The current generation is characterized by technological advancement and an increase in globalization. The incorporation of computer technology in the production process has allowed business organizations to increase creativity and innovation. Online traffic has also increased competition among business organizations, thus reducing average sales in the organization (Van Reenen, 2018). Starbucks is an example of a business that has experienced reduced sales due to the increase in online competition from other coffee companies across the globe. Therefore, there is a need to determine how Starbucks can increase its sales to maintain a positive competitive advantage in the market industry.
General Environment Analysis
The general environment analysis of Starbucks portrays that the organization has achieved success by incorporating strategic management in the business. The management of Starbucks is headed by the CEO of the organization Kevin Johnson, who was a former CEO of Juniper Networks and a 16-year-old pioneer of Microsoft organization. Johnson incorporated strategic use of information and computer technology in the business to achieve a competitive advantage in the current market industry. The CEO took over the company in 2015 and actively engaged with the company’s digital operations by supervising Starbucks’ information technology and supply chain management.
Starbucks has managed to acquire a significant share of the market industry through expansion into new markets and innovation of new products in the coffee line business. As of the year 2020, Starbucks operated over 30,000 locations worldwide. The business organization is situated in about 70 different countries, which allows it to expand its share of the market industry (Kee et al., 2021). Through creativity and innovation, Starbucks’ business organization attracts customers by introducing new products and services that set it apart from its competitors. Starbucks has, thus, acquired a significant share of the competitive coffee industry through increased creativity and business expansion.
Starbucks organization faces competition in different countries including the US, UK, China, and India. In US, Starbucks is the leading coffee distribution house in the US. It, however, faces competition from Dunkin, which has about 9.5 thousand stores compared to Starbucks 14 thousand in the US. In the UK, Starbucks faces stiff competition from Costa Coffee, which is the leading coffee house in the UK. The UK is mostly known for its tea drinking culture; however, Starbucks has significant market potential in the UK. In China, Starbucks mainly faces competition from the homegrown Luckin Coffee, which was founded in 2017. Before 2017, Starbucks dominated the China coffee consumption market while competing with McDonald’s and Costa Coffee. Lastly, in India, Starbucks is expanding its presence while facing stiff competition from local coffee houses like India Coffee House. However, Starbucks remains the leading coffee production house globally.
Starbucks corporation’s internal analysis highlights the financial, operational, and resource analysis.
Financial Analysis-The company’s financial analysis portrays a healthy revenue growth from 2015 to 2020, represented by a 13.7% increase (Hurriyati & Sultan, 2020). However, the company’s revenue was significantly impacted by the emergence of the COVID-19 pandemic, which saw a -5.9 drop in revenue.
Operational Analysis – The company recorded an operational loss in 2020, resulting in an operating margin of -2.2% in 2020. The efficiency ratios of the business, on the other hand, portray that the company has gained operational efficiency.
Resource Analysis – The business organization also enjoys remarkable asset and inventory turnover. The organization has established operational strategies to enable them to mitigate the pandemic. The use of digital tools in conducting the company’s operations is a practical operational strategy in the business. Therefore, human resources and digital tools are the most essential Starbucks resources amidst the Coronavirus pandemic’s emergence.
The strengths of Starbucks Company include the incorporation of strategic management in the organization. Through strategic management, the company has increased sales through technology applications (Hurriyati & Sultan, 2020). The company also improves the quality of products and services by improving the welfare of the employees through comprehensive work benefits and compensation packages. Lastly, innovation and creativity are also significant factors that have influenced the success of the Starbucks organization. Creativity allows the company to provide customers with services that exceed their expectations and thus, achieve customer satisfaction and loyalty.
The weaknesses of Starbucks organization include the high prices of the products, which reduces the demand for the products. The business organization is also affected by the ease of imitability of the products produced by the company. Ease of imitability increases the level of substitute products in the coffee industry, hence increased competition (Herningsih et al., 2019). Lastly, the organization is also affected by the production of generalized standard products. The current market industry is characterized by increased diversity. Some of the products produced by Starbucks do not reflect the cultural preferences of the customers in other geographical locations. The business organization needs to mitigate its weaknesses to maintain its competitive advantage in the market industry.
Starbucks organization has various opportunities in the current market industry. Globalization has allowed the business to expand its operations to developing coffee consumption markets globally. Through diversification, the business has managed to introduce different products and services like the sale of gift cards and the use of technology applications in the business. Creativity and innovation is also an opportunity that allows the business to attract and retain customers in the business. Innovation allows the management of Starbucks to exploit the emerging coffee trends, introduce new products, and strengthen its presence in the coffee industry. Lastly, Starbucks organization faces threats of competition from developing coffee houses globally. The organization also faces stiff competition from established coffee houses. In recent times, the operations of the business were significantly threatened by the COVID-19 pandemic that resulted in the closure of over 2000 Starbucks outlets worldwide. The ongoing global economic recession has also threatened to reduce the sales of the organization. However, the management of Starbucks has incorporated digital technology tools to allow them to operate during harsh economic times. Strategic management is, therefore, a key attribute of every business organization that wishes to achieve its set goals and objectives.
In the current generation, organizations are encouraged to embrace information and computer technology to allow them to integrate digital tools in the operations of the business to attain a competitive advantage.
Herningsih, N. M., Tchuykova, K. S., Is, W., & Mn, Q. (2019). The Starbucks effect: It affects on nearby organization. Journal of Critical Reviews, 6(5), 160-165.
Hurriyati, R., & Sultan, M. A. (2020). Analysis of the relationship between consumer-based brand equity, experiential marketing, customer satisfaction, and customer loyalty at Starbucks coffee in Karawang. JRB-Jurnal Riset Bisnis, 4(1), 58-69.
Kee, D. M. H., Faheem, M., Al-Anesi, S. A. L., Imran, M. Y., Hazrul, M., & Khairi, A. A. (2021). Navigating through the COVID-19 crisis: A case study of Starbucks. International Journal of Accounting & Finance in Asia Pasific (IJAFAP), 4(1), 24-36.
Van Reenen, J. (2018). Increasing differences between firms: Market power and the macro-economy. Centre for Economic Performance, LSE.