Strategic Fit Analysis of Starbucks Coffee Company

Topics: Starbucks, Coffee, Coffeehouse Pages: 13 (4165 words) Published: April 28, 2013

This report deals with a Strategic Fit Analysis of Starbucks Coffee Company with focus on the United States Segment. Genus (1998) highlighted that strategic fit is the concept whereby strategy is a means for achieving a match between the external environment of an organisation and its internal capabilities, as part of a quest for establishing competitive advantage over rival competitors.

The researcher will evaluate the market environment that Starbucks occupies as well as the internal environment of the company. The researcher will also highlight strengths/weaknesses and opportunities/threats of the current Strategic Fit of Starbucks.

The Starbucks Coffee Company evolved from a single store in Seattle’s historic Pike Place Market. In August 1987, Howard Schultz (Starbucks chairman, president and chief executive officer) purchased Starbucks with the help of local investors. He fashioned a new mission for the company: to inspire and nurture the human spirit – one person, one cup, and one neighbourhood at a time. Today, with more than 17,000 stores in 55 countries, Starbucks is the premier roaster and retailer of specialty coffee in the world.

The recession of 2008-2009 posed a great threat to Starbucks resulting in many of the stores being closed in an effort to re-examine its sales and growth strategies in order to deter customers from other cheaper-priced competitors such as Dunkin’ Donuts and McDonald’s Café. After the great financial struggle, Starbucks reclaimed its position in the US market.

The environment is what gives organisations their means of survival (Johnson et al, 2008). Ghuman (2010) classified the external environment into micro- and macro-environment. The author explained that micro-environment consists of different stakeholders outside of the organisation such as customers, suppliers, creditors, distributors and dealers. Although these constituents are not under the direct control of the organization, they can be influenced by the organisation through its policies and strategies. Changes in the micro-environment affect the organisation directly so it is also term Specific (Task) Environment. The author continued that the macro-environment consists of constituents that are beyond the control of a business organization such as socio-economical, technological, economical and political (STEP) factors which constitute their own individual environments. The effect of changes in the macro-environment on the business is indirect so it is also termed General (Societal) Environment. The micro- and macro-environment of Starbucks Coffee Company will be analysed using the Porter’s 5 Forces and the PESTEL framework respectively. 2.1 MACRO-ENVIRONMENT

The PESTEL framework will be used to identify how future trends in the political, economic, social, technological, environmental (‘green’) and legal environments might impact on the possible success or failure of particular strategies adopted by the Starbucks Coffee Company. Figure 1 shows the components of Starbucks’ macro-environment (Gamble and Thompson Jr., 2011).

Figure 1 (Gamble and Thompson Jr., 2011)
The political segment of Starbucks will be affected by taxation policies, international trade tariffs, government stability, international stability and employment law. * Taxation policies: increases in the taxation on farmers in the various countries producing coffee beans would influence the prices of Starbucks products in the US. For example, in 2003, the Tanzanian Minister of Finance announced sweeping reforms that included the Coffee Taxation and Benchmarking Initiative (CTBI) study’s recommendations (Labaste and Weber, 2010). Tax was lowered for small growers and this saving will be passed on to coffee giants such as Starbucks Coffee Company in the US. * International Trade Tariffs: Since Starbucks operates in 55...
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