STI COLLEGE TARLAC INC.

BRGY. SAN VICENTE,2300

TARLAC, PHILIPPINES

Strategic Management
Task Performance

Submitted by:

Ancheta, Rhi Anne Veronica

Austria, Bea Louis R.

Badua, KC Ann

Dela Cruz, Gerald

Dinero, Rica Angeline

Dizon, Ruscelle

Bachelor of Science in Tourism Management – 3B

Submitted to:

Mr. Antonio Cabradilla

Instructor
 TABLE OF CONTENTS
I. Summary………………………………………………………………………………………………………………………3

II. Basic Concepts of Strategic Management (Part 1)…………………………………………………………5

III. Basic Concepts of Strategic Management (Part 2)…………………………………………………………6

IV. Sustainability and Corporate Governance…………………………………………………………………….15

V. Social Responsibility and Ethics……………………………………………………………………………………18

VI. Environmental Scanning and Industry Analysis…………………………………………………………….19

VII. Organizational Analysis and Competitive Advantage……………………………………………………20

VIII. Strategy Formulation: Corporate Strategy……………………………………………………………………

IX. Strategy Formulation: Functional Strategy and Strategic Choice

X. Strategy Implementation: Organizing and Structure

XI. Execution: Linking Strategy, People, and Operations

XII. Contemporary Thinking on Strategy

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 SUMMARY

Starbucks is well-known for being a well-established firm, which is readily recognized by consumers
due to the widespread popularity of its brand and goods. We are perplexed as to why this Starbucks
is believed to be among the largest coffee shops on the planet. A multinational network of coffee
shops, Starbucks may be found in over eighty different countries throughout the world. Starbucks,
which was established in 1971 in the U.S. city of Seattle, Washington, has developed into one of the
most well-known and powerful brands in the whole globe. While Starbucks' other rivals are losing
ground because they are unable to stay one step ahead of the company's marketing and business
strategies. Therefore, as one of the students who is highly motivated by the talents that this firm has
in terms of managing it, we made the decision to look for their marketing strategies, tactics, SWOT
analysis, 5 Porters, BMC, and other tools that may assist us in comprehending how this company has
been able to stand on its own for an unspecified number of years. On this piece of paper, all the
material that is being presented in the handout is here, and we will use Starbucks as a reference to
illustrate various aspects of each subject that will be covered. Starbucks' management has earned a
reputation for being very capable and successful in the business world. The company's management
team has shown that they are capable leaders, capable of making strategic decisions, and focused on
achieving operational excellence. The following are some of the most important factors that
contribute to the success of Starbucks' management:

Leadership: Starbucks has experienced visionary executives at the helm, such as Howard Schultz,
who has played a vital role in establishing the company's direction and success. Howard Schultz is
only one example of this. The organization's vision, values, and long-term objectives are all
determined by the leadership team, and they are also responsible for fostering both growth and
innovation inside the company.

Planning for the Future: To recognize opportunities, forecast changes in the market, and devise plans
to remain one step ahead of rival businesses, the management of Starbucks engages in extensive
planning for the future. They make educated judgments regarding store locations, product offers,
and growth plans by doing in-depth research and analysis on customer preferences, the dynamics of
the market, and new trends.

Starbucks is well-known for its operational efficiency and uniformity throughout its vast network of
outlets located all over the world. The management team ensures that the standards for the store's
design, layout, equipment, and training are maintained in order to provide customers with an
experience that is consistent and of high quality. The priority placed on achieving operational
excellence leads to the happiness and loyalty of customers.

Starbucks places a high priority on its workers, who are referred to as partners and invests in their
training, growth, and overall well-being to show this commitment. The firm provides lucrative perks,
prospects for professional growth, and educational initiatives. This emphasis on employee
involvement and development helps to contribute to a staff that is motivated and devoted, which in
turn results in exceptional service to customers.

Adaptability and creativity: The leadership of Starbucks supports a culture of creativity and
innovation inside the company. The organization is always looking for innovative ways to improve the

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customer experience as well as new goods, technology, and activities to maintain its relevance in a
market that is always changing. The management team is eager to adjust and develop its strategy
depending on the input received from customers and the shifting trends in the market.

Financial Management: The leadership of Starbucks places a significant emphasis on maintaining a

strong focus on financial management and profitability. They keep a close eye on financial
performance, do their best to keep expenses under control, and work to get the most out of their
resources to boost growth and increase shareholder value. Both the company's financial stability and
its performance are a direct result of the excellent financial management procedures that have been
implemented.

Starbucks' management has shown that they are committed to practicing corporate social
responsibility (also known as CSR). They work to incorporate principles of sustainability, ethical
sourcing, and involvement in the local community into the daily operations of the firm. This focus on
corporate social responsibility not only echoes the company's core beliefs but also improves
Starbucks' brand image and fosters greater brand loyalty among its clientele.

In general, the leadership of Starbucks is held very high respect for strategic thinking, operational
efficiency, innovative thinking, employee involvement, financial management, and dedication to
social responsibility that it demonstrates. These aspects are important contributors to the company's
ongoing success and its standing as a market leader around the globe in the coffee sector.

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I.STRATEGIC MANAGEMENT

Starbucks is one of the most recognizable brands in the world. Their brand recognition has reached
epic heights thanks to the strength of their marketing and their commitment to keeping their brand
consistent. Not all of us have multi-million dollar marketing budgets, which makes replicating
Starbucks’ marketing tactics at the same level nearly impossible.

However, there are some basic core principles behind the Starbucks marketing strategy that nearly
any brand can borrow and implement. In this post, we’ll cover how their commitment to consistent
branding made Starbucks the successful brand it is today. We’ll also go over the tactics they are
currently using that are continuing their tradition. Plus, we’ll cover actionable takeaways you can use
to implement those marketing strategies and basic branding principles yourself.

Starbucks business strategy is based on the following four pillars:

1. Offering ‘third-place’ experience. Starbucks stores are effectively positioned as a ‘third

place’ away from home and work, where people can spend time in a relaxed and
comfortable environment with their friends or alone. Customers are even welcome to get
their work done in a Starbucks store. All company-owned stores in the US and most
company-owned stores abroad offer free wi-fi. “Starbucks stores are meticulously designed
to make customers stay longer, buy more, and return for another visit

After returning as CEO for the third time in April 2022, Howard Schultz announced his plans
for the company. Plans include building drive-through in 90% of new locations and
machinery that will allow baristas to handle increasingly complex customer orders more
quickly. Some analysts note that while drive through may increase profit martin, at the same
time they may compromise the essence of third place experience for customers.

Furthermore, according to Starbucks Chief Marketing Officer Mr. Brady Brewer the Seattle-
based coffee chain is also creating digital third place. Mr. Brewer shares his vision the global
coffeehouse chain creating a new global digital community on the basis of Web3 in general
and NFTs (non-fungible tokens) in particular.

2. Selling coffee of the highest quality. Starbucks business strategy can be classified as
product differentiation. Accordingly, the coffee chain giant focuses on the quality of its
products and customers pay premium prices for high quality. Excellent customer services as
one of the solid sources of Starbucks competitive advantage further increases the
attractiveness of the coffee retailer.
The multinational chain of coffeehouses duly recognizes the paramount role of its
employees in customer-facing positions to sustain high level of customer service.
Accordingly, the company refers to its employees as partners and offers them a wide range
of perks and benefits such as Bean Stock equity reward program, health coverage plans and
competitive salary. Nevertheless, the world’s largest coffeehouse chain is opposed to
unionization of employees and employee union problems is one of the major challenges that
made it necessary for Howard Schultz to return as CEO.

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 3. . International market expansion with the focus on emerging economies is one of the key
elements of Starbucks business strategy on long-term perspective. Started with only one
coffee shop in Seattle’s 1912 Pike Place in 1971, the company has expended into 84 markets
with 17133 company-operated stores and 16700 licensed stores as of October 3, 2021. On
average, the global coffeehouse chain has opened two new stores every day since 1987. The
company has announced long-term plans to increase its numbers of stores to 55000 by
2030.

4. Integrating technology into various business processes. “Starbucks is adamant when it says
that the purpose of new technology is not just to improve its website or to process
payments quicker for people who are waiting in line”.  The coffee chain achieves technology-
related value addition via integrating technology into a wide range of business processes and
procedures such as new product development, communication of the marketing message,
completing sales and monitoring the level of customer satisfaction. The most notable
examples for value creation via technological integration by Starbucks include the launch of
Mobile Order & Pay feature, which allows customers to buy without getting in line, the
launch of voice ordering app and “sending text message notifications to customers in the
Seattle area when their mobile orders are ready.”

Starbucks Corporation Report contains the above analysis of Starbucks business strategy.

The report illustrates the application of the major analytical strategic frameworks in business
studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and
McKinsey 7S Model on Starbucks. Moreover, the report contains analyses
of Starbucks leadership, organizational structure and organizational culture. The report also
comprises discussions of Starbucks marketing strategy, ecosystem and addresses issues of
corporate social responsibility.

II.INITIATION OF STRATEGY: TRIGGERING EVENTS

The initiation of strategy refers to the process of identifying and setting in motion the actions and
plans necessary to achieve a specific strategic objective or goal. Triggering events play a crucial role
in this initiation process by prompting organizations to assess their current position, recognize
potential opportunities or threats, and make strategic decisions accordingly.

Triggering events can take various forms, such as changes in the external environment, shifts in
customer preferences, emerging technologies, regulatory changes, or internal developments within
the organization. These events act as catalysts, signaling the need for strategic adjustments or the
pursuit of new opportunities.

When a triggering event occurs, organizations must engage in a strategic analysis to evaluate the
implications and determine the most appropriate course of action. This analysis involves assessing
the impact of the event on the organization's existing strategy, identifying potential risks and
opportunities associated with the event, and considering alternative strategic options.

Based on the analysis, the organization may choose to modify its existing strategy, develop new
strategic initiatives, or reallocate resources to capitalize on emerging opportunities or mitigate
potential risks. The initiation of strategy, triggered by these events, involves formulating clear
objectives, defining action plans, and allocating resources to implement the chosen strategic
direction.

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It is important to note that the initiation of strategy is an iterative process. As new triggering events
occur or the organization's external and internal circumstances change, the strategy may need to be
reevaluated and adjusted accordingly. Continuous monitoring of the business environment and
ongoing analysis are essential to ensure that the strategy remains relevant and effective over time.

Internal environment

1. New CEO: At that time, the CEO of Starbucks was Kevin Johnson. Johnson took over as CEO in April
2017, succeeding Howard Schultz. It is worth noting that executive positions can change, so it's
advisable to refer to the latest information for the current CEO.

2. Performance Measures: Starbucks uses various performance measures to evaluate its success and
monitor its internal performance. These measures may include financial indicators such as revenue
growth, profitability, and return on investment. Additionally, Starbucks places importance on
customer satisfaction, brand loyalty, and employee engagement as key performance measures.

3. Threat of a Change in Ownership: While Starbucks has been a publicly traded company, the threat
of a change in ownership typically refers to the possibility of a major shareholder or group of
shareholders acquiring a significant portion of the company's shares. Such a change could potentially
impact the direction, strategy, or operations of the company. However, it's important to note that the
specific details and potential impact of any change in ownership would depend on the circumstances
and the intentions of the new owners.

External environment

The external environment of Starbucks encompasses various factors that can influence its
operations, performance, and strategic decisions. Two key elements of the external environment are
external intervention and strategic inflection points.

1. External Intervention: External intervention refers to the involvement or influence of external

entities, such as governments, regulatory bodies, or industry associations, in the operations or
policies of Starbucks. These interventions can take the form of regulations, policies, or guidelines
that Starbucks must comply with. For example, government regulations regarding food safety, labor
practices, or environmental standards can impact how Starbucks operates and the decisions it
makes.

2. Strategic Inflection Point: A strategic inflection point refers to a significant change or disruption in
the external environment that can reshape the competitive landscape or industry dynamics. These
inflection points often arise from technological advancements, shifts in consumer preferences, or
emerging market trends. For Starbucks, a strategic inflection point could be the rise of digital
technology and mobile ordering, which prompted the company to invest in digital platforms and
enhance its mobile app to meet changing customer expectations.

Navigating external interventions and strategic inflection points requires Starbucks to stay vigilant,
monitor the external environment, and adapt its strategies accordingly. This might involve adjusting
operational practices, launching new products or services, or adopting innovative technologies to
remain competitive and meet evolving consumer demands.

STRATEGIC DECISION-MAKING

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Strategic decision making refers to the process of identifying and selecting the best course of action
to achieve long-term organizational goals and objectives. It involves evaluating various alternatives,
analyzing potential outcomes and risks, and making informed choices that align with the overall
strategic direction of the organization.

Strategic decisions are typically complex and have a significant impact on the organization as a
whole. They often involve allocating resources, setting priorities, and determining the direction and
scope of the organization's activities. Strategic decision making requires a thorough understanding of
the internal and external environment, including market dynamics, competitive landscape, customer
needs, and organizational capabilities.

Starbucks, as a global coffeehouse chain, has made several strategic decisions throughout its history
to establish itself as one of the most recognizable and successful brands in the world. Here are some
key strategic decision-making areas for Starbucks:

1. Market Expansion and Global Presence: Market expansion and global presence involve
strategies and activities aimed at entering new markets, expanding geographical reach, and
establishing a significant presence on a global scale to capture new customer segments and
drive business growth.
- Starbucks has pursued an aggressive strategy of global expansion. It has entered new
markets around the world, including emerging economies, and established a strong global
presence. This decision allowed Starbucks to tap into new customer bases and diversify its
revenue streams.
2. Focus on Customer Experience: Focus on customer experience involves prioritizing and
enhancing every touchpoint and interaction with customers to create positive, personalized,
and seamless experiences that meet or exceed customer expectations, fostering loyalty and
satisfaction.
- Starbucks places a strong emphasis on providing an exceptional customer experience.
They invest in creating a warm and welcoming ambiance in their stores, training their
baristas to deliver high-quality service, and developing innovative products and offerings
to cater to changing consumer preferences. This focus on customer experience has
helped Starbucks build a loyal customer base and differentiate itself from competitors.
3. Product Innovation and Menu Expansion: Product innovation and menu expansion involve
the continuous development and introduction of new and unique products, as well as the
expansion of the menu offerings, to cater to evolving consumer preferences, driving
excitement, and attract a broader customer base.
- Starbucks continuously introduces new products and expands its menu to cater to evolving
consumer tastes. They regularly launch seasonal beverages, new food items, and innovative
products, such as the introduction of the Starbucks Reserve brand. This strategy enables
Starbucks to attract new customers and keep existing ones engaged.
4. Ethical Sourcing and Sustainability: Ethical sourcing and sustainability encompass the
responsible and conscious procurement of goods and services, considering social and
environmental factors to support fair practices, reduce negative impacts, and ensure long-
term ecological balance.
- Starbucks has made sustainability a strategic priority. They have implemented programs to
source coffee beans ethically and sustainably, including their C.A.F.E. Practices program.
Starbucks has also focused on reducing its environmental footprint by investing in greener

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 store designs, recycling initiatives, and promoting reusable cups. These efforts align with the
growing consumer demand for responsible and sustainable business practices.
5. Digital Transformation and Technology Integration: Digital transformation and technology
integration involve the strategic adoption and seamless incorporation of digital technologies
and systems across an organization's processes, functions, and operations to drive
innovation, efficiency, and agility in the digital era.
- Starbucks has embraced digital technology to enhance the customer experience and
streamline its operations. They introduced the Starbucks Mobile App, allowing customers to
order and pay via their smartphones. They also launched the Starbucks Rewards program,
which offers personalized incentives and rewards to customers. By leveraging technology,
Starbucks has improved convenience and built a stronger digital relationship with its
customers.
6. Partnerships and Collaborations: Partnerships and collaborations refer to strategic alliances
and cooperative efforts between organizations, aimed at leveraging complementary
strengths, resources, and expertise to achieve shared goals, foster innovation, and create
mutual value.
- Starbucks has entered into strategic partnerships and collaborations to extend its brand
reach and offer new products and experiences. Notable partnerships include
collaborations with Spotify and UberEats, which have allowed Starbucks to integrate
music and food delivery services into their ecosystem. Such partnerships enable
Starbucks to tap into new customer segments and increase its brand exposure.

Entrepreneurial mode.

Entrepreneurial mode refers to a mindset and approach characterized by entrepreneurial thinking,

innovation, and risk-taking in business endeavors. It involves a proactive and opportunity-driven
mindset, where individuals or organizations identify and pursue new opportunities, adapt to
changes, and take calculated risks to create value and drive growth. Entrepreneurial mode often
involves being agile, creative, and resourceful in navigating challenges and seizing opportunities in
dynamic and competitive markets.

Starbucks can be characterized as an entrepreneurial company that has displayed key traits
associated with entrepreneurial behavior. Here are some aspects that highlight Starbucks'
entrepreneurial mode:

1. Innovation: Innovation is the process of creating and implementing novel ideas, products,
services, or processes that bring about positive change and provide a competitive advantage
in the market.
- Starbucks has been innovative in its approach to the coffee business. From introducing new
beverage offerings to creating unique store designs, Starbucks has consistently sought to
differentiate itself from competitors. Innovation is also evident in their digital initiatives, such
as the Starbucks mobile app, which transformed the way customers order and pay for their
products.
2. Risk-Taking: Risk-taking is the act of knowingly and willingly engaging in uncertain or
potentially adverse situations or decisions with the potential for both positive outcomes and
negative consequences.
- Starbucks has taken calculated risks throughout its history. When Starbucks started
expanding internationally, it ventured into unfamiliar markets, taking the risk of introducing
the coffee culture to countries with different preferences and traditions. The company's
willingness to take risks has contributed to its global success and brand recognition.

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 3. Entrepreneurial Leadership: Entrepreneurial leadership is a leadership style that combines
the visionary and risk-taking qualities of an entrepreneur with the ability to inspire,
empower, and mobilize teams to drive innovation, adaptability, and growth within an
organization.
- Starbucks' leadership, particularly under the guidance of its founder Howard Schultz, has
demonstrated entrepreneurial qualities. Schultz was known for his vision and passion for the
brand, and his ability to inspire employees to share in his entrepreneurial spirit. Starbucks'
leaders have shown a willingness to challenge the status quo and embrace change to drive
growth.
4. Customer-Centric Approach: A customer-centric approach refers to a business strategy that
places the needs, preferences, and satisfaction of the customer at the core of all decisions,
actions, and interactions, aiming to deliver exceptional value and create long-term customer
loyalty.
- Starbucks has built its success on understanding and meeting the evolving needs of its
customers. The company has consistently focused on providing a personalized and
exceptional customer experience. This customer-centric approach involves gathering
customer feedback, adapting to their preferences, and tailoring products and services
accordingly.
5. Brand Building: A customer-centric approach refers to a business strategy that places the
needs, preferences, and satisfaction of the customer at the core of all decisions, actions, and
interactions, aiming to deliver exceptional value and create long-term customer loyalty.
- Starbucks has created a powerful and recognizable brand that resonates with customers
worldwide. Through effective marketing and brand-building strategies, Starbucks has
positioned itself as more than just a coffee retailer. The company has cultivated a strong
emotional connection with its target market, allowing it to charge premium prices and
maintain customer loyalty.

6. Speed and Adaptability: Speed and adaptability refer to the ability of individuals or organizations
to respond quickly and effectively to changing circumstances, seize opportunities, and adjust
strategies, processes, or operations to remain competitive and relevant in dynamic environments.

- Starbucks has demonstrated agility and the ability to adapt to changing market conditions. The
company has shown a willingness to enter new markets quickly and adjust its strategies as needed.
This flexibility has enabled Starbucks to stay ahead of industry trends and maintain a competitive
edge.

Overall, Starbucks embodies several entrepreneurial characteristics, including a focus on innovation,

risk-taking, customer-centricity, strong leadership, brand building, and adaptability. These
entrepreneurial traits have played a significant role in the company's success and have allowed it to
continuously evolve and thrive in a dynamic and competitive market.

Adaptive mode.

Adaptive mode refers to a flexible and responsive approach in which individuals or organizations
actively adapt to changing circumstances and embrace continuous learning and improvement. It
involves the ability to quickly assess and adjust strategies, processes, and behaviors in order to
navigate uncertainty and capitalize on opportunities. In adaptive mode, individuals or organizations
demonstrate resilience, agility, and a willingness to embrace change as a means to thrive and
succeed in dynamic environments.

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Starbucks has demonstrated an adaptive mode in several aspects of its operations, allowing the
company to respond to changing market conditions and customer preferences. Here are some key
elements of Starbucks' adaptive mode:

1. Market Research and Consumer Insights: Market research and consumer insights
encompass the systematic gathering and analysis of data and information to gain a deep
understanding of target markets, consumer behaviors, preferences, and trends, enabling
informed decision-making and the development of effective marketing strategies.
- Starbucks actively invests in market research and consumer insights to understand evolving
trends, preferences, and demands. This information helps Starbucks identify opportunities
and make strategic adjustments to its product offerings, store designs, and marketing
campaigns. By staying attuned to customer feedback and preferences, Starbucks can adapt
its offerings to meet changing consumer needs.
2. Menu Innovation: Menu innovation involves the continuous development and introduction
of new and creative food and beverage offerings, as well as the enhancement of existing
menu items, to cater to evolving consumer tastes, drive customer engagement, and
differentiate from competitors.
- Starbucks continuously adapts its menu to cater to evolving tastes and dietary preferences.
They introduce seasonal offerings, limited-time promotions, and new product categories to
keep their offerings fresh and exciting. For example, they have expanded their non-dairy milk
options, added plant-based food items, and introduced alternative beverage choices to
accommodate different dietary preferences.
3. Digital Transformation: Digital transformation refers to the comprehensive and strategic
integration of digital technologies, processes, and capabilities across an organization to
fundamentally change how it operates, delivers value, and interacts with stakeholders in the
modern digital age.
- Starbucks has embraced digital technology to enhance the customer experience and adapt
to changing consumer behaviors. They have developed a robust mobile app that allows
customers to order ahead, customize their beverages, and earn loyalty rewards. This digital
transformation has enabled Starbucks to provide convenience, personalization, and seamless
integration between online and offline channels.
4. Store Format Adaptation: Store format adaptation involves modifying and customizing the
physical layout, design, and features of retail stores to align with specific market segments,
locations, or customer preferences, enhancing the shopping experience and maximizing sales
potential.
- Starbucks adapts its store formats to different locations and customer preferences. They
have various store formats, including traditional cafés, drive-thru locations, kiosks, and even
mobile units. This adaptability allows Starbucks to cater to different customer segments and
capture opportunities in diverse settings, such as airports, universities, and office buildings.
5. Localized Strategies: Localized strategies refer to the customization and tailoring of business
approaches, marketing efforts, and operations to address the unique needs, preferences,
and characteristics of specific local markets or geographic regions, optimizing relevance and
effectiveness.
- Starbucks employs localized strategies to cater to regional preferences and cultural
nuances. They adjust their menu offerings to include regional favorites, collaborate with local
suppliers, and incorporate local design elements into store aesthetics. This localization
strategy helps Starbucks create a more personalized and relevant experience for customers
in different markets.

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 6. Sustainable Initiatives: A sustainable initiative refers to a planned effort or project that aims
to promote environmental, social, or economic sustainability by implementing practices,
policies, or actions that minimize negative impacts, conserve resources, and contribute to
long-term well-being and resilience.
- Starbucks has demonstrated adaptability by prioritizing sustainability and environmental
responsibility. They have implemented various initiatives to reduce waste, promote recycling,
and source ethically produced coffee beans. By adapting their practices to align with
changing societal values, Starbucks aims to meet consumer expectations and contribute to a
more sustainable future.
7. Flexibility in Expansion: Flexibility in expansion refers to the ability of a business to adapt
and adjust its expansion strategies, operations, and resources in response to changing
market conditions, opportunities, or challenges, ensuring agility and maximizing chances of
success.
-Starbucks has shown adaptability in its expansion strategies. While they have pursued rapid
global expansion, they have also adjusted their approach based on market conditions. In
some cases, they have partnered with local companies or acquired existing chains to gain a
foothold in new markets. This flexibility allows Starbucks to tailor its expansion efforts to
local preferences and navigate regulatory and cultural complexities.

Overall, Starbucks' adaptive mode is reflected in its responsiveness to market research, menu
innovation, digital transformation, store format adaptation, localized strategies, sustainability
initiatives, and flexibility in expansion. By continuously adapting and evolving, Starbucks maintains its
relevance and ensures that its offerings meet the changing needs and preferences of its customers.

Planning mode.

Planning mode refers to a deliberate and strategic approach in which individuals or organizations
analyze, anticipate, and map out future goals, objectives, and actions. It involves setting clear targets,
outlining detailed strategies, and allocating resources in a structured manner to achieve desired
outcomes. In planning mode, emphasis is placed on thorough analysis, risk assessment, and
establishing a roadmap to guide decision-making and implementation.

Starbucks demonstrates a strong planning mode in its strategic approach to business operations. The
planning mode encompasses various aspects of the company's activities, including setting long-term
goals, developing strategies, and implementing structured processes. Here are some key elements of
Starbucks' planning mode:

1. Strategic Goal Setting: Strategic goal setting is the process of defining and establishing clear,
specific, and measurable objectives that align with an organization's overall strategy, guiding
decision-making, resource allocation, and performance evaluation to drive focused and
effective efforts toward desired outcomes.
- Starbucks engages in strategic planning to establish long-term goals and objectives. This
process involves defining the company's vision, mission, and core values. By setting clear
goals, Starbucks provides a roadmap for its operations and ensures alignment across the
organization.
2. Market Analysis: Market analysis is the systematic examination and evaluation of market
conditions, trends, competitors, customer behavior, and other relevant factors to gain
insights and inform business strategies and decision-making.

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 - Starbucks conducts comprehensive market analysis to understand industry trends,
competitive landscape, and consumer preferences. This analysis helps the company identify
opportunities and potential threats. By staying informed about market dynamics, Starbucks
can develop effective strategies and make informed business decisions.
3. Strategic Initiatives: A strategic initiative refers to a proactive and purposeful action or
project undertaken by an organization to achieve specific strategic objectives, often involving
significant resources, planning, and cross-functional coordination.
- Based on market analysis and goal setting, Starbucks develops strategic initiatives to drive
growth and competitive advantage. These initiatives may include expanding into new
markets, introducing new products, enhancing customer experience, and improving
operational efficiency. The planning mode allows Starbucks to evaluate the potential impact
of each initiative and allocate appropriate resources for its implementation.
4. Financial Planning: Financial planning is the process of assessing an individual's or
organization's current financial situation, setting financial goals, and developing a
comprehensive plan to manage income, expenses, investments, and assets in order to
achieve those goals.
- Starbucks engages in financial planning to ensure the effective allocation of resources and
achieve its financial objectives. This includes budgeting, forecasting, and financial analysis to
assess the financial performance of the company. Financial planning allows Starbucks to
track progress, make informed investment decisions, and optimize its financial resources.
5. Operational Planning: Operational planning involves developing detailed plans and
strategies to effectively and efficiently execute day-to-day activities, processes, and tasks
within an organization to achieve specific operational objectives.
- Starbucks engages in operational planning to optimize its supply chain, manage inventory,
and ensure smooth operations across its stores. This involves forecasting demand, managing
supplier relationships, and implementing efficient processes to meet customer expectations.
Operational planning helps Starbucks maintain consistency in its operations and deliver a
high-quality experience to customers.
6. Performance Measurement and Evaluation: Performance measurement and evaluation
refers to the systematic process of assessing and analyzing key performance indicators and
metrics to gauge the effectiveness, efficiency, and achievement of desired outcomes in order
to make informed decisions and drive continuous improvement.
- Starbucks sets key performance indicators (KPIs) and establishes metrics to measure the
success of its strategies and initiatives. This includes tracking financial performance,
customer satisfaction, employee engagement, and sustainability goals. By regularly
monitoring performance, Starbucks can identify areas of improvement, make adjustments to
its plans, and ensure accountability throughout the organization.
7. Continuous Improvement: Continuous improvement refers to an ongoing effort within an
organization to enhance processes, systems, products, or services over time through
incremental changes, data-driven analysis, feedback, and learning, aiming to optimize
performance, quality, and efficiency.
- Starbucks embraces a culture of continuous improvement, where planning is an ongoing
process. The company regularly evaluates its strategies, reviews market conditions, and
seeks feedback from customers and employees. This iterative approach allows Starbucks
to adapt its plans and make necessary adjustments to remain competitive in a dynamic
business environment.

Overall, Starbucks' planning mode is evident in its strategic goal setting, market analysis, strategic
initiatives, financial planning, operational planning, performance measurement, and continuous

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improvement efforts. By engaging in comprehensive planning, Starbucks can effectively navigate
challenges, capitalize on opportunities, and achieve its long-term objectives.

Logical Incrementalism.

Logical incrementalism refers to an approach to strategic decision-making where organizations make

small, incremental changes based on continuous learning and feedback rather than pursuing radical
or revolutionary changes. While Starbucks has demonstrated a combination of strategic planning and
entrepreneurial spirit, elements of logical incrementalism can be observed in its approach as well.
Here are some examples of how Starbucks has applied logical incrementalism in its operations:

1. Starbucks continuously introduces new beverages and food items to its menu based on customer
feedback and market trends. Rather than introducing a completely new menu all at once, Starbucks
incrementally adds new options and flavors to cater to evolving tastes and preferences. This
incremental approach allows the company to test the market and gather feedback before expanding
or making significant changes.

2. Starbucks has evolved its store formats over time based on customer needs and market insights.
They have introduced drive-thru locations, express stores, and small-format stores in urban areas to
adapt to changing consumer behaviors and preferences. By incrementally adjusting store formats,
Starbucks can assess the viability and success of each format before expanding further.

3. Starbucks has embraced digital technology to enhance the customer experience and streamline
operations. However, rather than implementing drastic changes all at once, the company has taken
an incremental approach to its digital transformation. They introduced mobile ordering and payment
options gradually, refined the features based on user feedback, and expanded the functionality over
time. This iterative process allowed Starbucks to learn and adapt to customer needs while minimizing
potential disruptions.

4. Starbucks empowers store managers and baristas to customize the store experience within a
broad framework. They can make adjustments to the store layout, design, and product offerings
based on local customer preferences and needs. This incremental customization approach allows
Starbucks to respond to specific market demands while maintaining consistency in its overall brand
experience.

5. Starbucks has made incremental progress in its sustainability efforts over the years. They have set
targets to reduce waste, increase the use of reusable cups, and source ethically produced coffee
beans. Starbucks has implemented these initiatives in stages, learning from each step and gradually
increasing its sustainability commitments. This incremental approach ensures that the company can
make meaningful progress while managing operational challenges and maintaining stakeholder
engagement.

Overall, while Starbucks combines elements of strategic planning and entrepreneurial decision-
making, it also employs logical incrementalism in various aspects of its operations. By making
incremental adjustments based on continuous learning and feedback, Starbucks can adapt to
evolving market conditions, minimize risks, and optimize its strategies for long-term success.

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STRATEGIC DECISION-MAKING PROCESS

A strategic decision-making process is a systematic approach to making critical choices that shape an
organization's long-term direction and success. It involves analyzing the internal and external
environment, clarifying the organization's mission, vision, and goals, formulating strategic options,
evaluating, and selecting the most suitable option, and developing an implementation plan. Once
implemented, the decision is monitored and reviewed to assess its effectiveness and make necessary
adjustments. This process ensures that decisions are made based on thorough analysis, alignment
with organizational objectives, and consideration of potential risks and rewards.

1. Evaluate Current Performance: Assessing the current performance of Starbucks involves analyzing
financial indicators, market share, customer satisfaction, and other relevant metrics to understand
the company's strengths and weaknesses.

2. Review Corporate Governance: This step involves evaluating the effectiveness of the company's
governance structure, including the board of directors, executive leadership, and decision-making
processes. It ensures that there is proper oversight and accountability in strategic decision-making.

3. Scan and Assess the External Environment: Starbucks would conduct a comprehensive analysis of
the external environment, including factors such as market trends, competition, regulatory changes,
and consumer preferences. This analysis helps identify opportunities and potential threats that may
impact strategic decisions.

4. Scan and Assess the Internal Corporate Environment: Evaluating the internal corporate
environment involves assessing the company's resources, capabilities, organizational structure,
culture, and core competencies. This assessment helps identify areas where Starbucks has a
competitive advantage and areas that may require improvement.

5. Analyze Strategic Factors: This step involves analyzing the information gathered from the external
and internal assessments to identify strategic factors that are critical for Starbucks' success. These
may include areas such as product innovation, brand differentiation, customer experience,
sustainability, and digital transformation.

6. Generate, Evaluate, and Select the Best Alternative Strategies: Based on the strategic analysis,
Starbucks would generate a range of alternative strategies to address the identified strategic factors.
These strategies would be evaluated against various criteria, such as feasibility, potential impact,
resource requirements, and alignment with the company's mission and vision. The best alternative
strategies would then be selected for further development.

7. Implement Selected Strategies: Once the strategies are selected, Starbucks would develop
detailed implementation plans, allocate resources, and define clear objectives and milestones. This
step involves aligning various departments and functions within the organization to execute the
chosen strategies effectively.

8. Evaluate Implemented Strategies: After implementing the selected strategies, Starbucks would
regularly monitors and evaluate its performance against predetermined metrics and targets. This
evaluation helps assess the effectiveness of the strategies and their impact on the organization's
performance.

III.DEFINITION AND THE TRIPLE BOTTOM LINE OF SUSTAINABILITY

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Definition of Sustainability:

Sustainability refers to the ability to meet present needs without compromising the ability of future
generations to meet their own needs. It involves making decisions and taking actions that balance
environmental, social, and economic considerations to ensure long-term viability and well-being for
both current and future generations.

Triple Bottom Line of Sustainability:

The triple bottom line (TBL) is a framework that expands the traditional notion of business
performance beyond just financial indicators. It emphasizes three interconnected dimensions of
sustainability: environmental, social, and economic. These three pillars are often referred to as
"people, planet, and profit." The triple bottom line framework encourages organizations to consider
the broader impacts of their activities and make decisions that create value not only for shareholders
but also for society and the environment. Here's a breakdown of each dimension:

1. Economic: The economic dimension of the triple bottom line recognizes the importance of
financial viability and economic sustainability. It involves generating profits, creating economic value,
and ensuring long-term financial stability. This dimension encourages businesses to adopt
sustainable business models that consider the long-term costs and benefits of their decisions,
balancing short-term profitability with long-term economic resilience.

2. Social: The social dimension of the triple bottom line considers the well-being of people and
communities affected by an organization's activities. It encompasses aspects such as fair labor
practices, employee health and safety, human rights, community engagement, diversity and
inclusion, and supporting social initiatives. It involves creating positive social outcomes and fostering
relationships with stakeholders.

3. Environmental: The environmental dimension of the triple bottom line focuses on minimizing
negative impacts on the natural environment and promoting ecological sustainability. It involves
practices such as reducing greenhouse gas emissions, conserving natural resources, managing waste
responsibly, protecting biodiversity, and adopting sustainable production and consumption patterns.

The triple bottom line approach encourages organizations to take a holistic view of sustainability,
considering the interconnectedness of environmental, social, and economic factors. By incorporating
the triple bottom line framework into decision-making processes, organizations aim to achieve
sustainable outcomes that benefit people, the planet, and profit simultaneously.

Definition of Sustainability for Starbucks:

Starbucks defines sustainability as meeting the needs of the present while considering the social,
environmental, and economic impacts on future generations. They aim to create a sustainable future
by focusing on ethical sourcing, environmental stewardship, and community engagement.

Triple Bottom Line of Sustainability for Starbucks:

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1. Economic: The economic aspect of the triple bottom line is crucial for Starbucks' sustainability. By
generating profits and maintaining financial stability, Starbucks aims to sustain its operations, invest
in innovation, and continue its social and environmental initiatives. The company's economic
sustainability allows them to drive positive change and create shared value for stakeholders,
including employees, suppliers, shareholders, and communities.

2. Social: Starbucks recognizes the importance of social responsibility and strives to positively impact
the communities in which it operates. They prioritize fair trade practices, ensuring that coffee
farmers receive fair compensation for their products. Starbucks also invests in the development and
well-being of its employees, providing competitive wages, comprehensive benefits, and
opportunities for career advancement. The company actively engages in community service and
supports initiatives related to education, youth empowerment, and social equity.

3. Environmental: Starbucks is committed to minimizing its environmental footprint by implementing

sustainable practices throughout its operations. This includes efforts to conserve water, reduce
energy consumption, decrease greenhouse gas emissions, and promote recycling and waste
reduction. They also prioritize sustainable sourcing of coffee beans and other ingredients, promoting
biodiversity conservation and supporting farmer livelihoods.

The triple bottom line approach is deeply ingrained in Starbucks' sustainability strategy. By
considering the environmental, social, and economic dimensions of its operations, Starbucks strives
to create a positive impact on the planet, people, and profit, embodying its commitment to a
sustainable future.

CORPORATE GOVERNANCE

Corporate governance refers to the system of rules, practices, and processes by which a company is
directed, controlled, and managed. It provides a framework for establishing accountability,
transparency, and ethical conduct within an organization. Corporate governance ensures that the
interests of various stakeholders, such as shareholders, management, employees, and customers, are
protected and balanced. It includes mechanisms for decision-making, oversight of management, and
compliance with legal and regulatory requirements. Effective corporate governance promotes
integrity, responsible business practices, and sustainable long-term growth while mitigating risks and
enhancing stakeholder confidence.

Corporate governance at Starbucks encompasses various functions and practices aimed at ensuring
accountability, transparency, and ethical conduct. Here are some key aspects of corporate
governance at Starbucks:

1. Goal and Risk Management: Goal and risk management involve defining clear objectives and
identifying potential risks, followed by developing strategies to effectively plan, monitor, and
mitigate risks while working towards achieving desired outcomes.
- Starbucks' corporate governance framework includes setting clear goals and objectives for
the company and managing risks effectively. The board of directors and management work
together to establish strategic goals and define risk management strategies to protect the
interests of shareholders and stakeholders.

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 2. Corporate Accountability: Corporate accountability refers to the responsibility and
transparency of a company in terms of its actions, decisions, and impact on stakeholders,
including social, environmental, and ethical considerations.
- Starbucks emphasizes corporate accountability through strong oversight and monitoring
mechanisms. The board of directors, as the governing body, ensures that management acts
in the best interests of the company and its stakeholders. They are responsible for holding
management accountable for their actions, decisions, and performance.
3. Shareholders Meetings: Shareholders meetings are gatherings where shareholders of a
company convene to discuss matters of importance, such as corporate governance, financial
performance, and voting on key decisions, providing an opportunity for shareholders to
exercise their rights and engage with the company's management.
- Starbucks conducts regular shareholders’ meetings, providing a platform for shareholders
to voice their concerns, ask questions, and vote on important matters. These meetings
facilitate engagement between shareholders and the company, promoting transparency and
shareholder participation in corporate decision-making processes.
4. Government Regulation: Government regulation refers to the rules, laws, and policies
imposed by governmental bodies to oversee and control various aspects of business
activities, ensuring compliance, promoting fair competition, and safeguarding public
interests.
-Starbucks operates in a highly regulated industry and complies with relevant government
regulations and laws. Corporate governance at Starbucks includes ensuring compliance with
legal and regulatory requirements, including labor laws, food safety standards, financial
reporting standards, and environmental regulations.

IV.SOCIAL RESPONSIBILITY AND ETHICS

Starbucks Coffee has an enormous number of locations that span the globe, a success due in part to
a commitment to social responsibility and corporate ethics. Since the company's founding in 1971,
Starbucks boasts strong ethical marketing and solid corporate citizenship policies. Despite this ethical
focus and mission, Starbucks made controversial business decisions contradicting the company's
ethics. This problem maintaining ethics reveals when comparing Starbucks' local ethical image with
the corporation's global actions in the coffee trade. When one enters their local Starbucks, the
commitment to corporate citizenship is readily seen in advertising and branding efforts. One does
not have to look far within the store to find pictures and ads of foreign coffee growers and how
Starbucks pays increased amounts of money to be a responsible purchaser of coffee. Starbucks has
often lived up to this responsibility. Starbucks pays more money than any other coffee purchaser to
ensure ethical supply chain management (Starbucks, 2012).

Conversely, Starbucks also drives down prices in developing countries where the bulk of its coffee is
purchased. This arguably unethical business practice occurs when Starbucks using its vast monetary
resources to block patent and legal rights of local coffee companies in the countries that produce
coffee. Starbucks used legal power and financial resources to block the trademarking efforts to
protect purchasing prices for coffee. For example, when one buys Sumatra Coffee at Starbucks, the
name Sumatra has no trademark, which the Sumatra coffee growers attempted to pass through
patent application. Despite the fact that Ethiopia or Sumatra is written on a bag of Starbucks coffee,
the names do not belong to the growers in these countries. Ultimately, this action allows Starbucks
to maintain price control over coffee. Starbucks claims that its higher than industry average coffee

18
goes to maintaining an ethical supply chain but this point is arguable (Starbucks, 2012). According to
Oxfam,

Starbucks decision to brand itself as a "good corporate citizen" creates a situation, which can be
construed as hypocritical due to the obvious contradictions between the company's actions and
ethics strategies such as maintaining sustainable supply lines. In the most simplest terms, Starbucks
is a multi-billion dollar operation buying in countries such as Ethiopia where 40–50% of export
income is derived from coffee (Oxfam, 2006). The majority of the growers workers (15 million
Ethiopians) are dependent on this trade which only allows them to live on less than $1 a day (Oxfam,
2006). The question that arises in this situation is whether Starbucks is actually being an ethical and
responsible corporate citizen? Whatever the answer a larger concern arises from the fundamental
need of companies to protect investments, which questions the wisdom of ethical branding at the
local level for Starbucks.

V.ENVIRONMENTAL SCANNING AND INDUSTRY ANALYSIS

Aspects of Environmental Scanning

Environmental scanning refers to an in-depth examination of key factors that influence the
business operations of a firm. It involves carefully studying a firm’s external environment to
predict environmental changes and detect changes already underway. Therefore, critical trends
and events will signal an alert before it develops a discernible pattern and before competitors
recognize them.

In undertaking environmental scanning, strategic managers must first be aware of the variables
that may affect a firm’s short-term and long-term decisions as follows:

A. Natural environment. It includes physical resources, wildlife, and climate that are an inherent
part of existence on Earth. These factors form an ecological system of interrelated life in
which the business is embedded. In a world concerned with climate change, a business must
scan the natural environment for factors that might previously have been taken for granted,
such as the availability of fresh water and clean air. Moreover, management must scan not
only the natural environment for possible strategic factors but also include in its strategic
decision-making processes the impact of its activities on the natural environment

Example:
Accelerating Sustainable Coffee
Starbucks has always been at the forefront of ethical coffee procurement.
These environmental targets for the coffee industry are an expansion of the C.A.F.E.
(coffee and farmer equity) Practices initiative. Farmers who take part in the initiative
had higher productivity than national averages, according to the data. It has
improved the lives of coffee growers and their communities and ensured a
sustainable supply of high-quality coffee for Starbucks.

To aid in its transition to a Planet Positive future, Starbucks is now emphasizing its
efforts to reduce emissions and water usage in "the first ten feet" (farm to port).

Carbon Neutral Green Coffee

Starbucks will work to meet its 2030 target of carbon neutral green coffee, reducing greenhouse gas

19
(GHG) emissions in coffee at Origin then compensating for any remaining emissions, by deploying
three primary strategies:
 Decreasing carbon emissions in Starbucks supply chain by equipping farmers with precision
agronomy tools.
 Promoting and distributing climate-resistant tree varietals.
 Protecting and restoring at-risk forests in key coffee landscapes.
Water Conservation at Origin
Water is used extensively in conventional coffee preparation. Starbucks' C.A.F.E. Practice supply
chain includes over 200,000 wet mills; by facilitating farmers' access to more water-efficient
machinery, the company may help reduce water usage while simultaneously improving quality
control and boosting production output.

Starbucks will achieve 50% conservation in water usage by 2030 by:

 Conserving water by directly investing in new ecological wet mills (eco-mills) for C.A.F.E.
Practice farms.
 Investing to make current water processing technology and machinery even more efficient.
 Investing to make current water processing technology and machinery even more efficient.

B. Societal environment. It is mankind’s social system that includes general forces that do not
directly affect the short-run activities of the firm but can influence its long-term decisions.
These forces are as follows:
 Economic forces. These regulate the exchange of materials, money, energy, and
information.
 Technological forces. These generate problem-solving inventions.
 Political-legal forces. These allocate power and constrain and protect laws and
regulations.
 Sociocultural forces. These regulate the values, morals, and customs of society.

C. Task environment. It includes elements or groups that directly affect a firm and, in turn, are
affected by it. These elements are as follows:
 Customers. They have the power to create or reduce the demand for a product or
service.
 Suppliers. They provide a product or service to another business.
 Competitors. They provide a better or similar product to the same target segment.
 Employees. They directly participate in activities that help fulfill the firm’s goals.
 Government Regulations. Any change in tax law will impact the business operation.
 Special Interest Groups. They bring attention to the firm and could affect the
operation in either a positive or negative way.

Industry Analysis: Analyzing the Task Environment

An industry is a group of firms that produces a similar product or service. Part of the industry
analysis examines the important stakeholder groups, like suppliers and customers, in a particular
corporation’s task environment. The following are the common methods used by firms in
conducting industry analysis:

20
 A. SWOT Matrix. It is a framework used to evaluate a firm’s competitive position by listing the
conditions inside and surrounding it. SWOT assesses internal, external, current, and future
potential factors that may affect the market position of a particular organization.

EXAMPLE

 Strengths. These are the internal areas where an organization excels and factors that
separate an organization from its competitors. These include a strong brand image, loyal
customer base, a strong balance sheet, and unique technology.
Starbucks Strengths – Internal Strategic Factors
1. Strong brand image
The Starbucks Company brand is the most well-known and powerful in the food and drink
business. The company's size, output, and number of dedicated clients have steadily

21
increased over time. According to Interbrand's 2022 valuation, the brand is worth $14.05
billion.
2. Strong financial performance
In the fiscal year 2022, Starbucks generated $32.25 billion in sales and $3.28 billion in
profit, putting it in a healthy financial position.
3. Growth in stores
From 1998 to 2023, the company went from having 1,886 outlets to having 35,711. There
are now two kinds of shops you may visit at Starbucks: company-operated and licensed. It
operates 18,253 shops under its own name and another 17,458 under license across the
world. Eighty-two percent of the income comes from the company's own outlets.
4. Extensive international supply chain
It is well-known that Starbucks has a worldwide supply chain that stretches around the
globe. Coffee beans for Starbucks are sourced from the Americas, Africa, and the Asia-
Pacific.
5. Acquisitions
Seattle's Best Coffee, Teavana, Tazo, Evolution Fresh, Torrefazione Italy Coffee, and Ethos
Water are just a few of the prominent brands that the firm has purchased. Starbucks has
found great success with its acquisitions.
6. Moderate diversification
Starbucks has expanded its company by offering novel products and menu items. The
taste of the coffee may be amplified by using coffee ice cubes, for instance.
7. Quality, Taste, and Standardization
Starbucks has expanded over the world because of the demand for its high-quality coffee
mixes. Its items are of high quality and uniformly standard throughout all its stores.
8. Efficiency, Strategic Planning, and Reinvestment Strategy
Profits from Starbucks are put back into opening new stores. The firm has benefited
greatly from the efficient operations and well-thought-out strategic choices that have led
to these successes.
9. Employee treatment
The company takes care of its staff, which leads to satisfied consumers. Starbucks has
been included in Fortune's annual list of the top 100 companies to work for year after
year.
10. Strong Loyalty Program
Starbucks' excellent loyalty program is a major factor in the brand's continued success.
You get three stars for every dollar spent. If you acquire 150 stars, you may have one
drink on the house. Mobile payments, advance orders, complimentary beverages on
members' birthdays, etc. are just a few of the perks of being a loyalty program member.
11. Increase starting wage for baristas
In 2022, all baristas at the coffee giant will be guaranteed minimum pay of $15 per hour.
According to a business statement, Starbucks also intends to pay its baristas an average
compensation of $17 per hour. During two years of service, Starbucks employees are
eligible for a 5% raise. Because of a constant scarcity of workers, hourly salaries were
raised during the epidemic.

12. Restrooms that are Unisex

To prevent prejudice against the Lesbian, Gay, Bisexual, and Transgender (LGBT)
population, Starbucks has installed gender-neutral bathrooms. This action is a reaction to
anti-LGBTQ legislation that targets transgender persons.

22
Weaknesses. These are the internal areas that hinder an organization from performing at its
optimum level. The business needs to make improvements to remain competitive in these areas.
These include a weak brand, higher-than-average turnover, high levels of debt, an inadequate
supply chain, or lack of capital.

Starbucks Weaknesses – Internal Strategic Factors

Starbucks Weaknesses – Internal Strategic Factors

1.High prices
Starbucks' prices are higher than those at McDonald's and other coffee chains, which puts it out of
reach.

2. Imitability of products
Starbucks does not have a monopoly on the market's most original offerings. This facilitates simple
product imitation by other businesses. The offerings at McDonald's McCafé and Dunkin' Donuts,
for example, are almost identical.
3. Generalized standards for most products
Several of its products don't meet the needs of consumers in countries with different cultural
norms. Its designed drinks, for instance, may not resonate with local tastes.
5. Procurement Practices
The company's unethical purchasing methods were challenged by several social and environmental
organizations. They said it uses poor farmers in the third world to get its coffee. Moreover, it has
been claimed that it goes against "Fair Coffee Trade" norms.

6. Recall of Products
Throughout the years, Starbucks has had to recall several of its most popular items. This may
damage the company's reputation and result in fewer customers.
7. Worst holiday drink
Starbucks debuted the "Iced Latte" as a festive Christmas holiday drink, but a recent survey found
that more than 21% of coffee aficionados really dislike it. Unfortunately, the beverage was a
letdown.

Opportunities. These are favorable external factors that could give an organization a competitive
advantage. For instance, if a country cuts tariffs, a car manufacturer can export its cars into a new
market, increasing sales and a larger market share.

Starbucks Opportunities – External Strategic Factors

1. Expansion in developing markets

Most of Starbucks' cafes may be found in the United States. The corporation may find significant
success by expanding into new markets like those in China, India, and parts of Africa.

23
 2. Business diversification and Products Specifications
It may increase its chances of generating more money by expanding into new markets. Another
lucrative possibility is catering product development to the needs of a defined niche market.

3. Introducing new products

Given the company's prominence, it would do well to expand its brand to include seasonal items
like Peppermint Mocha, Eggnog Latte, and Gingerbread Loaf.

4. Partnerships or alliances with other firms

A win-win for co-branding of any kind. Starbucks has the potential to form strategic agreements
with other leading businesses. Its brand recognition and market share would increase as a result.

5. Exploit the Latest Coffee Trends and Technologies

There is still space for growth at Starbucks despite the company's position as a leader in
innovative coffee technology. The newest coffee gadgets and innovations provide a plethora of
options, from the greatest foam technology to snap-chilling, return to black, and RSI-reducing
tools.

6. Adopt Price Differentiation

Offering both standard and high-end coffees has helped several coffee shops significantly expand
their clientele. Starbucks may attract middle-class customers by selling normal coffee at a lesser
price and positioning its more costly variant as a luxury good.

7. Strengthen Online Channels

More coffee is being purchased for takeout because of the pandemic as opposed to being
consumed in cafes. More consumers may use Starbucks' curbside or in-store pickup service if the
company improved its online sales channels.

8. Coffee Delivery Service

Presently, consumers who want their Starbucks coffee delivered depend on Uber Eats, Grubhub,
Doordash, and Postmates. If Starbucks wants to provide its customers with a better experience, it
can create its own coffee delivery service.

9. Coffee Subscription
A coffee subscription service from Panera Bread has already launched. Starbucks might
potentially test a subscription service for coffee as a means of reaching out to a wider audience.

Threats. These are the factors that may pose potential harm to an organization. For instance, a
drought threatens a wheat-producing company as it may destroy or reduce the crop yield. Other
common threats include rising costs for materials, increasing competition, tight labor supply, and
disruption through emerging technologies that may drive products or services obsolete.

Starbucks Threats – External Strategic Factors

1. Competition with low-cost coffee sellers

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Coffee shops abound, and many of them sell goods at reasonable prices. The long-term viability
of Starbucks, which charges more, might be jeopardized as a result.

2. Store-based retail competition

Threats to its market share might also come from aggressive rivalry from global corporations like
Dunkin' Donuts and McDonald's.

3. Product imitation
Both established competitors and upstarts may copy your product.

4. Strike by Independent Contractors Who Deliver Goods

Supply chain management at Starbucks is complicated by a large number of independent
contractors and other parties involved. Employees of a major supplier went on strike in 2019,
causing shortages for Starbucks cafes in the Midwest.

5. Separate Coffee House Revivals

Starbucks faces several social dangers. These cultural movements favor locally owned,
independent coffee shops and are against the growth of huge, corporate chains.

9. Variation in Purchase Patterns

Customer behavior and discretionary spending, according to experts, will continue to shift
because of the epidemic. Starbucks' expansion goals and daily operations may be hampered by
the restaurant industry's downturn and other macroeconomic issues.

10. Increases in the Cost of Green Coffee Beans

Concerns about its availability, stockpiling, and supply chain disruption have driven up the price
of raw coffee beans - Arabica, the world's most produced coffee (representing over 60% of the
world's output). Starbucks' bottom line will suffer for every extra dollar that goes toward paying
for higher-priced raw coffee beans.

11. Racism in food options: Starbucks under fire

Black, Indigenous, and People of Color (BIPOC) populations are disproportionately impacted by
dietary racism since they have fewer healthier food alternatives available to them at affordable
prices. Switch4Good said that the hoax was successful in exposing Starbucks for their deceptive
practices.

25
B. PESTEL Analysis. It is a tool to identify the external forces that may affect an organization
positively and negatively.

Figure 2. Example of PESTEL Analysis

Source: Strategic Management and Business Policy (15th ed.),
2018. p. 129

 Political. These factors determine the impact of government and government policy on a
particular organization or a specific industry. It includes trade, fiscal, and taxation policies,
among others.
 Economic. These factors determine the impact of the economy and its performance on an
organization and its profitability. These include interest rates, employment or unemployment
rates, raw material costs, and foreign exchange rates.
 Social. These factors determine the impact of the social environment and emerging trends on
the business profitability of an organization. These also help marketers to understand the
changing preferences of the customers further. These include changing family demographics,
education levels, cultural trends, attitude changes, and changes in lifestyles, among others.

 Technological. These factors determine the impact of technological innovation and

development on a particular market or industry. These include digital or mobile technology
changes, automation, research, and development. Moreover, these also include technological
influence on distribution, manufacturing, and logistics methods.

 Environmental. These factors determine the influence of the surrounding environment and
ecological aspects' impact on a market or industry. These include climate, recycling
procedures, carbon footprint, waste disposal, and sustainability.

 Legal. These factors determine the importance of understanding legal laws and procedures in
a given territory where a business operates. These include employment legislation, consumer
law, health and safety, and international and trade regulations and restrictions.

26
EXAMPLE OF PESTEL ANALYSIS

PESTEL OF STARBUCKS

The Political Landscape (Political Factors Affecting Starbucks Coffee’s Business)

The influence of government and associated policies on the cafe industry is analyzed here using the
PESTEL/PESTLE framework. The following are examples of political external issues that Starbucks
faces in its distant or macroenvironment:

 Market convergence and divergence (opportunity and threat)

 Strengthening government investment in infrastructure (opportunity)
 The excessive paperwork that plagues emerging nations (threat)
An external issue that offers both possibilities and risks to Starbucks and its worldwide expansion is
the integration and disintegration of political systems and regional markets. The coffee shop chain
can more easily penetrate regional markets by staying cohesive, but it faces more challenges when it
breaks apart. Starbucks can reach a wider audience of consumers and suppliers thanks to
government measures that aim to improve infrastructure. Nonetheless, many nations still have
27
excessive bureaucratic red tape. This political environment poses a risk to the coffee industry since it
may help the more politically connected local rivals advance in the market. As a result, this facet of
the PESTEL/PESTLE research reveals both potential and political barriers to expansion for Starbucks
Coffee.

The Economy (Economic Factors Important to Global Coffeehouse Chains)

The economic environment and trends are discussed in this part of the PESTEL/PESTLE analysis
model, which has implications for the coffee and food service industry. The distant or
macroeconomic environment that Starbucks must contend with includes the following economic
external factors:

 expansion in undeveloped nations (opportunity)

 Long-term unemployment rates falling (opportunity)
 Soaring wages in coffee-producing nations (threat)
Starbucks may expand its global revenue base because of rising middle classes and falling
unemployment rates in emerging nations. Yet, the increasing expense of ingredients poses a danger
to Starbucks due to the growing cost of labor in emerging nations. Most of the company's coffee
beans come from third-world nations. So, Starbucks Coffee faces large opportunities in this section of
the PESTEL/PESTLE study, while supply stability may be a concern.

Society Influences (Sociocultural Factors in Starbucks Coffee’s External Environment)

Here we see how customers and the coffee shop industry are affected by the social circumstances
and trends shown by the PESTEL/PESTLE analytical methodol[gy. The following are examples of social
and cultural external elements that Starbucks must manage in its extended or macroenvironment:

 The Rise of the Coffee Subculture (opportunity)

 The rise of the middle class (opportunity)
 Increase in health-related awareness (opportunity)
 Separate Coffeehouse Protests (threat)
Demand for Starbucks' specialty coffee is on the rise as the global middle class expands, creating the
potential for the company to enhance its bottom line. The corporation may also attract health-
conscious customers to its cafes and goods by expanding its selection to include more nutritious
options. Notwithstanding these benefits, Starbucks is threatened by independent coffeehouse
movements, which are cultural trends that support locally owned cafes over international franchises.
Starbucks Corporation's SWOT Analysis identifies this risk as well. So, both opportunities and a
significant danger exist for the coffee shop chain due to social external variables in this
PESTEL/PESTLE study.

Technologies (Technological Factors in the Starbucks Business Environment)

The PESTEL/PESTLE analysis model includes a section dedicated to the identification of technologies
and associated trends that have an impact on the coffee shop industry. The following are examples of
distant or macro-environmental technology variables that Starbucks encounters:

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  The rise of mobile devices as shopping tools (opportunity)
 Coffee growers get technological advancements (opportunity)
 Increased accessibility to home specialty coffee makers (threat)
If Starbucks wants to increase its income from mobile app sales, it may do a few things to make its
applications and related services better. New technology used by coffee producers provides another
opportunity for the corporation to optimize its supply chain. Yet, Starbucks faces competition from
cheaper, more convenient alternatives as the number of people who own specialty coffee makers for
home usage continues to rise. This PESTEL/PESTLE study demonstrates the significance of Starbucks'
competitive goods in light of the external technical variables that are impacting the industry, such as
new and developing technologies.

Environmental Factors

The PESTEL/PESTLE analysis model includes a section dedicated to identifying the influences of
environmental factors on the coffee shop's operations. The distant or macro-environment in which
Starbucks operates includes the following ecological/environmental external factors:

 Broadening access to and use of environmentally friendly procedures in commercial

settings (opportunity)
 Increasing availability of resources that have been obtained ethically (opportunity)
 Increased interest in eco-friendly goods (opportunity)
Starbucks can improve its sustainability standards and implementations thanks to the growing
availability of sustainable business processes. With these upgrades, the company's food and drink
products will have a better positive reputation in the market. Relatedly, "responsible sourcing"
highlights CSR initiatives like Starbucks' supplier chain. There is room for improvement in these areas
for the coffee firm. The company may enhance its current responsible sourcing procedures, including
those pertaining to the acquisition and supply of coffee. Moreover, Starbucks may use innovation to
provide eco-friendlier offerings. The corporation, for instance, may enhance the percentage of
recyclable materials used in the packaging of food and other goods. Furthermore, this PESTEL/PESTLE
research’s ecological aspects reveal openings for enhancing Starbucks' corporate image considering the
company's ecological effect supply stability may be a concern.

Society Influences (Sociocultural Factors in Starbucks Coffee’s External Environment)

Here we see how customers and the coffee shop industry are affected by the social circumstances
and trends shown by the PESTEL/PESTLE analytical methodology. The following are examples of
social and cultural external elements that Starbucks must manage in its extended or
macroenvironment:

 The Rise of the Coffee Subculture (opportunity)

 The rise of the middle class (opportunity)
 Increase in health-related awareness (opportunity)
 Separate Coffeehouse Protests (threat)

29
Demand for Starbucks' specialty coffee is on the rise as the global middle class expands, creating the
potential for the company to enhance its bottom line. The corporation may also attract health-
conscious customers to its cafes and goods by expanding its selection to include more nutritious
options. Notwithstanding these benefits, Starbucks is threatened by independent coffeehouse
movements, which are cultural trends that support locally owned cafes over international franchises.
Starbucks Corporation's SWOT Analysis identifies this risk as well. So, both opportunities and a
significant danger exist for the coffee shop chain due to social external variables in this
PESTEL/PESTLE study.

Technologies (Technological Factors in the Starbucks Business Environment)

The PESTEL/PESTLE analysis model includes a section dedicated to the identification of technologies
and associated trends that have an impact on the coffee shop industry. The following are examples of
distant or macro-environmental technology variables that Starbucks encounters:

 The rise of mobile devices as shopping tools (opportunity)

 Coffee growers get technological advancements (opportunity)
 Increased accessibility to home specialty coffee makers (threat)
If Starbucks wants to increase its income from mobile app sales, it may do a few things to make its
applications and related services better. New technology used by coffee producers provides another
opportunity for the corporation to optimize its supply chain. Yet, Starbucks faces competition from
cheaper, more convenient alternatives as the number of people who own specialty coffee makers for
home usage continues to rise. This PESTEL/PESTLE study demonstrates the significance of Starbucks'
competitive goods in light of the external technical variables that are impacting the industry, such as
new and developing technologies.

Environmental Factors

The PESTEL/PESTLE analysis model includes a section dedicated to identifying the influences of
environmental factors on the coffee shop's operations. The distant or macro-environment in which
Starbucks operates includes the following ecological/environmental external factors:

 Broadening access to and use of environmentally friendly procedures in commercial

settings (opportunity)
 Increasing availability of resources that have been obtained ethically (opportunity)
 Increased interest in eco-friendly goods (opportunity)
Starbucks can improve its sustainability standards and implementations thanks to the growing
availability of sustainable business processes. With these upgrades, the company's food and drink
products will have a better positive reputation in the market. Relatedly, "responsible sourcing"
highlights CSR initiatives like Starbucks' supplier chain. There is room for improvement in these areas
for the coffee firm. The company may enhance its current responsible sourcing procedures, including
those pertaining to the acquisition and supply of coffee. Moreover, Starbucks may use innovation to
provide eco-friendlier offerings. The corporation, for instance, may enhance the percentage of
recyclable materials used in the packaging of food and other goods. Furthermore, this PESTEL/PESTLE

30
 research’s ecological aspects reveal openings for enhancing Starbucks' corporate image considering the
company's ecological effect Legal Factors in Starbucks

The PESTEL/PESTLE analytical model includes a category for legal variables, which are rules and
regulations that affect the coffee industry. The following are examples of legal considerations that
Starbucks' distant or macroenvironment must account for:

 Regulations for product safety (opportunity)

 Including GMO regulations (opportunity and threat)
 Tighter restrictions on the workplace (opportunity and threat)
If Starbucks can establish that its products are safe, it will have a leg up on the competition. In a
similar vein, the business may adapt its supply chain to meet GMO ingredient requirements (GMOs).
Starbucks is succeeding in these areas now, but enhancements will only aid the company's bottom
line. Starbucks Coffee's access to the labor market and competitively priced coffee beans is
threatened by labor rules, particularly in developing nations. The coffee industry is also affected by
this external issue because of the higher cost of human resources. Nonetheless, there are measures
that may be taken to enhance the company's management of its people resources. As a result, the
discovered legal external variables in this PESTEL/PESTLE research of Starbucks provide both
possibilities and challenges to the firm as it expands internationally.

Porter's Five (5) Forces. It is developed by Michael E. Porter as a framework for assessing and
evaluating the competitive strength and position of a business organization.

Porter’s Five Forces Analysis of Starbucks

Porter's Five Forces is a method for analyzing a company's competitive environment. It identifies and
analyzes five competitive forces that shape the industry:

 Competitive rivalry
 New entrants
 Power of buyers
 Power of suppliers
 Threat of substitutes
 Competitive rivalry
Threat from competing companies is an external element that may have a significant effect on a
company's viability and success.

To begin, Starbucks faces stiff competition from a wide range of other businesses. Starbucks's
competitors include breweries, restaurants, and other coffee shops that provide similar beverages and
fares. Coffee companies like Nescafe and Lavazza might be the firm's main rivals. Coffee shops may range
from mom-and-pop operations to multinational conglomerates like Costa Coffee and Pret a Manger.

31
Furthermore, they may be somewhere to eat and buy baked goods, like a McDonald's Café. Due to the
abundance of rivals, competitive tensions are running high.

Nonetheless, it should be acknowledged that Starbucks' rivals don't exactly abound in variety. Several of
Starbucks' rivals are just not distinguishable from one another since they sell the same or almost
identical goods. All of them provide the usual coffee beverages like americanos and lattes. In addition,
the menus are often rather similar. This presents an opportunity for Starbucks to enter a new market
with a product that differentiates it from its competitors, such as a new coffee flavor or coffee drink
format. Finally, low switching costs can boost competitive competition. Due to the abundance of coffee
shops, customers may quickly switch providers by just visiting a new coffee shop first thing in the
morning. Competitive competition is high because there are numerous companies offering similar
products and services, the selection is enough, and switching is easy.

New entrants

Sales and market share for an established business might be threatened by new competitors entering
the market. To begin, starting a company like Starbucks requires just a minimal initial financial outlay.
Here, expenses will differ based on whether the startup is aiming to open a single coffee shop or an
entire network. As compared to huge coffee chain locations, small cafés may save considerable money
on supplies, wages, and rent. This makes it less difficult for upstart cafés to compete with giants like
Starbucks. Even if a tiny local coffee chain succeeded in driving one or two Starbucks out of business, the
company would still be very successful since it has over 32,000 outlets in 80 countries.

Yet, the expenditures associated with building a strong brand would make it difficult for a small business
to expand into a chain of coffee shops. To compete with a worldwide coffee chain like Starbucks, they
would need to invest heavily in areas such as supply, labor, and facilities, as well as in the formulation of
a winning business plan. In conclusion, the danger of new entrants is low for Starbucks due to the
moderate costs of launching a firm like Starbucks and the high expenses of brand building.

Power of buyers

Customers' bargaining power may be defined as their influence on price changes. The first is that it's
simple and inexpensive for Starbucks' consumers to switch carriers. We've established that there are
several coffee service providers; thus, customers may easily switch by just visiting a new coffee shop
each morning. Particularly in larger cities, practically every street has at least one coffee shop, so patrons
may easily bounce from one to the next. And with so many options, customers may experiment with
several suppliers, finding the ideal one for their needs in terms of price, convenience, and preferred
flavor profile. People have options, such as buying a coffee maker for the house or getting coffee from a
vending machine. Finally, a solitary shopper often places a little order. The loss of even ten or twenty
percent of Starbucks' regular consumers would not have a significant effect on its bottom line. This is
since millions of consumers frequent multiple Starbucks locations every day and place very tiny orders.
Buyer power for Starbucks is substantial due to consumers' ease of switching to other suppliers at low
cost, the abundance of suitable alternatives, and customers' typically modest purchase sizes.

Power of suppliers

32
The capacity of suppliers to raise the price of inputs is an example of supplier power. Secondly, there is a
reasonable amount of negotiating power due to the average size of individual suppliers. A small supplier
likely serves a small number of firms and so does not see a high volume of business. As a result, they are
constrained in their ability to arbitrarily raise rates, lest they risk driving away their clientele.

Moreover, due to the abundance of potential providers, it is Starbucks and other coffee shops who have
the upper hand, not the suppliers. Starbucks is free to choose the most practical supplier from among its
many options. Finally, suppliers' influence is diminished by the abundant global supply of coffee and tea.
Because of their relatively small size, considerable diversity, and big total supply, Starbucks' suppliers
pose no threat since they can offer the company little in the way of negotiating strength.

Threat of substitutes

In most cases, you may swap out one product for another, even if it doesn't belong to the same category.
This includes Starbucks' own wares as well. To begin, as was previously indicated, the purchasing
population has a lot of options. Moreover, we now have knowledge that the expenses associated with
changing coffee suppliers are minimal.

Ultimately, it seems that suitable alternatives are available at very little cost. Buying coffee from a
vending machine or brewing it at home is obviously more cost-effective than purchasing it at Starbucks.
The fact that Starbucks is more costly than other coffee shops is another factor that may deter some
potential consumers. The danger of replacements is considerable since there are many alternatives to
the company's coffee, transferring to a new supplier doesn't cost much, and substitutes are quite cheap.

Overall, Porter's Five Forces analysis suggests that competitive rivalry, buyer power, and replacement
threat are the strongest for Starbucks, while new entrants and supplier bargaining power are the
weakest. Despite facing challenges, Starbucks Coffee Company seems to manage them well, as seen by
its uninterrupted expansion since its founding in 1971.

Lessons Learned from Porter's Five Forces Analysis of Starbucks

 American coffee giant and coffeehouse chain Starbucks Corporation (Starbucks Coffee Company)
is headquartered in Seattle.
 With 32,000 locations in 80 countries make it the biggest coffee retailer in the world.
 In Porter's Five Forces analysis, the competitive rivalry, buyer power, and danger of replacements
are the most significant for Starbucks.
 They result mostly from an abundance of rivals, low switching costs, and an abundance of cheap
alternatives.
 Starbucks seems to be safe from new competitors and supplier strength.

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 Figure 3. Porter’s Five Forces

Source: Strategic Management Cases (10th ed.), 2018. p. 51

 Supplier power. This force analyzes how suppliers can easily influence price increases. This is
driven by the following factors: number of suppliers of each essential input; uniqueness of their
product or service; relative size and strength of the supplier; and cost of switching from one
supplier to another.

Example: The bargaining power of suppliers in the case of Starbucks is weak based on a
large number of suppliers and the high overall supply of raw materials.

 Buyer power. This force analyzes how buyers can easily influence price decreases. This is driven
by the number of buyers in the market, the importance of each buyer to the organization, and
the cost to the buyer of switching from one supplier to another. For instance, a few powerful
business buyers can often dictate terms.

Example: Starbucks must address the power of their customers on business

performance since they have a strong bargaining power based on low switching costs, a
large number of providers, and the high availability of substitutes.

 Competitive rivalry. This force examines the intensity of competition in the marketplace. This is
driven by the number and capability of competitors in the market. Rivalry competition is high
when there are few businesses equally selling a product or service, when the industry is growing,
and when consumers can easily switch to a competitor's product for a cheaper cost. When
rivalry among competitors is intense, advertising and price wars can ensue, negatively impacting
the business in the long run.
 Example: Starbucks faces a little competition because the they are more establish
compare to other competitors. The strong force of competitive rivalry is influenced by
the high number of firms, high aggressiveness of firms, and low switching costs.

 Threat of substitution. This force is threatening when buyers can easily find substitute products
with attractive prices or better quality and when buyers can switch from one product or service
to another with little cost. For example, switching from coffee to tea does not cost anything,
unlike switching from car to a bicycle.

Example: The Starbucks brand or products are not easy to replace by some other brands
because of its established brand and good services and products.

Threat of new entrants. This force determines how easy or difficult it is to enter a
particular industry. If an industry is profitable and there are few barriers to enter, rivalry
soon intensifies. When more organizations compete for the same market share, profits
start to fall. It is essential for existing organizations to create high barriers to entry to
deter new entrants.

Example: Starbucks are not threatened by its competitor because they know that its
company are stable and cannot be easily copied by someone.

C. Ecosystem Assessment Tool. The business ecosystem is demonstrated by a network composing four
(4) types of players in the industry: customers, suppliers, competitors, and complementors. The term
"ecosystem" is derived from the concept of the biological system in the environment.

Figure 4. Ecosystem Assessment Tool

Source: https://www.business-to-you.com
 According to Hayes (2018), the connection of these players demonstrates a constantly evolving
relationship in which each entity must be flexible and adaptable to survive, similar to the biological

system. Moreover, each player in the business ecosystem offers opportunities for cooperation with a
particular company, including the competitors. Bradenburger & Nalebuff (1996) summarizes the
components of this tool:

Customers. These are the people or parties that buy the products and services of an organization.
Additional customers mean more revenue, leading to a larger market share. Customers can be
end-consumers or other companies that will eventually take the products to the consumer
market.

 Suppliers. These parties provide the resources to produce or sell finished products or services.
They are classified as external factors which may affect an organization since suppliers have the
potential to raise prices and/or reduce the quality of the purchased inputs or raw materials. It is
therefore vital to keep a good and meaningful relationship with the suppliers or spread risk by
having multiple options.

 Competitors. These parties fight over an organization's market share by offering similar products
or services and targeting similar customers. However, companies often view competition as too
narrow, failing to foresee upcoming threats. Although competitors are often seen as parties to
fight over market share, it is also possible to collaborate with them.

 Complementors. These organizations offer complementary or harmonizing products or services

that could work well with a company’s products to make the result more attractive to
consumers.

VI.BUSINESS MODEL

A business model is a framework that outlines how an organization creates, delivers, and captures value. It
serves as a blueprint that defines the target market or customer segment it aims to serve, the products or
services it provides to fulfill customer needs or solve problems, and the channels through which it delivers
them. Additionally, the business model encompasses the revenue streams that generate money for the
organization.

To differentiate and sustain competitive advantage, a business model needs to have unique characteristics
that set it apart from competitors. This can be achieved through various means such as offering superior
product quality, cost leadership, innovative technology, exceptional customer service, or a combination of
these factors. Furthermore, sustainable competitive advantage can be maintained by continuously evolving
and adapting the business model to align with changing market dynamics and customer preferences. This
may involve leveraging emerging technologies, cultivating strong relationships with customers and
suppliers, implementing efficient operational processes, and fostering a culture of innovation within the
organization.
In summary, a business model defines the target market, products or services, and revenue generation
mechanisms of an organization. It differentiates itself from competitors through unique value propositions
and sustains competitive advantage by staying adaptable, innovative, and customer-centric.

BUSINESS MODEL DESCRIPTION

Freemium Starbucks offers a basic version of its mobile app for free, providing customers with
access to features like store locator and rewards program. Premium features, such as
personalized offers and exclusive promotions, are available through a paid
subscription, offering additional benefits and perks.
Subscription-based Starbucks offers a subscription service where customers can pay a monthly fee to
receive a set number of drinks or other products each month. This encourages
customer loyalty and ensures regular revenue for Starbucks.
Peer to Peer Starbucks allows customers to send digital gift cards to friends or family through its
mobile app, enabling peer-to-peer transactions. This facilitates social connections
and word-of-mouth marketing, as well as providing a convenient gifting option.
Starbucks allows entrepreneurs to purchase and operate their own Starbucks
Franchise franchises. Franchisees benefit from the Starbucks brand recognition, operational
support, and access to a proven business model. In return, Starbucks receives
franchise fees and royalties, expanding its brand presence and revenue stream
through franchised locations.
Direct Sales E- Starbucks operates an online store where customers can purchase its coffee beans,
commerce merchandise, and equipment directly from the company. This direct-to-consumer
approach enables Starbucks to reach a broader market and generate additional
revenue outside of its physical store locations.
Affiliate Marketing Starbucks partners with influencers, bloggers, and other online platforms through an
affiliate marketing program. These partners promote Starbucks products or services
on their platforms, earning a commission for driving traffic or sales to Starbucks. This
helps expand the brand's reach and drives online sales.
Razor and Blade Starbucks utilizes a razor and blade business model by selling its coffee machines
(razors) at a lower cost and generating ongoing revenue through the sale of coffee
pods (blades). This approach creates a long-term revenue stream as customers need
to continually purchase Starbucks-branded coffee pods for their machines.
 Consultation Starbucks offers consultation services to businesses and individuals seeking
expertise in the coffee industry. This includes advice on setting up a coffee shop,
optimizing operations, and developing customized beverage offerings. The
consultation services generate additional revenue while leveraging Starbucks'
knowledge and experience in the market.

Lock-in Starbucks uses a lock-in business model by creating a highly personalized and
seamless customer experience through its mobile app and rewards program. By
offering exclusive perks, personalized offers, and easy mobile ordering, Starbucks
encourages customer loyalty and reduces the likelihood of customers switching to
competitors.

Multi-brand Starbucks expands its brand portfolio by acquiring or partnering with other coffee
or beverage brands. These brands operate under separate identities while
benefiting from Starbucks' resources, distribution network, and expertise. This
diversifies Starbucks' revenue streams and allows it to cater to different customer
preferences and market segments.

Pay as you go Starbucks introduced a pay-as-you-go business model through its mobile app,
allowing customers to make purchases using mobile payments. Customers can load
funds onto their Starbucks app and use it to make payments at Starbucks stores,
offering convenience and loyalty rewards while simplifying the payment process for
customers.

Value Chain Analysis

Value Chain Analysis is a strategic management tool used to analyze and identify the activities and
processes within an organization that create value for customers. It involves breaking down the various
activities involved in the production and delivery of a product or service and examining their contribution to
the overall value creation.
The value chain consists of primary activities and support activities. Primary activities include inbound
logistics (receiving, storing, and distributing inputs), operations (transforming inputs into the final product
or service), outbound logistics (delivering the product or service to customers), marketing and sales
(promoting and selling the product or service), and service (providing after-sales support and customer
service).

Support activities encompass procurement (sourcing and acquiring inputs), technology development
(research and development, innovation, and technology infrastructure), human resource management
(recruiting, training, and retaining employees), and firm infrastructure (general management, finance,
accounting, and other administrative functions).

By analyzing the value chain, organizations can identify areas of competitive advantage, cost efficiencies,
and opportunities for improvement. It helps businesses understand how each activity contributes to the
overall value delivered to customers and can guide strategic decision-making, such as identifying areas for
cost reduction, differentiation, or process optimization.

Primary Activities

Inbound Logistics Operations Outbound Marketing and Service:

Logistics Sales

Starbucks Starbucks carefully Starbucks Starbucks invests Starbucks places a

procures high- roasts and blends distributes its heavily in strong emphasis
quality coffee the coffee beans products through marketing and on providing
beans from to maintain its extensive advertising excellent customer
various regions consistent flavor network of campaigns to build service.
worldwide. profiles. company-owned brand awareness. They train their
They maintain They have efficient and licensed They use various baristas to deliver
strong manufacturing stores. channels, consistent and
relationships with processes to They have including social personalized
coffee growers ensure product established an media, traditional experiences to
and suppliers. quality and efficient supply advertising, and customers.
The company consistency. chain to ensure collaborations, to The company also
focuses on ethical The company also timely delivery of promote their offers loyalty
sourcing and operates stores, products to stores. products. programs and
sustainable which are The company also The company mobile ordering
practices. designed to offers online leverages its brand options to
provide a ordering and reputation and enhance customer
comfortable and delivery services customer loyalty convenience.
welcoming to reach a wider to drive sales.
environment for customer base.
customers.
Secondary Activities

Procurement: Human Resources: Technology Firm Infrastructure:

Development

Starbucks sources high- Starbucks invests in Starbucks leverages Starbucks maintains a

quality coffee beans recruiting, training, and technology for various strong organizational
from various suppliers retaining talented purposes, including structure with effective
worldwide. employees. point-of-sale systems, management and
They prioritize fair trade They provide inventory management, leadership.
practices and support competitive and mobile ordering. They have robust
farmers' livelihoods compensation and They continually invest systems and processes in
through their C.A.F.E. benefits packages. in research and place to support their
Practices program. The company fosters an development to improve operations globally.
The company also inclusive and diverse their operational
procures other work environment. efficiency and customer
ingredients, equipment, experience.
and packaging materials
necessary for its
operations.

Cost Advantage of Starbucks Company

Cost advantage refers to a competitive edge that a business or organization enjoys over its rivals by being
able to produce goods or services at a lower cost without compromising on quality. This advantage can arise
from various factors, such as efficient production processes, economies of scale, access to cheaper
resources or inputs, advanced technology utilization, streamlined supply chains, or superior bargaining
power with suppliers. By operating with lower costs, a company can achieve higher profit margins, offer
more competitive pricing to customers, invest in innovation or expansion, withstand market fluctuations,
and ultimately secure a stronger position in the market.

Starbucks, as a global coffee giant, has managed to establish a significant cost advantage in its industry
through various strategic initiatives. Firstly, Starbucks benefits from economies of scale. With over 30,000
stores worldwide, the company can negotiate better prices for raw materials, such as coffee beans and milk,
due to its massive purchasing power. This enables Starbucks to achieve lower per-unit costs compared to
smaller competitors. Furthermore, the company's extensive supply chain network and centralized
purchasing system allow for efficient procurement and distribution, reducing transportation and inventory
costs.

Secondly, Starbucks has successfully implemented operational efficiencies across its stores. The company
invests heavily in technology and automation, which improves productivity and reduces labor costs. For
example, the introduction of mobile ordering and payment systems streamlines the customer experience
and reduces the need for additional staff. Additionally, Starbucks emphasizes training and standardized
processes, ensuring consistency and minimizing errors. By optimizing its operations, Starbucks maximizes
efficiency and keeps costs under control.

Overall, Starbucks' cost advantage stems from its economies of scale, efficient supply chain management,
and operational efficiencies. These factors enable the company to maintain competitive pricing, drive
profitability, and sustain its position as a leader in the coffee industry.

Primary and support activities of Starbucks:

a. Primary activities:

 Inbound logistics: Includes sourcing and procuring high-quality coffee beans, milk, and other
ingredients, as well as managing the global supply chain.
 Operations: Involves roasting, brewing, and preparing beverages, food items, and merchandise at
Starbucks stores.
 Outbound logistics: Covers the distribution of finished products to Starbucks stores, ensuring timely
delivery and freshness.
 Marketing and sales: Focuses on branding, advertising, and promoting Starbucks products, as well
as managing customer relationships and loyalty programs.
 Service: Includes customer support, order accuracy, store ambiance, and product quality.

b. Support activities:

 Procurement: Involves negotiating with suppliers, managing contracts, and ensuring the availability
of high-quality inputs.
 Technology development: Includes investments in digital platforms, mobile ordering systems, and
innovative technologies to enhance operations and customer experience.
 Human resource management: Encompasses recruitment, training, and development of employees,
ensuring their competence in delivering superior service.
 Firm infrastructure: Covers Starbucks' overall management, finance, legal, and administrative
functions.

Relative importance of each activity in total cost:

 The primary activities of Starbucks, such as inbound logistics (sourcing and procuring), operations
(roasting and preparing), and marketing and sales (branding and promoting), play significant roles in
the total cost of the product. These activities involve costs related to raw materials, labor,
advertising, and store operations, impacting the overall cost structure. Support activities like
procurement, technology development, human resource management, and firm infrastructure also
contribute to costs but may have a relatively lower impact compared to the primary activities.

Cost drivers for each activity:

 Inbound logistics: The cost of coffee beans, milk, packaging materials, transportation, and
warehousing.
  Operations: Labor costs, energy consumption, maintenance and equipment costs, and quality
control.
 Marketing and sales: Advertising expenses, promotional campaigns, loyalty programs, and market
research.
 Service: Employee wages, training costs, store maintenance, and product quality control.

Links between activities:

 There are several links between activities in Starbucks' value chain. For example, efficient
procurement and supply chain management (inbound logistics) directly impact the quality and cost
of inputs for operations. Effective marketing and sales activities drive customer demand, which
affects the volume of products produced and distributed. Service quality and customer satisfaction
are closely tied to the operations and service activities. Coordinated efforts across activities are
necessary to deliver a consistent and positive customer experience.

Opportunities for reducing costs:

 Streamline supply chain and procurement processes to negotiate better prices with suppliers.
 Invest in technology and automation to improve operational efficiency and reduce labor costs.
 Optimize marketing and sales strategies to target the most cost-effective channels and maximize
return on investment.
 Implement efficient training programs and employee management practices to improve
productivity and reduce turnover.
 Continuously monitor and optimize the firm's infrastructure and administrative functions to
eliminate unnecessary costs.
 Explore sustainable practices to minimize energy consumption and waste, reducing costs and
enhancing brand reputation.

Basic Organizational Structure

Simple Structure. A simple structure refers to a form or design that is straightforward and
uncomplicated. It typically lacks intricate details, ornamentation, or complex components. Simple
structures often emphasize minimalism, functionality, and efficiency. They are characterized by clean
lines, basic geometric shapes, and a focus on essential elements, making them easily understandable
and accessible to users or viewers.

CEO

WORKERS
 B. Functional Structure. Functional structure is a type of organizational structure that groups employees
based on their functional expertise and skills. It organizes the company into departments or divisions based
on specific functions, such as marketing, finance, operations, and human resources. Each department is led
by a manager or director who oversees the activities and personnel within that function. The functional
structure promotes specialization and efficiency by allowing employees to focus on their core competencies
within their respective departments.

CEO (Chief Executive Officer)

CFO (Chief Financial CMO (Chief COO (Chief CHRO (Chief Human
Officer) Marketing Officer) Operations Officer) Resources Officer)

C. Divisional Structure. A divisional structure is a type of organizational structure where the company is
divided into self-contained divisions based on product lines, geographic regions, or customer segments.
Each division operates as a separate entity with its own resources, such as marketing, operations, and
finance, to meet the specific needs of its division. This structure allows for greater focus and specialization
within each division, promoting responsiveness and innovation. The divisional structure is commonly used
in large and diverse organizations to facilitate efficient management and decision-making at the divisional
level.
Strategies to Competitive Advantage

Strategies to competitive advantage are approaches or actions taken by a company to outperform its
competitors and establish a stronger market position. These strategies typically involve leveraging unique
strengths and resources to differentiate from rivals. They may include cost leadership, where a company
focuses on achieving lower costs than competitors; differentiation, which involves offering unique products
or services; focus, targeting a specific market segment; and innovation, continuously introducing new and
improved offerings to stay ahead of the competition. Successful implementation of these strategies can
result in increased market share and profitability.

A. Cost Leadership: Starbucks implements cost leadership by achieving economies of scale through its
extensive global presence, centralized supply chain management, and efficient operations. By purchasing
coffee beans in bulk and streamlining its processes, Starbucks can offer competitive prices to customers
while maintaining profitability.

B. Product Differentiation: Starbucks excels in product differentiation by offering a wide range of coffee
options, beverages, and food items. They focus on creating a unique and immersive coffeehouse
experience, with cozy ambiance, friendly baristas, and personalized drink customization. This sets them
apart from other coffee chains and creates a loyal customer base.

C. Cost Focus: While Starbucks is primarily known for its premium offerings, it also targets cost-conscious
consumers through its lower-priced alternatives. For example, they introduced the Starbucks VIA Instant
Coffee line, providing a more affordable and convenient option for coffee lovers who want to enjoy
Starbucks-quality coffee at home or on the go.

D. Blue Ocean Strategy: Starbucks has applied the blue ocean strategy by expanding beyond traditional
coffee products and introducing innovative offerings. This includes the introduction of Teavana tea,
Evolution Fresh juices, and the acquisition of La Boulange bakery. By exploring untapped markets and
creating new demand, Starbucks has successfully differentiated itself and opened up new revenue streams.
E. Information Advantage: Starbucks leverages its customer data and technology to gain an information
advantage. Through its popular mobile app and rewards program, they gather valuable insights about
customer preferences, purchase history, and behaviour. This allows Starbucks to personalize marketing
efforts, offer targeted promotions, and enhance the overall customer experience.

VII. STRATEGY FORMULATION: FUNCTIONAL STRATEGY AND STRATEGIC CHOICE

Functional Strategy
Functional strategy is the short-term game plan for key functional areas within a company. It is an
approach to achieving corporate and business unit objectives and strategies by maximizing resource
productivity. Functional strategies are at the heart of the competitive advantage of any firm and are
formed in correlation with the changing competitive environment.

The parent business unit’s strategy dictates the orientation of a functional strategy. For example,
Starbucks following a competitive differentiation strategy through high quality might require a
functional manufacturing strategy emphasizing expensive quality assurance processes over cheaper,
high- volume production. A human resource functional strategy emphasizes hiring and training a highly
skilled but costly workforce. A marketing functional strategy emphasizes a distribution channel using
advertising to increase consumer demand over promotional allowances to retailers.

Types of functional strategy are as follows:

A. Marketing Strategy. It deals with pricing, selling, and distributing a product or service. The marketing
strategy can be classified as follows:

 Market development strategy. It is a strategy that falls under the category of business
growth. This strategy helps companies and businesses approach new customers properly by
introducing new or existing products to penetrate the market and gain a dominant market
share.

Example: Starbucks uses market development as its secondary strategy for intensive growth.
This strategy supports business growth by generating revenues in new markets or new
market segments by offering the company's current product mix of food and beverages.

Product development strategy. A company or business unit can develop new products or
services for existing markets or new ones for new markets.

Example Starbucks is a company that needs to develop products that can be sold in its
coffeehouses. By following the product development strategy, Starbucks can provide its
customers with new products and improve the taste of the product.

Brand extension. A company or business unit may use a successful brand name to market
other products.

For example; Now, it appears that Starbucks is making an effort to turn those anti-Starbucks
customers into willing Starbucks customers by offering brand extensions like the Refreshers
energy drinks launched last year (new flavors have been introduced for the 2013 summer
season) and more recently, testing handcrafted sodas in a few markets.
  Push strategy. A company or business unit may engage in trade promotion to gain shelf
space in retail outlets. Trade promotion includes discounts, in-store special offers, and
advertising allowances designed to “push” products through the distribution system.

Example: On January 19th, Starbucks promoted its partnership with Spotify on most of its
social platforms. FB Screenshot There was an initial pull to the post because of the
company’s mass number of followers. Starbucks provided a link to their website to follow
for more information about the deal. This allowed the company to increase traffic to their
website, which as mentioned by Davia Temin, is crucial to website longevity. Once
transferred to the site, consumers who are not already rewarded members are pushed to
enroll to receive Spotify benefits. They also push instant access by providing links to the
appropriate apps. Already locked into the site, customers can find easy access to subscribe
to Starbucks’ blog, where they will find updates and recipes, which is another example of a
push strategy by the company. The subscription is the gateway to promotional emails and
deals, which will hopefully push the customer to keep purchasing their products. Their blog
is updated almost daily, which keeps their follower’s content.

 Pull strategy. A company or business unit may engage in wide consumer advertising
designed to build brand awareness so that shoppers will ask for the company's products and
services.

Example: Starbucks uses a pull strategy, where they can use advertising and promotion to
induce customers to ask intermediaries for the product. They know that the brand is
perceived differently from the customers with high loyalty and satisfaction. This has resulted
in the company attaining its supplies 21 from the actual coffee growers, and thus, effectively
bypassing much of the middle market and saving enough funds. Starbucks marketing
channels include

 Retails stores

 Online

 Grocery

 Convenient stores

B. Financial Strategy. It examines the financial implications of corporate and business-level strategic
options and identifies the best financial course of action. It also provides a competitive advantage
through a lower cost of funds and a flexible ability to raise capital to support a business strategy. This
strategy can be classified as follows:

 Equity financing. A corporation can raise capital by selling company stock to investors. In
return for the investment, the shareholders receive ownership interests in the company.

Example: It appears slightly above 54% of Starbucks' assets are financed through equity.
Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The
higher the ratio, the greater risk will be associated with Starbucks' operation.
 Debt financing. A corporation can raise capital by borrowing money to acquire an asset. The
capital sources in debt financing include financial institutions such as banks and insurance
companies.

Example: Shareholders look at the debt-ratio to understand how much financial leverage a
company has. Starbucks has $27.98 billion in total assets, therefore making the debt-ratio
0.54. Generally speaking, a debt-ratio more than 1 means that a large portion of debt is
funded by assets.

Research and Development Strategy. It deals with product and process innovation and
improvement. It also concerns how new technology should be accessed through internal
development, external acquisition, or strategic alliances.

Example

The company has long been committed to provide customers the highest quality coffee and
service to create a unique Starbucks Experience, Starbucks stores around the world in
addition to the outside of the workplace and living accommodation, a warm and
comfortable living space " . At the same time, the company is constantly reflected through a
variety of corporate social responsibility activities contribute to the community; improve the
environment, the return of the partners and coffee-producing areas farmers. In view of the
unique corporate culture and philosophy of Starbucks, the company for many years by the
U.S. “Fortune "magazine named the" Most Admired Companies “(Howard, 2003).

 Technological Leader. Focuses on pioneering innovation.

Example: Starbucks stores are places to build community, and Starbucks is expanding these
connections to the digital realm leveraging Meituan’s pioneering ‘Super Store’ feature. By
end 2022, each of Starbucks 5,000+ company-operated stores in China will have a unique
page on Meituan platforms, where customers can access Starbucks Delivers and Starbucks
Now services to order food and beverages online, use the 1971 Salon booking service, and
check local events on a digital community board. Store partners can customize each page
with exclusive store tags, photos, video clips and other content that vividly showcase the
distinctive design and character of each store and its baristas.
 Technological Follower. Deals with imitating the products of competitors.

Example: In June 2010, Starbucks was named the most popular social media brand,
according to a snapshot taken of its fans, followers and subscribers by Famecount, an
online statistics and analytics provider. Starbucks social media space includes technology
like its website and social media platforms, including Facebook, Twitter and Foursquare.
According to a February 2010 article in "AdAge," Starbucks was able to use social
technology to its advantage and bring customers back to its stores by giving them an online
space to submit ideas and provide feedback on the brand and their experience with it.

 Open Innovation. A newer approach in which a firm uses alliances and connections with
corporations, governments, academic labs, and consumers to develop new products and
processes.
 Example: By implementing an open innovation platform, Starbucks is able to better gauge
their market by seeing the way that users are responding to shared ideas and comments.
The platform also serves as a natural testing site for new ideas and initiatives. Previously,
Starbucks would have gone through the costly process of a market research report and
research and testing groups, but now they have streamlined that entire process into one
easily manageable platform.

Operations Strategy. It determines how and where a product or service is to be

manufactured or delivered, the level of vertical integration in the production process,
deployment of physical resources, and relationships with suppliers. It also deals with the
optimum level of technology the firm should use in its operations processes. A firm’s
strategy is often affected by the product or service's popularity. In the case of manufacturing
firms, an increase in sales means an increase in production volume, which dictates the
appropriate strategy that the firm must employ. Whereas for service-oriented firms, the
level of service can be classified based on service quality, reasonable price, reliable delivery,
and flexibility of the service design.
Example
In simple words, operations strategy is defined as the action plan prepared by the company in
reconciliation with market requirements and operational resources that help to reach the overall objectives
and mission of the company efficiently and effectively (Nigel Slack, 2017). Starbucks has implemented
various operations strategy in their organization that helps them in allocating resources in a proper manner
which further supports the company in smooth production process ultimately satisfying the customers’
needs. Better Customer experience is very important for the company because it is the key aspect that
helps in building their brand image. Some of the operations strategy adopted by the company is described
below:

 
When the company has covered its market in the US, the company went for
a global strategy to expand its business beyond borders that helped it to
  reach huge customers and earn a high return on investment. The
customers around the globe residing in any country have the access to visit
Accessibility and their nearest location and have an amazing experience of Starbucks
Availability Product.

  There is a famous saying called “ Quality comes with a cost” which

indicates that if you want to have things with better quality you need to
 
pay higher prices. Starbucks sells the product with premium quality that’s
why the company charges a premium price for it. Because of the Quality
 Quality
Customers become ready to pay the price and get satisfied.
 

The company does not focus on the utilization of space rather the objective
of layout strategy is to focuses on premium customers’ experience. The
Layout layout of Starbucks is structured in such a way that it enhances workflow
efficiency (GREGORY, 2017). As it is based on premium experience the more
space you use premium price is charged.

  As I mentioned the company offers premium quality products at a premium

price, it normally opens its cafes in the urban areas where people could
Location
afford their products.

The company uses automation for the possible things in the office and
 
manual monitoring as well. The company continuously assures that their
  products are not out of stock.

This increases customer loyalty and trust as the customers will always be
Inventory able to get what they wanted from Starbucks and are never returned back
Management from the cafe because of stock-out.

1. The operations strategy for manufacturing firms can be classified as follows:

 Job shop. In this strategy, a small manufacturing system handles customized production
using skilled labor. Products are customized based on customer specifications.

Example: Paint shops, machine shops, and fabrication shops.

 Connected line batch flow. In this strategy, each machine functions like a job shop but is
positioned in the same order as the parts are processed. It is used when product
components are standardized.

Example: Toyota assembly lines consisted of three (3) to four (4) sub-lines, each about 300
meters in length. The trim line is for the installation of electrical parts. The drive train,
motor, exhaust, etc., are added to the chassis line. Bumpers, window glass, wheels, etc., are
attached during the final line.

 Flexible manufacturing systems. In this strategy, parts are grouped into manufacturing
families to produce a wide variety of mass-produced items.
 Example: Equipment factories, automobile factories, aerospace, medicine, and construction
industries widely use FMS.

 Dedicated transfer lines. In this strategy, highly automated assembly lines create a single
mass-produced product using little human labor.

Example: Ingersoll Production Systems is an expert in transfer line design and other
industrial automation systems that handle every production function, including milling,
drilling, tapping, or boring.

 Mass-production system. In this strategy, many low-cost, standardized goods can be

produced.

Example: Mass-produced food products include any food item made or processed on a
large- scale, such as in a factory. Generally, because these products are made industrially,
each item is identical or similar.

 Mass customization. In this strategy, people, processes, units, and technology reconfigure
themselves to give customers exactly what they want when they want it.

Example: Mass customization in the clothing industry where apparel firms use computer-
controlled machines to cut fabrics that match individual body measurements.

2. The operations strategy for service-oriented firms can be classified as follows:

 Quality. Service-oriented firms must ensure that they deliver error-free services that match
customers’ needs based on standard requirements. It may also pertain to the quality of the
delivery process, which establishes a reliable image to the clients

 Flexibility. Service-oriented firms must ensure that their service design can handle the
multiple demands of the clients. They must also anticipate unexpected circumstances based
on changing consumer preferences, which may require adjusting or completely modifying
their service design.

 Speed. Service-oriented firms must pay attention to their scheduling and capacity planning
management to deliver their services at an acceptable time.

 Dependability. Service-oriented firms must be consistent in the value that their service
provides. They must forecast possible future problems and lay down preventive measures
that will solve the issues identified.

 Cost. Service-oriented firms must maintain reasonable prices for their services by analyzing
where their operations costs are incurred and cutting down on unnecessary expenses.

C. Purchasing Strategy. It deals with obtaining the raw materials, parts, and supplies needed to
 perform the operations function. The Internet has changed the ability of procurement managers to
compare and source supplies for their organization. Research indicates that companies using
Internet-based technologies can lower administrative costs and purchase prices.

Example: Starbucks’ strategy of buying green coffee “12 to 18 months in advance” may give it a
“significant advantage” over competitors amid volatile price increases, CEO Kevin Johnson said on a
recent earnings call.

D. Logistics Strategy. Logistics strategy deals with the flow of products into and out of the
manufacturing process. To gain logistical synergies across business units, corporations began
centralizing logistics in the headquarters group to aggregate shipping volumes across the entire
corporation and gain better contracts with shippers.

Example: Their supply chain strategy focuses on efficient and ethical sourcing of raw materials,
manufacturing, and distribution processes. By implementing this strategy, Starbucks can effectively
reduce costs and increase efficiency, which can lead to higher profit margins.

E. Human Resources Management Strategy. Companies find that having a diverse workforce is a
competitive advantage. Research reveals that firms with a high degree of diversity following a
growth strategy have higher productivity, employee satisfaction, and commitment than firms with
less diversity. Diversity in terms of age and national origin also offers benefits.

Example: Starbucks is considered to be one of the few companies in the retail sector to provide
generous benefits to both full time workers as well as part timers, and this shows how they care
about its employees. This had a tremendous impact that their employees remained motivated, and
had a moderately low employee turnover. In the early 2000s, the Starbucks had faced a serious
challenge of finding and retaining the right number and kind of employees to man its future
growth. One of the Fortune's list "Best Companies to Work For" last January 2005, was Starbucks
Coffee Company (Starbucks).

Information Technology Strategy. Corporations have always used an information technology

strategy to give their business units a competitive advantage. Multinational corporations use
sophisticated intranets to allow employees to practice follow-the-sun management. Project team
members living in one country can pass their work to team members in another country where the
workday is just beginning.

Example: Starbucks is leveraging AI, machine learning, big data, analytics, and IoT technologies to
accelerate its digital transformation and enhance customer experiences and operational efficiencies.
The annual ICT spending of Starbucks was estimated at $618 million in 2021.

VIII. FUNCTIONAL STRATEGY

Functional strategy refers to the specific plans and actions taken by an individual business function to
support the overall organizational strategy. It involves aligning the objectives, resources, and capabilities of
a specific function, such as marketing, operations, or human resources, with the broader goals of the
organization. The functional strategy aims to optimize the performance of the function and contribute to
the achievement of the organization's strategic objectives. It involves making decisions about resource
allocation, process improvements, skill development, and technology adoption within the function. Effective
functional strategies are essential for enhancing organizational efficiency, effectiveness, and competitive
advantage.

Starbucks is a global coffeehouse chain that has implemented various functional strategies to achieve its
business goals. Here are some key functional strategies employed by Starbucks:

1. Product Development: refers to the process of creating and introducing new or improved products or
services to the market. It involves all stages, from generating ideas and conceptualization to design, testing,
and commercialization. The goal of product development is to meet customer needs, address market gaps,
and stay competitive. It requires research, innovation, and collaboration across various departments, such
as marketing, engineering, and manufacturing. Effective product development involves understanding
customer insights, conducting market research, iterating on prototypes, ensuring quality, and managing the
product lifecycle to drive business growth and meet evolving customer demands.

- Starbucks continuously focuses on developing innovative and high-quality coffee and beverage products.
They introduce seasonal offerings, limited-edition beverages, and new flavors to cater to evolving customer
preferences and enhance their product portfolio.

2. Store Expansion and Location Strategy: strategy refers to the deliberate plan and approach adopted by a
company to open new stores and determine their optimal locations. It involves analyzing market potential,
customer demographics, competition, and economic factors to identify strategic locations for growth. The
strategy considers factors such as population density, foot traffic, accessibility, and market demand. It aims
to maximize the company's presence in target markets, increase brand visibility, and capture new customer
segments. Store expansion and location strategy play a crucial role in expanding market share, increasing
sales revenue, and establishing a strong physical presence for the company.

- Starbucks pursues an aggressive store expansion strategy, aiming to open new stores in strategic locations
around the world. They conduct thorough market research and analysis to identify high-traffic areas, target
customer demographics, and opportunities for growth.

3. Customer Experience and Service: refer to the overall interaction and perception customers have when
engaging with a company or using its products or services. It encompasses all touchpoints and interactions
throughout the customer journey. The focus is on delivering exceptional experiences that meet or exceed
customer expectations, build loyalty, and foster positive brand associations. This includes factors such as
friendly and knowledgeable staff, prompt response to inquiries or issues, personalized interactions,
convenient and user-friendly processes, and consistent delivery of value. Customer experience and service
are vital in creating customer satisfaction, fostering long-term relationships, and generating positive word-
of-mouth recommendations, ultimately contributing to business growth and success.

- Starbucks places a strong emphasis on creating a unique and personalized customer experience. They
invest in training their employees, known as "partners," to deliver exceptional customer service. This
includes ensuring a welcoming atmosphere, efficient service, and customization options to meet individual
preferences.

4. Digital Transformation: refers to the integration of digital technologies into all aspects of an
organization's operations, processes, and activities, fundamentally changing how it operates and delivers
value to customers. It involves leveraging technology to streamline workflows, enhance efficiency, improve
customer experiences, and drive innovation. Digital transformation encompasses adopting emerging
technologies such as cloud computing, artificial intelligence, data analytics, Internet of Things (IoT), and
automation. It requires a shift in mindset, culture, and business models to embrace digital opportunities
and adapt to the changing digital landscape. Successful digital transformation enables organizations to stay
competitive, capitalize on new market opportunities, and meet evolving customer expectations in the digital
age.

- Starbucks has embraced digital technologies to enhance customer engagement and streamline operations.
They have implemented mobile ordering and payment systems, loyalty programs, and the Starbucks mobile
app, enabling customers to order ahead, earn rewards, and receive personalized offers.

5. Sustainable Sourcing and Social Responsibility: refer to the practices and initiatives undertaken by
organizations to ensure ethical, environmentally friendly, and socially conscious approaches in their supply
chains and operations. Sustainable sourcing involves procuring materials, ingredients, and resources in a
manner that minimizes negative environmental impact, supports fair trade, and promotes responsible
business practices. Social responsibility entails actively engaging in initiatives that benefit communities,
employees, and society at large, such as supporting local communities, promoting diversity and inclusion,
and implementing fair labor practices. These strategies aim to create a positive social and environmental
impact, build trust with stakeholders, and contribute to the long-term sustainability and reputation of the
organization.

- Starbucks focuses on ethical sourcing of coffee beans and other ingredients. They have established the
C.A.F.E. (Coffee and Farmer Equity) Practices program, which promotes responsible sourcing, fair trade, and
environmentally friendly practices. They also engage in community development and social impact
initiatives, such as their commitment to hiring veterans and supporting local communities.

A. Marketing Strategy:

- refers to a set of tactics and actions designed to achieve specific marketing objectives. It involves analyzing
target markets, identifying customer needs and preferences, and developing a plan to position and promote
products or services effectively. The strategy guides decision-making in areas such as product development,
pricing, distribution channels, and promotional activities. It aims to create a unique value proposition that
differentiates the company from competitors and resonates with the target audience. A well-defined
marketing strategy helps align marketing efforts with overall business goals and maximize the chances of
success in the marketplace.

1. Market Development Strategy: refers to a growth strategy in which a company seeks to enter new
markets or expand its presence in existing markets with existing products or services. It involves identifying
and targeting untapped customer segments or geographical regions. The strategy aims to increase market
share, drive sales, and capitalize on new market opportunities. It requires market research, understanding
customer needs, adapting marketing and distribution channels, and sometimes tailoring the product or
service to suit the new market. Market development strategy allows companies to diversify their customer
base, reduce dependency on existing markets, and fuel business expansion.

- Starbucks has implemented a market development strategy by expanding its presence into new markets
and regions. This strategy involves identifying and entering untapped markets or areas where the coffee
culture is still developing. Starbucks has successfully entered various international markets and continues to
explore opportunities for growth in emerging economies.

2. Product Development Strategy: refers to a systematic approach taken by a company to create and
introduce new products or improve existing products in order to meet customer needs and achieve
business objectives. It involves the entire process of conceptualizing, designing, testing, and launching new
products or making enhancements to existing ones. The strategy focuses on identifying market gaps,
conducting market research, generating innovative ideas, and translating them into marketable products. It
also includes considerations such as technological advancements, competitive analysis, pricing, and
marketing plans. A well-defined product development strategy helps companies stay competitive, drive
growth, and meet the ever-changing demands of customers in the marketplace.

- Starbucks is known for its continuous product innovation and development. The company regularly
introduces new beverages, food items, and merchandise to cater to changing consumer preferences and
trends. They focus on creating unique and premium products that differentiate them from competitors and
enhance the overall customer experience.

3. Brand Extension: refers to the strategic efforts undertaken by a company to extend its existing brand into
new product categories, market segments, or geographic regions. It involves leveraging the existing brand
equity and customer recognition to introduce new offerings or expand the brand's presence. The brand
expansion aims to capitalize on the brand's reputation, customer loyalty, and market positioning to drive
growth and capture new market opportunities. It requires market research, understanding consumer
preferences, ensuring brand consistency across different offerings, and adapting marketing and distribution
strategies to target the new segments effectively. Successful brand expansion can lead to increased market
share, revenue diversification, and enhanced brand value.

- Starbucks has successfully extended its brand beyond coffee by diversifying its product offerings. They
have introduced ready-to-drink beverages, packaged coffee for home brewing, and collaborations with
other brands to expand their presence in different consumer segments. This brand extension strategy
allows Starbucks to reach a wider audience and leverage its brand equity.

4. Push Strategy: is a marketing approach where a company focuses on promoting its products or services
directly to intermediaries, such as retailers, wholesalers, or distributors, with the aim of encouraging them
to push the product to end consumers. The company uses aggressive promotional tactics, such as trade
shows, sales incentives, personal selling, and advertising directed towards the distribution channel. The goal
is to create demand among intermediaries, who then "push" the product to customers through their
distribution networks. This strategy is commonly used when the company has limited direct access to end
consumers or when there is a need for rapid product distribution.

- Starbucks employs a push strategy by actively promoting its products to distributors, retailers, and other
intermediaries in the supply chain. They provide marketing materials, training programs, and incentives to
encourage these partners to stock and sell Starbucks products. This approach helps increase the availability
and visibility of Starbucks products in various retail outlets.

5. Pull Strategy: is a marketing approach where a company focuses on creating demand among end
consumers to pull the product through the distribution channel. Instead of targeting intermediaries, the
company invests in consumer-oriented marketing activities to build brand awareness, generate consumer
interest, and drive demand. This can involve advertising, social media campaigns, public relations,
influencer marketing, and other promotional tactics aimed at capturing the attention and interest of the
target market. The objective is to motivate consumers to actively seek out and request the product from
retailers or distributors, creating a "pull" effect in the market. Pull strategies are commonly used when the
company wants to establish a strong brand presence, differentiate its products, and create consumer
demand that drives sales.

- Starbucks also utilizes a pull strategy to create consumer demand and attract customers directly to their
stores. Through various marketing efforts, including advertising, social media engagement, and loyalty
programs, Starbucks aims to build brand awareness, create a desire for their products, and encourage
customers to seek out their stores and products.

B. Financial Strategy:

- refers to a comprehensive plan that outlines how a company manages its financial resources to achieve its
long-term goals. It involves making decisions related to capital structure, funding sources, investment
priorities, and financial risk management. The strategy aims to optimize the company's financial
performance, profitability, and sustainable growth. It also considers factors such as cash flow management,
budgeting, and financial forecasting to ensure adequate liquidity and resource allocation. A well-defined
financial strategy helps align financial decisions with the overall business strategy, mitigates financial risks,
and maximizes shareholder value. It is crucial for financial stability, efficient operations, and achieving long-
term financial objectives.

1. Equity Financing: refers to a method of raising capital for a company by selling ownership shares or
equity in the business. In this type of financing, investors provide funds in exchange for ownership rights in
the form of shares or stock. Equity financing can occur through various avenues, such as issuing shares to
individual investors, venture capitalists, private equity firms, or through initial public offerings (IPOs) when a
company goes public. Unlike debt financing, equity financing does not require repayment of the invested
amount. Instead, investors become shareholders and may participate in the company's profits and have
voting rights. Equity financing is commonly used by startups, growing companies, and businesses looking to
fund expansion, research and development, or other long-term investments.

- Starbucks has utilized equity financing as part of its financial strategy. This involves raising capital by
issuing shares of common stock to investors. By selling equity, Starbucks can raise funds without incurring
debt obligations. Equity financing can provide long-term capital for the company's growth initiatives, such as
store expansion, product innovation, and strategic investments.

2. Debt Financing: refers to a method of raising capital for a company by borrowing funds from lenders or
creditors, typically with the promise to repay the borrowed amount with interest over a specified period. It
involves taking on debt obligations, such as loans, bonds, or lines of credit, to finance business operations,
investments, or other financial needs. The borrowed funds can be used for various purposes, including
working capital, expansion, acquisitions, or equipment purchases. Debt financing requires the company to
make regular interest payments and repay the principal amount according to the terms and conditions
agreed upon by the lender. The lender does not gain ownership or equity in the company but rather acts as
a creditor with a legal claim on the borrowed funds.

- Starbucks has also utilized debt financing as a component of its financial strategy. This involves raising
funds by borrowing money from various sources, such as banks, and financial institutions, or issuing
corporate bonds. Debt financing allows Starbucks to access capital that can be used for different purposes,
including operational expenses, store renovations, or acquisitions. The company typically pays interest on
the borrowed funds and repays the principal amount over a specified period.

C. Research and Development Strategy:

refers to a systematic plan that outlines how an organization conducts research activities and develops new
products, technologies, or processes. It involves allocating resources, setting objectives, and establishing a
framework for innovation and knowledge creation. The strategy guides the identification of research areas,
collaboration with external partners, and allocation of funds for R&D projects. It aims to enhance the
organization's competitive advantage, drive technological advancements, and bring innovative solutions to
the market. A well-defined R&D strategy helps align research efforts with business goals, fosters a culture of
innovation, and enables the organization to stay ahead of competitors in a rapidly evolving market.

1. Technological Leader: A technological leader refers to a company or organization that occupies a

prominent position in terms of innovation, technological advancements, and expertise within its industry or
field. A technological leader is often known for its ability to develop and introduce cutting-edge
technologies, products, or services that set industry standards and shape the direction of technological
progress. They are characterized by their continuous investment in research and development, a strong
focus on innovation, and a track record of successful technological breakthroughs. Technological leaders
often enjoy competitive advantages, such as brand reputation, intellectual property rights, and the ability to
attract top talent, which further strengthens their position in the market.

- Starbucks strives to be a technological leader in the coffee industry by investing in research and
development (R&D) activities. This strategy involves dedicating resources to internal R&D efforts, which
focus on developing innovative technologies, processes, and systems to enhance the customer experience,
operational efficiency, and sustainability initiatives. Starbucks aims to stay at the forefront of technology
advancements and leverage them to differentiate itself from competitors.

2. Technological Follower: A technological follower refers to a company or organization that adopts and
imitates existing technologies and innovations developed by other companies or industry leaders. Rather
than being at the forefront of technological advancements, a technological follower focuses on studying and
understanding the innovations introduced by technological leaders and then implementing similar
technologies in their own operations or products. Technological followers typically prioritize efficiency and
effectiveness in the adoption and implementation of established technologies rather than investing heavily
in research and development to create new technologies. By following established trends and technologies,
they can reduce the risks and costs associated with innovation and capitalize on proven concepts in the
market. However, they may face challenges in differentiating themselves from competitors and maintaining
a competitive edge.

- While Starbucks aims to be a technological leader, it also recognizes the importance of monitoring and
adopting relevant technologies developed by others. As a technological follower, Starbucks keeps an eye on
industry trends, competitor innovations, and emerging technologies. This strategy involves assessing the
viability and impact of external technological advancements and incorporating them into its own operations
to improve efficiency, quality, and customer satisfaction.

3. Open Innovation: Open innovation refers to a collaborative and inclusive approach to innovation that
involves seeking and incorporating external ideas, knowledge, and resources into an organization's
innovation process. Unlike traditional closed innovation, which relies mainly on internal R&D efforts, open
innovation recognizes that valuable ideas and expertise can come from a variety of sources beyond the
boundaries of the organization. Open innovation involves engaging with external partners, such as
customers, suppliers, universities, research institutions, and even competitors, to co-create, share, and
leverage knowledge and technologies. This approach allows for greater flexibility, access to diverse
perspectives, and accelerated innovation cycles. It can lead to the development of breakthrough
innovations, improved problem-solving, reduced costs, and enhanced market competitiveness.

- Starbucks embraces open innovation as a part of its R&D strategy. This approach involves collaborating
with external partners, including technology companies, research institutions, startups, and suppliers.
Through partnerships and collaborations, Starbucks seeks to tap into external expertise, ideas, and
resources. This allows them to leverage the knowledge and innovation capabilities of external entities to
develop new products, technologies, and solutions that benefit both Starbucks and its partners.

By combining elements of being a technological leader, and follower, and practicing open innovation,
Starbucks aims to drive continuous improvement, stay competitive, and deliver value to its customers. The
specific focus areas and initiatives within Starbucks' R&D strategy may vary based on market dynamics,
customer needs, and emerging trends.

D. Operation strategy:

- refers to the plan and approach adopted by an organization to effectively manage its operations and
achieve its objectives. It involves making decisions regarding production processes, supply chain
management, capacity planning, resource allocation, and quality control. The strategy aims to optimize
operational efficiency, reduce costs, improve productivity, and enhance customer satisfaction. It focuses on
aligning operational activities with overall business goals and market demands. A well-defined operation
strategy helps the organization to streamline processes, adapt to changing market conditions, maintain a
competitive edge, and deliver products or services efficiently to customers.

1. Operation strategy for manufacturing firms

Starbucks is primarily known as a coffee retailer rather than a manufacturing firm, as its core business
revolves around operating coffee shops and serving customers. However, I can provide a general overview
of different operation strategies commonly employed by manufacturing firms that may be applicable in the
context of Starbucks' operations:

 Job Shop: A job shop operation strategy involves producing customized or unique products in small
quantities. While this strategy may not be directly applicable to Starbucks' coffee shops, it can be
seen in the customization options Starbucks offers its customers, such as selecting the type of
coffee, milk, and toppings for each individual order.
 Connected Line Batch Flow: In a connected line batch flow strategy, products are manufactured in
batches but move through connected production lines. This approach allows for efficient
production with minimal interruptions and is commonly used in food and beverage manufacturing.
Starbucks may apply this strategy in its supply chain and production facilities to ensure a smooth
flow of coffee beans and related products.
  Flexible Manufacturing Systems: Flexible manufacturing systems (FMS) involve utilizing advanced
technology and automation to create a highly adaptable production environment. While Starbucks'
operations are primarily focused on coffee preparation and customer service, elements of FMS may
be incorporated into its manufacturing processes, such as automated coffee grinding and brewing
equipment to enhance efficiency and consistency.
 Dedicated Transfer Lines: Dedicated transfer lines are used in manufacturing when a specific
product requires a dedicated production line due to its complexity or specialized requirements.
While Starbucks' product range is diverse, the processes involved in coffee preparation are generally
standardized and adaptable across different coffee blends and recipes. Therefore, Starbucks may
not extensively rely on dedicated transfer lines but instead employ standardized processes for
efficiency.
 Mass Production System: A mass production system involves the efficient production of large
volumes of standardized products. While Starbucks serves a large customer base, its coffee shops
typically prepare drinks on demand rather than producing coffee beverages in advance. However, in
the context of packaged coffee beans and merchandise, Starbucks may employ mass production
systems to meet the demand for its retail products.
 Mass Customization: Mass customization combines elements of mass production and
customization, allowing customers to personalize products within predefined options. While
Starbucks' primary focus is on providing consistent quality across its coffee shops, it incorporates
some level of mass customization by offering a range of coffee options, flavors, and customization
requests to accommodate individual customer preferences.

It's important to note that Starbucks' operations primarily revolve around the service industry rather than
traditional manufacturing. Therefore, while elements of manufacturing strategies may be applicable, they
are not the central focus of Starbucks' operational model.

2. Operations Strategy for Service-oriented Starbucks:

 Quality: Quality refers to the standard of excellence or degree of superiority of a product or service.
It is often measured by the level of customer satisfaction and adherence to predetermined
specifications or requirements.
- Starbucks places a strong emphasis on delivering high-quality products and services to its
customers. This includes sourcing premium coffee beans, training its baristas to prepare
beverages to a consistent standard, and ensuring a pleasant and comfortable ambiance in its
coffee shops. Quality is a key driver of customer satisfaction and loyalty for Starbucks.
 Flexibility: refers to the ability of an organization to quickly adjust to changes, challenges, and
opportunities. It involves being able to adapt to new situations by making operational, procedural,
and strategic changes in a timely manner.
- Starbucks strives to be flexible in meeting customer demands and preferences. This includes
offering a wide range of beverage options, accommodating customization requests, and
providing alternative milk choices and dietary options. The ability to adapt to changing
customer needs and preferences is crucial for Starbucks' service-oriented operations.
 Speed: refers to the ability of an organization to move quickly and efficiently in its decision-making
processes and in the execution of its strategies. It is key to staying competitive and keeping up with
rapidly changing market conditions.
 - Starbucks recognizes the importance of speed in serving customers in a timely manner,
especially during peak hours. The company invests in efficient store layouts, optimized
processes, and well-trained baristas to minimize wait times and provide quick service. Fast
service ensures customer convenience and helps manage high customer volumes efficiently.
 Dependability: refers to the ability of a company to consistently deliver its products or services on
time and as promised. It is essential for building trust and loyalty with customers, as well as
maintaining a positive reputation in the marketplace.
- Starbucks places a strong focus on being dependable and consistent in its operations.
Customers expect the same quality, taste, and service experience across different Starbucks
locations. Starbucks' operations are designed to deliver a reliable and consistent customer
experience, regardless of the store or barista serving the customer.
 Cost: Cost refers to the amount of resources, such as money, time, or effort, that must be expended
to acquire or achieve something. It is the price that must be paid for something, either in the form
of monetary payment or otherwise.
- While providing high-quality products and services, Starbucks also considers cost efficiencies in
its operations. The company strives to manage costs effectively through optimized supply chain
management, inventory control, and efficient store operations. This helps maintain competitive
pricing while delivering value to customers.

E. Purchasing Strategy:

refers to the systematic approach taken by an organization to acquire goods, materials, or services from
external suppliers. It involves making decisions related to supplier selection, negotiation, and contract
management. The strategy aims to optimize the procurement process, reduce costs, ensure timely
availability of goods, and maintain quality standards. It takes into account factors such as price, supplier
reliability, product quality, and supply chain efficiency. A well-defined purchasing strategy helps the
organization to establish strong supplier relationships, leverage buying power, mitigate risks, and drive
overall operational effectiveness. It plays a crucial role in managing the procurement function and achieving
cost savings while meeting the organization's needs.

The purchasing strategy of Starbucks revolves around ensuring a reliable and sustainable supply chain for its
coffee beans, other ingredients, and merchandise. Here are some key elements of Starbucks' purchasing
strategy:

1. Direct Sourcing: Direct sourcing refers to the practice of procuring goods and services directly from
the original source or manufacturer, bypassing intermediaries or third-party distributors. It enables
companies to have more control over their supply chain, improve cost efficiency, and establish
closer relationships with suppliers for better quality control and customization.
- Starbucks follows a direct sourcing approach, working directly with coffee bean farmers and
suppliers worldwide. This strategy allows Starbucks to establish long-term relationships with
suppliers, ensuring consistent quality, ethical sourcing practices, and traceability of its coffee beans.
Direct sourcing also helps Starbucks have better control over its supply chain and build collaborative
partnerships with farmers.
 2. Quality Assurance: Quality assurance is the process of ensuring that products or services meet or
exceed predetermined standards of quality. It involves systematic activities such as inspections,
testing, and audits to identify and correct any deviations or deficiencies, ensuring that the final
output consistently meets customer expectations.
- Starbucks places a strong emphasis on maintaining high-quality standards for its products. The
company implements rigorous quality control processes throughout the purchasing process to
ensure that the coffee beans and other ingredients meet Starbucks' quality requirements. This
includes conducting regular audits, certifications, and inspections of suppliers to uphold quality
standards.

3. Sustainability and Ethical Sourcing: Sustainability and ethical sourcing refers to the practice of
procuring goods and services in a manner that prioritizes environmental responsibility, social equity,
and economic viability. It involves sourcing materials and engaging in business practices that
minimize negative impacts on the environment, promote fair trade, support local communities, and
uphold ethical labor standards throughout the supply chain.
- Starbucks is committed to sustainability and ethical sourcing practices. The company focuses on
purchasing coffee beans that are grown in environmentally responsible ways and supporting fair
trade practices. Starbucks invests in programs such as the Coffee and Farmer Equity (C.A.F.E.)
Practices to promote sustainable agriculture, protect ecosystems, and improve the livelihoods of
farmers.

4. Supplier Diversity: Supplier diversity refers to a strategic approach where companies actively seek
to engage and partner with suppliers that are owned and operated by individuals from
underrepresented or diverse backgrounds. It aims to promote inclusivity, create economic
opportunities for minority-owned, women-owned, veteran-owned, or other historically
disadvantaged businesses, and foster a diverse and inclusive supply chain.
- Starbucks actively promotes supplier diversity in its purchasing strategy. The company strives to
work with diverse suppliers, including minority-owned, women-owned, and veteran-owned
businesses. This approach not only supports inclusivity and economic empowerment but also
fosters innovation and enhances the diversity of products and services available to Starbucks
customers.
5. Cost Management: Cost management is the process of identifying, analyzing, and controlling
expenses within a business to optimize profitability. It involves implementing strategies and
practices to minimize costs, improve operational efficiency, eliminate waste, negotiate favorable
terms with suppliers, and make informed decisions that balance cost reduction with maintaining
quality and meeting business objectives. - While maintaining quality and sustainability, Starbucks
also focuses on managing costs within its purchasing strategy. The company seeks competitive
pricing and negotiates favorable terms with suppliers while ensuring fair compensation for farmers.
Effective cost management helps Starbucks maintain competitive pricing and enhance profitability.

Starbucks continually evaluates and refines its purchasing strategy to adapt to changing market dynamics,
consumer preferences, and sustainability goals. The company's commitment to ethical sourcing, quality
assurance, and supplier collaboration sets the foundation for a resilient and responsible supply chain.

F. Logistics Strategy:
refers to the comprehensive plan and approach taken by an organization to manage the flow of goods,
information, and resources across its supply chain. It involves making decisions regarding transportation,
warehousing, inventory management, order fulfillment, and distribution network design. The strategy aims
to optimize the movement of products, reduce costs, enhance customer service, and improve overall supply
chain efficiency. It considers factors such as transportation modes, delivery timeframes, warehouse
locations, and technology utilization. A well-defined logistics strategy helps the organization to align its
logistical activities with business goals, minimize lead times, streamline operations, and maximize customer
satisfaction by ensuring timely and accurate product delivery.

The logistics strategy of Starbucks is designed to ensure efficient and effective movement of products,
supplies, and materials throughout its supply chain network. Here are some key elements of Starbucks'
logistics strategy:

1. Supply Chain Management: Supply chain management refers to the coordination and oversight of
all activities involved in the flow of goods, services, information, and finances from the initial
sourcing of raw materials to the final delivery of products or services to customers. It encompasses
various functions, including procurement, production, inventory management, logistics, and
distribution, with the goal of maximizing efficiency, minimizing costs, and delivering value to
customers.
- Starbucks focuses on managing its supply chain to ensure the availability of coffee beans,
ingredients, merchandise, and equipment at its stores worldwide. This involves coordinating with
suppliers, distributors, and transportation providers to optimize the flow of goods from origin to
destination. Starbucks emphasizes timely delivery, inventory management, and demand forecasting
to meet customer demand and minimize stockouts.
2. Distribution Network: A distribution network is a system of interconnected facilities, such as
warehouses, distribution centers, and transportation infrastructure, that enables the movement
and delivery of goods from suppliers to customers. It involves the strategic placement of these
network nodes to optimize inventory management, reduce transportation costs, and ensure timely
and efficient product distribution across geographic regions.
- Starbucks operates a global distribution network to serve its stores and customers. The company
strategically locates distribution centers and warehouses to facilitate efficient product flow. These
facilities are responsible for receiving, storing, and distributing coffee beans, packaged products,
and merchandise to individual stores. The distribution network is designed to minimize
transportation costs, reduce lead times, and ensure timely replenishment.
3. Transportation Management: Transportation management involves the planning, execution, and
control of the movement of goods or people from one location to another. It includes activities such
as route optimization, carrier selection, freight consolidation, tracking and tracing, and overall
logistics coordination to ensure efficient and cost-effective transportation operations.
- Starbucks employs a comprehensive transportation management system to coordinate the
movement of goods across its supply chain. This includes selecting appropriate transportation
modes, such as trucks, ships, or air freight, based on factors like distance, cost, and speed. Starbucks
collaborates with transportation providers to optimize routes, track shipments, and ensure timely
and secure delivery.
4. Reverse Logistics: Reverse logistics refers to the process of managing the return, disposal, or
repurposing of products, materials, or components from the end consumer back to the point of
origin or to alternative destinations. It involves activities such as product returns, refurbishment,
 recycling, and managing the flow of goods in the opposite direction of the traditional forward
supply chain to recover value, reduce waste, and address environmental concerns.
- Starbucks pays attention to the management of reverse logistics, particularly in areas like recycling
and waste management. The company promotes environmental sustainability by implementing
recycling programs for its packaging materials and coffee grounds. Additionally, Starbucks manages
the proper disposal of waste generated at its stores and facilities, aiming to minimize the
environmental impact of its operations.
5. Technology Integration: Technology integration refers to the seamless incorporation of various
technologies into existing systems, processes, or workflows to enhance efficiency, productivity, and
effectiveness. It involves aligning and integrating different technological components, such as
software, hardware, and data systems, to create a cohesive and interconnected infrastructure that
supports business operations and drives innovation.
- Starbucks leverages technology to enhance its logistics operations. The company utilizes advanced
systems and software for order management, inventory tracking, and supply chain visibility.
Technology integration enables real-time monitoring, data analysis, and decision-making, allowing
Starbucks to optimize logistics processes and address potential bottlenecks proactively.
6. Sustainability and Responsible Sourcing: Sustainability and responsible sourcing refers to the
practice of procuring goods and services in a manner that considers and mitigates environmental
and social impacts throughout the supply chain. It involves selecting suppliers that adhere to ethical
and sustainable practices, such as reducing carbon emissions, promoting fair labor conditions,
protecting biodiversity, and supporting local communities, with the aim of achieving long-term
environmental stewardship and social responsibility.
-Starbucks integrates sustainability principles into its logistics strategy. The company seeks to
minimize its carbon footprint by optimizing transportation routes, adopting fuel-efficient vehicles,
and exploring alternative energy sources. Additionally, Starbucks supports responsible sourcing
practices and partners with organizations to promote sustainable agricultural practices and support
farmer communities.

The logistics strategy of Starbucks focuses on ensuring the timely delivery of high-quality products while
minimizing costs and environmental impact. The company continuously evaluates and enhances its logistics
processes to improve efficiency, sustainability, and customer satisfaction.

G. Human Resources Management Strategy of Starbucks:

refers to the long-term plan and approach taken by an organization to effectively manage its workforce and
align HR practices with overall business goals. It involves making decisions related to talent acquisition,
employee development, performance management, compensation and benefits, and employee
engagement. The strategy aims to attract, retain, and develop a skilled and motivated workforce that can
drive organizational success. It takes into account factors such as workforce planning, diversity and
inclusion, employee satisfaction, and compliance with labor laws. A well-defined HR management strategy
helps the organization optimize human capital, foster a positive work environment, enhance productivity,
and align HR practices with the organization's strategic objectives.

The human resources management strategy of Starbucks is centered around creating a positive work
environment, attracting and retaining top talent, and fostering employee development and engagement.
Here are some key elements of Starbucks' human resources management strategy:
1. Partner (Employee) Engagement: Partner (employee) engagement refers to the level of emotional
commitment, involvement, and enthusiasm that employees have towards their work and their
organization, leading to higher productivity, satisfaction, and loyalty.
- Starbucks places a strong emphasis on partner engagement, considering its employees as
partners. The company believes that engaged partners contribute to a better customer experience.
Starbucks focuses on creating a supportive and inclusive work environment that values diversity,
encourages open communication, and recognizes the contributions of its partners.
2. Training and Development: Training and development refers to the process of providing employees
with the knowledge, skills, and competencies necessary to perform their jobs effectively, improve
performance, and support professional growth.
- Starbucks invests in training and development programs to enhance the skills and capabilities of its
partners. The company provides comprehensive training on coffee brewing techniques, customer
service, and Starbucks' culture and values. Starbucks also offers development opportunities for
career growth, such as leadership programs and tuition reimbursement, to foster a learning culture
among its partners.
3. Benefits and Rewards: Benefits and rewards refer to the incentives, compensation, and additional
perks offered to employees by organizations as a means to attract, motivate, and retain talent while
promoting employee well-being and satisfaction.
- Starbucks offers competitive compensation packages and benefits to attract and retain talent. The
company provides health insurance, retirement plans, and stock options for eligible partners.
Starbucks also offers unique benefits, such as the "Coffee Markout" program, which allows partners
to take home a pound of coffee or box of tea per week. The company recognizes and rewards
outstanding performance through programs like the Partner Recognition Program.
4. Work-Life Balance: Work-life balance refers to the equilibrium or harmony achieved when
individuals effectively manage and prioritize their professional responsibilities and personal life,
promoting well-being and satisfaction in both domains.
- Starbucks values work-life balance and offers flexible work arrangements to accommodate the
needs of its partners. The company provides scheduling options and strives to create a supportive
environment that enables partners to manage personal and professional commitments effectively.
5. Diversity and Inclusion: Diversity and inclusion refers to creating an environment that embraces
and values individual differences, perspectives, and experiences, fostering a sense of belonging and
equitable opportunities for all.
- Starbucks is committed to fostering diversity and inclusion throughout its workforce. The company
aims to create a culture where all partners feel valued, respected, and included. Starbucks actively
promotes diversity hiring practices, supports employee resource groups, and implements diversity
training programs to cultivate an inclusive workplace.
6. Ethical Sourcing and Sustainability: Ethical sourcing and sustainability entail sourcing products and
materials in a responsible and socially conscious manner that considers environmental impact, fair
labor practices, and long-term sustainability.
-Starbucks integrates ethical sourcing and sustainability principles into its human resources
management strategy. The company emphasizes responsible sourcing practices and supports fair
trade initiatives. Starbucks also engages in community service and environmental sustainability
efforts, such as the Starbucks Global Month of Service and the commitment to achieving 100%
ethically sourced coffee.
Through these human resources management strategies, Starbucks aims to build a highly engaged and
motivated workforce that delivers exceptional customer experiences and upholds Starbucks' brand values.
The company recognizes that its partners are instrumental in achieving its goals and places a strong
emphasis on their development, well-being, and satisfaction.

H. Information Technology Strategy:

refers to the overall plan and approach taken by an organization to leverage technology to achieve its
business goals. It involves making decisions related to IT infrastructure, systems development, data
management, cybersecurity, and digital transformation. The strategy aims to align IT initiatives with the
organization's strategic objectives, enhance operational efficiency, and support innovation and growth. It
considers factors such as IT budgeting, technology adoption, IT governance, and IT risk management. A well-
defined IT strategy helps the organization to leverage technology as a competitive advantage, improve
business processes, enable effective decision-making, and enhance customer experiences through the
effective use of digital tools and technologies.

It is known that Starbucks has been actively utilizing information technology to enhance its operations and
customer experiences. Some examples of IT initiatives and strategies that Starbucks has implemented or
may consider include:

1. Mobile Ordering and Payment: Mobile ordering and payment refer to the convenience of using
mobile devices to place orders and complete transactions, allowing customers to order, pay for, and
pick up goods or services seamlessly through a mobile application or platform.
- Starbucks has developed and deployed a mobile app that allows customers to order and pay for
their drinks ahead of time. This initiative streamlines the ordering process and enhances
convenience for customers.
2. Loyalty Program and Personalization: A loyalty program and personalization involve the
implementation of strategies and initiatives that incentivize customer loyalty and tailor experiences
to individual preferences and behaviors, fostering stronger connections and increased customer
satisfaction.
- Starbucks' loyalty program, Starbucks Rewards, utilizes IT systems to track customer preferences,
and purchase history, and offer personalized recommendations and rewards. This strategy aims to
enhance customer engagement and loyalty.
3. Digital Innovation: Digital innovation refers to the continuous development and application of new
digital technologies, solutions, and approaches to drive business transformation, enhance
operational efficiency, and deliver enhanced value to customers in the digital era.
- Starbucks has invested in digital initiatives, such as partnerships with technology companies, to
introduce innovative experiences like voice ordering through virtual assistants and integrating
digital screens into their stores for customer engagement.
4. Data Analytics: Data analytics is the process of examining large and diverse datasets to uncover
patterns, insights, and trends that inform decision-making, optimize performance, and drive
business outcomes.
-Starbucks likely employs data analytics to gain insights into customer behavior, optimize
operations, and make informed business decisions. Analyzing data on customer preferences, store
performance, and inventory can help improve efficiency and profitability.
IX. STRATEGY IMPLEMENTATION: ORGANIZING AND STRUCTURE

STRATEGY IMPLEMENTATION

Strategy implementation refers to the process of translating a strategic plan into action steps and initiatives
to achieve organizational goals. It involves allocating resources, assigning responsibilities, and setting
performance targets. Effective strategy implementation requires strong leadership, clear communication,
and a focus on aligning organizational resources and capabilities with the strategic objectives.

1. Market Expansion: Starbucks aims to increase its market presence by expanding its store network
globally. The implementation of this strategy involves identifying potential markets, conducting
market research, and establishing new stores in strategic locations. For example, Starbucks could
identify emerging markets in countries like India or Brazil and open new stores in key cities in those
regions.

2. Product Diversification: To enhance customer experience and attract a wider customer base,
Starbucks can implement a strategy of product diversification. This can involve introducing new
beverages, food items, and merchandise tailored to local preferences. For instance, in China,
Starbucks introduced teas and beverages inspired by traditional Chinese flavours to cater to local
tastes and preferences.

3. Technology Integration: Starbucks can implement a strategy to leverage technology to enhance the
customer experience and streamline operations. This can include implementing mobile ordering
and payment systems, integrating digital loyalty programs, and using data analytics to personalize
customer offerings. For instance, Starbucks' mobile app allows customers to order ahead and earn
rewards, creating a seamless and convenient experience.

4. Employee Training and Development: To maintain service excellence and uphold Starbucks' brand
image, implementing a strategy for comprehensive employee training and development is crucial.
This includes on-going training programs to ensure consistent product quality, customer service,
and adherence to company values. Starbucks can also invest in leadership development programs
to cultivate talent and promote internal career growth.

5. Sustainable Practices: Starbucks can implement a strategy to reinforce its commitment to

sustainability. This includes initiatives such as ethically sourcing coffee beans, reducing
environmental impact through eco-friendly store designs, and promoting recycling and waste
reduction. For example, Starbucks has set a goal to eliminate single-use plastic straws globally by
implementing alternative straw less lids.

The Following are the pre-requisites of strategy implementation:

 1. Strategy Framework: A strategy framework is a structured approach that defines how an
organization will achieve its long-term objectives. For Starbucks, their strategy framework could be
centered around market expansion, product diversification, technology integration, and
sustainability. This framework provides a broad direction and sets the foundation for the strategic
plan.

Example for Starbucks: Starbucks' strategy framework revolves around expanding its global market
presence, diversifying its product offerings to cater to local preferences, integrating technology for
enhanced customer experience, and promoting sustainable practices throughout its operations.

2. Strategic Plan: A strategic plan is a detailed roadmap that outlines the specific actions, initiatives,
and resources required to achieve the goals defined in the strategy framework. It includes a clear
vision, goals, objectives, and the allocation of resources to achieve them.

Example for Starbucks: Starbucks' strategic plan could involve specific initiatives such as opening a certain
number of new stores in emerging markets, introducing region-specific beverages and food items,
implementing mobile ordering and payment systems, and adopting environmentally friendly store designs
and practices.

3. Performance Indicators: Performance indicators are metrics used to assess the progress and
success of the strategic plan. They provide quantitative or qualitative measures to evaluate the
performance of specific activities and determine if the desired outcomes are being achieved.

Example for Starbucks: Performance indicators for Starbucks could include metrics such as store revenue
growth, customer satisfaction ratings, market share in target regions, adoption rate of mobile ordering
systems, and progress towards sustainability goals, such as the reduction of single-use plastic waste.

4. Implement Consistent Reporting and Link Performance Review: To ensure effective strategy
implementation, consistent reporting and performance review processes are necessary. These
processes involve regular monitoring and evaluation of key performance indicators to track
progress, identify areas of improvement, and make informed decisions based on the data.

Example for Starbucks: Starbucks can establish a reporting system where each store provides regular
updates on revenue, customer feedback, and sustainability initiatives. These reports can be reviewed by
regional managers and shared with the corporate leadership team for performance assessment. Regular
performance reviews can help identify successful strategies, address challenges, and make adjustments as
needed to ensure the strategic goals are being met.

Developing Programs, Budgets and Procedures

Developing programs, budgets, and procedures is a critical aspect of strategic implementation within an
organization. It involves designing and creating structured plans and frameworks to guide the allocation of
resources, financial planning, and operational guidelines.

Programs are a set of interconnected activities and initiatives designed to achieve specific objectives within
an organization. They are typically larger in scope than individual projects and involve multiple projects
working together towards a common goal. Programs often have a defined timeline, dedicated resources,
and a program manager overseeing the overall coordination and execution.
Example for Starbucks: One example of a program at Starbucks could be the "Customer Experience
Enhancement Program." This program aims to improve the overall customer experience across all Starbucks
stores. It includes initiatives such as enhancing store design and layout, implementing digital ordering
systems, upgrading equipment for faster service, and providing on-going training for baristas to ensure
consistent quality and personalized service.

Offensive Tactics

Offensive tactics refer to strategies and actions taken by an organization to gain an advantage over its
competitors, disrupt the market, or expand its market share. These tactics are proactive and aim to seize
opportunities, exploit weaknesses, and challenge the status quo. Offensive tactics can involve various
approaches, such as attacking competitors head-on, targeting specific market segments, leveraging
innovation, or engaging in aggressive marketing and pricing strategies.

Frontal Attack: A frontal attack is a strategy in which an organization directly confronts its competitors head-
on, often in their core market or with a similar product or service. It involves competing directly with rivals
using traditional methods to gain market share or surpass them.

Example for Starbucks: Starbucks employing a frontal attack strategy could be seen when they entered the
premium tea market with their brand "Teavana." By directly challenging established tea brands, Starbucks
aimed to capture a significant share of the market with its own line of high-quality teas and tea-based
beverages.

Flank Attack: A flank attack involves targeting a specific niche or segment of the market that is currently
underserved or overlooked by competitors. Rather than directly challenging the competition in their
stronghold, organizations using this strategy seek to exploit gaps or opportunities on the periphery.

Example for Starbucks: Starbucks' acquisition of the bakery chain "La Boulange" can be seen as a flank
attack strategy. By expanding its product offerings to include freshly baked pastries and artisanal bread,
Starbucks aimed to attract customers looking for quality bakery items, potentially drawing them away from
independent bakeries and other competitors in the coffee shop industry.

Encirclement Attack: An encirclement attack strategy involves surrounding and overwhelming competitors
from multiple directions. Organizations using this strategy aim to capture a larger market share by offering a
wide range of products or services, targeting various customer segments simultaneously.

Example for Starbucks: Starbucks implemented an encirclement attack strategy through its acquisition of
other coffee chains, such as Seattle's Best Coffee and Teavana. By expanding its brand portfolio and
targeting different customer preferences, Starbucks aimed to dominate the coffee market from various
angles, appealing to a wider range of customers and reducing the market share of competitors.

Bypass Attack: A bypass attack strategy entails bypassing traditional distribution channels or business
models to reach customers directly or through unconventional means. Organizations employing this
strategy often leverage technology or alternative distribution channels to disrupt existing market dynamics.

Example for Starbucks: Starbucks' introduction of its mobile ordering and payment system is an example of
a bypass attack. By allowing customers to order and pay for their drinks via a mobile app, Starbucks
bypassed traditional ordering processes, reducing wait times and improving convenience. This strategy
enhanced the customer experience and differentiated Starbucks from other coffee chains.

Guerrilla Attack: A guerrilla attack strategy involves unconventional tactics, such as surprise or localized
assaults, to disrupt competitors. Organizations using this strategy often focus on agility, creativity, and
exploiting specific opportunities to gain an advantage.

Example for Starbucks: In response to the growing popularity of independent, local coffee shops, Starbucks
could adopt a guerrilla attack strategy by strategically opening smaller, neighbourhood-focused stores. By
offering a more localized and personalized experience, Starbucks aims to compete with local coffee shops
on their own turf and win over customers who prefer a more intimate and community-oriented
environment.

Defensive Tactics

Defensive tactics are strategies and actions taken by organizations to protect their market position, assets,
and competitive advantage from external threats or challenges. These tactics are designed to safeguard the
organization's current market share, customer base, and overall stability. Defensive tactics often involve
proactive measures to mitigate risks, prevent competitive encroachment, and maintain a strong defensive
position.

1. Raising structural barriers refers to the strategic efforts made by an organization to create obstacles
or establish competitive advantages that make it difficult for new entrants or existing competitors to
challenge its position in the market. This involves creating barriers to entry through various means
such as proprietary technology, economies of scale, strong brand reputation, exclusive partnerships,
or regulatory compliance requirements. The objective is to fortify the organization's market position
and reduce the threat of new competitors or disruptors.

Example for Starbucks: Starbucks has raised structural barriers through the establishment of a strong brand
reputation and extensive network of stores. The widespread presence of Starbucks outlets and the
recognition of its brand name make it challenging for new entrants to gain comparable visibility and
customer trust. Additionally, Starbucks has developed proprietary technology for its mobile ordering and
payment system, creating a competitive advantage that is difficult for others to replicate. These structural
barriers give Starbucks a significant advantage in maintaining market dominance and fending off potential
competitors.

 Position Defense refers to the strategic approach of protecting a specific market position or
segment from competitors. In the context of Starbucks, an example of position defense would be
their focus on offering high-quality coffee beverages and a cozy atmosphere to differentiate
themselves from other coffee chains. By consistently delivering premium products and creating a
unique customer experience, Starbucks aims to maintain its position as a leading specialty coffee
retailer.
 Flank Defense involves protecting against potential threats from new or emerging competitors by
expanding into new markets or product categories. For Starbucks, a flank defense strategy could be
seen in their introduction of the Starbucks Reserve Roastery concept. This upscale coffee
experience allows them to cater to a more discerning audience and diversify their offerings beyond
their traditional coffee shop format, ensuring they capture different segments of the market.
 In summary, position defense for Starbucks revolves around solidifying their existing market
position through consistent quality and unique customer experiences, while flank defense entails
expanding into new markets and product categories to proactively address potential competitive
threats.

2. Increasing expected retaliation refers to a defensive strategy aimed at deterring potential attacks
by creating a perception that any aggression will be met with a strong response. In the context of
Starbucks, an example of increasing expected retaliation could be their proactive stance on ensuring
fair trade and ethical sourcing of coffee beans. By publicly committing to these values and actively
monitoring their supply chain, Starbucks sends a clear message that any violation of these principles
will be met with strong repercussions and potential loss of business.
 Preemptive defense involves taking proactive measures to prevent or mitigate potential threats
before they occur. For Starbucks, an example of preemptive defense could be their investment in
technology and digital infrastructure to enhance their mobile ordering and delivery capabilities. By
recognizing the growing trend of online ordering and anticipating customer preferences, Starbucks
stays ahead of the competition and maintains a strong market position.
 Counteroffensive defense refers to a strategy where a company responds to a competitive threat by
launching aggressive actions to regain lost ground or challenge the competitor. In the case of
Starbucks, an example of counteroffensive defense could be their introduction of the Starbucks
Rewards loyalty program. This initiative was a response to increasing competition from other coffee
chains and aimed at retaining and attracting customers by offering exclusive benefits and rewards.

In summary, increasing expected retaliation for Starbucks involves demonstrating a strong

commitment to ethical practices, preemptive defense entails anticipating market trends and
investing in technology, while counteroffensive defense focuses on launching strategic initiatives to
regain market share or combat competition.

3. Lowering the inducement for attack refers to a defensive strategy aimed at reducing the
attractiveness or perceived benefits of attacking a company. For Starbucks, an example of lowering
the inducement for attack could be their emphasis on fostering positive relationships with coffee
farmers and suppliers. By providing fair compensation and support for sustainable farming
practices, Starbucks creates a mutually beneficial partnership, making it less enticing for farmers to
align with potential competitors.
 Mobile Defense involves the ability to quickly adapt and respond to changing market dynamics or
threats. In the case of Starbucks, an example of mobile defense could be their introduction of new
seasonal and limited-time offerings. By continuously innovating and providing unique and exclusive
products, Starbucks keeps customers engaged and entices them to choose Starbucks over
competitors who may have a more static menu.
 Construction Defense refers to a strategy where a company builds barriers or obstacles to impede
potential attackers. In the context of Starbucks, an example of construction defense could be their
extensive network of physical stores and strategic locations. By establishing a widespread presence
and occupying prime retail spaces, Starbucks creates a significant barrier for new entrants, making it
challenging for competitors to gain a foothold in the market.
 In summary, lowering the inducement for attack for Starbucks involves fostering positive
relationships with suppliers, mobile defense focuses on adapting to market changes through
innovative offerings, while construction defense is achieved by establishing a widespread network
of physical stores and strategic locations to create barriers for potential competitors.

B. Budget refers to a financial plan that outlines expected revenues and expenses for a specific period. In
the case of Starbucks, an example of a budget would be their annual financial plan, which includes
projected sales, costs of goods sold, operating expenses, and capital expenditures. This budget helps
Starbucks allocate resources efficiently, make informed decisions, and track financial performance.

C. Procedures are a set of established guidelines or steps that dictate how tasks or activities should be
carried out within an organization. At Starbucks, an example of a procedure could be their standardized
coffee brewing process. The company has well-defined steps, including measurements, brewing times, and
quality checks, to ensure consistency and maintain the high standards of their coffee across all locations.

Another example of a procedure at Starbucks could be their inventory management process. This includes
protocols for tracking and replenishing supplies, conducting regular stock checks, and maintaining optimal
inventory levels to support operations without excess waste or stockouts.

Additionally, Starbucks has procedures in place for handling customer complaints or feedback. This includes
a standardized process for acknowledging and addressing customer concerns, escalating issues if necessary,
and striving for satisfactory resolutions to maintain customer satisfaction.

In summary, a budget in the context of Starbucks refers to their financial plan, while procedures encompass
guidelines for activities such as coffee brewing, inventory management, and customer complaint handling.
These budgeting and procedural practices help ensure financial stability, operational consistency, and
customer satisfaction for the company.

X. EXECUTION: LINKING STRATEGY, PEOPLE, AND OPERATIONS

The Strategy Process
According to Usman Ghani, a business analyst and Chairman of Conflucore, successful strategies have
several attributes that win the customer’s preference and create a sustainable competitive advantage.
Ghani emphasized the following attributes that an organization must address:

 Strategies display systematic adaptability

 Strategic processes must be applied
 Customer offerings are effectively differentiated by the organization

A good strategic planning process requires attention to the actual execution of the strategy, not a
compilation of forecasted numbers. It must come from the minds of the people closest to the action
who understand their markets, resources, strengths, and weaknesses.

In building a strategic plan, an organization's line people (rank-and-file staff) can help by collecting data
and using analytical tools because they are directly exposed to it. They are in the best position to
introduce ideas, know which ideas will work in their marketplace and which ones won’t, understand
what new organizational capabilities may be needed, weigh risks, evaluate alternatives, and resolve
 critical issues that planning should address but does not often do so.

In addition, business leaders must develop the substance of the strategic plan. A business leader who
comprehensively understands the business and its environment can motivate and inspire the line people
to contribute.

Bossidy and Charan, the author of the book “The Discipline of Getting Things Done,” summarized the
following considerations of business leaders in creating a strong strategic plan:

 Assessment of external environment. Business leaders must scrutinize their environment and
understand it well. They should examine everything from economic and demographic trends and
regulatory shifts to new technologies, alliances between competitors, and drivers of increasing
or decreasing demand for its products.
Example:
Starbucks has always been an unconventional business, fueled by a shared commitment to making
a good difference in the world via our combined efforts. Intentionally, transparently, and
responsibly, we seek lofty objectives for the benefit of our collaborators, our neighbors, and the
globe.
 Understanding existing markets. Business leaders must be aware of their customers' needs and
buying behaviors.
Example:
As a result of the economic downturn, people cut back on frivolous spending like going out to
restaurants and bars in favor of stocking up on bargains at home. And this harsh reality of the
market revealed Starbucks's steepest declines.

Revenues in the United States are projected to increase by $35.1 billion over the next five years,
representing a yearly growth rate of 3.7% for the industry. The strengthening economy and rising
levels of consumer confidence are the primary forces behind this expansion.
 Identifying growth opportunities. Business leaders must assess the needs of their organization
to gain potential progress and development. They must constantly identify the need for new
products or services, marketing channels, and business expansion.
Example:
Starbucks is currently transitioning away from its long-standing pastries to San Francisco favorite
La Boulange brand pastries. All pastries at Starbucks are now reheated before being served, and
the chain is also expanding its selection of "sweet and savory" treats. The authors note that as
more cities are added, the results improve, and that adoption is highest towards the coasts.
 Recognizing the competition. Business leaders must continuously monitor the emergence of
new entrants with more attractive value propositions for their customers.
Example:
The company Starbucks is in the business of roasting, marketing, and selling gourmet coffee1.
Dunkin' Donuts and McCafé are two of its key rivals, however as of 202223, both have a lesser
global market share than Starbucks does. Costa Coffee, the number two coffee chain in the
world,4, Caffè Nero, the number one coffee chain in Europe,4, and Tim Hortons, a major
competitor in the North American market, are all competitors.
 Assessment of business capabilities. Business leaders must evaluate their company’s capabilities
to execute a proposed strategy regarding people, processes, and resources.
Example:
Starbucks maintains that human and environmental well-being are integral to sustainable development.
The company has also updated its ongoing growth strategy, which strives to produce considerable value for
all stakeholders by driving steady and predictable growth in sales and margins.
 Creating strategic milestones. Business leaders must establish a timeline and metrics to
measure a strategic plan's progress.
Example:
Starbucks, unlike many other companies that only give lip service to diversity and inclusion, not
only recognizes the value of hiring people from a variety of backgrounds to ensure a welcoming
atmosphere for customers from all walks of life, but it has also embedded the means to achieve
this goal into its human resources procedures. Starbucks is able to fulfill its strategy objective of
becoming the "third place" so valued by its clientele because of these skills taken together.
  Determining critical issues. Business leaders must identify the organizational problems that may
affect the business's future growth.
Example:
Due to the saturation of the US market with 8078 locations, the majority of Starbucks' revenue
comes from the US, making the company very vulnerable to changes in the US economy and
growth. A negative large corporation image means that Starbucks, like other large corporations,
must spend more on CSR initiatives and keep a close eye on its employees' working conditions.
 Incorporating sustainability. Business leaders must ensure that their company operations exhibit
economic stability to ensure the long-run continuity of the organization.
Example:
Starbucks' commitment to sustainability stems from the company's desire to be resource positive,
meaning that it provides more to the environment than it consumes. The corporation has
tentatively targeted a 50% reduction in carbon, water, and waste by 2030. Ethically sourcing coffee
from farmers in 30 countries, designing a Greener Store Framework, and making a recyclable and
compostable paper cup are all part of Starbucks' commitment to sustainability.

The People Process

For many organizations, whether large or small, a properly implemented people strategy can help grow
the business. A people strategy is the organization’s prioritized people plan that enables a business to
be successful by attracting, developing, retaining, and inspiring the workforce. It is designed to inspire
and achieve company-wide alignment on goals that concern the people.

Example: Starbucks has developed the capacity to inspire employees to build close ties with one another
through a relationship-driven, employees-first strategy. In the United States, even part-time workers are
referred to as "partners" rather than "employees," and they are eligible to obtain benefits including
stock options and health insurance. Starbucks invested in its employees during the height of the global
financial crisis by providing them with opportunities to learn about coffee and take classes that could be
used toward college credit. Howard Behar, the former president of the company, held that if workers
are treated well, they will treat consumers well.

The following are the purpose of the People Strategy:

 It evaluates individuals accurately and in-depth.

 It provides a framework for identifying and developing leadership talent.
 It fills the leadership pipeline with the basis of a strong succession plan.

Very few companies accomplish all of these objectives well. One of the most significant shortcomings of
the traditional people strategy is that it is backward-looking and focused on evaluating the jobs people
are doing at present. Far more important is whether the individuals can handle the jobs in the future as
the company continues to grow.

Identifying the match between the right person and the right job is not always as clear-cut. Sometimes it
means replacing an excellent employee with a new one who is better equipped to take the business to
the next level. While it might seem like a daunting task, a functional people strategy relies on the
following key elements:

1. Start with a vision and some data. Even with a vision in mind, gathering data of all kinds is the
 best. In this process, it is vital to keep all evaluation methods as consistent as possible.
Example:
The corporate vision of Starbucks is to be the market leader. The coffee company's ability to adapt
to its external environment will hinge on how well these business statements are put into practice.
The adoption affects both the generic and intense growth tactics used by Starbucks. The coffee
shop may more easily achieve its mission and realize its vision thanks to the alignment provided by
the business's set of strategic goals.
2. Identify the problems and outcomes. A people strategy needs to be reflexive, which means it
needs to identify issues before they occur and handle them proactively.
Example:
Even when its costs increase, Starbucks will be able to keep its fans thanks to its goods. Customers
will be better able to handle future price hikes because to increased household incomes and an
uptick in consumer confidence.
3. Gather Feedback. Feedback is essential and must come from various people in various roles and
disciplines. It will ensure that the strategy makes sense and can inspire those within the
organization.
Example:
Starbucks reports more than 100 million weekly transactions. Jon Francis, Starbucks' senior vice
president of enterprise analytics, data science, research data, and analytics, oversaw the
formation of a specialized team of data scientists charged with making use of the company's vast
data reserves. Since then, the group and the corporation have benefited from data analytics'
ability to boost efficiency and productivity.

4. Visualize and communicate. A visual that can be used to communicate plans will help educate
the wider business about how work is thought about and allocated.
Example:
Starbucks' brand identity and visual emblem are consistently conveyed across all of their social
media platforms. Every time you see or hear anything about the company, you get the impression
that they care deeply about the well-being of their local community, their employees, and their
customers. Starbucks has established itself as a worldwide leader in its business by meticulously
managing its brand and internet presence. This legendary brand, Starbucks, appeals to the
consumer on multiple levels at once by offering a tasty selection of informative, promotional, and
lifestyle content.

5. Track and adjust. It is essential to check the overall strategy to ensure it is working proactively,
and if changes are needed, adjusting is necessary.
Example:
The company's supply chain and logistics employees were having trouble keeping up as
Starbucks' operations began to pick up steam. The well-known coffee company rapidly realized
they needed to use strategies and technology to control the flow of their raw materials, finished
goods, and components.

The company uses a vertically integrated supply chain to oversee the entire process, from the
cultivation of coffee beans through the sale of finished coffee products.
XI. Linking Strategy, people, and Operations 
The strategy process is about linking the people to operations. In building a strategic plan, the line people
or staffs of an organization can help by collecting data and using analytical tools. In addition, business
leaders must develop the substance of the strategic plan. 
What about Starbucks?  
Its linking strategy focuses on inking its chains having a strong foundation in getting every Starbucks in
monotone. Process, the way staffs dress, and its operations. People of Starbucks refers to its employees
who are hired through a thorough discussions and if the employee is in line with the standard of Starbucks.
Operations itself is being manage by the Headquarters in California that oversees all starbucks chains and if
they’re following all the standards and process of the company.  

XII. Contemporary thinking on Strategy 

In strategic thinking contemporary and prominent issues and decisions are considered specially. It could be
applicable and useful in a wide range of situations, including developing strategies for a company, making a
business or personal decision, or just understanding a situation. It could say be a mental or thinking process
applied by an individual in the context of achieving a goal or set of goals in a game or other endeavor as
mentioned before. It can be done individually as well as collaboration among key people who can positively
alter an organization’s future. 
For Starbucks, its strategy is not traditional. It’s all up to date and contemporary. Meaning, all it’s strategy
are what the mass would like to have. Its not for the company when Starbucks strategize its always fir its
people and staff and customers. Example of this, if Starbucks wants to develop a new coffee. They would
want to get the opinion of the mass first like social media platforms that would help the company
improve.