Mgt 510 word - This article describes Starbucks in the Australian context. This report includes PDF

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This article describes Starbucks in the Australian context. This report includes macro analysis of Starbucks, five forces, internal and external analysis including SWOT, each level strategies and value chain analysis....

Description

Starbucks Australia

Strategy Analysis

By Amzal Mohamed Student ID – 11645029

MKT510 – Strategy Analysis Assessment Item 1 – Strategic Management Due date – 26th of April 2019 1|Pa ge

Amzal Mohamed

SID – 11645029

Contents 1.

Introduction............................................................................................................................3

2.

MACRO Analysis......................................................................................................................3

3.

4.

5.

2.1.

Political factors................................................................................................................3

2.2.

Economic Factors.............................................................................................................3

2.3.

Social Factors...................................................................................................................4

2.4.

Technological Factors.......................................................................................................4

2.5.

Environmental Factors.....................................................................................................4

2.6.

Legal Factors....................................................................................................................4

Introduction of Starbucks Five Forces.....................................................................................4 3.1.

Competitions of Starbucks Coffee...................................................................................5

3.2.

Bargaining Power of Starbucks Buyers.............................................................................5

3.3.

Bargaining Power of Starbucks Coffee’s Suppliers...........................................................5

3.4.

Threats of Substitutes to Starbucks.................................................................................6

3.5.

Threat of New Entry........................................................................................................6

Internal Analysis......................................................................................................................7 4.1.

Strengths.........................................................................................................................8

4.2.

Weaknesses.....................................................................................................................8

Business Level Strategy...........................................................................................................8 5.1.

Starbucks’ business level Strategy...................................................................................9

5.2.

Primary Activities.............................................................................................................9

5.2.1.

Inbound Logistics.....................................................................................................9

5.2.2.

Operations...............................................................................................................9

5.2.3.

Outbound Logistics..................................................................................................9

5.2.4.

Marketing and Sales................................................................................................9

5.2.5.

Service...................................................................................................................10

5.3.

Secondary Activities......................................................................................................10

5.3.1.

Infrastructure.........................................................................................................10

5.3.2.

Human Resource Management.............................................................................10

5.3.3.

Technology Development......................................................................................10

Bibliography..................................................................................................................................11 2|Pa ge

Amzal Mohamed

SID – 11645029

1.Introduction Starbucks is an American company which operates as a chain of coffeehouse. Founded in 1971 by 3 entrepreneurs in Seattle, Washington. Initially Starbucks sold premium whole bean coffee in a store and managed to expand into 5 stores. Howard Schultz joined Starbucks as a retail marketing manager and tried to employ his vision of European coffee culture in USA. His suggestions were rejected by the original owners and Schultz had to leave the organization. Schultz commenced his own business of Espresso bars of Europe and with the growth he could purchase Starbucks from the original owners in 1987. From that point it operated as a coffee chain and expanded its global existence. Currently owns 28,218 locations worldwide and entered to Australia in 2000.

2.MACRO Analysis PESTEL analysis is a tool which analyse macro environment factors of an organization strategically. PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal factors. PESTEL analysis can produce a clear image about the operating challenges any industry including food and beverage will face.

2.1.

Political factors



Political stability is there in the Australian government.



Australia provides substantial support and controls in business conducts by ensuring level of corruption at a lower level, protection on intellectual property, Anti-trust laws interrelated to Food, Beverage & Tobacco, pricing regulations, taxation, wage regulations on minimum wage and overtime, essential benefits to the employees in the industry, working day regulations, Safety indices, etc.

2.2.

Economic Factors



Australia is a developed country and has a stable economy since it has a continuous GDP growth by 2.8% in 2016.



It has rising currency, lower unemployment rate, good inflations rate, competitive saving and interest rate control the aggregate demand and investment in the economy.



Increased household disposable income is there.



Outstanding standards and quality in the infrastructure in food and beverage industry.



Skill of labour force in the industry and the literacy rate in the economy is high.

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Amzal Mohamed

SID – 11645029

2.3.

Social Factors



In an industry, culture of the society and the ways of doing things can make direct impacts. Shared beliefs and norms, attitudes towards an object of the population play major role in how the industry should understand the customers and how the marketing message should be developed.



Trends in the Australian society proves that they have higher consideration on high life style which brings the timely changes to the industry.



Other social factors such as educational level, family leadership styles, class structures, leisure interests are all positive towards an organization.

2.4.

Technological Factors



Technology became a key factor which affect a business. Some businesses have gone lost since those couldn’t implement the timely technical changes. Technological analysis should be done to find the appropriate change and quick execution.



Australia is a country which has leading technology. Most of the Australians are familiar with online purchases and this proves that the target market is widely available on e-commerce.

2.5.

Environmental Factors



Australia is a developed country and is focusing on environmental protection, greenhouse concepts, carbon emissions, weather, climate change, laws regulating environment pollution and recycling.



Government and the environmental entities have their third eye on conducting production and related business activities by complying with the environmental rules and regulations.

2.6. 

Legal Factors

Australia is having a well-organized and clear legal system. As a regulator body the government focuses on labour regulations, consumer protection, discrimination law, copyright, patents / intellectual property law, health and safety law and data Protection.

3.Introduction of Starbucks Five Forces Any company’s success is depending on its effective ways of handling the adverse impacts of the five key forces in its competitive industry environment. These key factors are well explained in Michael Porter’s Five Forces analysis. Starbucks should focus and respond to these 5 key forces to keep and increase its position in the Australian market and globe. This analysis will reveal current industry conditions.

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Amzal Mohamed

SID – 11645029

3.1.

Competitions of Starbucks Coffee

Starbucks faces strong force of competitive rivalry. The below sub factors are making it stronger.  Large number of firms (strong force) – The company has a big competition and a bigger number of competitors, in many sizes, specialities and executed strategies. McDonald’s is an example for this.  Low switching cost (strong force) – Low switching cost means, it is easier for customers to move from Starbucks to its competitors. This is a major reason for the strong force of the competition.

3.2.

Bargaining Power of Starbucks Buyers

Starbucks faces strong force of bargaining Power of buyers. The below sub factors are making it stronger.  Low switching cost (strong force) – Customers can easily, without any cost can move to another brand or substitute. If they want, they can just stay away from Starbucks.  Substitute availability (strong force) – There are number of substitutes to Starbucks coffee. Such like ready to drink beverages, drinks and juices from restaurants and even the water is a healthy substitute.  Small size of individual buyers (weak force) – The percentage of an individual customer is very small when comparing with the total revenue of Starbucks Coffee.

3.3. Bargaining Power of Starbucks Coffee’s Suppliers Starbucks faces weak force of bargaining power of suppliers. Following factors are making it weaker.  High variety of suppliers (weak force) – There are number of suppliers who contribute with smaller percentage to the supply and alternative supplier options are there for the company.  Large overall supply (weak force) – It has a policy of diversifying the supply chain which reduces the power of bargaining power of suppliers.

3.4.

Threats of Substitutes to Starbucks

Starbucks faces strong force of threats of substitutes because of the following factors.  Availability of substitutes (strong force)  Low switching cost (strong force)  Low cost of substitutes (strong force) – The cost of many substitutes is lesser than the Starbucks products.

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Amzal Mohamed

SID – 11645029

3.5.

Threat of New Entry

Starbucks faces moderate force of the threats from new entry. This refers the potential effects of new comers to the industry. Below factors are making it moderate.  Moderate cost of doing business (moderate force) – New entrance can compete with the Starbucks since the cost of entry is moderate.  Moderate supply chain cost (moderate force) - New entrance can compete with the Starbucks since the cost of supply chain is also moderate.  High cost of brand development (weak force) – Competing against a strong brand like Starbucks isn’t easy to new comers. Conclusion based on the analysis The model analyses the external environment factors in the industry Starbucks coffee runs and reveals the key issues facing by the company. The success is calculated on how Starbucks face, respond to these 5 forces and currently, the forces have different strengths based on its position as follows,  Competitive rivalry (strong force)  Bargaining power of buyers (strong force)  Bargaining power of suppliers (weak force)  Threats of substitutes (strong force)  Threats of new entry (moderate force) Starbucks Coffee has many challenges about these forces. While bargaining power of suppliers offers least fear, threats of new entry offers moderate fear to the company. The company should focus more and ensure that, effective measures are made to prioritize the strong forces.

4.Internal Analysis Starbuck Coffee manages to stay as the first in its kind in the world for a long time now and entertaining competitive advantage because of the following key factors, 

Goodwill and the reputation of the company

Starbucks could find the place in the market from its quality atmosphere, product lines, alliances and partnerships along with the overall business structure. Its reputation and brand images make the customers coming back to Starbucks. There are very few or no companies in the industry which is like Starbucks in any aspect. And it will take a company a long period of time and huge amount of efforts to earn a reputation like Starbucks and it is hard to compete. 

Lowest employee turnover

Starbucks has a good working culture and because of that Starbucks benefits from high employee retention. This allows some savings on new recruiting, trainings costs. Well experienced employees are internal branding icons. It will be a hard thing to another company to maintain such a working environment like Starbucks does and compete. 

Main Product Line

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Amzal Mohamed

SID – 11645029

The snacks and other edibles which the Starbucks sells generate more profits than the Starbuck’s coffee. The product line is getting extended time to time and innovations are taking place as the timely need. Starbucks focuses on organic foods for the healthconscious consumers. 

Customer Service

Customer service is among the top of Starbucks’ culture and the customers know that they will get treated well in the Starbucks. Providing quality customer service equal to Starbucks is not a harder one by any company in the industry. So, Starbucks is on the competition regarding this and having a temporary advantage. 

Logo and Store recognition-based marketing Strategy

Starbucks has a very popular logo and the brand awareness is so high. These play as a competitive capability of Starbucks. But any company can copy this strategy, so Starbucks has a temporary advantage. 

Concept based marketing strategy

Starbucks is maintaining a very consistent and recognizable environment for its customers. Starbucks promotes its environment as the third space to the customers, where "familiar and welcoming shelter from work and home where they can relax in a peaceful public setting and enjoy a sense of community (Gulati, 2010)." This can be differentiated Starbucks from its competitors. The initial concept of “third place” is the key differentiation strategy. The facts mentioned above bring Starbucks, a sustained competitive advantage.

4.1.   

  

Goodwill and the reputation of Starbucks. Starbucks coffee is a global brand and the brand is well known for quality beverages. Gaining partner and customer references by strategically making alliances and licensing with reputed companies like Kraft foods, Unilever and Pepsi-Cola. Starbucks is entertaining the expertise benefits of its alliances in each area. Through licensing rather than franchising, the Starbucks hold more control of its operations. Starbucks offers wide variety of products. Variety of coffee beverages, other beverages, snacks, fresh organic foods (website, 2018). Talented and well experienced employees with high employee retention is a strength. Quality of the product, customer services, atmosphere of the Coffee shops plays as major strengths.

4.2. 

Strengths

Weaknesses

Starbucks has a conflict in balancing between the two completely opposite variables or goals. Such as increasing the sale and providing Starbucks

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Amzal Mohamed

SID – 11645029

 

experience. When the sales quantity is high the Starbucks might face trouble in providing peaceful environment to those customers who seek a “third space”. Starbucks had number of product recalls which affected the profit margins and the brand image. The threats from competitors, new entries, substitute are so high. When comparing the prices, Starbucks pricing is dramatically high.

The Starbucks’ strategy is to give an experience rather than just a coffee, in its unique culture. They differentiate their brand by offering quality product with great customer service and a feeling of social responsibility.

5.Business Level Strategy Business level strategy is related with a firm’s position against its competitors and five forces in the operating industry. Business level strategy can be divided into 4 main categories, 

Cost leadership



Differentiation Strategy



Focused low cost



Focused differentiation

5.1.

Starbucks’ business level Strategy

Differentiation strategy refers, the companies which provide customers with unique features and characteristics through its products or services unlike the competitors. The uniqueness is always treated as a qualified attribute to charge for premium. The differentiation strategy is done by high quality, high customer service, unique features, innovative aspects in the product, technological advancements, prestigious image maintenance. The company’s brand promise is to sell Starbucks experience than selling just a cup of coffee. The “Starbucks experience” or its popular concept, “The third-place experience” has changed the coffee shop feeling to a venue for chatting with friends, business meetups, relaxing etc. In each Starbucks outlets there’s a slight coffee aroma is in the air which makes the customers energized and make them feeling good. The term “third place” refers, a place in between work and home. This is the major positioning strategy undertaken by Starbucks which the competitors cannot easily copy. In an industry like food and beverage, coffee shops are everywhere. But none of those can compete with Starbucks brand reputation and quality. A value chain is a sequence of activities that targets at creating and adding value to a product at every step during the manufacturing process. Value chain activities can be divided into primary activities and secondary activities.

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Amzal Mohamed

SID – 11645029

5.2.

Primary Activities

5.2.1. Inbound Logistics Starbucks do the differentiation in its operations just like its customer services and product ranges. For inbound logistics, Starbucks has company-appointed coffee purchase...