Starbucks Corporation is a long chain of coffee houses that was founded in Seattle, Washington back in 1971. Since then, the company has opened more than 23,000 new locations across the world. It is known for its roasted coffee which many suggest is second to none. Its coffee is described as that of great taste and quality. One of its highest-ranking internal factors is its customer service which is one of the best in the world (Koehn & Grundy, 2001). The company has over the years transformed from a hand-making coffee company to one that uses automated espresso machines that have improved efficiency and the number of customers in general. The devices also provide their clients with a variety of drinks from tea, latte, and espresso. The following essay therefore seeks to provide an internal environmental analysis, based on the strengths, weaknesses and their competition.
Much of Starbucks' success is attributed to its mission, "To inspire and nature the human spirit - one person, one cup and one neighborhood at a time." Therefore, its internal environment is primarily based on the identification of consumers and new territories all over the world. The consumer-based company is very focused on marketing through market segmentation. It is people-oriented and most of the decisions made internally target the consumer (Thompson & Arsel, 2004). It begins by identifying and understanding the kind of people the company is aiming for. The company also utilizes various methods and techniques when segmenting depending on its unique product line and services which allows it to consider different viable strategies. Over the years, Starbucks has managed to maintain its success because of its ability to identify its leading clients with psychographic and demographic segmentation. Also, they work towards targeting particular types of individuals to establish long-lasting relationships.
Like any other organization, Starbuck has its strengths and weaknesses. In terms of strengths, Starbucks enjoys a high-quality brand that is known all over the world. The company's brand is based on its history as the best when it comes to coffee roasting, brewing, and serving. The company has worked tirelessly to ensure that their coffee is grown under the best standards of quality. Starbucks officials take coffee increasing very seriously to the extent that they travel to coffee farms in Asia, Africa, and Latin America to select high-quality beans. The company has also managed to bring out the balance and the rich flavor found in the seeds through its unique Starbucks Roast. Another strength is in its customer service delivery program. First, Starbucks provides a gathering place for meeting family and friends. Second, clients get to enjoy quality service in an inviting atmosphere while enjoying an exceptional beverage. Unlike other companies, Starbucks has managed to balance profitability and social conscience through ethical sourcing, community involvement, and environmental stewardship.
Some of the company's weaknesses include over-dependence on the Chinese market which has been the leading market for a long time, decline market share as more competitors join the sector and product recalls. Starbucks' other weakness includes expansion into the international market without a suitable framework or infrastructure - something that might damage its high-quality image. It also has a generalized standard for most of its products. In its efforts to dig deeper into its clients' wallets, the company has high price points which make its products unaffordable and thus limiting its market share especially in areas with relatively low disposable incomes.
One of the most important internal factors for the company is in selecting the target market. This important for both the general success of the company and ensuring that it stays ahead of its competitors in the industry. The target audience is vital for any company because it dictates the product price for its products and services. Starbucks focuses on the demographic's distribution for the consumption of its high-quality coffee. Customer-base income is a vital characterization of the demographic - segmentation. One such area is in the high-income earners' neighborhoods where it advertises and opens more stores. This factor is evident when looking at the geographic distribution of Starbucks stores. Studies indicate that the Starbucks customer trend tends to lean towards neighborhoods that earn over $60,000 per household (Pittayatham, 2011).
Besides, Starbucks customers are also motivated by self-expression. Starbucks' clients are considered unique, and therefore, the company has made efforts to show that its products are tailor-made specifically for their clients using their name-writing initiative. The company's CEO Howard Schultz has recently put out a directive asking his employees to develop a relationship with the customers through a first-name basis by writing their names on the coffee cups. Labeling the coffee cups with the client's name might be considered a small move, but it is a significant step in understanding the needs of their clients. This is one of the many ways Starbucks makes its clients feel special and unique. Such primary target market requires continuous monitoring and reevaluation given the fact that it is a $17 billion industry.
In the recent past, other companies like Costa Coffee, McDonalds McCafe, Dunkin Donuts, and Cafe Coffee Day have made the coffee industry very competitive. Its main rival is the McDonalds McCafe initiative which targeted the underdeveloped coffee market in the industry. An added advantage was its level of success in the fast food industry and great brand-name recognition. Like Starbucks, it also has a large customer base. Initially, market experts had predicted that McDonald's would hurt Starbuck stock, but the two companies have managed to work in the same market space safely. The main difference between the two is the fact that McDonald's has a better value perception while Starbucks is a leader in quality perception. Therefore, the two companies rarely compete for the same clients. However, McDonald's appeared to have noticed a niche in the coffee industry that is the American market.
As such, Starbucks has resulted in looking for new and untapped markets even in areas where it already enjoys high market shares as a way of cementing its presence in the market. One such market is the grocery shopping consumers where the company is making significant efforts with readymade products. High competition has also led the company to evolve its product line by targeting shopping consumers. These efforts are also fueled by the fact that the McDonalds brand appears to be making its way into China - a market Starbucks has enjoyed market dominance for a long time.
For a long time, Starbucks has mainly been adult-focused as it aims to connect with their customers, children and various communities through different advertising tactics. However, because of increased competition, Starbucks is turning to another new and broader market within the coffee industry; college-age students and post-graduates that live in the urban areas. The two segments would provide the company with an edge against its competitors as it aims at improving its sales.
Starbucks Structure and its Influence on Performance
Starbucks utilizes its organization structure to improve and develop its business on the global scene (Meyer, 2019). The coffee house has managed to maintain its industry leadership through the appropriateness of the company's structure. This is because the organizational; structure influences other areas of business such as management and leadership, changes in strategies and management, communication and other variables that facilitate success. Starbucks is continually evolving in terms of its organizational structure to ensure that the company's structure meets the business needs.
An example is a company adjusted its company structure upon expanding its business through the acquisition of other companies like Seattle's Best Coffee and Ethos Water. These changes ensure that the company's organizations structure can meet the needs of the business. This strategy is common among large multinational organizations which help to ensure that the company's operations are properly managed and streamlined (Meyer, 2019).
Starbucks has a matrix organizational structure which involves a mixture of different features borrowed from the basic organizational structure. The main features include fictional hierarchy, geographical divisions, product-based divisions, and teams. This structure has many characteristics one of them being in shaping strategic management decisions. The different levels in the organization also help in maintaining the integrity of the organization's structure. Another essential characteristic of the structure is the rate of reorganizations. In the past, Starbuck has transformed from a national brand to an international one. In that case, the company's structure has seen some reforms like a shift away from customers and towards global strategic expansion (Lee, Kozlenkova, & Palmatier, 2015).
Koehn, N. F., & Grundy, W. (2001). Howard Schultz and Starbucks Coffee Company (TN).
Lee, J. Y., Kozlenkova, I. V., & Palmatier, R. W. (2015). Structural marketing: Using organizational structure to achieve marketing objectives. Journal of the Academy of Marketing Science, 43(1), 73-99.
Meyer, P. (2019). Starbucks Coffee's Organizational Structure & Its Characteristics - Padmore Institute. Retrieved from http://panmore.com/starbucks-coffee-company-organizational-structure
Thompson, C. J., & Arsel, Z. (2004). The Starbucks brandscape and consumers'(anti-corporate) experiences of glocalization. Journal of Consumer Research, 31(3), 631-642.
Pittayatham, J. (2011). A comparative study of marketing mix between Coffee-World and Starbucks consumer in Bangkok.
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