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Prayoga Cahayanda SMAK04

Starbucks is the largest coffee shop network in the world. There have been many Starbucks stores are popping up all over Indonesia. Currently in Indonesia there are 147 stores spread across 12 cities. Starbucks as a coffee shop, is not only provides high-quality coffee but also creates a different experience for the customer and as a prestigious place to work .

Starbucks originated from the United States and is headquartered in Seattle, Washington. The first Starbucks store opened on March 30, 1971 by three partners : an English teacher, Jerry Baldwin, Zev Siegl, a history teacher, and a writer Gordon Bowker . The three were inspired by coffee roasting entrepreneur Alfred Peet, which they know personally, to sell high-quality coffee beans and their equipment. Since its founding as a toaster and coffee beans local retailer, Starbucks expanded rapidly. In 1990, Starbucks opened a new store every workday, a phase which continued until the 2000s

Starbucks value chain system creates added value to its products, which make customers willing to pay more. Therefore, the company does not hesitate to set prices above market for its products. In fact, customers come to Starbucks coffee and do not look at the price but they are looking for quality products and brand image that the company offers. This happen because their value activities were effective in the coordination between its primary and secondary activities, resulting in the creation of added value to Starbucks brand and products

Its inbound and outbound logistics activities, operations, marketing and service activities are supported with a good corporate management planning, human resource management, technological development, and procurement activities. For example, the setting up of stores is well planned. Each location is carefully studied, taking consideration and seemingly irrelevant details such as traffic flow, density of people and demographic characteristics of an area, and careful selection of personnel to be deployed in each outlet. These are done to support the primary activities that aim to deliver good quality coffee products to consumers. In the primary activity component, suppliers are cautiously selected, the distribution of coffee beans to each outlet is carefully planned to maintain freshness, and each store are designed to exude an ambience of luxury and comfort for its consumers. This is the cause that Starbucks become the company a leader in the coffee industry for last two decades.

SWOT analysis is the instrument used to perform strategic analysis . According to Freddy Rangkuti ( 2004 ), SWOT analysis is the identification of various factors systematically to formulate corporate strategy. This analysis is based on the logic that maximizes strength (Strength) and opportunities (Opportunities), but at the same time can also minimize weakness (Weakness) and threats (Threats).

Location

Exclusive ness

Weakness

Too many products

Risky Investment

Expansion of suppliers network

Expansion to developing countries

Opportuniti es

Enhance product offerings

Expansion of the retail operation

The increase in raw material prices

Increased Competition

Threats

Disruption of supplies

According to David (2006), IFE and EFE Matrix aims to analyze environmental factors, either internal and external. Internal factors are classified into strengths and weaknesses of the company and analyzed with matrix IFE . External factors classified into opportunities and threats for the company and analyzed with the EFE matrix. Stages in the manufacture of IFE matrix and EFE , are as follows : a. Factors specified in column 1 for external strategies are opportunities and threats and internal strategies are the strengths and weaknesses of the company b. Give weight to each factor in column 2, from 0.0 (not important) to 1.0 (most im portant). The sum of all weights given to all the factors must be equal to 1.0 c. Give rank 1-4 in the third column for each key factor, for determine the effectiveness of the company's strategy in response to these factors, by making a scale ranging from 4 (excellent ) to 1 (below the average ) d. Multiply each weight by its rating to determine the factors weighted value e. Sum the weighted value of each variable to determine the total weighted value for the company

Strategic Factor

Weight

Rating

Score

Strenghts
1.Brand Identity 2. Quality 3. Variation 0.2 0.1 0.1 4 4 3 0.8 0.4 0.3

4. Location
5. Convenience 6. Starbucks experience 7. Ethics

0.1
0.2 0.05 0.05

4
3 3 3

0.4
0.6 0.15 0.15

Weakness
1. Exclusiveness 2. Too many products 3. Risky Investment 0.1 0.05 0.05 3 3 2 0.3 0.15 0.1

Total

3.35

Strategic Factor Opportunities 1. Expansion of suppliers network 2. Expansion into developing countries 3. Enhance product offerings 4. Expansion of the retail operation Threats 1. The increase in raw material prices 2. Increased Competition 3. Disruption of supplies Total

Weight

Rating

Score

0.2 0.15 0.1 0.1

3 4 3 4

0.6 0.6 0.3 0.4

0.2 0.15 0.1 1

2 3 2

0.4 0.45 0.2 2.95

Values that obtained from the IFE and EFE matrix is inserted to IE Matrix for mapping the position of the company at the current time. The Total Weight of IFE scores will be put on the x-axis and the total weight of EFE scores will be put on the y-axis. IE Matrix divided into three major parts that have different strategy implications , namely : 1. Growth and Build division (I, II , or IV) 2. Hold and Maintain division ( III, V or VII). 3. Harvest or Divest division (VI, VIII or IX)

SWOT Analysis

Matrix (Strength/S)
Brand Identity Quality Variation Location Convenience Starbucks experience Ethics

IFE

(Weaknesess/W) Exclusiveness Too many products High-risk investment

EFE (Opportunities/O) S-O Strategy W-O Strategy Expansion of With an already strong trademark, Starbucks is supposed to suppliers Network look for a new supplier networks, especially in the Asia region To avoid risky investments in the U.S., Expansion into (SO1) Starbucks should try to expand its market developing countries Expansion of Starbucks instant products to supermarkets that to developing countries (WO1) Enhance product spread across the world (SO2) offerings Expansion of the retail operation (Threats/T) S-T Strategy W-T Strategy The increase in the One of the major threats facing Starbucks is from the price of coffee beans competitors. To encounter that, Starbucks had to innovate and To avoid competition from local cafes and and dairy products diversify their product more often to maintain its position in the of the risk of investing in the domestic, Increased competition market. (ST1) Starbucks is supposed to expand to other from local cafes and Due to political or economic instability in some countries may countries that have less competition and other coffee shops affect business operations. But with a strong global image, less risk (WT1) Disruption of supplies Starbucks can shift its operations elsewhere that have potential growth. (ST2)

Pairwise Comparison is used for obtaining data which identify the weight for Analytical Network Process. The scale used to indicate : 1 = if external or internal factors on horizontal part are less important than the strategic factors external and internal on vertical part 2 = if external or internal factors on horizontal part are equally important than the strategic factors external and internal on vertical part 3 = if external or internal factors on horizontal part are more important than the strategic factors external and internal on vertical part

Strategy Alternatives
1. Innovation and product diversification

Weight
0.208

2. Network supplier of new raw materials


3. Expansion to developing countries 4. Sales of instant products to supermarkets 5. Expansion to country with smaller competition and risk 6. Divert operations to a stable country Total

0.194
0.167 0.153 0.153 0.125 1

Key to the success of Starbucks is that they produce a quality product that is far superior than their competitors, while continuing to offer a variety of products that separate them from the competition. They understand that customers place a value on the image when drinking coffee at Starbucks, and are willing to pay a higher price for the image

The right strategy for Starbucks is the penetration and market development strategy and product development strategy. The most prioritized strategy is to make better innovation and product diversification in all product of Starbucks

Conducting research using other analysis such as Porter's five forces analysis, PEST analysis, Pestel analysis

Conducting surveys within the Starbucks organization in order to further explore the strategies employed directly by the company

Prayoga Cahayanda