Impact of Starbucks's Mission, Vision, Forces of Competition and Stakeholders on Its Success - Assignment Example

Business 499 Business Administration Assignment 5: Capstone Torri Kitchen Determine the impact of the company’s mission, vision, and primary stakeholders on its overall success. Starbucks Corporation is the US based premier roaster and retailer of specialty coffee, operating worldwide. The company’s mission is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Starbucks Coffee Company, n.d., n.p.). While the company’s vision is not clearly defined in its annual report, there is provided the company’s retail objective: “To be the leading retailer and brand of coffee in each of our target markets by selling the finest quality coffee and related products, and by providing each customer a unique Starbucks Experience” (Starbucks Annual Report 2013, 3). The long-term strategic objective of company is based on the striving to maintain Starbucks as one of the most respected and recognized brands in the world (Starbucks Annual Report 2013). Thus, the company has made a huge focus on its key stakeholders – its customers. Starbucks focused on providing the superior customer service in well-maintained company-operates stores (Starbucks Annual Report 2013). Thus, mission and company’s strategic objectives have set a clear direction for the company, which helped it to succeed. 2. Analyze the five (5) forces of competition to determine how they impact the company. Porter has defined five forces that shape competition, including: the bargaining power of suppliers, the threat of new entrants, the threat of substitute products or services, the bargaining power of suppliers, and rivalry among existing competitors (Porter 2008). Starbucks operates in the industry where the threat of new entrants is high, the threat of substitutes is also high, the bargaining power of suppliers is more benign. Even though the company operates in a highly competitive industry, it doesn’t automatically means to be the factor limiting profitability of the company (Porter 2008). However, relatively low entry barriers impose certain to risks to the company, which it should address by investing aggressively in modernization of its stores and innovating menus (Porter 2008). The suppliers’ bargaining power can be defined as benign, as there are many different suppliers of coffee and the company can switch to another supplier without substantial switching costs (Porter 2008). However, Starbucks still depends on the global prices for coffee (Starbucks Annual Report 2013). As Starbucks has many different distribution channels not owned by the company, the company’s strategy is shaped by the buyer’s power (Porter 2008). Intermediate consumers such as stores, offices, and other sale points have relatively benign buyer’s power, as Starbucks is not fully dependent on its distribution partners due to the ownership of its own stores and licensed stores (Starbucks Annual Report 2013). The threat of substitutes is relatively high, as the company’s main product is coffee drinks, while the substitutes are water, juices, tea, etc. Obviously for this reason Starbucks also sells teas and other non-coffee drinks in its stores (Starbucks Annual Report 2013). Rivalry among existing competitors is very high, and that is why the company is continuously introducing new products, develops additional services and values, etc. (Starbucks Annual Report 2013). However, Starbucks doesn’t compete with its key competitors on price, but on product features, brand image, customer service, and quality of product (Starbucks Annual Report 2013). 3. Create a SWOT analysis for the company to determine its major strengths, weaknesses, opportunities, and threats. SWOT Analysis is provided in the table below STRENGTHS WEAKNESSES -Strong brand connection with the consumers; -Robust distribution channel (MarketLine Report 2014); -Strong financial position, expanding operating margin (Canadean Company Reports 2013); -Recalls of products; -Tax evasions and legal proceedings (MarketLine Report 2014); -Overdependence on the US market (Canadean Company Reports 2013). OPPORTUNITIES THREATS -Business development in the emerging markets, mainly in the key Asian countries; -Growth of office coffee marketplace; -Expanding presence in the growing single-serve coffee market in the US (MarketLine Report 2014, 27). -Intense competition; -Government regulations might incur additional compliance costs (MarketLine Report 2014, 27). 4. Based on the SWOT analysis, outline a strategy for the company to capitalize on its strengths and opportunities, and minimize its weaknesses and threats. Based on the SWOT analysis it is possible to outline a strategy for the company which will capitalize its strengths and opportunities, and will minimize its weaknesses and threats. As it has been already stated, Starbucks has managed to build strong connection with its customers offering to them value-added services. As the food retail industry is highly competitive, Starbucks should continue focusing on offering various value-added services to the customers. By introducing new products and additional entertaining services the coffee corporation will have stronger competitive position on the market (MarketLine Report 2014). Taking into consideration massive “digitalization” of the society, greater focus should be made on the development of Digital Network and Starbucks apps. In addition to strong customer connection, Starbucks has a robust distribution strategy which is an obvious strength, which helps the company to stay competitive on the market. Currently, Starbucks has four key channels of distribution, including the following: company-operated retail stores, licensed stores, foodservice operations and CPG (MarketLine Report 2014). The company has already successfully utilized digital channels such as mobile applications for smartphones and Internet. Even though the company has developed and launched successfully many various apps and joint programs with its partners, it should continue leverage technology. By doing so, the company will be capable to add new sources for revenue generation and to increase continuously its target market (MarketLine Report 2014). Starbucks’ strong financial performance is one of the most substantial strengths of the company. Having financial flexibility, the company should focus on business expansion activities making focus on emerging economies as the markets for potential growth (MarketLine Report 2014). However, Starbucks also has some weaknesses that should be addressed in order to keep the company highly competitive on the market. There has been fixed an increasing number of product recalls recently (for example, voluntary product recall of Evolution Fresh in the beginning of 2014, recall of Soft Caramel Jams by La Boulange Cafe & Bakery Jams, the protein bistro boxes and Seasonal Harvest Fruit Blend, both with a threat of salmonella bacteria contamination and others) (MarketLine Report 2014). Starbucks’s product recalls could have adverse effect on the company’s reputation and brand. Therefore, the company should focus more on the quality of its Research & Development work and improve its Quality management strategy in order to minimize the risks of product recalls in future. In addition to product recalls, Starbucks has been involved in several lawsuits (MarketLine Report 2014). The company was sued for tax avoidance in the UK and was forced to pay more than $30 million in British corporation tax. Another lawsuit was commenced by Kraft Foods referred to the material breaches of the agreement terms (MarketLine Report 2014). All these tax evasion and lawsuits may negatively impact on the company’s reputation and decrease brand value. Therefore, it is critical to mitigate such risks by performing profound analysis of the external factors in each country where the company operates. Also, it is important to mitigate the risks of lawsuits while signing an agreement with distribution partners. Despite the global presence of the company, there are still the opportunities for international business expansion. In addition to concentrating on the markets with huge potential such as India and China, Starbucks can expand its business in the other fast growing Asian markets such as Indonesia, Malaysia, Philippines, etc. (MarketLine Report 2014). Besides international expansion, the company should expand its presence in office spaces and other workplaces (MarketLine Report 2014). Threats with which the company is facing also need to be addressed in order to keep the brand competitive on the market. The main threat of intense competition may lead to decrease of the Starbucks’ market share (MarketLine Report 2014). The above discussed utilization of Starbucks’ strengths and market opportunities will enable the company to maintain strength of its brand. 5. Discuss the various levels and types of strategies the firm may use to maximize its competitiveness and profitability. There are three levels of the strategies, which could be implemented by the firm aiming to maximize its competitiveness and profitability. These strategies are: corporate level strategy, business-level strategy, and firm-performance strategy (Beard & Dess 1981). Corporate level strategy relates to the questions of the overall direction of the company, while the business-level strategy is narrowed to the questions of how to compete within a particular business (Beard & Dess 1981, 663). The Starbucks’ corporate strategy is already defined and focused on global business development. However, in order to succeed in corporate strategy implementation the company should adopt proper business-level strategies. The company should not just open new locations and launch its business in new countries or cities, but also it should maintain already existing locations and stores. As the company is targeting Asian markets, where the culture is quite different from the Western culture, Starbucks might focus on product innovation and product differentiation strategy in order to gain its competitive advantage. The climate is Asian countries is hotter than in the majority of European countries, and the focus can be made on innovating some cooling coffee-drinks, which will satisfy the needs of the local consumers. Another business-level strategy which the company is actively seeking to develop is engaging consumers by leveraging the IT technologies (Starbucks 2013). This strategy also will drive Starbucks’s competitiveness and will maximize its profits. 6. Outline a communications plan the company could use to make the strategies you recommend above known to all stakeholders. In order to communicate the company’s strategic plans to the stakeholders it is necessary to formulate simple messages focusing on the reasons, timeline, responsibilities, and way of implementing these strategies (Sustainembed.pbworks.com, n.d.). Thus, Starbucks Corporation should develop a communication plan, based on the activity plan which includes: key activities, responsibilities, deadlines, priorities, and resources allocation (Sustainembed.pbworks.com, n.d.). Thus, in order to communicate the recommended strategies, Starbucks’ management should explain: why should the company focus business expansion on the emerging markets? What should the company adjust to the needs of local consumers? When best to open new stores? Who needs to be involved? How to make it happen and what resources are required (financial, human, time, etc) (Sustainembed.pbworks.com, n.d.). 7. Select two (2) corporate governance mechanisms used by this corporation and evaluate how effective they are at controlling managerial actions. The company states that it is committed to maintain its uncompromising principles during its business growth. To achieve this, the company has adopted several corporate governance principles and policies to lead Starbucks governance principles (Starbucks Annual Report 2013). One the mechanisms is Starbucks Corporation Corporate Governance Principles and Practices for the Board of Directors (Starbucks Coffee Company 2013). This document provides detailed information on the Board of Directors specifying the purpose, composition, frequency of meetings, authorities and responsibilities of the Board, and other important details on the work of the Board (Starbucks Coffee Company 2013). This mechanism is considered to be quite effective as it provides clear information to the company’s shareholders and disciplines the Board Members. Another important mechanism used by Starbucks Corporation is applicable to the CEO and Finance managers. The Code of Ethics for CEO and Finance Leaders defines the list of principles which the management should adhere. While the Code of Ethics is a good thing to have, it is not recognized to be as effective as some other corporate governance mechanisms. 8. Evaluate the effectiveness of leadership within this corporation and make at least one (1) recommendation for improvement. Howard Shultz is the CEO, chairman and the president of the Starbucks Corporation (Starbucks Annual Report 2013). Shultz is a strong leader of the company as he has a clear idea of what direction the company should take in order to succeed. The effectiveness of the company’s leadership can be evaluated based on the company’s financial performance and business expansion. Thus, the fact that the company has strong financial position (Starbucks Annual Report 2013) and continues to open new locations worldwide indicated that the company’s leadership is quite effective. The fact that the leadership team remuneration directly depends on the company’s financial performance is also a good indicator of effective HR strategy (James 2008). Moreover, recently, Howard Schultz has declared about the changes of the leadership team, stressing that now the company will make greater focus on innovation, payments initiatives and next generation retailing (Anonymous, 2014). The fact that the company is focusing on the e-commerce and digital strategy indicates that the leaders of the company focus on the opportunities (discussed in SWOT analysis), which is a good indicator. However, the company should also focus not only on the e-commerce and financial indicators but also on the quality management in order to manage product recalls properly. For this purpose it is recommended to strengthen quality management team. 9. Assess efforts by this corporation to be a responsible (ethical) corporate citizen and determine the impact these efforts (or lack thereof) have on the company’s bottom line. Provide specific examples to support your response. Starbucks Corporation is committed to be a responsible (ethical) corporate citizen. In order to do business in a sustainable way there have been undertaken various initiatives aimed to protect the environment and to help to the local communities. The key areas of the company’s sustainable efforts include: ethical sourcing (purchasing coffee that is responsible grown and ethically sold); providing support to farmers, reducing negative environmental impact (energy-efficient facilities and stores, conservation of water and energy use, recycling and innovating food packaging, investment into renewable energy, etc); and support of communities (youth leadership grants, community stores, etc.) (Global Responsibility Report 2013). The company provides updates on its plans and achievements related to its sustainable efforts. While there are given measurable indicators for practically every initiative, there is no information available regarding its impact on the company’s bottom line. It is difficult to measure real financial impact the sustainable practice have, however, it is possible to assume that it still has positive effect on the company as more and more consumers are conscious and worried about environmental issues (climate change) and therefore, they prefer to choose the companies who strives to protect the environment and reduce negative impact on it. References Anonymous (2014). Starbucks announces senior management leadership changes. M2 EquityBites. Beard, D. W., & Dess, G. G. (1981). Corporate-level strategy, business-level strategy, and firm performance. Academy of Management Journal, 24(4), 663. Canadean Company Reports (2013). Starbucks corporation: Foodservice - company profile, SWOT & financial report. Basingstoke: Progressive Digital Media. Global Responsibility Report (2013). The 2013 Global Responsibility Report. Retrieved from http://www.starbucks.com/responsibility/global-report James A. (2008). Starbucks’ Leadership won’t see pay raises in 2008. Seattle post-intelligencer. MarketLine (2014). Company Profile: Starbucks Corporation. MarketLine Advantage. Starbucks Annual Report (2013). Annual Report 2013. Retrieved from http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-reportsannual Starbucks Coffee Company (n.d.). Mission Statement. Retrieved from http://www.starbucks.com/about-us/company-information/mission-statement Starbucks Coffee Company (2014). Corporate Governance. Retrieved from http://www.starbucks.com/about-us/company-information/corporate-governance Sustainembed.pbworks.com.(n.d.). Communications and stakeholder engagement strategies. JISC Sustaining and Embedding Innovations. Retrieved 10 September 2014, from https://sustainembed.pbworks.com/w/page/35754150/Communications%20and%20stakeholder%20engagement%20strategies Porter, M. E. (2008). The Five Competitive Forces that Shape Strategy. Harvard Business Review, 86(1), 78-93. Read More