Political Economic

 Industry-specific rules and regulations  Buying power of consumers

 The level of relationships between USA and  Local currency exchange rates
countries that produce coffee beans
 Local economic environment within each market
 The level of political stability within a country Starbucks operates

 Taxation level

Social Technological

 Changing family patterns in USA and Europe  Emergence of innovative technology

 Consumer preferences  Biotechnological developments

 Changing work patterns  Developments in agriculture

 Changes in lifestyles of population

 The level of education of population in local

markets

 Changing values among population

Environmental Legal

 Environmental rules and regulations  Introduction of policies and regulations by health

authorities about caffeine production and
 Environmental disasters in countries producing consumption
coffee beans
 Introduction of tougher customs and trade
 Global warming and other environmental issues regulations
in a global level
 Licensing regulations related to the industry.

Pestel Analysis-nya StarBucks

Strengths Weaknesses

 High quality of products  Tall management structure

 Extensive range of staff benefits contributes to  Laissez Faire management style

employee morale
 Occasional lack of workforce on the floor
 Effective utilisation of information technology
 High turnover rate among employees
 Strategic relationships with suppliers
 High level of prices

 Over-saturation of markets

Opportunities Threats

 International market expansion (especially  Frequent changes in the market trends

Chinese and Indian markets)
 Better value offered by local cafes
 Innovate products and services
 Increase of coffee beans prices as a result of
 Increasing the product ranges activities of various non-government
organisations.

SWOT Analysis-nya Starbucks

Value-Chain Analysis-nya Starbucks

Starbucks McKinsey 7S’ Framework

The rationalised plan for effective leadership and management for Starbucks
Corporation is best presented through McKinsey 7S’ Framework. It has to be noted that “the essence of
McKinsey’s 7S model is that a firm is the comprehensive sum of its parts, and that the internal dynamics
of an organisation clearly determine that organisation’s ability to compete, the premise being that both
the strategy and the structure of the organisation determine management’s effectiveness” (Joseph and
Mohapatra, 2009, p.59).
The 7S’es of the framework are divided into hard and soft elements. Strategy, structure and systems are
considered to be hard elements of the framework, whereas, soft elements consist of shared values,
skills, style and staff. Starbucks management have direct influence and control over the hard elements
of the framework, whereas the soft elements are usually influenced by corporate culture, and therefore
they are more difficult to control.

Hard Elements

Strategy. Starbucks has to be concentrating on the quality of its products at the same time offering
excellent level of customer services. The main strategy for the company is to increase revenues through
effectively positioning Starbucks stores as ‘third place’ environment.

Structure. Flat management structure needs to be achieved through de-layering. Specifically, the
positions of assistant managers need to be eliminated within the stores, after which there will be only
three levels of management – store manager, shift manager and customer assistants, thus considerable
amount of costs can be saved and organisational efficiency can be increased.

Systems. Rather than daily roles among customer assistant being appointed by shift supervisors, the
rotation system of duties needs to be introduced that will reduce the potential of conflicts among the
workforce, and the work process would be more interesting.

Soft Elements

Shared values. Currently effective set of values are being promoted by management at Starbucks,
however, more effective initiatives and programs need to be devised that would ensure these values
being shared and appreciated by all members of the workforce.

Skills. Necessary training and development programs need to be organised in a systematic manner and
thus it has to be ensured that all members of the workforce are equipped with skills necessary to
achieve a high level of customer satisfaction.

Style. Management style within stores should be changed from Laissez Faire to inspirational
management. In this way a greater number of the workforce can be effectively motivated for higher
performances with less financial resources.

Staff. Only capable and promising candidates need to be employed by Starbucks and employees have to
be provided growth potential.

References

 Joseph, SJ & Mohapatra, S, 2009, Management Information Systems In Knowledge Economy,

PHI
Starbucks Porter’s Five Forces Analysis

Posted on January 1, 2014 by John Dudovskiy

Porter’s Five Forces represents theoretical framework that is used for industry analysis and strategy
development. Specifically, the five forces shaping competition within the industry consist of the
intensity of rivalry among the competitors, the risk of entry of new competitors, the bargaining power of
buyers, bargaining power of suppliers and the threat of substitute products and services.

The nature of the relationships among these forces is best presented in the following figure.

New Picture2 Starbucks Porter’s Five Forces Analysis

Starbucks Coffee Company is a global coffee company and a coffeehouse chain headquartered in
Washington, the US and the company has generated a consolidated revenues of $14.9 billion during
2013 with more than 200,000 partners, referred to as employees (Starbucks Annual Report, 2013).
Rivalry among existing competitors is high within the industry Starbucks operates in with major
competitors like Costa, McDonald’s, Caribou Coffee, and Dunkin Donuts and thousands of small local
coffee shops and cafes.

Starbucks customers possess large amount of bargaining power because there is no and minimal
switching cost for customers, and there is an abundance of offers available for them.

The threat of substitute products and services for Starbucks is substantial. Specifically, substitutes for
Starbucks Coffee include tea, juices, soft drinks, water and energy drinks, whereas pubs and bars can be
highlighted as substitute places for customers to meet someone and spend their times outside of home
and work environments.

Starbucks suppliers have high bargaining power due to the fact that the demand for coffee is high in
global level and coffee beans can be produced only in certain geographical areas. Moreover, the issues
associated with African coffee producers being treated unfairly by multinational companies are being
resolved with the efforts of various non-government organisations, and this is contributing to the
increasing bargaining power of suppliers.

However, the threat of new entrants to the industry to compete with Starbucks is low, because the
market is highly saturated and substantial amount of financial resources associated with buildings and
properties are required in order to enter into the industry.