Starbucks: The Company Analysis Case Study

Resources

• The company’s stores and offices occupy high-traffic, prime, and strategic locations;
• The company’s brand is one of the most recognized globally;
• The company operates in over 60 countries with economies of scale through superior distribution channels and supplier relationships;
• The company has leveraged technology and mobile outlets that allow it to keep up with modern trends;
• An extensive customer base that is highly loyal to the bran.

Capabilities

• Stores maintain certain aesthetic appeal that distinguishes them as cool among younger generations;
• The company nurtures a sustainable corporate culture, and human management strategies demonstrate the effectiveness of operations.
• The company displays a positive corporate image that boasts social responsibility.

Core Competencies

• The capacity to effectively use key differentiation initiatives by providing a premium mix of high-quality drinks and snacks.
• The provision of the unique Starbucks Experience that effectively builds brand loyalty.
• HR management’s ability to use a value-based strategy to develop extremely strong internal and external connections with its partners.

Business Strategy

It is important for large corporations such as Starbucks to maintain positive corporate culture for enhanced efficiency and growth. Organizational culture refers to the network of shared values and norms utilized as a guiding tool for employees’ response and perception of the organizational environment (Griffin et al., 2020). In Starbucks Corporation, the positive aspect of organizational culture is maintained by Howard Schultz — chairman of the company (Griffin et al., 2020). He demonstrates great interpersonal skills in managing the employees’ motivation via building a working environment with an emphasis on respect and dignity (Griffin et al., 2020). Despite rising healthcare expenses, Schultz is dedicated to providing health benefits to Starbucks workers and has developed educational opportunities for them to complete their degrees (Griffin et al., 2020). Schultz is praised for his dedication and leadership by colleagues and company employees. They demonstrate a strong desire to work hard in order to assist Starbucks in achieving its objectives.

Another essential aspect of the current Starbucks Business Strategy is the approach to marketing. The goal of designing a marketing plan for any company is to guarantee that its capabilities are aligned with the present market environment and will remain as such in the future (Hooley et al., 2020). This entails ensuring that a commercial organization’s resources and competencies are matched with the demands and requirements of the competitive marketplaces of its operation.

Starbucks approaches its marketing strategy with a competitive advantage in mind by adopting Porter’s differentiation. Differentiation refers to the creation of a product or service that is seen as incomparable in the market (Hooley et al., 2020). This approach creates a reason for the customer to seek the company’s services that he or she may consider unique and valuable. Starbucks differentiates itself from competitors via the quality of its products services that take advantage of the ongoing trends and local environment to create a savory experience of coffee drinking in an inviting ambiance (Hooley et al., 2020). The company’s customer-centered operation built an enormous network of loyal customers who are willing to pay a higher price for the coffee in Starbucks. Moreover, this network constantly expands due to the solid brand image and quality.

Marketing

Segmentation, targeting, positioning, and distinctiveness are all examined in a core marketing strategy study. This form of study enables the business to determine the type of service it wishes to give, as well as the product types it wishes to sell and to whom. The major demographic segment at Starbucks is between 25 and 40 years old with high wages, while the second target group is 18 to 24 years old and comes from wealthier households (Sakal, 2018). Customers, in general, are from Generation Y, born between 1977 and 2000 (Sakal, 2018). The company’s customers are classified as upper-middle class and have a college education, according to psychographic segmentation (Sakal, 2018). When it comes to targeting, Starbucks falls between mass marketing and segment marketing; they are aiming for a broad audience, but there are specific characteristics that customers must meet, such as higher incomes or being younger.

Starbucks ‘ marketing mix perfectly incorporates 4 P’s of Product, Place, Promotion, and Price. Their product remains high-quality to justify the price and popularity of the brand. Their customer service expands to the barista promise that in the event of the beverage being not up to the taste of the customer, it could be fixed. The place is also one of the main focuses of the company’s marketing as it is one of the features of Starbucks Experience (Wheelen et al., 2017). They are placed in high-traffic urban and suburban residences to guarantee constant customer flow. The company places high emphasis on the cleanliness of its cafes and strictly maintains high hygiene policies. Promotion is done mainly via word of mouth, but the company incorporates numerous advertising mediums. Starbucks advertises its product through social media, television commercials, and print marketing. Their brand is identifiable because of their combination of marketing channels, and they stand out because of the consistent company message promising a high-quality experience of coffee drinking.

Management

Starbucks’ organizational structure incorporates a variety of classic organizational topographies. Starbucks Coffee’s organizational system has the following basic characteristics:

• Functional Facility
• Divisions of Geography
• Divisions based on products
• Teams

The Starbucks Coffee organization system’s functional shape is applicable to company grouping. For example, the corporation has a human resources department, a finance department, and a marketing department. These divisions, such as Starbucks Coffee’s headquarters, are at the top of the firm hierarchy (Rothaermel, 2021). This position is responsible for the Starbucks organizational structure’s hierarchy. The HR department, for example, has protocols in place for all Starbucks cafés (Sakal, 2018). The company model’s functional organization allows for downward monitoring and control, with the CEO at the helm. Starbucks Coffee’s organizational structure is made up of physical divisions (Sakal, 2018). China and Asia-Pacific, Europe and North America, the Middle East, Russia, and Africa are currently the company’s three international business hubs (Sakal, 2018). On the US market, Starbucks Coffee has four regional divisions: west, north-west, south-east, and north-east.

A Senior Vice President oversees each physical division. Starbucks’ two workers allude to two administrators: the president of their regional office (for example, President of US Operations) and the chairman of their office (for example, Corporate HR Manager). The preceding regional requirement management regulations are followed in this article in Starbucks Coffee’s organizational framework (Sakal, 2018). Every divisional head has a lot of freedom when it comes to altering policies and guidelines to fit different business situations.

Starbucks’ organizational structure also employs product-based divisions. Both groupings (geographic and product-based) encompass product categories. Starbucks has a separate coffee and related products division, a separate baked goods section, and a separate cup division (Sakal, 2018). This feature of the framework permits other creative lines to take center stage. Starbucks uses its business structure to effectively generate and reinvent its product. In several parts of Starbucks Coffee’s business structure, teams are dispersed. The teams at the lower organizational levels, particularly at Starbucks cafés, are the most outstanding. In each café, the company has teams in place to supply products and services to clients. This examination of Starbucks’ corporate structure helps the corporation to provide effective and dependable customer service.

Accounting

The company adheres to transparent accounting principles and provides detailed yearly and quarterly records available for the public and shareholders. For the fiscal year of 2021, the company’s net earnings, including noncontrolling interests, were equal to 4,200.3 million dollars (Starbucks, 2021). Simultaneously the company owns 9,756.4 million dollars of the total current liabilities. Among these, cash and cash equivalents account for 6,455.7 million dollars (Starbucks, 2021). Breakage revenue of $164.5 million, $130.3 million, and $125.1 million in company-operated store revenues and $16.6 million, $14.3 million, and $15.7 million in licensing shop revenues were recorded for the fiscal years ended October 3, 2021, September 27, 2020, and September 29, 2019, respectively (Starbucks, 2021). In general, the company seems to maintain a positive balance sheet and remains a profitable venture for investment opportunities.

The company strictly follows the guidelines of the US Financial Accounting Standards Board and adheres to transparency measures. The FASB published a guideline in June 2016 that replaced the incurred loss impairment approach with a new methodology that takes into account current projected credit losses on financial assets such as receivables and available-for-sale securities (Starbucks, 2021). Each reporting period, the new approach requires companies to estimate and recognize projected credit losses. The guideline was implemented using a modified retrospective approach in the first quarter of fiscal 2021, resulting in a $2.2 million transition adjustment to the opening shareholders’ retained deficit on the company’s consolidated statements of equity (Starbucks, 2021). The company is also planning to incur necessary adjustments with the new guideline that was published in March of 2020 by the end of the first quarter of 2022.

Business Ethics

Starbuck business ethics is focused on solid core values that promote responsibility, dignity, and sustainability of the community and environment. Starbucks is a company that seeks to develop a sustainable partnership with local communities. The company is constantly engaged with like-minded organizations that help communities engage via social services, civic engagement, and community service opportunities (Rothaermel, 2021). At the same time, employees of Starbucks are considered to be organizational members or partners (Starbucks, n.d.). Each job position is presented as an essential part of the company and its core values; Therefore, Starbucks prefers the term “partners” to describe their employees by referencing them as a person “who shares in the mutual success and rewards of our enterprise” (Starbucks, n.d.). This approach to employee retainment maintains high-quality human resources within the company.

In the Starbucks Coffee Company, social responsibility is a core value of the company. Starbucks aims to engage in a socially responsible manner with all of its suppliers and to pay its coffee farmers a fair price for the beans they work so hard to harvest (Rothaermel, 2021). The firm is also ecologically conscious, preferring environmentally friendly alternatives whenever available. The installation, for example, is for environmentally conscious consumers who want to use it as an acid for loam in their garden instead of coffee grounds during the straw-hat season.

Starbucks follows all laws governing diversity identification, corporate governance, fair trade practices, competitive legislation, and intellectual property rights as its ethical foundation. They have a system of ethical decision-making that helps societal progress and charity action. Starbucks is committed to maintaining a robust corporate governance policy. Both workers are regarded as equal partners in the plan. The company provides a good system for recording concerns and ensuring a positive client experience.

References

Griffin, R. W., Phillips, J., & Gully, S. M. (2020). Organizational behavior: Managing people and organizations. Cengage.

Hooley, G., Nicoulaud, B., Rudd, J., & Lee, N. (2020). Marketing strategy and competitive positioning, (7th ed.). Pearson Education.

Rothaermel, F. T. (2021). Starbucks corporation. In Strategic management (pp. 102–120) (5th ed.). McGraw-Hill Education.

Sakal, D. V. (2018). Company analysis of starbucks corporation. Financijski klub. Web.

Starbucks Coffee Company. (n.d.). Become a partner. Web.

Starbucks Coffee Company. Starbucks fiscal 2021 annual report. Web.

Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy: Globalization, innovation, and sustainability. Pearson.