without any hindrance. The Environmental laws of some of the Asian and European countries are quite strict and hence any new foreign entrant needs to follow it in a proper manner (MNN Group, 2010). The environmental policies allow a company to deliver its services in a sustainable manner and avoid any sort of contribution in the pollution levels in the environment. This also helps in maintaining a good and respectable position among the competitors and also builds a loyal relationship with the sensitive target market segments of the society.  The company, at present, is indulging in a number of recycling and waste-treatment activities. The company has launched the industry’s first hot beverage cup with 10% post-consumer recycled fiber.  The company also started an initiative of using ceramic cups and a good discount to those customers who bought cups of their own. Apart from recycling, the company is also concerned with the water use and has announced to reduce the water wastage by 25% till the end of the year 2016(Corporation, 2016).  The company’s success highly depends upon the type of Coffee beans it is supplied with and if an Environmental disaster hits a country in the coming future hen it may have a drastic impact on the quality of the coffee beans being supplied to the outlets. The quality and production of Coffee may also be hampered by the Global warming issues prevailing in the world. The increment in the earth’s temperature due to Global warming patterns may also change the duration and occurrence of the Winter Season. As winter is the most desirable season for the coffee lovers, hence this might lower the sales for the firm in this particular season(Patiyal, 2016). 

  • Competition:Starbucks is currently leading the Coffee retail market by selling its products at the premium prices to increase their profitability. But the emerging competition in the Coffee industry is posing a great threat to the existence of the Starbucks in the current and potential markets. The major competitors for the company are Dunkin’ Donuts, McDonald’s and Caribou Coffee(Hawley, 2015). In the year 2002, Dunkin’ Donuts entered in the business of espresso beverages. For a better expansion of its business, the company entered into a partnership with Proctor and Gamble to sell the Coffee in the Grocery stores. On the same line, McDonald’s began to offer premium coffee at a cheaper price than Starbucks. As Starbucks also offers coffee beans and ground coffee in retail and grocery stores around the world so there are other competitors too in the markets including Maxwell House and Folgers. Both of these companies dominate the dry coffee goods market and hence give a great competition to Starbucks(White, 2016).  Competition helps a firm to perform better and deliver better services to its customers even under great competitive pressure. In a competitive environment, a company utilizes all its resources in a judicious manner to satisfy its customers in all possible manners. 

  • Economic Recession:Starbucks is known to offer premium priced coffees to its customers, but as the global economy turns sour, people have begun to lose appetite for these premium-priced drinks. The economic recessions in a country are also accompanied by the low-priced coffee offerings at the fast-food stores(Clark, 2009). The company had aimed to open around 20,000 stores in the US and a further 20,000 overseas. But, the economic turmoil has restricted its overall stores only up to 16,875. The unfavorable economic conditions in a foreign land often compel accompany to incorporate more of its resources to retain its customer base and profit rates(Jacob & Ulrich, 2012). 

  • Legal:In order to remain in the top position, Starbucks has to ensure that it does not violate any laws and regulations of a country. This applies both for the home market as well as the foreign markets. The company serves its customers with the best taste of caffeine, so it has to keep in mind the rules and regulations of a country specifically related to the production and consumption of caffeine. The health authorities of various countries are most concerned about what their people are consuming and whether the foreign entrants are not breaching the laws and standards introduced by them. Starbucks has faced similar type of legal issues in their home country and even in the market overseas. These legal complications have compelled the company to maintain its quality and serve its customers with the best taste of coffee(Murphy, 2012).  Apart from the rules and regulations imposed by the health authorities, the company’s internal operations are also influenced by the level of Customs and Trade regulations of a country. If a country has strict trade regulations, then the foreign entrants often compromise with its product quality to gain maximum profits from new markets. The company entering into foreign markets also faces legal issues associated with licensing and often pays a huge amount to settle such problems. 

  • Technological factors: Starbucks has been always known for using most of the innovative technological elements. For instance, to promote its products, Starbucks has been using the social media platform like Facebook and Twitter. Moreover, to reach more and more customers, the company has also launched its mobile app. The company has also been quite innovative in making its products. For example, Starbucks has recently purchased the Coffee Equipment Co. that has launched its single cup coffee maker known as the “Clover” which uses the technological elements and calculated algorithm to brew coffee within one degree Fahrenheit to produce an ideal flavor(Adkins, 2016). 

External influences to the Organization

The above mentioned external factors have both a positive as well as a negative influence on the company’s operations. These factors compel a firm to deliver the services in a more enhanced manner than the competitors in the market. Starbucks has always concentrated on the taste of the coffee it serves regardless of its premium prices and this strategy has allowed it to maintain its top position in the coffee industry(Lee, 2011).
The political and economic factors often allow a foreign firm to discharge its duties while adhering to the standards and regulations framed by a company. While remaining under such pressures, the foreign entrants do not compromise with the qualities of the products it is serving and even tends to expand its customer base in remote and raw markets. 
Globalization has allowed Starbucks to reach other potential segments of the markets for who only spend their earnings on basic amenities of life. This factor has also allowed the company to reach out for the coffee lovers in the unreachable countries of the world.

Task 2: Demographic Factors

Demographic factors are personal characteristics that are used to collect the data effectively and evaluate it on the people in a given population. The demographic factors present in the markets that influences the working of a company includes sex, age, education, marital status, income level, religion, family size, geographic region, etc. Demography plays a crucial role in deciding the sales and profit rates of coffee company. For instance, if a coffee shop is placed near an office or in a college campus, then it is likely to make more profits as compared to the one set on a highway or scarcely populated area(Dow Jones & Company, Inc., 2013). Demographic factors in a business and management world are the socio- economic characters that could be expressed statistically. These factors are to be taken into concern by every marketer before launching any new product or services in the market.
Coffee plays a pivotal part of everyday life in the US and other foreign countries. According to a recent report, more than 60% of the US households use either whole or ground coffee beans at home. Another report shows that around 13% of the American adults go to Starbucks compared to Dunkin’ Donuts, which is able to attract only 11% of the adult American population (Fetto, 2009).
The love for coffee could change suddenly or slowly over a period of time. It may increase or dwindle. The customers are the major asset for a business and their perceptions keep on changing with time. The company needs to align its operations and strategies with these changing behaviors. Starbucks is a highly customer-oriented company and it needs to incorporate strategies that target the specific consumers in specific markets(Gledhill, 2015).
The premium-priced coffee and other eatables are produced to attract those customers who consider the quality of services over the price and quantity. For the expansion of the customer base the company needs to evaluate the actual needs of the customers across the world and serve them with the tempting products that have the capacity to satiate their taste buds in a better way than the competitors in the markets. 
To have a competitive edge over all the other coffee sellers in the market, Starbucks has used the demographic factors to analyze the product preferences and determine the buying behavior of different consumers across the world. These traits also help the company to identify its key consumers and then align its marketing strategies to fulfill their specific demands. The target markets with similar sets of demographic characteristics help a company to maximize its sales and profits at a decent rate. 

Influence of Demographic factors on Policies and Decision-making within Starbucks

The Demographic factors have a crucial impact on how a coffee company sells its product and what all methodologies it adopts while doing so. Starbuck is known to serve its customers with premium-priced coffee products that could not be afforded by the people falling under medium to low-levels of income. The influence of the income levels could easily be seen in Asian developing countries which either recently are categorized underdeveloped nations or are still struggling to be in this category. To maintain a leading quality of coffee in all its stores, the company keeps the price premium(Jared, 2013). But in such nations, drinking coffee is regarded as a status symbol and is not regarded as one of the basic amenities. Hence the income levels and living profiles of customers in such countries are constantly compelling the company to amend its pricing strategy and even include coffee products with lower price yet tempting taste in the coffee shops(Team, 2015).
The Lifestyle of people in European and Asian countries is changing with time. At present these changes include long working hours in offices and homes. This change has made coffee, the most desirable drink of such people. This has influenced the company to open more and more outlets near the offices and other working areas. The increasing demand due to change in lifestyle has also compelled this coffee giant to increase its production while maintaining the quality of the coffee(Hadas, 2013). Starbucks has faced a great challenge in maintaining the quality while increasing the production and for this it has made a number of changes in its production strategy. Starbucks has installed new machineries and innovative operations in its production units to produce fine quality coffee while utilizing the available resources in a judicious manner(Gaille, 2014). 
As people all over the world are facing a number of health-related issues, hence the health authorities across the globe have developed strict laws related to production and consumption of caffeine in the countries. Consumption of coffee has both advantages and disadvantages associated with it and if the consumers face any health ailment by consuming coffee, then the concerned authorities immediately take strict action(National Coffee Association, 2016). High caffeine content often increase pulse rates and may lead to myriads of heart-related issues, hence it is recommended by doctors to patients with high blood pressure and heart ailments to avoid caffeine in daily uses. The legal complications often pose a great hindrance for such companies to deliver their services in the foreign markets because they often incorporate most of their skills and resources in tackling with these issues.
Approximately 40% of the people aged between 18- 24 years drink coffee daily. Hence, this the crucial target market for the company. Starbucks has aligned its marketing objectives and strategies to attract this huge market segment towards its products and have also hired employees with innovative and young minds who could easily interpret the actual consumer behavior and their demands with the coffee sellers in the markets(Waxman, 2006). 
The major demographic change in today’s world is denoted by the increasing role and participation of the women in the business and other crucial industries in the market. This has made the coffee shops to include a number of marketing strategies that have the potential to attract the female consumers. The Starbucks outlets all over the world have included a number of innovations in their ambience in the stores and even have employed female employees to readily promote the idea of women empowerment and independence(Thomas, 2014). 

Critical evaluation of the effectiveness of the company’s response

To tackle with the issues accompanied with the Demographic factors, Starbucks has responded in a very positive manner. This was important because the company has a very respectable image in the marketplace and it needs to maintain it in order to retain their loyal customers and even attract the new ones. However, there have been some times when the company has not been able to manage such issues in a wise manner and has responded unexpectedly(Liang, 2011).This is because the demands of the people are quite uncertain and unpredictable and if a company is not able to evaluate the actual needs of its customers, then it can never align its strategic goals and current operations to them.
The increasing stress and workload among the young, as well as old people, have made coffee as the most appreciated beverage among them. The increasing demand of this beverage due to the changing lifestyle and needs of the customers has forced the leading brands in the markets to open more and more outlets. To this, Starbucks has responded by launching its outlets in international markets offering them the services in compliance with their actual needs and tastes. To raise production, Starbucks has almost doubled the intake of its employees and even increased the sources for its coffee beans. The company has also installed improved machines in its production units and has also effectively trained its employees to deal patiently with the customers and serve them with a smile. However, the company has never compromised with its premium-prices and hence, is able to maintain its quality all over the world. The exorbitant price of Starbucks’ products is the symbol of its high quality and the efforts that have been put in every coffee cup to serve a perfect blend to the customers(Spinks, 2016). 
As the factors like age and income levels plays a crucial role in influencing the ways in which a company operates in a current or new market, hence, Starbucks offers a wide range of products suiting to every age group. The menu in every outlet includes dark coffee to espresso and even other eatables along with the coffee. Starbucks has taken care to serve the taste buds of all sorts of customers. The customers never feel reluctant to pay $4 for a coffee cup as they are getting the best taste of coffee(Burge, 2013). 
The geographic region also has a great influence on the sales and profits of Starbucks. Asian countries prefer tea over coffee and compelling them to adapt to the coffee culture was a tedious task. However, Starbucks has succeeded in attracting a huge market of tea-lovers towards the coffee shops. Although this took a great time but due to constant efforts, the company succeeded in gaining a huge customer base. But, on the other hand it could be seen that Starbucks is not readily expanding its business in the Asian countries as compared to its rapid expansion in European and Western Markets. This could be largely due to the lifestyles and perceptions of the Asians, which vary a lot from the Europeans. The Asians spend wisely and gives more priority to basic amenities rather than to luxurious items. Hence, this premium-priced brand is reluctant to expand its markets in developing nations and is trying to direct its talent and resources more significantly in the developed nations(D'Costa, 2011). 

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Areas of improvement in the responses

Coffee is an extremely diverse product and its value highly depends on a fact from where it is derived, the place where it has been grown, its size and texture and its processing and roasting. Starbucks has been able to maintain its position in almost all of its target markets and is still expanding its business in a number of remote areas and countries overseas. However, the demographic factors have influenced the methodologies through which the company decides its most potential target markets and even the internal operations carried out by the firm to compete with its worthy competitors in the markets(Roby, 2011).
There are a number of improvement areas that can be worked upon by Starbucks to deal wisely with the demographic factors. Firstly, the company could respond to the income levels factor by introducing some low-priced food products and beverages in the menu so that everyone in the market could afford it(Michelli, 2016). 
Moreover, Starbucks could also work on its pricing strategy so that it could target all sorts of customers in myriads of markets. The changes in the Pricing Strategy could also allow Starbucks to have a great competitive edge over its competitors as it would be serving low-priced coffee to the consumers who cannot afford premium-priced products. Targeting different types of consumers with a single product will definitely give a great experience to the company’s employees to evaluate and analyze the changing needs and behaviors of a variety of customers in the markets.
As an improved response, the company could seek alliance with the local marketers and experts who already have a great knowledge of their domestic markets. This could be done when the company is trying to explore foreign markets with an entirely new culture and market segmentation. This approach will help the company executives to learn more about their new customers and even anticipate the best strategies that could be adopted to attract and retain them for a longer period(Higbee, et al., 2008).

Conclusion

Starbucks has been able to be on the top position among all the other coffee companies across the globe. This has been made possible because of its great understanding of the coffee lover’s taste and the changing perceptions of myriads of people towards beverages and its associated advantages and disadvantages. The Demographic factors play a huge role in influencing the sales and profit rates of the company and even the ways in which it delivers its services in domestic as well as in the foreign lands. Starbucks has succeeded in closely analyzing the actual influence of these factors on its business and has incorporated significant measures to tackle serious issues associated with them. If the company adapts the suggested improvements, then it will readily expand its business to the foreign lands by targeting each and every potential customer with its tempting coffees and other food items. 

References

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Appendices

Appendix 1: Company Profile

Starbucks Corporation is the leading roaster, retailer, and marketer of specialty coffee in the world. Its operations include upwards of 7,300 coffee shops and kiosks in the United States, and nearly 3,000 in 34 other countries, with the largest numbers located in Japan, Canada, the United Kingdom, China, Taiwan, South Korea, the Philippines, Thailand, Malaysia, Mexico, Australia, Germany, and New Zealand. In addition to a variety of coffees and coffee drinks, Starbucks shops also feature Tazo teas; pastries and other food items; espresso machines, coffee brewers, and other coffee- and tea-related items; and music CDs.
Starbucks was founded in Seattle, Washington, a haven for coffee aficionados. The city was noted for its coffee before World War II, but the quality of its coffee had declined so much by the late 1960s that resident Gordon Bowker made pilgrimages to Vancouver, British Columbia, to buy his beans there. His point of reference for the beverage was dark, delicious coffee he had discovered in Italy. 
In 1982 Starbucks hired Howard Schultz to manage the company's retail sales and marketing. While vice-president of U.S. operations for Hammarplast, a Swedish house wares company, and working out of New York, Schultz met the Starbucks trio and considered their coffee a revelation. The company has always believed in serving the best coffee possible. Starbuck aims that all of its coffee is grown under the highest standards of quality, using ethical sourcing practices. Its coffee buyers personally travel to coffee farms in Latin America, Africa and Asia to select the highest quality Arabica beans. Once these quality beans arrive at our roasting plants, Starbucks experts bring out the balance and rich flavor of the beans through the specific signature.

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