Starbucks Industry Profile and Organization Analysis ...

Starbucks Industry Profile and Organization Analysis Spring 2013

MGMT-4900-01 Lindsay Holleman, Alex Lawson, Garrett Pinciotti, Russell Pellichino

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Table of Contents Section I Environmental Profile ........................................................................ 5

Current Environment .............................................................. 5 Future Environment ................................................................ 11 Assessment of Relevancy ...................................................... 13 Section II Industry Profile .................................................................................. 14 Historical Performance ...................................................................... 14 Fast Food Industry.................................................................. 14 Coffee and Snack Shop Industry ............................................ 17 Projected Performance...................................................................... 17 Fast Food Industry.................................................................. 18 Porter's Five Forces .......................................................................... 19 Rivalry Among Competitors .................................................... 20 Potential Entry of New Competitors........................................ 25 Potential Development of Substitute Products........................ 31 Bargaining Power of Buyers ................................................... 33 Bargaining Power of Suppliers ............................................... 35 Summary ................................................................................ 36 Porter's Industry Analysis Spreadsheet .................................. 38 Competitor Analysis .......................................................................... 40 Local Coffee Distributors ........................................................ 41

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Domestic Competitors ............................................................ 42 International Competitors ....................................................... 43 Competitive Behavioral Dynamics .......................................... 44 Forecast of Future Industry Opportunities .............................. 45 Key Industry Success Factors ........................................................... 47 Five Years Ago to Now ........................................................... 47 Five Years Hence ................................................................... 48 Assessing Success Factors via Analytical Tools .................... 49 Competitive Profile Matrix....................................................... 49 External Factor Evaluation Matrix........................................... 50 Section III Starbucks Current Strategy ............................................................... 51 Customer Experience ............................................................. 51 Focus on Store Level Economics ........................................... 53 Global Expansion ................................................................... 54 Streamlining Management...................................................... 55 Current State of Starbucks' Resources ............................................. 56 Financial ................................................................................. 56 Human Resources and Organizational Structure ................... 58 Core Competencies........................................................................... 60 Internal Factor Evaluation....................................................... 61 Value Chain Analysis.............................................................. 64 Primary Activities .................................................................... 64

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Support Activities .................................................................... 65 Sustainable Competitive Advantage ....................................... 67 Starbucks SWOT Analysis ................................................................ 69 Starbucks Strengths ............................................................... 69 Starbucks Weaknesses .......................................................... 70 Starbucks Opportunities ......................................................... 72 Starbucks Threats .................................................................. 75 SWOT Matrix .......................................................................... 77 Competition's SWOT Analysis .......................................................... 78 Competitors Strengths ............................................................ 78 Large Coffee Distributors Weaknesses .................................. 80 Small Coffee Shop Weaknesses ............................................ 81 Large Coffee Distributors Opportunities ................................. 82 Local Coffee Shop Opportunities............................................ 83 Competitors' Threats .............................................................. 84 Identification of Strategic Gaps in the Marketplace ........................... 86 Identification of Critical Success Factors and Measures ................... 87 Choice of Future Competitive Strategy ? Next Five Years ................ 90 SPACE Matrix......................................................................... 91 Implementation Plan.......................................................................... 95 Appendix ........................................................................................... 97 Exhibit 1 ? Income Statement................................................. 97 Exhibit 2 ? Balance Sheet ...................................................... 98 Exhibit 3 ? Financial Ratios .................................................... 100 References ........................................................................................ 101

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Section I: Environmental profile In and around any business are factors that play a role in the decisions, problems, and changes a company will face. Not all factors are controllable, however. These uncontrollable, external, factors range from the growing age of a predominant generation, to a new tax on international goods. They can take the form of social, cultural, demographic, environmental, political, legal, or technological forces. Whichever way, a business must be prepared to analyze and adapt to their environment. For any industry, a company must look at the current environmental situations as well as predict the future environment. Current Environment: One of the biggest social concerns in the minds of people in the United States right now is the threat companies pose towards the environment and health of the planet. People today want to have a "go green" mentality to help stop pollution, destruction of nature, and end global warming. In short, people want to improve the quality of life on a personal level, and therefore, expect the same on the corporate level. "Despite the growing concern over the long term side effects caused by criminal corporate negligence, most corporations are still trying to do the least they can get away with," (Fairbanks). Although this is not fact, it is an example of how consumers are thinking about the environment today and how they feel businesses are handling the situation. Imagine how people with the same view would react to a public corporation consistently trying to improve the environment. Would this company lose money? Yes. Would their future gains outweigh those losses? Absolutely. This can bring the practice

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