General Environment
Starbucks’ environment comprises factors within their control (internal factors) and factors outside their control (external or general factors) that affect the company’s daily operations (Mason, 2007). Since the general environment has a substantial consequence for the company’s operations and success, it is incumbent upon business executives to track the evolution of events and trends to take proactive action to remedy any unfavorable implications. A PESTLE analysis is a reliable strategic tool Starbucks’ executives can rely on to organize factors within the general environment and assess their impact on the industry and competing companies. Accordingly, the most significant factors within Starbucks’s general environment are political and economic factors. The company’s continued growth and retention of its international brand as one of the world’s largest coffeehouse companies heavily rely on these two factors.
Section on Politics
It is because of the government’s influence on business practices. Trade barriers, tax policies, and employment laws are all examples of politics. The sourcing of the company’s raw material, coffee, is affected by politics. The company’s acquisition of coffee from overseas markets depends on the political policies, laws, and regulations in those countries as well as the existing trade relations with the United States. It calls for the company’s adherence to social and environmental concerns raised by governments. The US requires the company to adhere to fair trade practices and regulations. Because the company is multinational, it will be subject to greater scrutiny from government authorities.
Economic Factors
Starbucks was effected by the COVID19 economic pandemic. Consumption power is being affected by an increasing unemployment rate. While this may have resulted to less coffee consumption it isn’t a problem. Low prices are what consumers want. The company will have to comply with consumer needs if they intend to keep competitors like Dunkin’ Donuts at bay. The company’s response has been to leverage the power of mobile technology through a strategic partnership with Apple to offer consumers discounted coupons via the iOS app. Despite the world economic downturn, the overseas market still presents an opportunity for Starbucks’ revenue growth especially in developing economies. The rising labor costs are important.
Five forces in competition
The identification and analysis of five competitive forces that shape Starbucks’s industry of operation can be achieved using Porter’s Five Forces model. The company’s successful growth relies on the effective management of these forces in the coffee industry. These forces that shape the company’s competitive landscape include:
- Consumer/Buyer Bargaining Power
- Competitive Rivalry
- Supplier Leverage
- Fear of Substitution
- Market entry
For me, these are the most significant points.
In Bargaining, Consumer-Buyer Power
The company’s massive consumer base exerts a massive force. Global market share is dependent on small numbers of customers. Starbucks’s low customer loyalty shows that people can switch to different coffeehouses if they are not satisfied with their service. Consumers can also substitute the company’s products with other products like instant beverages. Evidence of this force lies in the realization of the small size of individual purchases when compared to the company’s massive annual revenues. However, the collective power of consumers does not seem to be as important. To counter this power, the company should prioritize customers and create a brand.
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