Environmental scanning is crucial in the strategic management of an organization, as it helps gather information about both the external and internal factors impacting the company. One effective method for conducting this scanning is through a SWOTT analysis, which evaluates the strengths, weaknesses, opportunities, threats, and trends of the organization. Starbucks, a coffee shop that seeks to differentiate itself from its competitors, goes beyond simply providing coffee and aims to create a sense of connection among people.
Starbucks is a well-known corporation with a mission to inspire and nurture the human spirit. They aim to do this one person, one cup, and one neighborhood at a time (Starbucks, 2010, Para. 1 & 3). Starbucks has become famous for being the place to go for an excellent cup of coffee. To comprehend why Starbucks has been so successful, it is crucial to examine their use of environmental scanning and strategic advantages. Moreover, by identifying the values and measurement guidelines utilized by Starbucks, we can better understand how they stand out from their competitors in the market.
Environmental scanning is the process of collecting, examining, and assigning information for strategic purposes. According to Ask Kids (2011, para 1), this process involves gathering both factual and subjective information about a company’s operating environments. The most effective way to conduct environmental scanning is by conducting a SWOTT analysis. This analysis allows corporations to identify their strengths, weaknesses, opportunities, threats, and important trends within the organization.
The purpose of this paper is to provide a description of Starbucks’ internal and external environments through an environmental scan, while also determining the competitive advantage and strategies employed by the company. To achieve this, several questions will be answered, such as how Starbucks creates value and sustains competitive advantage through its business strategy, what measurement guidelines each company utilizes to assess strategic effectiveness, and the effectiveness of Starbucks’ chosen measurement guidelines. Overall, this paper will focus on analyzing the internal and external environments of Starbucks.
Starbucks has an internal environment comprising strengths like profitability, popularity, reputation as an employer, and ethical values. In 2009, Starbucks made more than 800 million dollars and in 2010, its revenue surpassed 7000 million dollars. Furthermore, Starbucks is a globally renowned coffee brand that can be purchased worldwide. The external environment of Starbucks consists of opportunities, threats, and trends.
Starbucks, a company with more than 8000 cafes in the United States, was acknowledged as one of the “Fortune Top 100 companies to Work For” in 2005. The company takes pride in its ethical mission and values. Despite having a global presence, most of Starbucks’ cafes are located in the United States.
Starbucks is known for its innovative nature and introduction of new products, but there is a possibility that people might lose interest in coffee or look for alternative ways to consume caffeine, like energy drinks. Despite Starbucks’ expansion of its menu with items like pastries and limited lunch options, coffee still remains the main source of revenue. In order to stay competitive, it is crucial for Starbucks to provide more choices on its menu as having a limited selection may drive customers towards alternatives such as McDonald’s. Furthermore, Starbucks typically has higher prices compared to its competitors.
Starbucks charges approximately four dollars for a regular cup of coffee, making it quite costly considering the current state of the economy. However, with the right individuals in the innovation department, any corporation can seize countless opportunities. Among the opportunities available to Starbucks are venturing into new markets, introducing new products, and forming partnerships with other manufacturers. To ensure nationwide availability of its products, Starbucks should consider expanding its cafes on a global scale. Furthermore, Starbucks has a tradition of offering limited-time-only holiday-themed coffees, such as “Peppermint Swirl” for Christmas or “Citrus Green Tea Splash” for spring.
Peru and El Salvador are important coffee suppliers to Starbucks. Offering Fair Trade products helps Starbucks differentiate itself from competitors. Collaborating with Keurig, a company known for its single-serving coffee brewers, is a great opportunity for Starbucks (Starbucks Menu, 2010, Para. 7). However, Starbucks also faces threats such as health concerns, inflation in product prices, and competition within the coffee market.
In response to stricter government regulations on caffeine levels in coffee products, consumers are searching for healthier alternatives to fulfill their daily caffeine needs. The global inflation has caused a significant increase in prices of dairy products and coffee within just two years, which may force Starbucks to raise the prices of their beverages. Additionally, Starbucks is facing intense competition from various competitors in the coffee market such as McDonald’s, Dunkin Donuts, 7-11, and Einstein Bagels.
All competitors have different prices and offer various items, but they are all considered potential threats. The analysis of trends is a new aspect that organizations are starting to consider in their SWOTT analysis. Starbucks sets itself apart by showcasing music and art in its cafes, featuring emerging artists. Its customer base consists of upper class individuals, students, and business professionals.
Starbucks employs corporate, business, and functional strategies concurrently. The corporate strategy establishes the overall direction of the company and its management. The business strategy encompasses competitive and cooperative strategies. The functional strategy represents the specific approach taken by each area within the company to optimize resource productivity and support the corporate and business strategies. Starbucks maintains a hierarchy of strategies where each one complements and reinforces the others.
The corporate culture at Starbucks shapes its values. The company highly values experience, customer intimacy, and ambiance.
Starbucks sought to create a unique experience for customers, aiming to go beyond typical coffee consumption and instead establish a sense of friendship. The company aimed to foster a welcoming environment that would bring people from the community together. This approach aimed at nurturing customer intimacy and differentiating Starbucks from competitors. Such a strategy, known as Sustainable Competitive Advantage (SCA), involves providing services or products that cannot be easily replicated or imitated by rivals. These offerings may encompass aspects like product design, features, brand identity, and delivery methods.
Starbucks is recognized as the leader in the coffee market due to its extensive efforts to maintain its brand advantage. The company differentiates itself from competitors by offering a unique coffee buying experience that has become almost a lifestyle for customers. Despite long lines, Starbucks customers are willing to wait instead of going elsewhere for their coffee. Starbucks Measurement Guidelines outline their commitment to success and being the top player in their field.
Starbucks employs various strategies to gain a competitive edge, continuously reinvent approaches, and expand profitability. This is achieved through three key guidelines: expanding and enhancing the brand name, prioritizing customer satisfaction, and valuing employees. Starbucks constantly reviews data from existing and newly opened stores to ensure a continuous growth rate while maximizing profitability for both establishments.
Starbucks values customer satisfaction as highly as employee satisfaction. The company is committed to hiring responsible and attentive individuals who can expedite the service without sacrificing personal connection with each customer. Prior to becoming full-time employees, all Starbucks staff members must undergo a comprehensive twenty-hour training session. Additionally, Starbucks offers an insurance package to its part-time employees, a benefit that is not commonly provided by other establishments. Starbucks believes that fostering employee happiness contributes to a more familial work environment. It is widely acknowledged that content employees result in satisfied customers. The Efficacy of Starbucks’ Assessment Policies
With 17,009 stores as of January 2011, Starbucks is the leading coffee seller in the country. Despite its humble beginnings as a small cart forty years ago, Starbucks stands out from its competitors by prioritizing both profit-making and the well-being of the community and its people. Their success can be summed up in four steps: prioritize excellent treatment of employees; employees reciprocate with exceptional service to customers; satisfied customers develop unwavering loyalty to the brand; this ultimately leads to continued growth and triumph for the company. In essence, Starbucks’ commitment to the community serves as the foundation for their long-lasting success.
In summary, in order for a company to succeed financially, it must conduct an environmental scan to evaluate its competitive advantages and strategies. Starbucks conducted an environmental scan using a SWOTT analysis to assess its internal and external environments, identifying strengths, weaknesses, opportunities, threats, and trends. The analysis revealed that Starbucks employs a hierarchy of strategies consisting of corporate, business, and functional strategies. Moreover, Starbucks prioritizes customer experience, customer intimacy, and ambience as its core values.
Starbucks follows three core principles to guide its strategies: expanding and improving the brand, prioritizing customer satisfaction, and valuing its employees. The paper emphasizes that treating employees well is crucial for the success of these principles. When employees are treated well, customers also receive exceptional treatment, resulting in store growth and profitability. From the beginning, Starbucks has sought to establish strong relationships with both employees and customers. The company aims to enhance the environment in all its operating locations.
