October 23, 2011
Starbucks and The Seven Segments of the General Environment
Starbucks is one of the most recognizable coffee retail chains in the world. Their brand focuses on high quality coffee using specialized roasting of beans from many countries around the world. The company began in 1971 in Seattle, Washington with one retail store and it grew to over 2,600 stores in 13 countries by the early 2000’s (Schultz, 2011). They now have operations and retails stores in more than 50 countries around the world (Harrer, 2011). The CEO, Howard Schultz, has developed a mission and guiding principles of how the corporation should handle their day to day business. Starbucks’ mission is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” (www.Starbucks.com). Starbucks has faced many economic, social, and competitive challenges along the way. Some of these include new entrants of competitors like McDonalds and Dunkin Donuts who offer similar products at lower prices. However, these competitors have yet to imitate the Starbucks environment of what they call “the third place” (Schultz, 2011). This will be explained more as we look further into how the seven segments of the general environment have, and still do, affect Starbucks. The general environment can be defined as uncontrollable factors in society that can indirectly affect a firm’s industry. It is important for a firm, such as Starbucks, to continually monitor and assess these changes or influences that are occurring in society. Many companies fail when they do not properly assess these elements that ultimately affect their strategic competitiveness (Hitt, Ireland & Hoskisson, 2011). Let’s begin by looking into their demographic segment. Starbucks can now be found in almost every community. They strive to bring people and places together (www.Starbucks.com). Some people believe the trend in their consumers show the majority are young college students and professionals in the upper middle class. However, Starbucks wants to provide a comfortable environment where people can meet, conduct business, or just to enjoy a fresh beverage or snack regardless of their income or social status. Each Starbucks is uniquely designed as a “third place”, a place in addition to home or work (Schultz, 2011). This has proven to be an excellent opportunity for Starbucks and Starbucks can now be found from one region to another. In addition, they offer music and book events in many of their stores in hopes to continue to attract loyal customers (www.Starbucks.com). While they don’t target specific incomes, many of their coffee prices are higher than some of their competitors like McDonalds. McDonald’s is redesigning many of their stores with the same philosophy in mind. They are also trying to develop a more comfortable environment for their customers as well. This could potentially become a threat to Starbucks. Therefore, if I were CEO, I would consider offering some lower priced menu items, without sacrificing quality, in order to minimize the threats from these other competitors. The next segment, the economic segment, refers to the impact the economy has had on Starbucks over the past few years. After years of company growth and stability, Starbucks found themselves in trouble in 2008 as a result of the declining economy. The employment rate was increasing and people were beginning to hold on to their money and watch their spending. In turn, Starbucks suffered. Their sales decreased and their stock prices began to fall. (Schultz, 2011) Howard Schultz, chairman and former CEO, decided to return as CEO to bring about a change in hopes that Starbucks could survive this downward trend in the global economy. His goal was to focus on the customer experience and to bring back the specialty of making the drinks by...