Foudation of business strategy of starbucks is a word file which talks about how the starbucks positioned themselves and their strategies to fight against competitors.

1. FOUNDATION OF BUSINESS STRATEGY
ON
STARBUCKS
Submitted by:
VIVEK PRAKASH MISHRA

2. FOOD & BEVERAGES INDUSTRY IN INDIA
INTRODUCTION
The Indian food industry is poised for huge growth, increasing its contribution in
world food trade every year. In India, food has become a high-profit industry by
reason of the scopeit offers for value addition, particularly with the food processing
industry getting recognised as a high-priority area in this liberalised era.
Accounting for about 32 per cent of the country's total food market, the food
processing industry is one of the largest industries in India and is ranked fifth in
terms of production, consumption, export and expected growth. The total food
production in India is likely to double in the next 10 years with the country's
domestic food market estimated to reach US$ 258 billion by 2015.
The role of the Indian government has been instrumental in the growth and
development of the industry. The government through the Ministry of Food
Processing Industries (MoFPI) is making all efforts to encourage investments in the
sector. It has approved proposals for joint ventures (JVs), foreign collaboration,
industrial licences and 100 per cent export oriented units.
Marketsize
The Indian food industry stood at US$ 135 billion in 2012 and is expected to grow
at a compound annual growth rate (CAGR) of 10 per cent to about US$ 200 billion
by 2015, according to a report by KPMG.
Indian agricultural and processedfood exports during April-May 2014 stood at US$
3,813.63million, according to data released by the Agricultural and ProcessedFood
Products Export Development Authority (APEDA). In 2013-14, the total
processed/value added agricultural products exported and the foreign exchange
equivalent earned therefrom stood at Rs 4,627.99 crore (US$ 752.39 million) as
compared to Rs 3,689.26 crore (US$ 599.89 crore) during the previous year.
The branded quick service restaurant (QSR) market in India, which has attracted
international brands such as McDonald's, Subway, Nando's, Domino's and KFC
currently stands at US$ 13 billion and is set to get bigger with new emerging players.
Marine productexports fromIndia touched US$ 5.01 billion during FY14, according
to Ms Leena Nair, Chairperson, Marine Products Export Development Authority
(MPEDA).

3. Investment
The foreign direct investment (FDI) equity inflows in food processing industries
during April 2000-July 2014 stood at US$ 5,949.21 million, as per data released by
Department of Industrial Policy and Promotion (DIPP). The following are some of
the investments and developments in the sector:
 ITC Ltd plans to foray into new categories suchas beverages that include fruit
juices, tea and coffee, and chocolates and dairy products. As a part of its plan
to enter the dairy sector, the company is constructing a milk processing unit
at Munger in Bihar.
 Bisleri International Pvt Ltd has launched its first branded soda in Hyderabad.
"This is our first experiment in the country. We will scale it up to other states
in the days to come," said Mr Santosh AS Borkar, Director - South Zone,
Bisleri International Pvt Ltd. The company would also be setting up eight
water plants in Telangana and Andhra Pradesh.
 Nissin, owner of Top Ramen Noodles, has launched a differentiated noodle -
Scoopies Mad Masala Short Noodle. The company commissioned its third
factory in Odisha earlier this year, with an investment of Rs 100 crore (US$
16.25 million), from where the product would be manufactured.
 Food Bazaar plans to tap the under-branded food and beverages space in the
Indian domestic market with the help of private labels to offer more choice to
the consumers.
 Hindustan Coca-Cola Beverages, the Coca-Cola Company's largest bottling
partner in India, plans to set up a Rs 1,000 crore(US$ 162.48 million) bottling
plant in Telangana and has also sought land for the proposed venture.
 Café Coffee Day (CCD), in a bid to expand its market in India, plans to add
150 cafes and 120 more Xpress outlets across the country during FY15.

4. STARBUCKS
Starbucks Corporation, generally known as Starbucks Coffee, is an American
global coffee company and coffeehouse chain based in Seattle, Washington.
Starbucks is the largest coffee house company in the world ahead of UK rival Costa
Coffee, with 20,737 stores in 63 countries and territories, including 11,910 in
the United States, 1,496 in China, 1,442 in Canada, 1,052 in Japan and 772 in
the United Kingdom.
Starbucks locations serve hot and cold beverages, whole-bean coffee, micro ground
instant coffee, full-leaf teas, pastries, and snacks. Moststores also sell pre-packaged
food items, hot and cold sandwiches, and items such as mugs and tumblers.
Starbucks Evenings locations also offer avariety of beers, wines, and appetizers after
4pm.[6] Through the Starbucks Entertainment division and Hear Music brand, the
company also markets books, music, and film. Many of the company's products are
seasonalor specific to the locality ofthe store. Starbucks-brand ice cream and coffee
are also offered at grocery stores.
From Starbucks' founding in 1971 as a Seattle coffee bean roaster and retailer, the
company has expanded rapidly. Since 1987, Starbucks has opened on average two
new stores every day. Starbucks had been profitable as a local company in Seattle in
the early 1980s . but lost money on its late 1980s expansion into the Midwest
and British Columbia. Its fortunes did not reverse until the fiscal year of 1989-
1990, when it registered a small profit of $812,000. By the time it expanded
into California in 1991 it had becometrendy. The first storeoutside the United States
or Canada opened in Tokyo in 1996, and overseas stores now constitute almost one
third of Starbucks' stores.[11] The company planned to open a net of 900 new stores
outside of the United States in 2009, but has announced 300 store closures in the
United States since 2008.

5. Starbucks PESTEL Analysis
PESTEL stands for political, economic, social, technological, environmental and
legal factors affecting the business and it is widely considered to be one of the most
effective analytical tools used to analyse the impacts of external factors to the
company. The following table represents PESTEL analysis conducted forStarbucks
Coffee Company:
Political
Industry-specific rules and regulations
Thelevel ofrelationships between USAand countries thatproducecoffeebeans
Thelevel ofpolitical stability within acountry.
Economic
Buying powerofconsumers
Localcurrencyexchange rates
Localeconomicenvironment within eachmarket Starbucksoperates
Taxation level
Social
Changing family patternsin USAandEurope
Consumerpreferences
Changing workpatterns
Changes in lifestyles ofpopulation
Thelevel ofeducationofpopulation in localmarkets

6. Changing values amongpopulation
Technological
Emergence ofinnovative technology
Biotechnological developments
Developments in agriculture
Environmental
Environmental rules andregulations
Environmental disastersin countries producingcoffeebeans
Globalwarming and otherenvironmental issues in agloballevel
Legal
Introductionofpolicies and regulations byhealth authorities aboutcaffeine productionand
consumption
Introductionoftougher customsandtraderegulations
Licensing regulations related to theindustry.
Starbucks Porter’s Five Forces Analysis
Porter’s Five Forces represents theoretical framework that is used for industry
analysis and strategy development. Specifically, the five forces shaping
competition within the industry consistof the intensity of rivalry among the

7. competitors, the risk of entry of new competitors, the bargaining power of buyers,
bargaining power of suppliers and the threat of substitute products and services.
The nature of the relationships among these forces is best presented in the
following figure.
Starbucks Coffee Company is a global coffee company and a coffeehousechain
headquartered in Washington, the US and the company has generated a
consolidated revenues of $14.9 billion during 2013 with more than 200,000
partners, referred to as employees .
Rivalryamong existingcompetitors is high within the industry Starbucks operates
in with major competitors like Costa, McDonald’s, Caribou Coffee, and Dunkin
Donuts and thousands of small local coffee shops and cafes.
Starbucks customers possess largeamountof bargainingpowerbecausethere is
no and minimal switching costfor customers, and there is an abundance of offers
available for them.
The threat of substitute products and services for Starbucks is substantial.
Specifically, substitutes for Starbucks Coffee include tea, juices, soft drinks, water
and energy drinks, whereas pubs and bars can be highlighted as substitute places

8. for customers to meet someone and spend their times outside of home and work
environments.
Starbucks suppliershave high bargainingpowerdue to the fact that the demand
for coffee is high in global level and coffee beans can be produced only in certain
geographical areas. Moreover, the issues associated with African coffee producers
being treated unfairly by multinational companies are being resolved with the
efforts of various non-government organisations, and this is contributing to the
increasing bargaining power of suppliers.
However, the threat of new entrants to the industryto compete with Starbucks
is low, because the market is highly saturated and substantial amount of financial
resources associated with buildings and properties are required in order to enter
into the industry.
Starbucks Value-Chain Analysis 2014
Value-chain analysis is an analytical framework that is used to analyse relationships
between various parts of operations and the manner in which each part adds value to
contribute to the level of revenues. Company value-chain can be divided into two
groups: primary and support activities.
Business’s inbound logistics, operations, marketing and sales, outbound logistics,
and service are considered as primary activities in value-chain as they are involved
in value creation in a direct manner. Supportactivities in value creation, on the other
hand, include infrastructure, human resources management, and procurement.
The following figure represents Starbucks Value-Chain analysis for the UK market:

9. The value of value-chain analysis in practical level can be explained in a way that
it allow to critically analyse each component of a business practice in an individual
manner, and search additional sources for competitive advantage within the
component.
Starbucks Strategic Fit Analysis
The following table revisits opportunities and threats faced by Starbucks in the UK
market and briefly analyses the extent of fit between these and Starbucks strengths
and weaknesses:

10. Fit Comments
Opportunitie
s
New product
development
Yes With the record revenues of $11.7
generated in 2011, Starbuck
possesses sufficient amount of
financial resources in order to engage
in new product development in a
successful manner
Increasing the
level of
operational
efficiency
through
technological
innovation
Yes Starbucks possesses financial and
human resources to engage in
research and development in order to
increase the level of operational
efficiency through technological
innovation
Increasing the
range of target
customer
segment
Yes Necessary amount of expertise and
resources are possessed by Starbucks
so that the range of target customer
segment can be increased
Specifically, a range of lower priced
drinks and food need to be added to
Starbucks menu so that individuals
with lower budgets can also be
included to target customer segment
Further damage
to brand image
due to paying
no taxes
scandal
Yes Effective PR programs can be initiated
by Starbucks so that the negative
impact of the scandal can be
minimised

11. Threats
Adverse impact
of changes in
the UK taxation
policy
No Starbucks possesses no tools to
impact changes in UK taxation policies
Continuing
economic
issues in the EU
and the UK
negatively
impacting the
levels of
consumer
spending
No Starbucks management can not
address macroeconomic issues in the
UK with negative implications on the
levels of consumer spending
The level of strategic fit for Starbucks
Starbucks McKinsey 7S’ Framework
The rationalised plan for effective leadership and management for Starbucks
Corporation is best presented through McKinsey 7S’ Framework. It has to be noted
that “the essence of McKinsey’s 7S model is that a firm is the comprehensive sum
of its parts, and that the internal dynamics of an organization clearly determine that
organisation’s ability to compete, the premise being that both the strategy and the
structure of the organisation determine management’s effectiveness” (Joseph and
Mohapatra, 2009, p.59).
The 7S’es of the framework are divided into hard and softelements. Strategy,
structure and systems are considered to be hard elements of the framework,
whereas, softelements consist of shared values, skills, style and staff. Starbucks
management have direct influence and control over the hard elements of the
framework, whereas the softelements are usually influenced by corporateculture,
and therefore they are more difficult to control.

12. Hard Elements
Strategy. Starbucks has to be concentrating on the quality of its products at the
same time offering excellent level of customer services. The main strategy for the
company is to increase revenues through effectively positioning Starbucks stores
as ‘third place’ environment.
Structure. Flat management structure needs to be achieved through de-layering.
Specifically, the positions of assistant managers need to be eliminated within the
stores, after which there will be only three levels of management – storemanager,
shift manager and customer assistants, thus considerable amount of costs can be
saved and organisational efficiency can be increased.
Systems. Rather than daily roles among customer assistant being appointed by shift
supervisors, the rotation system of duties needs to be introduced that will reduce
the potential of conflicts among the workforce, and the work process would be
more interesting.
Soft Elements
Shared values. Currently effective set of values are being promoted by
management at Starbucks, however, more effective initiatives and programs need
to be devised that would ensure these values being shared and appreciated by all
members of the workforce.
Skills. Necessary training and development programs need to be organised in a
systematic manner and thus it has to be ensured that all members of the workforce
are equipped with skills necessary to achieve a high level of customer satisfaction.
Style. Management style within stores should be changed from Laissez Faire to
inspirational management. In this way a greater number of the workforce can be
effectively motivated for higher performances with less financial resources.

13. Staff. Only capable and promising candidates need to be employed by Starbucks
and employees have to be provided growth potential.
Starbucks Strategic Capabilities
Threshold resources for Starbucks operations in the UK consist of venues, basic
coffee machine, tables, cups, human resources etc. However, threshold resources
would not suffice in terms of enabling Starbucks to survive the competition, and
therefore, Starbucks utilises a set of distinctive resources in UK market that include
effective design of shops, a wide range of fresh coffee and other products, customer
loyalty card, as well as, sophisticated Verismo technology.
Likewise, threshold competencies for Starbucks may consistof selling coffee drinks
and food prepared through basic processes to customers in the most basic manner.
Nevertheless, Starbucks strives to achieve a competitive advantage in the market
through a set of core competencies that include exceptional customer services
achieved through a high level ofemployee motivation, focus on productquality, and
strong leadership from CEO and President Howard Schultz.
Starbucks also possesses the following competencies and capabilities:
 Generating a record total revenues of USD 13.3 billion to further contribute to its
strong financial position
 Entering the market of super-premium juices through acquiring Evolution Fresh
 Increasing the range of its products through the introduction of Starbucks Blond
Roast
 Initiating a set of corporatesocial responsibility programs and partnerships such as
strategic partnership with DonorsChoose.org, initiating Youth Action Grants, etc.
 Launching personalised Frappuccino drinks