Section 1) Identifying your Organization � �The Starbucks Organization.�
Begin by thinking about the organization you have chosen that encompasses both the concept of
sustainability and the need to apply strategic thinking. Please refer to the handout, �Sustainable
Solutions Paper�Identifying a Potential Organization� for specific guidance on identifying an
organization for your Sustainable Solutions Paper.�
In your Proposal, identify the organization you have selected and place it in context; then specify
its relevance for study, providing supporting evidence as needed. Your initial proposal should be
approximately two substantive paragraphs.�
Research and references for this section
2
Sustainable Solutions Paper
Introduction
Sustainability has been part of Starbucks strategy since 2004. The sustainability
approach at Starbucks is critical when it comes to enhancing sourcing practices for
products other than coffee, its method of charity, transparency, reporting and declaration,
and management at executive and board levels. While the paper evaluates sustainability
solutions at Starbucks, it presents relevant information that can augment the
understanding of sustainability in entirety.
Purpose
The analysis of Starbucks is necessary, why because the firm’s future expansion
and sustainability rely on its capacity to embrace a healthy business model. The firm
should constantly advance its strategies important for value chain analysis, CRS and
sustainability so as to remain competitive. Because value chain goes further than the
business, it provides a platform for understanding an organization’s environmental, social
effect and general stability. For that reason, recognizing and assessing Starbucks value
chain presents insights that help in strategic planning and implementation. By and large,
the analysis of Starbucks is essential in providing pertinent information for a wider
knowledge base thus aid in comprehending sustainability.
Stakeholder Identification and Value Analysis
Stakeholder identification is the logical analysis and assessment of their impact
when it comes to executing high-growth and sustainable solutions. Stakeholder
identification is necessary during initial phases in formulating strategies, so as to prevent
3
improvident allocation of resources on strategies primary stakeholders may not support.
Moreover, stakeholder analysis is critical in enhancing and reformulating high-growth
strategies to get the approval of primary stakeholders who may be against such
techniques. Identification of stakeholders allows the firm to open other potential areas
and methods to increase rapidly its ability and competence (Mintzberg, 1990). At
Starbucks, stakeholders are people who occupy important positions in the company or
those with the ability to significantly impact the firm’s revenues and expenses. These
people can be within or outside the enterprise. In Starbucks, the relative effect of
potential clients for skim or non-fat drinks can easily prevail over the views one person,
the CEO. If the firm had attempted to reinvent its products to increase client base, instead
of using traditional brand lines, it might have easily met client needs. Currently, the
company sells various products besides coffee including, ice-cream and is evidently a
firm that can listen to all the stakeholders.
Integrated Concepts From Readings, Evidence and Implications
Starbucks’ commitment to its stakeholders and focus on its mission statement
and vision provides the firm with the need for change. The company looks for further
opportunities while increasing stakeholders’ value. However, the company ought to
integrate strategic intent thinking in their enterprise level strategy. This move will be
significant when it comes to inspiring innovation (Morçöl, 2005). As a result, this will
positively influence business strategy since change helps in the achievement of strategic
objectives. Using stakeholders’ opinions in the company’s business strategy helps in
exploiting the available opportunities. Moreover, strategic intent thinking allows the
search for opportunities relevant for repositioning or restructuring their competencies so
as to enhance sustainability (Stacey, 2013). All people across the organization are
charged with the responsibility of work in teams to achieve the organizational goals as
they have impartiality in the outcomes. Various perspectives on the organization provide
room to address flexible environmental changes without the need for implementing
strategic paradigms (Hitt, Ireland & Hoskisson, 2009).
Allowing stakeholder participation in the strategic planning allows the company to use
available opportunities. Intent thinking is also necessary for exploring further
opportunities, for which the firm can restructure its key competencies in a bid to increase
sustainability.
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General Force Analysis: External – Remote Environment
General Force Analysis involves collecting information about the organization’s external
environment based on opportunities as well as threats. It is an exercise of ensuring that
changes in external environment do not take the organization by surprise. They include;
Economics
The economic growth in developing nations as well as reducing joblessness
presents opportunities for this organization to generate profit from different markets.
Although, the increasing labor expenditures in developing adversely affects Starbucks
since it leads to high expenditure for raw materials. Starbucks gets a significant
percentage of raw materials from developing nations. Therefore, economic factors
provide the firm with opportunities.
Technology
The firm has opportunities of increasing their mobile apps and related services to
generate more profit via mobile payment platforms. Subsequently, Starbucks can enhance
the efficiency of its SCM using modern technologies utilized by coffee growers (Stacey,
2013). Nevertheless, the increasing availability of home-made coffee appliances threatens
the organization since enhances the availability of competitors’ products.
Demographics / social / culture
Social factors involve social environment and patterns that influence operations as
well as clients. For that reason, the company has to put into account various factors
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including, increasing the number of middle class, increasing coffee culture and growing
health conscious. The company has the opportunity of increasing its profit due to growing
demand for specialty products, coffee culture and increasing number of middle class.
Also, Starbucks can broaden its assortment of health brands to meet the needs of health-
conscious clients.
Government / legal / military On political factors, Starbucks faces regional
incorporation, which is beneficial for the firm when it comes to its international growth
strategy. In addition, many governments worldwide are upgrading their infrastructural
facilities that allow the company to access easily various markets and suppliers.
Nonetheless, bureaucratic procedures are persistent in many nations. This affects the firm
as its makes expansion hard, particularly in developing nations.
Physical environment
Sustainability pattern at Starbucks concentrates on business procedures, which guarantees
minimal ecological effects. With regards to accountable sourcing highlights on CRS in
the SCM. At the moment, the organization has got accountable sourcing guidelines.
Moreover, the firm has the opportunities of the offering, some its brands in eco-friendly
packaging
Implications, Threats, and Opportunities of GFA
According to the GFA model, there is a need for putting into account and further
assessment of the economic, technological and social factors hence the use of technology
such as mobile apps and related services to generate more profit via mobile payment
platforms. Subsequently, Starbucks can enhance the efficiency of its SCM using modern
technologies utilized by coffee growers (Hoovers, 2010).
Additionally, there is evidence of high profit due to growing demand for
specialty products, coffee culture and growing number of middle class. Much as these
6
benefits are favorable, the threats are potentially overwhelming. For instance, the
increasing availability of home-made coffee appliances threatens Starbucks since these
enhances the availability of competitors’ products (Hoovers, 2010). In general, by 2018,
however, the cost of coffee beans is expected to reduce, which will lead to reduced
market rates and high-profit margins. Health attitude is another factor that is important in
determining demand in this sector. The expected change in healthy lifestyle can be
adverse the industry since clients are aware of the associated weight and obesity issues
(Starbucks, 2013). Nonetheless, players in this sector have been proactive when it comes
to shifting to organic and healthy brand mix.
Porter’s Five Forces Industry Analysis: External – Industry Environment
Porter’s Five Forces Industry Analysis is a model for analysis industry
environment. These forces determine the competitiveness and attractiveness in the market
they include; the bargaining power of the buyers, the bargaining power of the suppliers,
the threat of new entrants, the threat of substitute products, and the intensity of the
rivalry.
Five Forces Matrix Analysis
Barriers to entry
This threat is moderate since entry barriers are high; thus put off new
rivals. However, the industry is moderately high due to monopolistic rivalry system. For
new entrants, the initial venture is affordable because they can lease stores and
equipment. At the domestic level, small-scale coffee stores can contend with Starbucks
since there are no possibilities for changing prices for buyers. Although, this industry is
associated with intense competition, chances of new entrants to be successful are
moderate.
Nonetheless, this average entry in the market is experienced by big incumbent
7
stores like Starbucks that have realized economies of scale through price reductions,
increased good organization, and a significant market share. Additionally, there is a
somewhat significant barrier since new entrants that try to differentiate their brands from
Starbuck’s brand quality, strategic regions, and store setting. Established companies such
as Starbucks have a substantial size as well as degree, providing them easy access raw
material and learning curve benefit. The anticipated revenue from established firms for
product equity, resources, location, and cost, are moderately high creating a moderate
barrier to entry.
Substitutes
There is some sensible substitute for coffee such as tea, soda, water, and energy
drinks (Porter, 1996). Pubs that sell non-alcoholic drinks can replace Starbucks coffee.
Further, clients can make their home-made coffee instead of buying premium coffee
brands. However, there are no cases of changing prices for buyers for switching to
substitutes that make them high. Nonetheless, it is to keep in mind that main players in
the industry such as Starbucks are addressing the threat of substitutes by selling coffee
makers and premium coffee packs, but it continues to exert pressure on the company’s
profits.
Bargaining power of suppliers
The primary components of the Starbucks value chain are coffee beans and
Arabica coffee cultivated in certain geographic regions, an aspect that makes changing
prices among suppliers moderately lower. With regards to Starbucks scale and size, it is
in a position to benefit from its suppliers, though it retains a fair trade licensed coffee
8
based on the coffee and farmer equity plan, which presents the suppliers with a fair
alliance position that in turn presents moderate low bargaining power. Further, vendors in
this industry pose a lower threat to compete with Starbucks through vertical integration
that reduces their power. Again, Starbucks has a vital component of suppliers that
reduces their power. For that reason, suppliers cause moderate low bargaining power.
Bargaining power of buyers
There are many purchasers. However, none of them can demand price
consideration. They offer vertically differentiated goods with a different client base that
make moderately low purchases that reduce buyers’ power. Although, there is no
changing price due to the significant availability of substitute products, Starbucks costs
are determined by current market conditions. On the other hand, clients have a modest
sensitivity to premium coffee since they pay highly for quality brands. However, they are
careful of exorbitant rates with regards to quality (Porter, 2008).
Competitive rivalry
This industry is associated with monopolistic competition, where Starbucks has
the biggest market share while its close rivals have a considerable share in the market,
thus provide great pressure on Starbucks. On the other hand, clients incur the cost of
changing to other stores hence create intense competition. However, Starbucks retains
competitiveness because of differentiation causing moderate rivalry (Porter, 2008).. The
retail coffee and snacks industry is not only mature but also growth rate is moderately
low causing intense competition among firms to moderately significant as they all aim at
9
increasing market share from well-established organizations. Nevertheless, the sector has
no over capacity, making the level of rivalry to being moderately high.
Implications, Threats, and Opportunities of Porter’s Five Forces
According to the Porter’s Five Forces Starbucks have opportunities and threats.
The firm’s main threat is intense competition from Dunkin. This is because Dunkin
Brands has a market share of 24.6% compared to Starbucks’ 36.7% (IBIS, 2013). There
is a somewhat significant barrier since new entrants that try to differentiate their brands
from Starbuck’s brand quality, strategic regions, and store setting. Also, Starbucks has a
substantial size as well as degree, providing them easy access raw material and learning
curve benefit. With regards to Starbucks scale and size, it is in a position to benefit from
its suppliers, though it retains a fair trade licensed coffee based on the coffee and farmer
equity plan, which presents the suppliers a fair alliance position that in turn presents
moderate low bargaining power (Hoovers, 2010).
Detailed Value Chain Analysis: Internal Environment
Value chain analysis
The value chain is a logical structure that is important when it comes to
identifying the firm’s operations that can generate value as well as competitiveness
(Garza, 2010). Value chain analysis includes inbound logistics, operations, outbound
logistics, marketing and sales, and services. Starbucks value chain is illustrated below;
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Primary Activities
Inbound logistics: in 2010, Starbucks supply chain management (SCM) was
remarkably modified following the return of Howard Schultz as the chief executive
officer due to the worldwide economic slump. The modification of the firm’s inbound
logistics entailed simplifying SCM and development of a distinct, global logistics
network (Hamel & Prahalad, 2005). Arabic coffee beans are imported from Africa, Latin
America, and Asia to Europe and the United States through the sea. They are delivered to
the firm’s regional distributions. After which this coffee is roasted then supplied to main
distribution centers across the globe. In addition to coffee from regional distribution hubs,
the main distributions get deliveries from suppliers for a variety of brands such napkins
and coffee appliances. Main distribution hubs produce over 70,000 deliveries weekly to
various Starbucks stores in more than 62 nations (Starbucks, 2013).
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Nevertheless, in the recent past, the firm has been searching for opportunities to
cultivate its coffee beans. In particular, since 2013 has about 240 h coffee ranches in
Costa Rica. This change in sourcing for the raw material may tremendously enhance the
efficacy of brand development for the operation because Starbucks gets the opportunity
of testing news coffee types.
Operations: the firm operates in about 62 nations in two systems namely firm
operated and certified. In 2014, the firm had about 10,713, and 10,653 firm-operated, and
certified stores respectively. The company increased the value of its operations through
provision free internet access to the stores. Furthermore, Starbucks operation segments
are categorized into five areas;
Segment Revenue
share
(%)
US, Latin America, and Canada 73
Asia Pacific 7
Africa, Europe, and the Middle East 8
Channel development 9
Others 3
Outbound logistics: clients can buy the firm’s brands from certified as well as
firm-operated stores. Also, they can use online services for particular brands, including
drink-related devices, tea, and packaged coffee among others (Wheeler, Colbert &
Freeman, 2003). Again, individual products can be purchased from leading supermarkets
such as Tesco and Wal-Mart. Marketing and sales: previously, Starbucks did not invest in
marketing its brands. Word-of-mouth was widely used marketing strategy this involved
quality offerings as well as customer services. Nonetheless, the intense competition
12
encouraged executives to reevaluate the marketing technique as such; the company
budget has continuously been going up in the last five years to reach about $315.5b in
2014 (Garza, 2010). The money is invested in different parts of print and media
promotions, events, direct marketing, and public relations.
Services: Starbucks primary source of competitive edge is good customer
services, an aspect that increases value to its product image. The firm’s customer
services are pleasantly polite and address regular clients by names. Seldom, regular
clients can get their preferred brands for free based on customer service discretion, an
indication of good gesture, which in turn adds the awareness of outstanding services to a
great degree. Additionally, following the increasing hectic lifestyle, the company spends
time assessing as well as enhancing ways on effectively matching their clients’ speed
needs-providing tailor made beverages in a few minutes. Starbucks utilizes differential
strategy. The firm aims at thwarting its rivals; as such MacDonald, Dunkin. Starbucks has
been successful in standardization and enhancing the economies of scales.
Enterprise Level Strategy
Enterprise level strategy governs the whole company while aligning the firm with
stakeholders. Starbucks monitors its workers so as to ensure quality products that meet
clients demands. Some of its stakeholders include customers, employees, investors,
suppliers, the environment and the government. In addition, the firm greatly values its
employees since they are the people that help the company to survive. Mission statement:
To inspire and nurture the human spirit – one person, one cup and one neighborhood at a
time.” This demonstrates some of the things the firm implements or embraces to survive
in the competitive sector. In any case, Starbucks mission statement not only nurtures and
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inspires but also reflects the aspect of one individual, one cup and one neighbor
(Starbucks, 2011).
Vision: to establish Starbucks as the premier purveyor of the finest coffee in the world
while maintaining our uncompromising principles while we grow.” This vision reflects
various aspects including finest coffee globally, growth, inflexible principles, and
premier purveyance (Starbucks, 2011). Starbucks mission statement and vision
demonstrate the platform upon which the company uses to increase its value and offer a
return on investment for its stakeholders. The company uses differentiation strategy to
fulfill the demands of its mission statement and vision, hence supporting their
stakeholders’ values.
Organizational Culture Type The company has a strong organizational
culture that revolves around ethical as well as responsiveness to clients’ demands. It is
obvious that Starbucks has loyal customers who are satisfied with products they buy. On
the hand, the company provides long-term benefits for its workers. Starbucks strives for
cohesive teams and developing strong links in a bid to create unity.
Customized Value Chain of Activities in Table Form
Table 1: Value Chain Analysis
Business Process Starbucks Dunkin Macdonald
Management operates both
centralized and
decentralized
Centralized
management
Same management
structure as
Starbucks.
Inbound logistics Modified SCM Unique niche for Strengths:
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acquiring organic
ingredients from
local farmers
• Economies of
scale
– Pass value to
clients (such as $1
menu)
Operations operates in about
62 nations
Has a global
presence
operates in 32,000
restaurants globally
in 118 nations
Outbound logistics Certified as well as
firm-operated
stores.
Tracks the
movement of
finished goods
Strength:
strengthened
Information
Systems
Sales High volume of
sales
Strategic marketing
to attract customers
Strengths:
•Product
– Health and
wellness promotion
& product –
customer and
market research
Service Good customer
services
Quick-service
restaurants boast
particular
Strengths:
• Fast food service
• Order
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characteristics that
in turn enhance the
number of clients
accurateness
Implications of Competitive Analysis
Strengths
Some of the organization’s strengths include; a modified supply chain
management (SCM). The modification of the firm’s inbound logistics entailed
simplifying SCM and development of a distinct, worldwide logistics network (Hamel &
Prahalad, 2005). Arabic coffee beans are imported from Africa, Latin America, and Asia
to Europe and the United States through the sea. Main distribution hubs produce over
70,000 deliveries weekly to various Starbucks stores in more than 62 nations (Starbucks,
2013). Because the firm operates in about 62 countries it had about 10,713 and 10,653
firm operated and certified stores respectively (Starbucks, 2013).
Weaknesses
The intense competition encouraged executives to reevaluate the marketing
technique as such; the company budget has continuously been going up in the last five
years to reach about $315.5b in 2014 (Garza, 2010). The money is invested in different
parts of print and media promotions, events, direct marketing, and public relations.
Skills
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The firm has been searching for opportunities to cultivate its coffee beans. In
particular, since 2013 has about 240 h coffee ranches in Costa Rica (Starbucks, 2013).
This change in sourcing for the raw material may tremendously enhance the efficacy of
brand development for the operation because Starbucks gets the opportunity of testing
news coffee types.
Capabilities
Starbucks main source of competitive edge is good customer services, an aspect that
increases value to its product image. The firm’s customer services are pleasantly polite
and address regular clients by names. Seldom, regular customers can get their preferred
brands for free based on customer service discretion, an indication of good gesture, which
in turn adds the awareness of outstanding services to a significant degree (Carlisle &
McMillan, 2006).
Detailed SWOT Analysis
SWOT Factor Matrix
SO strategies
The robust market presence and worldwide product recognition: the firm has
stores in different regions with a market share of 36.7% in the US and operates in more
than 60 nations (Starbucks, 2013). In addition, Starbucks is a leading product when
comes to coffee segment and in 2013 it was among the recognized brands worldwide
(Mintzberg, 1994). The company leverages its brand through merchandise and certifying
its product emblem out. The robust market presence and product recognition enable
Starbucks to gain a considerable competitive edge in the expansion in global markets
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while recording high growth. For years, the company has realized economies of scale
with advanced delivery networks and suppliers.
High-quality products: the company concentrates on quality product delivery and
prevents standardization of its quality even with significant production.
Location and appeal of Starbucks stores: Starbucks has located its stores in primes as well
as strategic locations worldwide. Starbucks target high-traffic areas, premium and
visibility regions close to various neighborhoods such as retail centers, learning
institutions, downtown and certain rural locations globally. A move that has earned
Starbucks an excellent capability and ability to expand in prime regions and meet clients
convince. The stores are also visually attractive with a cool element to reflect the distinct
feature of settings they operate in. The firm offers free WiFi, good music, quality
services and an excellent place for people to meet that forms a larger component f the”
firms experience” the key goal for Starbucks is making their stores a “home” to its
customers. The use of technology and mobile channels such as Starbucks apps helps the
company to leverage successfully and support its growth on a yearly basis (Plowman et
al., 2007)
Human resource management: The Company is recognized for highly
knowledgeable workers. They form the principal assets of Starbucks as such they are
offered great benefits including healthy practices, retirement plans, and stocks. This move
transforms to exceptional client services. It was ranked 91 out 100 good firms for one to
work with. Goodwill among customers as a result of CRS: Starbucks stores are friendly,
focus on recycling and waste reduction. The company also develops support in
communities they function. Client base loyalty: The firm has a massive customer base,
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and they have executed loyalty initiatives such as Starbucks Cards and Reward strategies.
The Card is an initiative that presents convenience, gifting and enhance card-holders
regularity to the stores.
ST strategies Intense competition: this primary threat the firm experience from Costa
Coffee, Dunkin Brands, McDonalds among others. Because the coffee market has a
market, this puts pressure on the organization. Starbucks main competitor in the United
States market is Dunkin Brands with a market share of roughly 24.6% (Hoovers, 2010).
Cost instability in the international coffee market: substantial price changes in the market
for high-quality coffee beans, has been challenging for Starbucks because it is in a
position to control.
Market saturation in developed economies: the firm generates substantial revenue
from developed markets that are currently facing congestion. On developed economies, a
financial crisis like 2008 may influence the developed markets upon which Starbucks
depends on. This would considerably affect the profit margins of Starbucks as clients
shift from premium products as they spend less during the financial crisis. Growing client
preferences and lifestyles: the customer shift to more health choices and the threats
associated with coffee affect Starbucks revenue.
WO strategies
Expansion in the new emerging market: The high diffusion, as well as reliance on
the American market, makes Starbucks global strategy further imperative. Also, the
company developed high-quality inroad in various nations, and in the recent past, India
has joined the list through the entry of an enterprise. The firm has a substantial growth
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potential in the expansion of emerging and new markets. This allows Starbucks to
leverage its size, experience, financial health and effectiveness in making new market
share.
Broadening brand mix and offerings: in the recent times, Starbucks has begun
expanding its product mix by offering teas as well as fresh juices using a smart
acquisition approach. They provide considerable opportunities for the firm (Hitt, Ireland
& Hoskisson, 2009). Increasing retail operations: the company sells the packaged coffee,
iced beverages through large retailers. This segment’s ability is not yet fully realized as
such presents Starbucks the opportunities for future monetization of their offerings.
Technological development: the firm has implemented mobile devices/apps and
partnered with Square a mobile payment platform, which is incorporated with Starbucks
app. Such developments allow clients to use the procedure efficiently, aligning client
loyalty using reward plans. In reality, Starbucks is ahead of its rivals, and roughly 10
percent of the transactions in the United States have been done using mobile apps. In any
case, this is a growing area and likely to drive clients to their shops at the same time as
technology progresses.
Delivery channels: the company has initiated a beta edition of distribution
network commonly called Mobile Pour. This presents substantial future opportunities by
increasing the delivery of products and likely to drive profits if executed.
Product extension: the firm has a strong product image, which can be leveraged to
extend horizontally of its operations and venture in brand diversification. This guarantees
that dilution risk associated with the brand is monitored.
WT strategies
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Costly products: Whereas Starbucks differentiate its brands especially during the
economic slowdown; clients have a switch to rivals with cheaper products. The high costs
can also lead to certain weaknesses especially in developing nations (Plowman et al.,
2007). Self-cannibalization by congestion: Aggressively expanding and saturation as a
result of congestion in the market contributes to cannibalization and reduces the
company’s sustainable growth objectives. This occurs primarily in the US where the firm
has over 8,087 stores (Starbucks, 2011).
Over-reliance on US market: With regards to self-cannibalization of the American
market, the firm gets a significant percentage of its revenue from the United States
making it’s susceptible prospect to the financial system as well as growth. Adverse great
firm image: just like any big establishment, the firm is under augmented inquiry and has
to invest in CSR while maintaining mechanical control of employment practices.
Consequently, Starbucks product culture may fail to be accepted in certain nations as part
of global development (Wheeler, Colbert, & Freeman, 2003).
Key Success Factor Analysis
Differentiation has been at the center of Starbucks main strategy. The company
offers differentiators like quality product mix, places, coffee drink repute and superior
clientele support that led to the creation of a quality product that is costly to emulate for
competitors. The company has also followed an intelligent approach to the strategic
alliance in making brilliant acquirements. Instead of embracing the franchise model,
Starbucks chose to operate stores and joint ventures in the global sphere (Clark, 2007).
Starbucks made considerable acquirements like Teavana (Tea products),
Bay Breads (quality bread), and Evolution Fresh (fresh products) as diversification
21
model. Moreover, the company’s acquisition methodology leans towards horizontal,
product and market acquisitions. Global strategy has been the other critical methodology
for Starbuck’s progression when expanding into some of the developed markets and also
emerging one, to geographically differentiate. The approach has been a great
accomplishment with operation spanning sixty nations. Collectively, these strategies have
offered Starbucks competitive edge against its competitors (IBIS, 2013).
Starbucks (Financial) Performance Analysis:
A close look at a 6-year period ratio and growth review of Starbucks financial
performance from 2008 to 2013 demonstrates that the income development of the
organization plummeted -5.9% during the 2008/09 economic slump (Starbucks, 2011).
However, the company made significant growth in earnings from 2010 to 2013 had a
growth rate of 13.7% in 2012. Starbucks made revenues amounting to $14.9b in 2013
(Starbucks, 2013). The running income has escalated substantially from 4.9% in 2008 to
fifteen percent in 2012. Conversely, in 2013, Starbucks generated a loss -2.2% that
stemmed from the legal penalty of USD 2.8b to Kraft Foods after terminating the
agreement. The penalty should be regarded as odd and therefore not be reduced from the
strong general functioning of Starbucks. The company’s return on equity (ROE) and
return on asset (ROA) were remarkable in 2012 with 29.2% and 17.8% in 2012
(Starbucks, 2013).
When considering Starbucks competence rates, the company has achieved
significant operation with significant asset inventory revenue ratios with a low of 1.51
and 5.4 correspondingly for 2013. Regarding cash exchange, the company increased to
54.7 in 2013, and this is where Starbucks ought to focus on reducing to enhance higher
22
proficiency. The company’s general financial health is remarkable with reduced
debt/leverage at an equity ratio of 0.29 for 2013 (Starbucks Company Profile, 2011). The
firm has decent current as well as quick ratios.
Analyzing the Company Strategy Type
Starbucks utilizes a multi-faceted strategy (Starbucks, 2013). This strategy entails
different strategies that are incorporated into an interrelated one so as to ensure that the
company is sustainable. In the multi-faced strategy, Starbucks has differentiation strategy
or diversification that is important in providing various brands that diverse regarding
price or characteristics, aspects that present competitiveness for the organization
(Starbucks, 2013). Other strategies Starbucks utilizes are functional approaches that
customized for particular departments across the organization like logistics; operations;
marketing and sales; human resources among others (Starbucks, 2013). The practical
strategy aims at presenting the roles of a certain department to set objectives, action plan,
and the overall mission of the company.
The multi-faceted approach enables Starbucks flexibility, sustainability and
expand globally with a particular emphasis now on Asia and emerging economies. The
multi-faceted strategy deploys allow the organization to embrace system thinking
philosophy within Starbucks transformation expansion of global market that embedded
system thinking process within its action plan for diversification; and this allows various
stakeholders being part of the whole system that influence decision- marking
(Stacey,2011). These interactions between different functions of Starbuck’s operation
enables successful transformation into the global coffee market, from serving one cup
one person in a neighbor heritage to a leader in this industry also unveil Starbucks’ adapt
23
the system thinking actions. The embracing of the system thinking in Starbuck’s
organization is apparent in a way that those reviewing the organization heritage, examine
the system as a whole that include themselves as part of the organization’s system and
potentially contribute to the problem and determine solutions to foster change as a team.
Action Plan Analysis
The action plan presents strategic objectives while identifying the phases needed
to accomplish those (Hamel & Prahalad, 2005). The action plan also integrates a timeline
to help in assessing the effectiveness. For action plans to be valuable, assessment process
should identify measurement of success, which should regard as benchmarks,(Starbucks,
2013). Once that complete, the company should repeatedly monitor the progress and
assess it against pre-set criteria. Despite proof of success, it is obvious that a franchise
strategic plans in the Starbucks diversification strategy is needed. That plan has not been
part of diversification strategy and ignored in the past (Starbucks, 2013). It also suggests
the need for launching a new menu embarked, which, will entice non-consumers taste for
coffee products and offers varieties of taste to accomplish the target Asia market for
establishing 1000 shops (Starbucks,2013). That franchise plan embedded in the
diversification plan will enable Starbucks timely accomplish the target1000 coffee bars
target before a new entrant’s disruptor activities emerges. The assessment of
accomplishments presents proof of success (Starbucks, 2013).
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Action Roles Timeline Resources & objectives
- Existing
- Required resources
to accomplish the
objectives
Potential obstacles
- What the firm
may oppose?
Communication Plan
- People involved
- Techniques used
- How frequent
Phase 1:
Retail
importance
Corporate
Executive
management
workers
2015-
2017
- Employees,
merchandising
competencies,
increase working
hours for the sales
teams. - Minimize
duplication of
products, invest in
marketing,
maximize operating
margins - Dunkin
- Dunkin will
utilize their
economies of
scale against
Starbucks
attempts. - Everybody is
involved; open
communication is
essential to realizing
the objective - Internal
communication, - On a daily basis
Phase 2:
Modify
Value Chain
Corporate
& Regional
branches
2015-
2017
- Logistics,
operations,
management,
customer service,
and sales - Raise bonus system,
regular auditing of
suppliers, increase
distribution hubs
and maximize
training hours for
every store. - workers and
firm’s
management - failure to
execute
necessary audits,
reduce additional
training time, and
non-compliance. - Corporate and
employees in regional
branches. - Performed daily
Phase3:
increase
Market
Share from
34%-40%
BOD
Executive
Officer
2015-
2017
- The available
resources to be used
optimally. - Further funding for
regional stores,
increase the number
of suppliers and
increase marketing
funds. - Dunkin and
Macdonald - Changing the
strategy, increase
marketing
techniques, and
reducing costs to
be competitive. - The regular meeting
of the BOD and
senior executives. - Internal emails, in-
person meetings. - BOD to hold monthly
meeting while weekly
meeting for other
people across the
firm.
25
Conclusions
Starbucks incorporates their vision and mission and investor values into their
organizational level approaches, business methods and functional approaches in a bid to
ensure sustainability. Starbucks embraces modern technology and innovative approaches
across their value chain, in an attempt to clamp down weaknesses and enhance the
company’s strength. Some of the strategies that have been used: value chain assessment,
general forces analysis, porter’s five force model, key success factors, action plan
analysis, (boid analysis and evolution industry strategy). Ultimately, Starbucks
recognizes the need for social obligation, an innovation that enhances quality and the
sustainability aspect of the organization and embrace system thing process throughout
transformational agenda for global expansion.
26
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