Starbucks Strategic Management Overview

Introduction:

Strategic management is referred to as the formulation as well as the implementation of the effective strategies in terms of fulfilling the organizational goals. Strategic management focuses on assessing the internal and external environmental factors and their impacts on the business. This assessment assists the organizational leaders to formulate the effective and relevant strategies that is important for meeting the common organizational goals. In this assignment, the Study will discuss the strategy of Starbucks, the famous American coffee company and the coffeehouse chain. In addition, to this, this assignment will also discuss Starbucks' financial performance and the strategic management that it has taken in order to improve the financial framework. This assignment will also discuss the external and internal environmental factors that affect the overall business of Starbucks. Moreover, this study is going to highlights the strength, weakness, and threats of Starbucks by discussing the SWOT analysis.

1. What is Starbucks' strategy?

Starbucks is a famous American coffee company which has 22,000 coffee shops in 40 different countries. The most important strategy of Starbucks to maintain this company as one of the most reputed and recognized brands in the world. The strategies taken by Starbucks is not only about the financial growth and profit, but also about offering people great place, where they can spend their best time with delicious coffee and share their great experience with the staffs and of Starbucks. The strategies taken by Starbucks are as follows:

Locational strategy:

Starbucks has clusters of 20 and more coffee stores in every urban hub of the countries in which it operates its business. Through targeting the urban areas, Starbucks aims to create the local Starbucks buzz which attacks the large range of the customers. According to Ansoff et al. (2019), sometimes, the closely situated stores can cannibalize the sales of the stores. In case of Starbucks, some of the economists say that, in each country, the closely located stores if Starbucks affect each other sales which not only increase the competition among the staff of eth two different stores but also distr4act the staffs to focus on one common goal of this organization. For eliminating this risk, Starbucks is going to expand the sales of coffee for the stores which face the reduces selling, through improving its online coffee delivery and infrastructure as well as an ambience that attract the customers (investor.starbucks.com, 2018). Moreover, Starbucks is going to open its new stores near the highway which can enhance its sales.

Diversification strategies:

For improving the operational efficiency, core values, principles and customer connections, Starbucks has taken the diversification strategy in terms of introducing the new products in the US market. Through this strategy, Starbucks focuses on establishing its footprint into the new US market. The major strategies and initiatives of Starbucks in the US market are:

Introduction of the Via, the innovative type of eth instant coffee. Via has been launched by Starbucks during February 2009, for the pack of three individual servings at $2.95. Via uses the patent process of making fantastic coffee, that improves the taste of Starbucks coffee (investor.starbucks.com, 2018).

The Single Serve Pod Coffee System has been launched in 2011, which improves the experience of the customers in having the best quality coffee.

Starbucks also acquired the juice maker Evolution Fresh Inc, in order to expand the retail distribution of delicious juices in its stores. This initiative of Starbucks has been proved one of the most effective and appreciable strategies, that assist its market expansion and improve the customer base (scholar.harvard.edu, 2017).

For improve the growth in the US market, Starbucks, acquired San Francisco bakery La Boulange, in order to distribute the baked goods and pastries to the Starbucks stored for improving experience of the customers.

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For analyzing this diversification strategy, Concentric Diversification theory can be discussed. Based on the theory, marketers need to focus on the product diversification or the market diversification for entering int the new market (Hill, 2017). In case of Starbucks, marketers have focused on the product diversification process through which they increase the range of the products, such as coffee, baked foods, pastries, cakes, fruit juices (investor.starbucks.com, 2018). Another important theory is the Ansoff Matrix that can be discussed in order to analyse the diversification strategy of Starbucks. In the case of Starbucks,, it focuses on the diversification strategy for the US market among the all four diversification tools that are described in the theory such as market penetration, product development, market development, and diversification. Instead of focusing on improving eth sales and volume of the existing market and existing product, Starbucks focuses on entering into a new market (US market) with new products, such as Via, Single Serve Pod Coffee System, juice and baked food products. This strategy is proved to be a highly effective strategy for Starbuck which not only improve the brand reputational of this company bust also improves its customer base in the new US market (investor.starbucks.com, 2018).

Selling strategy:

Several initiatives have been taken by Starbuck in order to grow its sales in the grocery sectors. Starbucks focuses on introducing the new brand and products into the stores. Through introducing the Via, the instant coffee, Starbucks is able to sell the $24 billion of eth global coffee products to the customer all over the world. Starbucks also increase sales through eth traditional grocery chains.

Starbucks selling strategy is not only based on the promotion, profit, and growth but also on improving eth emotional attachment with its shareholder's and stakeholders. Through, maintaining eth ethical and moral values, Starbucks is able to maintain its strong customer base which not only improves its sales each year but also strengthen its brand reputation (investor.starbucks.com, 2018).

International expansion strategy:

From 2009-2015, Starbucks has opened several stores in India and China. It has opened 400 stores in Mainland China and 800 stores in Greater China. Starbucks has taken the merging strategy for Indi, in which it merges with the Tata Global Beverages for establishing the large chain of Starbucks coffee house. By the end of July, Starbucks is able to opened more than 50 outlets of Tata Starbucks Ltd in India, especially in the commercial companies, malls, and airports. As stated by Hitt and Duane Ireland (2017), The Marketing Mix 4Ps Theory focuses on eth four majors’ aspects that the organizational need to consider while expanding eth business internationally. In this aspect, Starbucks aims to improve its product range and market expansion through eth international market strategies. Not only in the China and India, but also in other countries such as Morocco, Costa Rica, Finland, Monaco and Norway, Starbucks has established its market footprint through offering the wide range of food products and highly impressing brand values.

2.Assess Starbucks’ strategy in relation to:

Starbucks’ financial performance.

This study evaluates the financial performance of Starbucks by analyzing the company's current financial database and audited financial statement. Based on the Starbuck’s Annual Report (2018), sales of global comparable stores are increased by 3%, that is driven by the 4% increase in the American and US comparable stores sales. In the case of China Starbucks the comparable store's sales increases by 1%. In the case of the consolidated net revenue, Starbucks has shown a sharp increase of 11% than the previous year. During the end of 2018, the consolidated net revenue for Starbucks is $6.3 billion (scholar.harvard.edu, 2017).

On analyzing the above mentioned graphical representational it can be stated that Starbucks has shown a sharp increase in the net revenue growth (short term) and the substantial growth in the midterm. From the Starbucks 2018b Annual report, it is seen that adjusted with the nearly 2% net benefit from the streamline driven activities and nearly 1% of the headwind from unstable foreign currency translation, the consolidated net revenue n case of Starbucks has been increased nearly 9% over the prior years. Streamline-driven operational that are taken into account by the Starbucks is acquiring the East China business, closure of eth Teavana mall stores and the transformation of the certain international operation to licensed owned model from the company owned model (scholar.harvard.edu, 2017). Starbucks has also intended to grow its loyalty program that is known as the Starbucks RewardsTM loyalty program. From the Annual report of 2018, it is seen that there is 15% growth of the active members of Starbucks RewardsTM loyalty program to 15.3 million in the US, that assist Starbucks marketers to improve its international brand reputation. Moreover, the financial database also shows that there is 14% increase in the company operated transactional in the US through Mobile Order and Pay. Starbucks also has opened 604 new stores in the fourth Quarters and it now operates 29,324 stores over the 78 markets. This company also has increased its shareholders to $3.6 billion, through maintaining eth perfect combinational of the share purchases and dividends.

Revenue component for Starbucks:

Starbuck generates all its revenue through the licensed stores, the company operated stores, foodservice operations and the consumer-packaged operation.

The revenue that is collected from the operated stores and the licensed are based on eth different factors such as:

Ability if the Starbucks to leverage the financial support to the infrastructure within the geographic regions in which its stores operate

The ability for assessing the desirable local retail space

The expected ultimate size and structure of the market in which the store is operating (scholar.harvard.edu, 2017)

Global comparable stores sales:

Based on the Starbucks Annual Report, 2018, it can be stated the global store sales of the Starbucks Corp. has been increased by 2% in the fiscal first quarter in 2018, 2hich is down by 1% from 2017. However, the financial database shows that Starbucks accelerates its sale growth in China. In East China, the comparable sales have been increased by 6% at the first quarter in 2018, which is driven by the 30% revenue growth and the higher transaction.

In the case of the US, the scenario is different. Although Starbucks has shown the high comparable sales growth in China, in the US, the comparative sales growth has increased by 3% which is lower by 1% than in eth previous years. Economist analyses the reason behind this slow down can be the limited-time offered products in the US that can not resonate with the customers as expected. However, this slight reduction in the sales in US markets, assist the Starbucks marketers to improve and standardize their strategies in term of increasing their sales. One of eth major initiate taken by Starbucks for avoiding the racism is closing if 8000 stores in the US for one day to raise the voice against the racism. Most of the economist suggest that this step is going to be one of the major damages to the international and social reputation of Starbucks (investor.starbucks.com, 2018).

Re-Segmentation in Fiscal 2018:

For dealing with losses that are generated due to the closing down of eth most of the stores in US market, in the fourth quarter, 2018, Starbucks focuses on the realignment of the operating segment and organizational structure. Starbucks establishes the Global Coffee Alliance. It also improves the arrangement of the Channel Development Operational Segment, in terms of improving the ability of Starbucks to maintain the strong international connectional with the different market leaders in order to improve its sales (investor.starbucks.com, 2018).

B. Overall coherence of the Starbucks in terms of fitting with the company's external and the internal environment Assess Starbucks' strategy in relation to:

Internal and external factors affect the overall business decision and eth marketing framework of the organizational. In the case of Starbucks,, it has taken effective strategies for operating in the internal and external environment in terms of maintaining its financial growth and the grand reputation.

Internal environmental analysis and strategies for the internal environment:

There are five internal environmental factors such as

Organizational structure

Strength

Weakness

Opportunities

Threats

Starbucks has taken effective strategies that are relevant and effective in terms of maintaining a strong balance between the business growth and strong organizational structure. The strategies that are taken for dealing with the internal environmental factors are as follows:

Strong organizational structure:

Starbucks focuses on developing the strong organizational structure that is based on moral, ethical values, trust, transparency, and synergistic working environment, through maintaining good relations laming all the staffs, Starbucks build an emotional attachment with its shareholders which assist this company to deal with any difficulties (investor.starbucks.com, 2018).

High-quality products:

Starbucks focuses on maintaining the quality of all its products by selecting the best quality raw materials. The coffee that is sold by Starbucks has the best quality and aroma that attacks the millions of customers all over the world. Moreover, it also maintains the delicious taste and flavor of all the products such as juice, baked foods, pastries, cakes and soft drink which assist Starbucks to maintain a strong customer base.

Positive and strong organizational culture:

Starbucks focuses on maintaining the positive and trustworthy organizational culture which assist all the staffs to work synergistically. In the positive organizational culture, Starbucks staffs can share their opinion, views, and decision, which assist this company to deal with any type of internal organizational issues.

Innovation and risk-taking approaches:

Starbucks focuses on innovative and creative organizational culture. Creative organizational culture is important for origination to introduce new as well as effective organizational strategies (Jones, 2016). Starbucks has different delicious flavor of coffee such as Frappuccino, Coffee Mocha, Chinese tea, and decaf drinks. Moreover, Starbucks also have different types of desert and foods in their menus such as cheesecake, chocolate brownie, and the scone. Through this innovative and creative marketing approaches, Starbucks has established its strong footprint in the overseas market such as in the US, UK and China (investor.starbucks.com, 2018).

External environmental analysis:

STEEP Analysis:

3. Does Starbucks operate in the interests of its shareholders or its stakeholders?

Starbucks aims to build the company that focuses not only into the profit and financial growth but also emphasize on maintaining eth community relation as well as social purposes (investor.starbucks.com, 2018). When it comes to the shareholders, Starbucks always focuses on building such as business framework, that will always link the shareholder's values as well as their preference to the main goal and moral value of the organization. Moreover, through linking the shareholder's values to the cultural values, Starbucks focuses on improving its relations with its shareholders in terms of developing the highly stable and sustainable business framework. As stated by Ethiraj et al. (2016), the shareholders’ value is one of the most important aspects in business which a company needs to respect and maintain. Through linking the shareholder's interest with the business operational, organizational can increase its sales, earnings, revenue, and cash flow, leading to the optimum business success of the shareholders (investor.starbucks.com, 2018). As stated by shareholders are also referred to as the stakeholders who own s at least one share of the organizational or company. Shareholders are the company owners, and they directly influence the decisions, strategies, marketing moves and operational of the company. Now, Starbucks has four major shareholders which are as follows:

President of the Ariel Investment

Founder and former chief executive (Howard Schultz)

Group President of the Global Retail

Group president of the Siren Retail

Starbucks focuses on redefining the responsibilities of the business towards its shareholders. Starbucks focuses on developing such a company that respected the values, decision and viewpoint of its employee irrespective of their caste, race, sex, and religion. It also focuses on bringing together all its partners or shareholders, customers and the community for maintaining strong understanding among them. In this aspect, Richter and Torstensson (2016) commented that for each organization working with the shareholders is not enough, they need to understand each other values, decision, and opinion, which can assist eth organizational to increase its sales, revenue, and cash flow. Starbucks consider its shareholders as the building blocks of its business, who assist and direct the business operations by applying their experience to get the optimum success. Starbucks has conducted the ‘Race Together' campaign, in March 2015. This campaign is about the promotion of equality and the bias-less organizational framework of Starbucks. Through this campaign, Starbucks also involves its shareholders and the employee to involve actively in order to discuss the anti-racism with its customers (investor.starbucks.com, 2018). Moreover, Starbucks, continue to focus on the building a different type of company that would make the perfect balance between the social conscience and the profitability by applying the shareholder’s values into the organizational operations. This value is the major basis of Starbucks emotional relational and attachment to its shareholders and stakeholders. , that assist the staffs to make their best effort for achieving eth common organizational goals. Therefore, it can state that Starbuck gas successfully operates its business in the interest of shareholders and stakeholders.

4. What threats does Starbucks face; how should it counter these threats?

For identifying the threats of Starbucks, it is important to understand both the strength and opportunities for this organizational. The SWOT analysis is one of the effective processes, which can assist this study to determine the possible threats that Starbucks faces.

SWOT Analysis:

For dealing with these above-mentioned threats Starbucks focuses on different strategies such as:

Product development strategy:

As stated by Michael et al. (2017), product development strategy is one if the important business strategy that assists the marketers to improve their product range that attracts the customers, Starbucks has established strong product development strategy in overseas markets such as the US, China, India, and the UK. Starbucks focuses on diversification strategy to develop its product range by introducing the new products in the US market and China market. During the entry in the US market, Starbucks has introduced different products such as Via, the new type of instant coffee, Single-serve pod coffee systems, juices, and baked foods and pastries. Through the introduction of products, Starbucks has developed its product range that not only assists the marketers to extend the market but also improves its brand reputation (investor.starbucks.com, 2018).

Distribution strategy:

Starbucks uses multiple channels for the proper distributional of its products. Starbucks sells the products through the direct retail system in the company-owned stores. They import the coffee and process it and then use their brand name to sell the delicious coffee through their stores. Starbucks has made distributional agreements with different coffee suppliers such as airlines, hotels and the supermarket. Through maintaining strong relations with the distributional channels and suppliers, Starbucks focuses on improving its sells ad brand awareness in the domestic and international market.

Conclusion:

From the above-mentioned discussion, it can be concluded that strategic management process is one of the most important business aspects which assist the business marketers to formulate and develop effective business strategies that not only improve the business framework but also assist the staffs to meet the common organizational goals. Starbucks has taken effective strategies in terms of maintaining its financial performance. Moreover, it also focuses on product development, distributional strategies and diversification strategy, which would assist the organizational leaders of Starbucks to deal with the internal and external environmental factors. Moreover, this study also concludes that, although Starbucks experiences several threats such as increasing competition, a risk to brand reputation, saturation of the US market and heavy dependence of Starbucks of the international market, it focuses on innovative marketing strategies to deal with all these threats.

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