The purpose of this project is to conduct a strategic audit on Starbucks Corporation which I have chosen for my analysis. The Journey of Starbucks Company started way back in 1971. At the very beginning they were roaster as well as retailer of tea, spices, whole bean and ground coffee. However today they have more than 24,000 retail stores distributed among 70 countries attracting millions of customers with their extraordinary products.
- Current Performance
- Starbucks (SBUX) is a publicly traded organization operating in the coffee retailing industry serving coffee, tea and spices
- Named after the chief mate in the book Moby Dickand its logo inspired by a twin-tailed siren from Greek mythology
- Opened in 1971, with its first shop in Pike Place Market, Seattle, Washington
- Operates in over 75 countries, 25,000 retail stores and 300,000 employees who are called partners
- 2016 Financial Performance
- Net Revenues was approximately $21,315 billion US dollars which grew 11.2% from 2015
- Global store sales grew by 5% with the opening of 2,042 new stores globally
- Through share repurchases and dividends, 3.2 billion were distributed to shareholders
- “Starbucks already holds a 75% market share in the U.S. ready to drink coffee market, and hopes to claim an additional market share of $1 billion in the premium RTD category through its latest partnerships”(Team, Trefis, Forbes.com)
- The company exercises social consciousness in three(3) ways: Ethical Sourcing, Environmental Stewardship and Community Involvement
- Strategic Posture
- “ Our mission: to inspire and nurture the human spirit- one person, one cup and one neighbourhood at a time” (Retrieved from https://www.starbucks.com/about-us/company-information/starbucks-company-profile)
To accomplish their mission, employees are guided in their everyday decision-making by the company’s corporate values and principles
- “Together we will elevate our partners, customers, suppliers and neighbours to create positive change. To be innovators, leaders and contributors to an inclusive society and a healthy environment so that Starbucks and everyone we touch can endure and thrive.”(Retrieved from https://www.starbucks.com/responsibility)
- Here are SBUX core values:
- “Creating a culture of warmth and belonging, where everyone is welcome.
- Acting with courage, challenging the status quo and finding new ways to grow our company and each other.
- Being present, connecting with transparency, dignity and respect.
- Delivering our very best in all we do, holding ourselves accountable for results” (Retrieved from https://www.starbucks.com/about-us/company-information/mission-statement)
These values play an important part in achieving the company’s goals. SBUX mission is to see the company driven by humanity, therefore these values support its everyday actions in a way goals can be accomplished.
- Plans to reduce the environmental impact of its cups, engage partners in environmental leadership, and promote community service in its more than 25,000 stores.
- Plan to deliver earnings per share growth of 15% to 20%
- Boost revenue by 10% and open 12,000 new stores worldwide by 2021
- Expand their offerings of beverages
- Launch a new feature on their mobile app, the ordering system which one can place orders via voice command through artificial intelligence
- Elevate their employees through stock equity option, full health benefits and education opportunities
- Outstanding customer services
- Quality based distinction- superior quality tea and coffee
- Different techniques are used for marketing as well as branding
- More focus on customer orientation
- Steady brand experience
- Outrageous brand equity
- Unusual techniques of social media is used for initiating connection with the customers
- Generating authentic customer value
- traditional methods of marketing is rarely used
- For the last 4-5years they are investing heavily in advertisement
- Basic human rights are followed for developing their business as well as engaging their partners
- Non-discrimination policy
- Dedication to their practices of ethical business
- International Anti-Bribery standard
- Policy statements of mineral conflict
- Zero tolerance policy for not supporting strained labour and human trafficking
- Code of conduct for the suppliers where they expect their suppliers to behave in an ethical and responsible way
- Favours international principles of business practices that are ethical
Part 1: Corporate Governance and Finance
Themain reason for SBUX success is its wonderful organizational structure. The company has a matrix structure which is a mix of functional structure, geographic divisions, product-based divisions and teams.
Image shows SBUX organizational structure. Retrieved from https://www.google.tt/search?q=starbucks+board+of+directors+pictures&sa=X&rlz=1C1EJFA_enTT694TT694&tbm=isch&tbo=u&source=univ&ved=0ahUKEwib46mY8u3WAhUKcCYKHZsAAwEQsAQIIw&biw=1366&bih=637#imgrc=jBiuWHzAsxbslM:
- Board of Directors
- The purpose of SBUX Board of Directors, is to ensure that the company is managed efficiently in order to meet its long-term goals and objectives by serving the best interest of shareholders
- The Board is made up of 14 directors who meet all the essential requirements of NASDAQ and U.S Securities and Exchange Commission.
- Members have two (2) legal responsibilities: 1. Duty of Carein that, the members must exercise due diligence while making decisions in the management of the organization 2. Duty of Loyalty in that, members must make unbiased decisions to avoid conflict of interest
- The members are guided by a set of policies and procedures for the effective management of the Board of Directors
- The Board conduct meetings five(5) times per year and if additionally meetings are necessary they are done electronically
- Top Management
- In 2016, the company reshuffled the roles of its top management to make the focus on the company’s long-term strategy and innovation. The focus previously was on digital technology
- The senior team comprises of 58 individuals who bring a unique point of view and posse a wealth of experience that is a benefit to the company
- The senior team is responsible for
- Driving the company’s mission, vision and implementing policies and strategies
- Determining the hiring guideline
Part 2: Analysis of the environment
- Natural Physical Environment: Sustainability Issues
- Societal Environment
- Economic- global economic recession, increasing labour and operational prices is the essential economic factors for Starbucks
- Technological- association with Apple to bring out their discount coupons based on the app, Wi-Fi availability in all the stores of Starbucks
- Political-Legal- following the laws of those countries from where they get their raw materials as well as in the markets and apart from these are the tax policy and employment laws are also to be considered
- Socio-cultural- modifying family structures and values among the masses in USA and Europe, customer preferences, differences in the work pattern and customer’s lifestyles (Reinhard, 2015).
- Task Environment
- Threat of New Entrants- McDonalds has given a moderate amount of threat to Starbucks else obstacles are not very high for them as they have already seized a large market share
- Bargaining Power of Buyers- to get good quality coffee the customers are ready to pay high prices so the bargaining power is moderate to low
- Threat of Substitute Products and Services- this is high for Starbucks as there are various other products in the market that can act as a substitute for coffee. The home made products are also another threat (Qian & Xing, 2016)
- Bargaining Power of Suppliers- as Starbucks has their own policy of supplier diversity thus; the pressure is low to moderate. Along with that the outstanding supply chain management also decrease the bargaining power of suppliers
- Rivalry among Competing Firms- competition is moderate to high as this industry has a monopolistic competition with firms mainly competing for mainly market shares
- Internal Environment:
- Corporate Structure- Starbucks follows a matrix corporate structure that is mainly a hybrid type of mixture of various features from the fundamental type of the corporate structure
- Corporate Culture- they mainly follows a corporate culture of belonging, inclusion and diversity. Their main corporate culture features are prioritising their employees first, an approach of relationship driven, openness, collaboration and communication and diversity (Jackson, Lee & Bias, 2016).
- Corporate Resources- they have physical (stores, distribution centers and warehouses), financial (investments, expansion activities), human (well trained employees), technological (Information Technology, equipments and online stores) as well as organizational resources (brand and reputation, training programs and Starbucks culture)
- Marketing- It follows a direct strategy of market that starts with their products. However, it is distinct from others because of its premium quality of coffee in the market
- Finance- though it fell down in 2013 but again it in 2014 their conditions improved due to the solving of the legal issues and expansions
- Research and Development- This team is mainly responsible for the technical developments that are taking place in food and beverage products as well as the new equipments for coffee making
- Operations and Logistics- this is where the outsourcing of logic decisions, their products and services are adding any value to their consumers are looked after
- Human Resource Management- they have the best HRM that provide employee training, developing and a culturally diverse workplace for their staffs
- Information Technologies- they very tactfully uses the technology through social media, mobile app, brewing and Starbucks digital network
- Excellent quality of their products that is both environmental friendly and comparatively stable between locations. (Lemus et al., 2015)
- Their well planned strategy of growth has made them expand their business by increasing their stores at different locations
- Their excellent treatment to their employees has made them listed in the ‘Fortune’s top 100 Places to Work For’
- Their high priced products are both their strengths as well as their weakness.
- Starbucks does not have the most distinctive market because they are mainly famous for their products like Frappucinos, pumpkin spice latte and big chocolate chip cookies. Whereas there are many other coffee shops who also sells similar products by only fail due to the lack of a big name
- Starbucks mainly have their outlets mainly located in United States but they have more chances of making profit if the branch out for business in the markets of Central Europe, few regions of Africa and India as well (Rajasekaran, 2015)
- They must focus on introducing new products.
- Another opportunity is there where they can pair up with other companies and can co-brand.
- Starbucks biggest threats are Dunkin’ Donuts and McDonald’s (Brizek, 2014)
- The success of Starbucks can be partially assigned to their popularity in coffee, tea and snacks in the present society.
Brizek, M. G. (2014). Coffee wars: The Big Three: Starbucks, McDonald's and Dunkin'Donuts. Journal of Case Research in Business and Economics, 5, 1.
Jackson, S., Lee, P. L., & Bias, S. K. (2016). USE OF EXECUTIVE “GIVING” TO GUIDE ORGANIZATIONAL BEHAVIOR. Executive Ethics II: Ethical Dilemmas and Challenges for the C Suite, 159.
Lemus, E., von Feigenblatt, O. F., Orta, M., & Rivero, O. (2015). Starbucks Corporation: Leading Innovation in the 21st Century.
Qian, Y. A. N. G., & Xing, T. U. (2016). Starbucks VS Chinese Tea—Starbucks Brand Management Strategy Analysis in China. International Business and Management, 12(1), 29-32.
Rajasekaran, R. (2015). Starbucks' Entry into Tea-Drinking India. IUP Journal of Brand Management, 12(3), 45.
Reinhard, K. (2015). Differentiation as the key to success. A marketing plan for Starbucks.