Assignment 5: Capstone

Assignment 5: Capstone

Jamie Miller

Professor Laura Pogue

Business Administration Capstone: BUS 499

December 7, 2017
Assignment 5: Capstone

Introduction

This essay will discuss and evaluate Starbucks. It will define the influence of the

company’s mission, vision, and primary stakeholders’ overall accomplishments. It will fully

examine the five forces of competition and their influence. A SWOT analysis will be performed

to determine the strengths, weaknesses, opportunities, and threats. SWOT Analysis is a useful

technique for understanding a business’s strengths and weaknesses, and for identifying both the

opportunities open to a business and the threats they may face. Numerous levels and styles of

approaches will be argued over to capitalize on the competitiveness and profitability. I will

outline a communication plan to make strategies known to all stakeholders. Two corporate

governance mechanisms will be selected to evaluate the effectiveness of the controlling

managers. I will evaluate the effectiveness of leadership within the corporation and make

recommendations for improvement. An assessment of the efforts by Starbuck’s corporation to be

a responsible and ethical corporation and the impact of these efforts on the corporation is

bottom-line.

Determine the impact of the company’s mission, vision, and primary stakeholders on its

overall success.

A businesses Mission Statement is an organization's guide to help organization

representatives with its route to success. In reference to a business’s consumers, a Mission

Statement is confirmation that the organization is focused on the customers' motivation and

purpose. A mission statement articulates the front line of the organization and reminds the firm’s

partners of how the company would like to be seen by its consumers. (Starbucks, 2013).
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Starbucks Mission states, "Our mission: to inspire and nurture the human spirit – one

person, one cup and one neighborhood at a time." Their mission is pretty clear, they want to

create a culture of warmth and belonging, where everyone is welcome. This makes customers

feel appreciated and “at home.” As stated by Gregory, L, “Starbucks Coffee’s mission statement

and vision statement reflect the company’s emphasis on leadership in the coffeehouse industry.”

(Business Management). Starbucks’ vision is, “To establish Starbucks as the premier purveyor of

the finest coffee in the world while maintaining our uncompromising principles while we grow.”

There are four (4) components to their vision: Premier purveyance, Finest coffee in the world,

Uncompromising principles and Growth.

The main stakeholders in Starbucks Coffee’s business are, Employees (baristas, partners),

Customers, Suppliers (supply firms, coffee farmers), Environment, Investors and Governments.

(Panmore). The most important stakeholder for any business to sustain is its employees. They are

the “first impression” to all your consumers. The employees are the ones who create and deliver

the products or services that the customers consume. This is a make or break for any business. If

you lack in customer service, your customers will leave and it is known, “It’s generally accepted

that it costs three times more to find a new customer than it does to sell to an existing customer.”

(LinkedIn).

Starbucks understands the worth of maintaining a central goal that they aim to reach, that

drive has transformed the company’s vision over the years. For example, Charles Shultz

envisioned the company operating 2000 stores within the United States by the year 2000.

Unfortunately, that objective was not possible due to the risk the company undertook. After

rethinking the company’s inherent worth, a simplified vision of, “being the most recognized
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coffee bean house in the world” became Starbucks mental picture; and today, Starbucks

Corporation holds the title as such (Starbucks Corporation, 2010).

Globally, all governments that have interest in coffee growing countries have a major

investment in Starbucks. A few include: Costa Rica, Guatemala, Kenya, Nicaragua, and

Tanzania. This company makes every effort to be held accountable for its engagements, and

most importantly, accountability to ensure a “greener” planet as well as its stakeholders. In a

2005 annual stakeholder conference in Seattle Washington, Senior Vice President, Sandra Taylor

announced, “As a publicly traded company, Starbucks operations extend to be a good neighbor,

working with a diverse variety of stakeholders” (2005).

Analyze the five (5) forces of competition to determine how they impact the

company.

Michael Porter’s five (5) forces of competition are useful, because, when you understand

the forces in your environment or industry that can affect your profitability, you'll be able to

adjust your strategy accordingly. The five forces are: Competitive Rivalry, Supplier Power,

Buyer Power, Threat of Substitution, and Threat of New Entry. Porter's. Michael Porter states,

“Five Forces is a simple but powerful tool for understanding the competitiveness of your

business environment, and for identifying your strategy's potential profitability.” The five forces

of competition affect Starbucks competitive environment. Considering how Starbucks became

the front-runner in coffee, and a powerful well-known brand you must truly understand the

strategy of its competitors. Even though there are competitors globally. Domestic competitors

include Tully’s Coffee and Caribou Coffee. Internationally, rivals such as McDonald’s and

Dunkin Doughnuts. This fierce rivalry enabled Starbucks to evolve and differentiate itself from
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the others. Starbucks utilizes an exclusive advertising tactic that is not commonly seen in

business today. “Starbucks does not advertise on billboards, newspapers or magazines, instead

they use word of mouth and social media.” (Starbucks).

Create a SWOT analysis for the company to determine its major strengths, weaknesses,

opportunities, and threats.

Any successful business should always be alert to the competitive forces in its particular

marketplace, which is why company strategies must be observant of competitive intelligence.

Starbucks set out to develop and expand its advantages above its competitors by limiting its

marketing department by means of carrying out counter intelligence to guard its company from

any intelligent leaks that would assist its rivals. In the SWOT analysis for this particular

company, I have identified the strengths, weaknesses, opportunities and threats. Starbucks’

strengths is the management in the market of coffee, and its key reputation and appearance. From

then research I have conducted, the customers are pleased with the value and taste of the

company’s specialty gourmet coffees. They also had valuable networks as its stores and

coffeehouses are cleverly placed. Starbucks retail outlets are not franchised only company

operated. Also, “its client base is faithful to the brand and the business is a global market leader

with its renowned brand.” (Starbucks detail strategy, 2009).

Starbucks’ pricing is their main weakness. After comparison of multiple similar products,

Starbucks are higher in comparison to its rivals, as well as its operating costs. Yet, the profits are

completely reliant on the health of the coffee trees and coffee products. In 2007, they had a slight

obstacle with the decline of the economy, and the collapse strained the company to shut down

over six-hundred stores throughout the United States. Starbucks’ opportunities were recognized
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as they entered the Asian market in countries such as, Pakistan, India, and Bangladesh. The

Asian population is vast and the company’s marketing team dove into the middle-eastern

markets promoting its products that attracted its younger consumers, such as hot chocolate and

milk. They had robust market infiltration with its brand addition, distribution agreements, and

technological advancements in the promising international markets. Starbucks executives are

well pleased with its Asian customer base. (Starbucks). The number of rivals for Starbucks is

slowly accumulating. With convenient stores located from coast to coast, and street vendors

selling cups of coffee, to well-known businesses like, Dunkin Donuts, who has executed a

marketing campaign using entertainers that advertise the donut chain as having a coffee that has

“American running on Dunkin.” As well as, McDonald’s restaurants introducing in 2010 their

specialty coffee and lattes at inexpensive prices. “Coffee is big business, and the U. S. markets

are saturated with its coffee wars.” (e-Marketer, 2007).

Based on the SWOT analysis, outline a strategy for the company to capitalize on its

strengths and opportunities, and minimize its weaknesses and threats.

Starbucks has managed to grow into quite a profitable business. Not to mention that the

company could strengthen its products and services within its global economy by concentrating

on its role in environmental leadership. This perhaps would be for the business to implement the

economy of scale technique; generating recyclable “green” paper merchandise while decreasing

the rate of labor and constructing more solid affiliations. Starbucks would be able to see a decent

return from its opportunities by remaining with its partnership, Hewlett Packard. By allowing its

customers to continue burning and creating their own compact disk. Moreover, the company may

ponder taking advantage of fair trade products and services that could be sold in its restaurants,
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as well as co-branding with food and beverage manufactures. This opportunity is an additional

way the firm could expand the company’s global markets. (Starbucks). Starbucks has a position

for creating product growth and having a solid vision. Although, the weakness they are facing is

their exclusive dependency of the sale of coffee. This exposure can in fact set the company up

for failure and impede them when trying to get into other sectors of this business. How the

company could minimize its weaknesses? They need to pursue a selection of countries in an

effort to not endanger the business itself. Starbucks launched their business in 1971, many

companies have posed possible threats for them, with substitute brands of specialty coffees. In

order for them to benefit and counter these threats, the company must stay engrossed on its

mission statement and values.

Discuss the various levels and types of strategies the firm may use to maximize its

competitiveness and profitability.

Diversity. One important way for Starbucks to maximize its competitiveness and

profitability is through diversity. According to Forbes, “Starbucks Corporation is expanding its

Evolution brand by introducing new snack bars under the brand’s Harvest line of products.” I

think expanding their brand by offering a variety of products, not just coffee and the typical

snacks and drinks you can buy at the local coffee shop is a great step to differentiate the brand

and incorporate a wider array of consumers. “Starbucks has also tied up with Whole Foods

which will see the retail giant soon offering 12 Evolution Fresh juices and three Evolution

Harvest snack bars at its stores.” (Trefis Team).

Another strategic method Starbucks implemented in 2008 was reducing their stores.

Since McDonalds and Dunkin Donuts has made their way into the specialty coffee industry;
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Starbucks made the decision to close more stores to allow for additional profitability. They also

used the equity strategy alliance to align its firm with various companies, such as Barnes and

Noble, which have small coffee shops in some of its stores. Pepsi bottling company sells a

variety of Starbucks coffees and products in quantities of four and two pack containers. In 1994,

Pepsi joined forces with Starbucks forming the North American Coffee Partnership (NACP), a

joint venture that helped build the research coffee category in America. According to Gary

Lopez, president, Global Consumer Products Foodservice and Starbucks Coffee, “By joining

forces with Pepsi, Starbucks is tapping into a long history of innovation and expertise in

manufacturing, marketing, and distribution of refreshment beverages, such as Starbucks bottled

Frappuccino and other beverages” (Thompson & Strickland, 2010).

Outline a communication plan the company could use to make the strategies you

recommend above known to all stakeholders.

Many organizations begin their Diversity journey with a sound plan or they continue

efforts to ensure momentum. I believe initiating a communication plan is an excellent way to

keep stakeholders in the loop and helps them to see the vision externally. “A proactive and

thorough communications plan can help to effectively shape the diversity effort and help

employees understand its importance to the organization.” (The Kaleidoscope Group). Ways to

implement an effective Communication Plan is shown here with 9 steps:

Compile Data- Employers must first know what their workforce looks like compared

with the labor market. By capturing data on employee demographics, an employer is better able

to understand the diversity of its employees and identify any areas of concern or trends.
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Identify Needs and/or Areas of Concern- Once data are collected, underrepresented

areas can be identified. To do so, employers should begin with a high-level review of

demographics such as age, sex and race representation, and then continue to drill down by

location, department, position, etc.

Address Policies or Practices Affecting Diversity- Employers must determine if there

are barriers impeding the employment of individuals from different demographic groups.

Identify Business Objectives- Identifying how a diverse and inclusive workforce can aid

in achieving business objectives aligned with the company's strategy is the next step in the

process.

Procure Buy-in and Support- For the diversity initiative to succeed, senior level buy-in

and support are vital. Senior management must understand the business case for diversity and

inclusion initiatives, with direct links to the company's strategic goals.

Implement Initiatives- Examples of diversity and inclusion initiatives are changes in

policies and practices, staff training, targeted recruiting, and employer-sponsored diversity and

inclusion awareness events for employees.

Communicate the Initiatives- Employers must identify different stakeholders and

design messages for each stakeholder to inform, educate, engage or empower as appropriate.

Measure and Disseminate Outcomes- It is imperative to measure the results of the

diversity initiatives that have been implemented.

Review and Adjust- Diversity and inclusion initiatives are not static, and an ongoing

review of the workforce and a response to changing needs are necessary.

After communication is established and communication preferences are identified, the

project manager should ensure each stakeholder receives timely and consistent messages.
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Though stakeholders may receive different messages through different channels, it is imperative

that the project manager ensure that various messages and forms of communication do not create

a conflicting message.

Select two (2) corporate governance mechanisms used by this corporation and

evaluate how effective they are at controlling managerial actions.

In 2003, Starbucks’ perfected its board diversity by retaining new board members and has

currently applied the executive benefit method as a governance mechanism. The executive

compensation method is “a system that seeks to align the interest of the owners and managers

through salaries, bonuses, and long-term incentives” (Starbucks). Since they first launched in

1971, Starbucks has strived to become a major power and has held a large amount of the

industry’s market share of coffee. Starbucks has been dedicated to serving its consumers

excellence in brewed coffees and espressos. In the 1990’s and early 2000’s Starbucks released a

new store every workday, expanding globally. They have grown its brand and have maintained

victory even during a period when reducing stores considerably. As they continue to advance in

other markets by starting other SBU’s and staying extremely competitive. Starbucks has excelled

and able to remain on top in this industry with a competitive advantage by producing new

innovative products. In conclusion, Starbucks’ corporate governance mechanisms of board of

directors and executive compensation have proven to be a key in their success.

Evaluate the effectiveness of leadership within this corporation and make at least

one (1) recommendation for improvement.

Starbucks uses an effective leadership style which is designed to implement Starbucks

globally. The leadership strategy includes fifty-four markets outside the United States. The

arrangement encompasses the expansion of a three region organizational structures; China and
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Asian markets, Americas market, and EMEA- European, U.K., Middle East, Russia and African

markets. Each section collectively has a president that supervises the company-operated retail

business and work closely with other business partners in each market. They each function

autonomously to create and accelerate the multi brand development prospects within the

corporation. “The president of each regional division reports directly to the CEO for guidance.”

(Penn State).

I believe their form of Leadership is effective; however, I do not feel that the regions

should operate independently, operating as a unit is more effective. Their power would be a lot

stronger. The strategy is clever to accelerate the multi-brand, multi-channel and global growth to

rise globally in their opportunities. Lower leadership positions would be beneficial in the

development of these strategies.

Assess efforts by this corporation to be a responsible (ethical) corporate citizen and

determine the impact these efforts (or lack thereof) have on the company’s bottom line.

Provide specific examples to support your response.

Starbucks makes it clear that they are an ethically accountable business and they have

proven that the way they conduct business is at all cost: ethical. They hold themselves to a very

high standard and have shown throughout their communities, sourcing, diversity, and the

environment, that their number one priority is their values and ethics. Starbucks depends strongly

on their mission and value statements daily. They exhibit their promises to being a socially

accountable corporation and to deliver the highest quality of business for their consumers.

Starbucks gathers their yearly accounts to display its corporate social responsibility. Starbucks is

globally appreciated somewhat for their social responsibility to their environment. Starbucks has

achieved and maintained their good standing through their sustained pledge to their mission and
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value statements. Their moral strength has, over the years, affected their bottom line to make

them one of the most prosperous businesses globally. Starbucks also has experimented in going

“green,” which provides the health of the environment with using recycling for paper and

plastics.

Conclusion

In conclusion, I have discovered Starbucks to be one of the world’s top primary

corporations. They have reputable missions and values designed to satisfy not only their

stakeholders, but also their consumers. There has been inordinate strategic use of the SWOT

analysis to capitalize their competitive threshold in their industry. Starbucks’ corporate

atmosphere mirrors their vow to their industry and customers globally.

Assignment 5: Capstone

References

Gregory, L. (01/31/17). Starbucks Coffee’s Vision Statement & Mission Statement. Retrieved

from: http://panmore.com/starbucks-coffee-vision-statement-mission-statement

Thompson, A. (01/31/2017). Panmore. Starbucks Coffee’s Stakeholders: A CSR Analysis.

Retrieved from: http://panmore.com/starbucks-coffee-stakeholders-csr-analysis

Linkedin. (n.d.). What is the Cost of Customer Acquisition vs Customer Retention

Retrieved from: https://www.linkedin.com/pulse/what-cost-customer-acquisition-vs-

retention-ian-kingwill

Starbucks corporation. (2013). Retrieved from: www.starbuckscorporation.com

Starbucks detail strategy for profitable growth. (03/18/2009).

E-Market. (n.d.) Starbucks Big Business. Retrieved from:

https://www.emarketer.com/Article/Starbucks-Big-Business/1012305

Trefis Team. Forbes. Starbucks Has Big Plans to Diversify Beyond Coffee. (09/05/2013).

Retrieved from: https://www.forbes.com/sites/greatspeculations/2013/09/05/starbucks-

has-big-plans-to-diversify-beyond-coffee/#4d83cb4bde78

Thompson, A., & Strickland, A. J. (2010). Strategic management: concept and cases. E-Books

Library.

The Kaleidoscope Group. (n.d.) Communication Strategy. Retrieved from:

http://kgdiversity.com/communication-strategy/

Penn State. (n.d.) Starbucks Leadership Style. Retrieved from:

http://sites.psu.edu/leadership/2013/07/06/starbucks-leadership-style