Business

Principles,
Tools, and
Techniques
Application
 Business entities are important to country’s
economic growth. It enables to create and
services, provide jobs for individuals to generate
income and accumulate wealth and generate
revenue for the government which enables to
provide basic social services. Moreover, it
produces goods and services that individuals
needs and wants. Business to thrive and grow
need to used tools ad techniques to continuously
exist thus best practices and techniques need to
Applying business
principles, tools,
and techniques in
participating in
various types of
industries in the
locality
 There are various business tools and
procedures available in the business
analysis; it all depends upon the
organization’s current practices and how
they would like to use it. Some of the more
common analysis tools and techniques
include SWOT Analysis is a simple and
practical framework for identifying
strengths, weaknesses, opportunities
and threats that a company faces. It is
essential to leverage strengths, minimize
threats and to take advantage of available
1. How to conduct
the SWOT
Analysis? 1. Identify the Strengths of an
internal and consumer perspective.
2. Identify the Weaknesses of an
internal and consumer perspective.
3. Identify the Opportunity from an
external perspective.
4. Identify the Threats from an
external perspective .
5. Establish the priorities form the
Develop a strategy to address issues in the
SWOT,
such as:

• How can we use our strengths to take advantage of

the opportunities identified?
• How can we use these strengths to overcome the
threats identified?
• What do we need to do to overcome the identified
weaknesses to take advantage of the opportunities?
How will we minimize our weaknesses to overcome
the identified threats? 6
2. TOWS Matrix

Is a way of taking a SWOT Analysis

further, to provide actionable links
between the different parts of your
business and environment. It’s all
about the four key factors, as follows.

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 Strengths/ opportunities (SO): how will you use
your strengths to capitalize on your
opportunities?
 Weaknesses/ opportunities (WO): which
weaknesses do you need to overcome to exploit
your opportunities? How will you overcome
these weaknesses?
 Strengths/ threats (ST): how will you use your
strengths to overcome external threats?
 Weaknesses/ threats (WT): which weaknesses
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3. PESTLE/PESTEL (Political, Economic,
Social, Technology, Environment , and
Legal)

Its opportunities and threats are better

than SWOT, the direction of business
change, projects that will fail beyond your
control, and country, region, and market
issues through helping you create an
objective view. The following should be
taken into consideration in the conduct of 9
 Political
factors
Include government tax policies and
regulation; it may increase the tax rate in
a State and Country that my affect
business. Government laws on
competition in the marketplace is another
political factor, that is provide incentives
to growing businesses and cut down
incentives to regular business like yours. 10
 Is there any expected Elections on State
and National Level and how it shifts
government policies?
 Who are the upcoming contenders for
power? What is their plan for business
policy and regulation?
 What is the current and impending
legislative change?
 11
 What is the current disposable income of
costumer and how it can change it the
upcoming years?
 Currently, the economy is stable or not. It is
a growing economy, declining and a
stagnating economy
 Whether the exchange rate is stable or not.
What is the tendency of fluctuation?
 What are the prevailing criteria of credit
availability, how the credit criteria affect the 12
 Economic
Factors

An economic factor is a factor that

can affect and influence an
individuals’ financial status. They
include education, employment
status and income 13
 Social Factors

The things that affect the

habits and spending of
customers. These include:
demographics. lifestyles. tastes
and trends. 14
 Do you know about the overall population, there is a
growth or contraction in the population you are
operating?
 Know about social attitudes that might affect your
business. Are there any noticeable socio-cultural
changes in the environment?
 What is the level of education and health in the
society you are operating in? Are there any changes
in these external environment factors, and how it
affects you?
 What are the religious beliefs and how it affects your
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 Technological Factors
Technological factors include
production techniques, information and
communication resources, production,
logistics, marketing, and e-commerce
technologies. These affect how an
organization operates, sells its
products, interacts with, and gathers
intelligence on customers, suppliers, 16
 Are there any innovative technologies your
business could use?
 If you access new technology, how it benefits
you by redefining your product or cut costs,
etc.?
 How changing technology affect your
costumer base?
 What technologies your competitor is using
that positively affect their products and
services
 What other technological factors should you
17
consider?
 4. Porter’s Five
Factors
Helps you understand where your business power
lies in present competitiveness and future
positioning strength. It forces you to analyze
suppliers and customers’ bargaining power, the
threats to new entrants and substitutes and
competitive rivalry in your marketplace. Using this
tool helps you understand the balance of power and
to identify areas of potential profitability. According
to Porter, this model should be used at the line pf
18
“
How do
the 5
Forces
work?
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 Competitive rivalry

A measure of the extent of

competition among existing
firms. Intense rivalry can
limit profits and lead to
competitive moves,
including price cutting,
increased advertising
expenditures, or spending
on service/product
21
improvements and
 What’s the level of competition in
your company’s sector?
 Who are you large, direct
competitors? What advantages do
they do to stay competitive?
 Who are your smaller, independent
competitors? What do they do to stay
competitive?

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 The Threat of
Substitute Products

Companies are concerned that substitute

products or services may displace their own. The
threat of substitution is high when rivals, or
companies outside the industry, offer more
attractive and/or lower cost products. Buyers
then have the opportunity to make a
performance/price trade-off. The cost of
switching is also a factor. If it is high, the threat 23
 How easy is it to find an
alternative to your products or
services?
 What aspects of your
products/services can your
customers do manually?
 How do cheaper substitutes
measure up against your company 24
 Bargaining power of
buyers

Buyers have the power to influence price

and the quantity of products sold.
Powerful buyers can bargain on volume or
switching costs or they can find substitute
products. Price sensitivity also impacts
the buyer/seller relationship.
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 How easy is it to find an
alternative to your products or
services?
 What aspects of your
products/services can your
customers do manually?
 How do cheaper substitutes
measure up against your company 26
 The threat of New
Entrants

To defend against the threat of new

competitors, companies depend on
barriers to entry within an industry such
as customer loyalty, product
differentiation, market share, and cost
advantage. 27
 What’s the threat of new
businesses starting in this sector?
How easy is it to start up in this
business?
 What are the rules and
regulations?
 What finance would a start-up
need?
 Are there barriers to entry that 28
 Bargaining power of suppliers

Suppliers have the power to influence

price, as well as the availability of
resources/inputs. Suppliers are most
powerful when companies are
dependent on them and cannot switch
to other suppliers because of higher
costs or lack of alternative sources. 29
 How many suppliers are in the
market?
 Are there many options (which can
lower prices) or just a few (which
can raise them)?
 How easy is it to switch, what’s the
cost?
 How would changing suppliers
affect your products/services? 30
Let’s ponder our
thoughts through
a mini case of
Starbucks
applying the
different business
tool:
HISTORY OF STARBUCKS

Starbucks, American company that is the largest

coffeehouse chain in the world. Its headquarters are
in Seattle, Washington. It was founded by
Jerry Baldwin, Gordon Bowker, and Zev Siegl.
Our story begins in 1971 along the cobblestone streets of Seattle’s
historic Pike Place Market. It was here where Starbucks opened its
first store, offering fresh-roasted coffee beans, tea and spices from
around the world for our customers to take home. Our name was
inspired by the classic tale, “Moby-Dick,” evoking the seafaring
tradition of the early coffee traders.
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HISTORY OF STARBUCKS
Alfred Peet, a coffee-roasting entrepreneur, was a
major inspiration to the founders of Starbucks. Peet
was a Dutch immigrant who had begun importing
fine Arabica coffees into the United States during
the 1950s. Peet’s success encouraged the
Starbucks founders to base their business model on
selling high-quality coffee beans and equipment,
and Peet’s became the initial supplier of green
coffee beans to Starbucks. The partners then
purchased a used roaster from Holland, and
Baldwin and Bowker experimented with Alfred
Peet’s roasting techniques to create their own 33
HISTORY OF STARBUCKS
Ten years later, a young New Yorker named
Howard Schultz would walk through these
doors and become captivated with Starbucks
coffee from his first sip. After joining the
company in 1982, a different cobblestone
road would lead him to another discovery. It was
on a trip to Milan in 1983 that Howard first
experienced Italy’s coffeehouses, and he
returned to Seattle inspired to bring the warmth
and artistry of its coffee culture to Starbucks. By
1987, we swapped our brown aprons for green
ones and embarked on our next chapter as a 34
HISTORY OF STARBUCKS
Starbucks would soon expand to Chicago and
Vancouver, Canada and then on to California,
Washington, D.C. and New York. By 1996, we
would cross the Pacific to open our first store in
Japan, followed by Europe in 1998 and China in
1999. Over the next two decades, we would
grow to welcome millions of customers each
week and become a part of the fabric of tens of
thousands of neighborhoods all around the
world. In everything we do, we are always
dedicated to Our Mission: to inspire and nurture
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Coffee and Craft
It takes many hands to craft the perfect cup
of coffee – from the farmers who tend to the
red-ripe coffee cherries, to the master
roasters who coax the best from every bean,
and to the barista who serves it with
care. We are committed to the highest
standards of quality and service,
embracing our heritage while innovating to
create new experiences to savor.

36
Starbucks Partners

We like to say that we are not in the coffee

business serving people, but in the people
business serving coffee. Our employees –
who we call partners – are at the heart of
the Starbucks experience. We are
committed to making our partners proud
and investing in their health, well-being and
success and to creating a culture of
belonging where everyone is welcome.
37
SWOT ANALYSIS OF
STARBUCKS
STRENGTHS

 Strong brand image

 Strong financial performance
 Extensive international supply chain
 Acquisitions
 Moderate diversification
 Quality, Taste and Standardization
 Efficiency, Strategic, Planning &
Reinvestment Strategy
 Employee treatment S
38
SWOT ANALYSIS OF STARBUCKS

WEAKNESS
 High prices ES

 Imitability of products
 Generalized standards for most
products
 European Tax avoidance
 Procurement practices
 Recall of products
W 39
SWOT ANALYSIS OF
STARBUCKS
 Expansion in developing markets O
 Business diversification and
products specifications
 Introducing new products
 Partnerships or alliances with
other firms

OPPORTUNITIES
40
SWOT ANALYSIS OF STARBUCKS

T
 Competition with low-cost coffee
sellers
 Competition with big outlets
 Limitation
 Independent coffeehouse
movements
 Controversy on California warming
rule THREATS
 Philadelphia arrests 41
 Strength/Opportunities (SO), let us look
along with the strengths we made mention of
the brand image is visible that the customer
will know what Starbucks offers the market,
locally adapted food menus are offered to make
the customer feel like they are home and to
make customers satisfied, especially those who
are Coffee Lovers, while its opportunities
changing taste preferences.

What strategy can we think of? What will the

FOR company do to maintain its strengths and grab
the opportunity?
TOWS
MATRIX Perhaps we will suggest a continuous product
development that caters to customer 42
 The Starbuck shops give the
customers a comfort feeling, like they
are home. The combination of the
unique product offerings, the comfort
FOR feeling and excellent customer
service are the main reasons for the
TOWS customers to keep retaining.
MATRI
X
43
 High prices, For many
middle tiers and working
consumers, Starbucks’
offerings are more costly than
McDonald’s and other coffee
WEAKNESSE outlets. Its high prices reduce
S/ affordability for the
OPPORTUNIT consumers.
IES
44
 Along with the strengths of the
branding Starbucks, having a threat to
product service quality. Perhaps we
can suggest that they strategized on
advertising their products and
services and conduct a marketing
survey on customer preferences. The
customer service of the company then
STRENGH came out with a program that will
TS/ help them improve it. They could also
THREATS sustain their coffee and brand in the
best way. 45
 Generalized standards for most
products, Some of its product
offerings are not aligned with the
cultural standards of other markets.
For example, in some areas, its
crafted beverages do not associate
with the consumer preferences.
WEAKNESS
ES/
THREATS
46
 PESTLE Analysis of Starbucks

 Political Factors
 Economic Factors
 Social Factors
 Technological Factors
 Legal Factors
 Environmental Factors

47
 Political Factors
The main political factor is about sourcing the raw
materials. This has gathered a lot of the attention from
politicians in the West and from the source countries. For
this reason, the company wants to adhere to social and
environmental norms. It is willing to follow the sourcing
strategies. It gives importance to fair trade practices.

Another impact is the need to follow the laws and

regulations in the countries from where Starbucks buys
the raw materials. Activism and increased political
awareness in developing countries have made his essential.
48
 Economic Factors

The ongoing global economic recession is the

prime external economic driver for Starbucks.
As I already mentioned, this factor dented the
profitability of Starbucks. This has convinced
buyers to shift to cheaper alternatives. As they
did not quit buying coffee, Starbucks should seek
an opportunity here.
The company has to deal with rising labor and
operational costs. The inflationary environment
and falling profitability is causing a lot of stress.
49
 Social Factors

As already stated, Starbucks can offer cheaper

products but it might have to sacrifice the quality.
This is the main socio-cultural challenge that the
start-up faces. It will expand consumer base to
include the buyers from the lower and the middle-
income tiers. The “green” and “ethical chic”
consumers are also concerning. The baby boomer
generation is retiring. This means spending by
older consumers will decrease. Now, Starbucks
will have to tap the Gen X and the Millennials as
customers. 50
 Technological Factors

Starbucks is in a good position to enjoy benefits of the

emerging mobile wave. Its partnership with Apple to
bring app based discount coupons is helping it ride the
mobile wave easily.

The company introduced Wi-Fi capabilities in its

outlets already. Internet is important to the
consumers. They can now surf the web and do work
while sipping Starbucks coffee. This is an added value
to the brand. It enhances the overall consumer
experience.
51
 Legal Factors

Starbucks must ensure that it does not

violate any laws and regulations in the home
market and countries from where they buy
raw materials.
It should also stay alert about introduction of
caffeine production and consumption related
policies and regulations by health authorities.

52
 Environmental Factors

Many Starbucks business practices

concern activists and international
advocacy groups. Even the consumers
have expressed issues. So, the company
should take these into account to continue
holding consumers’ trust.

53
 Starbucks porter’s 5 forces
Competitive HIGH Starbucks Coffee Company faces the
strong force of competitive rivalry. In
rivalry or the Five Forces analysis model, this
competition force pertains to the influence of
competitors on each other and the
coffeehouse industry environment. In
this case, the following external factors
contribute to the strong force of
competition against Starbucks
Bargaining HIGH Starbucks experiences the strong force
or bargaining power of buyers or
power of customers. In Porter’s Five Forces
buyers or analysis model, this power is based on
customers the influence of individual customers
and their groups on the coffeehouse
business environment. The following
54
external factors contribute to the strong
Bargaining MEDIU Starbucks Coffee Company faces the
M
power of moderate force or bargaining power of
suppliers suppliers. Porter’s Five Forces analysis
model considers this power as the
influence that suppliers have on the
coffeehouse chain business and its industry
environment. The following external
factors contribute to the moderate
bargaining power of suppliers on
Starbucks Corporation
Threat of HIGH The strong force or threat of substitution
substitutes affects Starbucks Corporation. In the Five
or Forces analysis model, this threat pertains
substitution
to the impact of substitute goods or
services on the coffee business and its
external environment. The following 55
Threat of new MEDIU The moderate force or threat of
entrants or M new entry imposes challenges
new entry to Starbucks Corporation. In
Porter’s Five Forces analysis
model, this threat refers to the
effect of new players or new
entrants in the coffeehouse
industry. In this business case,
the following external factors
contribute to the moderate
threat of new entrants against
Starbucks

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Business Model Canvas

Key Partners Key Activities Value Propositions Customer Customer Segments

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Key Resources Channels

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Cost Structure Revenue Streams

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