Regent University Minor Chapter 5 Starbucks Coffee Company Case Study Paper

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xelb2019

Business Finance

Regent University

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CASE STUDY QUESTIONS – See Appendix: Case Analysis; and Case Analysis Boxes throughout the text – see page numbers below for more specific explanations of each point.  For HW cases such as this assignment, answer only the first 15 questions. Following the pattern below will ensure your readiness for the next steps.

1. Introduce the organization: basic facts and brief history

Pg. 14

2. Specifically identify the industry, life-cycle stage and the competitors – see IBIS World database

Pg. 25

3. Who has succeeded and failed in the industry? What are the Critical Success Factors (or KSF)?

Pg. 38

4. What political/legal forces affect the industry?

Pg. 55

5. What economic forces affect the industry? What is the market structure?

Pg. 62

6. What social forces affect the industry?

Pg. 81

7. What technological forces affect the industry?

Pg. 87

8. What is the current firm-level or corporate-level strategy?

Pg. 141

9. What is the current business-level [generic] strategy?

Pg. 172

10. What is the organization’s financial position and financial strategy – how do they make and invest their money?

Pg. 194

11./12. What are the organization’s Strengths and Weaknesses? On what competencies should they build?

Pg. 215

13./14. What are the organization’s Opportunities and Threats? How should they address or overcome them?

Pg. 217

15. What strategic alternatives are available to the organization?

Pg. 220

16. What are the pros and cons of these alternatives?               

17. Which alternative should be pursued and why?                    

HW Case Study Summaries

Instructions: This project requires you to apply the concepts and methods learned so far in the course. This is an individual project.

Strategic Management: Theory and Practice, 5th Edition, (Solon, OH: Academic Media Solutions, 2017) John A. Parnell (Online eTextbook Access Card: ISBN 978-1-942-04128-3)

  • Good to Great: Why Some Companies Make the Leap--and Others Don't, 1st Edition, (New York, NY: Harper Business, 2001) James Collins (ISBN-13: 978-0066620992)

Unformatted Attachment Preview

Strategic Management: Theory and Practice Chapter 4 The External Environment: Social and Technological Forces Strategic Management, 5e. © 2017 Academic Media Solutions. Chapter 4: Key Issues     Social Forces Food Consumption & Automobiles Technological Forces Strategy and the Internet Environmental scanning © violetkaipa/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. Analysis of the Macroenvironment   Macroenvironmental forces affect industries and individual firms within industries. The focus at this stage of analysis is on the industry, not the firm. Certain forces may be more prominent in some industries than in others. Strategic Management, 5e. © 2017 Academic Media Solutions. Macroenvironmental Forces      Political-Legal forces Economic forces Social forces Technological forces Collectively, these forces are sometimes referred to by the acronym PEST. The first two forces were addressed in the previous chapter. The latter two forces are addressed in this chapter. © dizain/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions.      Societal values Trends Traditions Religious practices Concern for the environment Strategic Management, 5e. © 2017 Academic Media Solutions. © Sofiaworld/Shutterstock Social Forces Select Social Trends in the U.S.       Declining birth rate Aging population More diverse society Emphasis on convenience Increased preference for online shopping Use of social media Strategic Management, 5e. © 2017 Academic Media Solutions. Social Forces Case #1- Food Consumption    Consumers “super size” at record rates while demanding healthier foods. Many fast food restaurants have been “supersizing” their meal combinations by adding extra fries and larger drinks, while at the same time expanding alternatives for items such as grilled chicken sandwiches and salads. Consumers are drinking more bottled water and fewer soft drinks, and eating more cereal as snacks. Strategic Management, 5e. © 2017 Academic Media Solutions. Social Forces Case #2- Automobiles  Demand patterns for vehicles is difficult to discern and is constantly changing. Contrary to demand patterns in other parts of the world, demand for large vehicles remains strong in the U.S. amidst cries for greater fuel economy. © Africa Studio/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. Social Forces: Global Concerns    Firms operating in multiple countries must address multiple sets of social forces. Social forces are influenced by national culture, the generally accepted values, traditions, and patterns of behavior in a society. Firms should recognize these cultural differences. Some firms struggle because their managers consciously refer to their own cultural values as a standard of judgment, a phenomenon known as the self-reference criterion. Strategic Management, 5e. © 2017 Academic Media Solutions. Technological Forces  Scientific improvements & innovations The Internet is arguably the most pervasive technological force affecting most industries. © Sergey Nivens/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. The World Is Flat (Thomas Friedman, 2005)   During the dot-com bubble of the late 1990s, telecommunications firms laid fiber optic cables across the oceans to connect the U.S. with China and India. Since the dot-com bust, these cables have provided high quality, low cost contact with developing nations, “leveling the playing field.” “Any activity that can be digitized and moved around will get moved around.” Strategic Management, 5e. © 2017 Academic Media Solutions. Strategy and the Internet   Has the Internet created new business models or just altered the old ones? Although the Internet plays a substantial role, critics challenge the notion that “new business models” are needed to compete in the “new economy.” Michael Porter and others argue that the market forces that governed the traditional economy have not disappeared in the Internet economy. Strategic Management, 5e. © 2017 Academic Media Solutions. Disaggregation & Reaggregation   Large firms exist because they can perform most tasks—raw material procurement, production, human resource management, sales, and so forth—more efficiently than would otherwise be performed if they were “outsourced” to the open market. Today, many progressive firms have “disaggregated” and no longer perform all of their functional activities, but instead “reaggregate” by searching for partner firms who can perform some of the activities more efficiently. Strategic Management, 5e. © 2017 Academic Media Solutions. Strategic Dimensions of the Internet   The Internet has influenced strategic management in very specific ways. Contrary to early expectations, the Internet has not always generated greater profits for businesses. Consumers have benefitted immensely. Five Strategic Dimension of the Internet are addressed in the following slides. © nmedia/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. Dimension #1: Movement toward information symmetry  Typical markets are characterized by information asymmetry, whereby sellers control key information that is not available to buyers. The Internet promotes information symmetry, whereby buyers and sellers share information. Strategic Management, 5e. © 2017 Academic Media Solutions. Dimension #2: Internet as distribution channel  The Internet acts as a distribution channel for nontangible goods and services. Consumers can purchase items such as airline tickets, insurance, stocks, and computer software online without the necessity of physical delivery. Strategic Management, 5e. © 2017 Academic Media Solutions. Dimension #3: Speed The Internet offers numerous opportunities to improve the speed of the actual transaction, as well as the process that leads up to and follows it. © Feng Yu/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. Dimension #4: Interactivity  Consumers discuss their experiences with products and services on bulletin boards or in chat rooms. Firms can readily exchange information with trade associations that represent their industries. Strategic Management, 5e. © 2017 Academic Media Solutions. Dimension #5: Potential for cost reductions and cost shifting The Internet provides many businesses with opportunities to minimize their costs—both fixed and variable—and thereby enhance flexibility. © Olivier Le Moal/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. Commoditization   Commoditization—Firms are having a more difficult time distinguishing their products and services from those of their rivals. Products from digital cameras to cake mix have become more differentiated, creating too many options for buyers. To simplify, buyers tend to reduce the purchase decision to a few factors such as key features or quality. If they cannot distinguish among the competitors along these factors, they may view the product as a commodity and base their final purchase decision on price. Strategic Management, 5e. © 2017 Academic Media Solutions. Mass Customization    Mass Customization is the ability to individualize product and service offerings to meet specific buyer needs. Personalization does not occur at the expense of economies of scale. Technology has enabled firms to engage in mass customization. Strategic Management, 5e. © 2017 Academic Media Solutions. Environmental Scanning    Definition—the systematic collection and analysis of information about relevant trends in the external environment. Keeping up with business trends is a form of environmental scanning. Today, obtaining key information is often not the problem. The real challenge is making sense of the deluge of reports, press releases, statistics, and other information. Strategic Management, 5e. © 2017 Academic Media Solutions. Benefits of Environmental Scanning    An increased general awareness of environmental changes Better strategic planning and decision-making Greater effectiveness in governmental matters More effective diversification and resource allocation decisions © Bloomua/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. Case Analysis Steps 7–8: Social & Technological Forces    Identify the specific social (step 7) and technological (step 8) forces that affect the industry. Specify precisely how the factors identified affect the industry. Focus on the industry, not the firm. Specific applications to the firm come later. Strategic Management, 5e. © 2017 Academic Media Solutions. Strategic Management: Theory and Practice Chapter 5 The Organization: Ethics and Corporate Social Responsibility Strategic Management, 5e. © 2017 Academic Media Solutions. Chapter 5: Key Issues     Stakeholders, Missions, Goals, & Objectives Managerial Ethics The Agency Problem Corporate Social Responsibility (CSR) Corporate Takeovers © tang90246/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. Organizational Direction: Stakeholders, Mission, Goals, and Objectives     Stakeholders—individuals or groups who are affected by or can influence an organization’s operations Mission—the reason for the firm’s existence Goals—desired ends toward which efforts are directed Objectives—specific, often quantified, versions of goals Strategic Management, 5e. © 2017 Academic Media Solutions. Goals and Stakeholders  Stakeholders—individuals or groups who are affected by or can influence an organization’s operations Different stakeholders have different ideas about organizational goals and most attempt to influence them to some degree. © dizain/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. The Agency Problem    A situation in which a firm’s managers—the “agents” of the owners—fail to act in the best interest of the shareholders. The extent to which this problem occurs is widely debated. The problem is rooted in moral hazard, when the parties in an arrangement—such as owners and managers—do not share equally in the risks and benefits. It is complicated by adverse selection, the inability of shareholders to identify the precise competencies and personal attributes of top managers when they are hired. Strategic Management, 5e. © 2017 Academic Media Solutions. Agency Perspective #1: Management Serves Its Own Interests   Executives seek to grow the firm because compensation tends to increase with firm size. Executives diversify the firm to increase prospects for survival at the expense of profitability. Strategic Management, 5e. © 2017 Academic Media Solutions. Agency Perspective #2: Management and Stockholders Share Same Interests   Since managers’ livelihoods are directly tied to the success of the firm, they tend to manage it in the best interest of the shareholders. Stock options can support this perspective by “turning the managers into owners.” Strategic Management, 5e. © 2017 Academic Media Solutions. Managerial Ethics   Managerial Ethics refers to one’s individual responsibility to make business decisions that are legal, honest, moral, and fair. Agreeing on what is “legal” and “honest” may not be difficult. Agreeing on what is “moral” and “fair” can be a difficult task! © Steven Frame/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. 6 Perspectives on Managerial Ethics 1. 2. 3. The Utilitarian view: Anticipated outcomes and consequences should be the only considerations when evaluating an ethical dilemma. The Self-Interest view: Benefits of the decisionmaker(s) should be the primary considerations. The Rights view: Evaluate organizational decisions on the extent to which they protect basic individual rights. Strategic Management, 5e. © 2017 Academic Media Solutions. 6 Perspectives on Managerial Ethics (Continued) 4. 5. 6. The Justice view: All decisions will be made in accordance with pre-established rules or guidelines. The Integrative Social Contracts view: Decisions should be based on existing norms of behavior, including cultural, community, or industry factors. The Religious view: Decisions should be based on personal or religious convictions. Strategic Management, 5e. © 2017 Academic Media Solutions. 1. 2. 3. Individuals deny responsibility, rationalizing that they have no other choice but to participate in unethical behavior. Individuals deny injury, suggesting that the unethical behavior did not really hurt anyone. Individuals deny rights of the victims, rationalizing that “they deserve what they got anyway.” Strategic Management, 5e. © 2017 Academic Media Solutions. © Gustavo Frazao/Shutterstock 6 Explanations for Unethical Behavior 6 Explanations for Unethical Behavior (Continued) 4. 5. 6. Individuals engage in social weighting by making carefully controlled comparisons. Individuals can appeal to higher values by suggesting that justification of the unethical behavior is due to a higher order value. Individuals may invoke the metaphor of the ledger, arguing that they have the right to engage in certain unethical practices because of other good things they have done. Strategic Management, 5e. © 2017 Academic Media Solutions. Social Responsibility   Social Responsibility refers to the expectation that business firms should serve both society and the financial interests of the shareholders. Ethics is about the individual; social responsibility is about the firm. Corporate social responsibility is often called CSR. © nasirkhan/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. Corporate Social Responsibility (CSR)- PRO & CON   Whether a firm has a social responsibility (and if so, to what degree) is widely debated. ARGUMENTS FOR A CSR focus on the need for firms to “give back” to the community. They highlight both the influence and resources available to firms in terms of advertising, product development, and community involvement. Strategic Management, 5e. © 2017 Academic Media Solutions. Corporate Social Responsibility (CSR)- PRO & CON The triple bottom line is the notion that firms must maintain and improve social and ecological performance in addition to economic performance. © marekuliasz/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. Corporate Social Responsibility (CSR)- PRO & CON   ARGUMENTS AGAINST A CSR emphasize that firms should be active socially only when doing so enhances profits. Managers don’t know what’s in the best interest of society and they shouldn’t spend shareholder resources on such endeavors. Firms don’t need to “give back” because they already serve society by providing needed products, jobs, and tax revenues. Either way, considering stakeholder perspectives—at least to some extent—is generally good business and can stave off government regulation. Strategic Management, 5e. © 2017 Academic Media Solutions. Sustainable Strategic Management (SSM)   Sustainable strategic management (SSM) is a broader notion of social responsibility refers to the strategies and related processes that promote superior performance from both market and environmental perspectives. The SSM perspective seeks to integrate the needs to earn profits and to serve society. Strategic Management, 5e. © 2017 Academic Media Solutions. Takeovers  Takeover: A purchase of a controlling quantity of shares of a firm by an individual, a group of investors, or another organization. Leveraged Buyout (LBO): Takeovers that rely heavily on borrowed funds. © JoeFotoSS/Shutterstock  Strategic Management, 5e. © 2017 Academic Media Solutions. Pros & Cons of Takeovers     Pro: Takeovers provide a needed system of checks and balances. Pro: The threat of a takeover can pressure managers to operate their firms more efficiently. Con: The need to pay back large loans can cause management to overemphasize the short term. Con: Extra debt required for an LBO can lead to bankruptcy. Strategic Management, 5e. © 2017 Academic Media Solutions. Outsourcing & Offshoring   Outsourcing—contracting out a firm’s non-core, nonrevenue-producing activities to other organizations primarily to reduce costs. Offshoring—relocating some or all of a firm’s manufacturing or other business processes to another country to reduce costs—is similar to outsourcing, but enables the firm to retain control of the operations abroad instead of relinquishing them to other firms. Strategic Management, 5e. © 2017 Academic Media Solutions. Outsourcing & Offshoring (Continued)    U.S. trade deficit was $505 billion in 2014, $343 of which was with China. India and Mexico are also prominent contributors. Some “white collar” jobs are now being outsourced, including attorneys and accountants. Cost-cutting is the incentive for both outsourcing and offshoring. Strategic Management, 5e. © 2017 Academic Media Solutions.
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Attached.

Running head: STARBUCKS

1

Starbucks
Student’s Name
Institution Affiliation

STARBUCKS

2

Introduction
Starbucks is a coffee company that was founded in 1971 in Seattle. The company’s
headquarter is located in Seattle, Washington, by three individuals, namely Gordon Bowker, Ziv
Siegel, and Jerry Baldwin. The company grew rapidly, and by 1982 it had a total of five retail
stores, where it was selling high-quality ground coffee and whole-bean coffee products to its
clients who include restaurants and espresso stands in the city. Starbucks expanded to other
cities, including Chicago and Vancouver. The company became public in 1991, and since then, it
has grown across major cities. Today, Starbucks is a leading brand and retailer in the world, with
Starbucks coffee shops being found in various shopping centers and other outlets nationally and
internationally.
Industry overview
Starbucks industry mainly operates in the retail coffee and snacks store industry. The
industry has had ups and downs over the past few decades. Some of the major industry
slowdowns occurred in 2009 when the country experienced an economic crisis, where the
industry revenue fell by 6.6 percent. Before the financial crisis, the industry had had consistent
growth. One of the primary reasons why the sector fell is due to consumers spending less in
times of economic crisis, especially on luxuries such as eat-outs. However, the industry has been
steadily growing, and Starbucks dominates the sector with a market share of more than 35
percent (Domingues et al., 2018).
Industry life cycle and market share

STARBUCKS

3

While the industry has grown significantly since the inception of Starbucks, it is in a
mature stage and comprises of a medium concentration compared to other industries. Starbucks
and Dunkin Brands in total...


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