Internal and External Environments for Growth

Introduction

This presentation states the business functions and the operational activities relevant with the marketing strategy of the Starbucks Corporation. This assessment will be going to present a description of the internal and external environment of Starbucks using PESTLE & SWOT analytical tools. Later on there are knowledge on the internal and external factors of Starbucks Corporation with recommendations on what strategies should Starbucks adopt for further development and growth. The PESTLE analysis presented the political, economic, social, technological, legal and environmental/ ecological factors of Starbucks and the SWOT is divided into two sections the strength and weaknesses are the internal factors depending upon the opportunities and threats are the external of Starbucks Corporation.

Adding to all these, the VRIO framework that is the value, rare, imitable and organised factors of the Starbucks resources shows the potential power of all the internal and external resources of the coffeehouse. This framework examined all the associated assets and abilities for a long term competitive advantage. It revealed all the strategic capabilities which could be used for planning the long term growth, increasing the competencies, balancing the assets and resources and development of the company.

Further the Porter’s five for and the generic strategies will evaluate the competitive forces of Starbucks for the existing market and research and for emerging its business into a new market with new audiences. These strategy developing tools will analyse the operations of Starbucks and some recommendations depending upon these results are advised for Starbucks to achieve its desired goals.

Porter’s strategy and Bowman’s Strategy Clock to devise strategic planning/strategic directions for Starbucks.

Starbucks Corporation was always named as Starbucks Coffee Company which took the direction of growth into a multi-operational company with the help of the Porter’s generic strategies & Bowman’s strategy clock that always highlighted their products and particularly their speciality in the coffee products. Starbucks Coffee has always looked forward for generating different products of themselves which they did too. The Bowman’s strategy clock as per the generic strategy accepted is the broad differentiation strategy from the Michael Porter’s strategic framework where the strategy of broad differentiation has involved in making the business functions of Starbucks and its products and services different from other separate coffee houses or restaurants & firms (Chen et al. 2018).

Somehow the broad differentiation strategy emphasised on propositioning Starbucks uniqueness and the high quality of their products and services. The broad differentiation is a competitive strategy where Starbucks coffee highlighted their specialty coffee differentiations in its cafes which are way more unique than many other coffee establishments who offers other services also along with coffee. Adding to all these, the broad differentiation competitive strategy also extends the other various areas of the Starbucks Coffee rather than just the coffee section. As an example, the coffee house businesses always use the responsible and sustainable in their sourcing policies to make it differentiated with the products as from its competitors. This has been engaged in the frequent introduction of new variants in its products, thereof proved to be contributing into the uniqueness and increased the competitive advantage of the food and beverages of Starbucks (Özcan et al. 2018). This resulted into manifesting in the organisational culture of Starbucks Corporation too.

As a comparison with this step of Starbucks, many competitors of them such as Dunkin’ & McDonald’s have tried and competed with this strategy of Starbucks by adopting the low cost products and services in their companies and coffeehouses but failed because Starbucks have always focused on emphasising to give to their customers a warm, cosy and friendly environment and a cool, calm and composed ambience the people for enjoying.

One hybrid strategy recommended to apply for Starbucks based on Porters generic strategies.

The hybrid strategies are contingency options for situations where the environment is to look after both the low cost of the product and differentiate it from other resulting to a short term performance and a long term survival in the market. From the fundamental and hybrid strategies of Porter’s generic strategies one strategy recommended that will empower the business and its operations of Starbucks are the Focus strategy which states to maintain the focus of the firm on the particular product in either a particular segment or in the overall market (Nellippallil et al. 2017). The current status of Starbucks in the present scenario is on the high level as a coffee house company leaving competitors one step behind in every aspect and to continue this growth Starbucks needs to emphasis more of their functional focus on their specialty product i.e. coffee. This will automatically increase its business economy and hence will benefit them with more prompt and satisfied clients and customers.

4.2 Based on the SWOT carried out in Activity 1(1.2), and from the diagram below, choose and recommend two Growth Strategies for Starbucks. (M4)

• Identify and explain each chosen strategy.

The two particular strategies which could be recommended for Starbucks as its growth strategies are market development strategy & horizontal integration strategy. Both will work in the growth procedure of Starbucks as it now needs to develop its customers and target markets. The market development strategy will identify more target markets and develops new used markets for penetrating the current product/s. In the market development strategy the target is always on the non-buying customers and new customers to attract them for the current products (Lee et al. 2019). This strategy recognises the utilised markets or customers who have not been reached before and targets the audiences there for serving the particular product or service. As an example, if any software company wants to launch any of their software programs to a new location or any new customers then this strategy will work best for it. The horizontal integration strategy is adapted when a company wants to introduce their services and products into a totally different market. This strategy helps in strengthening the market position of that form. The horizontal strategy seeks to offer the existing products or services to any new market by merging with any other company of the new area (Kumar et al. 2017). After collaborating, both the companies acquire several new strategic adoptions to furnish the existing company into the new place audience with a better market coverage. The basic difference between the market development and horizontal integration strategy is that in market development the existing company is solely responsible for the existing product introduction into the new market and customers but in horizontal integration the same functions are done by collaborating with any new company of the target location for better performance (Eggers et al. 2017).

• Justifications for recommending these strategies

In case of Starbucks, both the above recommended strategies will work best to its possible extent since Starbucks have succeeded in grabbing the existing market and grasping the attention of the existing target audience or customers with a good reputation. Now Starbucks should think of developing its target audience and extend its market reach outside its arena for a better development and growth of the company. In order to increase the customer range and market area for Starbucks, these two strategies will be best to adopt.

The market development strategy will recognise the new markets and new audiences to target and introduce the products and services of Starbucks and the horizontal integration will make this procedure much easier. In the market development strategy, Starbucks just have to identify the target market where they can offer their products to the customers but this process is not that easy as it sounds because the new markets will have new customers with different taste, choices & preferences. So to understand the new customers, Starbucks have to develop researches of the new place and needs to record the thoughts of people that would they like to try something new, will they accept any new product or any new variety in them. This is quite a hectic process to do. So to make this path easy and smooth, the horizontal integration will play the best role since this strategy says collaboration with any existing company or firm of the new market. This collaboration will make the market research and audience research easy and better because the existing firm of the new market is already aware of the taste and preferences of the customers which will be of great benefit to Starbucks.

References

Chen, C.J., Guo, R.S., Hsiao, Y.C. and Chen, K.L., 2018. How business strategy in non-financial firms moderates the curvilinear effects of corporate social responsibility and irresponsibility on corporate financial performance. Journal of Business Research, 92, pp.154-167.

Eggers, F., Hatak, I., Kraus, S. and Niemand, T., 2017. Technologies that support marketing and market development in SMEs—Evidence from social networks. Journal of Small Business Management, 55(2), pp.270-302.

Kumar, V., Chibuzo, E.N., Garza-Reyes, J.A., Kumari, A., Rocha-Lona, L. and Lopez-Torres, G.C., 2017. The impact of supply chain integration on performance: Evidence from the UK food sector. Procedia Manufacturing, 11, pp.814-821.

Lee, C.S., Chan, L., McNabb, D.E. and Khalifa, R., 2019. EXPLORING THE ROLE OF STRATEGIC ORIENTATION IN BUSINESS INNOVATION. Journal of Competitiveness Studies, 27(2), pp.90-101.

Nellippallil, A.B., Song, K.N., Goh, C.H., Zagade, P., Gautham, B.P., Allen, J.K. and Mistree, F., 2017. A goal-oriented, sequential, inverse design method for the horizontal integration of a multistage hot rod rolling system. Journal of Mechanical Design, 139(3).

Özcan, G.B., Mondragon, A.E.C. and Harindranath, G., 2018. Strategic entry and operational integration of emerging market firms: The case of Cemex, Beko and Tata Steel in the UK. Journal of Business Research, 93, pp.242-254.

Continue your journey with our comprehensive guide to Intercultural Business Practices.