Updated: Oct 27th, 2024

Starbucks Corporation’s Strategic Audit in 2016 Report

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Table of Contents

Current Performance
Strategic Posture
Corporate Governance
Situational Analysis
SWOT Analysis
External Environment: Opportunities and Threats
Internal Environment: Strengths and Weakness
Strategy Recommendations
Reference List

Current Performance

Starbucks is one of the fastest-growing food chains in the global food industry. Over the years, the company has been successful in creating a positive brand image in different markets globally. It is planning to increase the number of stores in growing markets that will have a positive impact on its earnings in the coming years. The company’s success is driven by its ability to develop a unique corporate culture, manage costs effectively, and commitment by the top management (Leinwand and Mainardi 2016).

The last reported operating cash flow was substantial and enough to support the company’s plan to develop new stores. The financial records of the company indicated that Starbucks achieved a high return on new store openings (Starbucks Corporation – Form 10K Report 2015). Also, the market share and profitability of the company has increased in the last few years (Trefis Team 2016).

Strategic Posture

Mission

Starbucks has a strong and impressive mission statement that reflects the efforts that the company makes to keep its business running successfully. The company’s mission statement is “to inspire and nurture the human spirit – one person, one cup, and one neighbourhood at a time” (Starbucks – Our Mission 2016, p. 1).

Vision

The vision statement of Starbucks has several important components that are relevant to its business including premier purveyance, finest coffees, corporate principles, and focus on overall growth (Starbucks – Our Mission 2016).

Objectives

Starbucks has mentioned its purpose to all employees, and it helps them to achieve their goals. The objectives of the company are “to sustain its position in the market as the most recognized” (Starbucks Details Five-Year Plan to Accelerate Profitable Growth 2014, p. 2) and a respected coffee brand globally and increase its mass-market reach. For these, Starbucks has developed strong strategic goals that help it to achieve its mission (Starbucks – Company Information 2016).

Strategies

Use of fresh coffee beans for best taste.
Introduce new and different flavors of coffee.
Introduce new product lines such as sandwiches and breakfast items (Thompson 2016).
Expansion of online services.
Allow customers to place pre-orders and pay online (Starbucks Mobile Order & Pay Now Available to Customers Nationwide 2015).
Maximize the number of customers in the market.
Team up with strong and reliable suppliers and companies (Geereddy 2014).

Corporate Governance

Board of Directors

The Starbucks Board of Directors is responsible for developing and enforcing corporate governance principles. The committee charter and policies govern corporate governance practices. The founder of Starbucks, Howard Schultz is the President and CEO. He served as the Chairman of the board from 1985 till 2008 (Starbucks – About Us 2016). After that, he was given the position of the company’s CEO and President. Currently, the Starbucks Board of Directors comprises 11 individuals. The details of all directors along with their joining years are provided in the following table.

Name	Job Title	Joining Year
Barbara Bass	Director	1996
William Bradley	Director	2003
Melody Hobson	Director	2005
Kevin Johnson	Director	2008
Olden Lee	Director	2003
Sheryl Sandberg	Director	2008
James G. Shennan	Director	1999
Javier G. Teruel	Director	2005
Myron Ullman	Director	2003
Craig Weatherup	Director	1999
Howard Schultz	Director	1982

Table 1: Board of Directors. Source: (Starbucks Corporation – Form 10K Report 2015).

Top Management

Howard Schultz, CEO hired people with extensive experience to strengthen the company’s management. It helped in managing the expanding retail network of the company (Lebowitz 2016). The four key individuals who have been part of the management team include Howard Schultz, Dave Olsen, Howard Behar, and Orin Smith (Starbucks Corporation – Form 10K Report 2015). They created the corporate values, principles, and culture through collective decision-making and efforts.

Situational Analysis

The coffee manufacturing and distribution industry is growing at a rapid pace. The number of companies operating in this industry is increasing that is making the competition complex and difficult to manage. The companies are focusing on innovative store designs and differentiable products. Moreover, consumer preference for low-price coffee products suggests that the demand for instant coffee is expected to grow in the years to come. The coffee companies are engaged in co-branding to increase their sales network.

SWOT Analysis

Strengths	Weaknesses
High-quality products.	High-priced products.
Ability to perform business ethically (Bush 2016).	Inability to extend its product profile.
Strong profitability.	Products easy to imitate (Bush 2016).
Operational efficiency.
Strong corporate culture and management.
Strong brand image and position in the market.
Strong presence in developed markets and extensive supply chain system.
Opportunities	Threats
Global population growth and increasing demand for coffee (Lombardo 2015).	Intense competition based on pricing.
Changing preferences of consumers.	Developed-markets reaching maturity.
Growing markets in Asia and the Middle East.	Possible governmental restrictions and taxes (Lussier 2008).
Demand for new coffee and confectionery products.

Table 2: SWOT Matrix.

External Environment: Opportunities and Threats

External Factors	Weight	Rating	Weighted Score	Comments
Starbucks Opportunities
Global Operations	0.3	4	1.2	Starbucks is expanding its business in China, India, Dubai, and Brazil (A Tale of Two Countries: Starbucks Growth in India and China2014).
Mergers, joint ventures, or strategic alliances.	0.1	5	0.5	It provides the company an opportunity to open more stores in different regions and countries.
Co-branding	0.1	4	0.4	Co-branding is helping the company to achieve high sales (Prins 2015).
Demand for new products	0.2	3	0.6	Customers appreciate more variety and Starbucks is always known for its variety of coffees with the best quality.
Customer Loyalty	0.4	4	1.6	Customer preference for coffee is changing, and the demand for coffee is increasing that can benefit the company as it has a good reputation in the industry (Bariyo 2015).
On-the-Go Lifestyle	0.2	5	1	Instant and flavored coffees and other food items are available in groceries and retail stores (CSD Staff 2015).
	1		5.3
Starbucks Threats
Direct Competition with existing and new companies.	0.3	3	0.9	Competitors are incurring high advertisement expenditure, and they are offering similar products with the price difference (Kell 2015).
No entry barriers	0.2	3	0.6	Other brands are offering coffee at a low price. Starbucks’s strategy is to keep its prices low (Greenspan 2015).
The possible recession and the cost of raw materials such as imported coffee beans.	0.4	4	1.6	Customer spending on high-priced coffee can be decreased due to the recession. The profit margin of businesses can be reduced due to the high material cost.
Taxation	0.1	3	0.3	The government could raise the rate of general sales tax.
	1		3.4

Table 3: External Factor Analysis Summary.

Internal Environment: Strengths and Weakness

Internal Factors	Weight	Rating	Weighted Score	Comments
Starbucks Strengths
High-quality products	0.3	4	1.2	Starbucks offers a great selection of high-quality products.
Profitability	0.1	5	0.5	It allowed the company to recover from the recent recession period and regain its position in the market.
Management members	0.2	5	1	The management team of the company is highly skilled and competent. It has allowed the company to recover losses and expand internationally.
Corporate culture	0.2	3	0.6	Employees are appreciated, and their efforts contribute to the company’s success.
Operations	0.2	3	0.6	Starbucks has a strong network of retail stores that are connected through the highly sophisticated management system.
	1.00		3.9
Starbucks Weaknesses
Pricing	0.4	3	1.2	The products of Starbucks are comparatively high-priced which allows other companies to benefit from their low pricing strategy.
Innovation	0.4	4	1.6	The company is slow in introducing new products. Consumers prefer to have a variety of complementary products with coffee.
Imitable products	0.2	4	0.8	The company’s products are not unique and other sellers can easily imitate them.
	1.00		3.4

Table 4: Internal Factor Analysis Summary.

Strategy Recommendations

The company needs to focus on developing its international business. The developed countries such as the US are reaching their maturity stage, and the growth opportunities are limited in these markets. Therefore, the company should focus on new markets in Asia and Africa. Moreover, the company should invest in research and development to improve its product variety. The customers are increasingly becoming more concerned about their health.

The company can introduce low-calorie food items that complement its main coffee products. The company should take steps to enhance the differentiation that could help it in the existing and new markets. The company should also work on developing leadership within the organization that could follow the footsteps of Howard Schultz.