Starbucks is ranked the best producer of Second-wave coffee, and it distinguished itself from the other coffee-serving in the United States of America since its product has a unique taste and quality. The name and the logo of Starbuck were inspired by a mermaid found in the novel Moby Dick.  Starbucks usually serves hot and cold drinks, micro-ground instant coffee they typically refer to as VIA, EVOLUTION Fresh juices, beverages, snacks, and full and loose-leaf teas. For evening hours, it serves beer, appetizers, and wine.  At their groceries, they sell ice-creams and cold coffee drinks which are in bottles. The company was first found in the year 1971 on 31st March, it was first founded by 3 students who formed a partnership when they met at the University of San Francisco. The company developed the name Starbuck after acknowledging “cargo house.” The first Starbuck store was situated in Seattle at 2000 Western Avenue, during this time the company only engaged in the selling of roasted whole coffee beans but did not yet involve in the brewing of coffee for selling purpose.  After these, the company continued with the wide spreading of its branches. The company started expanding gradually in its production and sales, coming 1986 it had made a more significant achievement of operating six stores in the location knowns as Seattle, and by this time it had begun selling espresso coffee. The first Starbucks location which is found out of America was opened in Tokyo in the year 1996. In the year 1998 Starbuck entered the market of the United Kingdom with a net worth of $83 million. In September 2002, Starbucks initiated its first store in Mexico City that is in the Latin America these locations grew rapidly and currently as we have over 500 locations situated in Mexico, and they still have an ambition of making it up to 850. In the year 2003 Starbucks managed to accomplish the purchase of Seattle’s Best Coffee from AFC Enterprises which cost them about $72 million. Still focusing on its expansion in 2007 the company established its first store in Russia that was about ten years down the line after making a registration of a trademark in Russia.  Apparently, the company has about 15,000 stores in fifty countries around the world. (Starbuck Website, n.d), this is quite a great achievement.

The company continued to increase its net worth. In 2008 the company acquired the Clover Brewing System Manufactures. After this, they began testing the Freshly pressed coffee system in their different situated locations in Seattle, New York California and Boston. In 2008 they module the website they used for collection of suggestion and feedbacks made by their clients and customers, they also got comments from different users through this site. In the same year, they developed a loyalty program which was meant for the registration of the different users of the Starbucks Card. In 2013 again Starbucks opened its first store in Ho Chi Minh City Vietnam, during the preceding years the company greatly expanded its stores and increased in its net worth.

Starbucks Chairman Howard Schultz has always been focused on making sure that growth does not cease the company’s culture. He served as the Chief Executive Officer until the year 2000. Starbucks success has always been demonstrated by the determination of its management and leadership. The management has very great communication, and managerial skills avoid any form of resource wastages. Starbuck maintains control of production processes by communicating with the farmers to secure beans, roasting its beans and managing distribution to all retail locations. The communication they have enhances the process of the Starbucks coffee and farmers to be informing Starbucks on what proportions of wholesale prices are paid.

However, the company has encountered several challenges during its operation, the main problem being conflict. The company has been involved in different forms of conflicts which have adversely impaired its progress. The conflict of interest at the company is usually the downfall of many companies hence the company’s body of management are obliged to ensure conflict of interest doesn’t exist in a company. A conflict of interest occurs where a personal interest interrupts the duties that are carried out in the company. The company avoids conflicts of interest by ensuring that ethical practices are employed in the company. This is because a conflict of interest may unconsciously affect even the well-behaved individual in the company and these may cause the individual’s integrity to be questioned. In the case of the rise of conflicts of interest, the subject must disclose the problem to the management who in turn takes the matter to the chief of ethics and compliance officer who resolves the issue. To be employed by Starbucks an individual has to engage personally in a different transaction that Starbucks has interest in. You must be acting on be working as a sales representative that is helping someone sell products or services. If you are an investor you should be making substantial direct investment in the firm

Some other conflicts that Starbuck have involve in are understaffing with the aim of cutting on the cost of labor. These practices have made the potential partners feel frazzled the customers get upset to maximum when they find out that there are not enough personnel to attend to them when they are in need, they feel frustrated. Understaffing has made the company not to perform its duties accurately and in a timely way. The business loses a lot when there are no enough partners to attend to every partner. The companies have laid down some strategies to resolve the conflicts it is facing with the customers. The company’s success has been based on the management constantly addressing these conflicts in an ethical way and also the success of these company it’s through its strenuous expansion in the different locations which have increased its net worth.

The Objectives of the company

Besides aiming at developing recognition of the name for their brand, they also focus on last expansion with the aim of taking over the in the coffee production industry. The primary mission and goal of Starbucks are first to become the top-ranked and popular coffee house around the globe. Starbuck company has an ambition of extending its marketing regions across Africa and some areas in Asia.

Strategies of The Corporation

Today Starbucks is highly honored due to their products and services, moreover their goal plan of being extremely the best, this makes them implement the strategies for developing their products and their market base. One of their big goals is pervasively spreading of their products and opening up new markets everywhere around the globe. The company is looking forward to implementing a strategy for developing their products; they plan to come up with new products. On the other hand, Starbucks strategic goal plan is bringing together their market strategies, having a vision of opening up new markets at the international level. Also, Starbuck is laying down strategies of expanding its stores around the world, so as to increase its sales volume in different countries,

Starbucks has a plan of changing their mission statement from the original one, which was to give inspiration and care for the humans that is giving one person one cup. The new mission which is (Starbucks our mission), states that they will focus on meeting the needs of their customers, through the provision of drinks which quench their thirst and having a maintained relationship with them.

The Organizational Structure and Operation analysis

In this chapter I will present a report on the external and internal assessment of Starbucks company, to determine how the company response to different conditions in the market. From the day it was founded the company has shown a rapid rate of advancement and growth, this makes it necessary to analyze its performance and operational activities for better understanding. Starbuck has made several adjustments and changes in its structure and strategies. For the firm’s operation and structural organization, Starbucks applies the technique of matrix structure. It is the most suitable fundamental technique because it helps in the organization of the structure and the performance around the company. Matrix method defines the state and position of the company and gives a clear understanding of the circular flow to both the shareholders and management. The primary goal of the Starbuck company is to increase its profitability and to deliver quality service to its consumer.

 

Strengths-Weaknesses-Opportunities-Threats (S W O T) Matrix

For the evaluation of a firm’s weakness, strength, viable opportunities and the threats of, we usually use a matrix known as SWOT matrix analysis. The SWOT matrix analysis on the other also hand helps in the placement of similar strengths and weakness to its equal viable opportunity and threat. Usually, there are always threats which always comes along with opportunity, this threat can severely damage the firm in the future. It is then necessary for a company to implement SWOT matrix in its operation because it helps in the analysis and evaluation on the areas which needs to be given more attention to ensure efficient service of the firm.

The following tabulation represents the potential opportunities with their similar threats for Starbucks Company.

Table 1 indicating the potential opportunities and threats associated

Viable Opportunities    Threats

Product Innovation    Fall in the supply of coffee beans

The potential for a large volume of sales    A rise in the Coffee beans prices

Partnering with firms producing similar products    Risk of product imitation

Expanding to regions of Asia, Africa, and the Middle East     Limitation of marketing base

Product mix Diversification    Exposure to the franchising risk

Opening Lounging area     Increasing the cost of shipping

Lunch particulars    High competition from the Coffee sellers who Sales at a lower price

 

 

 

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The type of matrix structure used in assessing the capability of a firm to deal with external factors is known as the Externa Factor Evaluation EFE. Starbuck usually uses this type of matrix to evaluate the external factors which influence its operation. The External Factor Matrix usually takes into account the threats and opportunities affecting organizational performance. The risks and opportunities are generally generated from the analysis of SWOT. The weights of the opportunities vary in terms of importance.

The following tabulation represents the weighted score indicating how Starbuck company is responding to the external factors influencing its operation.

Table 2 indicating the External Factor Evaluation for Starbucks Corporation

External Assessment using the EFE matrix

External Factors    Weight    Rate    Weight Score

Lunch particulars    0.06    3    0.18

Expanding to regions of Asia, Africa, and the Middle East    0.14    4    0.56

Opening Lounging area     0.06    4    0.24

Product mix Diversification    0.08    4    0.3

Partnering with firms producing similar products    0.04    1    0.04

Product Innovation    0.11    2    0.22

The potential for large volume of sales    0.12    4    0.48

 

High competition from the Coffee sellers who Sales at a lower price    0.07    3    0.21

Limitation of marketing base    0.04    2    0.08

The increment of the cost of shipping    0.02    2    0.04

Exposure to the franchising risk    0.07    2    0.14

Risk of product imitation    0.04    3    0.12

Fall in the supply of coffee beans    0.05    2    0.1

The rise in the Coffee beans prices    0.1    2    0.2

 

GRAND TOTAL    1.00        2.93

 

From the tabulation above, the Starbuck company weighted score is at 2.93. This is very close to the above average-level; thus position indicates that the company is responding appropriately to the external factors.

Internal Assessment

 

Internal assessment involves examination of the internal activities of the company to evaluate the strength and the weakness of the organization.

 

Table 3 illustrating the internal Factors categorized into strength and weakness

Strength    Weakness

Products of High-level quality    Scattered growth internationally

Many products to produce    Cost of expanding extremely high

Bestselling coffee house    Dependency of suppliers

Effective Global supply chain    Prices way too high

Great customer service    Imitation of products

Many stores    Common product variety

Great ambiance    The high cost of operation

 

Internal Factor Evaluation Matrix (IFE) is a matrix used in the “identification and evaluation of the main strengths and weakness and assesses their relationship in the different operations of a business concern (Kipley, Analyzing the internal Environment of firm)” Starbuck company applies the Internal Factor Matrix for making its analysis on the internal strength and weakness within the organization.

The following tabulation shows the Internal Factor Evaluation matrix for the Starbucks Organization.

 

 

 

 

 

 

 

Table 4 illustrating the Internal Factor Matrix for Starbucks Cooperation

Internal Assessment using the IFE matrix

Internal Factors    Weight    Rate    Weight Score

Strength

Products of High-level quality    0.14    3    0.42

Many products to produce    0.11    4    0.44

Bestselling coffee house    0.13    4    0.52

Effective Global supply chain    0.10    4    0.4

Great customer service    0.08    1    0.08

Many stores    0.10    2    0.2

Great ambiance    0.02    4    0.08

 

Scattered growth internationally    0.07    3    0.21

Cost of expanding extremely high    0.04    2    0.08

Dependency of suppliers    0.02    2    0.04

Prices way too high    0.09    2    0.18

Imitation of products     0.02    3    0.06

Common product variety    0.03    2    0.06

The high cost of operation    0.05    2    0.1

 

GRAND TOTAL    1.00        2.87

 

 

From the table, Starbuck corporation is at 2.87 when it comes to responding to the internal factors around the organization; this weighted score is almost above average. This weighted score significantly portrays that the company reacts efficiently to different internal changes this, for this reason, the company’s position is at its best level.

It has its weighted scores at 2.93 for EFE and 2.87 for IFE. Generally, it indicates that the company is on the right track when it comes to the formulation and implementation of the marketing strategies, which in turn creates room for expansion because the company stays in a hold and firmly maintain the plan for the coming periods.

 

 

 

 

 

According to Sohel et al. (2014) “Competition is one of the most certain issues in today’s business world. No matter how a firm is big or small; it has competitors in the industry, and the strategies of these competitors affect the process of formulating a strategic plan for the company”. (p.40-47)

Starbucks does have several competitors who are producing and selling similar products; these competitors include McCafé, Dunkin Donuts, and Coffee Bean Tea & Leaf.  It’s unfortunate that these competitors do sell these products at a lower price. BThis is a deadly threat to Starbucks company because the customers who are after cost-cutting tends to purchase cheap products form the other producers. Due to this competition, it is necessary to use the Competitive Profile Matrix (CPM). Capps et al (2012) argue that “a Competitive Profile Matrix utilizes critical success factors to allow an organization to compare itself to other competitors” (1059-1062). Starbucks applies this matrix in making the comparison and evaluation of the areas that they need to advance and improve to outdo its competitors. The correlation between the competitors and Starbucks is usually determined based on different critical growth and success factors. These factors include the; the product quality, satisfying the customer needs, the market shares, prices of the products, type of customer service, securing customer loyalty, brand image, and global expansion. By close examination of the preceding success factor Starbucks can evaluate if they are appropriately meeting those essentials;

The following tabulation illustrates the Competitive Profile Matrix for Starbucks Corporation.

 

Table 5: Showing the Competitive Profile Matrix for Starbucks Corporation

Starbucks

Corporation    Peet’s Coffee    McCafé

Critical Success Factors    Weight    Rate    Weight Score    Rate    Weights     Rate    Weighted score

Satisfying Customer Needs    0.14    4    0.56    4    0.56    2    0.28

Product quality    0.14    4    0.56    2    0.28    2    0.28

Brand Name    0.07    4    0.28    3    0.21    2    0.14

Market Share    0.09    4    0.36    3    0.27    2    0.18

Price Competitive    0.12    1    0.12    3    0.36    4    0.48

Financial position    0.09    2    0.12    3    0.18    3    0.18

Global Expansion    0.07    4    0.28    1    0.07    4    0.28

Innovation    0.08    2    0.16    2    0.16    3    0.24

Customer Service     0.12    4    0.48    3    0.36    2    0.24

Customer loyalty    0.08    4    0.32    4    0.32    2    0.16

Total             3.24        2.77        2.46

 

From the table, it is a clear indication that Starbuck is above the two competitors, Peet’s Coffee and McCafé. McCafé have a Weight score of 2.46 while Peet’s Coffee has a weighted score of 2.77, Starbuck is the leading with a weighted score of 3.24. This indicates that Starbuck is the leading company in the industry of coffee production. It meets all the critical success factors in the industry, unlike the others which are behind. Because Starbucks is leading in the competition, they don’t stress out in the short run because no one is going to take them over, in terms of market share and growth.

 

Financial ratios also known as accounting ratios are the relative magnitude selected from two values from a financial statement. Financial ratios are essential in measuring the strength of a company

According to Geereddy, N. (2012). “Starbucks boasts good financial health with low debt/leverage with a debt/equity ratio of 0.29 for FY2013 and maintains decent current and quick ratios.” (p.142)

Starbucks company uses several financial ratios in the analysis of performance and evaluation of the financial position.

 

Type of Ratio    2015    2014    2013

Gross profit margin    59.36%

Return on investment capital    42.32    50.27    0.40

Return on Investment     31.38%    26.81%    0.14%

Return to Assets

Return to equity    97.87%    79.23%

Current ratio    1.19    1.37    1.02

Quick ratio    0.64    0.81    0.71

Earnings per share     1.85    1.35    0.01

Equity ratio    1.14    1.04    1.57

Net Profit Margin    14.39%    12.57%    0.06%

 

 

In summary, this business analysis report typically provides information on the strategies that Starbucks corporation implements, the report emphasized the business matrix strategies that the company uses in the analysis of its operation. And strategy formulation. The grand matrices used by the firm clearly illustrates the strategic position of Starbuck in the industry. On the other hand, the matrix strategies were was very informative in demonstrating that Starbucks Company is appropriate and responding decently towards different opportunities and threats.

I would recommend that the company continues to use the implemented strategies for product and marketing development. Upon implementation of these strategies the company stands a high chance of extreme growth and significantly increasing their market shares and worth. Typically, when the company improves its product quantity and quality automatically will attract more consumers to its stores. Increasing the volume of sales can also be accomplished through the implementation of the product mix strategy. Moreover, when it comes to market development strategies the company can gain popularity and recognition mainly around the globe, gaining popularity and recognition will significantly help the company in its mission of expanding and being ranked the top producer. Another significant benefit that the company can get due to market development strategy is franchising; this entails the granting of authority to a corporate body to make sales of its goods and services in a specific region. Upon perfect execution of the plan, the company can significantly increase its sales volume leading to increased revenue.

The internal and external factors of Starbuck company has some significant impacts on its growth and future progress. The company has a lot of potential capabilities to outdo the other companies in coffee production and supply; the company is in a position to take over the industry of coffee production.

 

Reference

Sohel, S. M., Rahman, A. M. A., & Uddin, M. A. (2014). Competitive profile matrix (CPM) as a competitors’ analysis tool: A theoretical perspective. International Journal of Human Potential Development, 3(1), 40-47.

Capps III, C. J., & Glissmeyer, M. D. (2012). Extending the competitive profile matrix using internal factor evaluation and external factor evaluation matrix concepts. Journal of Applied Business Research, 28(5), 1059.

Geereddy, N. (2012). Strategic analysis of Starbucks corporation. Harward [Електронний ресурс].–Режим доступу: http://scholar. harvard. edu/files/nithingeereddy/files/starbucks_ case_analysis. pdf.

Tu, Y. T., Wang, C. M., & Chang, H. C. (2012). Corporate brand image and customer satisfaction on loyalty: An empirical study of Starbucks coffee in Taiwan. Journal of Social and Development Sciences, 3(1), 24-32.

 

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