Analysis of Starbucks Corporation - Case Study Example

Analysis Report Table of Contents A) Methods and Reason 3 Methods implemented by Starbucks Corporation 3 Reasons behind the implementation of methods4 B) PESTLE Analysis 5 Political 5 Economical 6 Socio-cultural 6 Technological 7 Legal 7 Environmental 7 Future action of Starbucks Corporation in UK based on Analysis 8 References 9 A) Methods and Reason Starbucks Corporation is a retailer and marketer of coffee around the world. It has become a premier roaster of largest coffeehouse company. Starbucks Corporation was founded in 1971 in Seattle by English teacher named Jerry Baldwin, writer Gordon Bowker and history teacher Zev Seigl. According to the researchers, Starbucks Corporation is operating in more than 50 countries with 16,706 stores across the world. Customers of Starbucks enjoy an exceptional cup of coffee, inviting atmosphere and quality service. Methods implemented by Starbucks Corporation The guidelines principles of the Starbucks Corporation includes to develop plan that can satisfy customer, embrace diversity, contribute effectively to environment and communities, creating great work environment and providing high standards of excellence on products. Three methods that are implemented by Starbucks Corporation to grow in size are rapid store expansion strategy, product line enhancement and coffee purchasing strategy. Rapid store expansion strategy of Starbucks includes international and domestic store expansion (Keller, 2003, p.160). International store expansion is based on expansion of consumer products in the region of South pacific. The corporate strategy of Starbucks Corporation is to maximize the market penetration, achieve profitability and offer high-quality products to consumers. Another international store expansion strategy adopted by Starbucks is creating company-operated stored and making new subsidiary. Domestic store expansion strategy is creating three year for local expansion and creating approach “Starbucks everywhere”. The implementation of valued based pricing strategy has benefited Starbucks Corporation to maximize profits. The advancement of technology has forced Starbucks Corporation to create and construct a plan that can benefit in future. The implementation of Wi-Fi in every outlet has been one of the methods to attract the attention of customers. Reasons behind the implementation of methods The financial accomplishment of the company helped to strengthen the partnership of Starbucks to grow in size. According to the researcher, the reason behind the implementation of values based pricing strategy is due to the rise of non-coffee commodity expenses and rising labour cost. Direct Coffee purchasing from farmers can be considered as another method applied by Starbucks (Kandachar and Halme, 2008, p.148). Key principles of the strategy were to build relationship with exporters and growers, and searching out multiplicities, and checking on appropriate agricultural condition to meet the standards of Starbucks Corporation. Some of the employee training programs initiated by Starbucks are effective training programs, awards for partners and screening. These systems of recognition and employee training enabled to create an effective training program to recruit and hire employees that are best of the job. The availability of Wi-Fi and planning of broad rand of products has provided a new dimension for Starbucks to create stores for the future and maintain sustainability in future. The protection of biodiversity and maintenance of healthy environment has been the focal point of organization to be successful. The application of coffee cultivation methods enabled to maintain healthy environment and protect biodiversity. Five success factors of Starbucks Corporation includes ability of planning a strategic approach that can help to establish a successful business model, ability to attract high-quality employees by providing equity right and advanced health care plan, ability to adjust to change in the consumer demographics. B) PESTLE Analysis PESTEL analysis is described as a framework or tool of macro-environmental factors used by marketers to monitor and analyze the external marketing environment that can create huge constructive impact on the growth of organization. The application of the tool helps to understand the bigger picture of the changes and opportunities of an organization. Starbucks Corporation conducted PESTEL analysis to analyze the impact of external factors towards the growth of organization. PESTEL factors include political-legal, economic, social, technological and environmental factors. The purchasing power of the consumer has been effectively influenced by ongoing global recession specially United Kingdom which characterized the operation of macro-environment of Starbucks Corporation. Political The production of coffee is becoming more and more in subject to the standard and quality of the product. The main political imperative faced by Starbucks Corporation is mainly the upsurge of concern over the source of raw materials. This concern over the sourcing has attracted the attention of the politicians in the countries and in the West. This is the pivotal reason which influenced Starbucks Corporation to be keen on adhering environmental and social norms. Starbucks is also keen to follow sourcing approaches that are in conformance to the fair trade performs. Moreover, this practice has been effectively accepted by governments and global corporations of the developed countries. The coffee beans production countries have imposed high tax on the farmers (Evenson and Pingali, 2009, p.3162). This means that Starbucks Corporation has to pay higher prices. The aftermath of 9/11 has created a huge adverse effect on the global market. The economic downturn can affect the markets and sales of Starbucks. Another political imperative faced by Starbucks Corporation is the regulatory pressure from United States. Moreover, the pressure arises within the home market and caused by the increased level of scrutiny of the business practices. The reduction of permit costs and licensing would lead to the lesser production cost of coffee beans for Starbucks. Economical High interest rate, financial crisis and recession are the major reasons behind the low sales growth rate of Starbucks. Moreover, it can lead to putting off of expansion plans and investment of Starbucks (Gillespie and Hennessey, 2010, p.221). The rise of mortgage repayment can lessen the disposable income of consumers. The ongoing global recession is the prime external economic driver for the reduction of revenue. The profitability of many global organizations has been dented by the economic recession. Recent study reveals that, consumers are shifting towards lower priced alternatives rather than cutting down their consumption of coffee. This provides an opportunity for Starbucks to create an effective pricing strategy. In the inflationary macroeconomic environment, the rise of labour and operational costs has become issues for Starbucks Corporation. The tumbling profitability has become economic issue which is squeezing organization to nullify their drawbacks. Socio-cultural There is a signal of high concern regarding the health of people consuming coffee. Coffee is regarded as bad beverage which influenced people to change their taste and look for new drinks. A training plan for customer has been launched, such as DDSMART. The key socio-cultural challenge for Starbucks Corporation is to sacrifice the quality of products due to the emergence of inflation. The Starbucks is offering cheaper alternatives by expanding the consumer base of middle and lower tiers of income level. The spending towards the older and retiring baby boomer group is likely to be tapered off. Technological The emerging mobile wave has been the perfect opportunity for Starbucks Corporation to tie up with Apple to introduce new application which will provide discount coupons. The benefits of advancement of technology can assist Starbucks to reach any many consumers as possible. The introduction of mobile payments has already been tested in United Kingdom can act a beneficiary for Starbucks. Wi-Fi has been introduced in all the outlets of Starbucks (Hit, Ireland and Hoskisson, 2012, p.101). Moreover, this provides an opportunity for consumer to surf the web and do their business work while having coffee. Legal It is vital for Starbucks to ensure that every laws and regulation is being followed (D’Addario, 2013, p.97). The introduction of new trade regulation and tougher customer can pose a treat for Starbucks for acquiring raw materials for the production of best coffee. Environmental Consumers, international advocacy groups and activists can create several concerns for Starbucks Corporation for effective business process. Therefore, it is vital for Starbucks to look in to the concerns and create strategy to nullify the issues for holding the trust of consumers. Countries producing coffee beans can experience environmental disaster. This can become an issue for Starbucks to take in to account of these issues. Future action of Starbucks Corporation in UK based on Analysis In 2014, Starbucks Youth Action programs are initiated by Starbucks Corporation in United Kingdom. The prime purpose of the grant program is to empower, inspire and support young people all over the world to contribute to the community by providing bold and fresh plans. Starbucks Corporation stated that necessary managing skills and training should be provided to the teams delivering promising ideas for the betterment of the organization and society. Organization of reward program, continuous improvement of coffee, becoming environment friendly and increasing international expansion can be recommendations for future actions. The introduction of Starbucks Card has benefited Starbucks Corporation to connect with costumers. Moreover, customers in the UK, Germany and Canada having their own Starbucks card can automatically earn reward points and mechanically enrolled in the reward program. The introduction of stored value cards can benefit Starbucks Corporation in future by recording the customer taste and implementation of change management. One strategy that can be implemented by Starbucks is expansion in to corporate market which can help to continue their growth. This can act a beneficiary factor for both customer and Starbucks. Another recommendation for Starbucks Corporation in UK market is to convince UK coffee customers to switch their brands from Nescafe through unique promotional strategy. Starbucks should prose a solution for creating a social identity brand to appeal customer by changing traditional brands of customers in UK like Nescafe. The strategy of Starbucks is to upsurge the perception of high quality products. Europe in the future of Starbucks and it is vital to implement the recommendation to penetrate the foreign market. References D’Addario, J. F., 2013. Influencing Enterprise Risk Mitigation. London: Diane Publishing. Evenson, E. R., and Pingali, P., 2009. Handbook of Agricultural Economics: Agricultural Development: Farm Policies and Regional Development. London: Elsevier. Gillespie, K., and Hennessey, D, H., 2010. Global Marketing. Stamford: Cengage Learning. Hit, M., Ireland, D. R., and Hoskisson, R., 2012. Strategic Management: Concepts and Cases: Competitiveness and Globalization. Stamford: Cengage Learning. Kandachar, G., and Halme, M., 2008. Sustainability Challenges and Solutions at the Base of the Pyramid: Business, Technology and the Poor. London: Greenleaf. Keller, L. K., 2003. Strategic brand management: Building, measuring and managing brand equity. London: Prentice Hall. Read More