Running head: STARBUCKS 1 STARBUCKS 3 Starbucks Name Institutional Affiliation Starbucks As an American company and coffee shop franchise, Starbucks was founded in 1971, Seattle, Washington in 1971. With well over 15,000 outlets globally, the company has been considered as the world’s leading coffee vendor with the majority of the outlets being located in North America (“Company Information”, 2018). As of 2014, the company was estimated to be having a market value of close to $100 Billion. However, this could not have been possible without globalization; globalization has allowed the company to expand beyond the boundaries of the American Nation and influence the economies of other countries. It has also allowed various political powers to interact thus promoting cooperation and finally it has been able to tap into economies that have raised the value of the brand such as that of China and Europe (“Company Information”, 2018). In 2003, Starbucks began its expansion to foreign countries exploiting its potential and thus promoted their economies through the “Starbucks Effect.” This was the emergence of various coffee shops competing with the franchise in selling coffee (Kang & Namkung, 2017). The internet of things can be regarded as one of the most influential aspects that have allowed Starbucks to grow and dominate most markets globally. The company is aggressive in implementing change and this is inclusive of their machines. The company always installs the latest in machinery that allows the outlets to operate at maximum efficiency. Moreover, technology has allowed the franchise to have better interaction with its clients through online tracking of consumer preference. This tracking allows the company to understand what the client expects of the company and makes the necessary changes (Kang & Namkung, 2017). Finally, the company relies on online platforms for the employment of their staff as conventional means are not only expensive but extremely time-consuming. As stated earlier, the “Starbucks effect” has been influential in the development of various economies through competition. Starbucks as a franchise has created a competitive environment in various markets that has resulted in the company being innovative in its marketing strategies (Kang & Namkung, 2017). This pressure to remain at the top can allow the company to generate above-average returns. Moreover, the brand is recognized by clients globally, this is the only advantage the company has considering that many locals may have other preferences towards other coffee vendors. In the Industrial Organization model, the company already qualifies as being attractive as its management and operation strategies are simple thus giving it room for more modifications to be applied. Moreover, the company applies the strategy of economies of scale whereby, due to its vast size it retails its products at a low and affordable price. This makes the company attractive ...

1. Running head: STARBUCKS
1
STARBUCKS 3
Starbucks
Name
Institutional Affiliation
Starbucks
As an American company and coffee shop franchise,
Starbucks was founded in 1971, Seattle, Washington in 1971.
With well over 15,000 outlets globally, the company has been
considered as the world’s leading coffee vendor with the
majority of the outlets being located in North America
(“Company Information”, 2018). As of 2014, the company was
estimated to be having a market value of close to $100 Billion.
However, this could not have been possible without
globalization; globalization has allowed the company to expand
beyond the boundaries of the American Nation and influence the
economies of other countries. It has also allowed various
political powers to interact thus promoting cooperation and
finally it has been able to tap into economies that have raised
the value of the brand such as that of China and Europe
(“Company Information”, 2018). In 2003, Starbucks began its
expansion to foreign countries exploiting its potential and thus
promoted their economies through the “Starbucks Effect.” This

2. was the emergence of various coffee shops competing with the
franchise in selling coffee (Kang & Namkung, 2017). The
internet of things can be regarded as one of the most influential
aspects that have allowed Starbucks to grow and dominate most
markets globally. The company is aggressive in implementing
change and this is inclusive of their machines. The company
always installs the latest in machinery that allows the outlets to
operate at maximum efficiency. Moreover, technology has
allowed the franchise to have better interaction with its clients
through online tracking of consumer preference. This tracking
allows the company to understand what the client expects of the
company and makes the necessary changes (Kang & Namkung,
2017). Finally, the company relies on online platforms for the
employment of their staff as conventional means are not only
expensive but extremely time-consuming.
As stated earlier, the “Starbucks effect” has been
influential in the development of various economies through
competition. Starbucks as a franchise has created a competitive
environment in various markets that has resulted in the company
being innovative in its marketing strategies (Kang & Namkung,
2017). This pressure to remain at the top can allow the company
to generate above-average returns. Moreover, the brand is
recognized by clients globally, this is the only advantage the
company has considering that many locals may have other
preferences towards other coffee vendors. In the Industrial
Organization model, the company already qualifies as being
attractive as its management and operation strategies are simple
thus giving it room for more modifications to be applied.
Moreover, the company applies the strategy of economies of
scale whereby, due to its vast size it retails its products at a low
and affordable price. This makes the company attractive to
clients regardless of nationality or region. Inclusive of the low
prices, the company trains some of its employees to become
baristas thus giving them the professional skill needed to satisfy
the needs of the client. All these characteristics are then
implemented by a strategic means thus ensuring that the

3. company earns above-average returns (Kang & Namkung,
2017). The same applies when the company applies the
resource-based model. This is because the firm has the
resources and identity that would give them the competitive
edge in the market against their completion. Secondly, it has the
technology, and capability to operate efficiently and at lower
prices compared to the competition. This assures that Starbucks
will always secure a larger and stronger consumer base. With a
strong consumer base, economies of scale accompanied by
technological advances, the company always has a competitive
advantage. Finally, with the current application strategy, the
company can easily identify any gaps in their performance that
can be amended thus giving it the needed advantage.
Starbucks as a corporation does not have a readily
available vision statement. However, from the analysis of its
home website, is to institute Starbucks as the leading vendor of
premium coffee globally, maintain its principles as it develops.
From the analysis, some key points can be identified, leading
vendor, premium coffee globally, principles and development
(“Company Information”, 2018). Being the leading vendor,
Starbucks wants to achieve control in the supply of coffee-based
products, in other words, coffee of the highest quality. It should
be noted that it has already seen through most of the parts of its
statement. As, it is already the leading vendor of coffee globally
and it is still developing (McGinn & Crowley, 2010). However,
when it comes to the quality of coffee, other companies such as
Dunkin Donuts and McDonalds have been stated by critics to be
having better quality coffee. When it comes to principles, the
company has been able to maintain them especially after the
reinstatement of Howard Schultz in 2008. From the Starbucks
website, the mission statement is “To inspire and nurture the
human spirit – one person, one cup and one neighborhood at a
time” (“Mission Statement”, 2018). From this statement, it
immediately reflects what the company does to keep itself
running. The company inspires and nurtures through its
employees, this is through the maintenance of a small company

4. culture (Williams, 2008). It encourages the employees to bond
with the clients thus creating a personalized experience. The
last key point identifies how the company aims to develop
gradually influencing the community positively and analytically
in the process.
The main stakeholders of the company include the
employees, customers, suppliers, environment, government and
finally investors. The company, unlike many others, has
prioritized its employees in several of its responsibilities
(Werther & Chandler, 2010). These are the social and corporate
efforts, and in return, the employees have assured job security,
optimal working conditions, and better wages. The company
went a step further and collaborated with Arizona State
University to pay over 50% of the tuition of junior and senior
students who worked with the company. The customers top the
least when it comes to numbers; their main interest in the
company is high-quality service as well as products (Werther &
Chandler, 2010). In return, the company addresses this matter
adequately and includes personalization of service thus giving
the consumer a warm experience. Suppliers, on the other hand,
include wholesale firms and coffee farmers. The suppliers
influence the performance of the company by ensuring the
varying demands of the company are satisfied duly. The
company, in turn, addresses the needs of the suppliers through
various corporate responsibility programs. When the
environment aspect of Starbucks stakeholders is addressed, it
has programs that make the company environmentally sound.
One of these programs includes the CAFÉ program that has
promoted biodiversity (Peloza & Shang, 2011). With reference
to the government, the company is influenced by the various
changes that are made to public policies and regulations. One of
the most fundamental regulations that affect the company is the
minimum wage (Peloza & Shang, 2011). Nonetheless, Starbucks
complies with these regulations and policies set by the
government.

5. References
Company Information. (2018). Starbucks Coffee Company.
Retrieved 9 January 2018, from
https://www.starbucks.com/about-us/company-information
Kang, J. W., & Namkung, Y. (2017). The Effect of Corporate
Social Responsibility on Brand Equity and the Moderating Role
of Ethical Consumerism: The Case of Starbucks. Journal of
Hospitality & Tourism Research, 1096348017727057.
McGinn, D., & Crowley, S. (2010). Vision Statement: Tired of
PowerPoint? Try This Instead. Harvard Business Review, 09.
Mission Statement. (2018). Starbucks Coffee Company.
Retrieved 9 January 2018, from
https://www.starbucks.com/about-us/company-
information/mission-statement
Peloza, J., & Shang, J. (2011). How can corporate social
responsibility activities create value for stakeholders? A
systematic review. Journal of the Academy of Marketing
Science, 39(1), 117-135.
Werther, W. B., & Chandler, D. (2010). Strategic corporate
social responsibility: Stakeholders in a global environment.
Sage Publications
Williams, L. S. (2008). The mission statement. A corporate
reporting tool with a past, present, and future. Journal of
Business Communication, 45(2), 94-119.
Running head: STARBUCKS 1
STARBUCKS 3

6. Starbucks
Student’s Name
Professor’s Name
Course Title
Institutional Affiliation
Date of Submission
Starbucks
Introduction
Starbucks is the biggest retailer that sells coffee products in the
world. Its market share is big and continues to expand as the
food and hospitality industry grows. The Company is affected
by environmental segments just like any other company in the
industry, although it seems to be coping well with the
difficulties. Demographics and economics impact the most on
the Company’s operations, and stiff competition as well as
threats of new entrants is the major challenges affecting the
Company. Starbucks can overcome the threats by increasing its
investment in unexplored regions, and utilize its strengths by
improving the quality of its products and hiring locally.
General Environmental Segments that Influence Starbucks the
Most
Demographics/Psychographics
Demographics refer to factors concerning the consumers and the

7. environment in which they live, and how the factors can
influence their consumption patterns. Examples of demographic
factors include: age groups of the population, the direction of
affluence, ethnic composition of the population, education
levels, variations in income levels, and sense of loyalty to the
Corporation (Market Line, 2017). Psychographics reveal the
attitudes and interests that the target population has towards the
Company’s products. Starbucks’ success largely depends on
demographics because factors such as education, attitudes
toward the products, and disparities in income determine
consumption patterns of the population. For instance, the poorly
educated, low-income earners, and the aged are less likely to be
potential consumers. As such, regions with populations with
unfavorable demographics are likely to bring in lower returns
than populations with favorable demographics.
Economics
Economic indicators such as interest rates, unemployment,
GDP, net disposable revenue, and the consumer price index
determine the productivity of Starbucks and the food and
hospitality industry as a whole. High unemployment rates mean
that the target population in a given region may not be willing
to buy food in hotels. This translates to a low rate of stock
replenishment. Starbucks set the prices of its commodities and
securities higher than its competitors. As a result, the Company
reported a decline in total revenue by the third quarter of 2017
by about -6.1%, which is a quicker overall decline of the
Company’s competitors by about 1.1% within that quarter
(Leduc, 2017). The consumer price index for coffee has been
declining from 200 to 195 in 2017, and the rate of inflation in
the US is 1.8 (Leduc, 2017). These factors have led to lower
profit margins for companies selling coffee, in which Starbucks
recorded a drop in net margin by about 12% (ML, 2017).
Two Forces of Competition Significant to Starbucks
Threat of New Entrants
The threat of new entrants implies that it is easy for new
entrepreneurs to enter the coffee market in the US and in any

8. other country that Starbucks operates. It is easy to enter the
industry, specifically the coffee beverage business for new
entrepreneurs. All that are needed are coffee-brewing machines
and the starting capital, which does not necessarily require a
huge amount of money because that depends on the business
size. Starbucks sets its prices relatively higher than its
competitors, which offers an advantage to new entrants in the
coffee brewing business (Wei, 2016). This threat poses a big
challenge especially in regions with low income-earning
populations. Starbucks has countered this threat by improving
the quality of its beverage so that it is still more appealing to
the customers despite the higher prices than that of the
competitors. The Company has also strengthened its brand,
diversified its areas of specialization to suit the demand and
cultures of specific consumers, increased the number of
branches, and subsidized the prices of its products in regions of
economic hardship (Wei, 2016).
Competitive Rivalry
Competitive rivalry denotes the competition between Starbucks
and other companies that produce similar products. The stiff
competition by rivals can be attributed to; the high number of
organizations in the same line of business, and low cost of
starting a coffee restaurant (Wei, 2016). Competitors such as
McDonald or Dunkin Donuts also have a large market share and
a big operating capital. As such, consumers can easily opt for
them whenever there is no Starbucks store in sight. This is
compounded by the fact that consumers can easily switch brands
and commodities whenever they wish, especially when there are
other substitute products such as tea and smoothies. Starbucks
has countered rivalry through venturing into other product lines
such as fruit juices and fast foods. The Company has also
installed roasteries to offer a variety of coffee flavors such as
nitro so as to catch up with competitors who are offering many
appealing coffee flavors that attract customers (Kowitt, 2017).
What Starbucks can do to improve its Ability to Address
Threats of New Entrants and Competitive Rivalry in the Near

9. Future
The threat of new entrants is a strong force that can also be
offset by Starbucks to maintain its competitive advantage. One
idea is for the Company to reinforce its CSR strategies in which
it will both embrace diversification of employees. This will let
employees work at stores located in their residence. When the
Company applies diversification in their labor force, it is likely
to retain employees who can identify with people of their
community who they often see and interact with (Valby, 2017).
Allowing employees to work in branches located in their area of
residence enables the Company to have a workforce that
properly understands the demographics of the particular
population. Such employees know the tastes and preferences of
the customers and their spending habits, and for their sake,
customers can be loyal to Starbucks. As such, they are more
likely to be preferred by the customers, which will enable the
Company to retain its customers even when there are new
entrants.
The most likely way that Starbucks can deal with the threat
of competitive rivalry is through innovations, price reduction,
and expanding its branches especially in underserved regions.
With its large market base and financial capability, Starbucks
can expand its branches in the US and oversees strategically to
cover communities that have been underserved by the food and
hospitality industry (Valby, 2017). Therefore, the Company will
move aggressively to outpace its competitors in opening
branches in underserved communities. Under the same
approach, Starbucks can launch the Community Stores Program
(CSP) to diversify its business portfolio when pursuing the
expansion agenda into new markets. The CSP can work because
employees will feel like they are part of the Company, which
will improve the brand image, and help attract new customers.
External Threats Affecting Starbucks and the Available
Opportunities
Threats
The biggest external threats affecting Starbucks are: increase in

10. prices of raw materials, intense competition from rival
companies, and costs of compliance with government policies
(Sisson & Bowen, 2017). The prices of the Arabica coffee keep
rising due to factors such as political and economic policies,
draught, and cost of production. As such, Starbucks cannot set a
fixed price commitment contract with suppliers. This compels
the Company to go by the prices that farmers set, which
sometimes affects the Company. Competition in coffee specialty
depends on product quality, price, and convenience (ML, 2017).
Starbucks faces competition from well established companies in
the restaurant sector such as Dunkin Brands. Dunkin Brands has
strong presence in the North-Eastern US, and trades franchise to
independent owners whereas Starbucks relies on building and
managing its own stores, which is expensive (ML, 2017).
Opportunities
The food and hospitality industry in the US is expanding, and
the restaurant food sales are estimated to be around $800
million in 2017, an increase of about 35% since 2010 (ML,
2017). The expansion is attributed to increase in consumer
demand, and economic growth in the US. This has enabled
Starbucks to utilize the opportunity to sell more products such
as premium Tazo brews, and Starbucks VIA Ready Brew.
Starbucks has also expanded its branches abroad in Asia and
Africa. The opportunities resulted from the increase in middle
class group of people in those regions (ML, 2017).
How Starbucks Should Deal with the Most Serious Threat and
the Greatest Opportunity
Starbucks can address the threat of increasing cost of raw
materials by working and cooperating with coffee-growing
farmers and agronomy experts. Since Starbucks is a big
cooperation in all aspects of the business, it has the capability
of hiring talented and innovative agronomists to work with
farmers to ensure that coffee growers utilize the best cultivation
methods possible. The Cooperation can also give loans to
struggling farmers to encourage them to grow high quality
coffee. The threat of competition can be dealt with through the

11. CSP, and opening stores in underserved regions while
maintaining quality. The opportunity arising from the expanding
food industry in many parts of the world can be utilized through
opening several branches in the most viable regions. For
instance, Starbucks can continue to open many branches in India
and China where the food and hospitality industry is steadily
expanding. However, Starbucks can diversify its products in
such regions to suit tastes and preferences of the local
population through offering beverages that are more appealing
to the locals such as tea in the Chinese market since tea is on
high demand in China than coffee (Wei, 2016).
Opinion on Starbucks’ Greatest Strengths and Significant
Weaknesses
Greatest Strengths
Starbucks’ greatest strengths include innovative technology
such as the Starbucks Card, My Starbucks Rewards, and Mobile
Order and Pay. The Cooperation also holds a strong financial
position evident from revenue growth in which the compound
annual growth rate increased by 11.2% more in 2016 than 2015
(Wei, 2016). The Cooperation also provides value-added
services such as entertainment to its customers. The innovative
technology enables the retailer to offer consumers bonuses, and
allows those without cash to purchase goods without smart
cards or cash, which is flexible and convenient to suit all
customers. The strong financial position gives Starbucks the
ability to expand to new markets, and to improve existing
stores. The value-added services that Starbucks offers to in-
store consumers such as free Wi-Fi, and the Starbucks Digital
Networks that allow customers read news from popular
publishers such as the New York Times have the potential to
attract new customers and retain existing ones. Starbucks can
maximize the strengths by maintaining high standards of
quality, and maintaining the offers and bonuses. It should also
continue investing in viable regions to expand its market share.
Significant Weakness
The greatest weakness that affects Starbucks is product recalls.

12. There have been cases of equipment and foodstuff being
recalled on many occasions. For instance, in 2016, the
Cooperation recalled reusable cold-to-go stainless steel drinking
straws thereby causing an injury-risk panic to customers (Wei,
2016). In the same year, Cheese and Fruit Bistro Boxes were
recalled because the products had cashew allergen. The
Cooperation also recalled sausages, eggs, and cheddar in
significantly large numbers. Such recalls and many others not
mentioned here can devalue the Starbucks brand thereby
resulting in low demand for its products. The weaknesses can be
fixed through employing technical inspectors who can assess the
products at the manufacturing/production stage to prevent
defective products from reaching customers.
Starbucks’ Resources, Capabilities, and Core Competencies
Starbucks’ resources include both tangible and intangible
properties. They include: assets in 62 countries adding up to
19,767 outlets globally, both licensed and company-operated
stores. The company had total revenue of about $14.89 billion
in 2013, with a compound annual growth rate of more than 11%
($21.316 million) in the financial year 2016 (Wei, 2016). The
Company employs more than 200,000 workers, some of who
have been highly trained to operate state of the art equipment,
and as baristas. Starbucks’ capabilities include: opening
branches in strategic areas such as high-visibility locations in
several settings such as suburban retail outlets. The brand is the
most recognized globally in the coffee beverage business, and
the Company successfully leverages its brand equity effectively
by merchandizing and licensing the brand (Thompson, 2017).
Starbucks is also capable of maintaining the large-scale
operation in more than 60 countries in which it enjoys economy
of scale, and lower costs of input.
Starbucks’ competencies arise from HR management
practices and organizational culture. Employees enjoy rewards
such as retirement and stock benefits. The production system is
knowledge-based, which builds an effective cooperate culture.
The Starbucks Rewards and Card initiative enhances customer

13. loyalty to Starbucks since it provides convenience, and offers
support to customers, which is a significant competency
(Foroohar, 2015). Further, the Company has good CSR in which
the stores are friendly to the community. The Company hires
employees from the local community in which each store is
located. It also has CSR initiatives and built goodwill with
customers. For instance, the Company offers high quality
foodstuffs, and builds brand equity by offering each customer
with unique experience through the integration of the local
community culture in the local stores (Wei, 2016).
Starbucks’ Value Chain
Starbucks’ value chain consists ofprimary and supportactivities.
Primary activities include inbound logistics that involve
selection of high quality coffee beans from mainly Asia, Africa,
and Latin America, which are transported and stored mainly in
the US. Manufacturing operations are done in more than 60
countries in licensed stores and company-operated outlets
(Warren, 2015). Outbound logistics is done through ensuring
that most of the goods are sold in their local stores alone. This
eliminates the need for intermediaries in the trading process.
Starbucks avoids aggressive marketing. However, it instead
focuses on quality and project-based marketing when new
products are to be launched and samples are required, in areas
near the stores. Customer service is based on quality of the
products, which is enforced by the Starbucks Experience.
Support activities include infrastructure such as stores that
Starbucks has constructed all over the world, the HR
management system that invests in employees, technological
advancements, and procurement processes. Procurement
involves agents travelling to areas where coffee is grown, and
establishing relationships with the farmers.
Where Value can be created using Resources, Capabilities and
Competence along the Value Chain
Despite the effectiveness of Starbucks’ value chain, it has
weaknesses that can be solved by the use of the vast resources,
capabilities and competencies. For instance, the procurement

14. process does not have to connect the Company and famers only
during harvest time. The Company can use its vast resources to
station their agents and agronomy experts in the regions where
the farmers plant coffee. This will save the Company cost of the
agents travelling from the US to different continents to look for
high quality coffee. The agronomy experts will also work with
the farmers hand in hand thereby increasing the quality of
coffee beans. Further, Starbucks should embrace aggressive
marketing to increase its popularity among populations that are
not familiar with the brand so as to ensure success when
opening stores in unexplored regions.
Conclusion
The two main segments of the environment that affect
Starbucks are demographics and economics, and the two most
significant forces of the competition facing the Company are
threat of new entrants, and competitive rivalry. The Company
can deal with these forces through innovativeness, improving
quality of its products, and expansion of its stores in unexplored
regions. The biggest external threats to the Company include
rise in cost of raw materials, intense competition, and
compliance with government policies. The greatest opportunity
for the company is the growing hotel and hospitality industry.

15. References
Foroohar, R. (2015). Starbucks For America. (Cover story).
Time, 185(5), 18-24.
Kowitt, B. (2017). Howard Schultz has something left to prove.
Fortune, 175(8), 114-124.
Leduc, C. (2017). “Onward How Starbucks Fought for Its Life
without Losing Its Soul” Book Review.
Sisson, D. C., & Bowen, S. A. (2017). Reputation management
and authenticity: A case study of Starbucks’ UK tax
crisis and “# SpreadTheCheer” campaign. Journal of
Communication Management, 21(3), 287-302.
Market Line. (2017). Starbucks Corporation SWOT Analysis.
Starbucks Corporation SWOT Analysis, 1-9.
Thompson, A. (2017). Starbucks Coffee’s Stakeholders: A CSR
Analysis. Panmore Institute.
Valby, K. (2017). Starbucks digs in. Fast Company, (218), 78-
85.
Warren, K. (2015). Strategy Dynamics Essentials. Strategy
Dynamics Limited.
Wei, C. (2016). Marketing strategy for setting up an own coffee
shop in China: using Starbucks as a case study.