Management tools SWOT and PEST are used by managers to inform decisions regarding business strategies. Discuss the usefulness and limitations of these tools in relation to a chosen organisation, providing commentary on how managers may overcome/minimise - Essay Example

PEST AND SWOT ANALYSIS OF STARBUCKS By PEST and SWOT Analysis of Starbucks Introduction Starbucks is a coffee company. It started back in the year 1971 when the first store opened in Seattle, Washington. This store initially used to sell only coffee beans and coffee making equipment rather than drinks for which it has become so famous across the world. Howard Schultz was the director of retail operations. He made a conclusion that the store should be selling drinks and not just beans and machines, a strategy that would end up benefiting the store even the more.

As such, he set out to convince the owners of the company but all his hopes were in vain, as the owners did not buy his idea. Furious and disappointed, he ventured out on his own and opened his own coffee store in the year 1986. Over the years, Starbucks has expanded at a higher rate more than 17,000 stores in fifty-five countries around the world with its biggest presence being in the United States whereby it has more than 11,000 installations (Bowhill, 2008) SWOT Analysis of Starbucks Starbucks experience is one of its strongest strengths, which enable it to grow and expand each every day.

As such, this strength enables Starbucks to deliver to its customer’s coffee that is perfect, in a warm atmosphere, with friendly staff and premium music that results to incomparable customer service. Employee management is another strength that Starbucks prides in, and as such, has to capitalize on it. Starbucks offers its employees with an extensive range of benefits and allowances. In addition, it has a competitive compensation package, which is higher than what other industry players offer to their employees.

However, the company also faces a number of weaknesses that hamper its operations and productivity. As such, it has to work on them in order to improve on them. One of its numerous weaknesses is the fact that it has a high product pricing policy whereby it offers customer experience and great coffee leading to high price of its products. This makes it lose out to some of its competitors such as McCafe premium coffee whose prices are much lower than those at Starbucks are. Another weakness that Starbucks has to improve on is its negative publicity.

Starbucks has been doing everything in order to receive positive publicity but all these efforts have been in vain. It has just been receiving negative publicity over its poor efforts of becoming a greener company, in tax evasions, as well as poor treatment of some suppliers. On the other hand, Starbucks has many opportunities that it has to take advantage of in order to expand its business. One of the opportunities that Starbucks has is expansion of its retail operations. This would mean that the company operates outside the green box whereby it does not only concentrate on coffeehouses and franchises but instead, it also sells some of its products through other retailers.

This firm should take this opportunity, form more of such partnerships, and offer its product that is coffee in other places that it will be sold such as supermarkets (Lussier, 2011) Starbucks has also to increase its product offerings. As such, the firm could expand the number of coffeehouses that offer wine and beer, add some new products, and reach out to a broader customer group. Starbucks has also some threats that have to eliminate for it to expand and grow well. For instance, trademark infringements is one of the threats that Starbucks is experiencing and has to eliminate so that it will not be involved in any case involving illegal use of its trademark.

This case is usually costly and detrimental for the productivity of the company. Another threat that this firm has to eliminate is supply disruptions. Due to political, economic and weather conditions, starbucks has to experience supply disruptions, adding significant cost to the firm hindering it from growing and expanding. PEST analysis of starbucks The PEST (political, economic, social and technological) analysis of the Starbucks Corporation provides its managerial team important information upon which to base strategic organizational goals and objectives.

The political aspects affecting the company’s operations include industry-specific rules and regulations, as well as the level of political stability within a country. Starbucks is a multinational corporation operating in several overseas subsidiaries across the globe far from its parent company in the United States. Therefore, the political environment greatly dictates it operations especially concerning overseas subsidiaries (McBrewster, Miller & Vandome, 2011) Economic factors influencing the operation of the company include aspects such as the buying powers of customers, the local currency exchange rate, as well as the level of taxation within the country of operation.

The social factors affecting the operation of the company include the tests and preferences of consumers, changing work patterns in the modern day economies, as well as the education level of the consumer within he local and domestic markets. This has a great influence in their buying behaviors, as they are able to read, write and comprehend information before applying it. As such, they can make important purchasing decision from an informed perspective. Lastly, the technological aspects affecting the operation of the company include the emergence of innovative technology, developments in the field of biotechnology, as well as developments in the agricultural fields (Pahl & Ritcher, 2009) Usefulness of SWOT and PEST to Starbucks In making major market decisions, the SWOT and PEST analysis enable the management of the company to know how to come up with informed decisions as they provide them with the right information regarding the current position of the company, its products and services, as well as its brand within the market.

SWOT provides the company with an internal analysis of its operations, such as the strengths, weaknesses, opportunities, and threats. In comparing these with its competitors in the industry, the company learns how best to position itself, as well as come up with appropriate market strategies to improve its efficiency and productivity. On the other hand, PEST analysis provides it with the external environment position whereby it outlines some of the major external factors within the business environment that affect its operations.

These too enable managers to come up with the right decisions to cater for every situation and or eventuality within the external business environment. Limitation of SWOT and PEST to Starbucks However, the SWOT and PEST analysis has its own sets of limitations thereby making them unreliable in some cases. For instance, they do not provide the position of its competitors, or the consumers’ tastes and preferences. Such critical information is important for the company to come up with strategic ways of maintaining market relevance, as well as continued profitability (Snelling, 2012) Conclusion In conclusion, it is imperative to note that these analyses are just mere projections of the company’s current position within the market.

They are not the absolute determiners of the company’s foreseen growth and future development plans. Therefore, the managerial team should only apply what is best in order t improve the company, expand its productivity, as well as major on its efficiencies Reference List Bowhill, B. (2008) Business Planning and Control: Integrating Accounting, Strategy, And People. Hoboken, New Jersey: John Wiley & Sons. Lussier, R. (2011) Management Fundamentals: Concepts, Applications, Skill Development.

Stamford, Connecticut: Cengage Learning. McBrewster, J., Miller, F. & Vandome, A. (2011) Pest Analysis. New York City: VDM Publishing, Murray-Webster, R. & The Stationery Office. (2010) Management of Risk: Guidance for Practitioners. Washington, D.C: The Stationery Office. Pahl, N. & Ritcher, A. (2009) Swot Analysis - Idea, Methodology and a Practical Approach. Boston: Bod – Books on Demand. Snelling, J. (2012) The Influence Of The SWOT Analysis In Organizational Development Strategic Planning.

Hamburg: GRIN Verlag.