Business strategy is the set of activities and works which allows a company to gain long term goals. This is such a procedure that helps in identifying the mission, vision, and goals of an organization and also formulates accurate policies or plans to attain such objectives. This is the important component of a firm as without an appropriate plan, an organization cannot smoothly run its business operations and its functions. The report is based on Starbucks is an American international chain of coffeehouse and roaster reserves and its headquarter is located in Seattle, Washington. It is the world’s largest coffee house which gains the attention of several customers towards their products or services. The company operates a business in around 30,000 places in more than 70 nations.
P1 Analyse the impact and influence of the macro-environment on the organization and its strategies
Starbucks is an international brand which was incorporated in 1985, November 4. This is well known for the retailing of special coffee and coffee roaster along with operations in around 82 centers all over the world. Starbucks also provides a variety of range for coffee and tea products for its customers and license their trademarks via channels like grocery, licensed stores, and food services.
Starbucks highlights its mission as “to cultivate and arouse human fortitude – one cup, one individual, one locality at a time.” And their vision is to “treat customers as family, be trustworthy, and provide all they have.” The vision and mission of Starbucks move around the customers to make them one unit for working together and be reliable towards them (Adner, 2017).
Starbucks’ retail objective is to reach the top of the retail industry as the leading retailer brand of coffee which will sell the top quality coffee and other related products for their customers and also providing them with a special experience in Starbucks stores. Starbucks focuses on the goal of reaching to every individual by providing the services of coffee products and other goods to create a neighborhood with togetherness all over the world.
The unwavering focus on the quality, care for employees, regular product advancement, amazing customer service, and their drive to be all over are the major core competencies for Starbucks as from the very start they have been focusing on providing the best quality products of coffee and fresh materials that the customers will be amused by them.
Pestle analysis is a kind of strategic analysis tool for analyzing the impacts of external issues on an organization (Ahmad, et. al., 2017). The six factors which impact the business of Starbucks are political, economic, socio-culture, technological, legal, and environmental.
Political: the sourcing of raw materials for the products and following laws and regulations are the major political factors that impact Starbucks along with tax policy and employment laws.
Economic: global economic recession, rising labor, operational costs, taxation level, environment inflation are some of the factors which are impacting the business of Starbucks in falling profitability (Alberti, et. al., 2017).
Socio-culture: the older generation is retiring from the spender party of the Starbucks which has caused due to the changing family patterns in USA and Europe along with consumer preferences, working patterns lifestyle of population, level of education and values are also changing which impact on the business of Starbucks.
Technological: Starbucks faces various technological impacts like innovative technology, emerging mobile wave, or web services which are impacting the business as a need for the enabling of services used by the customers while enjoying services.
Environmental: environmental factors like the rules and regulations, disasters in countries, or global warming are some factors that impact Starbucks ‘ business factors. Business practices for international activists are impacting largely on the services for consumers’ trust issues (Anwar, 2018).
Legal: legal factors like violating laws or regulations in the market place along with the licensing regulations or trade regulations impact Starbucks business policies.
M1 Analyse the macro-environment to determine and inform strategic management decisions
Strategic planning is such a process through which a company can create a strategy and develop effective decisions regarding how to allocate its resources to follow these tactics. This will assist in providing accurate guidelines to execute this strategy in a better manner. The macro-environment helps in analyzing external factors that may create negative influences on Starbucks’ functions and operations. With the use of PESTLE analysis, the company can easily examine external aspects that may develop consequences and create an impact on the business activities effectively. It helps examine the market situation where a firm attains a great position along with its commodities and mainly concentrates on increasing sales of existing goods to the market area (Carlier, et. al., 2019). The major purpose of the macro-environment is to focus on enhancing business growth and development level. Along with this, the company needs to focus on analyzing and examining the business functions to attain desired goals.
D1 Information and data applying environmental and competitive analysis to produce a set of valid strategic directions
Based on the results of the PESTLE analysis, strategic management decisions will get quickening at a higher level. There are different strengths and weaknesses of the PESTLE analysis can be used to develop effective decisions for the business. PESTLE is an important model that provides an accurate idea regarding the role of external surroundings in the context of Starbucks. Along with this, different factors can provide aspects of the company and the large market. PESTLE analysis gives all the required information about the huge aspects of the external environment that can assist in understanding the business conditions.
P2 Examine the internal environment and capabilities of an organization
Internal analysis is important for understanding the internal capabilities. The organization’s competency, competitive viability, and cost position can be explored using the internal analysis. The internal analysis provides important information regarding the various factors of an organization such as opportunities, strengths, weaknesses, and threats. Along with this understanding, the role of the internal environment is very important for the organization.
Strength: there are various strengths of Starbucks in which brand image, financial performance are important to create a strong influence in the market place. Starbucks ‘ increasing growth in stores and international supply chains are major strengths for the business along with the enhancement in quality, taste, and standardization for the efficiency, strategic planning, or employment treatment. These are the most important strengths of the Starbucks business culture (Chereau, et. al., 2019).
Weaknesses: Starbucks has various weak points in terms of business like high prices for the products offered to the customers, limit the ability of the products, tax avoidance, the generalized standard of products and procurement practices which make the business suffer due to the negative impact of the factors for the business processes. Criticism has been faced by the company for these weaknesses as they do not offer any special or unique products which can match the high prices.
Opportunities: opportunities are the vast sea of improvement that can help Starbucks to enhance their business on a larger aspect. They have opportunities for expansion in developing markets such as India, or other Asian countries. Product specification and diversification in business is another opportunity that can improve the revenue growth for the company to target a specific market. Introduction of the latest products, partnerships or alliances, delivery services, price differentiation, etc is a major opportunity that can efficiently improve the effectiveness of the organization (de Oliveira, et. al., 2017).
Threats: opportunities come along with threats for failure or negative impact of actions. Starbucks has various threats ahead like competition, imitation, global recession, rising prices of raw materials which can highly impact the regular working of the company all over the world due to these factors. The threats are required to be handled with care for the progress of the organization in the stores as per the customer’s desires.
VRIO and VRIN framework are the important tools for the understanding of internal resources for the analysis. This framework helps in the analysis of internal procedures for evaluating of resources and capabilities of the Starbucks organization which is very firm for the strategic model knowledge. The analysis can help in finding out the valuable and rare resources for Starbucks organization which are impacting on the issues for creating a competitive advantage for the organization (Massa, et. al., 2017). Starbucks needs to follow the single resource which is very important to hold on to the competitive advantage for long period in the marketplace. This will help in understanding the major factors for holding on to the success factors for the organization.
M2 Evaluate the internal environment to assess the strengths and weaknesses of an organization
McKinsey 7S Framework
It is an effective framework that can be used in a system of the company to identify different levels, forces, and methods of internal authority. Such can be used with the assistance of various other influences properly. This is a strategic vision for groups which includes teams, companies, and business units. The 7S define as systems, strategy, structure, style, staff, shared values, and skills. It helps to get to analyze the level of interior examination.
In this, the Structure of Starbucks is essential to enable because they are working with a three-layer scheme in a better manner. They have an effective approach to perform work with critical effectiveness and many more (Misra, et. al., 2017). It has been analyzed that they have shared the required vision that is carrying out other parties within systems. In an organization, the working system is good and sound where all the employees are performing great work to reach potential goals. They have skilled staffs that understand technical abilities. This is required for a company to concentrate on maintaining systems and processes within an organization as they are work for gaining better results.
P3 Porter’s Five Forces model evaluate the competitive forces
With the help of five force analysis, Starbucks will require to organize various understanding in such areas. Porters five force framework is an effective method that helps in examining the competition and rivals’ strategy appropriately. It demonstrates the industrial company economies to derive the forces which evaluate the competitive intensity and thus, it also enhances the attractiveness of the sector in regards to gaining income or profitability. Starbucks can also use different things that are described as follows:
Buyers’ Power: In such an analysis, the buyer’s power of purchasing is very high. The influences of buyers have directly impacted the company system as the industry has the vision to perform effective work as per the customers. When customers have power then Starbucks also offers an affordable rate of products and services to them which develop relation more strong with their desired buyers. Starbucks is facing major competition that means a profusion option for the customers. Today’s buyers are well informed and aware of all the product details (Pati, et. al., 2017). If Starbucks increasing its goods rate then its customers are switch to another company which may create a huge loss to the firm. In this situation, Starbucks provides a lower price of products to its consumers.
Suppliers Power: In this, Starbucks is evaluating the suppliers’ rates of a specific product. The suppliers also offer a high rate of products that are not easily getting by the company in a large market place. This will show the power of suppliers when they are providing a unique commodity to the business and it has demand among customers. It has been analyzed that the power of suppliers is less effective and efficient.
Threats of new entry: In this strategy, Starbucks has a very low level of threats and issues for the new entry. There are various new entry problems and issues in such a system but the industry takes heavy investment that may not influence the regular businesses operations. The company needs to evaluate major entries that may attract their customers by providing a lower rate of products (Ross, et. al., 2017).
Threats of substitution: For Starbucks, there are different substitution products and companies that are present or available which may create issues for their business functions and activities. The commodity which has been provided by them can be simply replaced effectively. Starbucks cannot replace its products and features but services can be changed as per the requirement of customers. It is analyzed that all the Starbucks products have some substitute item. Items Starbucks includes tea, food items, and coffee. Most people prepare tea and coffee at home as well. Also, there are certain replaceable items of these products like drinks, juices, and other beverages.
Competition: In the case of Starbucks, the competition is very high in a large marketplace where they are established or positioned their new products. Based on rivals, the main issue can be maintained and managed. There are various competitors of Starbucks such as Costa Coffee, Café coffee day, Caribou coffee, Tim Hortons, Peet’s, and Dunkin’ Donuts.
In the context of Starbucks, there is a main two key that ensures the high level of problems and its probability affects. The major issue is the technological advancement in which companies need to update and adopt new or latest technology that can help them in increasing growth and development level. By this, they can develop and produce unique coffee that attracts customers as well (Saiz-Alvarez, 2019). Another one is raw materials in which they are required to lower the raw materials costs which can directly impact their business operations.
M3 Strategies to improve competitive edge and market position
Ansoff matrix is an effective strategic planning method that helps in providing a framework to assist senior managers, executives, and marketers to develop tactics for future development. To the higher expansion and growth, Starbucks needs to use different growth tools and techniques. Such techniques can be used for the increased growth of the company. It is analyzed that market development is important as it can be used by a large number of the organization. Besides this, it assists in achieving desired goals and targets effectively. Starbucks uses the diversification technique which is essential for business development and success. Starbucks also uses the market penetration method as it helps the company in dealing and make contact with a diverse range of customers at both the national and international levels.
P4 Applying theories, concepts, and models interpret and devise strategic planning
The business management of Starbucks needs to execute effective tactics for evaluating the current marketing situation. With the assistance of such strategies, Starbucks will be capable for sustain its operations in uncertain marketing conditions for a long period. The strategies help in providing guide the administration of the company to develop plans and policies and also focus on eliminating arising risks.
Porter’s generic model is mainly used by a company for formulating plans to obtain competitive benefits in a large market place. This is used to develop plans in enhancing the share of the market of Starbucks. This model is providing different ways to manage Starbucks for gaining the purpose of competitive advantages (Timms, 2017).
Cost leadership strategy: It is mainly determined by developing and executing plans associated with the value of commodities of Starbucks. Through the implementation of cost strategic management, the company can easily ale to gain effective competitive advantages properly. Besides this, businesses also concentrate on reduces the cost of their products to attract several customers.
Differentiation strategy: It is that strategy in which products will be launched in the market along with various numbers of variations and fluctuations. With the assistance of variation, differentiation tactics can be better executed for further growth and development levels.
Focus strategy: Such a strategy will assist to look at a particular market form. In the hugely competitive market area, it will not very effective and efficient. This strategy is not suitable and appropriate for the Starbucks Company (Usry Abdullah, 2019).
Model of Bowman’s strategy clock:
In the case of Starbucks, diversification strategy is one of the essential tactics and this is providing a wide range of products. If the company does not gain success then they will bear a huge loss. On the other hand, strategic alliances can be developed by Starbucks along with other organizations. The rates of the raw materials have been enhancing and to resolve it, the company can develop SA with different companies. Globalization is another method for Starbucks in which various problems are significantly organized.
A strategic plan is a continuous procedure where decisions and plans are taken for developing the best possible use of required resources (Tsai, et. al., 2017). Starbucks management can concentrate on using the cost leadership strategy which is effective and executed by business operations. There are different strategic plan for Starbucks are described as follows:
Reduces the cost of goods or facilities – Starbucks needs to focus on reduces and lower the product rates which helps in gaining the attention of desired customers.
Providing innovative and improved goods – It is required for the company to developing unique and innovative types of products which assist in increasing goodwill and reputation of the organization in a large market area.
M4 Strategic management plan that has tangible and tactical strategic priorities and objectives
Priorities and Objectives:
- Enhancing sales volume by 20%
- increasing customer satisfaction level by 10%
- Focus on rising 5% market share
Different aspects of strategic management can be used for developing plans and policies. Such factors are capable to form strategic objectives and priorities which can make sure about the improvement of company operations. Differentiation strategy helps in improving policies and the growth of an organization.
From the above-described report, it is concluded that the role of the macro-environment helps in understanding their needs and ensure how such requirements can be essential for the further growth of a business. As per the evaluation of macro surroundings, Starbucks can develop a strong system that can assist them in continuous development and increase efficiency. PESTLE analysis is described in this report for analyzing external factors that may directly or indirectly affect business operations.
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