Analysis of the strategy and business performance of Starbucks Coffee UK.

• International trade regulations – this includes the import and export that Starbucks’ uses.  When countries that Starbucks uses to import good from, has a change in equity, this results in a loss of efficiency for Starbucks and large transfers can become inconsistent with equity.  Furthermore since the war on Iraq, which began in 2003 composed by the US and UK, trade relations have been distorted between US, UK and some countries.

 Economic:

• Competitors Pricing – the competitive rivalry between companies within an industry can lead to a price war between companies.  A rival in this case such as Costa Coffee, (a similar international chain on a smaller scale) can drive down profits and profit margins, as they offer same or similar products at a lower price. 
• Exchange Rates – As Starbucks is an international company, they are affected by a change in the international trade markets.  If there is a dramatic drop or rise in the country where the coffee is supplied from, this suggests that Starbucks can get more for their $ or £ when importing goods for the company.  This profit or loss is then reflected in the price for the consumer.  Furthermore exchange rates are constantly changing in the world market.
• Inflation Rates – A change in the inflation rates suggests increasing or decreasing prices.  In the UK this is measured using the Retail Price Index (RPI).  For Starbucks business costs will rise through inflation
• Interest Rates – A dramatic rise in interest rates means any investment and expansion plans are changed, for both suppliers and Starbucks.  Furthermore there is an effect on how much consumers have to spend, for example mortgage repayments rise so consumers have less disposable income to spend on luxuries such as coffee.  Thus low interest rates will have the opposite effect.
• Globalisation – farmers of the bean now earn less then they did in the past.  The low income and labour intensive method means that there is a decrease in the number of people willing to do it for a living, in turn a decrease in the coffee produced, thus resulting in a drop in the supply of coffee to Starbucks and profits.

 

Social

• Location – The transport and easy access for both customers and staff is important.  Easy access such as online store located is vital in order for customers to visit and show an interest.
• Age Distribution – The average age of the world population is getting older and birth rates are constantly evolving.  At present the market that Starbucks is targeting is mainly young people, however these views may change in the future as the market for young people decreases.  In order to increase their profits in the future, they must widen their target market, but not loosing the interest from present customers.
• Income Distribution – Where income is distributed is important, it is important for Starbucks to investigate this as it gives the idea of where to aim their marketing or to locate to their stores.  It is presumed that coffee is a luxury item, thus areas where people have more disposable income to spend should be targeted more.
• Health Consciousness – Nowadays people are more interested in healthy living and it is important in today’s market place, especially in western societies.  Consequently Starbucks can use this information when introducing new products to sell; this includes new coffee brands as well as food.  In the past biscuits and cakes have been associated with coffee, but people are now looking for healthier versions.
• Attitude to work – It is important that Starbucks considers the location of opening a chain; they must be careful not to locate to an area where people have a poor attitude to work.  It would be costly to recruit people, and then to train them and finally staff turnover would be high.
• Population Demographics – It is essential for Starbucks as they identify the population group they are aiming for, and what part of the population they are aiming their product to. 

 

Technological

• New Materials and processes – New improvements of technology in store ranges from new computerised cash registers to new developments in coffee making machines, can make a difference to the efficiency of staff.  This will then mean that customers are served quicker and therefore there is more potential to serve more customers in a day.  Furthermore customer relations will be improved.

• IT Development – many Starbucks stores are now introducing WI – FI Internet allowing people to access wireless Internet in store.  Additionally Starbucks is always improving its Internet facilities.  In 1999 Starbucks introduced their www site, which provides comprehensive information about nutritional facts as well as other important information such as store locaters etc.  As a result performance as well as international acknowledgement has improved, and the company now has the tools in order to target customers, analyse data and deliver new features to the market in as shortest time possible.
•  Research and Development activity – as a multi national business, Starbucks has a large budget as well as resources to have a good quality research and development department.  New ideas are constantly being tried in order to maintain customer’s need.
• Rate of technological change - the growth of the internet has meant information can be communicated more efficiently and accurately around the world.  This is important for Starbucks as it is an ever-expanding company, and needs to maintain contact with the ever-changing market and to maintain a head over competitors.

Environmental:

• Work Disposal – In many countries that Starbucks operates it is important that they consider the methods of waste disposal, as many countries have set laws.  If Starbucks does not follow this in any way they risk legal action, this could both affect them financially as well as their reputation of the brand name, as much of the waste disposed of will have their brand name on it.
• Pollution Problems – As Starbucks operates a take out facility as well as to eat in, many customers leave the shop with the cup and then dispose of it in the street.  In this case the packaging is important, as it should be biodegradable.
• Environmental pressure groups – groups such as Greenpeace and Friends of the Earth, are used to raise awareness of environmental issues, Starbucks should be aware of their influential power.  If the company takes part in any harm to the environment or animals, this will be followed with swift action from these organisations, such as high-powered protests.  Therefore there is a chance that the Starbucks image will be affected.

Legal:

• Land use – When opening a new store it is important that Starbucks looks at regulations related to building shops, and converting previous buildings, as land could be green belt or other factors.
• Health and Safety Regulations – In some of the countries that Starbuks operates there may be a more relaxed approach to this.  It is important that Starbucks enforced this in all the stores they operate, regardless of the wider context; this is to ensure good global operations as well as ensuring that all laws are followed.  Furthermore if they follow all the regulations there is a less likelihood of there being any cases bought against the company with regards to negligence.  Internationally Starbucks should acknowledge the legal requirement that ensures that staff and customers are in a safe environment.
• Employment Law – Each country that Starbucks operates in has there own varying employment laws.  Many stores may offer a day of once a week, others may have a limit on the maximum number of hours an employee can work in a week and in all countries there is a variance on the national minimum wage that an employee can earn.

From looking at the PESTEL analysis it can be seen that Starbucks is a strong brand, and this strength of the brand is an important factor in the future of the company.  The PESTEL analysis is mainly used to assess the future impact of environmental issues that may occur.  However it only deals with the external business environment, additionally another limitation is that these environmental influences that have been expressed may be important to one company, but in turn may not be as important to another.  Often it can be seen when analysing the issues using the PESTEL analysis it can be seen a merely listing al the external influences as opposed to was in which the company can improve or the strengths of the company.  For the environmental analysis to be more accurate it is important for the company to monitor and focus on the factors that most influence the industry.

1636972

221 BSS

Business Management

Coursework 2 : Individual Report

Referances:

Chambers I, (1997), Business Studies, Casueway Press

Johnson G, Scholes & Whittington, (2005), Exploring Corporate Strategy, FT Prentice Hall

Mullins L.J, (2004), Management and Organizational Behaviour, FT Publishing

 

 

 

 

 http://news.bbc.co.uk/1/hi/business/3204523.stm