Starbucks Company Strategy in Terms of Pestle - Assignment Example

?PESTLE ANALYSIS Introduction In this competitive world, every firm has to be well aware about the market and their competitors which may capture their market share. They have to develop strategies to make themselves unique in the market. Firms in order to sustain in the market bring in a lot of changes which includes changing marketing strategy and launching innovative products/services in the market so as to stay one step ahead of their competitors (Johnson, 2009). PESTLE analysis is done by every company to get the political, economical, social, technological, legal and environmental condition that may impact the running of their successful business. The assignment elaborates the strength of Starbucks and how it is successful in spite of facing with shortcomings. PESTLE analysis is done to identify the factors which may affect the smooth journey of Starbucks towards it success. Starbuck is a largest multinational coffeehouse chain in the world, which is based in United States. Starbucks aims at selling dripped brew coffee, hot and cold drinks, espresso-based hot drinks, snacks, coffee mugs and coffee beans. Starbucks also have Entertainment division, Hear Music brand and also markets books and films (Thompson, 2001). Methods used by Starbuck to increase its market size Starbucks from its foundation in Seattle, Washington, has grown in size as a local coffee bean seller by opening new stores all over Seattle. The local growth later slowed but the company expanded in the foreign markets and is opening 7 stores a day worldwide. Today Starbucks market share in the restaurant industry rose by 7% from the previous year 23%. The revenue also rose by 11% to $ 3.36 billion. The global sales at store rose by 6% and that increased the traffic by 5% and the average spending per visit went up to 1% in average. These figures show the success of Starbucks and also encourage the company to increase its market share. There are many reasons behind the success of Starbucks (Baertlein, 2012). The following are the few points behind the success of Starbucks: In 2008, Starbucks purchased 385 million pounds of coffee beans among which 77% were grown ethically and responsibly meeting Starbucks’ Shared Planet ethical sources principles for coffee. The company aimed at buying 100% of the beans grown in this way. These beans ensured good quality and thus coffee lovers as well as common people relied on this brand. Starbucks thus penetrated in to the market by ensuring their customers good quality of coffee. Till November 2012, Starbucks had 18000 company owned outlets worldwide of which 13000 are in United States and the rest in other countries. The company has its outlets in 62 countries around the globe and is expanding more to increase its market share in the restaurant industry. In China, Starbucks experienced potential growth and recently there are around 3000 stores. The reason behind the success of the company in China is that it focussed on productivity through innovative products and it also saw expansion through the successful working of grocery channel. In the grocery department, craze for K-Cups and other products have made the brand available in the consumer homes also. Many of the customers of Starbucks have made Starbucks their daily hangouts where they use the free internet connection to interact with their friends and the habit continues with the introduction of new menus. Starbucks from its advent went on entering new markets all over the world. Tokyo was the first location for Starbuck outside North America. It established their outlets there in 1996. It entered the market of United Kingdom in 1998. Thereafter it went on entering countries like China, India and expanded their brand them with dignity (Kumar, 2000). Starbucks increased their product line and made their products unique and good in quality. Few of the products are Vanilla Latte, Mocha; White mocha, Caramel Machiatto, Caramel Frappuchino and Mocha Frappuchino. Starbuck gives a tall cup of coffee at just $2.00 and $20.00 for the fanciest drink. These not-so-competitive prices have allured the customers to the coffee shops and thus the company is encouraged to invent new products and satisfy their customers more (Miller, 2012). The ambiance of the coffee shops is also a positive point to look at. The company knows what their customers expect when they enter into a coffee shop and thus Starbuck has made their interiors according to their tastes and preferences. Starbucks interiors in Los Angeles and Tokyo gave a rich warm colour theme, organic looking art, pleasant music. Every part of the coffee shop has the warm aroma and the couches scream for comfort. Starbucks have successfully executed their social media marketing plan and this plan has contributed a lot to their growth. The company web site and 6 social platforms including Facebook, Twitter, G+, Pinterest, Youtube and My Starbucks ideas have built a strong social media corner for the company. Through the media Starbuck gave the customers daily update of the products and their prices. Different offers and contests are also put up in the media to attract the customers for taking part and win prizes. PESTEL Analysis of Starbucks The aim of PESTEL analysis is to summarise and identify influences that effect the operation of an organisation (Leontiades, 2005). It elaborates the effect of political, economic, socio-cultural, technological, legal and environmental factors on the successful working of an organisation. PESTEL defines: P – Political, E – Economic, S – Social, T – Technological, E – Environmental, L – Legal. Starbucks PESTEL analysis is elaborate in this section. Political: The political forces play an important role in this industry as the green coffee beans are imported from the nations that have tropical climate and have the altitudes to grow coffee. Industry detailed rules and regulation have made Starbuck more particular about obeying them as dictated. The kind of relationship between USA and other countries that produced coffee beans is an important factor to look upon because if the countries are not politically stable, Starbucks will find it difficult to get coffee beans (Handlechner, 2008). Government view on culture, terrorism and religion has affected Starbucks a lot. Starbucks should examine the political stability of any country before planning expansion in that country. Changes in government lead to changes in legislation and taxation. The elections in America have affected Starbucks as the new government can bring in changes in the existing taxation system. After the event of 9/11 the world market faced with economic downturn which affected the sale and marketing of Starbucks (Kumar, 2000). Economic: The economic depression had a large effect on the coffee industry. Coffee is basically regarded as luxury goods which the consumers try not to take or trade down to lower cost alternatives as income decreases. The purchasing power of consumers affects the sale of company products. Lower the purchasing power of the consumers, the sale of the products goes down. The local currency exchange rates also affect the sale of products (Collis, 2005). When the exchange rate increases, people stop buying products which affects the sale of the product. Starbucks is affected by the same problem (Burrow, 2011). Social: Social trend is very important for coffee industry. Consumers did not have the habit of consuming coffee in United States and the coffee culture which is prevalent today was not present then. Now, consuming coffee has gained much popularity and the coffee culture is spreading in United States and all over the world. Starbucks expanded its territory from middle class worker to a larger base of customers in a lower income market. The changing family patterns in USA and Europe affects the sale of Starbucks as conservative families does not like to go to coffee shops. The changing customer preferences have made Starbucks more particular about the products. With the change in lifestyle of the population Starbuck has also changed their product line so that it goes with the current life style. The changing values of the population have forced Starbucks to change their way of thinking about the values of the mass and thus strategies product accordingly (Ferrel, 2012). Technological: The service in Starbucks is labour intensive and it depends on the company’s human resources. Technology in the espresso machines is important for companies in the speciality coffee industry. Starbucks had upgraded all the machines to Mastrena espresso machine made especially for the company that grinds every shot to order for superior consistency of espresso shots, greater options for customization and a lower profile to enable baristas to connect visually with the customers for personal interaction. The advent of new technologies has compelled Starbucks to embrace the new technology which have made them more efficient in working. Biotechnological developments and agricultural development have also affected Starbucks (Dransfield, 2001). Environmental: Starbucks follow the environmental rules and regulations. It recycles the cups once used. It has promised to reduce energy consumption by 25% by 2013. Starbucks have continued to use water-saving technology and aims at reducing water consumption by 25% by 2015(Mercer, 2008). Global warming and other environmental issues have given danger signal to Starbucks. Starbucks have faced huge problem when the countries from where they get coffee beans have faced with environmental disasters (Mercer, 2008). Legal: Starbucks have faced new rules and regulations by health authorities about the production and consumption of caffeine. The company spends $ 250 million on health insurance. It confronted with tougher customs and trade regulations. Starbucks paid $225.00 to resolve the Consumer Protection case for gift card breach (Miller, 2012). Reference List Baertlein, L., 2012. Starbucks Raises 2013 Forecast, Defies Industry Trend. [online] Available at: [Accessed 10 July 2013]. Burrow, L., 2011. Principles of business. Connecticut: Cengage Learning Inc. Collis, D., 2005. Corporate strategy. Noida: McGraw Hill Professional. Dransfield, R., 2001. Corporate strategy. Chicago: Heinemann Educational Publishers. Ferrel, H., 2012. Marketing strategy. Connecticut: Cengage Learning Inc. Handlechner, M., 2008. Marketing strategy. Norderstedt: Druck and Binding. Johnson, G., 2009. Exploring corporate strategy. New Jersey: Pearsons education Limited. Kumar, A., 2000. Principles of business management. New Delhi: Atlantic Publishers and Distributers. Leontiades, J., 2005.Multinational corporate strategy: Planning for world market. New York: Lexington Books. Mercer, D., 2008. Marketing strategy: The challenge of the external environment. London: Sage Publication. Miller, R., 2012. Modern principles of business law. Connecticut: Cengage Learning Inc. Thompson, J., 2001. Understanding corporate strategy. London: Thompson Learning. Read More