Organization and Management

Group 7
Junio, Jexin Leigh Felizar
(leader)
Alvez, Brent Thea
Borja, John Michael
Papio, Joross Andrei
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STARBUCKS
CASE STUDY
 Brief History
The first Starbucks location opened in 1971. The name is inspired by Moby Dick’s first mate. This name and the
mermaid logo were inspired by the love of the sea, from Starbucks original location in Seattle Washington in the heart of
Pike Place Market. Starting as a single shop specializing in high quality coffee and brewing products the company grew to
be the largest roaster in Washington with multiple locations until the early 80’s. In 1981, current CEO Howard Schultz,
recognized a great opportunity and began working with the founder Jerry Baldwin. After a trip to Italy to find new
products, Schultz realized an opportunity to bring the café community environment he found in Italy to the United states
and the Starbuck’s brand we know today began to take form. Selling espresso by the cup was the first test. Schultz left
Baldwin to open his own Italian coffee house Il Gornall which found outrageous success and in 1987 when Starbucks
decided to sell the original 6 locations, Schultz raised the money with investors and purchased the company and fused
them with his Italian bistro locations. The company experienced rapid growth going public in 1992, and growing tenfold
by 1997, with locations around the United States, Japan and Singapore. Starbucks also began expanding its brand.
According to George Garza in his article The history of Starbucks the following product lines were added: Offering
Starbucks coffee on United Airlines flights. Selling premium teas through Starbucks’ own Tazo Tea Company. Using the
Internet to offer people the option to purchase Starbucks coffee online. Distributing whole bean and ground coffee to
supermarkets. Producing premium coffee ice cream with Dreyer’s. Selling CDs in Starbucks retail stores. Starbucks uses
minimal advertising and has grown on word of mouth and brand recognition. According to Garza by 2004 Starbucks had
reached 1,344 locations.

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 Brief History
Today, according to the Starbucks website, they have 16,706 stores (as of Dec. 27, 2009) in 50 countries. In 2009
they made strives socially as they opened the Farmer Support Center in Kigali, Rwanda and became the world’s largest
buyer of Fair Trade CertifiedTM coffee. Their mission statement from the company profile is as follows: “Our mission is
to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.” Their core competencies
can be defined as high quality coffee and products at accessible locations and affordable prices, provided a community to
share in the coffee drinking experience, and variety of choices. The also value ethics and good business practices and are a
leader being voted one of 2010’s most ethical businesses by Ethisphere magazine for the 4th year running. (“Starbucks”)
Starbucks is facing its own struggles however as it saw sales start slipping before other companies did in the recent
recession. According to Melissa Allison in her article Starbucks has a new growth strategy — more revenue with lower
costs, Starbucks has closed 900 stores and eliminated 34,000 jobs. Starbucks new strategy is to refocus on some of the
areas that decrease risk and up front investment. This includes expanding foreign stores, with aid of partnerships that share
risk and costs, selling VIA instant coffee and other products in retail and convenience stores, and reinvigorating the
Seattle’s Best Brand coffee. A statement from CFO Troy Alstead this March paints this picture: “We clearly hit a wall and
didn’t do very well in the 2007/2008 time period. From here forward, when we grow Via, Seattle’s Best Coffee and
consumer products, there’s less investment for each dollar of revenue. consumer products, there’s less investment for each
dollar of revenue.

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 Brief History
This new strategy has inspired some optimistic feedback. Morningstar investment research firm has increased
estimate of Starbucks shares from $4 a share to $24 after the statement of revamping the brand. Morningstar analyst had
this to say R.J. Hottovy.: “I’m surprised it wasn’t ramped up in earlier years. Product innovations and international
expansion not only make the business potentially more profitable, but defend them against competition.” International
partnerships increase challenges but also create new ideas in new markets that can then be translated back to US markets.
(Allison) Starbucks in a mature stage of its lifescycle. It was founded over 20 years ago and it has experienced rapid
growth in the last 2 decades. However within the last few years its growth has slowed and has even had to close locations.
They are now focusing efforts on previous endeavors and international expansion.

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 Value Chain
The upstream portion of the value chain
shows the product development from adding teas and international
influences, to the research that took place to develop the VIA instant
coffee line. They also search the globe for Fair Trade suppliers of
high quality beans. These products are then distributed to corporate
storefronts, franchise locations, airport terminals, grocery stores and
more, and finally offer ground coffee and gift cards to take home.

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 New Value Chain
A new value chain with international development added upstream to allow for
international markets to develop new products that better suit there cultures that could
potential add value to the US market as well such as the Green Tea Latte developed in
Japan’s Starbucks. Added downstream is Online Storefront customization, that would allow
you to create a profile online, order online, create new drinks etc. Also added is a mobile
app that could locate Starbucks locations, put in drink orders etc.
Boston Matrix shows the cash cows as the regular Starbucks line of Coffee’s, Latte’s and
Frappuccino’s found at nearly every location. These are stable products that account for the
bulk of sales. A potential star is the International locations, which hold less financial risk
and open doors for innovation and stability. Question marks are the recently added VIA
instant coffee to be expanding to grocery stores and convenient stores. Current products
like this such as the dog, pre-bottle Frappuccino’s account for a tiny fraction of sales.
Another question mark is the oft forgotten sub-brand Seattle’s Best.

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 New Value Chain
The company will be revamping this brand and its future is unknown. The following is
Porter’s Generic Competitive strategy. Shown is Starbucks as a whole in the differentiation
strategy as they provide a high-quality coffee and unique experience in the convenience of
a large volume of locations, which separates them from their competition. VIA, the new
instant coffee line is straddling differentiation and low cost- leadership. While it will be a
low cost and convenient alternative to Starbucks regular coffee, it is still unique from other
products in the market. The in-store gifts and brewing utensils are in the focused
differentia-

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 Pestle Analysis
Starbucks Coffee Company, founded in 1971, has grown to an international brand. As
the world’s biggest coffeehouse company, Starbucks continues to lead the industry in
sustainable business and innovation. Such success is attributed to the firm’s ability to address
the external PESTEL/PESTLE factors. The PESTEL/PESTLE analysis framework indicates
the most significant influences on Starbucks based on characteristics of the remote or macro-
environment. Despite its current industry leadership, Starbucks must continue monitoring its
remote or macro-environment. The PESTEL/PESTLE analysis model can be used to satisfy
this need. Through continued effectiveness in addressing the external factors identified in the
PESTEL/PESTLE analysis of its remote/macro-environment, Starbucks Coffee can continue
to succeed despite the negative forces impacting its business.
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 Political Factors Affecting Starbuck’s Business
This part of the PESTEL/PESTLE analysis framework identifies the impact of
governments on business. Starbucks experiences the following political external factors in its
remote/macro-environment:
1. Regional integration of markets (opportunity)
2. Improving governmental support for infrastructure (opportunity)
3. Bureaucratic red tape in developing countries (threat)
Regional integration is a current trend and external factor that presents an opportunity for
Starbucks to globally expand. Also, most governments around the world are improving
infrastructure, which creates the opportunity for Starbucks to access more markets or suppliers.
However, bureaucratic red tape persists in most countries. This external factor is a threat
because it makes business expansion more difficult for Starbucks, especially in developing
countries. Thus, this aspect of the PESTEL/PESTLE analysis model presents mostly
opportunities for Starbucks Coffee.
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 Economic Factors Important to Starbucks Coffee
This component of the PESTEL/PESTLE analysis model refers to the economic conditions
and changes significant to business. Starbucks faces the following economic external factors in
its remote or macro-environment:
1.High growth of developing countries (opportunity)
2.Declining unemployment rates (opportunity)
3.Rising labor cost in suppliers’ countries (threat)
The high economic growth of developing countries and the declining unemployment rates
create opportunities for Starbucks to gain more revenues from various markets around the
world. However, the rising labor cost in developing countries is an external factor that threatens
Starbucks because it increases the company’s spending for ingredients. The firm sources much
of its coffee beans from developing countries. Thus, this part of the PESTEL/PESTLE analysis
model presents mostly opportunities for Starbucks Coffee.
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 Social/Sociocultural Factors Influencing Starbucks Coffee’s External
Environment
This aspect of the PESTEL/PESTLE analysis framework shows the social conditions and
trends influencing consumers and business. Starbucks must address the following
social/sociocultural external factors in its remote/macro-environment:
1.Growing coffee culture (opportunity)
2.Increasing health consciousness (opportunity)
3.Growing middle class (opportunity)
Starbucks has opportunity to increase its revenues based on increasing demand for
specialty coffee, which is due to a growing coffee culture and a growing middle class around
the world. Also, the company has the opportunity to widen its array of more healthful products
to attract health-conscious consumers to Starbucks cafés. Thus, all the identified external
factors in this component of the PESTEL/PESTLE analysis model present opportunities for
Starbucks Coffee.
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 Technological Factors in Starbucks
In
Coffee’s Business
this part of the PESTEL/PESTLE analysis model,
technologies and related trends are identified. Starbucks experiences the
following technological external factors in its remote/macro-environment:
1.Rising mobile purchases (opportunity)
2.Technology transfers to coffee farmers (opportunity)
3.Rising availability of specialty coffee machines for home use (threat)
Starbucks has the opportunity to improve its mobile apps and linked services to gain
more revenues through mobile purchases. The company also has the opportunity to
improve its supply chain efficiency based on new technologies coffee farmers use.
However, the rising availability of home-use specialty coffee machines is a threat to
Starbucks because it increases the availability of substitutes to Starbucks products. Thus,
this aspect of the PESTEL/PESTLE analysis framework presents mostly opportunities for
Starbucks Coffee.
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Ecological/Environmental Factors
This component of the PESTEL/PESTLE analysis model identifies the effects of
ecological or environmental conditions and changes on business. Starbucks faces the
following ecological/environmental external factors in its remote or macro-environment:
1.Business sustainability trend (opportunity)
2.Growing popular support for responsible sourcing (opportunity)
3.Growing popular support for environmentally friendly products (opportunity)
The business sustainability trend focuses on business processes that ensure minimal
environmental impact. In relation, responsible sourcing emphasizes corporate social
responsibility in the supply chain. Starbucks has opportunities to enhance its performance
in these areas. Note that the company already has responsible sourcing policies. Starbucks
also has the opportunity to offer more of its products in recyclable packaging. Thus, in this
part of the PESTEL/PESTLE analysis model, Starbucks Coffee has major opportunities.

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Legal Factors
The legal factors in the PESTEL/PESTLE analysis model are the laws and regulations
on business. Starbucks must address the following legal external factors in its
remote/macro-environment:
1.Product safety regulations (opportunity)
2.GMO regulations outside the United States (opportunity)
3.Increasing employment regulation (threat)
Starbucks has opportunities to improve its performance by satisfying product safety
regulations and regulations on ingredients from genetically modified organisms (GMOs).
Starbucks is already performing well in these aspects. However, increasing employment
regulation, especially in developing countries, threatens Starbucks Coffee’s access to the
labor market. This external factor also impacts Starbucks through increased spending for
human resources. Thus, in this aspect of the PESTEL/PESTLE analysis model, the
identified external factors present mostly opportunities for Starbucks Coffee.
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 “
Recommendations based on Starbucks Coffee’s PESTEL/PESTLE Analysis

This PESTEL/PESTLE analysis shows that most of the external factors in Starbucks
Coffee’s remote/macro-environment present opportunities. However, the company must work
to address the identified threats, especially the threat of substitution linked to the increased
availability of home-use specialty coffee machines. On the other hand, Starbucks cannot do
much but to avoid the threat of bureaucratic red tape. Overall, the PESTEL/PESTLE analysis
framework indicates that Starbucks Coffee has plenty of room for further global growth.

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 Starbucks Coffee Company SWOT Analysis & Recommendations

Starbucks Corporation (also known as Starbucks Coffee Company) maintains its position
as the biggest coffeehouse chain in the world through innovative strategies that utilize business
strengths in overcoming weaknesses to exploit opportunities and overcome success barriers,
such as the threats in the coffee industry environment, as identified in this SWOT analysis. The
SWOT Analysis model is a strategic management tool that assesses the strengths, weaknesses,
opportunities, and threats (SWOT) relevant to the business and its internal and external
environment. In this business analysis case, the SWOT analysis of Starbucks Coffee considers
the strengths and weaknesses (internal strategic factors) inherent in operations in the coffee,
coffeehouse and related businesses. The analysis also considers the opportunities and threats
(external strategic factors) related to the competitive landscape, which is partly based on the
strong force of competition determined in the Porter’s Five Forces analysis of Starbucks
Corporation. Such a competitive environment requires that the company continuously improve
its business strengths to optimize its financial performance and growth trajectory.

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 Starbucks Coffee’s Strengths (Internal Strategic Factors)
This component of the SWOT analysis model deals with the internal factors that the
company can use as strengths to address weaknesses and protect the business against
competition. In this case, Starbucks Coffee’s main strengths are:
1. Strong brand image
2. Extensive global supply chain
3. Moderate diversification through subsidiaries
Starbucks Corporation has one of the world’s strongest and most popular brands. The
company has a growing population of loyal customers, which adds to the stability of the
coffeehouse business. In the SWOT analysis model, the extensive global supply chain
strengthens Starbucks by supporting operations. For example, the company has a global
network of suppliers that are carefully selected based on criteria pertaining to quality, such as
the quality of Arabica coffee beans. Also, the company gradually diversifies its business, such
as through the acquisition or
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 Starbucks Coffee’s Strengths (Internal Strategic Factors)
development of subsidiaries like Ethos Water, Seattle’s Best Coffee, and Teavana.
Diversification minimizes the effects of market and industry risks. The internal strategic factors
identified in this part of the SWOT analysis of Starbucks Corporation shows that the business
has strengths that promote resilience through diversification and a global supply chain.

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 Starbucks’s Weaknesses (Internal Strategic Factors)
Business weaknesses are identified in this component of the SWOT analysis. Weaknesses
are internal factors that reduce or limit business capabilities. Starbucks Corporation’s
weaknesses are as follows:
1.High price points
2.Generalized standards for most products
3.Imitability of products
Starbucks has high price points that maximize profit margins but reduce the affordability
of its products. This internal strategic factor is a weakness because it limits the company’s
market share, especially in areas with relatively lower disposable incomes. Also, this SWOT
analysis considers generalized standards a weakness that limits the flexibility of the coffee and
coffeehouse chain business. For example, the company’s generalized standards for its crafted
beverages reduce these products’ cultural alignment with local target markets and associated
consumer
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 Starbucks’s Weaknesses (Internal Strategic Factors)
preferences. In addition, many Starbucks products are imitable. For instance, small local
competitors could develop beverages that are not the same as but similar to the company’s
products. Even the design and ambiance of the company’s cafés are imitable. This business
environment condition empowers competitors. The internal factors in this part of the SWOT
analysis of Starbucks Coffee Company show that the business must develop strengths to reduce
the adverse effects of imitation and the influence of high price points on the company’s market
share in the global industry.

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 Opportunities for Starbucks Corporation
(External Strategic Factors)
This part of the SWOT analysis model focuses on external
factors that present opportunities for business growth and
development. In this case, the main opportunities available to Starbucks
Coffee Company are:
1.Expansion in developing markets
2.Business diversification
3.Partnerships or alliances with other firms
Starbucks Corporation can increase its revenues through expansion in developing
markets. This opportunity draws attention away from the U.S. market, where most of the
company’s revenues are generated. Also significant in this SWOT analysis is business
diversification, which can improve Starbucks’s long-term stability. For example, through
higher diversification, the company can reduce its dependence on
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 Opportunities for Starbucks Corporation
(External Strategic Factors)
its current industries, thereby improving overall revenue growth
opportunities.
Diversification is currently a minor growth strategy as
shown in Starbucks Corporation’s generic competitive strategy and intensive growth
strategies. The industry environment also presents the opportunity to strengthen the
company’s presence and market share through partnerships or alliances with other firms.
For instance, alliance with major retailers improves distribution and market share of the
company’s consumer goods, such as ready-to-drink coffee. The external strategic factors in
this part of the SWOT analysis show that Starbucks can improve its industry position by
developing its operations to exploit the opportunities in the global industry environment.

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Threats Facing Starbucks (External Strategic Factors)
Threats against the business are identified in this part of the SWOT analysis. Threats
are external factors that reduce or limit business performance. In this company analysis
case, the following are the main threats relevant to Starbucks Coffee Company:
1.Competition involving low-cost coffee sellers
2.Imitation
3.Independent coffeehouse movements
Starbucks Corporation competes against a wide variety of firms in the international market.
For example, the company competes against major restaurant chains that offer low-cost
coffee products. This external strategic factor threatens Starbucks because such competitors
can reduce the company’s market share by competing based on low prices. Also, this
SWOT analysis considers imitation as a major threat against the coffeehouse business. In
light of the company’s weaknesses, the threat of imitation involves firms that try to copy
the taste,
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Threats Facing Starbucks (External Strategic Factors)
look and feel of Starbucks products. In addition, the industry environment is subject to
independent coffeehouse movements. These movements are sociocultural efforts that
support the operations of small independent local coffeehouses, and oppose the expansion
of multinational coffeehouse chains. Such sociocultural trends influence consumer
perception and purchasing behaviors, as shown in the PESTEL/PESTLE analysis of
Starbucks Corporation. Successful marketing campaigns and branding strategies are needed
to counteract the effects of these trends. This part of the SWOT analysis of Starbucks
Coffee Company identifies external strategic factors that impose challenges to international
expansion and market penetration.

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 SWOT Analysis of Starbucks Corporation – Recommendations

“
The industry environment of Starbucks Coffee Company involves diverse challenges,
especially because of the company’s moderate diversification. The coffeehouse chain
business faces issues such as competition, imitation, and social trends that oppose
international players in local markets. Based on the current condition of the business, some
of the most notable strategic management concerns enumerated in this SWOT analysis of
Starbucks Coffee Company are the imitability of products and the corresponding threat of
imitation, the threat of competition involving low-cost sellers, and independent coffeehouse
movements.
A recommendation to protect Starbucks’s business against imitation is to aggressively
innovate,
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 “
,especially in the area of product development. Innovation can make the company’s products
more difficult to imitate. It is also recommended that Starbucks Corporation consider pricing
strategies that attract more customers. For instance, bundle pricing can help address the
threat of competition involving low-cost sellers. Furthermore, a suitable recommendation in
this case is to implement creative marketing and branding strategies that build Starbucks’s
corporate image as a contributor to community development. Such an image can help reduce
sociocultural opposition against the company. These recommendations focus on minimizing
the negative impacts of the internal and external factors enumerated in this SWOT analysis.

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The biggest scandals to ever hit Starbucks

▪ Starbucks is known for many great things: it's is the largest coffee chain in
the entire world. It's regularly named to "best" lists by both Fortune and
Forbes, thanks to the way they treat their employees, the benefits they offer,
and the way they run their business. Of course, it's also known for its
popular seasonal lattes (who can forget the Pumpkin Spice Latte?!) and
sugary Frappuccinos. But one thing the company is known for that's less
than desirable is its tendency to be involved in all sorts of controversies. 

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The biggest scandals to ever hit Starbucks

▪ They may be all about delicious coffee-flavored treats and smiling baristas,
but that doesn't mean Starbucks doesn't have their fair share of problems to
deal with. The coffee chain has been plagued by lawsuits (some silly, while
others were no laughing matter), seemingly endless social media backlash,
and even a boycott call from the President of the United States. Here are
some of the biggest scandals to ever hit Starbucks — some of it's probably
fresh in your mind, but you may have forgotten about a few of these. 

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The biggest scandals to ever hit Starbucks

▪ Around the same time of the underfilling lattes lawsuit, the company was
dealing with two other lawsuits for something similar: using too much ice
in iced beverages. One lawsuit, filed by Chicago resident Stacy Pincus,
claimed that Starbucks instructed baristas to fill iced beverages with much
more ice than liquid in an attempt to make money. The New York Daily
News reported that the Chicago class-action lawsuit wanted $5 million, for
Starbucks to repay any customer who bought an iced drink in the past 10
years. That lawsuit was dismissed a few months later. 

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The biggest scandals to ever hit Starbucks

▪ An almost identical lawsuit was happening in California, at the same time.

Los Angeles resident Alexander Forouzesh sued the company for
underfilling cups with fluid, saying that even without ice, there wasn't
enough liquid in an iced beverage. A few months later, the Washington Post
reported that U.S. District Judge Percy Anderson, of the Central District of
California, dismissed the case, saying, "When a reasonable consumer walks
into a Starbucks and orders a Grande iced tea, that consumer knows the size
of the cup that drink will be served in and that a portion of the drink will
consist of ice. Because no reasonable consumer could be confused by
this..." 

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The biggest scandals to ever hit Starbucks

▪ During the holiday season, Starbucks is known for two things: extra sugary
seasonal drinks, and cups that celebrate the Christmas spirit. But in 2015,
the company decided to take a more non-denominational stance with their
cups. Instead of doing a Christmas-themed design, they debuted simple red
cups. In a statement about the cups, the vice president of the
company, Jeffrey Fields, said, "In the past, we have told stories with our
holiday cups designs. This year we wanted to usher in the holidays with a
purity of design that welcomes all of our stories." 

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The biggest scandals to ever hit Starbucks

▪ Some customers, however, were not pleased. Joshua Feuerstein shared a

video on his Facebook page where he said "political correct-ness" had
prompted Starbucks to "take Christ and Christmas off their cups." He
started a "movement" to go into Starbucks and say your name is
"Merry Christmas," so that employees were forced to write that on the cups.
The video went viral, and Feuerstein told CNN, "I think Starbucks has
gotten the message that the Christian majority in this country has awakened
and are demanding that our voice be heard." Much social media backlash
ensued, with many backing Feuerstein, and many defending Starbucks. 

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The biggest scandals to ever hit Starbucks

▪ Even then-presidential candidate Donald Trump weighed in on the issue,

saying "I have one of the most successful Starbucks, in Trump Tower.
Maybe we should boycott Starbucks? I don't know. Seriously, I don't care...
If I become president, we're all going to be saying Merry Christmas again,
that I can tell you."

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