Starbucks is an international company that deals with roasting and selling coffee. The company has grown to become the biggest coffeehouse globally. The company's success can be attributed to its ability to handle its external issues. PESTEL analysis model has been instrumental in identifying external matters that Starbucks need to address. The analysis will also be used in the future to show the factors that are vital for Starbucks to resolve and become successful in the market.
In regards to political factors, regional integration and improving infrastructure are some of opportunities for the company to reach more markets. However, the company faces bureaucratic red tape in most developing countries which is a threat to its expansion desire. The economic conditions such as high economic growth and declining unemployment rates in developing countries are an excellent opportunity for the company to sell its products. However, there is an increase in employment costs in emerging markets which is a threat to the company's revenues and margins bearing in mind that it gets its coffee beans from these countries.
Social-cultural factors present an opportunity for Starbucks to expand and grow its earnings. The growing middle class and the ever-increasing coffee culture present an opportunity for the company to reach more markets. Further, the company can expand its products portfolio such that it offers healthy products to health-conscious consumers.
In regards to technological factors, the company has an opportunity to take advantage of the rise in mobile phone purchases to improve its mobile app and therefore increase mobile purchases. However, there is access to specialty coffee machines which is a threat to the company's products. In regards to legal factors, the company has to observe safety regulations in the international market. However, there has been an increase in employment regulation which threatens the company as it will need to incur more labor costs. In regards to environmental factors, people have been demanding sustainability measures by most companies and corporate social responsibility. The company has the opportunity to reduce environmental pollution and create environmentally friendly products (Geereddy 5).
Resources, Capabilities & Core competencies
Tangible, intangible, organizational capabilities
The company's tangible resources include its workforce. The company has thousands of skilled employees who play a significant role in helping the company achieve its goals. From low-level employees to managerial employees, they are a tremendous asset to the organization. The company has also succeeded in having multiple premium locations which ensure that customers can easily access its retail stores. The company has also succeeded in building a strong financial base that allows it to have enough capital for investment (Starbucks 32).
The intangible resources for this company include its strong brand equity. A strong brand that is recognized all over the world allows customers want to identify with it. Its customers can distinguish its products and services from those of imitators. People also have a unique experience when they visit the coffeehouse since the company offers free WiFi services, warm atmosphere, and innovative product exhibition, promotions and others.
Starbucks organizational capabilities are being able to meet the demand of its customers. The company has been able to build its coffee and other snacks that meet the preferences and tastes of customers. It also has automated equipment that allows it to save time and maintain flavor.
Starbucks is a company that emphasizes on quality of its products which helps in attracting customers. Through differentiation strategies, the company offers a premium product mix of unique beverages and snacks. The company provides the most exceptional quality of coffee and other products. Further, it provides excellent customer service, sparkling and well-kept stores that mirror the quality of the products it sells. The company also stresses the importance of constant product advancement. It also desires to be in every corner of the world through its expansionary strategies. The company also cares for its employees. It also maintains a solid internal and external link with suppliers which help it in expanding into international markets (Geereddy 3)
The company's strengths allow it to address its weaknesses to protect itself from competition. The company has a strong brand image that is popular and strongest globally. It also has its loyal customers who maintain its stability. The company has an extensive supply chain which assists in supporting its operations. Further, it selects its suppliers based on quality which guarantees the uniqueness of its brand. The other strength is modest diversification through subsidiaries. Diversification allows it to reduce market and industry threats.
Starbucks' weaknesses include high prices of its products, imitability of its products and generalized standards. The company charges high prices for its products to create huge profit margins. However, some customers, especially in developing countries, are unable to afford them causing its market share to decline. Additionally, Starbucks has generalized standards for its products which make it difficult for it to create products that suit local markets. Another weakness of this company is that competitors can copy the products it offers. Small business can produce comparable coffee and other snacks as well as open cafes similar to those of Starbucks.
Opportunities for Starbucks include venturing into developing markets, diversifying its business and forming partnerships or alliances with other companies. The developing countries offer huge markets, and the company can take advantage of this opportunity. Diversification will ensure that the company does not depend on its present industry and therefore expand its revenues. Forming strategic partnerships or alliances will allow the company to improve its distribution networks and markets share (Glowik 162).
The threats facing the company include stiff competition from low-cost sellers, imitation and independent coffee houses. The company competes with many companies in the international market. Competition threatens the company's market share since they fight based on low-cost strategy. Imitation endangers the company as they try to copy the taste, look and feel of the company's coffee. Further, there is a movement that supports small coffee firms and opposes the expansion of multinational companies like Starbucks. This trend is likely to affect the company's desire to expand to the international markets.
Geereddy, Nithin. "Strategic analysis of Starbucks corporation." Harward [Elektronnii resurs].-Rezim dostupu: http://scholar. harvard. edu/files/nithingeereddy/files/starbucks_ case_analysis. pdf(2012).
Glowik, Mario. "4.7 Case study: Starbucks." Global Strategy in the Service Industries: Dynamics, Analysis, Growth (2017): 156. https://books.google.co.ke/books?hl=en&lr=&id=siQlDwAAQBAJ&oi=fnd&pg=PA156&dq=strategic+analysis+of+starbucks&ots=XA3b_IzX3A&sig=AwCFHPLXAaq8Fgfr_c5XHZ6p2X8&redir_esc=y#v=onepage&q=strategic%20analysis%20of%20starbucks&f=false
Starbucks 2017 10-Q Form for FY ended March 27th, 2016 https://www.sec.gov/Archives/edgar/data/829224/000082922416000062/sbux-3272016x10xq.htm
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