External and Internal Environments Analysis: Starbucks Coffee Company
External and Internal Environments Analysis: Starbucks Coffee Company – Using the corporation you chose from the Week 3 assignment, Strategic Management and Strategic Competitiveness, examine the industry in which the entity operates…
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Paper details
Overview
In this assignment, you are to use the same corporation you selected and focused on for the Strategic Management and Strategic Competitiveness assignment. *Starbucks Coffee Company*
Using the corporation you chose from the Week 3 assignment, Strategic Management and Strategic Competitiveness, examine the industry in which the entity operates. Use any or all of the following resources to conduct research on the company:
- Company website.
- Public filings from the Securities and Exchange Commission’s Filings & Forms page.
- Strayer University’s online databases.
- The Lexis Advance database.
- Other miscellaneous sources. Note: the company’s annual report will often provide insights that other resources may not include.
Use the External and Internal Environments Template [DOC] to ensure that your assignment meets the requirements.
Requirements
Write a 4–6 page paper in which you do the following:
- Choose the two segments of the general environment that would rank highest in their influence on the corporation you chose.
- Assess how these segments affect the corporation you chose and the industry in which it operates.
- Considering the five forces of competition, choose the two that you estimate are the most significant for the corporation you chose.
- Evaluate how well the company has addressed these two forces in the recent past.
- With the same two forces in mind, predict what the company might do to improve its ability to address these forces in the near future.
- Assess the external threats affecting this corporation and the opportunities available to the corporation.
- Give your opinions on how the corporation should deal with the most serious threat and the greatest opportunity. Justify your answer.
- Give your opinion on the corporation’s greatest strengths and most significant weaknesses.
- Choose the strategy or tactic the corporation should select to take maximum advantage of its strengths, and the strategy or tactic the corporation should select to fix its most significant weakness. Justify your choices.
- Determine the company’s resources, capabilities, and core competencies.
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Solution
External and Internal Environments
Business entities exist in environments defined by unique operational aspects. Each component of the business environment is considered to influence an organization’s performance. Therefore, it is ideal for business organizations to have ample awareness about their environment and its influence. The significance of understanding the environment’s influence on an organization is illustrated by an evaluation of the Starbucks Coffee Company.
General Environment
The general environment in which business organizations operate is subdivided into distinct segments. It is the kind of performance realized in each segment that contributes to an organization’s overall performance. Two critical segments are illustrated to have huge impacts on Starbucks’ performance. The two segments are the socio-cultural and political factors.
Sociocultural Segments
The socio-cultural environment refers to the community’s way of life. Organizations are encouraged to have better insights regarding the social environments to determine whether its influence on its operations is positive or negative. An environment whose social-cultural practices align with a firm’s products and operations positively influences its performance.
The socio-cultural segment in the Starbucks environment is depicted by growth in coffee consumptions habit in society. Coffee consumption is fast becoming part of human beings’ culture. For instance, it is common for friendship and business discussions to be held in coffee joints. Starbucks aims to further develop better connections by creating better interactive sessions that are supported by the availability of unique coffee products (Starbuck, 2020).
The Political Segments
Business organizations tend to consider the political environments of the nations they expand their operations. The political climate of the foreign regions greatly determines the efficiency of the organization and revenue levels. Countries’ relationships, business and market integration, and infrastructure developments are considered key in determining an organization’s success in foreign territories.
Starbucks, as a company, has opened up branches in different nations. The company has more than 31,000 stores across the globe. Setting up branches in diverse countries indicates that the organization’s activities can be affected by the global political environment. Besides, Each of Starbucks’ stores in other countries is influenced by the region’s political climate.
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Five Forces of Competition
Starbucks relies on Porter’s five forces analysis to attain a competitive advantage over its coffee industry peers. The application of Porter’s five forces analysis is seen in the past actions the organization has taken to enhance its competitive edge. In particular, supplier power and product substitution forces have been significant in enhancing the firm’s competitiveness.
Power of Suppliers
Starbuck recognizes suppliers’ contributions to steering the competitive nature of the organization. Suppliers are perceived to be the first avenue to attaining the quality needs of customers. The situation is highlighted by Starbuck’s ability to access quality coffee beans from its suppliers. The organization has, therefore, implemented various strategies to enhance better relationships with suppliers. For instance, the organization introduced ethical coffee sourcing policies.
The guidelines promote transparency in the coffee bean purchasing process, thereby improving suppliers’ confidence. Starbucks also opened its first farmers’ support center in 2004 in San Jose, California. The move would be adopted in several other branches. Creating the farmer support centers aims to answer their queries and train them of the diverse standards required to meet Starbuck’s quality demands. The strategy is a means to improve its relationship with suppliers.
The threat of Similar Products
Starbuck has continued to manufacture better and unique products to fight off the competition that might arise from competitors. The organization’s product uniqueness is seen in its launch years when it offered customers espresso beverage and brewed coffee at a time non-existed in America. Another essential and unique nature of Starbucks’ products is seen in the organization being the first to develop beverage cups made of recyclable plastics. Likewise, Starbucks’ product uniqueness is seen in eliminating artificial transfers in its espresso beverages, thus offering customers unique healthy products.
Future Improvements
Starbucks should enhance several aspects of its supply and product uniqueness for its future benefit. The organization prioritizes the quality of coffee beans as a competitive strategy. The situation is illustrated by Starbuck’s focus on building better relationships with the farmers. However, the challenge comes from the suppliers getting bargaining power, thereby dictating the cost of materials.
Starbucks’ reliance on specific farmers for the supply of coffee beans provides suppliers with more bargaining power. Starbucks should, therefore, expand the scope of its suppliers. The strategy will allow the organization to gains access to many sources of raw materials. In return, Starbucks will save much money due to a decline in supplies’ cost.
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Likewise, Starbucks should also enhance the uniqueness of the complimentary product it offers alongside coffee. The organization has increased the range of products it offers, for instance, ethos water and different fresh foods such as sandwiches and pastries. However, the complementary products do not reflect the same level of uniqueness seen in the coffee brands. Starbucks should, therefore, ensure that it enhances the uniqueness of its complementary products to attain the same kind of success it has achieved with the coffee.
Greatest External Threat
The most significant external threat to Starbucks is competition. The organization’s external nature is seen because the organization cannot manipulate them to bring the desired goals. On the contrary, Starbucks has to adjust its operations to respond to the growing competition. The organization’s competition includes both small and big organizations offering coffee to customers.
Small coffee organizations offer their customers with low priced coffee. It is not only the small organizations that pose as threats to Starbucks. On the contrary, it is the big coffees organizations that act as the biggest competition for Starbucks. Organizations such as McDonald’s and Dunkin’ Donats are considered significant and possess the resources needed to challenge Starbucks’ market share.
Greatest Opportunity
Starbucks’ most significant opportunity lies in its ability to expand to other territories. Access to more regions means that Starbucks would improve its market share, thereby realizing more profit. The expansion drive has been part and parcel of the organization ever since its inception. The strategy’s effectiveness is seen in the firm’s rise from a single store in Seattle to more than 22,000 as of 2015 (Starbucks, 2016).
Despite the high number of stores across the world, Starbucks continues to tap into emerging markets. The organization is continuously looking for regions perceived to show excellent market potential. Places such as China and other developing nations are considered as the next avenues for Starbucks’ expansion.
Strengths and Weaknesses
As an organization, Starbucks is portrayed as having both strengths and weaknesses from its internal environment. One of the critical strengths for Starbucks is the strong brand the organization has built. The organization is considered the leading brand in the food and beverage industry. Another strength of the organization is seen in the strong financial position Starbucks enjoys.
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The robust nature of Starbucks’ finances is seen in its 2019 financial records that showed it earned profits worth $ 3.6 billion from a revenue collection of $256.5 billion (Starbucks, 2020). The ability to increase the number of stores is another keys strength of the organization and is illustrated by growth from 1886 stores in 1998 to 31256 in 2019.
Likewise, Starbucks has several weaknesses. One of the significant weaknesses of the organization is its high pricing. Starbucks’s prices are depicted to be relatively high for most of the working population compared to that of competitors. The situation thus acts as a deterrent to customers from visiting Starbucks. Also, some of Starbuck’s products’ standardized nature makes it challenging to attract customers in specific markets. The standardized nature of the products makes it challenging to meet the needs of different market preferences. Likewise, Starbucks’ products look similar to those of its competitors.
Strategy
Starbucks can deploy several strategies to enhance its strengths and improve its weaknesses. Starbucks should continue with its strategy to identify potential markets to set up new stores. The strategy has proven to work, as depicted by the high rate of financial success the organization has attained. Starbucks can also improve its various products by coming up with an innovative menu. The move will lead to the organization coming up with unique products. Also, the organization should put considerations of customer needs in different markets. The strategy will allow the organizations to meet the market needs of different consumers.
Resources, Capabilities, and Core Competencies
Starbucks’ operations are influenced by the possession of diverse resources, capabilities, and critical competencies. The availability of capital depicts the primary resource. It is access to a vast pool of funds that have allowed Starbucks to increase its stores. On the other hand, the capabilities are seen in the organization’s ability to carry out intense acquisition strategies that have allowed it to acquire other firms. The staff knowledge and skills depict Starbucks’ core competencies. It is the knowledge and skills that have allowed Starbucks to develop unique products and attain operational efficiencies.
References
- Starbucks. Starbucks Company Timeline. 2016. https://www.starbucks.com/about-us/company-information/starbucks-company-timeline Accessed November 11th, 2020
- Starbucks. Fiscal 2019 Annual Report. 2020. https://s22.q4cdn.com/869488222/files/doc_financials/2019/2019-Annual-Report.pdf Accessed November 11th, 2020
- Starbucks. Annual Reports. https://www.annualreports.com/Company/starbucks-corp Accessed November 11th, 2020
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