Strategic Management

Submitted by: Sadaf Rizwan

Submitted to: Mr Salah Uddin
Date of Submission: 23rd Aug 2010

STARBUCKS

Introduction

Starbucks is the largest coffee chain in the world, with over 15,000 locations worldwide.
Starbucks began as a local coffee retailer in Seattle, Washington, but soon expanded to
introduce the coffee bar experience to mainstream America. Starbucks owns Seattle's
Best Coffee and most Diedrich Coffee locations.

Currently Starbucks seems to be an emerging part of their business and this is being
proved by aiming to become leading global company through making a difference in
people’s lives all around the world. This goal is quite close to being achieved as proved
the Starbucks current locations in international markets and the successfulness of these
ventures. The current countries in which Starbucks are located in are: Australia, Bahrain,
Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Malaysia, New Zealand, Oman,
Peoples Republic of China, Philippines, Qatar, Saudi Arabia, Singapore, South Korea,
Switzerland, Taiwan, Thailand, United Arab Emirates, Egypt, United Kingdom, and the
United States.

Mission Statement

“Our aim is to establish Starbucks as a vender that provide the finest quality of coffee in
Pakistan while maintaining our adamant principles while we nurture”
It is not possible to fulfill our mission until and unless we set particular goals in order to
achieve our mission. Our main focus will remain to provide great working environment
and treat each and every employee with respect. Provide best quality coffee and also
diversify our business competitively. Satisfy customer every time they make a purchase
and contributes positively to our communities and our environment and also recognize
that profitability is essential to our future success.

These goals will help as a guideline for all employees for top level to the lowest level in
achieving company’s mission and that same time high quality standard will be maintain.
These set of goals not only support employees but also customers are the center of focus
as to provide finest quality of our coffee and at the same time good service as well

External Environmental Factors

The main reason behind the success of Starbucks is their international operations. During
mid 1990s Starbucks penetrate into international markets no longer relaying on US
market for growth. The external factors that might influence our operations in Pakistan
are:

Economic Factors

Economic factors are an important aspects that concern the nature and direction of the
company in which a firms operates. During previous years Starbucks has to suffer due to
economic recession in countries like; Switzerland, Germany and Japan in the year 2000.
This results in huge decline in sales and revenues. Since Pakistan is going through
economic recession, therefore, initially Starbucks might face some difficulty in
generating revenues but since coffee house market already exists in Pakistan, therefore it
would not be difficult to initiate business.
Technological Factors

Starbucks is constantly penetrating through global market to provide its customer a better
coffee experience. Globally they have introduced Starbucks Cards to improve customer
loyalty, which increases the number of visits and improve services. They also have WI-FI
in most of their stores according to customer needs. In Pakistan they can also built WI-FI
in their stores as such infrastructure is available in Pakistan since a long time. Pakistan
might not have those equipments that are required to prepare coffee that is made
especially by Starbucks so they have to import the latest equipment for other countries.

Political Factors

Increasing tension between United States and the rest of the world might hinder
Starbucks operations and major reason is the security issue. Previously there were rumors
that Starbucks is sponsoring Jewish against Palestine, therefore due to increasing security
threats Starbucks closed down some of their stores in Israel. Similarly in Pakistan, the
law and order situation is disturbed every now and then, and when ever political situation
are not under control most of the businesses suffers shutdown for many days, due to
which there daily revenue is affected. Previously, in Pakistan one or two foreign
company have close down its business such as Costa Coffee.

The coffee beans that are used by Starbucks are imported for foreign countries.
Therefore, fluctuating import rates can be a threat to their revenue. If the cost of import is
more the process is made more complicated the result could eventually be a change in
price, which would influence the level of consumption for Starbucks coffees.

Social Factors

Starbucks focuses on creating environmental leadership in all regards. This objective is

closely followed by them. Starbucks has an advantage in one regard that is coffee shop
culture exists since a long time and they have particular target consumer that are willing
to buy their products.

Environmental Factors

There are a number of coffee houses operating in Pakistan some local and some foreign
chain as well. This can create difficulty to penetrate into market since coffee drinkers
market already exists, and they are quite loyal to there brand. But since Starbucks is
popular worldwide they can attracts customers with the passage of time.

Situation Analysis

Michael Porter defines five forces impacting a firm's competitiveness— threat of

substitutes, threat of new entrants in the industry, bargaining power of suppliers,
bargaining power of customers, and the intensity of competition within the industry. A
firm's strategic decisions to respond to these five forces are a source of risk also.

Threat of Substitution

Starting an operation in Pakistan can give rise to threat of substitution from many other
companies that are operating in Pakistan and producing the same product and they have
targeted a huge chunk of population, such as Espresso, Café Coffee Day, and etc. They
also satisfy consumer needs as well.

Threats of Rivalry

In Pakistan Starbucks main problem would be rival competition. As there are many
coffee houses that offers same products, satisfying there existing consumer need. They
can face a problem of competitive prices offer by competitors.
Bargaining Power of Suppliers

One of the major threats for Starbucks is supplier’s bargaining power. Starbucks don’t
deal with those suppliers that do not follow the same environmental ethics that are for
Starbucks. This may lead them to lose a good opportunity or deal with a supplier that
they will not deal with him. Also dealing with small suppliers instead of dealing with
limited number of big power full suppliers is not giving them real good deals for facilities
and prices.

Bargaining Power of Buyers

As coffee drinkers market already exists in Pakistan and they are offering competitive
prices, and they are using domestic precuts to produce the end product. Coffee beans that
are used by Starbucks is imported and is expensive as well, this leads to higher cost of
coffee. Since there are many other coffee shops that are offering competitive prices there
are high chances for consumer to stick to their old brands.

Threats of New Entrants

New entrants in market can be a threat as well. As coffee drinker market already exists
and if new brand is introduced with innovative and diversified product and competitive
prices as well. It would be difficult for existing companies to maintain its revenue, and
they might be forced to reduce there product prices.

Different researches have shown that Starbucks that operating in countries other than
domestic such as Japan, Middle East and European countries ones are going through
loses. It was also observed that the volatile international business environment made it
difficult for the company to effectively manage its international operations.