ACTIVITY 1 - COBALT

International Business & Change Management

1. Conduct PESTEL analysis for Starbucks compared to the existing competition:
Pestel framework makes reference to political, economic, social, technological,
environment and legal factors.

Glossary
SBUX: Starbucks Corporation
DNKN: Dunkin Brands Group. Inc.
MCD: McDonalds Corp.
SRGY: Nestle
Industry: Specialty Eateries
PESTEL stands for political, economic, social, technological, environmental and legal
factors affecting the business and it is widely considered to be one of the most effective
analytical tools used to analyses the impacts of external factors to the company.
The macroeconomic environment that Starbucks operates in is characterized by the
ongoing global economic recession, which has dented the purchasing power of the
consumers. However, market research done in the last few months has indicated that
consumers have not cut down on their coffee consumption and instead, are shifting to
lower priced options. This means that Starbucks can still leverage the buying power of

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the consumers in a manner that would give it a significant advantage over its rivals by
offering cheaper alternatives.

Apart from this, Starbucks has already made some moves to jump on the emerging
mobile computing revolution by tying up with Apple to introduce discounted coupons in
the apps used in the iPhones. Further, this exercise has also been accompanied by cobranding and cross selling which means, that Starbucks is well placed and poised to
reap the benefits of the Smartphone revolution. Having said that, it must be noted that
consumers in the United States are increasingly turning Ethical Chic which means
that the products they buy and the brands they consume need to prove that they are
following social and environmental norms in their manufacture. This is the key
challenge that Starbucks faces as it confronts the emerging challenges of the new era of
consumer awareness and the galloping Smartphone revolution.
The following table represents PESTEL analysis conducted for Starbucks Corporation

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POLITICAL FACTORS
Industri.specific rules and regulations
The level of relationships between USA and countries that produce coffee beans
The level of political stability within a country

ECONOMIC FACTORS

Buying power of consumers

Local currency exchange rates
Local economic environment within each market Sturbucks operates
Taxation level

SOCIAL FACTORS

Changing family patterns in USA and Europe

Consumer preferences
Changing work patterns
Changes in lifestyles of population
The level of education of population in local markets
Changing values among population

TECHNOLOGICAL FACTORS
Emergence of innovative technology
Biotechnological developments
Developments in agriculture

ENVIROMENTAL FACTORS
Environmental rules and regulations
Environmental disasters in countries producing coffee beans
Global warming and other environmental issues in a global level

LEGAL FACTORS
Introduction of policies and regulations by health authorities about caffeine production and consumption
Introduction of tougher customs and trade regulations
Licensing regulations related to the industry

2. When can it be an advantage to be considered a "later mover" or "follower"

instead of a first mover?
Second movers are companies that respond to a first movers competitive action, often
through imitation or a move designed to counter the effects of the first movers action.
How fast a second mover responds may influence its results. Before following the first
mover, a second mover should evaluate initial customers reaction to the first-movers
actions and analyses markets to identify critical issues.

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Late movers are companies that respond to a competitive action, but only after
considerable time have elapsed after the first movers action and the second movers
response. And there is a danger in moving late as a late movers performance generally
suffers relative to the performance of first and second movers. As late movers are the
last ones to respond to the first and second movers actions, late movers tend to be poor
performers and often are weak competitors
One key factor is that creating a product is costly, both in terms of the money invested
and the mistakes made on the path to success. While the pioneer pays a steep price in
creating the product category, the later entrant can learn from the experience of the
pioneer, enjoying lower costs and making fewer mistakes as a result.
Give three examples from different sectors to see if the positioning of these three
companies is maintained for longer than a decade, if they move to become a "first
mover" when possible or if they manage to maintain their advantage against their
competitors.
Ebay was the first company to take the auction process online, kicking off operations in
1995. Nowadays giant online companies are facing the market as a good competitors
like Amazon or even Alibaba.

Coca cola was the first cola producer and began selling its product to the public in 1886.
Many years after that, it is still the best with maximum incomes against the competitors.
Apple has adapt the role of second mover talking about wearable devices and it is
leading the market chasing really close by Samsung.

3. Using Porter's Five Forces, what is the predominant force present in the sector
of virtual operators (such as Skype) over the last decade?
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1. The threat of entry of new competitors. When it is very easy for other companies to
enter a sector, the sector is less attractive. New companies will enter the sector, raising
supply, lowering profit until the profit rate is no longer attractive.
I would say it is an easy market because the companies which are in the market now are
taking advantage of the big range existing between cost and income. New companies
can enter the market and gain customers just because there are offering the same
product and less expensive.
2. The intensity of competition. If the existing players in the industry are highly
competitive, they will offer more/better services and/or charge less to win customers.
On the other hand, if competition is not intense, higher profit margins can be
maintained.
Competition would be great because it would help to decrease prices to the final
customer. Nowadays prices in the market are fixed by the biggest companies so there is
no competition.
3. The threat of substitute products. Not only is a company affected by other
competitors in the same sector, but also by substitute products. The classic example of
market myopia is the railroad industry, which ignored competition in a substitute from
the fledgling trucking industry.
4. The negotiating power of suppliers. The negotiating power of suppliers: If your
suppliers are powerful, and have some kind of clout (scale, regulatory protection, brand,
monopoly), they will likely extract a large share of profits in a supply chain (producers
surplus).
5. The negotiating power of customers. If the customers are organized and powerful
(for example, Wal-Mart Stores Inc. is your customer), then the customer will leverage
this clout to get more for less, and reduce profitability.

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Try to anticipate what might be the response of mobile and landline companies.
Give, at least, three examples.
The response of landlines companies is taking effect to face these companies entering
the market with power. Vodafone has bought ONO and Orange did the same with
Jazztel. Both companies are two of the three more powerful companies in mobile
network and have decided to buy other companies which have the infrastructure of
internet ADSL. They will compete with the new virtual operators arising just taking
advanced of them because if one virtual operator is getting bigger it is because the
customer is using internet connection.
I just would like to mention WhatsApp launching voice calling service in Q1 2015. We
will see if it breaks the market.

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