Starbucks Business Analysis - Example

Abstract

This paper seeks to provide a detailed synopsis of the specialty coffee industry and the role of Starbucks Company in the coffee industry and its application of the IT to carry out business in the coffee industry. Starbucks Company is found in a relatively growing market economies and because of this growth, the company stands a better chance of becoming a market leader especially in the coffee industry. The paper seeks to examine the business structures of the Starbucks Company when it comes to IT application in most of its business operations to determine its future implications of its current business strategies. To attain this objective, the company is continuously expanding some of its global store bases through adding stores in both existing and new markets like U.S, China among many other global markets. The company is also trying to leverage the experience that it has gained over time through the use of its traditional store models that will enable it to continue offering new products including coffees to all its customers.

Introduction

Starbucks Company is a premier marketer, roaster and retailer in the coffee industry that produces and sells beverages like tea and coffee in the global markets particularly in about 68 countries around the world. The company undertakes the business of buying and roasting of high-quality coffees that they sell along with other beverages like tea, handcrafted coffee among others beverages through company-operated stores. In addition to selling beverages, Starbuck Company also sells tea and coffee products, and they have licensed their trademarks through very any channels like licensed stores, national foodservice accounts, and grocery. Other than selling Starbucks coffee brands the company has also expanded its operation to sell goods and services under the brands of Seattle's Best Coffee, Evolution Fresh and even Ethos.

Most of the stores that are operated by the Starbuck Company are located in strategic places, for example, high-traffic location thus the products have higher visibility to most of the customers. The company can change the size and format of some of its stores thus giving them room to locate some of their products in or a near a variety of settings including suburban, downtown and many other strategic locations.

Business Strategies used by Starbucks Company

Among the strategies employed by Starbucks Company are the differentiation strategies and cost strategies because of the many firms coming into the coffee industry. The company adopted the strategies so as to allow for the production of better brands compared to its competitors in the markets and this made the company establish many features that met the customer's demands. To accomplish these business strategies, Starbucks Company had to establish a lower cost structure that pays off higher profits when correctly managed thus allowing for business expansion. To be able to complete the action plan of the company base on the differentiation strategy, Starbucks company took a different approach when establishing its value chain; it established value chain that majorly focus on identification and optimization of the activities in the chain that improves customer values. The company has also put a lot of focus on adding some other features to their products which will ensure that they maximize customer service experience thus increasing the potential of the company for customization.

SWOT Analysis of Starbuck Company

Starbuck Company stands as one of the biggest coffeehouses around the world with most of its competitive advantages being based some of its strength as a global leader as indicated in its SWOT analysis. SWOT analysis of the Starbuck Company presents a lot of internal and external forces that are very important for the growth of the company

Strengths

Starbuck Company has one of the largest and most popular brands of products, and this has enabled the company to have a competitive advantage over its key market competitors. The growing population in the world's markets are also very loyal to the products that are offered by the Starbuck Company because of the quality of their brands this has helped the company to boost its sales. Most importantly, Starbuck Company has a wide network of suppliers that cover most of the global markets and as a result, it is capable of maintaining production all the time.

Weaknesses

The commodity prices for Starbuck Company are relatively higher compared to some of the prices of other firms in the market, and this has made the products to be less accessible to the low-income earners. Some of the products offered by the Starbuck Company are based on the generalized corporate standards and as a result, the products are relatively less aligned with the cultural demands of most of the consumers in the world markets. Also, most of the coffee brands and many other beverages that are offered by the Starbuck Company are Imitable especially when it comes to café ambiance and even products (Thompson, Strickland, & Gamble, 2007).

Opportunities

The company has a lot of expansion opportunities in various parts of the world especially in the Middle East, Asia and even Africa where the presence is currently at the minimal point but the economic growth rates are very high. Despite the fact that Starbuck Company has a well-established and diverse product mix, it is still important for it to consider more diversification so as to help in improving its competitive advantage. The company can choose to enter into a partnership or even company alliance with other companies so as to boost and strengthen its competitive position in the world markets.

Threats

Some of the threats that Starbuck Company is currently experiencing is the pilferage of the low-cost coffee into the world markets offered by companies like McDonald's and Dunkin' Donuts that pose a lot of competition to the priciest products of Starbuck Company. There are a lot of piracy in the food industry where a lot of companies copy the business of other companies, for example, a lot of companies have imitated Starbucks, and they are successfully carrying out their business, and this is a threat to the Starbucks. Also, there is the high growth of social movements that have offered to support independent coffeehouses and opposing large coffeehouse chains like Starbucks.

Industry Situation Analysis

A lot of people are doing well in the coffee processing industry because the industry is made up of a large number of consumers; thus, there is a lot of competition within the firms in the industry. The coffee industry has been very active for a long period, however, the competition within the industry has become very intense following the rise in the coffee sales thus causing a lot of increase in the profit margins of the firms in the industry. Some of the competitors that Starbucks Company is facing in the coffee industry are like McDonald, Dunkin Donuts among other key market competitors who poses a lot of threat in the marketplace. It is very important for the firms like Starbucks Company to carefully examine the dominant economic characteristics of the industry environment to determine the direction the industry is headed and whether the coffee industry is a good model to venture into. The coffee industry has witnessed continuous growth despite an increase in the coffee prices in the last few years; however, this increase has seriously hurt the overall profits of most firms within the industry. In the last few years, Starbucks Company had to raise its prices globally particularly in the U.S and China markets because of the constantly increasing prices of coffee and other ingredients.

Despite a decline in the markets of the coffee industry in the U.S, there are still upcoming markets in other parts of the world for the specialty coffee industry. Also, there is the high growth rate of the of emerging coffee markets for example Brazilian economy making the Brazilian to be the largest coffee drinking economy in the future with a growth rate of about 40%. India is another upcoming economy that Starbucks Company has considered opening its branches following it economic growth rates and its spending orientation on coffee products and other beverages. Most of the Indian population is composed of the middle and upper-class consumers who are more able to spend on coffee drinking and other products that might have been considered important in the past. There is fast growth rate within the coffee industry and the company like Starbucks that ventured into the industry like this s more likely to win the battle for market leadership among the many market competitors.

Value-chain Analysis of Starbuck Company

The value-chain analysis of the Starbuck Company can be categorized into two namely: primary activities where the company is directly or indirectly involved in the physical creation of commodities/products, after sale services and even in the marketing and delivery system. The second category is the secondary of support activities where the organization's infrastructures and inputs provide room for the primary activities to take place. Value chain analysis of a company provides an opportunity for the company to develop a strategic goal that will allow it gain a competitive edge over its key rivals in the marketplace.

Primary Activities

INBOUND LOGISTICS: most of the inbound logistics of the Starbucks Company are composed of many agents whose work is to identify coffee bean producers in most of the coffee producing countries so as to establish a good supply chain for the company. The company then communicates the required standards regarding the quality of coffee beans to the producers so as to create a strategic relationship between the producers and the company that will ensure a steady supply of the coffee beans to the company. The chain begins from the farm as it flows through the exports centers through the brokers who sell the beans to the processing companies in a packaged format.

OUTBOUND LOGISTICS: outbound logistics of the Starbucks Company takes three forms for example retail business organization where products are sold directly to the consumers without going through the hands of any intermediary. Within the Starbuck's outbound logistics there are also other specialty sales and marketing where company products are directly sold to large restaurants and other specialty accounts that are not falling the retail business customers for example United Airlines. Also, there are also direct responses within the outbound logistics of the Starbucks Company where the company directly handle the orders from the internet or through the mail address and delivery also done in the same manner.

Sales and Marketing:

Starbucks Company invest the very little amount of money in the sales and marketing; however, it heavily relies on the word of mouth that is achieved through the high quality of its brands and the high level of customer service. In some case, the company does occasional marketing through a sampling of the new products that is majorly conducted in areas that are closer to the stores.

Services:

Offering high-quality services to customers is one of the goals that Starbucks Company is committed to accomplishing so as to gain customer loyalty for its products; this will ensure that the company attracts and maintain new and old customers. Most of the company employees are committed to going greater extent in ensuring that customer satisfaction is achieved through offering high-quality products and services.

Infrastructure:

The infrastructure of the Starbucks Company is made up of a wide range of support activities like planning, management, legal support and so on that are meant to provide support to the entire work of the Starbuck's value chain (Haag & Cummings, 2007).

Human Resource Management:

The most important and valuable resource to the Starbucks company is the workforce and therefore the company is more committed to investing a lot of money in its workers which they feel is their biggest competitive advantage. Starbucks Company puts a lot of value in its employees, and it considers them as important as a stakeholder in the business management and operation; the management believes that as long as needs of the workers are met, they will provide quality services.

Technological Development:

Starbucks Company heavily depends on the use of technology especially for its cost-saving reasons and even for ensuring that there is consistency in offering high-quality products and good customer services. An example of the technology that has to be employed by the Starbucks Company is the introduction of the computerized coffee roaster to ensure that there is consistency in the taste of the coffee beverages produced by the company. When it comes to issues of technology, Starbucks Company has both internal and external issues to handle; product development, patenting and research & development are examples of supplier based concerns that the company must try to handle.

How Starbucks Company uses IT in Business Activities to Support its Business Strategy

A lot of people think that Starbucks Company is just a coffee producing company; however, they ignore the fact that any other type of restaurant can produce and sell coffee; what makes Starbucks Company more unique is the application of technology in its operations. Some of the most IS systems that are employed and used by Starbucks Company are like: transaction processing system, customer relationship management system, decision support systems and even supply chain management system. Starbucks Company built most of its point of sale based on the Oracle technology that enabled it to scale and seamlessly move its existing Oracle-based data warehouse to Oracle Exadata so as to expand insights and facilitate the decision-making process. Decision support system, for example, is used majorly in the analysis of business data that is, it is used as the auxiliary decision maker through the use of business data, knowledge and models. Starbucks Company uses online analytical processing especially in doing the large scale data analysis and statistical analysis as a place of reference when it comes to management of decision making.

Decision support system is a computer application program that helps Starbucks Company to analyze business data and present it in a way that the user can easily make their business decisions based on the analysis. Starbucks Company majorly employs the decision support system in the parent company established in the United States in which an Oracle system is used to generate business reports on which vital decisions are based. The main reason is that only the parent company has the power to make vital decisions especially those attaching to the company products, quality of services and even welfare of the company employees.

Through the use of the Oracle technology, Starbucks Company has been able to establish enterprise data warehouse that contains information relating to marketing, store management, customer loyalty and even supply chain data that can be used to drive business decision at any level of development. Oracle technology has improved the ability of the Starbucks Company to analyze rapidly and act very fast on issues touching on the customer loyalty, coffee sales, and supply chain information so as to continue driving innovation. Oracle Exadata Database Machine has made the work easier for the company because it has created a high-performance enterprise data warehouse and business intelligence environment that offers both managers and data analysts with timely actionable insights on product performance and supply chain operations.

The Value Created by the IT in the Starbucks Company

The use of Information technology especially Oracle technology has helped the company to gain the ability to load and refresh data from all it retail stores all over the world and as a result there is service level agreement in all its subsidiaries. It has also enabled the company to load very fast most of the information relating to point-of- sale and even customer loyalty among its many stores to the data warehouse and answer questions relating to coffee sales, product mixes in individual stores very quickly.

The technology of Oracle has enabled the company to be able to develop a front-end dashboard which is a major business indicator that allows many product users like stores and corporate managers to gain rapid visibility into the operational data and even on the store-level sales. Most importantly, the technology has increased insights for most of the product analysts, especially in the consumer preferences so as to facilitate strategic development and even product launches. Development of IT in most of the company operations has significantly reduced the number of hours a store manager may take in making business reports and simultaneously increasing insights for most store managers thus improving their abilities to make a decision in many stores. Used Oracle partitioning concept has also help Starbucks Company a great deal as it has helped in optimizing data storage manageability thus ensuring cost efficiency for the company.

IT Systems to be applied by Starbucks Company in the Future to Address Challenges

Starbucks Company is looking forward to establishing a system referred to the internet of things which are sensor devices that allow communication from one device to another and with a human over the internet. Given that most of the stores of the Starbucks Company have a well-established super high-tech Clover coffee machines, the company would wish to use the internet of things to connect to the cloud so as to communicate the performance of the machine and even track the preferences of the customers. An example of such devices is the Clover-Net machine that offers cloud-based services that can be used by the company to organize clover data for important decision making by the company management. Starbucks Company is also working on the establishment of smart refrigerators that can be used to track expiration dates of perishable commodities like milk, and other products can be safely stored. The company is also working on measures that can allow it become a leader in Wi-Fi hotspot performance and therefore it is considering bringing Google on board to offer super high-speed access that is much faster than what its competitors are currently using. Google is also working on establishing an app feature that will automatically log users of the Starbucks' products into the Starbucks Wi-Fi the second time they ate moving into the company's stores. Unlike many other retail business situations where a lot of Wi-Fi is grudgingly supplied or sometimes missing at all, Starbucks Company is looking forward to completely handle the problem by establishing a much faster and easier Wi-Fi.

Conclusion

It is very true that Starbucks Company has come a long way from the initial systems that were very ineffective and contributed to the significant increase in the cost of coffee production among other costs like marketing costs. However, for the Starbucks Company, it must still put a lot of efforts in case it wants to fully exploit the level of Technology within the coffee industry. The major undoing of the Starbucks Company is its size; however this problem can be countered through employing the highest level of technological development in all its branches to outcompete most of its market rivals in the world markets. Because of the high-level technology employed by the Starbucks Company, it has witnessed great achievements, especially in its goals to become the best fast food industry in the global markets. Starbucks Company is currently witnessing a large growth in its profit margins following its good business reputation and the quality of services it offers to its customers. And as a result of the increased sales volume of the company' products, Starbucks Company has opened a lot of its retail stores in most of the global markets. Decision- making processes and the quality of the services offered by the Starbucks Company has equally improved following the high level of technology and the skilled labor force employed by the company.