Company Analysis: Starbucks Coffee - Essay Example

? Company Analysis: Starbucks Coffee Company Analysis: Starbuck Coffee Introduction Starbuck Coffee is a multinational beverage company whose presence in the market is felt across the world. This is due to its appropriate organizational structure, models, corporate strategies and ability to use the opportunities in the market to have competitive advantages over its main competitors. This paper gives a critical analysis of Starbuck Coffee including though the SWOT and PEST analysis models to determine the basis for its growing success. The organizational culture of the company has also been discussed in this paper in relation to its impact on the business activities. Recommendations are given at the tail of the paper as a suggestion of appropriate strategies which could ensure continued growth of the company both in the local and international market. The Situation of the Organization Starbucks Coffee is a multinational coffee chain whose headquarters are in Washington. The company is rated as the largest coffee corporation in the world. Starbucks Coffee has internationalized into more than 55 countries across the world with over 18 thousand subsidiaries (Lockyer, 2009, p.9). Most of its branches are within the US, Canada and the UK. Starbucks deals in coffee, sandwiches, salads, snacks, other cold and hot drinks and pastries. The company began in 1971 as a local retailer of roasted coffee in Seattle and it has grown rapidly ever since. It was in the mid 1990s that the company expanded into the international market. This started the opening of many stores outside the US which is attributed to the company’s appropriate organizational theory, structure, culture and corporate strategic plans (Marcial, 2005, p. 109). Currently Starbucks Coffee is the most competitive coffee company in the world coffee market. The company has its own buildings across the world with some branches distributed in various institutions such as schools, airports and malls in different countries. This makes the company the largest coffee chain in the world and this is due to its strategic goals and objectives. The core objective of Starbucks coffee is to be recognized and respected as the best coffee brand and other specialty beverages. Hence the company continues to expand and grow as the main strategy of meeting its goal. The company also embarks in retaining its customers through producing high quality coffee and diversifying into new coffee brands (MarketWatch, 2010, p. 29). The growth of Starbucks in the international market is also due to its ability to make meaningful use of the opportunities in the market through capitalization and investment into new markets outside the US. Motivational theories demonstrate that a company must value its staff because of the basic role they play in the success of attaining goals and objectives. This is through proper compensation, staffing, training and development of the human capital (Jargon, 2010). The ever growing success of Starbucks Coffee is majorly promoted by its staff that is treated very well by the company management. The happy employees of the company all of whom are paid above the minimum wage are also motivated by good working condition and various benefits. As a result the employees act to retain the customers of the various branches of the company. The human resource group of Starbucks employs students in its branches within institutions of learning and hence providing opportunities for all. The relationship of the company with surrounding communities is desirable through its social corporate responsibility which has ensured preservation of the environment with the use of recyclable packaging (Thompson & Arsel, 2004, p. 641). Apart from normal business activities, Starbuck Coffee contributes to charitable organizations. The charity work of the company focuses on charities such as those involved with the homeless, environmental conservation and HIV/AIDS research. This demonstrates how Starbucks acts as an influential force both for the market and the community surrounding its subsidiaries. Organizational Analysis Organizational structure The corporate governance of Starbucks is an important force in the achievement of the company’s goal and objectives. The organizational structure of the company is well organized with a chairman and a CEO under who are senior executives. The levels of the management in the company fall under strategic, tactical and operational management levels with the subordinates falling at the bottom of the structure. This arrangement ensures that each level in the company management has specified roles. In general, the roles and responsibilities of the managing team and all staff within Starbuck Coffee are aimed at ensuring the mission and vision of the company is attained (Lockyer, 2009, p.9). The top executives of the company are responsible for making strategic decision such as international expansion. Moreover, decision on the strategic plans including budgeting for future expansion is part of the responsibilities of the top executives. The tactical managers make decisions on matters such as staffing, training and development and supervision of operational managers. The operational level management is responsible for controlling the daily today activities of the company within its branches. Subordinates make the majority of the company’s human capital and they are responsible for the preparation of the coffee beverages, serving the customers, taking and executing orders. The company staff thus acts as the most influential force which determines the success of the company. As a result, the company values its employees through admirable pay packages, good working condition, training and development (Calabrese, 2011, p. 19). The system theory is the center of the company’s management and operation. This is due to its large size with many operations and branches in different countries. The company is a system with various subsystems which operate to meet a common goal and objectives. The top management of the company controls the operations of the subsystems to ensure that they do not diverge from the common vision of the company. Technology is applied by Starbuck Coffee in the management of its diverse resources within the system and its subsystem. Business applications and information systems such as Management Information Systems are used to manage finances, human resources and the assets of the company. These systems increase the efficiency and the effectiveness in service delivery and the movement of the company’s products along its supply and value chains (Jargon, 2010). Organizational change The changes within Starbuck Coffee which have played a great role in its growth include the application of modern technology in management, production, business activities and control. Trough these changes, the company has diversified its products and brands and as a result grown into new markets such as the energy drink market (Farchy & Rappeport, 2011, p. 17).The company has updated its coffee equipment through new acquisitions to keep pace with technology and this has improved the aroma of its coffee and the quality of al beverage products. Starbucks acquired The Coffee Equipment Company as a corporate strategy of making its products better and hence grab the largest share in the market. However, the top executives of the company ensure that the changes in the organization management and operations do not erode the rich culture of the organization (MarketWatch, 2010, p. 29). The changes that Starbuck make are aimed at ensuring that it survives in the competitive market especially from fast food business chains such as the McDonalds. The coffee industry is characterized by high prices of raw materials and competitive prices. Therefore Starbuck Coffee embarks in applying technology to increase the efficiency of production at the same time reducing the cost of manufacturing (Thompson & Arsel, 2004, p. 636). This has enabled the company to meet the increasing demand in the market by selling at relatively low prices. Furthermore, the quality of the company’s products and brands has been increased as a result of innovative production and qualified manufacturing expertise. These are the strong forces behind the increasing popularity of the company in both the local and international market (Calabrese, 2011, p. 20). SWOT Analysis The main strength of Starbuck Coffee is its dominance in market through the already established large market share. The ability to dominate in the market is due to the immense resources available to the company. Starbuck is thus able to purchase its competitors as demonstrated by the numerous acquisitions it has had in the recent past (Thompson & Arsel, 2004, p. 634). The company has adequate resources which enables it to buy a large quantity of supplies and as a result produce more products as compared to the competitors. The advantage of purchasing supplies in bulk is due to the lower costs involved. This makes the company provide competitively low prices for its coffee brands which puts it at a much better position in the local and international markets and thus its ability to beat the competition in the market. The strengths of Starbuck make it narrow the competition to a few competitive producers such as Nestle, McDonalds and Kraft (MarketWatch, 2010, p. 31). The threats and competition that Starbuck Coffee faces include regional coffee retailers and shops such as Tim Horton’s. Fast food chains and restaurants are also major threats to Starbuck Coffee. Moreover, convenience stores and gas stations are outlets which pose a big threat to the company’s business. This explains the company’s corporate strategic plan of ensuring that appropriate measures are used to beat the completion and hence become the market leader in the beverage business (Calabrese, 2011, p. 18). The big coffee retailers such as Nestle are overcome through marketing strategies and pricing by the company. Despite the competition, Starbuck is currently leading in the coffee business and therefore is ahead of its competitors in terms of market share, brands and business size. The opportunities available to Starbuck Coffee include emerging new markets in the international community into which more investment should be directed. Technology is a significant opportunity that the company has which would be utilized in production of high quality and variety of brands with efficiency and low cost. This is possible through acquisition of companies which specialize in coffee equipment. Utilization of such opportunities will enable Starbuck to have a competitive advantage through a larger market share, loyalty of the customers. This is achieved through provision of quality at prices which are relatively lower as compared to those of the major competitors (Farchy & Rappeport, 2011, p. 17). PEST analysis The environmental factors have an impact on the success of a business enterprise (Hiriyappa, 2009, p. 23). The analysis of the political environment around Starbuck Coffee shows that the policies of the federal government impacts on its progress and growth. The government policies are designed to prevent monopolization of industries. Therefore the domination of Starbuck in the beverage industry is bound to government regulation. The internationalization of Starbuck means that the global economy has an influence in its success. The performance of the host countries in the exchange rate affects imports, export and taxation of the company’s brands. The economic forces implicate on the market mix especially the prices but there is a general economic recovery in the global market which is promising to the consumers (Calabrese, 2011, p. 19). The social environment has influenced the promotional and advertising strategies of Starbuck Coffee. This has caused the company to employ advertising via social network sites because the consumers no longer get intrigued by the traditional methods of advertising. The technological environment is a driving force in the beverage industry especially in production, management and promotion. Technology is playing a vital role in connecting people in the modern business environment through interactive media, social networking, and mobile devices such as smart phones and thus communication of business information has been enhanced. Organizational culture The culture of Starbuck is parallel to its mission, vision and business objectives. The business culture gives Starbucks a unique identity in the market. The activities of the company are focused at Nurturing and inspiring the spirit of the consumers who are the company’s customers (MarketWatch, 2010, p. 32). The various branches of the company are customer focused in service and product delivery regardless of the region of operation. The management of the company values the value of its employees who are enabled to work at a motivating environment and conditions which justified the happy customers of the company and their loyalty to the Starbuck brands. Recommendations Starbuck should concentrate in continued improvement of quality of its products and diversification of brands as the most appropriate way of beating the competition. Therefore Starbuck should differentiate itself from coffee shops and convenient stores in the quality and product range of its beverages and brands. The company should use the opportunities available in the beverage market such as the weather changes. During winter for example coffee sales are likely to increase. Therefore the production of the company’s brands would be strategically planned to cater for such opportunities. The opportunities in learning institutions such as the demand in colleges should be the main target of the company especially in its international strarategic plans for expansion. Marketing and promotion being a core function of business success must be prioritized in the strategic plans of Starbuck Coffee. This is because the company is not alone in the beverage market and therefore competitive advantage should be gained through appropriate marketing and promotion of its current and new brands. This will increase the market share of the company within the different regions in which it operates. The social cultural aspect must also be taken into consideration in the marketing strategies of the company because of the diversity of cultural beliefs in different regions and the potential impact they have on the company image. Conclusion Organization theory and behavior is important as a guideline in the analysis of a company so that its strengths and market presence are measured to justify its success or failure. Starbuck Coffee Company is a very successful company in the local and international beverage market and its presence in the market has been higher than its competitors for a long time. This is due to the appropriate organizational structure which ensures that the human capital plays their respective roles efficiently. The systems approach which is applied by the company in addition to the application of technology also contributes to the success of the company. Despite the forces in the political, economic, technological and social environment, the company has applied its strengths and utilized market opportunities to be the leader in the coffee industry. References Calabrese, D. (2011). Who Bucks Starbucks? Specialty Coffee Retailer, 18(8), 18-20 Farchy, J., & Rappeport, A. (2011). High coffee costs give Starbucks grounds for a rise. Financial Times, pp. 17 Hiriyappa, B. B. (2009). Organizational Behavior. New Age International. 23-39 Jargon, J. (2010). For Starbucks, a new retail mix: coffee company to build on symbiotic relationship between grocery stores and its signature cafes. Wall Street Journal, pp. B.9-B.9 Lockyer, S. E. (2009). Starbucks instant coffee launch invites skepticism from analysts. Nation’s Restaurant News, 43(8), 9-10 MarketWatch, (2010).Company Spotlight: Starbucks. MarketWatch: Drinks, 9(3), 29-34 Marcial, G. (2005). Starbucks' Brew May Be As Rich As Ever. Businessweek, (3932), 109. Thompson, C. J., & Arsel, Z. (2004). The Starbucks Brandscape and Consumers' (Anticorporate) Experiences of Globalization. Journal of Consumer Research, 31(3), 631-642 Read More