Week 6, Assignment 2 External and Internal Environments Starbucks Trisha Griggs BUS499 Business Administration Capstone Professor Grizzell May 16, 2020 External and Internal Environments for Starbucks The Most Important Segments of General Environment The general environment for Starbuck plays a key role in influencing the company’s decision-making and access to resources. A good understanding of the factors in its general environment helps Starbucks to achieve effective management. Two of the segments of the environment with maximum influence on Starbucks are the economic and technological segments. For Starbucks, economic factors have a huge influence on the company’s operations (1). The fact that Starbucks relies heavily on customers’ voluntary spending implies that its operations can easily be affected macro-economic conditions. For example, negative economic changes such as the current issue of the Coronavirus pandemic directly affects the amount of money that Starbucks’ customers around the world have for discretionary purchases. Technological factors have a huge influence not only on Starbucks operations but also on its management practices. Like most companies operating in the current globalized world, Starbucks is incorporating technological aspects in its operations to improve operations and hence promote customer satisfaction (2). The company strongly relies on information technology systems in almost all its operations including management of supply chains, administrative functions, online business, and point of sale processing. The technological segment presents a massive growth opportunity for Starbucks. With an increased focus on mobile technology such as ordering apps, mobile payments, reloads and loyalty functionality, Starbucks can effectively use technological advancements to spur more growth, especially in the international markets (3). The Most Significant Forces of Competition for Starbucks Two of the most significant competition-related forces for this company are the threat of substitutes and the bargaining power of customers. The large number of firms in the coffee industry intensifies the competitive rivalry that Starbucks faces. The industry is characterized by companies of different sizes that offer substitutes for Starbucks’ products. This implies that the company can suffer adversely as a result of the actions of the competitors such as lowering the prices (2). Starbucks reduces the effect of high competition by being an innovative leader in product development (4). The bargaining power of buyers represents the pressure exerted on the business by customers to provide them with quality products or services. For Starbucks, buyers have high bargaining power. They gain this power as a result of the high availability of substitutes and low switching costs. Therefore, Starbucks must progressively strive to satisfactorily meet the needs of its customers, failure to which they can switch to the products of the competitors. Starbucks reduces the effect of the high bargaining power of buyers by focusing on efficient customer services and timely adjustment to customer needs. By being flexible in product development, the company has succeeded in adapting its products to changing customer preferences and tastes (4). This has contributed massively to promoting customer loyalty. How Starbucks can address the Competitive Forces With the ever-growing competition in the coffee industry, Starbucks must focus on improving its competencies to strengthen its brand image further. One way of achieving this objective is through more aggressive innovation. Through innovation, the company can improve product differentiation thus reducing the risk of competition significantly (2). The company also needs to review its pricing strategies to maintain a competitive advantage. With the low cost of switching and the high availability of substitutes, customers are highly likely to react to price changes. Therefore, by reviewing its pricing strategies, Starbucks can increase its customer base and, in turn, beat the competition. The main recommendation for Starbucks to reduce the force of the high bargaining power of buyers is to invest in creating innovative marketing and branding strategies. By strengthening its corporate image on the global market, Starbucks can benefit massively in terms of enhanced customer loyalty. The company can also benefit from the use of social media marketing to build strong connections with its customers. External Threats and Opportunities The main threats for Starbucks include the fierce competition in the coffee industry, the company having a narrow market, and risks in the supply chain such as natural disasters (3). Starbucks mainly attributes its success to the popularity of its coffee and tea products and hence can suffer adversely when consumers shift from these products. Competition is the greatest threat for the company as some of its main competitors sell their products at slightly lower prices. The company should increase its focus on product diversification. This strategy will enable it to effectively meet the diverse and ever-changing needs of buyers and thus grow its market share. The main opportunities for Starbucks include expansion into emerging markets, diversification of business and product specifications, and co-branding (3). The greatest opportunity for the company is venturing into emerging markets. Starbucks over-relies on the American markets. Increasing its presence in overseas markets as well as venturing onto developing markets can grow its sales massively. Strengths and Weaknesses Starbucks' key strengths include a firm brand image, massive growth in the number of stores, strong financial performance, strong international supply chain, and moderate diversification (3). The most superior strength of this company is its strong brand image. Starbucks has the strongest and the most popular brand in the coffee industry (5). Starbucks should utilize its strong brand to expand its presence in the developing markets. With its strong brand, the company can easily penetrate the emerging markets, especially with the connectivity brought by social media marketing. Key weaknesses for the company include high prices compared to some competitors, generalized products, products that can easily be imitated, and product recalls (3). The greatest weakness of the company is high pricing. Given the high availability of substitutes, it is easy for customers to shift to other product brands. Hence, the company should consider reviewing its pricing strategies. Starbuck’s Resources, Capabilities, and Core competencies Starbucks’ key resources include a strong supply chain and high customer loyalty. The company has unmatched access to the best cocoa around the world and hence its ability to provide customers with quality products. It maintains reliable sources and a responsible supply chain for coffee beans to ensure consistent production of quality products. High-quality products have enabled Starbucks to maintain a loyal customer base (5). Key capabilities for the company include high product quality and effective customer service. The high quality of products contributes to improved customer loyalty. Being a customer-centric brand, Starbucks maintains a constant focus on quality customer service. Enriched services to customers also contribute to high customer loyalty. The most notable competencies for Starbucks include its brand equity and moderate global presence. The ability of Starbucks to gain customers' trust has been key to its brand equity. Starbucks also has a significant global presence that presents a competence to deal with competition. References . 1. Company Information. Starbucks Coffee Company. (2020). Retrieved 16 May 2020, from https://www.starbucks.com/about-us/company-information. 2. Starbucks Corporation. (2019). Retrieved 16 May 2020, from https://www.sec.gov/ix?doc=/Archives/edgar/data/829224/000082922419000051/sbux9292019x10xk.htm. 3. Starbucks Corporation SWOT Analysis. (2019). Starbucks Corporation SWOT Analysis, 1–7. Retrieved from http://libdatab.strayer.edu/login?url=https://search.ebscohost.com/login.aspx?direct=true&db=bt h&AN=139067687&site=eds-live&scope=site 4. Cheng, A. (2019). How Starbucks Plans To Roast Its Coffeehouse Competition. Forbes. Retrieved 16 May 2020, from https://www.forbes.com/sites/andriacheng/2019/01/25/how-starbucks-plans-to-roast-itscoffeehouse-competition/#ce44672247aa 5. Kowitt, B. (2019). How Starbucks Got Its Buzz Back. Fortune, 180(4), 84–93. Retrieved from http://libdatab.strayer.edu/login?url=https://search.ebscohost.com/login.aspx?direct=true &db=bth&AN=138722396&site=eds-live&scope=site
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