In this assignment, you are to use the same corporation you selected and focused on for Assignments 1, 2, and 3.Consider the corporation you have selected to use in your first three assignments.Resear

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Week 6 Assignment 2

Karla Davis-Sanchez

BUS499 Business Administration Capstone

Dr. Joseph Keller

May 18, 2020

Week 6 Assignment 2

This paper will continue the discussion about Starbucks. It will discuss two segments of the general environment and how these segments affect Starbucks corporation. Two forces of competition that are most significant to its business, and how they are addressed in the past. Predict how Starbucks can improve its ability to address these forces in the future. External threats affecting the business and opportunities available. Starbucks greatest strengths and weaknesses, and finally resources, capabilities, and core competencies for the corporation.

Starbucks two segments that rank highest in their influence on the public corporation are the sustainable physical environment segment and the sociocultural segment. With its corporation being formed around a corporate social responsibility it makes sense that these two segments rank the highest in their influence on the public. Sustainable physical environment encompasses minimizing a firm’s environmental footprint which Starbucks does, whereas the sociocultural segment includes workforce diversity, and attitudes about the quality of work life (1, Hitt).

Sustainable Physical Environment Segment

As previously stated, minimizing a firm’s environmental footprint, as Starbucks has and continue to do; shows that the sustainable physical environment is important to Starbucks corporation. They are leading in sustainability working to make coffee the world’s first sustainable agricultural product and reduce the environmental impact of their stores. Partnering with Conservation International on C.A.F.E. Practices, their ethical sourcing program. They source 99 percent of their coffee promoting quality, economic transparency, and social and environmental impacts, while working towards a goal of 100 percent ethically sourced tea and cocoa by 2020. Starbucks is continuing to find innovative ways to cut back on its use of cups and straws testing a variety of greener cups that are both recyclable and compostable through the NextGen Cup challenge and launching a lightweight strawless lid in hopes to eliminate 1 billion single-use plastic straws annually. They are promoting greener stores with 1,600 LEED certified stores around the world, with a goal to reach 10,000 by 2025. Starbucks has committed to more than $140 million in renewable energy to power its stores over the past two years, reducing its environmental impact and supporting access to green power. With plans to locally source more than 50 percent of its renewable energy in the U.S. by 2020 (2, Starbucks Stories & News).

Sociocultural Segment

The sociocultural segment encompasses, women in the workforce, workforce diversity, and attitudes about the quality of work life (1, Hitt). Starbucks is a company of diversity. They are a company who wants to welcome everyone. They believe in an unrelenting dedication to foster a diverse, inclusive, and equitable environment for partners, customers, and communities they serve. The current environment includes 68% women partners (employees), 46% minorities, and 100% equal pay. The workforce composition includes 46% people of color, and 54% for whites. Starbucks aspirations are to provide inclusion training and tools, provide diversity education for its retail partners, drive leader accountability for diversity and inclusion outcomes, increase internal pipeline of diverse leaders at VP an director levels, and continue to partner with community-based youth organizations and educational institutes. Starbucks will continue to strive to create a culture of belonging-where everyone is welcome ( 5, Starbucks).

Out of the five forces of competition the two that are most significant to Starbucks, would be rivalry among competing firms and the threat of substitute products. With Starbucks leading the way in premium coffees, teas, and pastries, rivalry amongst competing firms and a threat of product substitution is inevitable. After all everyone wants to be the best at what they do.

Rivalry Among Competing Firms

Starbucks has many rivalries to compete with from coffee chains, to fast food restaurants offering similar products. Its main rivals Dunk N Doughnut and McDonalds forced Starbucks to step its game up to remain in the competition. Starting from the beginning when Starbucks only sold coffee beans to be grinded by the customers, Howard Schultz traveled to Italy and saw the difference in how coffee stores were compared to what was offered in the U.S. He saw the baristas interacting and being friendly with its customers (even on a first name basis) to add a personal touch and warmth feeling and mixing drinks with a smile. From there he put the new ideas in motion and incorporated these methods and went back to the states, purchased the Starbucks from its previous owners and turned Starbucks around for the better (3, Starbucks). Moving them along to deal with its current competitors and their threats of substitute products being brought into the equation.

Threat of Substitute Products

With many corporations and businesses around, the threat of substitute products will always be a big factor. If it is easily imitated chances are the competition will be high and not as easy of a market to penetrate. Starbucks was aware to stay in competition they had to offer products that were different from its competitors. They had to become innovative in differentiating their products to continue customer loyalty, and market to gain new customers. The significance of the threat of substitute products is high for Starbucks. With many coffee places selling the same coffee beans at lowering pricing, Starbucks has to be able to provide something different. Thankfully, it has acquired companies that can help with product differentiation to keep them ahead of its competitors.

With knowing that rivalry among competitors and the threat of substitute products are high for Starbucks, there are a few predictions that I feel could help Starbucks to remain ahead of its competitors and make future improvements for its corporation. First and foremost, they should remain working with their local farmers globally to create and maintain the best coffee beans that will set them apart from its competitors and continue to be innovative to create new products as well. If Starbucks stick with using ideas and feedback from its employees and customers, they can react faster to make improvements. They should continue to acquire or co-brand with companies specific to its needs to gain profit and revenue and remain among their competitors. I can say I don’t see too much wrong with Starbucks business strategy, and as the saying goes “if it’s not broke, don’t fix it”. I believe as long as they continue to be creative and innovative they can continue to lead. They should not get comfortable with the lead or become stagnant or they too can be knocked from the competition.

The greatest external threat to Starbucks is its competition with low-cost coffee sellers, with many coffeehouses offering its products at an affordable rate. This can threaten the future’s stability of Starbucks which offers higher prices (4, Business Strategy Hub). Coffee can easily be brewed from home now with the help of coffeemakers and Keurig’s available worldwide. With that in mind Starbucks is not a necessity to get a good cup of “joe” as it is referred to in many places. As stated, coffee can be purchased at a lesser price and could lead to Starbucks demise. To combat this issue Starbucks should continue to bring superior quality products that are worth the price difference. They need their products to remain differentiated from its competitors and continue to acquire companies who can add growth and profits to the company. They have acquired seven major companies to include its own bakery. This strategy along with the continuous experienced offered by Starbucks can help lessen this threat. After all, many customers go for the intimate relaxed atmosphere, friendly customer service and warmth, and premium coffees, teas, pastries, and snacks offered at its locations.

Starbucks greatest opportunity is its business diversification and products specifications. With its partners being diverse not only in gender, race, ethnicity, religion, sexual orientation, age, and disability, but also in cultural backgrounds, thoughts ideas, and life experiences. They have 100 percent pay equality and its diversity only enhances their work culture, and drives the business success (5, Starbucks). When it comes to product specifications, Starbucks offers premium beverages, pastries, and treats. Acquiring its own bakery allows them to sell superior pastries that are not easily imitated, they use local products which may vary dependent upon the local resources available, so no one pastry will be the same but will not be too far off from the other stores location treats. With other acquisitions from Seattle’s Best Coffee, Teavana, Tazo, Evolution Fresh, Torrefazione Italia Coffee, and Ethos water (4, Business Strategy Hub), they continue to have product specifications and have an advantage over its competitors who may not be able to compete on Starbucks level. If they continue with this strategy over time it can lead to a market that is hard to penetrate because Starbucks will have more resources and assets to buy out tis competitors to better and expand its brand.

Starbucks like all businesses has its strength and weaknesses it is after all unavoidable when it comes to competition. Some of its strengths are its strong brand image, growth in stores, employee treatment, and as mentioned earlier its acquisitions. It is the most popular and strongest brand in the food and beverage industry making it hard for its competitors to compete. The number of stores has increased from 1,886 to 31,256 between 1998 and 2019. Employees are treated very well, and Starbucks has been consistently listed as one of the Fortune’s Top 100 places to work for while offering advancements in education and benefits to part time employees. Lastly its many acquisitions with some of the top companies. The most significant weaknesses are high prices, imitable products, and European tax avoidance. Starbucks coffee is rather costly compared to competitors such as McDonalds and other coffee outlets (mom and pop shops) which many customers may not be able to afford. Their product is not the most unique as McDonalds Café and Dunkin Doughnuts offer almost the same products. Lastly, with its tax avoidance in the UK, it faced several controversies and criticisms (4, Business Strategy Hub). These are all things that can bring a major corporation down and should be fixed as soon as possible.

Strategy or Tactic

To continue to take maximum advantage of its strengths, Starbucks should continue to acquire, bundle, and leveraging their resources for the purpose of taking advantage of opportunities and create value (1, Hitt). With acquiring other companies, it has an advantage with differentiating its brand from others, offering numerous products which will help with bundling and the ability to leverage with other firms to gain access to what they need to remain ahead of the competition. This will give them a competitive advantage for the time being. To fix the most significant weaknesses, Starbucks has to first ensure that they are paying taxes to avoid any legal actions that may come about. As far as product imitation, if they continue to work with and train farmers with producing their beans, they can specify what is grown and find new innovative ways to produce different coffee beans so that they are not similar to others. Pricing is ultimately something they may not be able to lower, however if they continue to produce premium goods and provide exceptional service the prices can be overlooked. “You get what you pay for”, and with that their differentiating strategy allows them to be a tad bit higher than its competitors. Many businesses don’t provide the same quality products, but they can provide a close enough imitation, but still would not be able to compete with Starbucks as far as rising process.

With resources encompassing a spectrum of individual, social, and organizational phenomena, Starbucks uses many of these to have a strong foundation of resources. As mentioned previously its many acquisitions help to add to Starbucks resources as its premium beverages and pastries continue to dominate the playing field. With teaching and training farmers how to produce sustainable coffee beans and adjust to climate change they are able to receive earnings above-average returns. They invest in the farmers to provide funding to ensure the farmers can purchase the necessary loans and proceeds to continue to farm their coffee globally. Starbucks has many resources that contribute to its capabilities such as human resources, marketing, manufacturing, and research and development. They motivate their employees by offering access to a free education, treat them very well in terms of paying above the minimum required wages, and offering effective training for all its employees. Their brand promotion is a strong and popular brand through productive marketing techniques and with selling their coffee brands in store allows it to become a household brand. Starbucks continue to encourage ideas and feedback to manufacture product and design quality and develop different forms of technology to increase sales, such as its app that allows members to receive rewards and purchasing online. Its customer service is a part of its core competencies and providing a friendly and relaxing atmosphere for its consumers. With these resources, capabilities, and core competencies available to Starbucks, they continue to remain ahead of their competitors.

1. Hitt, Ireland, & Hoskisson. 2020. Strategic management: Concepts and cases: Competitiveness and globalization (13th ed.). Mason, OH: South-Western Cengage Learning

2. Starbucks Stories & News. 2019. Leading in Sustainability. Retrieved from

https://stories.starbucks.com/stories/2019/leading-in-sustainability/

3. Starbucks. 2020. Company Information. Retrieved from

https://www.starbucks.com/about-us/company-information

4. Business Strategy Hub. 2020. Starbucks SWOT 2020/ SWOT Analysis of Starbucks. Retrieved from https://bstrategyhub.com/swot-analysis-of-starbucks-starbucks-swot/

5. Starbucks. 2020. Diversity and Inclusion at Starbucks. Retrieved from

https://www.starbucks.com/responsibility/community/diversity-and-inclusion