Internal Factor Evaluation (IFE) of Starbucks

Introduction

The Internal Factor Evaluation (IFE) centers on the in-house elements that contribute to the success or failure of the company. The analysis culminates in an IFE matrix. An IFE matrix assesses the strength and weaknesses of the operational areas of the business. The average score for an IFE matrix is 2.5. A score below this average means the internal environment of the company and its related operations are weak (Mohammadian, 2017).The company under analysis in this paper is Starbucks Corporation. The company has an IFE index of 2.9 which indicates that the company's internal environment is supportive. Also, Starbucks internal operations are healthy.

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Strengths

Human Resource

Mainly, Starbucks strength lies in the ability of its employees to perform exemplary. The firm's personnel is highly motivated and has a strong commitment to the company's success (Epstein & Buhovac, 2014). They are always ready to share their knowledge, product expertise and give quality service to the clients. Teamwork is an integral characteristic that is common to all departments (Rothaermel, 2015). Additionally, Starbucks' employees are highly ethical, socially appealing and have a knack for environmental stewardship. The degree of motivation of a workforce determines the success of a company. Starbucks should aim at maintaining high ethical and motivated employees through rewarding them with excellent remuneration packages and offering self-improvement instances for example workshops and training (Mohammadian, 2017).

Brand Recognition

Starbucks is a well-positioned brand that capitalizes on the distinctive combination of coffee shops alongside state of the art work environments. Brand recognition is one of the primary success factors for Starbucks (Epstein & Buhovac, 2014). The company has invested its resources to achieve a standard look and feel that distinguishes it from the rest of the competition. Brand recognition has contributed to the extensive expansion policy of the company through market positioning strategy. Brand recognition is a crucial pillar of any company, and as such, Starbucks can invest more on creating a more authentic brand that its clients can relate with amidst the cutthroat competition in the industry (Rothaermel, 2015).

High-Quality Products

Starbucks management emphasizes quality over quantity. The company's coffee is usually touted as the best globally despite being in a highly competitive environment. Through using quality coffee beans, maintaining production consistency and offering convenience, the company scores highly on the quality of its coffee (Mohammadian, 2017). Compromising on quality over amount is not among the options available to the management because deterioration in quality will adversely affect customers' loyalty which in turn affects the sales (Epstein & Buhovac, 2014).

The company is established on quality both service-wise and product-wise. One of the challenges facing the company is controlling the output of the labor force with a target of maintaining the customer experience consistent. The management believes that employing skilled labor will result in quality coffee. Compromising on quality will award the company's competitor with a market advantage (Haskova, 2015). Therefore, Starbucks management has a responsibility of ensuring that it hires skilled and competent employees who can maintain quality.

Use of Technology

Starbucks has tapped well on the global technological revolution through prioritizing on digital initiatives. The company adopted a mobile application which its customers can use to order and pay for products. Through the mobile application, the company aims at cementing its hold on the coffee market while expanding the customer base boundaries (Mohammadian, 2017). The mobile app can also be used to track customers' awards and also check the balance of award points. Starbucks cannot afford to ignore technology as much of the competition wars have shifted to digital platforms. Also, the company has invested in digital networks through availing unlimited Wi-Fi in its coffee shops and stores. Last, the company the company has integrated single-coffee maker machines that employ clear-cut technology to make coffee within a Fahrenheit of its model temperature and produce the expected flavor (Haskova, 2015).

Customer Loyalty

Starbucks has been attributed with transforming the coffee industry. The firm has capitalized on customer loyalty to drive revenue and sustain earnings. The coffee shop environment, products portfolio, and rapid growth rate have worked to boost customer loyalty (Haskova, 2015). The firm can work to increase its share earnings which will strengthen its brand strategy and market positioning. Additionally, the company can refurbish its loyalty reward program to include its emerging markets in Asia and Africa. A loyalty program can double as a marketing penetration tool for the company.

Strong Culture

Starbucks culture is one of the unique elements that set it apart from its competitors. Primarily, its organization culture determines the employees' service delivery and the business-wise performance. The employees work together in unity and relate to clients professionally. The work environment is described by warm and friendly setting that works for the company's overall objectives (Haskova, 2015). The firm can find ways to strengthen its organizational culture because it is a crucial determinant of customer loyalty.

Weaknesses

Product Pricing

Starbucks prices its coffee expensively in a bid to maintain its brand image of exclusivity and prestige. Through its luxury coffee market segment, the company has succeeded in implementing its expansion program while cutting hidden costs and investing those costs in employee benefits, trade fairs, and reviving loss-making branches (Mohammadian, 2017). However, the exorbitant prices attached to its products have served to scare away potential customers in the lower income brackets. These customers form the vast majority of populations, especially in the firms emerging markets. The company can revise its pricing strategy to accommodate the low-income earners.

Cross-Functional Management

The company has established a cross-functional approach to management. Competition among managers is one of the primary disadvantages of this management setup (Rothaermel, 2015). Junior managers with multiple supervisors find themselves in a confusion web created by the environment of competition. Secondly, the mid-level managers become frustrated due to lack of clear direction in handling tasks which can also lead to their over-burdening.

Lack of Internal Focus

The expansion policy of Starbucks has deviated the company's primary agenda of offering quality coffee supported by excellent service delivery (Haskova, 2015). The company has embarked on an expansion program which has placed the core objective at stake. The task of ensuring that each branch maintains high quality and excellent service delivery is a hefty task for the management. Starbucks management should ensure that its quality assurance policies are followed in every branch. The company should also employ individuals who are skilled and knowledgeable (Rothaermel, 2015).

Financial Ratios

Starbucks debt-to-equity ratio is 0.79 which is relatively high. The ratio indicates that the firm is not in a position to generate enough money to satisfy its debt responsibilities. However, the ratio suggests that the firm is capitalizing on the increased profits which are brought by financial leverage. The current ratio for the firm is 1.01% which indicates that its short-term strength is favorable and it is in a position to meet its short-term debts. Lastly, the firm's leverage ratio is 3.22 which suggests that the Starbucks average consumer's debt is low in comparison to their disposable income thus they can sustain their spending on the company's products. The firm financial position is of healthy status as shown by the ratios above

References

Epstein, M. J., & Buhovac, A. R. (2014). Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts. Berrett-Koehler Publishers.

Haskova, K. (2015). Starbucks Marketing Analysis. CRIS-Bulletin of the Centre for Research and Interdisciplinary Study, 2015(1), 11-29.

Mohammadian, H. D. (2017). Principles of Strategic Planning.

Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.