This study is dedicated to shed more light on the analysis of internal and external influences of Starbucks Corporation. This will involve in-depth analysis of the strengths, weaknesses, opportunities, and threats that Starbuck Corporation is experiencing as a result of competition from other companies. This paper will also discuss the aspects of Porter’s five forces and how it has influenced the policies and businesses undertakings of this company.
Statement of the Problem Starbucks faces stiff competition for market share from its rivals and therefore it has to redesign its objectives in order to remain successful and international in scope. The main strategic problem that faces Starbucks Corporation is that of inconsistency of drinks being made differently by workers within one store location and also the drinks made in different store locations varies in terms of quality and how they taste differently which has over the past contributed to Starbucks Corporation failing to retain a substantial market share as a result of poor quality of drinks that they offer to its customer.
Businesses has evolved and therefore different organizations are embarking on strategies to attract and retain there customers in order to survive in the ever changing business environment. With the help of SWOT and Porter’s five forces such problems can be easily solved if and only the management of the Starbucks Corporations formulate viable strategise that will result in attaining set objectives.
The main objective of this study is therefore to analyze the business environment in order to design action plans that will ensure the success of the corporation for example how the company can produce quality drinks consistently in all departments within the corporation and in all of its branches thus attracting and retaining the customers. (Starbucks Corporations, 2008) SWOT Analysis By use of SWOT analysis, situation analysis is very decisive to Starbuck Corporation and can be analyzed in two aspects; analysis of external environment and analysis of internal environment.
Usually external environment analysis discloses the firms’ opportunities and threats that are either present or potential, whereas the internal environment analysis discloses the firms’ strengths and weaknesses that are inherent in its business settings. Internal Factors The major endeavour of any company is to make best use of profits so as to give the best probable returns to owners for the capital they have devoted in the firm. In order to realize this objective, firms must be effective and efficient in its production purposes.
For that reason, any firm including Starbucks rely on its internal features for resourceful and successful operations. Research indicates that the main internal fundamentals comprises; physical resources and equipment, financial strength, competent personnel, production and operations, and market competence. Such features results to either strengths or weaknesses of a firm. (Starbucks Corporations, 2008) Starbucks Strengths Strength in this context can be described as distinguishing competence that a business can do comparatively better than its rivals and which the firm has and enhance the accomplishments of the set objectives.
Starbucks Corporation has a strong brand name that aids the corporation to have a competitive advantage when compared to its rivals. The company’s drinks are well known and therefore it is best placed than its rivals. The other strength is that of best marketing network that have made the corporation in the past to do well in its operations. Starbuck Corporation has opened numerous branches and thus it has distributed its drinks without any distribution problem.
The corporation has the most excellent distribution channels that have been a strength that has appreciably assisted the corporation to control the drink market for a long time over the past. Another strength associated with Starbuck Corporation is the capability to spot the market segments and hence an excellent competitive position of the corporation. Starbucks have a lot of customers that it has been serving over the past when compared to its rivals which have not been able to secure large market share.
Also the corporation have a strong financial base thus it has embarked in the future in developing core operating units that have aided the corporation to achieve firm structure. Weaknesses of Starbucks A weakness in this context can be described as any feature of the corporation that hinders the corporation from achieving its objectives. More often than not, it entails the corporation’s assets, resources, and potentials. Most up-to-date research reveals that Starbucks Corporation is faced with a small number of weaknesses that has hindered the corporation’s success.
The first weakness reported of late is that of production of poor quality products that has left its customers dissatisfied and has opted to purchase the corporation substitute’s drinks offered by its competitors. More specifically the taste of the drinks has been questionable and customers have reported the deviations between the different tastes of drinks from different branches of the corporation. (Starbucks Corporations, 2008) The other weakness is that of corporation’s policies, measures, and guiding principles which are reported to be weak since in some market segments the corporation have performed poorly.
Such regulations have been directed to the human resources, that is, the workforce and the management team that have been performing disappointingly of late in their respective responsibilities of production of drinks. Negligence on the side of the marketing executives has been pointed out and reports suggest that they have not come up with suitable marketing strategies to deal with with the ever increasing competition in the marketplace in terms of quality drinks.
There has been a spat that the drinks that the corporation is currently producing are detrimental to human health, an issue which has led to declining of its market share. Also the systems of production, controls, and work methods have been under scrutiny in the past few years for such poor performance. There have been allegations that the work methods used are not expedient in the corporation if they need to cope with change and the ever increasing rivalry. External Factors External factors are usually divided into micro and macro environment.
Micro environment is about actual and political transactions used in a firm and its environment in day to day activities of a company that include; customers, suppliers, intermediaries among others. On the other hand macro environment is about external higher order forces which do not affect an organization dealing as yet or directly but may do so in the future. External factors may include; economic, technological, competition, political/legal, and social-cultural factors. However, external environment of a company may be explicitly explained when opportunities and threats of the firm are considered.
Opportunities of Starbucks An opportunity in this aspect can be defined as any event, development, or a feature of the external environment which creates conditions that are favourable or advantageous to the business in relation to a particular objective or set of goals to be attained. It is an attractive venture for a corporation’s operations which if exploited will lead to a significant upward change with desired results such as increase in profits margins and growth. There are many opportunities that exist for Starbuck Corporation in relation to emerging markets all over the world.
There are great emerging markets in Africa, Asia, and Australia among other countries. There is great investment demand in these places that Starbucks can maximize on it. There is significant increase in the consumption of drinks which creates a great opportunity for Starbucks to expand their investments. The technological innovation, for example, that of e-commerce should be utilized by the corporation and in order to result to expansion of the market share of the corporation thus increasing its profits and enhancing growth.
Since Starbucks Corporation is among the largest firms, its competitive advantage allows the corporation to penetrate to more new markets than its rivals. If the company can fully utilize this it will have the upper hand in terms of competition and explore new markets and profit margins will shoot up thus gaining more power to compete globally. The corporation can also utilize its opportunity of strong financial base and embark on acquiring new machines that will aid in producing quality drinks. Threats of Starbucks
A threat can be referred to as an environmental development or event which will present problems or challenges likely to hinder the achievement of organizational objectives, for example, competition, high interest rates, government legislations, declining real income among others. Starbucks Corporation is now facing stiff competition from its main rivals thus there has been a drop in the market shares thus a reduction of their profits. The marketing strategies of Starbucks need to be reviewed in order to cope with the increasing competition.
For it to continue succeeding both locally and globally, the marketing managers have to incorporate recent technological innovations like doing business online. (Starbucks Corporations, 2008) There are times when government regulations may hinder the operation of the organization. This can also be termed as a threat. Under this, Starbuck Corporation over the last few years in some countries have been experiencing challenging times whereby some states have passed laws that do not favour using drinks of Starbucks as a result of low quality.
Other threats include increased barriers in trade; it has become hard for the company to operate both within and outside because of the quality of products. There have been stringent regulations regarding to imports and exportation procedures. Another threat that has hindered the success of the company of late is the ever decreasing income of the consumers of its drinks. This may have arisen because of the increase in inflation and high interest rates thus raising the standard of living and hence cannot afford to purchase the drinks of the corporation.
Porter’s five forces It is very significant for the Starbucks to use the porter’s five forces to ensure that they strategically position themselves in a way that they become very competitive to make sure that they remain in business and also make and maximize profits. Managers have a very important role in ensuring that they do enough analysis so that they employ strategies to make them make the best out of the business that they do.
Porter’s forces can be analyzed to act as yard sticks for the supermarkets and the drug companies to position themselves so as to do a profitable business as they face a very competitive and saturated environment that is very sensitive to changes. The Closeness of Substitutes Substitutes are alternative products that have the ability to satisfy similar needs and give solutions. Substitutes of Starbucks drinks reduce the potential returns since they place a ceiling on the prices offered for same drinks by other companies.
Starbucks Corporation faces a big challenge from its rivals because they also produce drinks that serve the same purpose and satisfaction of the customers. (Porter, 1985) Due to research, Starbucks competitors are discovering new drinks that are either more effective or have good taste when compared to Starbucks’s drinks. This has become a very big challenge since the market has become open and new discoveries are welcome every time. Customers have always been tempted to try the new drinks to see whether they are more effective and sweet.
The Intensity of Rivalry among Established Companies Starbucks Corporation faces a very competitive environment that has a big concentration of rival competitors making it a very competitive venture in business. Starbucks compete with its rivals across all levels and try all strategies to ensure that they beat their rivals and try to do extensive marketing and innovation to attract more customers every day. There are many established companies that are more organized and have better strategies than the Starbuck and therefore have a competitive edge over it.
Starbucks is an established corporation and therefore it has a well developed network that has a good client base and that is supported by customer loyalty and therefore can use such opportunity to lock out the new companies that try to make an impact by entering into the existing markets. Customers will always be pulled to go to the already established firms that they are used to them and will always feel that their services are the best and therefore Starbucks’s should utilize such an opportunity.
The new companies are highly challenged and have positioned themselves strategically by ensuring that they offer quality drinks well and also price such drinks fairly in order to attract customers. The bargaining power of suppliers Suppliers take advantage of their unique supplies to ask and bargain for what they want and enjoy the monopoly and charge expensively for the products or services that they offer. Customers are very sensitive to any changes that may affect them that are caused by the bargaining power of the suppliers.
Suppliers are a competitive threat to Starbucks Corporation because they can raise the prices of new and the old supplies and therefore making the customers to try substitute products that can satisfy the same need. Suppliers may cost the corporation a lot of financial constrain if they switch and fail to supply their products as it is involving to get new and reliable suppliers that can give quality and be efficient all the time. (Porter, 1985)
The determinants of the suppliers’ power in Starbucks Corporation include: suppliers concentration in one particular place that is central in location, volume of suppliers that they offer to the corporation and finally the costs related to the total purchases that the corporation does. Starbucks suppliers have always ensured that they take advantage of their strengths to bargain and register as much profits as possible and make the corporation to accept what they offer and fix high prices.
The Risk of Entry by Potential Competitors There are new competitors that have interred into business with an intention to bring new capacities that never existed before so that they may give competition to Starbucks Corporation. Every new entrant into market is a big threat to the Starbucks since they may pose a big danger when they come and take the existing customers by intimidating them with good attractive services and quality drinks.
The higher the entry barriers, the less it is likely for outsiders to enter the industry; however the business that Starbucks operate have no limits to entry and therefore the company is prone to intense rivalry. (Porter, 1985) The Bargaining Power of Buyers This is the marketplace of outputs. Customers of Starbucks Corporation put the businesses a lot of pressure since they are very sensitive to any change in drink quality and are always ready to window shop and find where quality drinks are being offered.
The availability of substitute drinks has made it very challenging for the Starbucks management and are therefore it has the task of learning the behavior of its customers so as not to scare them to their competitors and therefore reducing their profitability. It is very important for the Starbucks Corporation management to highly depend on market intelligence so as to be very strategic in its pricing since there are many companies that are ready to offer quality drinks, reduce prices by negligible amount that can attract customers from competitors.
Starbucks Analysis The corporation has responded well in terms of new technologies that come up as a result of globalization. The company has utilized the use of online marketing and also incorporated the use of new technologies in production and operations activities which have seen significant increase in productivity. The company generally has responded to globalization by opening subsidiaries in many countries thus increasing its market share and hence profitability of the company. (Starbucks Corporations, 2008)
Nevertheless, there has been a considerable criticism that Starbucks management has failed to be effective and efficient in its business activities because they have practiced unacceptable managerial activities of planning, organizing, directing, and controlling. The company has not ensured that the respective managers of respective departments are well equipped with human, technical, and conceptual skills that give them an opportunity to integrate the managerial activities above in order to produce results expected from their departments.
The absence of such skills by managers has led to the company performance decreasing in some of its potential markets. Starbucks Corporation has been criticized for not building a strong human resource relationship with its entire workforce who has failed to enhance the success of corporation. The company does not recruit its employees based on their qualifications and their competence. They have not achieved effectiveness and efficiency because they have not developed their staff through training and have not adopted proper compensation systems that have in turn demoralized the employees in their work.
Such employees have not been able to cope with effects of competition and thus they have produced poor or low quality drinks. (Starbucks Corporations, 2008) Decisions regarding to employees, operations management, and the marketing decisions have not been constantly revised by the management of the corporation in order to match international standards that will foster success in business environment. For example, employees have not been properly trained to cope with new changes like introduction in technology.
Further, marketing strategies developed does not ensure fair competition in the market, and the products of the corporation have not been developed and designed to meet required international standards. However, many companies who deal with sale of drinks have also diversified and fight for market share with Starbuck Corporation, a development which has given the corporation rough time in coming up with viable marketing strategies (Starbucks Corporations, 2008)