Consumer confidence in products can also fall if the economic 'mood' is low Inflation rates Inflation is a condition of increasing prices. Business costs will rise for Starbucks through inflation, as will shoe-leather costs as they shop around for new 'best prices' of materials, menu costs will rise as Starbucks have to create new price lists. Also, uncertainty is created when making decisions not least because inflation redistributes money from lenders to borrowers.
A firm that borrows L during an inflation period will pay back less in 'real terms' as the value of this money will decline over the period.
Competitors pricing Competitive pricing from competitors can start a price war for Starbucks that can drive down profits and profit margins as they attempt to increase, or at least maintain, their share of the market. Globalisation Globalisation of the coffee market has meant farmers of the bean now earn less money than they used to.
This can result in a decrease of people willing to do it for a living, which will mean a decrease in coffee produced, resulting in a drop in Starbucks supply levels and probably profits. Exchange rates Starbucks are affected by exchange rates when dealing with international trade. This saving can be passed along to the customer.
Exchange rates are forever changing throughout the world in today's market. Attitude to work Starbucks would not want to locate to an area where the local population have a poor attitude to work. Recruitment would be difficult, training arduous, and staff turnover would be high.
Attitudes to work are important in other ways. A large number of workers in large cities now go out for their lunch rather than use an internal canteen. Starbucks can use this to their advantage and promote the shop as a place where people can meet up and so it will mean that they will get a larger amount of people in their stores at this time of the day.
They must be sure there are people who live there with sufficient skills to ensure successful operation of the business, or at least the potential to learn that comes with a good education. Starbucks must ensure it's shops are clean and comfortable, service is of the highest order and health and safety issues are fully addressed.
Location Transport needs to the premises must be considered for both staff and customers. Easy access is vital to ensure there is no excuse for staff to arrive late or for customers not to visit. Age distribution Research shows the average age of the population is getting older and birth rates are stagnating. Starbucks is presently aiming it's product at young people but maybe these views will change in the long-term as the market proportion for young people diminishes.
The most profitable way forward may be to widen their target market despite the risk of alienating present customers. Starbucks can use this information when deciding the additional products to sell, as well as coffee, as a large number of their customers are looking for healthy alternatives to cakes and biscuits, which have been associated with coffee in the past. Starbucks launch edits first-generation e-commerce Web site in In late , Starbucks decided the site needed a major upgrade to enable new functionality and prepare for long-term growth.
To achieve these goals, Starbucks upgraded to Microsoft Commerce Server , one of the key Microsoft. NET Enterprise Servers. As a result, scalability and performance have improved, and the company now has the tools it needs to profile and target customers, analyze site data, and deliver new features to the market in the shortest time possible.
New materials and processes Developments in the technology of coffee making machines and the computers that Starbucks use to run their cash registers will enable their staff to work more quickly and efficiently.
This will result in customers being served quicker and create the potential to serve more customers in a day. This will prevent customers from having to wait around for long periods thus improving customer relations along with increasing the customer base. Software upgrades In the short-term, Starbucks must identify the most efficient software upgrades to use to keep up with the competition. This applies to the improving the accessibility of their website www.
Rate of technological change The rate of technological change in the current world market is high, much higher than, say, thirty years ago.
Much of this is down to the Internet and the speed with which information can be communicated around the globe. Starbucks will need to invest heavily just to standstill in their ever expanding and developing market, and even more so to try to stay ahead of competitors.
They need to ensure they are not in violation of e. Employment law Each country has varying employment laws. Some may have a Sabbath day, some may have a limit on the number of hours an employee may work per week, all will have varying levels of minimum wage. Starbucks should consider these factors when deciding on relocation. Health and Safety regulations Starbucks may find these regulations are not as stringent or well enforced in certain countries.
It would be wise though to enforce a universally high standard of health and safety throughout all it's shops to maintain a good global image and ensure all laws are abided by.
Also, by not maintaining high standards they will be liable for a large amount of civil cases as it is a legal requirement for them to enable that their staff and customers are safe when they are in their stores. Monopolies commission If Starbucks consider expanding their operations further to control an even larger percentage of the market than they already have they will have to consider the possibility of breaking monopolies legislation as they may have a share of the market that is too large.
This would mean that they would have unfair advantage over other companies in the same market. This would mean that they could benefit from economies of scale and would also be able to charge prices that were not competitive in the market and get away with it due to the lack of competition. The Competition Commission are in place to try and prevent these situations occurring [e.
Land use Starbucks may have to abide by local planning regulations when building shops or altering purchased sites, as certain areas of land may be protected or unsuitable. All matters would be addressed by the local government. The packaging for this cup must be carefully considered to make it as biologically degradable as possible.
Certain other materials can be very harmful to the natural environment. Planning permissions Planning permission may not be granted if Starbucks wish to build in an area that could be harmful to the environment. The land may be protected. Work disposal Starbucks need to carefully consider the methods in which they dispose of their waste as there are strict laws in most countries to ensure a firm trading in their country disposes of the waste that is created in their business in a specific and efficient way.
If they do not follow these laws they may find themselves being sanctioned, which not only affects them financially but also tarnishes the reputation of the brand name, as most of the waste created will bear the logo of Starbucks. Environmental pressure groups Starbucks should be aware of the physical and influential power of groups such as Greenpeace and Friends of the Earth. Any violation of animal or environmental rights by a company is usually followed by a swift and attention-drawing protest from one of the groups.
Brand image and customer bases are often irreconcilably tarnished due to the actions of these groups. The condition in which a product is sold advertising, saturation changes over time and must be managed as it moves through its succession of stages. As of now Starbucks is in the Maturity stage because of their level of success over the past few years and the large amount of income they also earned in the past years.
Starbucks doesnt look like its going to be slowing down anytime soon and it is only going to get bigger in time. Porter of Harvard Business School in It draws upon industrial organization IO economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market.
Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the abnormal profit rate will tend towards zero perfect competition.
The higher the barriers to entry are within any given industry the smaller the threat of new entrants to that industry. Porter, , p. Consumers have a habit of wanting to try new products and services and if its cheaper and the quality is better they quickly branch over and this poses a threat for many companies.
This is why Starbucks needs to keep their consumers happy by keeping their prices low and product quality at a high standard. Note that this should not be confused with competitors' similar products but entirely different ones instead. For example, Competitors like Pepsi and Coca-Cola offered beverages, which had the caffeine inherent in specialty coffee, at significantly lower prices Quelch, However, there existed large differences in taste and the demographic makeup of consumers between the two products; thus, consumers were unlikely to directly substitute coffee for caffeinated soft drinks or vice versa.
If substitute occurs Starbucks can and will see a decrease in sales, their might still be loyal consumers but if the product offered by the competitor or competitors satisfy consumer wants and needs this can affect Starbucks and may even cause the franchise to be put out of business. This is why Starbucks needs to reinvent itself constantly.
In the case of Starbucks customers have a lot of influence over the prices and menu presented by Starbucks. If consumers decide that Starbucks coffees and treats are too expensive and decide to cut back on the amount they consume for the year this will affect the profit and therefore cause a loss for Starbucks as well as cause them to reduce prices which will still affect profit within the organization. Suppliers of raw materials, components, labor, and services such as expertise to the firm can be a source of power over the firm, when there are few substitutes.
Suppliers may refuse to work with the firm, or, e. The suppliers of Arabica beans were mostly small to medium-sized family owned farms and typically sold their crops to processors through local markets. Lee, These farms were numerous and unrelated to one another, with no unionization, giving them very little collective bargaining power.
If Starbucks suppliers were to either rise the prices on the beans, cups or anything else they supply to Starbucks in order for Starbucks to make a profit they will have to elevate the prices on menu items and this could cause a problem for consumers.
They might see it as paying too much and therefore would cut back or stop buying and this would cause Starbucks great loss.
This is why organizations need to keep their suppliers happy in order to keep consumers happy and also to remain successful within the market.
Although Starbucks is as successful as it is it can still be affected by any one of these threats of competitive rivalry, this can cause Starbucks to either go out of business in the US or any other country that they operate in or it can do damage to Starbucks in terms of making a good profit.
Although Starbucks arent really competing with any large competitors there are still those coffee shops that sell the same quality of coffee as Starbucks these are the threats which Starbucks has to prepare for in the long run.
Through achieving these factors companies could insure competitive performance for the organization. Product Taste your own product. The basis of the modern caf is the coffee or espresso. Before you do anything else, make sure your coffee taste good. That means trying different beans and learning how to make espresso properly. Serve food, more than just pastries and cookies. You need choices that are delicious but don't require that you hire an expensive chef. Healthy salads, sandwiches, wraps and soups make the difference between keeping your customers in the caf.
After you are in business for a time, rework your menu to eliminate items that don't sell well. Restructure the menu to feature the best-selling products Atmosphere Create a welcoming, relaxed atmosphere. Frequent other cafes or coffee houses and make notes about what you like and don't like. Add a comfortable couch along with bistro-type tables and chairs. Be sure the caf is spotless inside and out.
Stay open later in the day. Don't close your doors at 2p. On top of that Starbucks chain operating in Asian countries was not that much profitable because Asian consumers preferred tea over coffee.
All this was announced to the public on March 18, By doing so, clients were able to customize their drinks for free. It was a clear incentive to build a deeper relation and even attract more heavy users Isabel Vaz, The means used were TV campaigns or coupons in newspapers. Thus, the machine allowed the technique of making coffee which was practiced by employees, and in the overall process, speed was not compromised. Clover-enabled temperature controlling, the amount of water, and brewing period through a number of programmes adapted to each type of bean, without taking too much time.
Compared to a French drink, which took ten minutes a good quality coffee took two minutes. It varied for students, where more space was required and for take-away customers, where space was limited. Morningstar analyst John Owens November 11, said: Rather than significantly lower its beverage price, it is choosing to find ways to cut costs through less structural expansion and improved operational efficiencies Gambardella, Company to offer comprehensive healthcare coverage and equity in the form of stock to the part-time worker.
From Business Today following five points were obtained: m On March , the company came up with "My Starbucks Idea" where customers could exchange ideas directly with the company and among themselves. There were around 93, opinions, ideas, and suggestions on everything such as products, advertising, services, in-store 14 P a g e music, layout, corporate social responsibility etc.
The feasible and successful were heard and implemented which resulted in a robust and loyal fan for the company. This initiative allowed Starbucks to inform about the large and different range of product it was offering worldwide.
Consumers were also displayed with how to order their signature cup and what it would look like. Quantity and ingredient mix were the only modification consumers could do in their signature drink.
This promotion led to the creation of online traction and over one million people across the US queued up at Starbucks outlets. Starbucks was looking for ideas to re-engage with its customers, so, it let him begin a Twitter handle for Starbucks on his suggestion which resulted in , followers. Source: Businesstoday.
Brewing innovation. As per Business Insider slides, Starbucks also took following measures to overcome economic slowdown: a The company also decided to only deliver whole-bean coffee to its stores and required baristas to grind the beans in the stores.
Any coffee that had been sitting more than 30 minutes was to be tossed. VIA got 30, distribution centers for sale. In addition, Starbucks trademarked product Frappuccino also started selling at retail stores. Whenever Starbucks made an international expansion, its organisational values were made to align according to the cultural and market values of the nation. It is mentioned by Behar, that the company through its ability of how it prices its products offered health insurance to any employee who worked for more than 20 hours or more in a week as they provided to the CEO.
Furthermore, in work of Vinod and Sudhakar, it is mentioned that how Behar was deeply touched by the murder of three Starbucks employees in Washington DC during a botched robbery. Behar also shared how in response to this event Schultz did not call Public Relations or legal counsel, but flew to the store and spent the entire week visiting with the families and employees in the area.
Servant leadership is also highlighted by taking down views about the company from the bottom level employees and caring for them because it is the baristas who interact with the customers and in what way customers can be served better. Starbucks seems to reflect the problems of employees can bring new information to management, good ideas from different angles to provide solutions to problems; it is worth collecting and research for the company Jianfei, Starbucks organizational structure and performance is viewed differently by its competitors and customers.
Some say that it is customer centric, others say that it is focusing towards the premium class of customers and not the middle-income group. Marques reported that in the Fortune Best Companies to work for in , Starbucks Corporation was listed as number 16 because it had implemented spirituality in the workplace as an 16 P a g e innovative approach to enrich the ethical values of management and employees Lemus et al.
Also in works of Lemus et al. These five factors are: a Leadership position in the market b Financial sustainability of the organization, c Work environment d Commitment to innovation e Meeting CSR requirements Evaluating Starbucks Core Competence, Networks and Partnerships There are many reasons why customers and employees around the world like to associate themselves with Starbucks which has always been a matter of pride for them.
The first and second place being home and workplace. The comfortable seating atmosphere, mild music, behaviour of baristas, no smoking zone and the smell of freshly brewed coffee beans when they enter the store becomes a relaxing world for them. In works of Isabel Vaz, it is mentioned that the company celebrated its fortieth anniversary in March by launching four new product lines. This clearly shows that Starbucks is committed to innovation. Starbucks menu is also there for health and calorie conscious people.
It is also mentioned in the work of Paryani, mentioned that the coffee beans are packed in vacuum packaging, which is developed by the company. These flavour lock 17 P a g e bags have a one-way valve that allows carbon dioxide to escape; however, it keeps out the harmful air and moisture which cause the coffee beans to go stale.
Morais et al. This clearly shows the company is going technologically ahead of its competitors and also cares for customers comfort. Training of baristas for delighting the customer has become a core competency for Starbucks. Business Ethics and Corporate Social Responsibility practice undertaken by Starbucks and how it helped the Starbucks to meet its strategic goals Engaging in public welfare and ethical practices to run a company builds a positive image for the brand in the eyes of government and people.
Starbucks engages in responsible farming practices in coffee-growing regions around the world. Coffee farmers are directly provided with Starbucks agronomists and quality via these centres, which help them implement more 19 P a g e responsible growing practices, improve the quality and size of their harvests, and ultimately earn better prices. Through the SFSI, Fairtrade farmer cooperatives are eligible to apply for loans from the funds supported by Starbucks to help improve livelihoods and promote environmental stewardship and economic stability in the coffee industry.
What are the key elements of Starbucks? The key elements of Starbuck? Grow the business by constantly adding more stores around the world: The Company has had tremendous success in opening stores around the world. It has applied its global strategy effectively and has enjoyed increase in sales from global operations.
In January , Starbucks released a statement regarding the strategic initiatives planned to accomplish just that Starbucks announces strategic initiatives to increase shareholder value; chairman Howard Shultz returns as CEO,
If consumers decide that Starbucks coffees and treats are too expensive and decide to cut back on the amount they consume for the year this will affect the profit and therefore cause a loss for Starbucks as well as cause them to reduce prices which will still affect profit within the organization. Starbucks in this regard has a strength of a brand when it comes coffee in the mind of consumers and can leverage itself through its pricing strategy and also making people wait less in line and for orders when compared against quick service of McDonalds and other outlets.
Local currency exchange rates. However, they remain vulnerable to the possibility that their innovation may falter over time. Recently June 13, Tanzania's Minister of Finance harmonized and rationalized local government taxation to boost rural productivity of the coffee bean. Websites: 1. Strategic Report for Starbucks Corporation.
For Starbucks it would be coffee beans and raw food items, as well as fixed assets such as buildings, machinery etc. However, starting from recent a range of Starbucks products such as 3-in-1 coffees in sachets are being sold through a set of leading supermarkets.
An analysis utilizing Porters five-forces model outlining competitive pressures will show that the coffee industry is able to provide for attractive profits by firms in the industry. A firm that borrows L during an inflation period will pay back less in 'real terms' as the value of this money will decline over the period. It would be wise though to enforce a universally high standard of health and safety throughout all it's shops to maintain a good global image and ensure all laws are abided by. Coffee quotas and price controls ended.
In January , Starbucks released a statement regarding the strategic initiatives planned to accomplish just that Starbucks announces strategic initiatives to increase shareholder value; chairman Howard Shultz returns as CEO, Thus, managers need to determine how a firm is to compete so that it can obtain advantages that are sustainable over a lengthy period of time.
These could range from diversification to sale of operations. Planning permissions Planning permission may not be granted if Starbucks wish to build in an area that could be harmful to the environment. S and Canada by end of , which resulted in conserving nearly hundred gallons of water usage per store every day. Starbucks operations are conducted in more than 50 countries in two ways: direct operation of the stores by the company and licensing.
Those resources that are younger and in better condition are deemed more useful to Starbucks. Latif, M. By implementing both of these strategic objectives Starbucks will continue to be the leader in the coffee industry and further enhance its brand power and market position.
Van Houtte. In the case of Starbucks customers have a lot of influence over the prices and menu presented by Starbucks. How should we compete in those industries? Also, by not maintaining high standards they will be liable for a large amount of civil cases as it is a legal requirement for them to enable that their staff and customers are safe when they are in their stores. As the largest coffee company in the world, the environment is an important and ongoing concern of the organization.
In addition, Starbucks trademarked product Frappuccino also started selling at retail stores.
New materials and processes Developments in the technology of coffee making machines and the computers that Starbucks use to run their cash registers will enable their staff to work more quickly and efficiently. Local economic environment within each market.