Competitor analysis

Marketing Mix??
Pestel
Bgc matrix??
Conclusion

Executive Summary
Starbucks was founded in 1971 by Jerry Baldwin, Zev Siegal, and Gordon Bowker. In 1987, Howard
Schultz bought over the company and has since begun to expand. Today, Starbucks coffee has grown
into the largest coffeehouse company in the world with 16,120 stores in 94 countries such as in
Australia, Canada, China, Puerto Rico, etc. Starbucks has thirty blends and single origin coffee.
Starbucks brand coffee can also be purchased in local stores to brew at home. Starbucks employs
over 140,000 employees worldwide with over five million customers a week. At one point they had
typical customers coming in on an average of six times a month while loyal customers come in on an
average of eighteen times a month spending averaging $50. Starbucks is one of Fortune magazines
100 Best Companies to work for in 2008 and is Business Ethics 100 Best Corporate Citizens for the
fourth year.
This report aims to strategically evaluate Starbucks Corporation. The analysis will be done using VRIO
Framework, PESTEL analysis, Product Life Cycle Analysis, Porters Five Forces analysis, Marketing
Mix, Value chain, Porters Generic Strategies and SWOT analysis. A Competitor analysis will also be
done to compare Starbucks with its competitors. I will also be addressing the recommendations
using Ansoff Matrix and giving a couple of suggestions.
1.0 Introduction
When I walked [into Starbucks] for the first timeI know this sounds really hokeyI knew I was
home. I can't explain it. But I knew I was in a special place, and the product kind of spoke to me."
Howard Schultz (TheBiographyChannel, 2014)
Starbucks is known to be a coffee chain which allows customers to feel at home. People are more
than willing to pay and return again for the delightful experience, and for the past 3 decades,
Starbucks has managed to monopolize the market. We will look at the Macro and Micro
environments of Starbucks, and identify the strengths and weaknesses. We will analyze how
Starbucks is able to be so successful and also discuss ways in which Starbucks can improve in order
to have continual market share growth and profits.

2.0 Company Summary

2.1 Background
Starbucks was founded in 1971 and opened its first store in Seattle. It is the worlds leading brand of
specialty coffee, with almost 17,000 outlets all over the world. They believe in serving the best
coffee possible, and serve with the highest quality Arabica beans. They started off as a local roaster
of whole bean and ground coffee, but have since diversified over the years. Today, they own one of
the highest market shares in the industry and serve more than 50 countries. (Starbucks, 2011)

2.2 Mission and Vision

To inspire and nurture the human spirit one person, one cup and one neighbourhood at a time.

2.3 Current Market Position

(Forbes, 2014)
3.0 VRIO Framework

3.1 Strong Global Presence

Valuable
One of the most valuable organizations in the world, Starbucks has a very strong global presence,
which helps in increasing its market share and sales revenues. (Azarian, et al., N.Y.)
Rare
Starbucks is one of the strongest coffee corporations in the world. Although there are many other
coffee companies, Starbucks is the most recognizable and its outlets are found in many different
parts globally. (Azarian, et al., N.Y.)
Inimitable and Non-substitutable
None of Starbucks competitors can gain such a large global presence as it would take a lot of time
and resources to try to substitute its name. (Azarian, et al., N.Y.)
Organized to Exploit

Starbucks has successfully organized its management systems, processes, organizational structure
and policies. Thus it is able to exploit its capabilities and resources. (Azarian, et al., N.Y.)
3.2 Specialty Coffees
Valuable
Starbucks offers many different types of unique coffees as well as hand-crafted beverages which
competitors do not often offer. They also provide calorie information for the coffees in their menus
to appeal to different target markets. (Azarian, et al., N.Y.)
Rare
Specialty drinks are not limited to Starbucks only as competitors like Dunkin Donuts as well as
Coffee Bean also offer specialty coffee during festive seasons. (Azarian, et al., N.Y.)
Inimitable and Non-substitutable
Specialty coffees can be imitated or even improvised by competitors, considering the fact that they
are already serving similar products as Starbucks. (Azarian, et al., N.Y.)
Organized to Exploit
Starbucks is constantly adding new drinks to their menu and introducing different products from
time to time, thus allowing consumers to try new beverages frequently, and this keeps consumers
coming back. (Azarian, et al., N.Y.)

3.3 Upscale and Cozy Atmosphere

Valuable
The cozy atmosphere that Starbucks outlets have allows customers to feel relaxed and comfortable
while enjoying a snack or a cup of coffee. This is one of the strengths that Starbucks has which their
competitors do not. (Azarian, et al., N.Y.)
Rare
Starbucks is the only coffee chain with an upscale ambience, encouraging customers to bring along
their computers and do some work while relaxing at the same time. Most of their competitors
cannot create such a homely atmosphere. (Azarian, et al., N.Y.)
Inimitable and Non-substitutable
When competitors realize that customers are looking for this kind of cozy ambience to be in, they
might just imitate and renovate their stores to be similar to Starbucks in order to attract more
customers. (Azarian, et al., N.Y.)

Organized to Exploit

Starbucks is taking advantage of the fact that customers thoroughly enjoy the cozy and homely
experience, and does not plan to have a new facelift for its stores. They are sure that customers
return because of this comfortable environment. (Azarian, et al., N.Y.)

4.0 Macro Environmental Analysis

4.1 PESTEL Analysis
4.1.1 Political
4.1.2 Economical
4.1.3 Social
4.1.4 Technological
4.1.5 Environmental
4.1.6 Legal
5.0 Micro Environmental Analysis
5.1 Porters Five Forces Analysis

Rivalry among Existing Competitors

The rivalry among competitors such as Costa Coffee, Dunkin Donuts, McDonalds and Coffee Bean is
high. Competitors serve coffee and similar food products like sandwiches and cakes, which makes
competition high. (Dudovskiy, 2014)
Bargaining Power of Buyers
Bargaining power of buyers is high because consumers do not have any cost of switching to other
competitors, therefore creating significant pressure on Starbucks. (Dudovskiy, 2014)
Bargaining Power of Suppliers
The demand for coffee is high in every parts of the world, and high-quality coffee beans can only be
produced in certain geographical areas. To add on to the increasing bargaining power of suppliers,
there are many issues associated with African coffee producers being unfairly treated by
multinational organizations. (Dudovskiy, 2014)
Threat of Substitutes
The threat of substitutes is moderate as the substitutes for coffee include juices, tea, water, soft
drinks and energy drinks. Starbucks is already selling tea, juices and water. Thus the threat of
substitute drinks is only substantial. (Dudovskiy, 2014)
Threat of New Entrants
The threat of new entrants is low because the market is already highly saturated. In order to enter
the industry, huge financial resources like capital and properties are required. With industry giants
like Starbucks and Dunkin Donuts, it is very difficult for new entrants to enter and survive in the
market. (Dudovskiy, 2014)

6.0 Industry Analysis

6.1 Product Life Cycle Analysis

Starbucks is currently in the Maturity stage of its product life cycle. It has experienced rapid growth
in the last 3 decades since it was founded. However, its growth has slowed down within the past few
years, which has led to a slight decline in sales revenue. There are many competitors out there
which have come up with similar products as Starbucks, leading consumers to be spoilt for choices.
Many consumers will not just stick to a particular store; instead they will patronize the store which
serves products to their likings. (Lee, N.Y.)
6.2 Starbucks Turbulence

In this industry, the change is low. Consumers expect only good coffee from coffee chains. The
predictability is high because consumers do not change their tastes overnight. People who love
coffee will keep returning, and we can predict that as long as new products are introduced and
improvised, Starbucks will still be a leading coffee chain.
6.3 Key Factors for Success
Starbucks has several key success factors and listed here are some.

6.3.1 Skill-related
Starbucks has a superior workforce talent as its baristas are trained and professional. Starbucks is
also innovative as they are constantly developing new products. Two of the most popular new
products are the Green Tea Latte and Cranberry Mocha Frappe. (Koomsub, N.Y.)
6.3.2 Marketing-related
The employees at Starbucks are friendly and courteous, and this makes customers enjoy their
experiences. Starbucks also has a broad line of products and selection, making customers spoilt for
choices. They also have ongoing promotions like the 1-for-1 Venti-sized beverages every now and
then. (Koomsub, N.Y.)
6.3.3 Organizational Capacity
Starbucks offers e-commerce for customers to order and purchase products online. It also possess
managerial know-hows. (Koomsub, N.Y.)
6.3.4 Convenient Locations
Out of all the coffee chains in the world, Starbucks has the most extensive range of outlet stores
globally. In Singapore itself, there is at least one Starbucks outlet in every neighbourhood. This
makes it very convenient and accessible for consumers to visit. People would always go for ease,
thus this makes it a success factor for Starbucks. (Koomsub, N.Y.)
Starbucks Experience
7.0 Marketing Mix
7ps

http://www.slideshare.net/noopursingla/starbucks-29256308

8.0 SWOT Analysis

(Kotler, 2006)
8.1 Strengths break up
Starbucks has an extremely strong brand image. Over the years, it has built up its foundation and
social image successfully. Whenever a coffee chain comes to mind, Starbucks would definitely be
one of the first names to pop up. Starbucks is known to be one of the best coffee chains in the
world. They also produce high-quality products as they use high-quality Arabica coffee beans to
roast their coffees. Even for handcrafted beverages, they also have standardized measuring cups so
as to make sure the portion of every ingredient is equal, making the taste of the beverages almost
identical everywhere in the world. One of the strongest strengths of Starbucks would be the
Starbucks experience. They are well known for their perfectly blended coffee, soothing music, cozy
atmosphere with comfortable sofa seats, and friendly staff, which results in incomparable customer
service. (Jurevicius, 2013) This is something that every competitor cannot beat, which makes
Starbucks gain competitive advantage. Starbucks also has an extensive range of products in its
menu, from freshly roasted ground coffee to handcrafted ice-blended beverages, and now even
having flavoured teas, juices, as well as snacks like sandwiches and cakes. Customers can have a
large variety to choose from, and can try something different on every visit. Starbucks also has
attractive membership benefits like getting a complimentary slice of cake on your birthday month,
and also be able to redeem a free drink of any size with every purchase of 13 drinks. This keeps
customers coming back to enjoy the benefits.
8.2 Weaknesses break up
However, the beverages are priced relatively high. In Singapore, a regular small-sized coffee costs at
least $6. Not everyone can afford to drink coffee at this price all the time, therefore the target
market for Starbucks is not for the lower-income people. There is also a lack of workforce in stores
at times, especially during lunch and dinner hours. Customers have to queue and wait for a

substantial amount of time before receiving their orders, and this is due to a lack of manpower
during the busy periods. Another weakness would be that the price of coffee beans is the major
influence over the firms profits. It is a commodity and cannot be controlled by Starbucks. Due to
weather conditions, seasonal changes and many other factors, the price of coffee beans cannot be
fixed and Starbucks profits cannot be constant or estimated all the time. (Jurevicius, 2013)
8.3 Opportunities break up
Starbucks can increase its market expansions to emerging economies like the Chinese and Indian
markets, as the number of outlet stores in these two markets are comparably lesser than compared
to the European and Asian countries. Starbucks should expand its retail operations. They should sell
some of their products through other retailers by forming partnerships such as supermarkets to sell
its products like coffee beans. Starbucks can also increase product offering by expanding the number
of outlet stores that offer alcoholic drinks, and also add new products to reach a broader customer
group. (Alexis, 2013)
8.4 Threats break up
Starbucks also faces threats like the rising prices of coffee beans and dairy products. This is
something that Starbucks cannot control, but still have to buy them from their suppliers no matter
how much they cost. Consumers often compare the prices, and local cafes offer much lower prices.
Not everyone can afford Starbucks but everyone can afford local cafes. This causes Starbucks to
experience intense competition. Another threat would be trademark infringements. Starbucks is
always involved in cases where the illegal use of its trademark is used. In countries like Thailand and
China, small coffee outlets are opened with the Starbucks logo, some identical while some slightly
changed. People who fail to notice the imitations would think that the quality of Starbucks has gone
down, making it detrimental for Starbucks. (Alexis, 2013)
9.0 Competitor Analysis
Retail coffee and snacks market share in the United States

(Geeredy, N.Y.)
The first Dunkin Donuts was opened in 1950 in Quincy, Massachusetts by William Rosenberg. Today,
there are over 13,000 Dunkin Donuts located in 50 countries worldwide with sales of $6.4 billion in
2006. Dunkins headquarters is located in Canton, Massachusetts.

Dunkin Donuts is known for their doughnuts and coffee. Over the years, Dunkin has introduced new
products such as bagels, muffins, breakfast sandwiches. In order to compete with the lunch crowd,
Dunkin expanded their product menu to include pizzas and sandwiches. In order to compete with
the specialty coffeehouses, Dunkin expanded their coffee offerings to include flavored coffees,
lattes, coolattas, flavored hot chocolate and teas.

10.0 Value Chain Analysis

The above is the value chain for Starbucks. It shows the product development from adding tea and
international influences, to the research which developed the VIA instant coffee line and the search
for high-quality beans. The products are then distributed to storefronts, grocery stores and the retail
outlets. Finally they offer ground coffee and gift cards to take home. (Lee, N.Y.)

Here is the new value chain, with international development added upstream to allow the
development of new products in international markets that suit the cultures of different countries.
An example would be Green Tea Latte developed in Starbucks Japan. Online storefront
customization is added downstream, and it allows consumers to create an account online, to order
online and even to create our own drinks. The mobile application is also added, and it can locate the
Starbucks locations, as well as receiving the latest promotions that Starbucks is having. (Lee, N.Y.)

11.0 Porters Generic Strategies

(Lee, N.Y.)
Here, Starbucks is using the Differentiation strategy as a whole. They provide high-quality coffee and
a unique, homely experience in the convenience of many locations. The high quality, great ambience
and good accessibility together, allow customers to have a one-of-a-kind experience and
convenience. This separates Starbucks from its competitors. The new instant coffee line, VIA, is in
between Differentiation and Cost Leadership. Although it is a lower-cost alternative to regular coffee
at Starbucks, it is still special and unique from other products in the market. The in-store products
like brewing utensils and gifts such as gift cards and coffee mugs fall under the Focused
Differentiation category because they target consumers who are coffee lovers, and they are also
items which are unique to Starbucks and cannot be found anywhere else.

11.0 Recommendations for Future Direction

11.1 Ansoff Matrix

(Riley, 2012)

11.1.1 Market Penetration

Market penetration is the growing sales of existing products in existing markets. For Starbucks, they
have a loyalty programme, where its members can receive special benefits during their birthday
month and getting a complimentary drink upon purchasing 13 beverages. The baristas have also
started writing customers names on the cups to identify who is having which drink. This results in
greater customer satisfaction. (Blatchford, 2013)
11.1.2 Product Development
Product development is where a business aims to introduce new products into existing markets. An
example would be to develop a new premium coffee which is made from rare and exclusive coffee
beans, with some additional flavours to compliment it. (Blatchford, 2013)
11.1.3 Market Development
Market development is when the business seeks to launch its existing products into new markets.
Starbucks can penetrate into new emerging economies like China and India. By expanding their
business there, Starbucks is most likely to succeed in making itself the largest monopoly in the
market. As China and India are both extremely huge, it provides a good opportunity for Starbucks to
start new outlets there and have growth in revenue.
11.1.4 Diversification
Diversification is the launching of new products into new markets, with the potential of increasing
sales revenues significantly. Starbucks should plan to introduce food products like baked rice, fish
and chips, finger food to Starbucks. As they only serve sandwiches and cakes in most outlet stores,
Starbucks should come up with an attractive food menu like that of Coffee Club and The Coffee

Connoisseur (TCC). This way, it will attract a larger group of customers and hopefully the food range
can be a significant source for consumers meals.

12.0 Other Recommendations

12.1 Introducing New Promotions
Other than the Ansoff Matrix, Starbucks can also increase their sales and sustain their market share
by introducing new promotions. Now that they already have the re-chargeable membership card,
they should implement some discount offers for students and elderly to target different target
groups. Since working adults are already regular customers, Starbucks should make their products
affordable to the younger and older generation. This in turn can create more sales revenues.
(UKEssays, 2013)
12.2 Acquisition
Starbucks can further increase its market growth by acquiring companies which have financial
difficulties that they see a potential in recovering. If done well, huge profits will come in. Just like
Walt Disney Company buying over Marvel, it is because Disney sees the potential in Marvel, and is
confident in making larger profits after acquiring Marvel.
12.3 Employee Training and Development
Training and development plays an important role in the service line. Employees must be wellmannered and professional in order to maintain a good brand image of the organization. Starbucks
should organize training programmes for its staff to attend annually to improve on their customer
service and also to give feedback about their jobs and see which areas can be corrected.
12.4 Employee Motivations
Employees should be given good pay and benefits in order to be motivated to work. For an
organization like Starbucks, it is essential for all employees to enjoy being at work before they can
provide good service and produce high-quality beverages for customers in order to maintain its
image and position in the market.

13.0 Conclusion
Starbucks plans to diversify is one of the Ansoff Matrix growth strategies. The alternative
strategies to grow sales are market penetration, market development and product
development. The benefits to Starbucks are to grow sales, spread uneven demand and gain a
competitive advantage. This strategy is also suitable for Starbucks because they have
exhausted the ability to grow sales through the other means.
Appendices

Appendix 1: Starbucks Corporations Financials

Source: Starbucks 10-K Form for Fiscal Years ended 2008-2013