Starbucks Corporation Case Study

CASE STUDY #2

Starbucks, 2015 Case

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Introduction

Starbucks Corporation, founded in 1971 in Seattle, is a premier roaster, marketer and retailer of specialty coffee around the world. Starbucks has nearly 200,000 employees and 21,000 stores in 60 countries. [1] Their product includes roasted and high-quality coffees, tea, a variety of fresh foods and other beverages. They also sell coffee and tea products under their trademarks. Starbucks also markets its products mix with other brand names, which include Seattle’s Best Coffee, Teavana’s Heaven, Torrefazione Italia, Evolution Fresh, La Boulange. Starbucks had total revenue of $21.31 billion as of October 2nd, 2016. [2]

This report is prepared for Starbucks Coffee Company to analyze the strategic position for Starbucks in the Coffee Industry. It provides an external environment analysis, a SWOT analysis, and a porter's model.

External environment of Starbucks

As the world’s biggest coffeehouse company, Starbucks leads the industry for a long time. The success is attributed to the ability to identify the external environment, and the PESTLE analysis model indicates the most significant influences on Starbucks in this business environment. 

Political factors

The first part of the PESTLE analysis identifies the impact of policies on Starbucks. Starbucks experiences the following political factors: 

Infrastructure improving

Most governments around the world are improving infrastructure. This development policy creates the opportunity for Starbucks as well other companies to access more markets or suppliers. 

Integration of markets 

Such as free trade area, these international trade policies gives convivence to companies to trade their products and enter a market. For Starbucks, it promoted its global expansion.

Human rights activities

After complaining that Guatemalan coffee picker received less than $3 a day, Starbucks demonstrated its concern for employee welfare outside of U.S. [1] This gives an opportunity to Starbucks to enhance this brand loyalty.

Gay marriage

This would address Starbucks as a place of diversity, so every can have a coffee in the store without discrimination and unequal. This would help Starbucks to improve its brand awareness, but militants may against it. [1]

Gun carrying

Starbucks requests that people do not carry guns into stores even in those states which would permit it. However, the boycott appealed to people to avoid visiting Starbucks stores in the US on Saturday, August 2013 due to the gun policy of the company. [3]

Economic factors

Then, second part refers to the economic environment to business. Starbucks faces the following economic external factors:

Economic growth

The high economic growth of developing countries creates opportunities for Starbucks to gain more revenues from various markets around the world.

Economic crisis (2007-2009)

The crisis had reduced the consumer spending power significantly, noticeably deceasing Starbucks revenues in 2008 to 2011. [1]

Currency exchange rate

As USD increases in value revenues generated in foreign markets in local currencies buy fewer USD, thus diminishing the total profits. For example, during the first quarter of 2015 alone, unfavorable exchange rates decreased Starbuck’s revenues by USD 92 million. [4]

Labor cost 

The rising labor cost is an external factor that threatens Starbucks because it increases the company’s spending for operation.

Raw material cost

An increase in the prices of raw materials, specifically, coffee beans is one of the most significant external economic factors for the company. 

Social factors

This aspect of the PESTLE analysis shows the social conditions and trends influencing consumers and business. Starbucks must concern about the following economic external factors:

Coffee culture

Increasing demand for specialty coffee, which is due to a growing coffee culture and a growing middle class around the world, gives the opportunity to increase its revenues.

Employee satisfaction

Starbucks believes that happy employees are the key to competitiveness and growth, so they are offering a good benefits package to employees, such as insurance, paid vacations and a stock option plan. [1]

Human rights

Starbucks becomes the first agriculture commodity importer to implement a code for minimal working conditions and pay for foreign subcontractors. [1]

Ethical business

Starbucks introduced new ethical coffee-sourcing guild lines in 2001 to encourage the sustainable production of high-quality coffee.

Social investment in origin countries

Through partnerships with organizations that share our concerns, Starbucks makes long-term investments, such as building schools, health clinics, and coffee processing facilities to improve the well-being of families in coffee farming communities. [5]

Technology factors

Technologies and related trends are identified in this part. Starbucks experiences the following technological external factors:

Roast facilities

Roasters are promoted from within the company and trained for over a year to make high quality.

Innovations of visible location

Starbucks invests its brand, menu and building style to improve its brand awareness.

New equipment

Starbucks is trying to use in every store new fuel-efficient equipment for reducing the emission of the gas. They are using more of the bio degradable material for recycling.

E-commerce

Starbucks has made online shop locator to make the process easier for the customers to reach to the store. Starbucks is also doing online delivery of their produced coffee.