Starbucks Coffee’s Operations Management:

10 Decisions, Productivity
UPDATED ONUPDATED ON JANUARY 31, 2017 BY LAWRENCE GREGORY

A Starbucks café in
Brisbane, Australia. Starbucks Coffee’s success relates with the fulfillment of the 10
decisions of operations management for optimal productivity in all business areas.
(Photo: Public Domain)
Starbucks Coffee Company’s business success is linked to the proper application of the
10 decisions of operations management (OM). These 10 decisions refer to the different
areas of operations where the firm’s management must address specific business
objectives. As a global business, Starbucks addresses these 10 decisions of operations
management through different approaches and policies. For instance, the company
applies its Coffee and Farmer Equity program in supply chain management. Starbucks
cafés also exhibit the firm’s organizational culture as a way of optimizing quality of
service. Thus, Starbucks has integrated strategies for streamlining the 10 decisions of
operations management.

Starbucks Coffee’s business fulfills the 10 decisions of operations management through

varying strategic initiatives for productivity and management in all areas of the
organization.

Starbucks Coffee’s Operations Management, 10

Decision Areas
1. Design of Goods and Services. Starbucks emphasizes premium design for its
goods and services. The premium character is linked to the company’s broad
differentiation generic strategy, along with its premium pricing strategy. Other firms,
such as manufacturers, are also involved in the design of some goods like Starbucks
mugs. In this decision area of operations management, Starbucks ensures that its
goods and services reflect the firm’s high-end brand image.

2. Quality Management. Starbucks also uses the premium character in quality

management. For instance, the company carefully sources its coffee beans from coffee
farmers who comply with Starbucks quality standards. The firm also prefers to buy
coffee from farmers certified under the Starbucks Coffee and Farmer Equity (CAFE)
program. Premium quality service is ensured through servant leadership and a warm
friendly culture. In this decision area of operations management, Starbucks implements
high quality to align with the firm’s premium brand image.

3. Process and Capacity Design. Process and capacity efficiency is one of the
contributors to Starbucks’ success. The company’s processes are highly efficient, as
observable in its cafés. Also, Starbucks optimizes capacity and capacity utilization by
designing processes to meet fluctuations in demand. For example, processes at the
firm’s cafés are flexible to adjust personnel to a sudden increase in demand during peak
hours. In this decision area of operations management, Starbucks aims to maximize
cost-effectiveness though efficiency of workflows and processes.

4. Location Strategy. Starbucks’ location strategy focuses on urban centers, especially

those with large middle and upper class populations. Most of its cafés are in densely
populated areas. Also, Starbucks occasionally uses strategic clustering of cafés in the
same geographic area to gain market share and drive competitors away. This decision
area of operations management shows that Starbucks emphasizes areas with affluent
consumers who could afford its premium priced products.

5. Layout Design and Strategy. The layout design of Starbucks cafés maximizes
workflow efficiency. It also supports a warm and friendly ambiance to match the
company’s organizational culture. This layout strategy does not maximize space
utilization for tables and seats because Starbucks’ focus is on premium customer
experience, which involves higher prices for more leg space in the cafés. In this
decision area of operations management, Starbucks prioritizes customer experience
over space utilization.

6. Job Design and Human Resources. Starbucks’ human resource management

integrates organizational culture in all areas of the business. This organizational culture
involves the employees-first attitude that cares for Starbucks workers. Also, at the
cafés, the company uses work teams of baristas. In other parts of the organization,
Starbucks uses functional positions, such as HRM positions and inventory management
positions, with less emphasis on work teams. In this decision area of operations
 management, the focus is on ensuring that the Starbucks culture is woven into every
job, while satisfying basics on technical specifics of tasks.

7. Supply Chain Management. Starbucks Coffee’s supply chain is global, although

majority of the company’s coffee beans come from farmers in developing countries. The
company’s strategy for its supply chain involves diversification of suppliers to ensure
stability of supply. Starbucks also uses its Coffee and Farmer Equity (CAFE) program to
select and prioritize suppliers. This program uses criteria for ethical practices, including
emphasis on sustainability. Thus, in this decision area of operations management,
Starbucks integrates ethics and corporate social responsibility with supply chain
efficiency.

8. Inventory Management. Inventory management at Starbucks is linked with the firm’s

supply chain and various facilities. At the cafés, inventory management involves office
automation and manual monitoring. In Starbucks’ supply hubs, automation is more
comprehensively used. The company aims to minimize stockout and ensure continuous
supply of coffee beans to its cafés. Starbucks addresses this decision area of
operations management by focusing on supply adequacy and automation.

9. Scheduling. Starbucks uses automated and manual scheduling approaches for its
various business activities. The company also applies flexible schedules for
management personnel. This decision area of operations management relates with
Starbucks in terms of the firm’s objective of streamlining processes, while allowing
some degree of flexibility among management positions in the organization.

10. Maintenance. Starbucks maintains its physical assets through dedicated teams of
employees trained for maintaining facilities and equipment, as well as third parties that
offer maintenance services. These third parties include local businesses that provide
equipment tune-ups for Starbucks cafés. In addition, the company maintains its human
resource capacity through training and retention strategies that include relatively high
compensation. Thus, Starbucks addresses this decision area of operations
management through the involvement of café personnel, dedicated maintenance teams,
and third-party service providers.

Productivity of Starbucks Coffee

Starbucks’ operations management use various productivity criteria based on the area
of operations. Some notable productivity measures in the company are as follows:

1. Average order filling duration (Starbucks café productivity)

2. Weight of coffee beans processed per time (roasting plant productivity)
3. Equipment repair duration (maintenance productivity)
Starbucks Corporation’s Marketing Mix
(4Ps) Analysis
UPDATED ONUPDATED ON FEBRUARY 27, 2019 BY ROBERTA GREENSPAN

A Starbucks café in Warsaw, Poland.

Starbucks Corporation’s marketing mix (4Ps) equally emphasizes the elements of
product, place, promotion, and price to support the company’s brand image and
competitive advantages in the coffee shop industry. (Photo: Public Domain)
Starbucks Corporation (Starbucks Coffee Company) has a marketing mix (4Ps) that
supports the firm’s industry position as the leading coffeehouse chain in the world. The
marketing mix identifies the main components of the company’s marketing plan,
namely, product, place, promotion, and price (the four Ps). In this business analysis
case, Starbucks uses its marketing mix as a way of developing its brand image and
popularity. With the strongest brand in the industry, the company shows how an
effective marketing mix supports brand development and multinational business growth.
Starbucks changes its marketing mix over time as a way of responding to strategic
challenges in the market, including competitive forces involving firms like Dunkin’
Donuts, McDonald’s, Burger King, and Wendy’s, as explained in the Porter’s Five
Forces analysis of Starbucks Corporation. Such changes in the marketing mix
emphasize the company’s need to evolve its various business operations to maintain
effectiveness against growing competition.

The marketing mix or 4P functions as a marketing tool for establishing a unified and
systematic approach to bring Starbucks Corporation’s products to food and beverage
markets around the world. Effectively doing so supports operational effectiveness in
other areas of the business. In the context of the marketing mix, it is of critical
importance to apply a suitable combination of approaches for promoting the right
products offered at the right places at the right price. The effectiveness of this mixture
supports strategies in various business areas and advances the attainment of Starbucks
Corporation’s mission and vision statements.

Starbucks Coffee Company’s Products

 This component of the marketing mix focuses on what the business offers to customers.
Starbucks Corporation continues to innovate its product mix to capture more of the food
and beverage market. The company adds or modifies product lines, with the aim of
expanding its market reach and growing its market share. The following are the main
categories of Starbucks products:

1. Coffee
2. Tea
3. Baked goods
4. Frappuccino
5. Smoothies
6. Other foods and beverages
7. Merchandise (mugs, instant coffee, etc.)

Starbucks Coffee Company’s product mix is a result of years of business innovation.

For example, the company added the Frappuccino line after it acquired The Coffee
Connection in 1994. The business also has an ongoing product innovation process that
aims to offer new products to attract and keep more customers, especially because the
business must attract a diverse population of customers in the international market.
Thus, this part of Starbucks’ marketing mix involves beverages, foods, and merchandise
that are carefully selected or designed to satisfy the needs and preferences of target
consumers worldwide.

Place in Starbucks Coffee Company’s Marketing Mix

This component of the marketing mix determines the venues at which customers can
access the products. Starbucks offers most of its products at cafés or coffeehouses.
However, there are various other places or channels of distribution available for these
products. In this case, the following are the main venues or places that Starbucks
Corporation uses to reach its target customers:

1. Coffeehouses/Cafés
2. Retailers
3. Mobile apps

Initially, Starbucks sold its products through coffeehouses. Eventually, the company
offered some of its products through its online store. This approach served as a major
integration of e-commerce into the company’s strategies. However, Starbucks ended its
online store operations in 2017. The strategic change reflects the company’s shift to
focus on in-store experience in brick-and-mortar coffeehouses. Nonetheless, some of
Starbucks’ merchandise items are available through retailers. On the other hand, mobile
apps allow customers to conveniently place their orders online so they could easily get
their food and drinks at the company’s coffeehouses. This part of Starbucks’ marketing
mix shows how the firm adapts to changing times, technologies, and market conditions.
 Starbucks Promotions (Marketing Communications
Mix)
This component of the marketing mix refers to the communication strategies used to
disseminate information about the firm and its products, and to encourage customers to
buy these products. Starbucks Corporation promotes its products through interpersonal
relations and communications, although advertising is also part of the promotional
approach. In this case, Starbucks’ promotional mix is as follows:

1. Word-of-mouth marketing
2. Advertising
3. Sales promotions
4. Public relations

Starbucks became popular primarily through word-of-mouth marketing. In the marketing

mix, word-of-mouth usually focuses on providing the best customer experience in order
to encourage people to spread positive words about the business. The company also
advertises its products through television, print media, and the Internet. Sales
promotions are used in Starbucks Rewards, which is a program involving freebies that
customers can avail after purchasing a certain amount of the company’s products. The
corporation infrequently uses public relations, which has not always been successful for
the business. For example, the Race Together public relations campaign was widely
criticized. Still, the Starbucks Foundation continues its efforts to solve various
challenges in society. The Foundation helps communities, while promoting the
company’s brands. This part of Starbucks Corporation’s marketing mix shows the core
significance of word-of-mouth marketing, advertising, and the supporting roles of public
relations and sales promotions for the coffeehouse chain business.

Prices and Pricing Strategy of Starbucks Coffee

Company
Starbucks uses a premium pricing strategy. In the marketing mix context, this pricing
strategy takes advantage of the behavioral tendency of people to purchase more
expensive products on the basis of the perceived correlation between high price and
high value. The company’s coffee products are more expensive than most competing
products, such as McDonald’s Premium Roast. Through this pricing strategy, Starbucks
maintains its high-end specialty image. Still, the company strives to develop and
actually provide high quality products and satisfactory customer experience in its
coffeehouses. This part of the marketing mix directly relates to Starbucks Corporation’s
generic competitive strategy, in helping the business maintain its premium brand image.
Starbucks Coffee’s Stakeholders: A CSR
Analysis
UPDATED ONUPDATED ON JANUARY 31, 2017 BY ANDREW THOMPSON

Starbucks Coffee at
Vaughan Mills, Ontario, Canada. Most of Starbucks Coffee Company’s stakeholders’
interests are satisfied through the firm’s corporate social responsibility efforts. (Photo:
Public Domain)
Starbucks Coffee Company’s stakeholder management approaches are based on
different programs for corporate social responsibility (CSR). The company is an
advocate of CSR movements, especially those pertaining to sustainability in business.
In the context of corporate social responsibility, Starbucks needs to account for the
demands or interests of stakeholders, because the company is viewed not just as an
organization for profit, but also as a citizen of society. Thus, the firm must contribute to
the improvement of society. Starbucks has already implemented various corporate
social responsibility programs for its stakeholders. The current strong brand and
corporate image of Starbucks indicates the firm’s efforts to include stakeholders in its
strategies and success.

Starbucks is effective in its corporate social responsibility efforts, although more effort is
needed with regard to the stakeholder group of coffee farmers, as well as the issues of
youth rates and tax avoidance in some regions.

Starbucks Coffee’s Stakeholder Groups

Starbucks continues to improve its corporate social responsibility practices to address
the concerns of different stakeholder groups. The following are the main stakeholders in
Starbucks Coffee’s business:
1. Employees (baristas, partners)
2. Customers
3. Suppliers (supply firms, coffee farmers)
4. Environment
5. Investors
6. Governments

Employees. Starbucks prioritizes employees in its corporate social responsibility

efforts. As stakeholders, employees typically demand for better working conditions, job
security and higher wages. Starbucks’ organizational culture emphasizes the
employees-first attitude. Employees are also given wages above the legally mandated
minimum wage. In 2014, Starbucks boosted its CSR performance for this stakeholder
group by giving scholarships to employees based on a partnership with Arizona State
University. In this partnership, Starbucks pays for 56% of tuition fees for employees’
junior and senior years at the University. However, the company’s performance in
addressing employees as stakeholders has room for improvement. In some countries
like New Zealand, Starbucks gives very low wages to juvenile workers (youth rates).
These youth rates are often criticized. The firm can improve its corporate social
responsibility performance by addressing such issue in this stakeholder group.

Customers. Starbucks considers customers as among its top stakeholders. The

interests of this stakeholder group are high quality service and products, such as coffee
and related beverages. As the world’s most popular specialty coffeehouse chain,
Starbucks effectively addresses this interest. The company also includes customers as
major stakeholders by extending the Starbucks culture to customers at its cafés. For
example, warm and friendly relations are emphasized within the company and in how
baristas interact with customers. Thus, Starbucks Coffee’s corporate social
responsibility efforts fulfill the interests of this stakeholder group.

Suppliers. Starbucks suppliers are composed of wholesale supply firms and coffee
farmers. The main interest of this stakeholder group is compensation and a growing
demand from Starbucks. Farmers aim to increase coffee yield to generate more
revenues. Starbucks addresses the interests of these stakeholders through a number of
corporate social responsibility programs. For example, the firm’s supplier diversity
program ensures that more suppliers from around the world are included in the supply
chain. In addition, Starbucks’ Coffee and Farmer Equity (CAFE) program requires
transparency among wholesale suppliers to ensure that coffee farmers are properly
paid. Thus, Starbucks’ corporate social responsibility efforts comprehensively address
the interests of this stakeholder group.

Environment. Starbucks has corporate social responsibility programs for

environmentally sound business. The company’s CAFE program has led to higher
biodiversity and shade quality in certified coffee farms. Currently, 90% of Starbucks’
supply is from CAFE-certified farms. This significant figure shows that Starbucks is
effective in addressing its corporate social responsibility to this stakeholder group,
although there is room for improvement.
Investors. As in any business, Starbucks must address investors as stakeholders.
Investors have interests in high financial performance of the company. Starbucks’ global
expansion and continued dominance in the coffeehouse industry indicates high financial
performance. Even though it suffered considerable decline in 2007, Starbucks has
recovered and is on a growth path once more. Thus, the firm satisfies this stakeholder
group’s interests.

Governments. Starbucks must address the interests of numerous governments as

stakeholders, considering the company’s global presence. In general, Starbucks
complies with rules and regulations. However, the company has been criticized for tax
evasion in Europe. Starbucks uses a network of locations in different European
countries to exploit tax advantages. At present, much of this system remains, with
Starbucks paying unexpectedly low taxes in the U.K. Thus, the company’s
comprehensive corporate social responsibility efforts can be improved to address this
stakeholder group.

Analysis of Starbucks’ CSR Performance for

Stakeholders
Starbucks has high corporate social responsibility performance in addressing the
interests of most of its stakeholders. The company satisfies most of the concerns of
stakeholder groups like customers, employees, suppliers, the environment, and
investors. However, Starbucks needs to improve its CSR performance to reach a 100%
CAFE-certified supply chain to maximize environmental benefits. Starbucks can also
improve its CSR performance in addressing governments around the world by
improving its tax compliance. In addition, the firm can improve youth rates/wages to
ensure satisfaction of youth workers in some markets like New Zealand. These are the
three main areas where Starbucks can change to boost its corporate social
responsibility performance to satisfy stakeholders.

Starbucks Corporation’s Organizational

Culture & Its Characteristics
UPDATED ONUPDATED ON FEBRUARY 20, 2019 BY EDWARD FERGUSON
 A Starbucks café in Singapore. Starbucks
Coffee Company’s organizational culture is a critical success factor of the coffeehouse
chain business, especially in supporting its competitive advantages against other food
and beverage firms. (Photo: Public Domain)
Starbucks Corporation’s organizational culture is one of the most distinct characteristics
of the firm. A company’s organizational or corporate culture widely influences
employees and business performance through values, customs, traditions, and related
behavioral expectations in the business organization’s context. In Starbucks Coffee’s
case, the organizational culture permeates all aspects of the business, including the
operations of franchisees and licensees. However, company-owned stores are where
Starbucks Coffee’s organizational culture is most easily observable. The way café
employees work with each other and how they interact with customers are indicators of
the company’s corporate culture. The warm and friendly ambiance in these coffee
shops is part of the company’s cultural distinction from competitors, which include
Dunkin’ Donuts and McDonald’s McCafé. Starbucks has an organizational culture that
relates with the company’s strategies for successful brand development and the global
growth of the franchise and licensing network, despite challenges tied to economic
fluctuations and industry-specific trends.

Starbucks Coffee’s organizational culture is a key success factor in the business,

considering that the company sells not just its coffee and other food and beverage
products, but also the experience of buying and consuming these products. In this way,
the firm uses its corporate culture as a distinction in the coffeehouse chain
market. Starbucks Coffee’s corporate structure enables optimal application and
observance of this culture throughout the business and its subsidiaries, such as Ethos
Water, Seattle’s Best Coffee, and Teavana, despite differential managerial approaches
used among franchisee and licensee locations.

Starbucks Coffee’s Organizational Culture Type and

Features
Starbucks Coffee’s organizational culture is a culture of belonging, inclusion and
diversity. The combination of the company’s key cultural characteristics is unique and
specific to the nature of its coffeehouse chain business. The internal cultural situation is
reflected through the company’s human resource development programs and baristas’
 interactions with customers. In this regard, the main features of Starbucks’ corporate
culture are:

1. Servant leadership (“employees first”)

2. Relationship-driven approach
3. Collaboration and communication
4. Openness
5. Inclusion and diversity

Servant Leadership. Starbucks Corporation has a servant leadership approach, which

characterizes the behavioral manifestation of the company’s organizational culture
among leaders, including corporate leaders and team leaders. In this approach, leaders,
managers and supervisors emphasize support for subordinates to ensure that every
employee grows in the company. This feature of Starbucks’ corporate culture translates
to the employees-first approach. The company highlights the importance of caring for
employees as a way of optimizing employee morale and customer satisfaction. Former
Starbucks President Howard Behar developed this feature of the firm’s organizational
culture because he believed that employees who are cared for are the ones who care
about customers.

Relationship-driven Approach. Starbucks also has an organizational culture that

supports warm and friendly relationships. For instance, at the company’s cafés, baristas
exhibit warm and friendly bonds with each other. This feature of the company’s
corporate culture extends to customers, who are also treated with warmth. Through this
cultural emphasis on relationships, Starbucks develops the global coffee culture that
drives consumer demand for the company’s specialty coffee products.

Collaboration and Communication. The corporate culture of Starbucks encourages

collaborative efforts through effective communication. At the cafés, baristas clearly
communicate with each other to fulfill orders. Also, they collaborate as teams to make
the order fulfillment process efficient. Thus, Starbucks Corporation’s organizational
culture supports efficiency in business processes, which contributes to quality of
service, positive customer experience, and business cost-effectiveness.

Openness. Openness is another major characteristic of Starbucks Coffee’s

organizational culture. In the company’s early years, employees had a traditional and
old-fashioned culture of fear in speaking up to their superiors. To address this issue,
former President Behar introduced open forums to encourage employees to ask
questions and communicate with superiors. A culture of openness developed as a
result. Through this cultural feature, Starbucks empowers employees and facilitates
innovation in product development and service provision.

Inclusion and Diversity. Starbucks has an anti-discrimination policy that shapes its
organizational culture. This policy prohibits any form of discrimination based on gender,
race, ethnicity, sexual orientation, religion, age, cultural backgrounds, life experiences,
thoughts, and ideas. Through this feature of the corporate culture, Starbucks facilitates
information sharing and positive rapport among employees, as well as innovation based
on diverse ideas. This cultural facilitation supports employee motivation and helps
minimize turnover. This aspect of the company’s organizational culture also makes
customers feel welcome at Starbucks cafés.

Note on Starbucks Coffee Company’s Corporate

Culture
Starbucks has gone through significant changes in its organizational culture. These
changes are based on issues and problems leaders like Howard Schultz and Howard
Behar identified, especially in the early years of the specialty coffeehouse chain
business. As a way of enhancing business performance, Starbucks instituted reforms in
its corporate culture. Today, the company’s organizational culture is a distinct
characteristic that builds competitive advantage and develops a consumer population of
loyal Starbucks fans from which the business derives stable financial performance. The
main corporate strategic management challenge lies in the effective implementation of
this culture in the human resources of franchisees and licensees, as these business
partners arguably have their own approaches to human resource management and
associated organizational culture development.

Starbucks Coffee’s Organizational Structure

& Its Characteristics
UPDATED ONUPDATED ON FEBRUARY 14, 2019 BY PAULINE MEYER

A Starbucks café at the Shinbashi

Yurikamome train station in Tokyo. Starbucks Corporation’s (Starbucks Coffee
Company) organizational structure evolves to support business growth in the global
coffee and coffeehouse industry. (Photo: Public Domain)
Starbucks Corporation (Starbucks Coffee Company) uses its organizational structure to
facilitate business development in the global coffee industry. As the largest coffeehouse
chain in the world, the company maintains its industry leadership partly through the
appropriateness of its corporate structure. A company’s organizational or corporate
 structure influences all areas of the business, including management and leadership,
communication, change strategies and management, and other variables critical to
business success. Starbucks evolves to ensure that its organizational structure matches
current business needs. For example, the company adjusted its corporate structure
upon expanding its business through the acquisition of other firms, such as Ethos Water
and Seattle’s Best Coffee. Such adjustment makes Starbucks Corporation’s
organizational structure specific to the needs of the business. This structure fits within
conventional typologies of organizational structures. Similar to the case of other
multinational organizations, the company employs its structural characteristics to ensure
that its operations are streamlined and properly managed.

Starbucks Coffee Company supports its competitive advantages through the

characteristics of its corporate structure. These competitive advantages are essential in
interacting with the industry environment, which involves the strong force of competition
shown in the Porter’s Five Forces analysis of Starbucks Corporation. The company
competes against large and small coffeehouse businesses, as well as food service firms
like McDonald’s, Dunkin’ Donuts, Wendy’s, and Burger King. Through the effective
design and development of its organizational structure, Starbucks Corporation keeps
growing despite competitive pressure from these firms in the international market.

Starbucks Corporation’s Organizational Structure

Type and Characteristics
Starbucks has a matrix organizational structure, which is a hybrid mixture of different
features from the basic types of organizational structure. In this case, the structural
design involves intersections among various components of the business. For example,
the company’s product-based divisions intersect with functional groups and geographic
divisions, which in turn intersect with other parts of the organization. The following are
the main features of Starbucks Coffee’s corporate structure:

1. Functional hierarchy
2. Geographic divisions
3. Product-based divisions
4. Teams

Functional Hierarchy. The functional hierarchy feature of Starbucks Coffee’s

organizational structure refers to grouping based on business function. For example, the
company has an HR department, a finance department and a marketing department.
These departments are most pronounced at the top levels of Starbucks’s corporate
structure, such as at the corporate headquarters. This characteristic is hierarchical. For
example, the corporate HR department implements policies applicable to all of the
company’s cafés. The functional hierarchy of the corporate structure facilitates top-down
monitoring and control, with the CEO at the top. Functional groups are responsible for
the organization-wide development and implementation of Starbucks Corporation’s
generic competitive strategy and intensive growth strategies.
Geographic Divisions. Starbucks Coffee’s corporate structure involves geographic
divisions, which are based on physical location of operations. The company has three
regional divisions for the global market: (1) Americas, (2) China and Asia-Pacific, (3)
Europe, Middle East, and Africa. Also, in the U.S. market, Starbucks Coffee’s
organizational structure involves further geographic divisions: (a) Western, (b)
Northwest, (c) Southeast, and (d) Northeast. Each geographic division has a senior
executive. In this way, each local manager reports to at least two superiors: the
geographic head (e.g. President of Europe, Middle East, and Africa Operations) and the
functional head (e.g. Corporate HR Manager). This feature of Starbucks’s corporate
structure enables closer managerial support for geographic needs. Each division head
is given flexibility in adjusting strategies and policies to suit specific market conditions.

Product-based Divisions. Starbucks has product-based divisions in its organizational

structure. These divisions address product lines. For example, the company has a
division for coffee and related products, another division for baked goods, and another
division for merchandise like mugs. This feature of the corporate structure enables
Starbucks to focus on product development. In this way, the company develops and
innovates its products with support through its organizational structure. Such
development provides competitiveness that the business needs, especially in
considering the threats identified in the SWOT analysis of Starbucks Corporation.

Teams. Teams are used in different parts of Starbucks Coffee’s organizational

structure. However, teams are most visible at the lowest organizational levels,
particularly at the coffeehouses. For example, in each café, the company has teams
organized to deliver goods and service to customers. This feature of Starbucks’s
corporate structure enables the business to provide effective and efficient service to
consumers. Team effectiveness is a major determinant of the financial performance of
franchised locations and company-owned coffeehouses. Starbucks’s corporate
culture influences how such team effectiveness is achieved. The company’s
development depends on team-based factors and associated human resource
management strategies.

Starbucks Corporation’s organizational structure has many characteristics. However,

the ones enumerated above are the most significant in shaping strategic management
decisions in the business. Also, different levels of the organization are responsible for
maintaining the integrity of the corporate structure. The structural characteristics
identified are the ones that matter most at the corporate level, involving Starbucks’s
headquarters and executive direction.

Starbucks Coffee’s Corporate Structure Development

Starbucks Corporation reforms its organizational structure over time. By 2007, the
company was expanding rapidly, such that it shifted focus away from customers and
toward strategic global expansion. However, the business experienced significant
decline in sales in that year. This decline was worsened because of the lack of focus on
customer experience. When Howard Schultz resumed the CEO position in 2008, he
changed Starbucks Coffee’s corporate structure to bring focus back onto customer
experience. New regional divisions were created and teams at the company’s cafés
were given better training.

The current corporate structure of Starbucks is a result of reform to improve customer

experience and business financial performance. The company recognizes the
importance of strategic alignment involving various facets of the business. In this case,
for example, aligning the corporate structure with trends in the coffee and coffeehouse
industries stabilizes Starbucks’s market presence and market share. It is expected that
the company’s future organizational structure will involve additional product-based
divisions to account for further diversification. Its development history suggests that the
company will continue acquiring more firms in the future to support its growth strategies.

Starbucks Coffee Company SWOT Analysis

& Recommendations
UPDATED ONUPDATED ON FEBRUARY 14, 2019 BY JESSICA LOMBARDO

A Starbucks café in Seoul. A SWOT analysis

of Starbucks Coffee Company (Starbucks Corporation) shows a strong global position
to address weaknesses and opportunities. The company must innovate and use its
strengths to address threats in the external business environment of the coffee and
coffeehouse industries. (Photo: Public Domain)
Starbucks Corporation (also known as Starbucks Coffee Company) maintains its
position as the biggest coffeehouse chain in the world through innovative strategies that
utilize business strengths in overcoming weaknesses to exploit opportunities and
overcome success barriers, such as the threats in the coffee industry environment, as
identified in this SWOT analysis. The SWOT Analysis model is a strategic management
tool that assesses the strengths, weaknesses, opportunities, and threats (SWOT)
relevant to the business and its internal and external environment. In this business
analysis case, the SWOT analysis of Starbucks Coffee considers the strengths and
weaknesses (internal strategic factors) inherent in operations in the coffee, coffeehouse
and related businesses. The analysis also considers the opportunities and threats
(external strategic factors) related to the competitive landscape, which is partly based
on the strong force of competition determined in the Porter’s Five Forces analysis of
 Starbucks Corporation. Such a competitive environment requires that the company
continuously improve its business strengths to optimize its financial performance and
growth trajectory.

Starbucks Coffee operates in various industries that impose different challenges in

growing the business. The variety of these industries has increased over time, as the
company develops more products to complement its core coffeehouse business. For
example, Starbucks Corporation’s marketing mix or 4P indicates that the company has
expanded its product offerings to include tea, food, and merchandise, in addition to
coffee. In the context of the SWOT analysis model, this condition creates a challenging
business environment where the company needs to use different sets of competencies
that match various industries. Strategic consideration for the internal and external
factors shown in this SWOT analysis can help increase Starbucks Coffee’s success in
competing against various coffeehouse firms and other food service business, such as
Dunkin’ Donuts, McDonald’s, Burger King, and Wendy’s.

Starbucks Coffee’s Strengths (Internal Strategic

Factors)
This component of the SWOT analysis model deals with the internal factors that the
company can use as strengths to address weaknesses and protect the business against
competition. In this case, Starbucks Coffee’s main strengths are:

1. Strong brand image

2. Extensive global supply chain
3. Moderate diversification through subsidiaries

Starbucks Corporation has one of the world’s strongest and most popular brands. The
company has a growing population of loyal customers, which adds to the stability of the
coffeehouse business. In the SWOT analysis model, the extensive global supply chain
strengthens Starbucks by supporting operations. For example, the company has a
global network of suppliers that are carefully selected based on criteria pertaining to
quality, such as the quality of Arabica coffee beans. Also, the company gradually
diversifies its business, such as through the acquisition or development of subsidiaries
like Ethos Water, Seattle’s Best Coffee, and Teavana. Diversification minimizes the
effects of market and industry risks. The internal strategic factors identified in this part of
the SWOT analysis of Starbucks Corporation shows that the business has strengths
that promote resilience through diversification and a global supply chain.

Starbucks’s Weaknesses (Internal Strategic Factors)

Business weaknesses are identified in this component of the SWOT analysis.
Weaknesses are internal factors that reduce or limit business capabilities. Starbucks
Corporation’s weaknesses are as follows:
1. High price points
2. Generalized standards for most products
3. Imitability of products

Starbucks has high price points that maximize profit margins but reduce the affordability
of its products. This internal strategic factor is a weakness because it limits the
company’s market share, especially in areas with relatively lower disposable incomes.
Also, this SWOT analysis considers generalized standards a weakness that limits the
flexibility of the coffee and coffeehouse chain business. For example, the company’s
generalized standards for its crafted beverages reduce these products’ cultural
alignment with local target markets and associated consumer preferences. In addition,
many Starbucks products are imitable. For instance, small local competitors could
develop beverages that are not the same as but similar to the company’s products.
Even the design and ambiance of the company’s cafés are imitable. This business
environment condition empowers competitors. The internal factors in this part of the
SWOT analysis of Starbucks Coffee Company show that the business must develop
strengths to reduce the adverse effects of imitation and the influence of high price points
on the company’s market share in the global industry.

Opportunities for Starbucks Corporation (External

Strategic Factors)
This part of the SWOT analysis model focuses on external factors that present
opportunities for business growth and development. In this case, the main opportunities
available to Starbucks Coffee Company are:

1. Expansion in developing markets

2. Business diversification
3. Partnerships or alliances with other firms

Starbucks Corporation can increase its revenues through expansion in developing

markets. This opportunity draws attention away from the U.S. market, where most of the
company’s revenues are generated. Also significant in this SWOT analysis is business
diversification, which can improve Starbucks’s long-term stability. For example, through
higher diversification, the company can reduce its dependence on its current industries,
thereby improving overall revenue growth opportunities. Diversification is currently a
minor growth strategy as shown in Starbucks Corporation’s generic competitive strategy
and intensive growth strategies. The industry environment also presents the opportunity
to strengthen the company’s presence and market share through partnerships or
alliances with other firms. For instance, alliance with major retailers improves
distribution and market share of the company’s consumer goods, such as ready-to-drink
coffee. The external strategic factors in this part of the SWOT analysis show that
Starbucks can improve its industry position by developing its operations to exploit the
opportunities in the global industry environment.
 Threats Facing Starbucks (External Strategic Factors)
Threats against the business are identified in this part of the SWOT analysis. Threats
are external factors that reduce or limit business performance. In this company analysis
case, the following are the main threats relevant to Starbucks Coffee Company:

1. Competition involving low-cost coffee sellers

2. Imitation
3. Independent coffeehouse movements

Starbucks Corporation competes against a wide variety of firms in the international

market. For example, the company competes against major restaurant chains that offer
low-cost coffee products. This external strategic factor threatens Starbucks because
such competitors can reduce the company’s market share by competing based on low
prices. Also, this SWOT analysis considers imitation as a major threat against the
coffeehouse business. In light of the company’s weaknesses, the threat of imitation
involves firms that try to copy the taste, look and feel of Starbucks products. In addition,
the industry environment is subject to independent coffeehouse movements. These
movements are sociocultural efforts that support the operations of small independent
local coffeehouses, and oppose the expansion of multinational coffeehouse chains.
Such sociocultural trends influence consumer perception and purchasing behaviors, as
shown in the PESTEL/PESTLE analysis of Starbucks Corporation. Successful
marketing campaigns and branding strategies are needed to counteract the effects of
these trends. This part of the SWOT analysis of Starbucks Coffee Company identifies
external strategic factors that impose challenges to international expansion and market
penetration.

SWOT Analysis of Starbucks Corporation –

Recommendations
The industry environment of Starbucks Coffee Company involves diverse challenges,
especially because of the company’s moderate diversification. The coffeehouse chain
business faces issues such as competition, imitation, and social trends that oppose
international players in local markets. Based on the current condition of the business,
some of the most notable strategic management concerns enumerated in this SWOT
analysis of Starbucks Coffee Company are the imitability of products and the
corresponding threat of imitation, the threat of competition involving low-cost sellers,
and independent coffeehouse movements.

A recommendation to protect Starbucks’s business against imitation is to aggressively

innovate, especially in the area of product development. Innovation can make the
company’s products more difficult to imitate. It is also recommended that Starbucks
Corporation consider pricing strategies that attract more customers. For instance,
bundle pricing can help address the threat of competition involving low-cost sellers.
Furthermore, a suitable recommendation in this case is to implement creative marketing
and branding strategies that build Starbucks’s corporate image as a contributor to
community development. Such an image can help reduce sociocultural opposition
against the company. These recommendations focus on minimizing the negative
impacts of the internal and external factors enumerated in this SWOT analysis.

Starbucks Coffee PESTEL/PESTLE Analysis

& Recommendations
UPDATED ONUPDATED ON JANUARY 31, 2017 BY NATHANIEL SMITHSON

A Starbucks café in
Toronto. Starbucks Coffee’s PESTEL/PESTLE analysis indicates that most of the
external factors in the company’s remote or macro-environment present opportunities.
(Photo: Public Domain)
Starbucks Coffee Company, founded in 1971, has grown to an international brand. As
the world’s biggest coffeehouse company, Starbucks continues to lead the industry in
sustainable business and innovation. Such success is attributed to the firm’s ability to
address the external PESTEL/PESTLE factors. The PESTEL/PESTLE analysis
framework indicates the most significant influences on Starbucks based on
characteristics of the remote or macro-environment. Despite its current industry
leadership, Starbucks must continue monitoring its remote or macro-environment. The
PESTEL/PESTLE analysis model can be used to satisfy this need. Through continued
effectiveness in addressing the external factors identified in the PESTEL/PESTLE
analysis of its remote/macro-environment, Starbucks Coffee can continue to succeed
despite the negative forces impacting its business.

Starbucks Coffee’s industry leadership is linked to the company’s effectiveness in

addressing external factors identified in this PESTEL/PESTLE analysis. The
 PESTEL/PESTLE analysis model is used to determine the most important issues that
Starbucks must address in its business strategies.

Political Factors Affecting Starbucks Coffee’s

Business
This part of the PESTEL/PESTLE analysis framework identifies the impact of
governments on business. Starbucks experiences the following political external factors
in its remote/macro-environment:

1. Regional integration of markets (opportunity)

2. Improving governmental support for infrastructure (opportunity)
3. Bureaucratic red tape in developing countries (threat)

Regional integration is a current trend and external factor that presents an opportunity
for Starbucks to globally expand. Also, most governments around the world are
improving infrastructure, which creates the opportunity for Starbucks to access more
markets or suppliers. However, bureaucratic red tape persists in most countries. This
external factor is a threat because it makes business expansion more difficult for
Starbucks, especially in developing countries. Thus, this aspect of the
PESTEL/PESTLE analysis model presents mostly opportunities for Starbucks Coffee.

Economic Factors Important to Starbucks Coffee

This component of the PESTEL/PESTLE analysis model refers to the economic
conditions and changes significant to business. Starbucks faces the following economic
external factors in its remote or macro-environment:

1. High growth of developing countries (opportunity)

2. Declining unemployment rates (opportunity)
3. Rising labor cost in suppliers’ countries (threat)

The high economic growth of developing countries and the declining unemployment
rates create opportunities for Starbucks to gain more revenues from various markets
around the world. However, the rising labor cost in developing countries is an external
factor that threatens Starbucks because it increases the company’s spending for
ingredients. The firm sources much of its coffee beans from developing countries. Thus,
this part of the PESTEL/PESTLE analysis model presents mostly opportunities for
Starbucks Coffee.

Social/Sociocultural Factors Influencing Starbucks

Coffee’s External Environment
 This aspect of the PESTEL/PESTLE analysis framework shows the social conditions
and trends influencing consumers and business. Starbucks must address the following
social/sociocultural external factors in its remote/macro-environment:

1. Growing coffee culture (opportunity)

2. Increasing health consciousness (opportunity)
3. Growing middle class (opportunity)

Starbucks has opportunity to increase its revenues based on increasing demand for
specialty coffee, which is due to a growing coffee culture and a growing middle class
around the world. Also, the company has the opportunity to widen its array of more
healthful products to attract health-conscious consumers to Starbucks cafés. Thus, all
the identified external factors in this component of the PESTEL/PESTLE analysis model
present opportunities for Starbucks Coffee.

Technological Factors in Starbucks Coffee’s Business

In this part of the PESTEL/PESTLE analysis model, technologies and related trends are
identified. Starbucks experiences the following technological external factors in its
remote/macro-environment:

1. Rising mobile purchases (opportunity)

2. Technology transfers to coffee farmers (opportunity)
3. Rising availability of specialty coffee machines for home use (threat)

Starbucks has the opportunity to improve its mobile apps and linked services to gain
more revenues through mobile purchases. The company also has the opportunity to
improve its supply chain efficiency based on new technologies coffee farmers use.
However, the rising availability of home-use specialty coffee machines is a threat to
Starbucks because it increases the availability of substitutes to Starbucks products.
Thus, this aspect of the PESTEL/PESTLE analysis framework presents mostly
opportunities for Starbucks Coffee.

Ecological/Environmental Factors
This component of the PESTEL/PESTLE analysis model identifies the effects of
ecological or environmental conditions and changes on business. Starbucks faces the
following ecological/environmental external factors in its remote or macro-environment:

1. Business sustainability trend (opportunity)

2. Growing popular support for responsible sourcing (opportunity)
3. Growing popular support for environmentally friendly products (opportunity)
 The business sustainability trend focuses on business processes that ensure minimal
environmental impact. In relation, responsible sourcing emphasizes corporate social
responsibility in the supply chain. Starbucks has opportunities to enhance its
performance in these areas. Note that the company already has responsible sourcing
policies. Starbucks also has the opportunity to offer more of its products in recyclable
packaging. Thus, in this part of the PESTEL/PESTLE analysis model, Starbucks Coffee
has major opportunities.

Legal Factors
The legal factors in the PESTEL/PESTLE analysis model are the laws and regulations
on business. Starbucks must address the following legal external factors in its
remote/macro-environment:

1. Product safety regulations (opportunity)

2. GMO regulations outside the United States (opportunity)
3. Increasing employment regulation (threat)

Starbucks has opportunities to improve its performance by satisfying product safety

regulations and regulations on ingredients from genetically modified organisms (GMOs).
Starbucks is already performing well in these aspects. However, increasing employment
regulation, especially in developing countries, threatens Starbucks Coffee’s access to
the labor market. This external factor also impacts Starbucks through increased
spending for human resources. Thus, in this aspect of the PESTEL/PESTLE analysis
model, the identified external factors present mostly opportunities for Starbucks Coffee.

Recommendations based on Starbucks Coffee’s

PESTEL/PESTLE Analysis
This PESTEL/PESTLE analysis shows that most of the external factors in Starbucks
Coffee’s remote/macro-environment present opportunities. However, the company must
work to address the identified threats, especially the threat of substitution linked to the
increased availability of home-use specialty coffee machines. On the other hand,
Starbucks cannot do much but to avoid the threat of bureaucratic red tape. Overall, the
PESTEL/PESTLE analysis framework indicates that Starbucks Coffee has plenty of
room for further global growth.

Starbucks Coffee Five Forces Analysis

(Porter’s Model) & Recommendations
UPDATED ONUPDATED ON FEBRUARY 21, 2019 BY ROBERTA GREENSPAN
 A Starbucks café at Beijing Capital
International Airport. A Porter’s Five Forces analysis of Starbucks Corporation reveals
that competition, customers, and substitutes are major strategic concerns among the
external factors that impact the coffee and coffeehouse chain industry environment.
(Photo: Public Domain)
Starbucks Corporation (Starbucks Coffee Company) successfully grows through
management effectiveness in addressing the impacts of the five forces in the global
coffee industry and coffeehouse industry environments. The company deals with
external factors, such as the ones outlined in this Five Forces analysis of the business.
Michael E. Porter’s Five Forces analysis model evaluates the industry environment
through relevant external factors that define the competitive landscape. The analysis
model provides information for strategic management to address the five forces,
namely, competitive rivalry, the bargaining power of customers or buyers, the
bargaining power of suppliers, the threat of substitution, and the threat of new entrants.
In this external analysis case, Starbucks operates in a business environment that
involves strong competition with other coffeehouse companies, as well as food and
beverage businesses like Dunkin’ Donuts, McDonald’s, Wendy’s, Burger King, and
Subway. The SWOT analysis of Starbucks Corporation shows sufficient strengths to
counter the force of such competitors, although the company needs to continue
strengthening its competencies to continue growing despite the competition.

In the strategic management of Starbucks Coffee Company, it is crucial to account for

the effects of external factors on the multinational business. This Porter’s Five Forces
analysis of the coffeehouse chain highlights some of the most notable factors that the
company’s strategies must consider. These strategies are focused on ensuring
competitive advantage while fulfilling Starbucks’s corporate mission and vision
statements.

Summary & Recommendations: Porter’s Five Forces

Analysis of Starbucks Corporation
Summary. The strong force of competition is the combined effect of the external factors
identified in this Five Forces analysis. In this regard, the most significant forces for
Starbucks Coffee Company’s strategic consideration are competitive rivalry, the
bargaining power of customers, and the threat of substitutes. Still, the other forces also
 influence the company’s business performance. In summary, the following are the
intensities of the Five Forces in Starbucks Corporation’s industry environment:

1. Competitive rivalry or competition – Strong Force

2. Bargaining power of buyers or customers – Strong Force
3. Bargaining power of suppliers – Weak Force
4. Threat of substitutes or substitution – Strong Force
5. Threat of new entrants or new entry – Moderate Force

Recommendations. In general, addressing the external business environment based

on the results of this Porter’s Five Forces analysis, Starbucks’s strategic goal must
focus on maximizing the strengths and related competencies of the coffeehouse
business. For example, the company can implement strategies to make its brand even
stronger. This recommendation is intended to address the strong force of competitive
rivalry, the strong bargaining power of buyers, and the strong threat of substitution.
Specific to the force of competition, a recommendation is to boost Starbucks
Corporation’s competitive advantages. For instance, the company can improve the
diversity of its supply chain as a way of increasing resource access and production
stability. It is also recommended that Starbucks increase its marketing aggressiveness
to attract and retain more customers.

Competitive Rivalry or Competition with Starbucks

Coffee Company (Strong Force)
Starbucks faces the strong force of competitive rivalry or competition in the food service
and coffeehouse industries. In the Five Forces analysis model, this force pertains to the
influence of competitors on each other and the industry environment. In this case of
Starbucks Coffee Company, the following external factors contribute to the strong force
of competition:

 Large number of firms (strong force)

 Moderate variety of firms (moderate force)
 Low switching costs (strong force)

The large number of firms is an external factor that intensifies competitive rivalry.
Starbucks Corporation has many competitors of different sizes. In relation, the
population of competitors is moderate varied in terms of specialty and strategy. In this
Five Forces analysis of Starbucks, such moderate variety further strengthens the level
of competition in the industry. In addition, competition is strengthened because of the
low switching costs, which are the disadvantages to consumers when shifting from one
provider to another. For example, this case involves minimal disadvantages to
consumers who transfer from the company to other coffeehouses. Based on this
component of the Five Forces analysis, competition is among the company’s top-priority
challenges. Starbucks Corporation’s generic strategy and intensive growth
strategies are a reflection of strategic responses to competition.
 Bargaining Power of Starbucks’s Customers/Buyers
(Strong Force)
Starbucks Coffee Company experiences the strong force or bargaining power of buyers
or customers. In Porter’s Five Forces analysis model, this force is based on the
influence of individual customers and groups of customers on the international business
environment. In Starbucks Corporation’s case, the following external factors contribute
to the strong bargaining power of customers:

 Low switching costs (strong force)

 High substitute availability (strong force)
 Small size of individual buyers (weak force)

In this component of the Five Forces analysis model of the business, the bargaining
power of buyers is among the most significant forces affecting the company. Based on
the low switching costs, customers can easily shift from Starbucks to other brands. In
addition, the high substitute availability means that customers can stay away from
Starbucks if they want to, because there are many substitutes like instant beverages
from vending machines. These strong factors overshadow the fact that individual
purchases are small compared to the company’s total revenues. The small size of
individual purchases equate to the weak influence of individual buyers on the business.
Despite such weakness, the other two external factors strengthen the bargaining power
of customers. Thus, this component of the Five Forces analysis shows that the
bargaining power of customers is a top-priority strategic issue. Starbucks Corporation’s
marketing mix or 4Ps provide support for brand strengthening to partially address the
bargaining power of consumers.

Bargaining Power of Starbucks Coffee’s Suppliers

(Weak Force)
Starbucks Coffee faces the weak force or bargaining power of suppliers. Porter’s Five
Forces analysis model considers this force as the influence that suppliers have on the
company and its industry environment. The following external factors contribute to the
weak bargaining power of suppliers on Starbucks Corporation:

 Moderate size of individual suppliers (moderate force)

 High variety of suppliers (weak force)
 Large overall supply (weak force)

The moderate size of individual suppliers is an external factor that imposes a moderate
force on Starbucks. However, the high variety of suppliers weakens their bargaining
power. For example, suppliers have various strategies and competencies that they use
to compete against each other, with the aim of gaining more revenues by supplying
 more materials, such as coffee beans, to Starbucks Corporation. The bargaining power
of suppliers is further weakened because of the large overall supply. For instance, there
are many suppliers of coffee and tea around the world. This external factor limits the
influence of individual suppliers. The overall effect of the external factors in this
component of the Five Forces analysis is the weak force or bargaining power of
suppliers on the company. Another consideration is the company’s policy of diversifying
its supply chain as a way of addressing the trends identified in the PESTEL/PESTLE
analysis of Starbucks Coffee Company. Such policy weakens suppliers’ power. As a
result, suppliers’ bargaining power is a minor strategic issue in managing the business.

Threat of Substitution or Substitutes to Starbucks

Products (Strong Force)
Starbucks Corporation experiences the strong force or threat of substitution. In the Five
Forces analysis model, this force pertains to the impact of substitute goods or services
on the business and its external environment. The following external factors contribute
to the strong threat of substitution against Starbucks:

 High substitute availability (strong force)

 Low switching costs (strong force)
 High affordability of substitute products (strong force)

This component of the Five Forces analysis indicates that substitutes have strong
potential to negatively impact Starbucks Coffee’s business. The high availability of
substitutes makes it easy for consumers to buy these substitutes instead of Starbucks
products. For example, substitutes like ready-to-drink beverages, instant beverage
powders and purees, and food and other beverages are readily available from various
outlets, such as fast food and fine-dining restaurants, vending machines, supermarkets
and grocery stores, and small convenience stores. In addition, the low switching costs
further strengthen the threat of substitutes, as it is easy for consumers to buy
substitutes instead of Starbucks products. Moreover, many of these substitutes are
affordable and cost less than the company’s products. Thus, this Porter’s Five Forces
analysis of Starbucks Coffee Company determines that the threat of substitutes is a
high-priority strategic management concern.

Threat of New Entrants or New Entry (Moderate Force)

Starbucks Corporation faces the moderate force or threat of new entry. In Porter’s Five
Forces analysis model, this force refers to the effect of new players or new entrants in
the industry. In this business case, the following external factors contribute to the
moderate threat of new entrants against Starbucks:

 Moderate cost of doing business (moderate force)

 Moderate supply chain cost (moderate force)
 High cost of brand development (weak force)

The moderate cost of doing business is associated with the variability of the actual cost
of establishing and maintaining operations in the coffeehouse industry. For example, the
cost of operating a small coffeehouse is lower compared to the cost of operating a
coffeehouse chain. In relation, smaller cafés have lower supply needs and
corresponding supply chain costs. These external factors enable smaller firms to do
business and compete against Starbucks Corporation. On the other hand, brand
development is costly. In the context of the Five Forces analysis model, this condition
reduces the threat of substitution. For example, small coffeehouses do not have enough
resources to develop their brands. Also, brand development typically requires years to
reach the level of strength of the Starbucks brand. The combination of these external
factors imposes the moderate force or threat of substitutes against the company. Thus,
this Five Forces analysis shows that the threat of substitution is a significant but limited
issue in Starbucks Corporation’s strategic management.

Starbucks Coffee’s Generic and Intensive

Growth Strategies
UPDATED ONUPDATED ON JANUARY 31, 2017 BY ANDREW THOMPSON

A Starbucks café in
Lima, Peru. Starbucks Coffee’s generic strategy (Porter’s model) aligns with the market
penetration intensive growth strategy. However, the company also uses product
development and market development as secondary intensive growth strategies.
(Photo: Public Domain)
Starbucks Coffee Company’s generic strategy (based on Michael Porter’s model) is
responsible for its emphasis on specialty coffee products. On the other hand, a
combination of intensive growth strategies influences the approach that Starbucks uses
for growth and expansion. These intensive strategies for growth are also directly related
to the company’s generic strategy. Intensive growth strategies must be aligned with the
generic strategy to maximize firm performance and potential success. In Starbucks
Coffee’s case, such alignment is observable in the firm’s continuing emphasis on
penetrating markets with its specialty products, while offering these products to
customers from various segments. Thus, Starbucks successfully aligns and follows its
generic strategy and intensive growth strategies.

Starbucks Coffee’s generic strategy, based on Porter’s model, allows the firm to
compete based on specialty products. Starbucks also uses its intensive growth
strategies to support expansion, although its focus is on market penetration.

Starbucks Coffee’s Generic Strategy (Porter’s Model)

Starbucks Coffee uses the broad differentiation generic strategy. In this generic
strategy, the goal is to make the company different from other competitors. It is such
difference that makes Starbucks stand out. The company’s emphasis on specialty
coffee easily differentiates Starbucks cafés from many other establishments that offer
coffee. However, the application of the broad differentiation generic strategy also
extends to other areas of the business. For instance, Starbucks uses its sustainable and
responsible sourcing policy to differentiate its products from competitors. This generic
strategy is also manifested in the company’s culture. While competitors like McDonald’s
and Dunkin Donuts emphasize low cost, Starbucks Coffee emphasizes a warm friendly
ambiance that people enjoy.

An implication of the broad differentiation generic strategy is that Starbucks Coffee must
continue innovating to ensure differentiation in the long term. This generic strategy
could lose its strength when competitors also find ways to stand out. To address this
issue, Starbucks keeps innovating its product mix and supply chain. In applying the
broad differentiation generic strategy, Starbucks focuses on specialty ingredients and
products, such as baked goods that do not have high-fructose corn syrup. Starbucks
also innovates its supply chain to satisfy its generic strategy through a continuing
search for the most sustainable and finest ingredients. Thus, based on this generic
strategy, Starbucks Coffee’s strategic objective is to innovate products and its supply
chain.

Starbucks Coffee’s Intensive Strategies (Intensive

Growth Strategies)
Market Penetration. Starbucks Coffee’s main intensive growth strategy is market
penetration. This intensive strategy supports the firm’s growth by maximizing revenues
from existing markets. Starbucks already has presence in 65 countries around the
world. To maximize revenues and growth in these current markets, the company applies
the market penetration intensive strategy by opening more company-owned stores.
Starbucks also applies this intensive strategy for growth through licensing for
merchandise and franchising in some countries, such as the Dominican Republic.

Market Development. Starbucks Coffee uses market development as its secondary

intensive growth strategy. This intensive strategy supports the company’s growth by
generating revenues in new markets or market segments. For example, Starbucks
Coffee plans to enter more countries. These countries are mostly in Africa and the
Middle East. In this intensive strategy, Starbucks grows by expanding its global reach.

Product Development. Starbucks Coffee also uses product development as a

secondary intensive growth strategy. This intensive strategy involves creating new
products to gain more revenues. Starbucks continues innovating its product mix. For
example, after the firm acquired The Coffee Connection, it started offering Frappuccino
at Starbucks cafés. The company also introduced sodas in 2014. Through such new
products, Starbucks grows through this intensive strategy.

Strategic Analysis and Recommendation for

Starbucks Coffee
Starbucks Coffee’s broad differentiation generic strategy ensures that the firm maintains
competitive advantage through specialty products and ingredients. This generic strategy
translates to various policies and programs to keep the firm differentiated. A challenge
in applying this generic strategy is that Starbucks must always innovate. Starbucks
needs to keep improving and innovating ahead of competitors to maintain its growth
based on this generic strategy.

Starbucks Coffee’s intensive growth strategies are aligned to the firm’s generic strategy.
Because it stands out based on differentiation, Starbucks can penetrate markets and
compete with other firms in these markets. However, the business lacks significant
presence in Africa and the Middle East. Thus, Starbucks can use its intensive growth
strategy of market development to grow in these regions. Also, the intensive growth
strategy of product development can be used to offer products that suit the distinct
cultural preferences of consumers in Africa and the Middle East.

Starbucks Coffee’s Mission Statement &

Vision Statement (An Analysis)
UPDATED ONUPDATED ON FEBRUARY 16, 2019 BY LAWRENCE GREGORY
 A Starbucks café in Tokyo. Starbucks
Corporation’s (Starbucks Coffee) corporate mission statement and corporate vision
statement reflect the company’s culture and expansion plans in the global coffeehouse
and coffee industry. (Photo: Public Domain)
Starbucks Corporation’s (also known as Starbucks Coffee) mission statement and
vision statement represent the company’s emphasis on leadership in the coffee industry
and the coffeehouse market. A company’s corporate mission statement is an indicator
of what the business does for its target customers. In this business analysis case of
Starbucks, the corporate mission focuses on the philosophical purpose of the business.
On the other hand, a company’s corporate vision statement reflects the strategic
direction of the business in terms of what it wants to achieve in the future. In this case,
Starbucks’s corporate vision focuses on leadership in the industry. The company’s
success in responding to its competitive environment depends on the effectiveness of
implementing these corporate statements. This implementation influences Starbucks’s
generic strategy and intensive growth strategies. Corresponding strategic objectives
enable the business to streamline its operations toward following the corporate mission
statement and satisfying the corporate vision statement.

Established in Seattle, Washington in 1971, Starbucks Coffee continues to grow and

expand its business internationally. This expansion brings the company in competition
against various firms. For example, the company competes against Dunkin’ Donuts
and McDonald’s, as well as other food service businesses that offer food and beverage
products, such as Burger King and Wendy’s. The Porter’s Five Forces analysis of
Starbucks Corporation shows that these competitors and related industry factors and
market factors combine to create the strong force of competitive rivalry in the industry
environment. The company must strengthen its competitive advantages accordingly.

Starbucks Coffee’s Corporate Mission Statement

Starbucks Coffee’s corporate mission is “to inspire and nurture the human spirit –
one person, one cup and one neighborhood at a time.” This mission statement
reflects what the company does to keep its business running. It is clear that target
consumers are given emphasis in this corporate mission. The following components of
 Starbucks’s corporate mission statement influence strategic management in growing the
business:

1. Inspire and nurture the human spirit

2. One person, one cup and one neighborhood at a time

Starbucks Coffee “inspires and nurtures the human spirit,” starting with its employees.
To address this component of its mission statement, the company maintains a small
company culture, where rapport and warmth are important. In this way, the corporate
mission is a direct determinant of Starbucks Coffee’s corporate culture. In addition, the
same component of the company’s mission statement pertains to customers’
experience. The business extends its warm and small company culture to its customers.
For example, employees’ and customers’ first names are used at Starbucks cafés. Also,
the design of these coffeehouses aims for warmth and coziness. These approaches
inspire and nurture meaningful and warm relationships involving employees and
customers. Another factor to consider in Starbucks Coffee’s corporate mission
statement is that it indicates a personal and gradual approach. The “one person, one
cup and one neighborhood at a time” component shows that the company ensures
meaningful impact on every employee and customer. In parallel, this part of the
corporate mission means that Starbucks Coffee plans to continually and gradually grow
the business, one place or neighborhood at a time.

Starbucks Coffee’s Corporate Vision Statement

Starbucks Coffee’s corporate vision is “to establish Starbucks as the premier
purveyor of the finest coffee in the world while maintaining our uncompromising
principles while we grow.” This corporate vision statement has the following
components relevant to the business:

1. Premier purveyance
2. Finest coffee in the world
3. Uncompromising principles
4. Growth

Aiming to be the premier purveyor means that Starbucks Coffee wants to achieve
leadership in providing its products, especially coffee of the best quality. The company
achieves this component of its vision statement by continuing its multinational
expansion as one of the largest coffeehouses and coffee companies in the world.
However, it is not yet clear if Starbucks effectively addresses the “finest coffee in the
world” component of its corporate vision. Analysts and critics point out that coffee from
McDonald’s or Dunkin’ Donuts may be better than Starbucks coffee in some aspects.
Nonetheless, Starbucks addresses the “uncompromising principles” component of its
corporate vision statement. These principles include ethical conduct and a warm
culture. The company maintains these principles, especially during Howard Schultz’s
leadership as CEO. Also, the company satisfies the “growth” component of its vision
statement, as manifested in the continuing global expansion of the business through
new Starbucks locations. The company now has more than 28,000 locations around the
world. Thus, the business effectively addresses its corporate vision.

Starbucks Coffee’s Corporate Vision & Corporate

Mission – Recommendations
A good point about Starbucks Coffee’s mission statement is that it is sufficiently abstract
to make it applicable to future business scenarios. However, this corporate mission
does not satisfy many of the conventional characteristics of ideal mission statements.
For example, Starbucks’s mission statement does not inform about target customers,
types of products, and target markets. While the company presents a facet of its
business philosophy, the resulting corporate mission needs improvement to satisfy ideal
conventions. Thus, it is recommended that Starbucks add such pieces of information in
its corporate mission statement to improve the matching of the statement with the
business and its operations.

Starbucks Coffee’s vision statement is concise, clear, and inspiring, especially in terms
of achieving and maintaining the premier status in the coffeehouse and coffee industry.
This focus on leadership is a motivator that challenges management and other
members of the company’s human resources. Moreover, the corporate vision is stable
in terms of applicability to future business scenarios at Starbucks Corporation. For
example, the “premier purveyor” component is expected to remain applicable in the long
term. However, the company fails to include new business operations and products in
the corporate vision statement. For example, tea, pastries, and merchandise (consumer
goods) are now part of the product mix, as outlined in Starbucks’s marketing mix or 4P.
These products are not yet included in the company’s corporate vision statement. Thus,
a recommendation is to improve Starbucks’s corporate vision by adding these pieces of
information regarding various products, to make the vision more accurate in
representing the business.