Strategic Appraisal Report
Starbucks Corporation was first established in 1971 in Seattle by three founders Baldwin, Bowker, and Siegl. The founders loved coffee and had an idea to establish a coffee brand that would meet global consumers’ satisfaction regardless of their diversities. Currently, Starbucks is among the most prosperous businesses in the world. With more than 16,850 locations in 40 countries and $10.7 billion in annual revenue, it is obvious that Starbucks is a retail coffee tycoon. The corporation has kept its same-store sales increase at 5% for fourteen years running. But one does not reach such heights without a well-thought-out industrial strategy. Such accomplishment is the result of careful planning and study rather than chance events. The mission statement of Starbucks is to establish a welcoming environment where everyone feels like they belong while also acting courageously, questioning the existing quo, and coming up with fresh ideas for how to advance both our business and one another. They further articulate that they are always present, constantly communicating with honesty, respect, and decency, giving all corporation has, and taking responsibility for their actions. This is reinforced in the vision statement that articulates that the firm aims at establishing the premier purveyor of the finest coffee brands worldwide without compromising its principles as the firm develops.
Competencies and Resources
The primary competence of the corporation is its ability to consistently stay committed to a quality brand. This proves to be a competitive advantage in meeting consumer satisfaction. The stores are also developed with ample atmosphere for relaxation and aerating customer moods.
The employees are motivated to meet the demands with the rich skills and competence in the human resource base. The corporation also has an emphasis on best business practices and moral values. The organization was ranked among the most ethical firms in 2011 with ethics in its market operations. Further, the organization has elevated innovations in regard to product development processes. In addressing the changing customer tastes and preferences, the corporation uses innovative approaches to create satisfying brands.
Environmental Segments Affecting the Firm
The most profound environmental factor affecting the organization is the socio-cultural factors. The firm has been straining in meeting the ever-changing consumer preferences which affect consumer-base. Recently, people are migrating towards healthier dieting styles and avoiding fast-food if unregulated. As a result, the firm has been tailoring its brand to meet the market demands with the introduction of energy drinks and fresh hand-made juices which is a positive move. The firm also keeps on trying to meet the demands for cheaper products of the intense competition faced in the industry (Shtal et al., 2018). With the price consciousness of the market, the firm offers cheaper products with lower quality and premium products for
quality-inclined clients. This is a reaction to the global economic recession that makes consumers migrate to cheap products and their substitutes. The rising labor costs and variations in currency exchange rates are also prime factors that affect the corporation. With the changes in the economic environment, the firm has adjusted its position by the provision of substitutes for premium products and providing natural energy drinks which consumers can shift to in case they are unable to meet the firm’s financial expectations for the coffee brands.
Business-Level Strategy Used
Since its initial conception, Starbucks has made provisions for differentiation like premium product offerings, places, coffee beverages prestige, and superior customer service as prime pillars for its business strategies. This differentiation has transformed into constructing a premium valued product that is expensive to imitate for rivals. Starbucks has also adopted a cunning approach that includes forging alliances and making astute purchases. Starbucks established company-oriented outlets and cooperative partnerships in overseas countries instead of adhering to the franchising model (Dess et al., 2015). To employ the portfolio diversification strategy, the corporation has made several significant acquisitions, including Teavana, Bay Breads, Evolution Fresh, and many other brands. The company has a long series of strategic collaborations, partnerships, and Starbucks purchases through acquisitions.
Starbucks Value chain analysis
The firm utilizes inbound logistics where it purchases raw coffee from coffee-producing nations all over the world. The firm has a strength in that it selects different flavors from different countries around the globe owing to the growth in the industry. The organization has over thirty thousand stores in more than eighty nations. The store’s opening and closing time varies based on the region. Besides, the stores are located in convenient locations in regards to traffic and high-visibility to promote sales volume increase. The corporation additionally uses outbound logistics in the transportation of its coffee brands and beverages to consumers from its stores. The functionality is deemed as a distribution that takes place outside the in-house production areas. Distribution of the brand also takes place in major supermarkets and other fast-food-based organizations such as Deliveroo and Uber Eats.
The firm has managed to establish itself strongly as a prime coffee brand among global consumers. Its brand reputation and recognition favor the firm based on the trust of consumers for high-quality products. The corporation has also adopted customization in an urge to meet consumer satisfaction. Numerous coffee outlets and a vast variety of coffee brands have been established to help capture vast consumers within different locations and preferences. However, the firm has faced several weaknesses in its operations starting with the premium pricing technique which is considerably expensive during the current economic recession (Liu, 2022). This has been challenging for the company since many clients prefer cheaper products and substitutes with less consideration for quality. Besides, the firm’s establishment of numerous global outlets makes the corporation prone to recession and currency variations. This could have a detrimental impact on the financial income of the corporation. Another weak point of Starbucks is premised on the aggressive strategy for product expansion which leads to loss of value for some of the firm’s products.
Starbucks faces a wide range of opportunities, including the creation of more ecologically responsible and cost-effective technologies as well as the enlargement of its product line horizon. Because cultural appropriation is critical to the effectiveness of their international expansion, different cultural events that may spread their product line could be considered opportunities with enormous advantages. The firm has an opportunity to develop new product lines specializing in the beverage industry and also the opening of new stores. The firm could earn more revenue through intensified sales that emanate from new market ventures and franchising strategies that result in increased sales volume. Some of the prominent threats facing the company include vulnerability to reduced market share owing to the growth of rivals with cheaper prices on products and substitutes provision such as McDonald’s, KFC, and Krispy Kreme among many others. (Liu, 2022). Other considerable threats include sales decline as a result of increased rivalry inside the coffee establishment market. Consumer behavior may alter if an economic downturn occurs. As customers can readily transition to other specialty beverages, a shift in customer preferences and tastes could negatively impact the company’s sales.
Starbucks is currently in a position of relative prosperity, but internal evaluations must be done. It is necessary to consider their flaws to prevent their destruction. The product line is often uniform because of its unified control. However, given that they are growing internationally, what holds true in one place may not always hold true in another. Applying a “multi-domestic strategy enabling for a geographically based customization as this is in keeping with its new priorities of personalization and consumer happiness” is a viable suggestion to evaluate this deficiency.
Dess, G. G., Lumpkin, G. T., Eisner, A. B., & McNamara, G. (2014). Strategic management: Text and cases.
Geereddy, N. (2013). Strategic analysis of Starbucks corporation. Harward [Електронний ресурс].–Режим доступу: http://scholar. harvard. edu/files/nithingeereddy/files/starbucks_ case_analysis. Pdf.
Liu, X. (2022, July). Exploring the Future Value of Starbucks. In 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022) (pp. 793-800). Atlantis Press.
Shtal, T. V., BURIAK, M. M., AMIRBEKULY, Y., UKUBASSOVA, G. S., KASKIN, T. T., &
TOIBOLDINOVA, Z. G. (2018). Methods of analysis of the external environment of business activities. Revista espacios, 39(12).
Treece, D. (2019, August 28). What is value chain analysis and how do you use it? Business News Daily. https://www.businessnewsdaily.com/5678-value-chain-analysis.html
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Strategic Appraisal Report– This analysis is expected to give students the opportunity to evaluate a company of their choice and use the strategy tools discussed in this course. You will act as a consultant who has been asked to give a status of the organization to the board of directors.
Board members are short on time so it is very important that your report is concisely written and free from speculation and drama. Please use this template. You must use APA style writing and your report should be a minimum of 4 pages and a maximum of 7 pages. Additional academic writing support options are available here.
Any submission received past the due date will receive an automatic 15% deduction.
Your report should include the following:
- The organizations vision/mission statement
- The external environment including:
- Segments of the environment that currently impact the firm
- Porter’s Five Forces Model
- The internal environment including:
- Resources, capabilities, and core competencies
- Value chain analysis
- SWOT analysis
- Business model
- Type of business-level strategy used
- Competitor analysis
- International opportunities
- Organization structure & leadership
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