This is a Thunderbird Case Study.The case focuses on Starbucks Coffee (NSE: SBUX) in the early spring of 2003. The company has demonstrated rapid growth for over a decade, and is continuing to grow profitably through the current recessionary environment. The case details the history and development of the company, highlighting the evolution of the corporate concept of a "third place," and the key individuals in the organization in this development. The second part of the case details the international expansion activities of the firm, highlighting the potential cultural and economic challenges which it may increasingly face as it expands to more traditional coffee-drinking markets, and low-income emerging markets. The third and final section of the case details the increasing pressure placed on Starbucks by the anti-globalization movement. Although Starbucks has actively pursued a number of socially- responsible operating policies, such as the purchase of Fair-Trade coffee, the subsidization of health care facilities in Central America, and the introduction of a number of socially responsible coffee products in its stores, it continues to be the target of anti-globalization activities. The case concludes with the question as to whether the company will be able to continue to grow as rapidly and profitably as the recent past as it reaches saturation point in the domestic market.
Swot Analysis of "Planet Starbucks (A)" written by Michael Moffett, Kannan Ramaswamy includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Starbucks Coffee facing as an external strategic factors. Some of the topics covered in Planet Starbucks (A) case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Planet Starbucks (A) casestudy better are - – central banks are concerned over increasing inflation, increasing household debt because of falling income levels, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google,
geopolitical disruptions, technology disruption, etc
Introduction to SWOT Analysis of Planet Starbucks (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Planet Starbucks (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Starbucks Coffee, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Starbucks Coffee operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Planet Starbucks (A) can be done for the following purposes –
1. Strategic planning using facts provided in Planet Starbucks (A) case study
2. Improving business portfolio management of Starbucks Coffee
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Starbucks Coffee
Strengths Planet Starbucks (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Starbucks Coffee in Planet Starbucks (A) Harvard Business Review case study are -
Sustainable margins compare to other players in Strategy & Execution industry
– Planet Starbucks (A) firm has clearly differentiated products in the market place. This has enabled Starbucks Coffee to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Starbucks Coffee to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Starbucks Coffee in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Starbucks Coffee is present in almost all the verticals within the industry. This has provided firm in Planet Starbucks (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Analytics focus
– Starbucks Coffee is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Michael Moffett, Kannan Ramaswamy can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Training and development
– Starbucks Coffee has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Planet Starbucks (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Strong track record of project management
– Starbucks Coffee is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Starbucks Coffee
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Starbucks Coffee does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Strategy & Execution field
– Starbucks Coffee is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Starbucks Coffee in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Planet Starbucks (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Starbucks Coffee digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Starbucks Coffee has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High switching costs
– The high switching costs that Starbucks Coffee has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Innovation driven organization
– Starbucks Coffee is one of the most innovative firm in sector. Manager in Planet Starbucks (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Planet Starbucks (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Planet Starbucks (A) are -
No frontier risks strategy
– After analyzing the HBR case study Planet Starbucks (A), it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Lack of clear differentiation of Starbucks Coffee products
– To increase the profitability and margins on the products, Starbucks Coffee needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Planet Starbucks (A), is just above the industry average. Starbucks Coffee needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Skills based hiring
– The stress on hiring functional specialists at Starbucks Coffee has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Starbucks Coffee needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Starbucks Coffee supply chain. Even after few cautionary changes mentioned in the HBR case study - Planet Starbucks (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Starbucks Coffee vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Planet Starbucks (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Starbucks Coffee 's lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Starbucks Coffee is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Starbucks Coffee needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Starbucks Coffee to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Starbucks Coffee has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As Planet Starbucks (A) HBR case study mentions - Starbucks Coffee takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Planet Starbucks (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Starbucks Coffee has relatively successful track record of launching new products.
Opportunities Planet Starbucks (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Planet Starbucks (A) are -
Developing new processes and practices
– Starbucks Coffee can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Better consumer reach
– The expansion of the 5G network will help Starbucks Coffee to increase its market reach. Starbucks Coffee will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Starbucks Coffee to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Starbucks Coffee to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Starbucks Coffee can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Planet Starbucks (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Leveraging digital technologies
– Starbucks Coffee can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Using analytics as competitive advantage
– Starbucks Coffee has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Planet Starbucks (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Starbucks Coffee to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Starbucks Coffee can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Starbucks Coffee in the consumer business. Now Starbucks Coffee can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Starbucks Coffee can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Starbucks Coffee can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Starbucks Coffee can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Starbucks Coffee in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Starbucks Coffee can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Starbucks Coffee can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Planet Starbucks (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Planet Starbucks (A) are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Starbucks Coffee needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Starbucks Coffee high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Planet Starbucks (A), Starbucks Coffee may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Starbucks Coffee.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Starbucks Coffee can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Starbucks Coffee in the Strategy & Execution sector and impact the bottomline of the organization.
Regulatory challenges
– Starbucks Coffee needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Starbucks Coffee business can come under increasing regulations regarding data privacy, data security, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Stagnating economy with rate increase
– Starbucks Coffee can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Starbucks Coffee can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Planet Starbucks (A) .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Starbucks Coffee in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Planet Starbucks (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Planet Starbucks (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Planet Starbucks (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Planet Starbucks (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Planet Starbucks (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Starbucks Coffee needs to make to build a sustainable competitive advantage.
