Factors Determining Starbucks' Success: External Environment Essay

Length: 7 pages Sources: 2 Subject: Business Type: Essay Paper: #90626654 Related Topics: Dunkin Donuts, Internal Factors, Kraft Foods, Starbucks
Excerpt from Essay :



Starbucks Case Analysis

Starbucks Case Analysis

Situation Analysis



New Entrants





Strategic fit

Many individuals all over the world walk into Starbucks daily for their cup of coffee, but it is more than the costly coffee that brings individuals in day after day to the shops across the globe. Starbucks offers a high-energy atmosphere and helpful employees who help clients in any issue or question they might have with the coffee or service. People buy the product because of symbolizes and the status position coming along with it. Although various business designs are available, the concepts and framework of Starbucks is a good design to follow, due to its nationwide and international success. This paper investigates the strategic fit of Starbucks as a business and further shows how it survives even through hard economic times. By looking at the market and company situational analysis, the paper will figure out where Starbucks stands on the global coffee market. At the end, the paper will offer strategic suggestions for Starbucks and how applying the techniques.

2 Background

Starbucks Organization, established in 1985, is a leading specialized coffee store and one of the best-known manufacturers today in the marketplace (Grimm, Lee & Smith, 2006). In addition to its sale of high-quality coffee products, Starbucks retailers also offer Italian-style coffee drinks, cold blended drinks, complimentary foods, coffee-related accessories and equipment, and top quality herbal tea. Besides its company-operated retailers, it also offers packed coffee and tea items, ready? to-drink drinks such as its canned Frappuccino drinks, ice creams, Starbucks DoubleShot coffee drinks and other items mainly through licensing connections (Pahl, 2008). Since its establishment, Starbucks has been known for its competitive expansion, as it seemed impossible to open new shops quickly enough to keep up with demand. Along with a drastic decrease in the development of its same-store sales, it seems that Starbucks may have run out of development opportunities. Moreover, as other specialized coffee retail outlets such as Peet's and Caribou have joined the industry, and as competition from fast food stores such as McDonald's and Dunkin' donuts has increased, Starbucks has lost business. Consequently, the company seems to be declining (Pham-Gia, 2009).

Despite these circumstances, Starbucks continues to be the most powerful organization in the market, and it has many possibilities to increase its earnings. The significant problems confronting the organization include; sustaining the Starbucks encounter for clients; store development, competitors from fast-food stores and other specialized coffee suppliers; specialized functions; increasing demand; and penetrating new marketplaces; and decreasing input costs. Since the revival of Howard Schultz in 2008, much has been done that solves the problems described (Grimm, Lee & Smith, 2006).

3 Situation Analysis

3.1 External analysis

3.1.1 Suppliers

Because Starbucks is a large corporation, it can apply enough pressure on its providers. However, it opts to utilize this power, arguing it has never been in their best interest. Starbucks does not function by a design in which it 'squeezes down' its providers. It treats the connection as collaboration. Some of the providers have grown with Starbucks and have designed their companies around its development. It has great operating requirements for its providers and needs to ensure proper earnings so that the providers can meet these standards. These great requirements include ecological policies such as energy preservation, packaging, and agricultural techniques as well as worker benefits. Starbucks is aware of the significance of the health of the overall provider "ecosystem." Dairy, green coffee, paper products, and employees are the major inputs in their function (Pahl, 2008). Coffee is a product and an unpredictable industry. In a latest coffee problem, prices decreased significantly that many farm owners were incapable to maintain business. Starbucks is completely reliant upon its coffee providers and requires a top quality bean. It mitigates risk to guarantee its providers through agronomy programs it has designed in coffee generating areas. It works with the farm owners...


It is growing its provider platform as it develops its retail platform (Grimm, Lee & Smith, 2006).

3.1.2 Customers

For Starbucks, the threat of customers is low due to a low chance of backward integration, differentiated items, varied client platform, and their ability to influence customer preferences. The number of People in America consuming specialized coffee is increasing daily. In addition, there is a notion that Starbucks items are of good top quality than other locations. Studies indicate that the specialized coffee market is growing in the U.S. And People in America will continue to buy Starbucks items. It is unlikely that clients will engage in a backward integration by drinking homemade coffee to substitute Starbucks coffee items. The company offers highly differentiated items, which decreases buyer threats. The product has become a household name in the U.S. And overseas. Starbucks offers a high-energy atmosphere and helpful employees who help clients in any issue or question they might have with the coffee or service (Grimm, Lee & Smith, 2006).

3.1.3 Competitors

Starbucks brought specialized coffee to the market, and now it can be found at gas stations and supermarkets. Competition can be seen from two perspectives: item and location. If competition can be found in the item, then all locations that offer coffee may be a rival. If rivalry can be found in the coffee encounter, then Starbucks may be competing with coffeehouses. Experts typically identify Dunkin donuts and smaller stores like Deitrich Coffee, New World Restaurants, and Caribou as Starbucks' opponents (Pham-Gia, 2009). While the entire coffeehouse industry is expanding, the company continues to acquire more business when compared to other fast food restaurants. If we increase the industry to include donut stores, then Starbucks business reduces. Starbucks is the prominent opponent in terms of product experience and coffeehouses market. On the contrary, rapid growth has attracted contenders from other restaurant stores including McDonald's and Hamburger King, whose new coffee items, presents increased rivalry for established coffeehouses (Pahl, 2008).

3.1.4 New Entrants

New entrants have a room in the coffeehouse market, but new newcomers face powerful limitations to entry to contest with Starbucks in the coffeehouse section. Starbucks enjoys the best geographical places in significant places and the suburbs. The price of copying Starbucks' property would be very great. Starbucks has a positive relationship with many of the reasonable business growers including providers of top quality beans. There are so many reasonable coffee farm owners to form collaborations, and the company has strong connections with most of them. When a new comer has much better access to raw materials, it increases the cost of rivalry. With more experience, the company has structured its procedures behind the counter, discovered how to open shops successfully, and has become experienced in working with providers to be more effective. Such a curve benefit is important to newcomers that wish to contend on a large scale (Grimm, Lee & Smith, 2006).

3.2 Internal Analysis

3.2.1 Strengths

A couple powerful points that Starbucks has is that it leads the coffee market. The first strength is its fast speed of development, not only locally but also worldwide. Many of the shops that are starting are coming from the worldwide market. Starbucks is also financially stable which was confirmed during the economic problems during 2009 and 2008 (Pham-Gia, 2009). Its stock price might have dropped, but its earnings hardly took a hit. Starbucks also has powerful brand identification by customers. It is known for its top quality products and its customer friendly atmosphere. Starbucks' has many powerful points that will bring it through the years to come (Pahl, 2008).

3.2.2 Weaknesses

Although Starbucks has many powerful points, it also has weak points. One of Starbucks' significant weak points is its cost. McDonald's uses Starbucks' high-cost straight against the organization in their marketing strategies. Another weak point is that 75% of its earnings are centered on its coffee items and other specialized drinks. This implies that with the increasing prices of beans, that Starbucks will take an immediate hit every time the cost of coffee increases. Dunkin donuts and McDonald's both concentrate first on food and then coffee; thus, it makes them less insecure as a business to the increasing coffee costs all over the globe. Overall, the weak points of Starbucks do not over-shadow its strengths; therefore, it is a powerful and viable business (Pham-Gia, 2009).

3.2.3 Opportunities

The worldwide industry is the main source of opportunity for Starbucks as a company. In countries with increasing economic systems, such as the BRIC countries, there is increasing middle and upper classes that want to buy specialty coffee. The countries are developing and growing their preferences towards coffee. With South America set to be the world's biggest coffee customer in the world by 2020, it provides a huge niche for Starbucks to more fervently penetrate and propagate (Pham-Gia, 2009). India is also a developing nation that has lately started to accept the coffee industry. With Starbucks expecting to get into Indian…

Sources Used in Documents:


Grimm, C.M., Lee, H., & Smith, K.G. (2006). Strategy as action: Competitive dynamics and competitive advantage. New York: Oxford University Press.

Pham-Gia, K. (2009). Marketing strategy of 'Starbucks Coffe'. Mu-nchen: GRIN Verlag GmbH.

Pahl, N. (2008). The idea behind the Starbucks experience: The main elements of Starbucks' strategic diamond. Munchen: GRIN Verlag.

Cite this Document:

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