Executive summary This reportis about Starbucks company. The reportwill begin with an introduction to Starbucks, its background, about Starbucksin Singapore and the various issues. The next sections will consist of thefindings for Starbucks. This will include a detailed analysis of PEST, themodes of entry for Starbucks and the choice of organisational structure. Thereport will end with a conclusion and recommendations.
Introduction Starbuckscorporation BackgroundStarbucks Corporation is an American Company of coffeehouse chain.Starbucks was first founded in Seattle, Washington United States in 1971 wherethe current headquarters is located. The company is founded by Jerry Baldwin,Zev siege and Gordon Bowker. Starbucks product range from mainly coffee, tea,smoothie drinks, baked products, sandwiches and even merchandises. As of 2017,there are a total of 27 339 Starbucks stores worldwide in 6 continents and 76countries.
Starbucks in SingaporeSingapore is the third international country to beintroduced to Starbucks. The first Starbucks store in Singapore was open on 14 December1996 at Liat Towers along orchard Road. According to the latest data, there aremore than 130 outlets in Singapore. Starbucks has its own Singapore website andFacebook page. Findings 1. Pestle Analysis: Starbuck’s success islinked to its effectiveness in addressing the possible external factors whichincludes political, economics, socio-culture, technological, environmental andlegal factors.
These factors have an influence on Starbucks and it is importantto constantly assess them. Political:In terms ofpolitical factors, examples include sourcing for their raw materials, the needto follow the laws and regulations of the countries they are venturing into,employment law of the different countries, the tax and trade policies. Starbuckssources their main product, arabica beans, from 3 regions- Latin America,Africa and Asia-Pacific.
Starbucks process of sourcing raw materials has gainedattentions of Politicians in various countries. As a result, Starbucks has madeit compulsory for the company to source for product while complying toenvironmental and social norms. This includes investing in farmer communities toensure that supply of coffee is sustainable and of quality. They have also madesure that their sourcing is accredited by conservation international.Anotheraspect is the necessity to follow the laws and regulations of the countriesthey venture into. This is with relevance to the increase in activism andpolitical awareness. With the changes in these laws and regulation, Starbucksis required to change to meet these changes effectively.
The lastaspect is the tax policies and trade policies in the various countries. Whenventuring into other countries, Starbucks must keep to the various tax andtrade policies implemented in those countries. Economics:Economics isanother factor that has an influence of Starbucks. Aspects of economic thataffect Starbucks include the rising labour and operational cost, the ongoingeconomic recession and currency exchange rate. The risinglabour and operation cost has a direct influence on Starbucks in terms of thecompany’s spending. For example, an increase in the price of raw material suchas coffee bean will have direct economic impact on the company as it willresult in rise of operational cost.Another aspectis the ongoing economic recession that has a direct effect on Starbucks sales.
Starbucks needs to keep up with the changing trends and adjust themselvesaccordingly such as reducing price of items and studying consumer buying power.However, considering that most consumers has not shifted to alternative cheaperbrands, Starbucks could attempt to work on other aspects to keep customerloyalty.The thirdaspect would be the currency exchange rate that also affects Starbucks. If therate of USD increases, local currencies will tend to buy lesser USD which inturn causes decline in total revenue. Socio-culture:The thirdfactor that affects Starbucks in socio-culture. This factor analyses thevarious trends and social sides that influences the business and consumers.
Aspects of this factor includes consumer preference which is seem throughgrowing trend in coffee, changes in lifestyle through the growth in health-consciousconsumers and the change in demographics for consumers.There is an increasingdemand for speciality coffee which is an opportunity for Starbucks to use thechance to increase their product value and in turn increase product demand.However, despite the increased demand for coffee, consumer would prefer moreaffordable but quality worthy coffee. This can cause consumers to changepreference in shop making Starbucks lose its consumer base.
Anothertrend changes in lifestyle of consumers as there is an increase in ‘healthconscious’ individuals. This is a marketing strategy for Starbucks as they cantake the opportunity to introduce healthy products that will attract relevantcustomers.Lastly, thechanging demographics is a considerably important factor that Starbucks mustconsider for their marketing. As time passes, the previous generations are retiring,and it is important to market their product according for consumers mostly formGen X and Millennials. The older consumer base is turning to more ‘healthy’drinks and thus the consumer base for these people are decreasing. TechnologicalTechnologyis an important factor that can change how a company functions.
In thisglobalised age, technology plays a big part in a company. Starbucks has usedtechnology to give the company an edge in competition. One common factor is the introduction of freeWi-Fi in all Starbucks shops. This increases the number of customers cominginto the shop. Another factor is seen through its partnership with Applecompany. The partnership involves free Wi-Fi access to iTunes Music Store. LegalOne importantfactor is the laws and regulations of the country. Starbucks has to make sure thatthey follow all laws relating to setting up business and taxes product safety regulationsand other laws.
2. Entry mode Entry mode is the expansion of a certain company into a newmarket in other countries. Starbucks utilises 3 main strategies- jointventures, licensing and wholly owned. The tables below show some examples foreach strategy. Examples of country with joint venture: (figure 1) Country Partner Austria/ Switzerland Bon Appetit group France Group VIPS Germany Karstadt Quella AG, Spain Group Vuos& Europastry, S.A. Taiwan president coffee co. Puerto Rico MacNaughton group Hong Kong Maxim’s Cateres Limited South Korea Shinsegae department Mexico S.
C de Mexico S.A de C. V Israel Delek development China- Shanghai Shanghai president coffee Co. Poland AmRest Coffee Example of country with license: (figure 2) Country Partner China -Beijing Mei Da coffee co Indonesia PT Mitra Adiperkasa Philippines Rustan Coffee Corp Middle East M.H Aishata Co. W.L.L New Zealand Restaurant Brands Ltd.
Examples of country that are wholly owned: (figure 3) country United Kingdom Canada Thailand Japan Singapore Entry mode in Singapore:Being the 3rd country outside North America to beintroduced to Starbucks, the company carefully planned their entry intosingapore. Starbucks chose Singapore as it is known to be more ‘westernised’compared to other Asian countries. Additionally, Singapore market is well-knownfor being a good place for business. Singapore also has a growing ‘coffeeculture’ and people are more prone to buying premium coffee and wants to savourthe taste of coffee. Entry mode of Starbucks in Singapore started throughlicensing in the beginning. On June 21 2004, it has been reported that Starbuckscoffee international has acquired its licensed operations from partner BonvestHolding Limited.
Thus, since 2004, Starbucks coffee Singapore is a wholly ownedsubsidiary of Starbucks coffee corporation.There were several reasons why Starbucks gave licensing toBonvest Holdings Limited. Firstly, Bonvest was rather familiar in the foodindustry as they had run some businesses. Also, they were more familiar in thelocal market, Singapore laws and regulation and other aspects of Singaporemarket which meant that they would know best how to grow Starbucks. Also, when Starbucksfirst came to Singapore, there were no specific coffee brand that was popularin Singapore and thus Starbucks had the chance to be at the top. 3. Organisational structure Vertical differentiation àdecentralisation within the organisation.
Within Starbucks, decision-making is decentralised. Starbucks has stores in 76 countries and eachcountry has their own culture, and demographics. Through decentralisation, Starbucksaims to effectively save time, improve communication, decreases delays andimprove performance overall. Through this flexibility given to employees,improvements have occurred in terms of customer service, product quality andefficiency of work. Starbuck’s objective is to make every employee have a senseof acceptance and give lower level management the autonomy to make decisions.Starbucks is also supportive of the idea of innovation and therefore, employeesare given the autonomy to share their ideas to make Starbucks a much bettercompany.The table below shows the advantages and disadvantages of Starbucksin implementing a decentralised structure: (figure 4) Advantages Disadvantages Time and money efficiency Since more people have the power to make decisions, it may lead to confusion or chaos if not handles properly Improved communication between employees and higher management Employees with the right the make decisions may not want to accept other’s decisions More understanding between customers and Starbucks organisation and so decisions made would be better.
When there are many people with the ability to make decisions, co-ordination may be a problem if employees are not able to work together. Horizontaldifferentiation à Worldwidematrix structure Starbuckscompany uses worldwide matric structure which compromises of functional,geographical and teams& product based. The table below shows the differentdivisions: (figure 5) Divisions Reasoning Functional structure It includes the top management of Starbucks. The top is the CEO of Starbucks followed by the different head of departments of the company.
Departments would include the HR department, Marketing department and the finance department. Geographical division the structures are divided according to the head for each geographical location. Each geographical location has a head who sees over their locations and report to the top management. There are 3 main regions involved- china and Asia pacific, Americas and EMEA (Europe, UK, Middle East, Russia and Africa) Product and team division This is divided according to the product and team they oversee. This is the lower level management in the hierarchy.
This division is involved in seeing over the different product lines and reports to their geographical superior. Starbucks hadimplemented this structure as it is their goal to improve communication betweenupper and lower management and give a bigger sense of belongingness toemployees. It is also an attempt for Starbucks to increase their goal indiversification and improve relationship with customers.