The Company And External And Internal Environment Factors Marketing Essay


Coffee plays a important function within the context of drink. Coffee was a staple merchandise of the Union soldier ‘s diets with an allocation of ? 36 of beans for every soldier during the Civil War. From the mid-1960 so far, the norm of American people consume 3, 1 cups of java a twenty-four hours ( Sweet 2007, p.154 ) . In add-on, the big figure of consumer, from the USA to other major states, began imbibing Starbucks java on a regular basis because of its unique atmosphere and high category quality of java ( Larson 2008, p.6 ) . This study is an effort to look insight into Starbucks in the USA market and includes the analysis of assorted environmental factors and the industry in which the company operates. These political, economic and other factors have great impact over the company ‘s public presentation. . Huge experience and first-class trade name image are the company ‘s two major strengths. Other strengths, failings, menaces and chances are decently analysed in this study. Based on this analysis some specific recommendations are made in this study.

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1. Methodology

An effort had been put frontward to bring forth a study on Starbucks Company runing in retail java industry. All the informations are collected from assorted secondary beginnings like company web sites, on-line articles, books etc. This study provides the analysis of resources and capablenesss of the company and external and internal environment factors by utilizing some tools and theories including Pest, Porter ‘s five forces, Swot and Value concatenation analysis. At last recommendations have been provided on the footing of the findings of the analysis.

2. Brief Background of Starbucks

Starbucks started its journey in the twelvemonth 1971. It was founded by Jerry Baldwin, Gordon Bowker and Zev Siegl. Prior to the period of 1971 they were involved in roasting and selling land java, whole bean, tea and spices. There was merely one shop in the pike topographic point market of Seattle. Today there are about 16,706 shops throughout the universe. Among these shops 8,850 are straight operated by the company and remainders are licensed shops. These shops are located in over 50 states in the universe ( Starbucks, 2009a ) . More than 120,000 people are working in the company. Starbucks employees are called spouses of their company. Starbucks is chiefly renowned for offering premium category java. In add-on to java, the company besides offers handcrafted drinks and fresh nutrients like adust pastries, salads, sandwich etc. Starbucks is found to be committed to running concern responsibly. There are three countries that are chiefly focused by the company in the procedure of carry throughing the duties. These three are ethical sourcing, community engagement and environmental stewardship. The company ‘s headquarter is located in Seattle ( CNN Money, 2009 ) .

3. External Analysis

3.1. Plague Analysis

Plague analysis is a technique to see external environment and elements act uponing any companies and industries ( Porter, 1980 ) . Since Starbucks is a United states based company, PEST analysis is conducted concentrating on the US market.

Figure1. PEST Analysis

Political: There are several political parties that can act upon any determination of the company sing enlisting, occupation cuts, opening and shutting of shops, wages etc. Furthermore there is brotherhood in the organisation. This brotherhood is called Starbucks Workers Union which has great influence over the determinations sing working hours, pay, enlisting etc. ( Starbucks Union, 2010 ) .Also some ordinance and jurisprudence including revenue enhancement policy, deregulating, international trade duty, authorities and international stableness have a great impact on Starbucks. For case, the USA retreated of the ICA ( International Coffee Agreement ) which set export quotas for bring forthing and kept the java monetary value stable. As s consequence of this, Price controls and java quotas ended. Farmer in the USA had suffered and their net incomes had decreased before the deregulating was done ( Heavey 2008, p.3 ) .

Economy: Equally far as economic system of US is concerned it is to a great extent affected by the recent recession. In 2009 the existent GDP growing rate of the state was -2.4 % . Buying power of most of the Americans has declined and this has resulted in lessening in overall demand of about all the merchandises and services. Such state of affairs has affected the concern of Starbucks besides and it is reflected by the entire gross of the company ( Cardinal Intelligence Agency, 2009 ) .

Society: Equally far as society is concerned most of the people in US are found to be in the age group of 15-64 old ages. 82 % of all the Americans live in the urban countries. Population growing rate in the state is found to be every bit low as 0.977 % . However 99 % people in the state are officially educated ( Cardinal Intelligence Agency, 2009 ) . Such society is surely favorable for the concerns like Starbucks.

Technology: America is one of those states where engineering is an of import portion of day-to-day life. Each and every organisation in the state is heavy user of advanced engineerings. Organizations like Starbucks ever have the chance of utilizing high terminal engineerings to better their services and installations ( Central Intelligence Agency, 2009 ) .

3.2. Rival Analysis

Starbucks face tough competition from Dunkin Donuts, Panera Bread, Steattle ‘s best java and McDonalds. However, any forte java store or speedy service eating house can be considered as a chief rival of Starbucks. In the US market the company faces heavy competition from Dunkin Donuts and McDonalds. Different participants have different ways of deriving competitory advantages. For illustration, monetary value cuts, enlargement of production to increase their market portion. It is true that McDonalds is a chief rival of Starbucks, but Starbucks ‘s offerings are wholly different from that of McDonalds. Starbucks offer a life-time experience that changes clients ‘ manner of sing their life styles. It offers premium quality java at a premium monetary value ( Pitek, 2009 ) .

On the other manus, McDonalds is a speedy service eating house that is really popular throughout the universe. It has redefined the universe of bites and Burger. Starbucks besides offer bites, but that is non its chief offering. Dunkin Donut, nevertheless, trades with java and it is celebrated for that. The company was established about 21 old ages before the set up of Starbucks. Dunkin faced tough competition after the reaching of Starbucks and forced to modify its offerings. For case it came up with frozen java and debit java card after they were introduced by Starbucks ( DiCarlo, 2004 ) .

3.3. Porter ‘s Five Forces Analysis

Harmonizing to Michael Porter, the five forces that influence the construction of an industry are purchasers ‘ dickering power, providers ‘ bargaining power, competition among the challengers, menace of new entrants and menace of replacements ( Fulton et al 2008, p.2-6 ) .

Competitive Rivalry within an Industry

Dickering Power of Supplies

Dickering Power of Buyers

Dainty of New Entrants

Dainty of New Substitutes

Figure2. Porter Five Forces Analysis

Equally far as specialty java industry is concerned purchasers have strong bargaining power as they have several options. There is big figure of forte java stores and speedy service eating houses where people can come and pass quality clip. In order to pull more and more client each of these stores need to hold some singularity in their offerings. Starbucks is renowned for its alone java and in-store atmosphere. Equally long as such singularity is maintained clients are expected to lodge with the trade name ( Fulton et al 2008, p.2-6 ) .

Suppliers are holding medium dickering power as the industry deals with forte java. Companies like Starbucks depend to a great extent on their providers who supply all the inputs like java, milk, equipments etc. It is really of import to hold high quality natural stuffs at a cost that can be afforded by the company. Furthermore these stuffs should be supplied in clip. As a consequence providers have important sum of dickering power. However, being a globally celebrated trade name, Starbucks besides has some power with which it can negociate with its providers sing monetary value, quality and clip ( Fulton et al 2008, p.2-6 ) .

The US market is full of forte java stores and speedy service eating houses. As a consequence competition is found to be intense in nature. Each and every participant is seeking to better their offerings in order to pull more and more clients.

Menace of new entrants is found to be moderate to high. This is chiefly because it is non really hard to get down a forte java store or a speedy service eating house in US. However it requires batch of attempts to go a globally celebrated concatenation of java store that offers premium category java along with assorted other services ( Fulton et al 2008, p.2-6 ) .

Menace of substituent is found to be low as it is really hard to come up with merchandise that will replace java. Over the past century universe has seen several new drinks and drinks, but none of them has been able to replace java and its gustatory sensation. As a consequence Starbucks and other companies should be really small disquieted about the menace of substituent ( Fulton et al 2008, p.2-6 ) .

4. Internal Analysis

4.1. SWOT Analysis

Swot Analysis is used for happening out strengths and failing of any company and looking at chances and menaces of any company ( Mindtools, 2010 ) . These figures are the undermentioned ( Datamonitor 2009, p.17-21 ) :

Table1: Swot Analysis



Unique atmosphere

Huge trade names and established logo

Excellent production variegation: java, baked nutrient cadmiums etc.

Wide geographic presence

Strong research and development capablenesss

Dependant on the USA market

Dependant on java concern

Monetary value: expensive



Expansion into retail operation

Opportunity of incorporating vertically

Licensing partnerships and distributions

Powerful rivals

Dependant on discretional disbursement

Awareness of wellness hazard

Resources: Datamonitor, 2009


Major strength of Starbucks is its unique ambiance which is found at each and every shop of it. Most of the clients visit Starbucks shops either because of this ambiance or because of first-class quality of Starbucks java which is another major strength of the company ( Heavey 208, p.11 ) .

Starbucks is a immense trade name throughout the universe. Furthermore the company has immense experience in the forte java industry as it is in the concern for about three decennaries. In add-on to this Starbucks has excellent relationship with its providers who are chiefly responsible for the premium quality of the java. This is besides a major strength of the company ( Datamonitor 2009, p.17 ) .

Starbucks non merely offers java, but it offers handcrafted drinks and fresh nutrients like adust pastries, salads, sandwich, cds etc. Such a broad scope of offerings keeps the company much in front of its rivals ( Heavey 2008, p.12 ) .

Starbucks has begun runing outside the USA since 1987. Starbucks operated 1.979 operated retail shops and 3.134 accredited retail shops in 2008 and continues to spread out its presence through licencing partnerships. It is clear that a strong geographic presence can cut down the concern hazard in footings of specific markets and expand the grosss of company ( Datamonitor 2009, p.18 ) .

Starbucks has a strong research and development capablenesss which guarantee merchandise quality. The quality of its production is the nucleus strength behind of Starbucks ‘ trade name. It has well-built research and development squad and concentrate on quality and merchandise invention which helps prolong the company trade name value ( Datamonitor 2009, p.18 ) .


Starbucks is found to be to a great extent dependent on the US market. Most of its shops are located in this state. This is a major failing of the company because if tomorrow anything incorrect happens in US, the company will fight to last ( Heavey 2008, p.12 ) .

Starbucks is chiefly renowned for its java. In other words the company is excessively much dependant on java concern. This is another major failing of the company ( Datamonitor 2009, p.18 ) .

Starbucks charges their java at premium monetary value which is higher than the norm of market monetary value where rivals try to cut down their monetary value to derive advantage of competition ( Heavey 2008, p.12 ) .


Starbucks has the chance to concentrate more on the developing states like India where there is no Starbucks shops. Developing states like South Africa, Brazil should besides be given more importance by the company ( Heavey 2008, p.12 ) .

Starbucks is chiefly into the roasting of java. As a consequence it has the chance of incorporating vertically. The company can put in bring forthing java ( Heavey 2008, p.12 ) .

Starbucks licenses the rights to market and bring forth its merchandises through partnerships both internationally and domestically. For case, in partnership with Unilever and PepsiCo entered a licensing understanding for selling and fabrication of Starbucks Tazo Tea ready-to-drink drinks. Starbucks besides licenses the right to administer its trade name merchandises ( Datamonitor 2009, p.19 ) .


Intense competition and powerful rivals are the chief menace for Starbucks. There are several local participants who offer or seek to offer the same services that are offered by Starbucks. In add-on to this there are rivals like McDonalds and Dunkin ( Heavy 2008, p.12 ) .

The planetary economic downswing is the other menace for Starbucks because of depending on its clients ‘ discretional disbursement. As a consequence of this, consumers have less money for these discretional purchases due to occupation losingss, decreased entree to recognition ( Heavey 2008, p.13 ) .

There is addition in consumer consciousness of wellness hazards including fleshiness in the USA. Starbucks ‘ merchandises contain dairy merchandises, sugar, caffeine and other active compounds which can take to a assortment of inauspicious wellness effects. This addition in wellness consciousness within American consumer could diminish significantly the demand for the Starbucks ‘ nutrient merchandises and drinks ( Datamonitor 2009, p.20 ) .

4.2. Analysis of Resources & A ; Capabilities and Competitive Advantages of Starbucks

Distinguish between the resources and the capableness of the house is of import. Harmonizing to Grant, “ resources are the productive assets owned by the house ; capablenesss are what the house can make ” ( Grant 2008, p.130 ) .

The resources of Starbucks can split into four classs: Human, Physical, Financial and Intellectual capital. The store that they own for functioning services and goods, any vehicles that they own for transporting goods and all equipment that is used to make merchandises are physical resources of Starbucks. These resources are younger and a really good status that allow Starbucks to retain its current success. The cognition, worker adaptability and accomplishments are human resources for Starbucks. Staffs who work for Starbuck from CEO to waiter go a company ‘s “ most valuable plus ” ( Heavey 2008, p.8 ) . These staffs play important function in making the celebrated and alone ambiance in all the Starbucks shops ( Starbucks, 2009b ) . In add-on, fiscal resources are hard currency, capital, creditors or debitors. Starbucks believe “ the less debt they are in, the more positive their resources audit expressions ” ( Heavey 2008, p.8 ) and besides have a great many of working capital including groceries, assortment of whole java beans, equipment etc. Intellectual capital including patents, trade name, client databases etc. can make value for companies. Starbucks ever protect this intangible information. One of the few ways used by Starbucks is to guarantee its employees sign confidentiality understanding to forestall any leak of cognition to its rivals ( Heavey 2008, p.8 ) .

Starbucks has assorted capablenesss. More of import 1s of these that allow Starbucks to stand apart from its rivals are their market leading, superior retail location and atmosphere and their supply concatenation operations. Starbucks has the big market portion that provides Starbucks the capableness to put industry tendency. Besides superior retail locations provide Starbucks powerful capablenesss over its rivals. Shops are exposed with good local demographic composings and higher pes traffic and operated with good ambiance including music, magazines and wireless cyberspace etc. Supply concatenation operations are superior to its rivals in java industry in footings of the quality of natural stuffs should be supplied in clip and transmutation rate ( Larson 2008, p.55 ) .

Harmonizing to Karami ( 2007, p.121 ) Strong and sustainable resources and capablenesss allow to companies gain competitory advantages. Porter value concatenation analysis and VRIO model are used in this study to place Starbucks nucleus competencies that provide companies with a ‘competitive advantages ‘ ( Gates 2009, p.10 ) .






Firms Infrastructure

Human Resource Management


Retail Gross saless

Figure3. Porter Value Chain Analysis and VRIO Analysis

VRIO Framework




to Imitate


S or W



Firm Infrastructure

( Fundss )








Human Resource


( civilization )


























( Customer Relations )








Resources: Gates 2009 p.10

The VRIO analysis based on Porter value concatenation illustrated above indicates Starbucks nucleus competencies. These countries are human resources direction, selling and retail location.

Human resources direction: Employee is one of the most important beginnings of sustainable advantages. As a consequence, Employees are equal within organisation and trained, developed and rewarded by Starbucks ( Heavey 2008, p.9 ) . The empowering civilization and employee stock ownership programme aid to craft exceeding work force. It means that employees are encouraged to look themselves as a portion of concern and are empowered by director to take determinations without the permission of director ( Gates 2009, p.10 ) .

Selling: Starbucks has created its trade name which is good known all over the universe by understanding people ‘s life style, values and demands. Starbucks spends of import per centum of its gross on selling and advertisement including on-line advertisement, hoardings. These originative selling will go on to supply sustainable advantaged ( Gates 2009, p.10 ) .

Sales/Retail Location: Service is important factor that sets Starbucks apart from its rivals. All Starbucks shops are located in much higher pes traffic and have good shopfronts. Important thing is that approximately 85 per centum of Starbucks gross comes from its retail shopfronts ( Gates 2009, p.11 ) . Starbucks is such an administration that realised the importance of club-like ambiance in a java store where people can hold a cup of premium quality java with beautiful music, magazine, wireless cyberspace etc. It is a alone experience, a different life style. It is frequently said that “ people do non purchase java at Starbucks ; instead they buy the alone Starbucks experience ” ( Kirbyson, 2004 ) . Such alone ambiance and premium quality have helped Starbucks to derive competitory advantages.

While there are rivals that may able to engage much the same people, the combination of employee authorization, good quality work atmosphere, passion for trade name and repute excellence makes Starbucks ‘ gross revenues scheme a uninterrupted competitory advantage ( Gates 2009, p.11 ) .

5. Recommendation

Starbucks should give more importance to the emerging states in Asia, Africa and Latin America. States like India and South Africa should be chosen for opening new Starbucks shops. Economies of these states are turning at a high rate. Today, people of these states have more money to pass and their disbursement capacity is increasing twenty-four hours by twenty-four hours. Furthermore they are really much aware of the trade name name of Starbucks. As a consequence it can be expected that people in these states will welcome any determinations sing the gap of Starbucks shops. Initially the company can get down with accredited shops in these states. Once it has clear understanding about the consumers ‘ gustatory sensations and assorted environmental factors, it can get down running its ain shops.

Starbucks should vertically incorporate. The company can get down bring forthing java. This will surely cut down the extent of dependence of the company on its providers. Starbucks can organize strategic partnerships with some of its of import providers.

Since Starbucks is a financially strong organisation, it can get down new concerns. For case, the company can get down a fast nutrient retail concatenation like McDonald or KFC. If this can be done successfully, so the company will be financially stronger and far in front of its rivals.

6. Decision

Starbucks is one of most successful companies in the universe. It is a United states based company that has adopted some highly effectual schemes and implemented them more efficaciously. It is a financially sound organisation that has presence in most of the of import markets in the universe. Several macro-environmental factors that are likely to hold great impact over the concern of Starbucks are political factors, economic factors, technological and societal factors. Starbucks should capitalise on assorted chances that it has in order to retain its success in the long tally. It should work on its failings and seek to change over them into strengths.

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