Essay Sample on Overview and History: Starbucks

Nothing is well known than Starbucks; the brand name is familiar for its freshly brewed coffee. Though very few know the history behind this brand. The brand was founded in 1971 by Jerry Baldwin, Zev Siegl and Gordon Broker. Moby's Dick, a novel writer, enthused the name of the brand. Starbuck began just like a retailer. In the year 1982, Howard Schultz started his career in Swedish kitchenware. In the year 1983, after his visit to Millan, he came back with a brilliant idea that he saw in the espresso bar, a kind of warm community experience and proposed the idea to the board. Though the board of directors did not support his idea. This disagreement marked the end of Howard Schultz career with Starbucks coffee after which he opened his coffee bar the II GIORNALE. In the year 1987, Howard bought Starbucks. Since then till now it is the famous coffee brand.

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Current situation and significant issues

Currently, the coffee industry growth rate is at 7%, making the fast-growing restaurant business. Generally, the production of coffee in the world is at 110-120 million bags in a year. The espresso coffee well distributed in the globe with 14 billion of espresso coffee reaching over 20,000 bars in Italy. However, America is the largest consumer of coffee, consuming over 146 billion cups of coffee per year. Consumption of coffee in America is the estimated rise in the next few years. Starbucks has reached its presence in China and also forming connections with other tea- coffee companies to extend their brand. Starbucks has opened over 20,000 stores in the world. Starbucks, however, is affected by the high cost of their coffee and poor marketing strategies. The company focuses on the quality other than the proper distribution of coffee to the supermarkets.

Situation analysis

Pestel Analysis; Which stands for political, economic, social, technological, environmental and legal factors. The PESTLE factors are considered remote and macro impacts affecting a business. If the company addresses these critical factors, it can strive irrespective of the negative forces affecting the company (Gillespie, 2007).

Political; external political factors affecting the Starbucks coffee in its remote external -environment are the current state of recession this reduces the consumer ability to purchase the products. Government policy that focuses on the coffee business limiting their market.

Economical; the high growth rate of the developing countries creates an opportunity and also the high employment allows Starbuck to gain more revenues from several countries. However, there is an increased labor cost in developing countries which poses as a threat and increase the cost of ingredients.

Social; for social, cultural factors, there is a high growth rate of coffee growing culture and middle-class growth rate. The growth of the middle class increases coffee demand. Thus, the Starbuck have an opportunity to grow their revenues.

Technological factors; star bucks have the opportunity to grow their revenue because of the increased purchase of mobile phones and this allows more comfortable technological transfers to the coffee farmers. Though the high growth of coffee, making machines can affect the company's market (Roper,2012).

Legal factors; Starbucks has met the required product regulation though it has not yet satisfied the required labour regulation for developing countries this poses as a threat.

Ecological and environmental; the ability for Starbuck coffee to source for quality coffee and the use of reusable materials make the company's product environmentally friendly.

Swot analysis; a swot analysis is an analysis based on strength, weaknesses, opportunity and threat that a business is facing. Swot analysis; is also a composition of both the internal and external factors affecting a business.

External analysis; Opportunity and threats; Starbuck coffee have the opportunity to move into new unexplored markets like Asia. Another opportunity is high growth and demand for coffee by consumers. However, the star buck coffee brand faces threats from its competitors like the Mc Donald coffee, caribou coffee, and Peets coffee. The company have invested in the sale of excellent coffee for value.

Internal analysis; strength and weaknesses; Starbucks coffee has the trademark of a right image, also known for the strategic positioning of their stores and also have the top niche coffee roasting technology thus producing the best coffee quality. Internally the company offers extrinsic motivation to the employees; thus, they have highly motivated workers. However, the company's weak points are lack of proper infrastructure despite its aggressive expansion. The company also lack product differentiation and finally, lack of well-organized distribution channels.

Analysis using the porter's five model

Threat substitution; This possesses a high threat to the corporation. Availability of this substitute makes customers switch their choices easily. Threat substitution can act as a significant setback for the Starbucks coffee company. Another factor is the low switching cost, and it is easy for the consumer to buy other products than the Starbucks product (Dobbs, 2014). Besides, the affordability of other products works as a disadvantage to the Starbucks corporation.

Competitive rivalry; the food coffee industry flooded with many sellers. Competitive rivalry poses a strong force of competition. In addition to this, the low switching cost, this is a more natural formula for consumers to shift to other products.

Bargaining power of buyers or customers; a strong force t affecting the company, the buying power of consumers that are affected by the international environment. Also, the low switching cost allows customers to switch to other products easily.

Bargaining power of Starbucks coffees suppliers; The bargaining power impacted by the moderate size of individual suppliers which act as a moderate force on Starbucks. However, the great variety of suppliers and the ample supply weakens the supplier bargaining powers. Bargaining power works as a weak force to Starbuck coffee.

The threat of new entry; is moderate force faced by the Starbucks corporation. The cost of up taking a business goes in line with the type and nature of the business. The larger the business, the higher the cost, besides, the supply chain to this business is also extensive. Also, brands development considered being costly. All these poses as a weak force to the Starbucks business.

References

Dobbs m. (2014). Guidelines for applying the porters five forces framework. A set of industrial Analysis

Gillespie, A. (2007). pestel analysis of the macro environments foundations of economics. oxford press the USA

Roper k. (2012 November) implementation of PESTEL Drivers and Barriers cross-national analysis. in world workplace 2012 IFMA

US Department of Commerce international trade administration. The consumer goods industry.