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Starbucks Strategic Management

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This proposal is about Starbucks. Starbucks is at maturity stage in product life cycle. The revenue is keep increasing since 2009, and the revenue of 2011 is $11.7 billion. The number of Starbucks stores has 17244 all over the world. The fixed cost percentage was above 89 % every year. The major Competitors are Green Mountain Coffee Roasters, Coffee Bean and Tea Leaf, Costa Coffee, Peet’s Coffee and Tea, and Caribou Coffee. There are close substitute of coffee, which are Teechino, Cafix, Genmaicha, Pero, and Roastaroma. The goals are to serve 25% of drinks that use the reusable cups, and front-of store recycling. Through this proposal, I had mentioned about identification of resources and capabilities which includes, inbound and outbound logistics, operations, marketing and sales, procurement, human resource management, technology development, and administration.

There are many successful strategies for Starbucks to implement, like they offer Frappuccino with others products, become the ‘third place’ for everyone, and customer satisfaction. The most important resources for Starbucks are employees, coffee beans, and fund. I recommendation Starbucks provide delivery service, the Starbucks location should at the place where is obviously to show the signboard, and use the organic coffee beans to brew coffee. After Strategies had planned, Starbucks need to use to right person to implement them and control them. I believe that Starbucks will keep improving their strategies to meet the demand of customers.


Starbucks Coffee Company was started in 1971(Starbucks Corporation, n.d.). The founders of the Starbucks are Jerry Baldwin, Zev Siegl, and Gordon Bowker (Starbucks Corporation, n.d.). All of them have the passion for the coffee. Thus, these three partners opened the first shop called Starbucks Coffee, Tea and Spices in Seattle (Starbucks Corporation, n.d.). The first Starbucks logo, which designed by a friend, is the two-tailed mermaid encircled by the words ‘Starbucks Coffee Tea Spices’ (George, n.d.). Their outlets are across 55 countries, of course Singapore has Starbucks branches also (Wikipedia, n.d.). Today, Starbucks has more than 30 types of drink provide to the customers (Starbucks Singapore, n.d.). Beside of these, they also provide cakes, sandwich, and many types of breakfast to match with the drinks (Starbucks Singapore, n.d.). These show that Starbucks had expanded the business direction to attract more customers’ attention.

Structuring an Environmental Analysis

Industry Analysis

Starbucks Coffee Company not only provides coffee drinks, it is also provides yogurt parfait, hot breakfast, and others (Starbucks Singapore, n.d.). Although it has so many products, but Starbucks is famous in coffee drinks. Coffee is the drink that rich in antioxidants, which will prevent the cell damage (Talk about Coffee, n.d.). Thus, people who often drinking coffee
will reduce the Parkinson’s disease, and other diseases (Talk about Coffee, n.d.). Drinking coffee will also improves people awareness on their work or studies (Martin, n.d.). Starbucks is using the over-counter sale to sell its products (Anton, 2010).

Now, Starbucks has 17,244 stores all over the world (New York Times, 2012). Its 2011 revenue was $11.7 billion in the whole year (Starbucks Corporation, 2011). Appendix 1 and 2 had mentioned that how does Starbucks grow in past 5 years (Starbucks Corporation, 2011) (Starbucks Newsroom, 2011). Starbucks offered unique drinks to differentiate its products Paul, 2011). It is high exit barriers for Starbucks. The Appendix 3 shows that the fixed cost percentage were above 89% in 2007, 2008, and 2009 (Starbucks Corporation, 2011).

Major Competitors of Starbucks in Singapore are Green Mountain Coffee Roasters, Coffee Bean and Tea Leaf, Costa Coffee, Peet’s Coffee and Tea, and Caribou Coffee (Imisidro, 2006). The coffee industry is fragmented. The Appendix 4 shows that the people who are above 60 are the high coffee consumption. According to the Porter’s theory, most of the customers of this industry are not powerful (Caron, 2010). The company who supply coffee beans is powerful in this industry. The Suppliers of this industry is powerful (Caron, 2010). It is because there are only few suppliers to provide high quality coffee beans. The suppliers know that the buyers must have their coffee bean to generate the most delicious coffee. The buyers are costly to change the suppliers. Starbucks is in the low barrier entry industry (Morningstar, n.d.). We can see people selling coffee everywhere, there are at least one in every building.

The 5 top coffee substitutes are Roastaroma, Genmaicha, Teechino, Cafix, and Pero (Cathy, n.d.). Appendix 5 mentioned the close substitute of coffee, and the compare of the prices. The strategies of the substitutes of coffee is let the drinkers quit the caffeine from coffee (Dr. Karen, n.d.). Thus, they produce other drinks that taste like coffee but without caffeine to help people. People who can’t take caffeine, will take these substitutes as a try. This industry is a global industry. From Appendix 6 shows that there
are many countries produce coffee (Wikipedia, n.d.). Once the organization become globalization means that they have the demand from overseas. This industry is not regulated, even though people might addict with caffeine. But the symptoms will resolve in few days, which include lethargy, sleepiness and headache (Ron, 2011). If the country has the regulation of high tax with foreign company to entry, then the company is not willing to enter that country to sell their products. Thus, it will decrease the competitive of that industry in the country.

External Stakeholders and the Broad Environment

Starbucks asked its stakeholders for feedbacks, and put the feedbacks in the Corporate Social Responsibility Annual Report (Gale, 2005). The feedbacks had mentioned the human rights and environmental concerns, socially responsible invertors, academics, and others. Through this feedback activity, Starbucks will need to change its strategy plans to match the feedbacks as much as possible.

Political Forces – Starbucks need to import its coffee bean, thus the change law of import will affect Starbucks. If the import charges getting high, Starbucks might charge them on the price. It will affect the consumption for the Starbucks coffee (Brent, Michelle, Sean, Leonard, Luke, 2002).

Economic Forces – If the economy inflation seriously, Starbucks might raise the price of coffee. It will affect the customers’ consumption for coffee. This will affect the sale of Starbucks seriously (Brent, Michelle, Sean, Leonard, Luke, 2002).

Social Forces – Now, people are more concern about environment friendly. Thus, Starbucks be more aware about the recycling and reusing the resources. Through their cups, serviettes, and others (Brent, Michelle, Sean, Leonard, Luke, 2002).

Technological Forces – We know that Starbucks brew their coffee beans by their own. Thus, Starbucks has more advance technique to brew the coffee
beans than before. Through this technology, Starbucks is more efficient to produce the products (Brent, Michelle, Sean, Leonard, Luke, 2002).

Factors that Influence Demand and Cost Structures

Coffee will increase people awareness, and prevent from some of the disease. Starbucks is at maturity stage in product life cycle (refer Appendix 7). The Singapore income level is $292,431 in 2010 (refer to Appendix 8) (National Income and Balance of Payments, n.d.). Appendix 9 mentioned about the economic cycles of Singapore from 1961 to 2008. Appendix 10 mentioned about Singapore Demographic trends from 1970 to 2011 (Population Trends 2011, n.d.). Starbucks keep continuing release new products, and provide wifi in every outlet (Starbucks Coffee Company, n.d.). This will attract more customers. There are limited natural resources for Singapore, thus Singapore has to reduce the trade barriers and drive the growth rate up (Margarate, 2005). 7 technological trends of Starbucks are Mobile Payments, Social, Desktop Virtualization, Cloud Computing, Consumerization of IT, Competition for Talent, Big Data Analytics (refer Appendix 11). Starbucks is a well-known brand, no matter in Singapore or in worldwide. We know that Starbucks’ drinks need more than $5 to get its drinks, it means that the price will not affect the demand even though it is not cheap.

Stage of the product life cycle – Starbucks is at the maturity stage, it is because the revenue is keep increasing since 2009.

Capital intensity – We know that Starbucks’ fixed cost is quite high from appendix 3. Thus, Starbucks is sensitive with the demand fluctuation.

Economies of scale – Thus, Starbucks have to purchase high quantity and quality coffee beans to meet the demands. Starbucks achieve the lower cost of purchases from the high quantity of coffee bean.

Learning/experience effects – Starbucks will raise the pay of the employees 0% to 5% half a year base on the performance (Adam, Justin, Donald, Suzana, n.d.).

The power of external stakeholders – The suppliers, substitutes, and competitive rivalry are powerful in this industry, but there are no powerful customers and entry barriers.

The influence of other stakeholders – The other stakeholders like unions, governments sure have powerful influence for this industry from the price to the trade barriers.

Technological reduce cost – According to the appendix 11, Starbucks has invest lots of IT in their business. They are mobile payments, social, desktop virtualization, cloud computing, consumerization of IT, computing for talent, and big data analytics. These technological not only can reduce the cost, but also increase the relationship among customers and employees.

Strategic Issues Facing the Industry

Driving forces in industry – The competitors and substitutes are driving forces to this industry.

Threats – No one knows when will Starbucks replace by other drinks, Starbucks shows the cost of products. There is many other brands copy the products of Starbucks (Marketing Teacher.com, n.d.).

Opportunities – New products can be sold in the outlets, Starbucks keep exploring its market in other country (Marketing Teacher.com, n.d.).

Requirements of survival – Starbucks must have the resource, which is coffee beans, people, and fund. If there is short of these requirements, they need to have the capability and get these resources.

Key success factors – There are five success factors of Starbucks. They are offer consumers what they love, consistency, focus on capturing consumer’s attention, understand the economics of your business, and ability to think outside the box (refer to Appendix 12) (Lyve, n.d.).

Structuring an Organizational Analysis

Evaluation of the Internal Environment

Mission 1– ‘Is to inspire and nurture the human spirit. One person, one cup, and one neighborhood at the same time’, for Starbucks coffee (About.com).

Mission 2 – ‘Starbucks is committed to a role of environmental leadership in all facets of our business’, for environment (About.com).

Vision – The coffee beans are in highest standards of quality, and using ethical practices which under Starbucks (VoteforUs.com).

The purpose of Starbucks is to produce high quality coffee to everyone in everywhere.

Long Term Goal 1 – Serve 25% of drinks that use the reusable cups in our store (Starbucks Coffee Company, n.d.).

Long Term Goal 2 – Front-of store recycling in our outlets (Starbucks Coffee Company, n.d.).

Starbucks wants to be more green to public its products, by using the reusable cups and increase of using tumblers. Now, Starbucks is implementing these strategies, but still have the room to improve.

Internal Stakeholders basically is the stakeholders within the organization or the project. Like management, employees and others. The CEO of Starbucks is Howard Schultz since January 2008. Business Week Magazine named him as one of the top 25 managers in 2002. He is the one making final decision for Starbucks (Bloomberg Business Week, n.d.). The weakness of him is he always wondering what is the next step for him to do (Scribd, n.d.). He knows that people can’t build an organization alone (Scribd, n.d.). He believes that people will brings different strength and mix together (Scribd, n.d.). He
is participative in the management practice. CEO will know all the things that happen within the organization with this practice. He has the capability to solve the problems, and willing continues to be a learner (hitstreak, n.d.).

Starbucks is the public traded company. List of directors refer to Appendix 13. The directors control the interest of Starbucks together. The total assets on December 2011 are 7.836 Billion (Ychart, 2012). They have 160,000 employees all around the world (Daniel, 2011). Total net revenues in 2011 are 11.7 Billion. Starbucks is 41 years old, and refer to Appendix 14 for the geographical location (Wikipedia, n.d.).

The employees are well trained by Starbucks. If there is a union, I believe that Starbucks allows the employees to join the union. Starbucks will provide the environment and the things that the employees deserved. Starbucks has provided free wifi for customers. It also provides you the comfy chair, and relaxing music, after you purchase a drink. There is pack of students with their assignments and laptops, even at 12 a.m.

Identification of Resources and Capabilities

In 2008 there is a recession, Thus Starbucks have to closed outlets, and reorganize (The New York Times, 2012). Through this incident, there are some president of Starbucks will need transferring responsibility for some oversea outlets. The CEO mentioned that the international business would generate at least half of the revenue during that recession. CEO made this announcement and decision immediately when they know the situation, thus we know that they are high performance for Starbucks. Starbucks will train the employees in the first 2-4 weeks. The training program includes the history and knowledge of coffee, retail skills, customer service, and teach them how to brew a perfect coffee(Anton, 2011).

Inbound logistics – Starbucks will receive the coffee beans and other products from the suppliers, then they made their products by using these materials, and sell them at the shop (Anton, 2011).

Operations – Starbucks brew the coffee and pack other subsidiary products in the shop (Anton, 2011).

Outbound logistics – The activities of storing and distributing the brewed coffee to the customers, after ordered by the customers (Anton, 2011).

Marketing and Sales – This activity is let customers know the brand and purchase. Starbucks is a well-known name all over the world, thus marketing is not necessary for the company. People will automatically purchase high quality coffee with them (Anton, 2011).

Service – This activity is concern the employees’ attitude to the customers. It focuses on the customers’ satisfaction with the service that Starbucks provided. To ensure the customers will repurchase again (Anton, 2011).

Procurement – The processes that acquire every resource that input to the activities. This method is to ensure that get the high quality of resource from the suppliers (Anton, 2011).

Technology development – Now the customers can order via Internet, and get the drinks from the shop. People also can use the computers that provided from the shop to access Internet (Anton, 2011).

Human Resource Management – Starbucks treat every employee as the same. They feel have the value to the company by get free coffee and health care coverage. All the employees have to go under 24 hours of training before face the customers (Anton, 2011).

Administration – Starbucks management need to in charge the management activities. They need to plan about the new strategies, then need to evaluate need how much capital to implement the plans (Anton, 2011).

From the outlets that keep increasing year by year, we know that Starbucks has good reputation with strong brand name from everywhere. Starbucks had
registered patents, logo, and others. Howard Schultz says that they have no patents on anything that they do, and they can be copied by anyone else. But people can’t copy the soul, heart, and conscience of Starbucks. They are always at the high visibility location to attract people attraction. Starbucks will keep good relationship with the external Stakeholders like suppliers.

Evaluation of Strategies

~ Starbucks wants to increase the competition with competitors, thus Starbucks offer Frappuccino with more bottled version, and release Frappuccino ice cream. Starbucks also want to develop more products for the brand.

~ Starbucks wants to be the ‘third place’ for people between work and home. This is the very important concept to attract more people by the unique and relax atmosphere.

~ Customer satisfactions’ is important for every industry, of course for Starbucks also. They want the customers enjoy the Starbucks coffee until the last drop of coffee.

After Starbucks implemented these strategies, Starbucks increase their revenue and attract more people no matter they like to drink coffee or not. Starbucks attract the people who love Frappuccino to purchase and taste the new flavor after transform Frappuccino in many kinds. They let people become curiosity with the new products. Starbucks become a place that let people enjoy the drink coffee with excellent atmosphere. Once people want to relax with coffee, their mind will appear the name of Starbucks. The most important thing is they will repurchase again, and let them feel that they are important for Starbucks. Through many successful strategies, Starbucks’ revenue and outlets that around the world keep increasing year by year.

Frappuccino – After the transform of Frappuccino, Starbucks indeed get more market share from the competitors (VoteforUs, n.d.).

‘Third place’ – Let people have one more choice when they need to relax their mind (VoteforUs, n.d.).

Customers’ satisfaction – Starbucks increase customers’ satisfaction with well trained of employees. Thus, they have arranged a 24 hours training scheme for the employees before face the customers (VoteforUs, n.d.).

Identification of Sources of Competitive Advantage

Starbucks is using Arabica coffee beans to brew out the coffee, thus the taste of the coffee is same around the world. Starbucks can be able to use high quantity and quality coffee beans to meet the demand. It is because they brew the coffee beans by their own with the secret recipe, so the taste of the coffee would not different because of country. This is the advantage of Starbucks brew by them. Some of the coffee shop use the ready coffee powder and make the coffee. This is one of the ways to differentiate themselves with others.

The new products and services can be sold in the Starbucks, like Fair Trade Products (VoteforUs, n.d.). Starbucks keep trying to expand their market in global. Now, we can drink its coffee in more than 53 countries. Starbucks try extent the brand, like the breakfast, pastries, and tumblers for gain more market share. The price of the Starbucks coffee is not affordable for everyone, although they are using the high quality of coffee beans.

Developing A Strategic Plan

Strategic Direction and Major Strategies

There are many retail shops have selling the coffee, like restaurant, supermarket, and other coffee shop. Instead it is quite common drinks for people to sell and most of the coffee that they sell is cheaper than Starbucks. Thus, Starbucks can develop a coffee that is highly differentiated with others, and ask some well-known celebrities to advertise
for them. The price of the coffee must be more affordable for the public. Nowadays, there are more and more people concern with their health, and keep away with caffeine. Starbucks can launch a drink, which taste like coffee, but without caffeine. This product is good for people from addict with caffeine.

Evaluation of Opportunities and Recommendations

There are many Starbucks house that available in Singapore. They operate in 24 hours, 7 days a week. It is quite convenience for the citizens actually. If there is having a heavy rain, and people who would like to have a hot Starbucks coffee, it is not convenience for people to buy the coffee. Starbucks should provide the delivery service for people especially during the rain to satisfy customers.

Most of the Starbucks are operates in the shopping centre among many shops. Thus, Starbucks should choose the location where is obviously to show the Starbucks’ signboard, let all the people know that Starbucks is at there.

Starbucks is using high quality coffee beans brew coffee to the customers. If Starbucks use the organic coffee beans to brew coffee, I’m sure that it will increase more reputation and gain more market share for Starbucks. Nowadays, people are more concern about their health, so the organic coffee sure will be popular to everyone. Of course, the price of this coffee must be affordable for people.

Before they implement the strategies, they need to evaluate the financial whether they afford for the strategies, and need to ensure that the strategies will bring more profit to Starbucks. Starbucks should implement the strategies that are fit with the company’s ability, otherwise it might cause the company lose money. The customers are the most important stakeholders to support the strategies. There is no use with the strategies, if the customers not support Starbucks.

Implementation and Control

After Starbucks developed the strategies, Starbucks need to make sure do they have the resources, like fund, people, and skill. Starbucks has the financial, and had trained all the employees. Thus, I believe that Starbucks have enough resources to implement the strategies. After Starbucks implemented them, they have to control the strategies. Otherwise, it is no use with the implementation of strategies. Starbucks can recruit the people who can create systems, structures, and processes that will that to implement the strategies with the lower risk. Starbucks need to implement the strategies before more competitors appear in the market. Starbucks can observation the changes of the external stakeholders like governments to transform the strategies. Starbucks needs to set two targets in the strategies plan. If the first target has meet, means that the strategies is success, if the target meet the second target which is higher, means that the strategies is success with well-trained employees, and well control.


In my conclusion, we know that Starbucks is a well-built organization, and the leader of the industry. Starbucks have the very strong brand name, which gain the greatest market share in this industry. After analyzed Starbucks through this proposal, we know that Starbucks has the capability to implement and control the strategies. Starbucks have many good strategies that they implemented, and those strategies are well control under Starbucks. The important thing is Starbucks has well-trained employees, which will help Starbucks to meet the goals efficiency.

Reference list

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