STARBUCKS

STRATEGIC MANAGEMENT
REPORT
DATE OF SUBMISSION: SEPTEMBER 11, 2019

MARY JOY RUTH DOMINGUEZ

NEW ENGLAND CENTER FOR CHILDREN | ABU DHABI, UAE
Executive Summary

I. INTRODUCTION
II. INDUSTRY ENVIRONMENT ANALYSIS
PORTER’S FIVE FORCES
 Threat of New Entrants – Moderate
Starbucks has established and developed a strong brand and earned
customer loyalty through its numerous coffee chains globally.
 Bargaining Power of Supplier – Low
Large overall supply of coffee beans, tea leaves and other raw materials
used by Starbucks are being supplied by various suppliers around the world
thus limiting the influence of every suppliers. The bargaining power of the
suppliers further weakens due to the Supplier Diversity Program being
implemented by Starbucks where diverse groups and companies being
owned and operated mostly by women, LGBTQ, person with disability,
veterans and minority are given priority to work with Starbucks.
 Bargaining Power of Buyer – Moderate
Since a lot of coffee shops and restaurants serves common beverages and
products being offered by Starbucks, many customers may tend to shift
from Starbucks to other brands due to low switching costs. Several
affordable coffee substitutes such as instant coffees, teas, and juices are
also easily accessible and available in the market. However, many
Starbucks franchisees uses promo strategies such as customer loyalty
rewards where customers can earn stars with every purchase to redeem
free beverage or item. Moreover, coffee/caffeine addiction makes
customers to purchase their preferred drinks again from Starbucks.
 Threat of Substitute Products - High
Main coffee substitutes such as tea, juice, energy drinks, alcoholic and non-
alcoholic beverages are readily available and affordable from numerous
outlets such as grocery stores, convenience stores, vending machines, and
restaurants, making it easier for consumers to buy these low-priced
substitutes instead of Starbucks products. In addition, many consumers opt
 to brew their coffees and make their teas at home further strengthening
threats of substitutes.
 Competitive Rivalry – High
Despite being the market leader and having almost 40% of US market
share, Starbucks faces a strong competition among many coffee shops in
the food and beverage industry. Dunkin Donuts, Mc Café, Costa, Caribou
Coffee and Tim Hortons were among the major competitors of Starbucks
worldwide. Low switching costs for consumers further strengthens the
competition as many coffee beverages and products being offered by
Starbucks are also being served by other coffee shops. Still, high quality
products and excellent customer service helped Starbucks build a strong
brand that provides a competitive advantage among its competitors.

III. VRIN ANALYSIS

VRIN Analysis is used to assess and evaluate company’s resources and

capabilities in achieving competitive advantage among its competitors.
Resources, also considered as company assets are needed in order to
sustain and support business operations. It includes physical resources,
human resources, intellectual resources and financial resources. For it to
provide the business a competitive advantage, these resources must
possess VRIN qualities – valuable, rareness, imitability and non-
substitutable.

Value – Resources must be important and useful to the company.

Rareness – Resources must not be easily obtained or acquired by
competitors.
Imitability – Resources must not be easily imitated by competitors.
Non-substitutable – Resources must not be easily substituted by any
other resource.
 Is it Is it Can be easily Can be easily
Resources and Capabilities
valuable? rare? imitated? substituted?
Strong Brand Image Yes Yes No No
 Starbucks is a well-
established coffee
company since 1971.
 Starbucks is the
leading retailer of
finest coffee in the
world.
 Starbucks has now
more than 27,000
stores across the
globe.
High Quality Products Yes Yes No Yes
 Starbucks is known for
its high standard
coffee and wide
variety of signature
products.
Excellent Customer Service Yes No No No
 Starbucks is
committed to provide
and improve its
customer service by
having skilled and
knowledgeable
employees.
 Starbucks believed
that a happy and
satisfied employee is
the key in providing
 excellent customer
services.
Well-managed Supply Yes Yes No Yes
Chain
 Starbucks works and
interacts directly with
farmers to ensure that
produced coffee
beans achieve quality
standard requirements
through special
trainings and
programs.
 Company has also
established Coffee
And Farmers Equity
(C.A.F.E) and Coffee
Sourcing Guidelines
(CSG), standards and
practices for every
supplier.
Store Atmosphere and Yes Yes Yes Yes
Concepts
 Every store was
established to create a
friendly, comfortable
and welcoming
environment.
 A cozy place where
people can socialize,
communicate, study,
work or spend quality
time alone.
Global Presence Yes Yes No No
 Today, Starbucks is
recognized as the
largest coffee chain
company, with over
27,000 stores
worldwide, the
company continues to
expand and grow
internationally.

VALUE CHAIN ANALYSIS

Value Chain Analysis is used in identifying business activities that can create
value and competitive advantage to the business.

Firm Infrastructure
Activities
Support

Human Resource Management

Technology Development
Procurement
Inbound Operations Outbound Marketing Service
Logistics Logistics and Sales

Primary Activities

Primary Activities
 Inbound Logistics – Starbucks has maintained close relationships with
their partnered coffee growers in establishing effective and efficient supply
chain management system and ensuring the production of finest quality
coffee beans. Green coffee beans, produced directly from the farms are
transported to regional distribution centers, where beans are roasted and
 packed then transported to different central distribution centers around the
world.
 Operations – Starbucks sells a wide variety of high-quality coffee, tea, and
other food products through its company-operated stores and licensed
stores. According to Starbucks’ 2018 Annual Report, 80% of its total net
revenue were generated from its company-operated stores while licensed
stores accounted for only 11%. Today, Starbucks has operated with more
than 27,000 stores across more than 75 countries worldwide including
Teavana, Seattle’s Best Coffee, Evolution Fresh.
 Outbound Logistics – Starbucks offers a wide variety of products including
coffee, tea, juices, pastries, coffee beans, tea bags and other beverages. In
addition, Starbucks also sells coffee and tea related merchandise such as
espresso machines, coffee press, mugs, tumblers, novelty items and many
more. Majority of its products were sold directly at its company-operated
and licensed stores. However, packed coffee, tea and other ready-to-drink
beverages may also be purchased through other channels such as grocery,
convenience stores, specialty retail stores and foodservice accounts.
 Marketing and Sales – Starbucks brand has been recognized all over the
world by offering its customers high-quality product and excellent service.
However, with the increasing competition in the market, Starbucks started
increasing its marketing investments through various marketing strategies
in the form of advertisements, promotions, events and public relations.
 Services – Aside from its high-quality products, Starbucks has a reputation
for providing excellent customer services to their consumers. Still,
Starbucks aims to continuously improve its services to achieve and exceed
its customers’ expectation.

Support Activities
 Firm Infrastructure – Dedicated people from the management, finance
and legal departments are needed in carrying out all planning and control
activities required in running and supporting business operations.
 Human Resource Management – Starbucks believed that one of the major
factors contributing to the success of an organization lies in good human
resource management, that a highly motivated and committed employees
would continue to provide excellent service leads to higher customer
satisfaction. For that reason, the company is dedicated in providing its
employees with great compensation, benefits and healthy work culture.
Comprehensive training programs were also conducted to help employees
perform their job effectively and efficiently.
 Technology Development – Starbucks has been known for their success
in the creation and usage of innovative technologies such as automated
information system and centralized logistic planning network used to
provide accurate and timely information on inventory levels and storage
capacities. The company has also launched its Mobile Order & Pay system,
where customers are now able to place orders and purchase it using their
mobile app. Starbucks recognizes the importance of making products and
services more convenient as possible will further enhance customer loyalty.
This app also includes My Starbucks Rewards Program, where customers
can earn stars as reward points for every beverage they spent. Customers
then may use these stars to redeem free drinks or merchandise.
 Procurement – Starbucks acquires their high-quality coffee beans directly
from their diverse group of supplies worldwide.

BCG MATRIX
RELATIVE MARKET SHARE
HIGH LOW
STAR QUESTION MARK
GROWTH
MARKET

RATE
HIGH
 CASH COWS DOGS

LOW
IV. STRATEGIC MAP
 Financial
 Customer
 Internal Process
 Learning & Growth

V. DIRECTIONAL POLICY MATRIX (DPM)

SEGMENT ATTRACTIVENESS
CASH GROWTH LEADER
STRONG

GENERATION LEADER
CAPABILITIES

TRY HARDER CUSTODIAL PHASED

AVERAGE

GROWTH WITHDRAWAL

DISINVEST PHASED DOUBLE OR

WEAK

WITHDRAWAL QUIT

UNATTRACTIVE AVERAGE ATTRACTIVE

VI. CORE COMPETENCIES ANALYSIS

VII. ORGANIZATIONAL CULTURE
VIII. INTERNATIONALIZATION STRATEGIES
 International Strategy
 Multidomestic Strategy
  Global Strategy
 Transnational Strategy
IX. COMPETITIVE ADVANTAGE
 Cost Advantage
 Differentiation Advantage

REFERENCES

https://www.starbucks.com/responsibility/sourcing/suppliers

https://s22.q4cdn.com/869488222/files/doc_financials/annual/2018/2018-Annual-Report.pdf